<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 1999
REGISTRATION NO. 333-80335
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 5
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>
[Pictures of the WWW.PCQUOTE.COM, MARKETSMART-REAL.PCQUOTE.COM and
WWW.CNNFN.COM Web sites and PCQuote 6.0 RealTick]
<PAGE>
[STOCK TICKER ART]
SUBJECT TO COMPLETION -- AUGUST 31, 1999
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>
PROSPECTUS
- --------------------------------------------------------------------------------
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 and delayed market
quotes, 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 $11.00 and $13.00
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
COMMERZBANK CAPITAL MARKETS CORPORATION
,1999
[STOCK TICKER ART]
<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........... 27
Forward-Looking Statements........ 28
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 29
<CAPTION>
PAGE
----
<S> <C>
Business.......................... 37
Management........................ 48
Principal and Selling
Stockholders.................... 53
Certain Transactions.............. 55
Description of Capital Stock...... 62
Shares Eligible for Future Sale... 64
Underwriting...................... 65
Legal Matters..................... 67
Experts........................... 67
Where You Can Find Additional
Information..................... 67
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.
1
<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.
Investors should read the entire prospectus carefully.
PCQUOTE.COM
PCQuote.com is an Internet-based provider of real-time and delayed market
quotes, timely business news and comprehensive tools for researching and
analyzing financial information. 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 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. We have no operating history as a stand-alone
entity and have limited revenues and a history of losses.
WWW.PCQUOTE.COM is our free Web site that provides access to delayed quotes,
news, research and analytical tools. Through our 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). We are ranked third among approximately 311 content Web sites (second
among all financially-oriented Web sites) surveyed in @plan's Summer 1999 report
in terms of the percentage of the Web sites' audience that is male and has a
household income of at least $50,000. According to the same report, the
percentage of our Web sites' audience that is male, has a household income of at
least $50,000 and has shopped online in the last six months is ranked sixth
among the surveyed content Web sites (fifth among all financially-oriented Web
sites). We believe these user demographics are 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 Fall 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 and delayed market quotes, 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 our 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 $11.0 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 six
months ended June 30, 1999, we derived approximately 88.9% of our revenues from
the sale of subscriptions to our services and approximately 7.7% 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.
On August 30, 1999, HyperFeed Technologies formally separated the business
of PCQuote.com and our associated assets and liabilities from HyperFeed
Technologies' other businesses and operations. We believe the separation will
allow us to establish a separate identity as a Web-based company. This will
enable us to take advantage of opportunities more readily available to Internet
businesses. We believe we will be able to better attract and retain key
employees by offering compensation tied to the financial and stock market
performance of our business. In addition, the separation will allow us to pursue
our own financing avenues.
We have entered into a number of agreements with HyperFeed Technologies
providing for our formal separation from them and governing various interim and
ongoing relationships between us and HyperFeed Technologies. These agreements
provide for the contribution to us of intellectual property and other assets
relating to our business, the licensing of a 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
debt and 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 $0.40;
- 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 1,210,779 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 August 30, 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 the 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 $63.3 million from our sale of
5,800,000 shares of common stock in this offering at an assumed initial public
offering price of $12.00 per share.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -----------------------------------
1998 1999
------------------------ ------------------------
1995 1996 1997 ACTUAL PRO FORMA(1) 1998 ACTUAL PRO FORMA(1)
--------- --------- --------- --------- ------------- --------- --------- -------------
(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 $ 4,376 $ 6,944 $ 6,944
Total operating expenses.... 70 2,096 3,850 5,027 5,665 2,651 3,113 3,404
Loss from operations........ (70) (1,936) (3,288) (1,658) (3,817) (1,144) (1,962) (2,725)
Net loss.................... $ (70) $ (1,962) $ (4,572) $ (2,162) $ (4,321) $ (1,551) $ (1,966) $ (2,729)
--------- --------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- --------- ------------- --------- --------- -------------
Pro forma basic and diluted
net loss per share........ $ (0.22) $ (0.44) $ (0.16) $ (0.20) $ (0.28)
--------- ------------- --------- --------- -------------
--------- ------------- --------- --------- -------------
Pro forma weighted-average
shares used in the
calculation of basic and
diluted net loss per
share..................... 9,800,000 9,800,000 9,800,000 9,844,882 9,844,882
--------- ------------- --------- --------- -------------
--------- ------------- --------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash....................................................................................... $ 238 $ 60,785
Total assets............................................................................... 4,335 64,882
Long-term liabilities...................................................................... -- --
Total stockholders' equity (deficit)....................................................... (410) 62,918
</TABLE>
(1) Reflects (a) the impact of the agreements with HyperFeed Technologies,
Townsend Analytics and CNNFN 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 us 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. The principal risks we may face as an early stage company
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
June 30, 1999, we had incurred aggregate accumulated losses of approximately
$10.7 million. For the six month period ended June 30, 1999, our operating
losses were 28.3% of our revenues. We expect operating losses and negative cash
flows to continue for the foreseeable future. We intend to significantly
increase our operating expenses by spending approximately $11.0 million over the
next 12 months to promote our Web site and service offerings and through the
rapid growth in the number of our employees. In the most recent quarter ended
June 30, 1999, the number of our full-time employees increased 29.7%. 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 six months ended June 30, 1999, we derived approximately 88.9% 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 to 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 to 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
7
<PAGE>
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.
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 community of loyal users;
- conduct effective marketing campaigns;
- develop new and maintain existing advertising and business-to-business
relationships, such as arrangements that provide for us to distribute our
content to other businesses, 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 user base for 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 community of loyal 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, such as content distribution arrangements,
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.
8
<PAGE>
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;
- 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 events;
- 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
9
<PAGE>
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;
- 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.
We also compete with private label distributors of PCQuote 6.0 RealTick to
which we offer private label versions of this service for distribution 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
to its brokerage customers.
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
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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 AN AGREEMENT WITH CNNFN TO PROVIDE OUR USERS WITH ACCESS TO
TIMELY FINANCIAL NEWS HEADLINES AND STORIES; THE EXCLUSIVITY PROVISION OF
THIS AGREEMENT CONTAINS EXTENSIVE EXCEPTIONS.
We rely on an agreement with CNNFN to provide users of our Web sites with
access to timely financial news headlines and stories. Our agreement with CNNFN
contains an exclusivity provision that prohibits CNNFN from licensing CNNFN
headlines to our direct competitors. However, this exclusivity is subject to
numerous exceptions. The exclusivity does not apply to:
- any registered broker-dealer Web site that is used for trading and is
accessible only by its clients;
- financial Web sites currently controlled by CNNFN or its affiliates;
- several of CNNFN's existing relationships; and
- any Web 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.
In addition, CNNFN can terminate the exclusivity provision 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 or any of its affiliated or subsidiary
companies:
- acquires 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.
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 six months ended June 30, 1999, we derived
86.4% 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.
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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. The number of our full-time employees grew from 37 as of
March 31, 1999 to 48 as of June 30, 1999, a growth rate of 29.7%. We expect that
our number of employees will grow rapidly in the future. 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 48 full-time employees, as compared to 37 full-time employees as
of March 31, 1999. We expect that our number of employees will grow rapidly in
the 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 the
following executive officers and key employees: 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 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 and
Secretary, 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
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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. Historically, we have experienced service disruptions
several times per year. These disruptions typically last from approximately
thirty seconds to approximately fifteen minutes. 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 Contribution and Separation Agreement with HyperFeed Technologies from
providing for a back-up data feed source for our PCQuote Orbit service during
the term of our DataFeed License Agreement with HyperFeed Technologies. The
DataFeed License Agreement has a five-year term and will automatically renew for
additional one-year periods unless we terminate at least 60 days prior to the
end of the initial or any renewal terms. The parties may also terminate this
agreement sooner under circumstances described in "Certain
Transactions--HyperFeed Technologies". This prohibition against providing for a
back-up data feed source for our PCQuote Orbit service could exacerbate
complications arising from any interruption of data feed services from HyperFeed
Technologies. 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 in the future. 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 utilize 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;
- 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
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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, trade secret and common law
trademark law and restrictions on disclosure to protect our intellectual
property, such as our content, source codes, trademarks, trade names and trade
secrets. Although we consider our trademarks to be among our most valuable
assets, 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 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
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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 18.7% of our
total revenues in the six months ended June 30, 1999. Our agreement with A.B.
Watley is for an initial term ending December 31, 2000. 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.
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
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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
U.S., 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.
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
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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, such as
portfolios, stored on our servers 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 success 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
$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 an 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
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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 incurred aggregate operating losses of approximately
$16.6 million from 1996 through 1998. 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 a research and
development resource to us and is responsible for providing software updates to
the services we license from them. A delay or failure by HyperFeed Technologies
to provide 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 ARE NOT SUBJECT TO DISINTERESTED
NEGOTIATIONS.
As part of our separation from HyperFeed Technologies, we have entered into
agreements with them 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 resulted 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
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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 $8.12 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 $12.00 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 our
net proceeds from 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 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 of shares of our common stock 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).
19
<PAGE>
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 they 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.
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 $12.00 per share, are
estimated to be approximately $63.3 million ($67.7 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 $11.0 million for marketing
and promotional purposes over the next 12 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 $2.8 million, which consists of: (1) $213,500 per month for
services provided to us beginning in April 1999, (2) $500,000,
representing one-half of the amount to be paid by HyperFeed Technologies
to Townsend Analytics under a termination agreement between them, (3)
approximately $514,000 for data feed services provided to us beginning in
April 1999 and (4) approximately $486,000 in anticipated working capital
advances; 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 is required to pay to Townsend Analytics under a 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 June 30, 1999,
PCQuote.com had a deficit in net tangible book value of $2.3 million or $0.24
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
$12.00 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 June 30, 1999 would have been $61.0 million or
$3.88 per share. This represents an immediate increase in net tangible book
value of $4.12 per share to existing stockholders and an immediate and
substantial dilution of $8.12 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........................ $ 12.00
Deficit in net tangible book value as of June 30, 1999..... (0.24)
Increase attributable to new investors..................... 4.12
Pro forma net tangible book value after this offering........ 3.88
---------
Dilution in pro forma net tangible book value to new
investors.................................................. $ 8.12
---------
---------
</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% $ 918,952 1.3% $ 0.09
New investors.................................... 5,800,000 36.9% 69,600,000 98.7% 12.00
------------ --------- ------------- ---------
Total............................................ 15,728,948 100.0% $ 70,518,952 100.0%
------------ --------- ------------- ---------
------------ --------- ------------- ---------
</TABLE>
(1) Sales by HyperFeed Technologies in this offering will cause the number of
shares held by existing stockholders 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 June 30, 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 following table should be read in conjunction with
our financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash................................................................................... $ 238 $ 60,785
--------- -------
--------- -------
Stockholders' equity:
Preferred stock, par value $0.01 per share; 1,000,000 shares authorized; none issued
and outstanding actual and as adjusted............................................. -- --
Common stock, par value $0.01 per share; 74,000,000 shares authorized; 9,928,948
shares issued and outstanding; and 15,728,948 shares issued and outstanding as
adjusted (2)....................................................................... $ 99 $ 157
Additional paid-in capital........................................................... 6,700 69,970
License fee.......................................................................... (5,530) (5,530)
Accumulated deficit.................................................................. (1,679) (1,679)
--------- -------
Total stockholders' equity (deficit)................................................... (410) 62,918
--------- -------
Total capitalization................................................................... $ (410) $ 62,918
--------- -------
--------- -------
</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 1,210,779 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, Townsend Analytics and CNNFN 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
----------------------------------
YEAR ENDED
ACTUAL ADJUSTMENTS DECEMBER 31, 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) 8,063,787
------------- -----------------
113,000(b)
1,680,000(e)
Gross profit.................................................. 3,369,324 1,848,324
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) (3,817,097)
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) (4,321,451)
Income taxes.................................................. -- --
------------- -----------------
Net loss...................................................... $ (2,162,451) $ (4,321,451)
------------- -----------------
------------- -----------------
Pro forma basic and diluted net loss per share................ $ (0.22) $ (0.44)
------------- -----------------
------------- -----------------
Pro forma weighted-average 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
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------
SIX MONTHS
ACTUAL ADJUSTMENTS ENDED JUNE 30, 1999
------------- --------------- -------------------
<S> <C> <C> <C>
Revenues:
Subscription.............................................. $ 6,171,371 $ 6,171,371
Advertising............................................... 536,455 536,455
Other..................................................... 235,975 235,975
------------- -------------------
Total revenues........................................ 6,943,801 6,943,801
Direct cost of revenues..................................... 5,792,913 $ (75,000)(a) 6,264,913
------------- -------------------
57,000(b)
490,000(e)
Gross profit................................................ 1,150,888 678,888
Operating expenses:
General and administrative................................ 1,864,984 142,000(c) 2,114,984
108,000(d)
Sales and marketing....................................... 961,126 19,000(d) 980,126
Research and development.................................. 133,842 22,000(d) 155,842
Depreciation.............................................. 152,803 152,803
------------- -------------------
Total operating expenses.............................. 3,112,755 3,403,755
------------- -------------------
Loss from operations........................................ (1,961,867) (2,724,867)
Other income (expense)
Interest income........................................... -- --
Interest expense.......................................... (4,354) (4,354)
------------- -------------------
Other expense, net.......................................... (4,354) (4,354)
------------- -------------------
Loss before income taxes.................................... (1,966,221) (2,729,221)
Income taxes................................................ -- --
------------- -------------------
Net loss.................................................... $(1,966,221) $ (2,729,221)
------------- -------------------
------------- -------------------
Pro forma basic and diluted net loss per share.............. $ (0.20) $ (0.28)
------------- -------------------
------------- -------------------
Pro forma weighted-average shares used in the calculation of
basic and diluted net loss per share...................... 9,844,882 9,844,882
------------- -------------------
------------- -------------------
</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. 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 license had been in effect during the period described, the
direct cost of revenues would have been lower than if the license had not
been in effect during the same period. The decrease in direct cost of
revenues during this period is a result of the negotiated rate per user and
quote accessed included in the license. This pro forma charge was less than
the costs related to the data feed allocated to us during this period. The
license was negotiated by us and Hyperfeed Technologies such that HyperFeed
Technologies would provide the data feed at a cost that approximated the
amount HyperFeed Technologies would charge an unaffiliated third party.
(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.
25
<PAGE>
(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.
(e) To record the impact of the non-cash charge relating to the warrants issued
to CNNFN in connection with our license agreement with CNNFN as if the
warrants had been issued as of January 1, 1998. The estimated value of the
warrant ($5,880,000) will be amortized as a non-cash charge ratably over the
42-month term of the license agreement.
26
<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
six months ended June 30, 1998 and 1999 and the balance sheet data as of June
30, 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 six months ended June 30, 1999
are not necessarily indicative of results to be expected for the full year. We
commenced operations in July 1995.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ ------------------------
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 $ 3,376 $ 6,171
Advertising.......................... -- 167 1,131 1,368 735 537
Other................................ -- 30 230 548 265 236
--- --------- --------- ----------- ----------- -----------
Total revenues..................... -- 973 4,763 9,912 4,376 6,944
Direct cost of revenues................ 70 813 4,201 6,543 2,869 5,793
--- --------- --------- ----------- ----------- -----------
Gross profit........................... (70) 160 562 3,369 1,507 1,151
Operating expenses:
General and administrative........... -- 1,084 2,298 2,482 1,358 1,865
Sales and marketing.................. -- 620 1,226 2,108 1,115 961
Research and development............. -- 392 254 241 84 134
Depreciation......................... -- -- 72 196 94 153
--- --------- --------- ----------- ----------- -----------
Total operating expenses........... -- 2,096 3,850 5,027 2,651 3,113
--- --------- --------- ----------- ----------- -----------
Loss from operations................... (70) (1,936) (3,288) (1,658) (1,144) (1,962)
Other income (expense), net............ -- (26) (1,284) (504) (407) (4)
--- --------- --------- ----------- ----------- -----------
Loss before income taxes............... (70) (1,962) (4,572) (2,162) (1,551) (1,966)
Income taxes........................... -- -- -- -- -- --
--- --------- --------- ----------- ----------- -----------
Net loss............................... $ (70) $ (1,962) $ (4,572) $ (2,162) $ (1,551) $ (1,966)
--- --------- --------- ----------- ----------- -----------
--- --------- --------- ----------- ----------- -----------
Pro forma basic and diluted net loss
per share............................ $ (0.22) $ (0.16) $ (0.20)
----------- ----------- -----------
----------- ----------- -----------
Pro forma weighted-average shares used
in the calculation of basic and
diluted net loss per share........... 9,800,000 9,800,000 9,844,882
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................................................... $ -- $ -- $ 238
Total assets....................................................................... 2,885 3,306 4,335
Long-term liabilities.............................................................. -- -- --
Total stockholders' equity (deficit)............................................... 1,064 1,080 (410)
</TABLE>
27
<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.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our 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. Our Web Template service allows users to create their own "private
label" Web sites with many of the features of our own Web sites, such as access
to delayed or real-time quotes and research and analysis tools. Our Hyperscript
service allows users to develop their own Internet-based market data
applications. 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, have been contributed to us by HyperFeed
Technologies as an additional capital contribution. We have assumed 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 88.9% of our total revenues for the six
months ended June 30, 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 7.7% of our total revenues for the six months
ended June 30, 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 3.4% of
our total revenues for the six months ended June 30, 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;
29
<PAGE>
- 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.
Previously capitalized software development costs include the costs of
initial development of our Web sites; 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 June 30, 1999, there were $1.9
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 June 30, 1999 is
scheduled to be charged against operations as follows: $600,000 in the last six
months of 1999, $900,000 in 2000 and $400,000 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.
- 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 contributed 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 also granted 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 approximately $555,000 for the six months ended June 30,
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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
Fall 1999.
We have entered into an agreement with HyperFeed Technologies effective as
of April 1, 1999 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 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.
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. 25% of the
shares subject to this warrant vested immediately and an additional 25% 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 contra-equity account.
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 with respect to our
business. 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 until we pay aggregate license fees of $5.0 million. This
$5.0 million payment represents one-half of the $10.0 million guaranteed minimum
aggregate license payment arrangement among Townsend Analytics, HyperFeed
Technologies and us. In addition, we could be required to pay up to $2.0 million
to satisfy any shortfall in the $5.0 million minimum license fee payment
allocated to HyperFeed Technologies if the amounts paid by us and HyperFeed
Technologies do not in the aggregate reach $10.0 million. Since we expect to
receive 70% of the revenue derived collectively by us and HyperFeed Technologies
from products licensed to both us and HyperFeed Technologies, we believe this
approach will equitably split the $10.0 million guaranteed minimum. We will also
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.
RESULTS OF OPERATIONS
Our results of operations prior to April 1, 1999 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
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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 prior to April 1, 1999, 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 periods
presented. Allocations of corporate expenses are estimates based on our
management's best assessment of actual expenses. It is our management's opinion
that the expenses charged to PCQuote.com are reasonable. Commencing April 1,
1999, general and administrative expenses are based on a combination of our
actual expenses and the costs under our agreement with HyperFeed Technologies.
The financial statements were prepared as if PCQuote.com operated as a
stand-alone entity since its 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.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Total revenues increased 58.7% for the six months ended June 30,
1999 to $6.9 million from $4.4 million for the comparable 1998 period. Total
subscription-based revenue increased 82.8% to $6.2 million in the 1999 period
from $3.4 million in the 1998 period, while total advertising revenue decreased
to $537,000 in the 1999 period from $735,000 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 101.9% to $5.8
million for the 1999 period from $2.9 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. Costs in the 1999
period also included our obligation to reimburse HyperFeed Technologies for
$500,000 as part of HyperFeed Technologies' termination agreement with Townsend
Analytics and the amortization of $350,000 relating to the warrant we issued
under our license agreement with CNNFN. Amortization of software development
costs increased to $542,000 in the 1999 period from $392,000 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 decreased to $1.2 million in the 1999 period
from $1.5 million in the 1998 period.
OPERATING EXPENSES. Total operating expenses increased to $3.1 million in
the 1999 period from $2.7 million in the comparable 1998 period. This was
primarily due to the initiation of the services and support agreement with
HyperFeed Technologies and an increase in the number of employees during the
1999 period. Sales and marketing expenses decreased to $961,000 in the 1999
period from $1.1 million in the 1998 period. The decrease was due to lower sales
personnel costs and a decrease in
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promotional expenditures. Research and development expenses increased to
$134,000 in the 1999 period from $84,000 in the 1998 period as a result of an
increase in the number of development personnel and related expenses.
Depreciation expense increased to $153,000 in the 1999 period from $94,000 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 $412,000 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 increased to
$2.0 million in the 1999 period from $1.6 million in the 1998 period.
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 to our PCQuote
6.0 RealTick service and the private label version of this service. 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.
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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
sites, 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
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 six months ended June 30, 1999, cash
provided by operating activities increased to $749,000, as a result of the
increase in accrued expenses.
Cash used in investing activities was $1.3 million in 1996, $1.4 million in
1997, $1.3 million in 1998 and $637,000 for the six months ended June 30, 1999.
The primary use of cash for investing activities in these periods was for
capital equipment purchases and software development. Equipment purchases of
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$432,000 in 1997, $315,000 in 1998 and $511,000 during the first six 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 six months ended June 30, 1999
from $512,000 for the six months ended June 30, 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 six months of 1999, as compared to $1.1 million
for the first six months of 1998.
We had no cash balance as of December 31, 1998 and a cash balance of
$238,000 as of June 30, 1999. Our current liabilities exceeded current assets by
$1.7 million as of December 31, 1998 and by $3.2 million as of June 30, 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 of common
stock will satisfy our working capital and capital expenditure requirements for
at least the next 24 months.
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 for our products, information systems and critical suppliers. We are
currently in the final stages of 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 have reviewed the Year 2000 disclosures of our vendors and suppliers as
to the compliance of their systems. Of those reviewed,
- 50.0% indicate they are currently Year 2000-compliant;
- 50.0% indicate they are assessing their systems;
We have not had a response from 5 of our vendors.
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
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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.
As of June 30, 1999, approximately 90% of the testing of mission-critical
systems have been completed. All testing, including internal infrastructure, is
scheduled to be completed by September 30, 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 June 30, 1999, we have spent $58,500 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 and delayed market
quotes, timely business news and comprehensive tools for researching and
analyzing financial information. 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.
According to Forrester Research, 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.
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 U.S. 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.
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. During the six
month period ended June 30, 1999, we derived approximately 7.7% of our revenues
from advertising.
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
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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.
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
individuals visiting our WWW.PCQUOTE.COM Web site on a monthly basis increased
24% between their Winter 1998 report (covering the months of July to September
1998) and Summer 1999 report (covering the months of January to March 1999). We
pay @plan a fee for its services. Based on surveys conducted by The Gallup
Organization, @plan's Summer 1999 report states that we have a significantly
greater concentration of users and subscribers in the demographic categories set
forth below than both the World Wide Web at large and the overall Investing and
Finance Web Site category, as measured by @plan:
- men with a household income of $50,000 or more
- men with a household income of $50,000 or more who have monitored their
investments online in the last 30 days
- men with a household income of $50,000 or more who have engaged in online
shopping during the past six months
- viewers with investment portfolios valued at $50,000 or more
- viewers who currently own shares of common stock
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Based on the results of the @plan report, we believe our user demographics
are attractive to online advertisers. Audiences with higher incomes and past
online shopping experience are generally considered by online advertisers to be
demographically desirable.
GROWTH STRATEGY
Our objective is to strengthen our position as an Internet-based provider of
real-time and delayed market quotes, 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, approximately 57% of our users have shopped online
during the six month period ending March 31, 1999. 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 OUR 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 our relationship with CNNFN, we
offer users of our Web sites 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. We plan to enter into relationships with other providers of content and
services and to leverage these relationships to establish 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 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 online 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.
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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>
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.
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- 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.
- 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.
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<PAGE>
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.
- 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 Fall 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,
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<PAGE>
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 that work 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 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 code HyperFeed 2000 data into
the application. Once completed, developers become subscribers to Quotesockets,
our related subscription plan, and pay 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.
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<PAGE>
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.
SIGNIFICANT RELATIONSHIPS
We believe that our relationships with CNNFN, HyperFeed Technologies and
Townsend Analytics help us to establish 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 our 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.
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 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 $11.0 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
relationships with leading Web sites, developing brand extensions and engaging
in ongoing media relations. We may also market our services by establishing
business-to-business relationships with leading Web sites. For example, we may
enter into relationships with high-traffic Web portals to establish direct links
to our Web sites or we may distribute our content to other Web sites based on
revenue-sharing or other arrangements. We
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<PAGE>
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 18.7% of our
total revenues in the six months ended June 30, 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 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. During the
six month period ended June 30, 1999, approximately 60 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
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<PAGE>
advertisers from outside of this industry. During the second quarter of 1999,
the largest advertisers on our Web site, based on revenue, were as follows:
<TABLE>
<S> <C>
- - Datek Online - OnSale.com
- - Discover Brokerage - Oracle
- - DLJdirect - Scottrade
- - Fidelity - StockInvestor.com
Investments - TheStreet.com
- - Hewlett-Packard
- - IBM
</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.
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 currently use no more than 50% of our total available capacity.
We intend to expand our excess capacity, from time to time, as necessary to
maintain this level of excess capacity. In the event one site experiences an
outage
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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 trade secret and common law trademark
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. We attempt to enter into
confidentiality agreements with our employees, consultants and third parties
with whom we enter into business relationships if we believe these persons will
have access to information we consider to be confidential, 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. 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 June 30, 1999, we had 48 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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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)......................... 54 Director Designee
Francis J. Harvey (1)....................... 56 Director Designee
James R. Quandt (1)......................... 50 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 at Ameritech Corp. From 1991 to
1995, he served as Vice President of FutureSource, a financial data provider,
and was responsible for international business development.
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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 our 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.
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
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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 five executive officers, other
than our Chief Executive Officer, who we expect will earn more than $100,000
annually. Effective April 28, 1999, we began 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,
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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 began
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 12 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 12 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 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 1,210,779 shares of
our common stock as of the date of this prospectus at an exercise price equal to
the initial public offering price including
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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 our 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 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 our outstanding common stock and
shares of our 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 our 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 our
outstanding common stock.
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(4) Includes 9,800,000 shares of our common stock 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 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 were entered into contemporaneously on August
30, 1999. 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 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.
On August 30, 1999, HyperFeed Technologies formally separated the business
of PCQuote.com and the associated assets and liabilities from HyperFeed
Technologies' other businesses and operations. HyperFeed Technologies and we
have entered 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.
We expect to be required to pay approximately $486,000 to HyperFeed
Technologies in repayment of amounts we anticipate will be advanced to us for
working capital.
The Contribution and Separation Agreement established PCQuote.com as a
stand-alone entity with objectives separate from those of HyperFeed
Technologies. We believe the separation will allow us to establish a separate
identity as a Web-based company. This will enable us to take advantage of
opportunities more readily available to Internet businesses. We believe we will
be able to better attract and retain key employees by offering compensation tied
to the financial and stock market performance of our business. In addition, the
separation will allow us to pursue our own financing avenues.
CONTRIBUTION AND SEPARATION AGREEMENT
The Contribution and Separation Agreement entered into by HyperFeed
Technologies and us sets 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;
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- 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
- all rights arising from the contracts and agreements relating to our
business.
In addition, HyperFeed Technologies has granted 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 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 is required to pay to
Townsend Analytics under its new agreement with Townsend Analytics.
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. We expect to pay
approximately $1,281,000 to HyperFeed Technologies under this agreement at the
closing 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 has 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
beginning in April 1999. 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 60 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 30 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
$555,000 for the six months ended June 30, 1999. We expect to pay approximately
$514,000 to HyperFeed Technologies under this agreement at the closing of this
offering for amounts accrued since April 1, 1999, the effective date of the
agreement.
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 have also entered 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
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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 5% 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 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, sub-license 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
sub-license 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 granted 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 90-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
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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:
- 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
60
<PAGE>
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;
- several of CNNFN's existing relationships; and
- 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, Inc.) 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 5% interest in the common
stock of PCQuote.com outstanding prior to the offering, for an exercise price of
$.000001 per share. 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 contra-equity account.
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 90-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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<PAGE>
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
Prior to this offering, there were 9,928,948 shares of our 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 our 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
Our 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.
Our 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;
62
<PAGE>
- 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 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 our Board, our President, our 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.
63
<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 (1)
1% of the then-outstanding shares of common stock and (2) 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.
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<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters for
whom Prudential Securities Incorporated, U.S. Bancorp Piper Jaffray, Inc.,
FAC/Equities, a division of First Albany Corporation, E*OFFERING Corp. and
Commerzbank Capital Markets Corporation 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....................................................................................
Commerzbank Capital Markets Corporation............................................................
-------------
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>
Underwriting fees are calculated as a percentage of the initial public
offering price. At present, the representatives of the underwriters have advised
us that underwriting fees will not exceed 7% of the proceeds from the sale of
the shares offered. There will be no additional items of compensation paid to
the underwriters as part of this offering. 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,
65
<PAGE>
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.
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 options.
- 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 that were retained by, or released to, the syndicate
member.
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 approximately 230,000 of the
shares offered for sale at the same offering price directly to our officers,
directors, employees, persons with whom we have vendor, supplier or other
business relationships, 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.
66
<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. Wildman,
Harrold, Allen & Dixon owns 83,900 shares of the common stock of HyperFeed
Technologies. 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.
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<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 June 30, 1999 (unaudited)............................ F-3
Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............................................................... F-4
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1996, 1997 and 1998 and for
the six months ended June 30, 1999 (unaudited)......................................................... F-5
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............................................................... F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
PCQuote.com, Inc.:
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, stockholders' equity (deficit) 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.
/s/ KPMG LLP
July 28, 1999,
except as to the first and fourth paragraphs of Note 8,
which are as of August 30, 1999
Chicago, Illinois
F-2
<PAGE>
PCQUOTE.COM, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30, 1999
1997 1998 -------------
------------ ------------ (UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................................................. $ -- $ -- $ 238,302
Accounts receivable, net of allowance for doubtful accounts of
$33,998, $109,036 and $252,079 as of December 31, 1997, December
31, 1998 and June 30, 1999, respectively........................... 400,121 437,043 798,308
Prepaid expenses and other current assets............................ 16,358 42,446 529,888
------------ ------------ -------------
Total current assets................................................... 416,479 479,489 1,566,498
Property and equipment, net of accumulated depreciation of $71,989,
$268,205 and $421,008, as of December 31, 1997, December 31, 1998 and
June 30, 1999, respectively.......................................... 359,946 478,574 836,926
Software development costs, net of accumulated amortization of
$886,373, $1,612,293 and $2,118,429 as of December 31, 1997, December
31, 1998 and June 30, 1999, respectively............................. 2,108,640 2,348,027 1,932,067
------------ ------------ -------------
Total assets....................................................... $ 2,885,065 $ 3,306,090 $ 4,335,491
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable..................................................... $ 1,025,360 $ 1,402,603 $ 1,808,308
Accrued compensation................................................. 133,569 111,457 145,337
Accrued interest..................................................... 223,206 -- --
Accrued exchange fees................................................ 149,976 32,325 141,151
Accrued royalties.................................................... 9,708 -- 500,000
Due to Parent........................................................ -- -- 854,072
Other accrued liabilities............................................ 28,933 55,698 99,715
Unearned revenue..................................................... 249,845 623,827 1,196,579
------------ ------------ -------------
Total current liabilities.......................................... 1,820,597 2,225,910 4,745,162
------------ ------------ -------------
Stockholders' equity (deficit):
Preferred stock, par value $.01 per share; authorized 1,000,000
shares; no shares issued and outstanding........................... -- -- --
Common stock, par value $.01 per share; authorized 74,000,000 shares;
9,928,948 shares issued and outstanding............................ -- -- 99,289
Additional paid-in capital........................................... -- -- 6,699,663
License fee.......................................................... -- -- (5,530,000)
Accumulated deficit.................................................. -- -- (1,678,623)
Stockholder's investment............................................. 1,064,468 1,080,180 --
------------ ------------ -------------
Total stockholders' equity (deficit)............................... 1,064,468 1,080,180 (409,671)
------------ ------------ -------------
Total liabilities and stockholders' equity......................... $ 2,885,065 $ 3,306,090 $ 4,335,491
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscription........................ $ 776,282 $ 3,401,469 $ 7,995,691 $ 3,375,524 $ 6,171,371
Advertising......................... 166,497 1,131,120 1,368,463 735,532 536,455
Other............................... 30,058 230,323 547,957 265,096 235,975
------------- ------------- ------------- ------------- -------------
Total revenues........................ 972,837 4,762,912 9,912,111 4,376,152 6,943,801
Direct cost of revenues............... 812,988 4,201,310 6,542,787 2,869,052 5,792,913
------------- ------------- ------------- ------------- -------------
Gross profit.......................... 159,849 561,602 3,369,324 1,507,100 1,150,888
Operating expenses:
General and administrative.......... 1,083,490 2,297,383 2,481,583 1,357,741 1,864,984
Sales and marketing................. 620,450 1,226,021 2,108,399 1,114,548 961,126
Research and development............ 392,158 253,973 241,223 83,763 133,842
Depreciation........................ -- 71,989 196,216 94,834 152,803
------------- ------------- ------------- ------------- -------------
Total operating expenses.............. 2,096,098 3,849,366 5,027,421 2,650,886 3,112,755
------------- ------------- ------------- ------------- -------------
Loss from operations.................. (1,936,249) (3,287,764) (1,658,097) (1,143,786) (1,961,867)
Other income (expense):
Interest income..................... 556 10,537 8,292 5,143 --
Interest expense.................... (26,171) (1,295,090) (512,646) (412,208) (4,354)
------------- ------------- ------------- ------------- -------------
Other expense, net.................... (25,615) (1,284,553) (504,354) (407,065) (4,354)
------------- ------------- ------------- ------------- -------------
Loss before income taxes.............. (1,961,864) (4,572,317) (2,162,451) (1,550,851) (1,966,221)
Income taxes.......................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Net loss.............................. $ (1,961,864) $ (4,572,317) $ (2,162,451) $ (1,550,851) $ (1,966,221)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma basic and diluted loss per
share............................... $ (0.22) $ (0.16) $ (0.20)
------------- ------------- -------------
------------- ------------- -------------
Pro forma weighted-average shares used
in the calculations of basic and
diluted loss per share.............. 9,800,000 9,800,000 9,844,882
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- ADDITIONAL STOCKHOLDERS'
PAR VALUE PAID-IN LICENSE ACCUMULATED STOCKHOLDER'S EQUITY
SHARES AMOUNT CAPITAL FEE DEFICIT INVESTMENT (DEFICIT)
--------- --------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <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)... -- -- -- -- (1,678,623) (287,598) (1,966,221)
Contributions from Parent, net
(unaudited)..................... -- -- -- -- -- 126,360 126,360
Transfer of stockholder's
investment on March 31, 1999
(unaudited)..................... -- -- 918,942 -- -- (918,942) --
Warrant issued for license fee
(unaudited)..................... -- -- 5,880,000 (5,880,000) -- -- --
Warrant exercised (unaudited)..... 128,948 1,289 (1,289) -- -- -- --
Amortization of license fee
(unaudited)..................... -- -- -- 350,000 -- -- 350,000
--------- --------- ----------- ----------- ------------ ------------- -------------
Balance at June 30, 1999
(unaudited)....................... 9,928,948 $99,289 $6,699,663 $(5,530,000) $(1,678,623) $ -- $ (409,671)
--------- --------- ----------- ----------- ------------ ------------- -------------
--------- --------- ----------- ----------- ------------ ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- ----------------------------
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) $ (1,550,851) $ (1,966,221)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation........................ -- 71,989 196,216 94,834 152,803
Provision for doubtful accounts..... -- 95,018 148,625 78,072 160,000
Amortization of software development
costs............................. 266,671 549,698 725,920 391,717 541,580
Amortization of warrant issued for
license fee....................... -- -- -- -- 350,000
Changes in assets and liabilities:
Accounts receivable............... (91,782) (403,357) (185,547) (151,826) (521,265)
Prepaid expenses and other current
assets.......................... (24,807) 8,449 (26,088) (8,678) (487,442)
Accounts payable.................. 284,181 741,179 377,243 466,341 416,256
Accrued expenses.................. 142,983 402,409 (345,912) (149,312) 1,530,244
Unearned revenue.................. 98,193 151,652 373,982 365,073 572,752
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities................ (1,286,425) (2,955,280) (898,012) (464,090) 748,707
INVESTING ACTIVITIES
Purchase of property and equipment.... -- (431,935) (314,844) (162,698) (511,155)
Software development costs
capitalized......................... (1,324,402) (976,167) (965,307) (512,278) (125,620)
------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities.......................... (1,324,402) (1,408,102) (1,280,151) (674,976) (636,775)
FINANCING ACTIVITIES
Contributions from Parent, net........ 2,610,827 4,363,382 2,178,163 1,139,066 126,370
------------- ------------- ------------- ------------- -------------
Net cash provided by financing
activities.......................... 2,610,827 4,363,382 2,178,163 1,139,066 126,370
Net change in cash.................... -- -- -- -- 238,302
Cash at the beginning of the period... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Cash at the end of the period......... $ -- $ -- $ -- $ -- $ 238,302
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Warrant issued for license fee.................................................................... $ 5,880,000
-------------
-------------
</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 and delayed market quotes,
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 until June 1999 when the Company opened a
separate bank account for certain receipts and disbursements. 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
F-7
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-8
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-9
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
BUSINESS SEGMENT INFORMATION
The Company operates in one reportable segment of financial data services.
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 June 30, 1999 and for the six months ended
June 30, 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 six months ended June 30, 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
F-10
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 has filed 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 $0.52. 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, was recorded as
a contra-equity account and will be amortized over the term of the agreement.
(8) CERTAIN TRANSACTIONS
On August 30, 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 DataFeed License 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
until we pay aggregate license fees of $5.0 million. This $5.0 million payment
represents one-half of the $10.0 million guaranteed minimum aggregate license
payment arrangement among Townsend Analytics, HyperFeed Technologies and the
Company. In addition, the Company could be required to pay up to $2.0 million to
satisfy any shortfall in the $5.0 million minimum license fee payment allocated
to HyperFeed Technologies if the amounts paid by us and HyperFeed Technologies
do not in the aggregate reach $10.0 million. Since the Company expects to
receive 70% of the revenue derived collectively by us and HyperFeed Technologies
from products licensed to both us and HyperFeed Technologies, we believe this
approach will equitably split the $10.0 million guaranteed minimum. The Company
will also 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.
On June 8, 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 August 30, 1999, the Company amended its articles of incorporation to
increase its authorized common stock to 74,000,000 and to authorize 1,000,000
shares of $0.01 par value preferred stock for future issuance.
F-13
<PAGE>
EMPOWERING TODAY'S ON-LINE INVESTORS. [PCQUOTE.COM LOGO]
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.
- --------------------------------------------------------------------------------
[PCQUOTE.COM LOGO]
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
FAC/EQUITIES
E*OFFERING
COMMERZBANK CAPITAL MARKETS CORPORATION
HTTP://MARKETSMART-REAL.PCQUOTE.COM HTTP://PCQUOTE.COM
<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.
On March 19, 1999, we issued 9,800,000 shares of our common stock to
HyperFeed Technologies for an aggregate of $10.00.
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 for an aggregate of
$0.13. 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 the 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 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 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**
10.13 Sublease to be entered into by and between registrant and HyperFeed Technologies, Inc.
10.14 Amendment No. 1 dated August 12, 1999 to Software License and Distributor Agreement dated May
28, 1999 by and between registrant and Townsend Analytics, Ltd.
23.1 Consent of KPMG LLP
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
23.3 Consent of @plan**
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.
II-3
<PAGE>
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
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. 5 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 30th day of August, 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. 5 to the Registrant's Registration Statement has been signed by the
following persons in the capacities indicated on August 30, 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 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 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**
10.13 Sublease to be entered into by and between registrant and HyperFeed Technologies, Inc.
10.14 Amendment No. 1 dated August 12, 1999 to Software License and Distributor Agreement dated May
28, 1999 by and between registrant and Townsend Analytics, Ltd.
23.1 Consent of KPMG LLP
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
23.3 Consent of @plan**
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>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PCQUOTE.COM, INC., A DELAWARE CORPORATION
PCQuote.com, Inc., a Corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on March 19, 1999.
2. The Certificate of Amendment of Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
April 14, 1999.
3. This Amended and Restate Certificate of Incorporation has been duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of Section 242 and 245 of the General Corporation Law of the State of
Delaware.
4. This Amended and Restate Certificate of Incorporation was approved
by the written consent of stockholders holding at least a majority of the
outstanding Capital Stock of the Corporation pursuant to Section 228 of the
General Corporation Law of the State of Delaware.
5. The Certificate of Incorporation of this Corporation is amended and
restated in its entirety to read as follows:
FIRST: The name of the Corporation is PCQUOTE.COM, INC.
SECOND: The registered office of the Corporation in the State of Delaware shall
be located at Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent shall be The Corporation
Trust Company.
THIRD: The Corporation shall engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: A. AUTHORIZED SHARES. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is Seventy-five Million
(75,000,000), consisting of Seventy-four Million (74,000,000) shares of Common
Stock, $0.01 par value per share (the "Common Stock") and One Million
(1,000,000) shares of Preferred Stock, $0.01 par value per share (the "Preferred
Stock") with a total authorized capital of Seven Hundred Fifty Thousand Dollars
($750,000.00).
<PAGE>
Upon the effectiveness of this Amended and Restated Certificate of
Incorporation, each outstanding share of this Corporation's Common Stock shall
be automatically converted into Nine Thousand Eight Hundred (9,800) shares of
this Corporation's Common Stock.
B. PREFERRED STOCK. The Board of Directors is authorized,
subject to any limitations prescribed by law, to provide for the issuance of
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter
referred to as a "Preferred Stock Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the terms of any Preferred Stock Designation.
C. COMMON STOCK. Except as otherwise provided by the General
Corporation Law of the State of Delaware, by this Certificate of Incorporation
or any amendments hereto, all of the voting power of the Corporation shall be
vested in the holders of the Common Stock, and each holder of Common Stock shall
have one (1) vote for each share of Common Stock held by such holder on all
matters voted upon by the stockholders.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors is expressly authorized and
empowered, in the manner provided in the By-Laws of the Corporation, to make,
alter, amend and repeal the By-Laws of the Corporation in any respect not
inconsistent with the laws of the State of Delaware or with this Certificate of
Incorporation.
In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon it, the Board of Directors may exercise all such powers
and do all such acts as may be done by the Corporation, subject, nevertheless,
to the provisions of the laws of the State of Delaware, this Certificate of
Incorporation and the By-Laws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them, and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code, or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be
2
<PAGE>
summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
EIGHTH: The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
By-Laws of the Corporation. Election of directors need not be by ballot unless
the By-Laws of the Corporation shall so provide. Meetings of stockholders may be
held within or outside of the State of Delaware, as the By-Laws of the
Corporation may provide.
NINTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders 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 the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, as the same exists or hereafter may be amended, or (iv) for any transaction
from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of directors shall be eliminated or limited to the full
extent authorized by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of this Article shall not adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
TENTH: A. The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board. For purposes of this Certificate of Incorporation, the term "Whole
Board" shall mean the total number of authorized directors whether or not there
exist any vacancies in previously authorized directorships.
B. Newly created directorships resulting from any increase in
the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless otherwise provided by law or by resolution
of the Board of Directors, be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office until the next annual meeting of stockholders and until their successors
shall be duly elected and qualified. No decrease in the authorized number of
directors shall shorten the term of any incumbent director.
3
<PAGE>
C. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
By-laws of the Corporation.
D. Any directors, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least sixty-six percent (66%) of the voting power of
all of the then-outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together as a single
class.
ELEVENTH: Indemnification of Directors and Officers.
A. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C of this
ARTICLE ELEVENTH with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section A of this ARTICLE ELEVENTH shall include
the right to be paid by the Corporation the expenses (including attorneys' fees)
incurred in investigating or defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
4
<PAGE>
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section B or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this ARTICLE
ELEVENTH shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators.
C. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
A or B of this ARTICLE ELEVENTH is not paid in full by the corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses), it
shall be a defense that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law, and (ii) in
any suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article ELEVENTH or otherwise shall be on
the Corporation.
D. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification
and to the advancement of expenses conferred in this ARTICLE ELEVENTH shall not
be exclusive of any other right which any person may have or hereafter acquire
under any statute, this Certificate of Incorporation, the Corporation's By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
E. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability
5
<PAGE>
or loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
F. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this ARTICLE ELEVENTH with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
TWELFTH: No amendment or repeal of Article NINTH or ELEVENTH of this Certificate
of Incorporation shall apply to or have any effect on the right of any
individual referred to in Article NINTH or ELEVENTH for or with respect to acts
or omissions of such individual occurring prior to such amendment or repeal.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
6
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Jim R. Porter, the Chief Executive Officer of the Corporation. The
signature below shall constitute the affirmation or acknowledgement, under
penalties of perjury, that the facts herein stated are true.
Dated: August 30, 1999
PCQUOTE.COM, INC.
/s/ Jim R. Porter
__________________________
Jim R. Porter,
Chief Executive Officer
ATTEST:
/s/ Andrew Peterson
_________________________
Andrew Peterson
Secretary
7
<PAGE>
EXHIBIT 5.1
[Letterhead of Wildman, Harrold, Allen & Dixon]
July 12, 1999
PCQuote.com, Inc.
300 South Wacker Drive
Chicago, IL 60606
RE: REGISTRATION OF 8,912,500 SHARES OF COMMON STOCK
Ladies and Gentlemen:
We have acted as counsel to PCQuote.com, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-1, filed by the Company with the Securities
and Exchange Commission (the "Commission") on June 9, 1999 (the "Registration
Statement"). The Registration Statement relates to the proposed sale of up to
8,912,500 shares of the Company's Common Stock, $.01 par value per share (the
"Shares") pursuant to an underwriting agreement (the "Underwriting
Agreement") to be entered into among the Company, a selling stockholder and
the underwriters as described in the Registration Statement. Pursuant to the
Registration Statement and the Underwriting Agreement, the Company is selling
up to 6,187,500 of such Shares and a selling stockholder is selling up to
2,725,000 of such Shares.
We have examined such matters of law and such documents, corporate
records and other matters as we deemed necessary for the purpose of rendering
this opinion, including the Company's Certificate of Incorporation, the
Company's By-Laws, the Registration Statement pursuant to which the Shares
are to be registered under the Securities Act of 1933, as amended (the
"Act"), and records of corporate proceedings.
Based upon the foregoing, it is our opinion that upon the execution
and delivery of the
<PAGE>
PC Quote, Inc.
August 12, 1999
Page 2
Underwriting Agreement by the Company and the selling stockholder, (i) up to
6,187,500 shares to be offered and sold by the Company, when sold, issued and
delivered against payment as provided in the Underwriting Agreement, will be
duly authorized, validly issued, fully paid and non-assessable, and (ii) up
to 2,725,000 Shares of the Company to be offered and sold by the selling
stockholder pursuant to the Underwriting Agreement will be duly authorized,
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. We also consent to the reference
to our firm under the caption "Legal Matters" in the Registration Statement.
In giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
/s/ Wildman, Harrold, Allen & Dixon
-----------------------------------
WILDMAN, HARROLD, ALLEN & DIXON
<PAGE>
CONTRIBUTION AND SEPARATION AGREEMENT
CONTRIBUTION AND SEPARATION AGREEMENT (this "Agreement") is executed
this 30th day of August 1999 and effective as of April 1, 1999 (the "Effective
Date"), by and between HYPERFEED TECHNOLOGIES, INC., a Delaware corporation
("HyperFeed"), and PCQUOTE.COM, INC., a Delaware corporation (the "Company").
R E C I T A L S
WHEREAS, prior to the execution and delivery of this Agreement,
HyperFeed formed the Company as a wholly-owned subsidiary of HyperFeed;
WHEREAS, simultaneously herewith, HyperFeed and the Company are
entering into the Maintenance Agreement, in the form attached as EXHIBIT A
hereto (the "Maintenance Agreement"), the DataFeed License Agreement, in the
form attached as EXHIBIT B hereto (the "DataFeed License Agreement"), the
Services Agreement in the form attached as EXHIBIT C hereto (the "Services
Agreement"), the Noncompetition Agreement in the form attached as EXHIBIT D
hereto (the "Noncompetition Agreement"), the Registration Rights Agreement, in
the form attached as EXHIBIT E hereto (the "Registration Rights Agreement"), the
Tax Indemnification and Allocation Agreement, in the form attached as EXHIBIT F
hereto (the "Tax Indemnification and Allocation Agreement") and the Sublease, in
the form attached as EXHIBIT G hereto; and
WHEREAS, HyperFeed desires to contribute certain assets to the Company
as an additional capital contribution to the Company, and the Company desires to
assume certain of the liabilities of HyperFeed.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound by the terms hereof applicable to each of them, hereby agree as
follows:
ARTICLE I
CONTRIBUTION TRANSACTION
SECTION 1.01. HYPERFEED CONTRIBUTION. On the terms and subject to the
conditions of this Agreement, HyperFeed hereby sells, assigns, transfers,
conveys and delivers to the Company as an additional capital contribution to the
Company, and the Company hereby acquires from HyperFeed, effective as of the
Effective Date, all the right, title and interest of HyperFeed in, to and under
the HyperFeed Contributed Assets (as defined below); and HyperFeed hereby grants
to the Company as an additional capital contribution to the Company a perpetual,
worldwide, non-exclusive right and license to use, execute, reproduce,
distribute, perform, display, modify, enhance, create derivative works, and
market without payment to any other person all of the HyperFeed Licensed Assets
(as defined below) and related documentation. The contribution and acquisition
of the HyperFeed Assets (as defined below)
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and the assumption of the Assumed HyperFeed Liabilities (as set forth in
Section 1.02 below) is collectively referred to in this Agreement as the
"Contribution Transaction."
The term "Business" means the businesses conducted by HyperFeed and
related to (i) the Internet websites owned by HyperFeed and known as
www.pcquote.com and marketsmart-real.pcquote.com, (ii) the Internet enabled
desktop applications owned or licensed by HyperFeed, and (iii) third-party site
development enabling end-users to receive data via the Internet. The term
"HyperFeed Contributed Assets" means the business, properties, assets, goodwill
and rights of HyperFeed, of whatever kind and nature, real or personal, tangible
or intangible, related to the Business that are owned, leased or licensed by
HyperFeed and are set forth on the attached Schedule 1.01(a). "The term
HyperFeed Licensed Assets" means business, properties, assets, goodwill and
rights of HyperFeed, of whatever kind and nature, real or personal, tangible or
intangible, related to the Business that are owned, leased or licensed by
HyperFeed and are set forth on the attached Schedules 1.01(b). The term
"HyperFeed Assets" means, collectively, the HyperFeed Contributed Assets and the
HyperFeed Licensed Assets".
SECTION 1.02. ASSUMPTION OF CERTAIN LIABILITIES.
(a) On the terms and subject to the conditions of this
Agreement, the Company hereby assumes, effective as of the Effective Date, and
from and after the Effective Date the Company agrees to pay, perform and
discharge when due, any liability, obligation or commitment of HyperFeed under
the following (collectively, the "Assumed HyperFeed Liabilities"), other than
any Excluded HyperFeed Liabilities:
(i) all of the Current Liabilities as set forth on
the First Quarter Balance Sheet (as defined below) as of March 31,
1999, including without limitation, (A) all accounts payable, notes
payable (and any security therefor) and all other payables of any kind
related to the Business; and (B) all obligations arising under the
contracts, leases, licenses, indentures, agreements, commitments and
other legally binding arrangements, whether oral or written
("Contracts"), relating to the Business and specifically listed on
Exhibit B to Schedule 1.01(a) attached hereto (the "HyperFeed
Contracts");
(ii) any other liabilities of HyperFeed, not to
exceed $500,000.00, whether known or unknown, relating to the Business
and not set forth as Current Liabilities on the First Quarter Balance
Sheet as of March 31, 1999;
(iii) $500,000 representing one-half of the
$1,000,000 owed by HyperFeed to Townsend Analytics, Ltd. ("Townsend")
pursuant to Section 1 of the Termination Agreement dated May 28, 1999
by and between HyperFeed and Townsend; and
(iv) an amount not to exceed $2,000,000, representing
the difference between (A) the $5,000,000 minimum aggregate license fee
payment HyperFeed is
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required to pay to Townsend under its new agreement by and between
HyperFeed and Townsend; and (B) the amount of license fees actually
paid by HyperFeed to Townsend during the period commencing April 1,
1999 and ending December 4, 2000.
(b) Notwithstanding Section 1.02(a), or any other provision of
this Agreement or any of the other agreements and instruments executed and
delivered in connection herewith and the transactions contemplated hereby,
including, but not limited to, the Maintenance Agreement, the DataFeed License
Agreement, the Services Agreement, the Noncompetition Agreement, the
Registration Rights Agreement, the Tax Indemnification and Allocation Agreement
and the Sublease (the "Ancillary Agreements"), and regardless of any disclosure
to HyperFeed or the Company, the Company shall not assume any Excluded HyperFeed
Liability, each of which shall be retained and paid, performed and discharged
when due by HyperFeed. The term "Excluded HyperFeed Liability" means:
(i) any liability, obligation or commitment
of HyperFeed not specifically assumed pursuant to Section 1.02(a);
(ii) any liability, obligation or commitment of
HyperFeed, whether express or implied, liquidated, absolute, accrued,
contingent or otherwise, or known or unknown, arising out of the
operation or conduct by HyperFeed or any of its affiliates of any
business other than the Business;
(iii) any liability, obligation or commitment of
HyperFeed arising out of (A) any suit, action or proceeding
("Proceeding") pending or, to the knowledge of HyperFeed, threatened as
of the Effective Date or (B) any actual or alleged violation by
HyperFeed or any of its affiliates of any Applicable Law (as defined in
Section 3.03) prior to April 1, 1999, including without limitation, any
liability, obligation or commitment of HyperFeed arising out of that
certain legal proceeding known as GRAHAM R. CLARK V. P.C. QUOTE
INCORPORATED (HYPERFEED) 1999 C 559 High Court of Justice, Queens Bench
Division, London (and related proceedings) , filed May 10, 1999;
(iv) any liability, obligation or commitment for
Taxes (as defined in Section 3.12), whether or not accrued,
assescurrently due and payable);
(v) except as provided in Section 4.02(b), any
liability, obligation or commitment for transfer, documentary, sales,
use, registration, value-added and other similar Taxes and related
amounts (including any penalties, interest and additions to Tax)
incurred in connection with this Agreement, the Ancillary Agreements,
the Contribution Transaction and the other transactions contemplated
hereby and thereby ("Transfer Taxes");
(vi) any liability, obligation or commitment of
HyperFeed arising under any HyperFeed Benefit Plan (as defined in
Section 3.14(a)) except with respect to any liability arising with
respect to any Company employee to the extent any such Company employee
participates in such HyperFeed Benefit Plan after March 31, 1999;
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(vii) Any liability, obligation or commitment of
HyperFeed that relates to, or that arises out of, products or services
shipped or sold by or on behalf of HyperFeed on or prior to the
Effective Date (including claims of negligence, personal injury,
product damage, product liability, product warranties, promotional
obligations, strict liability, product recall or any other claims
(including workers' compensation, employer's liability or otherwise)),
whether such liability, obligation or commitment relates to or arises
out of accidents, injuries or losses occurring on or prior to or after
the Effective Date;
(viii) any liability, obligation or commitment of
HyperFeed that relates to, or that arises out of, the employment or the
termination of the employment with HyperFeed of any employee or former
employee of the Business (including as a result of the transactions
contemplated by this Agreement); and
(ix) any liability, obligation or commitment of
HyperFeed to any of its respective affiliates.
(c) The Company shall acquire HyperFeed Assets free and clear
of all liabilities, obligations and commitments of HyperFeed, other than the
Assumed HyperFeed Liabilities, and free and clear of all Liens (as defined in
Section 3.05), other than Permitted Liens (as defined in Section 3.05).
SECTION 1.03. CONSENTS OF THIRD PARTIES.
(a) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any asset
or any claim or right or any benefit arising under or resulting from such asset
if an attempted assignment thereof, without the consent of a third party, would
constitute a breach or other contravention of the rights of such third party,
would be ineffective with respect to any party to an agreement concerning such
asset, or would in any way adversely affect the rights of HyperFeed or, upon
transfer, the Company under such asset. If any transfer or assignment by
HyperFeed to, or any assumption by the Company of, any interest in, or
liability, obligation or commitment under, any asset requires the consent of a
third party, then such assignment or assumption shall be made subject to such
consent being obtained. To the extent any HyperFeed Contract may not be assigned
to the Company by reason of the absence of any such consent, the Company shall
not be required to assume any Assumed HyperFeed Liabilities and if not assigned
shall not be entitled to receive benefits arising under such HyperFeed Contract.
(b) In connection with those consents that have not been
obtained as of the date hereof, HyperFeed and the Company hereby agree that,
until any such required consent is obtained, HyperFeed, or one or more of its
subsidiaries, as appropriate, shall, with the reasonable and necessary
cooperation of the Company, and at the Company's direction, continue to fulfill
any and all obligations and commitments, and enforce any and all rights, of
HyperFeed in connection with any asset, claim or right that constitutes a
HyperFeed Asset but for which any required consent has not been obtained, and
that the Company shall be entitled to all of the economic claims, rights and
benefits under such asset, claim or right and
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HyperFeed shall pay or cause to be paid to the Company all such economic
benefits as promptly as practicable following receipt by HyperFeed or any of
its subsidiaries; provided that the Company shall be responsible for the
Assumed HyperFeed Liabilities, if any, arising under such asset, claim or
right, to the extent that the Company has received the economic benefit of
such asset, claim or right, and further provided that the Company shall
reimburse HyperFeed for its costs to fulfill any such obligations,
commitments or enforcement of rights.
ARTICLE II
THE CLOSING
SECTION 2.01. THE CLOSING. The closing of the Contributions (the
"Closing") is taking place at the offices of Wildman, Harrold, Allen & Dixon,
225 West Wacker Drive, Chicago, Illinois 60606, on the date hereof.
SECTION 2.02. TRANSACTIONS TO BE EFFECTED AT THE CLOSING. At the
Closing:
(a) HyperFeed is delivering (i) appropriately executed copies
of this Agreement and each Ancillary Agreement to which it is specified to be a
party, (ii) such appropriately executed bills of sale, assignments and other
instruments of transfer relating to HyperFeed Assets in form and substance
reasonably satisfactory to HyperFeed and the Company and (iii) such other
documents as the Company has reasonably requested to demonstrate compliance with
the terms and provisions of this Agreement;
(b) the Company is delivering (i) appropriately executed
copies of this Agreement and each Ancillary Agreement to which it is specified
to be a party, (ii) such appropriately executed assumption agreements and other
instruments of assumption providing for the assumption of the Assumed HyperFeed
Liabilities in form and substance reasonably satisfactory to HyperFeed and (iii)
such other documents as HyperFeed has reasonably requested to demonstrate
compliance with the terms and provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HYPERFEED
HyperFeed hereby represents and warrants to the Company, as of the
Effective Date and the date of execution of this Agreement, as follows:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. HyperFeed is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
and possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct the Business and its other businesses as presently
conducted, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect (i) on the
business, assets, condition (financial or otherwise)
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or results of operations or prospects of HyperFeed and its subsidiaries,
taken as a whole, or of the Business, (ii) on the ability of HyperFeed to
perform its obligations under this Agreement and the Ancillary Agreements or
(iii) on the ability of HyperFeed to consummate the Contribution Transaction
and the other transactions contemplated hereby and thereby (a "HyperFeed
Material Adverse Effect"). HyperFeed is duly qualified to do business as a
foreign corporation in each jurisdiction where the character of HyperFeed
Assets held by it or the nature of the Business make such qualification
necessary for it to conduct the Business as currently conducted by it or the
failure to so qualify has had or could reasonably be expected to have a
HyperFeed Material Adverse Effect. HyperFeed has delivered to the Company
true and complete copies of the certificate of incorporation and by-laws of
HyperFeed, as amended through the date of this Agreement.
SECTION 3.02. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.
HyperFeed has full power and authority to execute this Agreement and the
Ancillary Agreements to which it is a party. HyperFeed has full power and
authority to consummate the Contribution Transaction and the other transactions
contemplated hereby and thereby. The execution and delivery by HyperFeed of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation by HyperFeed of the Contribution Transaction and the other
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action. HyperFeed has duly executed and delivered this
Agreement and each Ancillary Agreement to which it is a party, and this
Agreement, and each Ancillary Agreement to which it is a party, constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms except as enforcement may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or equitable principles
relating to or limiting creditors' rights generally.
SECTION 3.03. NO CONFLICTS; CONSENTS. The execution and delivery by
HyperFeed of this Agreement and each Ancillary Agreement to which it is a party
and the consummation of the Contribution Transaction and the other transactions
contemplated hereby and thereby and compliance by HyperFeed with the terms
hereof and thereof do not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of HyperFeed under, any provision of (i) the
certificate of incorporation or by-laws of HyperFeed, (ii) any Contract to which
HyperFeed or any of its subsidiaries is a party or by which any of their
respective properties or assets is bound or (iii) any judgment, order or decree
("Judgment") or statute, law, ordinance, rule or regulation ("Applicable Law")
applicable to HyperFeed or its properties or assets, other than, in the case of
clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a HyperFeed
Material Adverse Effect. No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or filing with, any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity"), is
required to be obtained or made by or with respect to HyperFeed in connection
with (A) the execution, delivery and performance of this
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Agreement or any Ancillary Agreement or the consummation of the Contribution
Transaction or the other transactions contemplated hereby and thereby or (B)
the conduct by the Company of the Business following the Closing as conducted
on the date of execution this Agreement.
SECTION 3.04. FINANCIAL STATEMENTS.
(a) Schedule 3.04 sets forth for the Business (i) a Statement
of Assets as of December 31, 1998 (the "Year End Balance Sheet"), (ii) a
Statement of Assets as of March 31, 1999 (the "First Quarter Balance Sheet"),
(iii) an Income Statement for the twelve months ended December 31, 1998 (the
"Full Year Income Statement"), and (iv) an Income Statement for the three months
ended March 31, 1999 (the "First Quarter Income Statement"). The Year End
Balance Sheet and the Full Year Income Statement were derived from the audited
financial statements of HyperFeed for the year ended December 31, 1998, as
audited and opined upon by KPMG LLP in their report dated March 12, 1999. The
term "Financial Statements" shall mean the Year End Balance Sheet, the First
Quarter Balance Sheet, the Full Year Income Statement and the First Quarter
Income Statement. The Financial Statements have been prepared from the books and
records of HyperFeed relating to the Business and fairly present the financial
condition and results of operations of the Business as of the respective dates
and for the respective periods indicated.
(b) The Business does not have any material liabilities or
obligations of any nature (whether accrued, absolute, contingent, unasserted or
otherwise), except for items set forth in Schedule 3.04.
SECTION 3.05. HYPERFEED ASSETS. HyperFeed has good and valid title to
all HyperFeed Assets free and clear of all mortgages, liens, security interests,
charges, easements, leases, subleases, covenants, rights of way, options,
claims, restrictions or encumbrances of any kind (collectively, "Liens"), except
(i) such as are set forth in Schedule 3.05 (all of which shall be discharged
prior to the Closing), (ii) mechanics', carriers', workmen's, repairmen's or
other like Liens arising or incurred in the ordinary course of business, Liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business and
liens for Taxes that are not due and payable or that may thereafter be paid
without penalty, and (iii) other imperfections of title or encumbrances, if any,
that do not, individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the conduct of the
Business as presently conducted (the Liens described in clauses (ii) and (iii)
above are referred to collectively as "Permitted Liens").
SECTION 3.06. INTELLECTUAL PROPERTY.
(a) Schedule 3.06 sets forth a true and complete list of all
patents (including all reissues, divisions, continuations and extensions
thereof), patent applications, patent rights, trademarks, trademark
registrations, trademark applications, servicemarks, trade names, trade secrets,
business names, brand names, domain names, copyrights, copyright registrations
and renewals, designs, design registrations, software (together with all related
source code(s) and applicable documentation) and all owned, used, filed by or
licensed to HyperFeed and used,
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held for use or intended to be used in the operation or conduct of the
Business (collectively, the "Intellectual Property"), other than unregistered
designs and copyrights that, individually and in the aggregate, are not
material to the conduct of the Business as presently conducted. With respect
to all Intellectual Property constituting HyperFeed Assets (the "Contributed
Intellectual Property") that is registered or subject to an application for
registration, Schedule 3.06 sets forth a list of all jurisdictions in which
such Contributed Intellectual Property is registered or registrations applied
for and all registration and application numbers. Except as set forth in
Schedule 3.06 (i) all the Contributed Intellectual Property has been duly
registered in, filed in or issued by the appropriate Governmental Entity
where such registration, filing or issuance is necessary or appropriate for
the conduct of the business as presently conducted, (ii) HyperFeed is the
sole and exclusive owner of and has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of
and sublicense, without payment to any other person, all the Contributed
Intellectual Property and the consummation of the Contribution Transaction
and the other transactions contemplated hereby does not and will not conflict
with, alter or impair any such rights, and (iii) during the past three years,
HyperFeed has not received any written or oral communication from any person
asserting any ownership interest in any Contributed Intellectual Property.
(b) HyperFeed has not granted any license of any kind relating
to any trade secrets, confidential information, inventions, know-how, formulae,
processes, procedures, research records, records of inventions, test
information, market surveys, subscriber lists and marketing know-how of
HyperFeed constituting HyperFeed Assets (the "Technology"), or to any
Contributed Intellectual Property or the marketing or distribution thereof,
except nonexclusive licenses to end-users in the ordinary course of business.
HyperFeed is not bound by or a party to any option, license or agreement of any
kind relating to the Intellectual Property of any other person for the use of
such Intellectual Property in the conduct of the Business, except as set forth
in Schedule 3.06 and except for so-called "shrink-wrap" license agreements
relating to computer software licensed in the ordinary course of the Business.
The conduct of the Business as presently conducted does not violate, conflict
with or infringe the Intellectual Property of any other person. Except as set
forth in Schedule 3.06, (i) no claims are pending or, to the knowledge of
HyperFeed, threatened, as of the Effective Date or the date of execution of this
Agreement against HyperFeed by any person with respect to the ownership,
validity, enforceability, effectiveness or use in the Business of any
Intellectual Property and (ii) during the past three years HyperFeed and its
affiliates have not received any written or oral communication alleging that
HyperFeed or any of its affiliates has in the conduct of the Business violated
any rights relating to Intellectual Property of any person.
(c) All material Technology has been maintained in confidence
in accordance with protection procedures customarily used in the industry to
protect rights of like importance. All former and current members of management
and key personnel of HyperFeed or any of its affiliates, including all former
and current employees, agents, consultants and independent contractors who have
contributed to or participated in the conception and development of material
Technology (collectively, "Personnel") either (i) have been party to a
"work-for-hire" arrangement or agreement with HyperFeed, in accordance with all
Applicable
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Laws, that has accorded HyperFeed full, effective, exclusive and original
ownership of all tangible and intangible property thereby arising or (ii)
have executed appropriate instruments of assignment in favor of HyperFeed as
assignee that have conveyed to HyperFeed full, effective and exclusive
ownership of all tangible and intangible property thereby arising. No former
or current Personnel have any claim against HyperFeed in connection with such
person's involvement in the conception and development of any Technology and
no such claim has been asserted or is threatened. None of the current
officers and employees of HyperFeed has any patents issued or applications
pending for any device, process, design or invention of any kind now used or
needed by HyperFeed in the furtherance of the Business, which patents or
applications have not been assigned to HyperFeed, with such assignment duly
recorded in the United States Patent and Trademark Office.
SECTION 3.07. CONTRACTS.
(a) Except as set forth in Schedule 3.07 and Exhibit B to
Schedule 1.01(a), and except for Contracts relating solely to assets that do not
constitute HyperFeed Assets, HyperFeed is not a party to or bound by any
Contract that is used, held for use or intended for use in, or that arises out
of, the operation or conduct of the Business and that is:
(i) an employment agreement or employment
Contract;
(ii) a collective bargaining agreement or other
Contract with any labor organization, union nor association;
(iii) a covenant not to compete or other covenant of
HyperFeed restricting the development, manufacture, marketing or
distribution of the products and services of the Business;
(iv) a Contract with (A) any shareholder or
affiliate of HyperFeed or (B) any current or former officer, director
or employee of HyperFeed or any of its affiliates;
(v) a lease, sublease or similar Contract with any
person under which (A) HyperFeed is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned
by any person or (B) HyperFeed is a lessor or sublessor of, or makes
available for use by any person, any tangible personal property owned
or leased by HyperFeed, in any such case has an aggregate future
liability or receivable, as the case may be, in excess of $5,000;
(vi) (A) a continuing Contract for the future
purchase of materials, supplies or equipment, (B) a management,
service, consulting or other similar Contract or (C) an advertising
agreement or arrangement, in any such case that has an aggregate future
liability to any person in excess of $5,000;
(vii) a material license, option or other Contract
relating in whole or in part to the Contributed Intellectual Property
(including any license or other Contract
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under which HyperFeed is licensee or licensor of any Contributed
Intellectual Property) or to any Technology;
(viii) (A) a Contract under which HyperFeed has
borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to, any person or (B) any other note, bond,
debenture or other evidence of indebtedness issued to any person;
(ix) a Contract (including any so-called
take-or-pay or keepwell agreement) under which (A) any person has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of HyperFeed or (B) or HyperFeed has directly or indirectly
guaranteed indebtedness, liabilities or obligations of any other person
(in each case other than endorsements for the purpose of collection in
the ordinary course of business);
(x) a Contract under which HyperFeed has,
directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any person (other than
extensions of trade credit in the ordinary course of the Business);
(xi) a Contract granting a Lien upon any HyperFeed
Asset;
(xii) a Contract providing for indemnification of
any person with respect to material liabilities relating to any current
or former business of HyperFeed or any predecessor person;
(xiii) a Contract not made in the ordinary course of
the Business;
(xiv) a confidentiality agreement;
(xv) a Contract for the sale of any HyperFeed
Asset or the grant of any preferential rights to purchase any HyperFeed
Asset or requiring the consent of any party to the transfer thereof;
(xvi) a Contract for any joint venture, partnership
or similar arrangement;
(xvii) other Contract that has an aggregate future
liability to any person in excess of $5,000 and is not terminable by
HyperFeed by notice of not more than 60 days for a cost of less than
$5,000; or
(xviii) a Contract other than as set forth above to
which HyperFeed is a party or by which it or any of its assets or
businesses is bound or subject that is material to the Business or the
use or operation of HyperFeed Assets.
(b) Except as set forth in Schedule 3.07, all HyperFeed
Contracts are valid, binding and in full force and effect and are enforceable
by HyperFeed in accordance with their
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terms except as enforcement may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or equitable principles
relating to or limiting creditors' rights generally. Except as set forth in
Schedule 3.07, HyperFeed has performed all material obligations required to
be performed by them to date under HyperFeed Contracts, and they are not
(with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and, to the knowledge of
HyperFeed, no other party to any HyperFeed Contract is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. HyperFeed has not, except as disclosed in the
applicable Schedule, received any notice of the intention of any party to
terminate any HyperFeed Contract. Complete and correct copies of all
Contracts listed in the Schedules, together with all modifications and
amendments thereto, have been delivered to HyperFeed and the Company.
(c) Except as set forth in Schedule 3.07 HyperFeed has
obtained the written Consent of the other party or parties to any HyperFeed
Contract where consent is required by virtue of the execution and delivery of
this Agreement or the consummation of the Contribution Transaction to avoid the
invalidity of the transfer of such Contract, the termination thereof, a breach,
violation or default thereunder or any other change or modification to the terms
thereof.
SECTION 3.08. PERSONAL PROPERTY. Each material item of tangible
personal property and interests therein, including all machinery, equipment,
furniture and vehicles, of HyperFeed that constitute HyperFeed Assets (the
"Personal Property") is in good working order (ordinary wear and tear excepted),
is free from any material defect and has been maintained in all material
respects in accordance with the past practice of the Business, and no repairs,
replacements or regularly scheduled maintenance relating to any such item has
been deferred. All leased personal property of the Business is in all respects
in the condition required of such property by the terms of the lease applicable
thereto.
SECTION 3.09. PERMITS.
(a) HyperFeed has obtained all material certificates,
licenses, permits, authorizations and approvals of Governmental Entities
("Permits") that are necessary or desirable for the conduct of the Business. All
such Permits are validly held by HyperFeed, and HyperFeed has complied in all
material respects with all terms and conditions thereof. During the past three
years, HyperFeed has not received notice of any Proceedings relating to the
revocation or modification of any such Permits the loss of which, individually
or in the aggregate, has had or could reasonably be expected to have a HyperFeed
Material Adverse Effect. None of such Permits will be subject to suspension,
modification, revocation or nonrenewal as a result of the execution and delivery
of this Agreement or the consummation of the Contribution Transaction.
(b) HyperFeed possesses all material Permits to own or hold
under lease and operate HyperFeed Assets and to conduct the Business as
currently conducted.
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SECTION 3.10. INSURANCE. HyperFeed maintains policies of fire and
casualty, liability and other forms of insurance with respect to the Business in
such amounts, with such deductibles and against such risks and losses as are, in
HyperFeed's judgment, reasonable for the Business. The material insurance
policies maintained by HyperFeed with respect to the Business are listed in
Schedule 3.10. All such policies are in full force and effect, all premiums due
and payable thereon have been paid, and no notice of cancellation or termination
has been received with respect to any such policy which has not been replaced on
substantially similar terms prior to the date of such cancellation. To the
knowledge of HyperFeed, the Business has been conducted in a manner so as to
conform in all material respects to all applicable provisions of such insurance
policies.
SECTION 3.11. SUFFICIENCY OF HYPERFEED ASSETS. The HyperFeed Assets,
together with the services and licenses to be provided by HyperFeed under the
Services Agreement, the Maintenance Agreement, and the DataFeed License
Agreement are sufficient for the conduct of the Business immediately following
the Closing in the same manner as currently conducted. There are not any assets
used, held for use or intended to be used in the operation or conduct of the
Business that do not constitute HyperFeed Assets or which are not to be made
available to the Company pursuant to the Services Agreement.
SECTION 3.12. TAXES.
(a) For purposes of this Agreement:
"Tax" means (i) any tax, governmental fee or other
like assessment or charge of any kind whatsoever (including any tax
imposed under Subtitle A of the Code and any net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license,
withholding tax on amounts paid, payroll, employment, excise,
severance, stamp, capital stock, occupation, property, environmental or
windfall profit tax, premium, custom, duty or other tax), together with
any interest, penalty, addition to tax or additional amount due,
imposed by any Governmental Entity (domestic or foreign) responsible
for the imposition of any such tax (a "Taxing Authority"), (ii) any
liability for the payment of any amount of the type described in clause
(i) above as a result of a party to this Agreement being a member of an
affiliated, consolidated or combined group with any other corporation
at any time on or prior to the Effective Date and (iii) any liability
of any person with respect to the payment of any amounts of the type
described in clause (i) or (ii) above as a result of any express or
implied obligation of such person to indemnify any other person.
"Code" means the Internal Revenue Code of 1986, as
amended.
(b) Except as set forth in Schedule 3.12, (i) HyperFeed, and
any affiliated group, within the meaning of Section 1504 of the Code, of which
HyperFeed is or has been a member, has filed or caused to be filed in a timely
manner (within any applicable extension periods) all material Tax returns,
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reports and forms required to be filed by the Code or by applicable state, local
or foreign Tax laws, (ii) all Taxes shown to be due on such returns, reports and
forms have been timely paid in full or will be timely paid in full by the due
date thereof, and (iii) no material Tax Liens have been filed and no material
claims are being asserted in writing with respect to any Taxes.
(c) Except as set forth in Schedule 3.12, (i) neither
HyperFeed nor any of its affiliates has made with respect to HyperFeed, or the
assets of the Business, any consent under Section 341 of the Code, (ii) the
HyperFeed Assets are not "tax exempt use property" within the meaning of Section
168(h) of the Code, and (iii) None of the HyperFeed Assets are leases made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954.
(d) HyperFeed is not a "foreign person" within the meaning of
Section 1445 of the Code.
SECTION 3.13. PROCEEDINGS. Schedule 3.13 sets forth a list of all
pending Proceedings or claims with respect to which HyperFeed has been contacted
in writing by counsel for the plaintiff or claimant, arising out of the conduct
of the Business or against or affecting any HyperFeed Asset and that (a) relate
to or involve more than $5,000, (b) seek any material injunctive relief or (c)
may give rise to any legal restraint on or prohibition against the transactions
contemplated by this Agreement. Except as set forth in Schedule 3.13, none of
the Proceedings or claims listed in Schedule 3.13 as to which there is at least
a reasonable possibility of adverse determination would have, if so determined,
individually or in the aggregate, a HyperFeed Material Adverse Effect. Except as
set forth in Schedule 3.13, to the knowledge of HyperFeed, there are no
unasserted claims of the type that would be required to be disclosed in Schedule
3.13 if counsel for the claimant had contacted HyperFeed that if asserted would
have at least a reasonable possibility of an adverse determination. Except as
set forth in Schedule 3.13, HyperFeed is not a party or subject to or in default
under any material Judgment applicable to the conduct of the Business or any
HyperFeed Asset or Assumed HyperFeed Liability. Except as set forth in Schedule
3.13, there is not any Proceeding or claim by HyperFeed pending, or which
HyperFeed intends to initiate, against any other Person arising out of the
conduct of the Business. Except as set forth in Schedule 3.13, to the knowledge
of HyperFeed, there is no pending or threatened investigation of or affecting
the conduct of the Business or any HyperFeed Asset or Assumed HyperFeed
Liability.
SECTION 3.14. BENEFIT PLANS.
(a) Schedule 3.14 contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by HyperFeed for the benefit of any officers or employees of the
Business ("HyperFeed Pension Plans") and all "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase,
deferred compensation plans or arrangements and other employee fringe benefit
plans maintained, or contributed to, by HyperFeed for the benefit of any
officers or employees of the Business (all the foregoing, including HyperFeed
Pension Plans, being herein called "HyperFeed Benefit Plans"). HyperFeed has
made available to the Company true,
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complete and correct copies of (i) each HyperFeed Benefit Plan (or, in the
case of any unwritten HyperFeed Benefit Plans, descriptions thereof), (ii)
the two most recent annual reports on Form 5500 (including all schedules and
attachments thereto) filed with the Internal Revenue Service with respect to
each HyperFeed Benefit Plan (if any such report was required), (iii) the most
recent summary plan description for each HyperFeed Benefit Plan for which
such a summary plan description is required and (iv) each trust agreement,
group annuity contract or other funding and financing arrangement relating to
any HyperFeed Benefit Plan.
(b) Each HyperFeed Benefit Plan has been administered in all
material respects in accordance with its terms. HyperFeed and all HyperFeed
Benefit Plans are in compliance in all material respects with the applicable
provisions of ERISA, the Code, all other Applicable Laws and all applicable
collective bargaining agreements. Except as set forth in Schedule 3.14, all
material reports, returns and similar documents with respect to HyperFeed
Benefit Plans required to be filed with any Governmental Entity or distributed
to any HyperFeed Benefit Plan participant have been duly and timely filed or
distributed. Except as set forth in Schedule 3.14, there are no Proceedings
pending or, to the knowledge of HyperFeed, threatened against or involving any
HyperFeed Benefit Plan and there are no investigations by any Governmental
Entity or other claims (except routine claims for benefits payable in the normal
operation of HyperFeed Benefit Plans) pending or, to the knowledge of HyperFeed,
threatened against or involving any HyperFeed Benefit Plan or asserting any
rights to benefits under any HyperFeed Benefit Plan.
(c) Except as set forth in Schedule 3.14, no employee or
former employee of the Business will become entitled to any bonus, severance,
job security or similar benefit or any enhanced benefit solely as a result of
the transactions contemplated hereby.
SECTION 3.15. ABSENCE OF CHANGES OR EVENTS. Except as set forth in
Schedule 3.15, since the date of the First Quarter Balance Sheet, there has not
been any material adverse change in the business, assets, condition (financial
or otherwise), results of operations or prospects of the Business, taken as a
whole. Except as set forth in Schedule 3.15, since the date of the First Quarter
Balance Sheet, HyperFeed has caused the Business to be conducted in the ordinary
course and in substantially the same manner as previously conducted and has made
all reasonable efforts consistent with past practices to preserve the
relationships of the Business with customers, suppliers and others with whom the
Business deals.
SECTION 3.16. COMPLIANCE WITH APPLICABLE LAWS. The Business is in
compliance in all material respects with all Applicable Laws, including those
relating to occupational health and safety. HyperFeed has not received any
written or oral communication during the past three years from a Governmental
Entity that alleges that the Business is not in compliance in any material
respect with any Applicable Laws. HyperFeed has not received any written notice
that any investigation or review by any Governmental Entity with respect to any
HyperFeed Asset or the Business is pending or that any such investigation or
review is
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contemplated. This Section 3.16 does not relate to matters with respect to
Taxes, which are the subject of Section 3.12.
SECTION 3.17. TRANSACTIONS WITH AFFILIATES. None of the Contracts set
forth in Schedule 3.07 between the Business, on the one hand, and HyperFeed or
any of its affiliates, on the other hand, will continue in effect subsequent to
the Closing.
SECTION 3.18. EFFECT OF TRANSACTION. Except as set forth in Schedule
3.18, no creditor, employee, client, customer or other person having a material
business relationship with the Business has informed HyperFeed that such person
intends to change such relationship because of the contribution of the Business
or the consummation of any other transaction contemplated hereby.
SECTION 3.19. YEAR 2000 COMPLIANCE. All computer systems and software
being contributed or licensed hereunder are and will be accurately able to: (i)
process any date rollover, (ii) process calculations or computations regardless
of the dates used in such calculations whether before, on or after January 1,
2000, (iii) accept and respond to two digit year date input in a manner that
resolves any ambiguities as to the century to which such two digit year date
input relates in an appropriate manner and (iv) store and display date data in a
manner that is unambiguous as to the century to which such two digit year date
input relates. None of the above-referenced systems, software or products will
malfunction, cease to function, generate incorrect data or provide incorrect
results when providing and/or receiving data in connection with any valid date,
whether occurring before, on or after January 1, 2000.
SECTION 3.20. DISCLOSURE. No representation or warranty of HyperFeed
contained in this Agreement or in any Ancillary Agreement, and no statement
contained in any document, certificate or Schedule furnished or to be furnished
by or on behalf of HyperFeed to the Company or any of their representatives
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading or necessary in order to fully
and fairly provide the information required to be provided in any such document,
certificate or Schedule.
ARTICLE IV
COVENANTS
SECTION 4.01. REASONABLE BEST EFFORTS. Each party shall, and shall
cause its affiliates to, use its reasonable best efforts (at its own expense) to
obtain, and to cooperate in obtaining, all consents from third parties necessary
or appropriate to permit the Contributions to be completed.
SECTION 4.02. EXPENSES; TRANSFER TAXES.
(a) Except as set forth in Section 4.02(b) below and in
Section 4.03 and 6.03, all costs and expenses incurred in connection with this
Agreement and the Ancillary
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Agreements and the transactions contemplated hereby and thereby shall be paid
by the party incurring such expense.
(b) Each party shall be responsible for and shall pay, as and
when incurred, all Transfer Taxes, documentary Taxes and filing or recording
fees and applicable to the Contributions that such party incurs. Each party
shall use reasonable effort to avail itself of any available exemptions from any
such Taxes or fees, and to cooperate with the other parties in providing any
information and documentation that may be necessary to obtain such exemptions.
SECTION 4.03. POST-CLOSING COOPERATION.
(a) HyperFeed and the Company shall cooperate with each other,
and shall cause their respective officers, employees, agents, auditors and
representatives to cooperate with each other, after the Closing to ensure the
orderly transition of the Business from HyperFeed to the Company and to minimize
any disruption to the Business that might result from the transactions
contemplated hereby. After the Closing, upon reasonable written notice,
HyperFeed and the Company shall furnish or cause to be furnished to each other
and to their respective employees, counsel, auditors and representatives access,
during normal business hours, to such information and assistance relating to the
Business (to the extent within the control of such party) as is reasonably
necessary for financial reporting and accounting matters.
(b) After the Closing, upon reasonable written notice,
HyperFeed and the Company shall furnish or cause to be furnished to each other,
as promptly as practicable, such information and assistance relating to
HyperFeed Assets (including, access to books and records) and the Contributions,
to the extent within the control of such party, as is reasonably necessary for
the filing of all Tax returns, and making of any election related to Taxes, the
preparation for any audit by any Taxing Authority, and the prosecution or
defense of any claim, suit or proceeding related to any Tax return. HyperFeed
and the Company shall cooperate with each other party in the conduct of any
audit or other proceeding relating to Taxes involving the Business.
(c) Each party shall reimburse the others for reasonable
out-of-pocket costs and expenses incurred in assisting such party pursuant to
this Section 4.03. No party shall be required by this Section 4.03 to take any
action which would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations.
SECTION 4.04. FURTHER ASSURANCES. From time to time, as and when
requested by any party, each party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions (subject to Section 4.01),
as such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements,
including, in the case of HyperFeed, executing and delivering to the Company
such assignments, deeds, bills of sale, consents and other instruments as the
Company or its counsel may reasonably request as necessary or desirable for such
purpose.
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SECTION 4.05. QUOTESOCKET COMPATIBILITY. The Company agrees and
covenants that until such time as the DataFeed License Agreement is terminated
by the Company pursuant to Section 8B thereof, the Company shall take reasonable
steps to insure that Orbit (as defined in Schedule 1.02 to this Agreement) shall
remain solely compatible with QuoteSockets (as defined in Schedule 1.02 to this
Agreement) such that at all times Orbit will only be able to receive Data Feed
(as defined below) from HyperFeed and from no other source. As used in this
Section 4.05 Data Feed shall mean any market datafeed provided via the internet,
satellite or land line containing market data information obtained, selected and
consolidated under the authority of various agencies and other information
providers.
SECTION 4.06. NON-DISCLOSURE OF CUSTOMER LISTS. HyperFeed agrees and
covenants that it shall not disclose, sell, lease or rent the customer lists of
HyperFeed relating to the Business which are being contributed to the Company
hereunder to any third party without the prior written consent of the Company.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. INDEMNIFICATION BY HYPERFEED. HyperFeed shall indemnify
the Company and each of its affiliates and each of its officers, directors,
employees, stockholders, agents and representatives against, and hold them
harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) ("Losses"), as incurred (payable promptly
upon written request), arising from, in connection with or otherwise with
respect to:
(i) any breach of any representation or warranty of
HyperFeed that survives the Closing and is contained in this Agreement, in
any Ancillary Agreement or in any document delivered in connection herewith;
(ii) any breach of any covenant of HyperFeed contained in
this Agreement or in any Ancillary Agreement;
(iii) any Excluded HyperFeed Liability;
(iv) the disclosure by any current, former or future
personnel of HyperFeed of any proprietary information of the Company and its
affiliates; and
(v) any fees, expenses or other payments incurred or owed
by HyperFeed to any brokers, financial advisors or comparable other persons
retained or employed by it in connection with the transactions contemplated
by this Agreement.
SECTION 5.02. INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify the HyperFeed and each of its respective affiliates and each of its
officers, directors,
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employees, stockholders, agents and representatives against, and hold them
harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) ("Losses"), as incurred (payable promptly
upon written request), arising from, in connection with or otherwise with
respect to:
(i) any breach of any representation or warranty of the
Company that survives the Closing and is contained in this Agreement, in any
Ancillary Agreement or in any document delivered in connection herewith;
(ii) any breach of any covenant of the Company contained
in this Agreement or in any Ancillary Agreement;
(iii) any Assumed HyperFeed Liability; and
(iv) the disclosure by any current, former or future
personnel of the Company of any proprietary information of HyperFeed and its
affiliates.
SECTION 5.03. CALCULATION OF LOSSES. The amount of any Loss for which
indemnification is provided under this Article V shall be net of any amounts
actually recovered by the indemnified party under insurance policies with
respect to such Loss and shall be (i) increased to take account of any net Tax
cost incurred by the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. In computing the amount of any such
Tax cost or Tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Loss.
SECTION 5.04. TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless any party, (i) pursuant to Section 5.01(i) or
5.02(i) shall terminate when the applicable representation or warranty
terminates pursuant to Section 5.06 and (ii) pursuant to the other clauses of
Section 5.01 or 5.02 shall not terminate; provided, however, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim (stating in reasonable detail the basis of such claim)
pursuant to Section 5.05 to the party to be providing the indemnification.
SECTION 5.05. PROCEDURES.
(a) In order for a party (the "indemnified party"), to be
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim made by any person against the indemnified
party (a "Third Party Claim"), such indemnified party must notify the
indemnifying party in writing of the Third Party Claim promptly following
receipt by such indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been
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actually and materially prejudiced as a result of such failure. Thereafter,
the indemnified party shall deliver to the indemnifying party, promptly
following the indemnified party's receipt thereof, copies of all notices and
documents (including court papers) received by the indemnified party relating
to the Third Party Claim and not also addressed to the indemnifying party.
(b) If a Third Party Claim is made against an indemnified
party, the indemnified party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party; provided, however, that such counsel is
not reasonably objected to by the indemnified party. Should the indemnifying
party so elect to assume the defense of a Third Party Claim, the indemnifying
party shall not be liable to the indemnified party for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all
the indemnified parties shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying party of
records and information that are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any employees available on
a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Whether or not the indemnifying party
assumes the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld). If the indemnifying party
assumes the defense of a Third Party Claim, the indemnified party shall agree
to any settlement, compromise or discharge of a Third Party Claim that the
indemnifying party may recommend and that by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and that would not otherwise adversely
affect the indemnified party. Notwithstanding the foregoing, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim
(and shall be liable for the fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party
Claim seeks an order, injunction or other equitable relief or relief for
other than money damages against the indemnified party that the indemnified
party reasonably determines, after conferring with its outside counsel,
cannot be separated from any related claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the indemnifying party shall be
entitled to assume the defense of the portion relating to money damages.
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(c) OTHER CLAIMS. In the event any indemnified party should
have a claim against any indemnifying party under Section 5.01 or 5.02 that
does not involve a Third Party Claim being asserted against or sought to be
collected from such indemnified party, the indemnified party shall deliver
notice of such claim with reasonable promptness to the indemnifying party.
The failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability that it may have
to such indemnified party under Section 5.01 or 5.02, except to the extent
that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
indemnified party within 15 calendar days following its receipt of such
notice that the indemnifying party disputes its liability to the indemnified
party under Section 5.01 or 5.02, such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 5.01 or 5.02 and the indemnifying party
shall pay the amount of such liability to the indemnified party on demand or,
in the case of any notice in which the amount of the claim (or any portion
thereof) is estimated, on such later date when the amount of such claim (or
such portion thereof) becomes finally determined. If the indemnifying party
has timely disputed its liability with respect to such claim, as provided
above, the indemnifying party and the indemnified party shall proceed in good
faith to negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
SECTION 5.06. SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
representations and warranties contained in this Agreement, in any Ancillary
Agreement or in any document delivered in connection herewith shall survive the
Closing solely for purposes of Article V and shall terminate at the close of
business five years following the Effective Date. The covenants of the Company
and of HyperFeed contained in Sections 4.05 and 4.06 of this Agreement shall be
perpetual in nature and shall indefinitely survive the Closing, subject to the
earlier termination of Section 4.05 in accordance with its terms.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. 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
HyperFeed may assign this Agreement and its rights and obligations hereunder to
any entity controlling, controlled by or under common control with, HyperFeed,
or to any entity that acquires HyperFeed by purchase of stock or by merger or
otherwise, or by acquiring all or substantially all of HyperFeed's assets,
provided that any such assignee succeeds to all of the rights and is subject to
all of the obligations of HyperFeed under this Agreement. Any attempted
assignment in violation of this Section 6.01 shall be null and void ab initio.
SECTION 6.02. NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article V, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and
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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.
SECTION 6.03. 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.
SECTION 6.04. NOTICES. 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
Attention: John Juska
SECTION 6.05. INTERPRETATION; EXHIBITS AND SCHEDULES; CERTAIN
DEFINITIONS.
(a) The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit but not otherwise defined therein, shall have the meaning
as defined in 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.
(b) For all purposes hereof:
"affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person.
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"including" means including, without limitation.
"person" means any individual, firm, corporation,
partnership, limited liability company, trust, joint venture,
Governmental Entity or other entity.
"subsidiary" of any person means another person, in
which an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first person.
SECTION 6.06. 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.
SECTION 6.07. ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements, along with the Schedules and Exhibits thereto, contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede 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 or in
the Ancillary Agreements.
SECTION 6.08. 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.
SECTION 6.09. AMENDMENTS AND WAIVERS. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 6.10. CONSENT TO JURISDICTION. Each of HyperFeed and the
Company 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, any Ancillary
Agreement or any transaction contemplated hereby or thereby. Each of
HyperFeed and the Company 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 the Company 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
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jurisdiction in this Section 7.10. Each of HyperFeed and the Company
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
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.
SECTION 6.11. 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, HyperFeed and the Company have duly executed this
Agreement as of the date first written above.
HYPERFEED TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ John E. Juska
------------------------------
John E. Juska
Senior Vice President
PCQUOTE.COM, INC. ,
a Delaware corporation
By: /s/ Timothy K. Krauskopf
------------------------------
Timothy K. Krauskopf
President
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SCHEDULE 1.01(a)
HYPERFEED CONTRIBUTED ASSETS
The HyperFeed Contributed Assets shall mean all of the Assets as set forth on
the First Quarter Balance Sheet as of March 31, 1999, including without
limitation the following:
(A) EQUIPMENT. All of the furniture, office equipment, computer
equipment, machinery, equipment, and other items of personal property owned and
used by HyperFeed in connection with the Business;
(B) RECORDS. Copies of all books, documents and records of, or relating
to any material necessary to the operation of the Business (including all
financial and business records, customer lists and files, supplier records,
insurance policies and any claims or credits thereunder and copies of all
personnel records and payroll records for the current and last two calendar
years for all employees who will become employees of the Company as of the
Closing);
(C) ACCOUNTS RECEIVABLE. All accounts receivable, notes receivable (and
any security therefor) and all other receivables of any kind related to the
Business;
(D) GOODWILL. All goodwill of the Business;
(E) CUSTOMER LISTS. All customer lists of HyperFeed relating to the
Business;
(F) INTELLECTUAL PROPERTY. All Intellectual Property (including,
without limitation, the copyrights and rights of copyright) and technology
relating to the Business and listed on Exhibit A attached hereto; and
(G) CONTRACTS. All rights and privileges arising from the contracts
and agreements relating to the Business and specifically listed on Exhibit B
attached hereto.
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EXHIBIT A TO SCHEDULE 1.01(a)
HYPERTOOLS:
HyperTools, including object code, source code, application documentation and
source code documentation, as described in the documentation. HyperTools
includes any one of a variety of programming interfaces which "talks" or
interfaces with a HyperFeed 2000 Quote Server. HyperTools assist developers in
writing programs that "pull" out only the unique data desired from the entire
HyperFeed 2000 data stream. HyperTools include the following:
HYPERSCRIPT LIMITED:
A Do-it-Yourself toolkit, which provides developers with everything
needed to quickly and easily integrate the HyperFeed 2000 datafeed into
web sites, Intranets and Internet-based financial applications.
HyperScript Limited allows a user to cap the number of symbols a web
site visitors or application users can access. HyperScript Limited
allows a user to pre-select up to 30 ticker symbols.
HYPERSCRIPT UNLIMITED:
A Do-it-Yourself toolkit, HyperScript Unlimited which provides
developers with everything needed to quickly and easily integrate the
HyperFeed 2000 datafeed into web sites, Intranets and Internet-based
financial applications. HyperScript Unlimited allows developers to
provide their web site visitors or application users with unlimited
access to all of HyperFeed 2000's price and fundamental data.
HyperScript Unlimited provides application portability and, end-users
can submit queries as many times as they wish.
MARKETSMART:
MarketSmart service including all applicable object code, source code,
application documentation and source code documentation, as described in the
documentation. MarketSmart Real-Time is HyperFeed's PC Quote branded real-time
Web Presence. Located within www.pcquote.com, the site functions as a real-time
quote source for Web based clients. The site also includes partnerships with
various content providers who supply research and analysis to PC Quote's end
user. MarketSmart delivers real-time HyperFeed quote data to the end user.
MarketSmart allows users to organize this data in a variety of fashions that
suit their investment needs. The user can conduct research on their investments
through a variety of third party applications and content.
WEB TEMPLATES:
Web site developments products known as Web Templates, including all applicable
object code, source code, application documentation and source code
documentation, as described in the documentation. Web Templates are used to
enhance the content of customer web sites, and are co-branded. Web Templates
allow customers to quickly add financially-enriched web pages that are formatted
to compliment the customer's web site, without having to buy expensive servers
and development resources.
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PAY PER QUOTE:
The Pay Per Quote server based application product including all applicable
object code, source code, application documentation and source code
documentation, as described in the documentation.
DOMAIN NAME AND WEBSITE:
The Internet Universal Resource Locator and domain name, including all
sub-domain names, known and identified as:
http://www.pcquote.com
Including all html, java, scripts and other languages used to create the
pcquote.com web site, including all applicable object code, source code,
application documentation and source code documentation, as described in the
documentation.
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EXHIBIT B TO SCHEDULE 1.01(a)
DoubleClick Network Affiliate Agreement by and between PC Quote, Inc. and
DoubleClick, Inc. dated April 19, 1999
D.A.R.T. Service Agreement by and between PC Quote, Inc. and DoubleClick,
Inc. dated September 30, 1998
Internet Information Access Agreement by and between PC Quote, Inc. and
@Plan, Inc. dated April 30, 1998
Representative Agreement by and between PC Quote, Inc. and Fairclough &
Associates dated August 20, 1998
Mutual License Agreement for Limited Redistribution by and between PC Quote,
Inc. and VectorVest, Inc. dated June 1, 1998
Web Site Content Agreement by and between PC Quote, Inc. and IQC
Corporation dated February 1, 1999, as amended by Amendment 1 dated March 2,
1999
Web Site Content Agreement by and between PC Quote, Inc. and and IQ Net dated
April 23, 1997
DataFeed License Agreement by and between PC Quote, Inc. and Zacks Investment
Research dated September 3, 1998
Internet Distribution License by and between PC Quote, Inc. and Market
Guide, Inc dated February 4, 1998 and any related arrangements or
understandings
The Market Guide Database Distribution Agreement by and between PC Quote,
Inc. and Market Guide, Inc. dated June 1, 1994
Internet Co-Branding Agreement by and between PC Quote, Inc. and IPO.COM Inc.
dated December 29, 1998
Master Agreement for InterNetworking Service by and between PC Quote, Inc.
and GTE Internetworking Incorporated dated August 31, 1998, as amended by
letter agreement
Data Acquisition and Distribution Agreement by and between PC Quote, Inc.
and Strategic Weather Services dated September 16, 1998
Data Acquisition and Distribution Agreement by and between PC Quote, Inc.
and Hartfield Management, Inc. dated October 7, 1998
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Dow Jones Financial News Services Composite Feed Master Distribution
Agreement by and between PC Quote, Inc. and Dow Jones & Company dated August
23, 1994, as amended by letter agreement dated August 8, 1996, as further
amended by letter agreement dated July 15, 1998
Content Distribution Agreement by and between PC Quote, Inc. and Dow Jones &
Company dated January 9, 1998
Multex Investor Network Affiliate Operating agreement by and between PC
Quote, Inc. and Multex.com, Inc. dated December 22, 1999
Web Site Data License Agreement by and between PC Quote, Inc. and Pfizer,
Inc. dated November 20, 1997
All of the existing Web Template, Co-Branding and HyperScript customer
contracts to which HyperFeed is a party
All of the existing PCQuote 6.0 on the Internet End-User Agreements
All of the existing advertising contracts to which HyperFeed is a party
All of the existing Omega SDK contracts to which HyperFeed is a party
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SCHEDULE 1.01(b)
HYPERFEED LICENSED ASSETS
The HyperFeed Licensed Assets shall mean all of the Intellectual Property
related to the following:
ORBIT:
Orbit, including object code, source code, application documentation and source
code documentation as described in the documentation. Orbit is a software
product comprised of a set of modular, front-end, financial market software
applications, created by HyperFeed used as a real-time market tool for the
online investor. These applications are tailored specifically for use with
HyperFeed, and utilize the Quote Socket application programming interface
("API"). Orbit is written in C++ utilizing Microsoft Foundation Classes, each
application is self contained, and loosely coupled to the other applications
through propriety API's.
QUOTESOCKETS:
QuoteSockets object code and documentation, as described in the documentation.
QuoteSockets is the marketing name given to the propriety middle-ware layer that
provides connectivity from the user applications to HyperFeed data stored on a
quote server. Connectivity between client and server is achieved using the
TCP/IP protocol. Each Client workstation communicates to the server what data it
requires by subscribing to the Quote Server. The server maintains a per client
interest list and publishes data to the client as required. Quote Sockets was
written in C++ utilizing Microsoft Foundation Classes.
HYPERFEED SOFTWARE DEVELOPMENT KIT FOR QUOTESOCKETS:
QuoteSockets Software Development Kit ("SDK"), including documentation, as
described in the documentation. QuoteSockets SDK is a software tool which
enables a programmer to develop applications for a specific platform and
integrate HyperFeed 2000's market data. The SDK includes one or more programming
interfaces and programming tools (including API and Active X Controls),
documentation, sample code, access to technical support, and a 3-month
subscription to the delayed HyperFeed 2000 datafeed over the Internet.
HYPERSERVER:
Configuration specifications and documentation for HyperServer, as described in
the documentation. HyperServer is a server specially configured according to
HyperFeed specifications to receive HyperFeed 2000 market data directly from the
HyperFeed 2000 ticker plant via satellite or landline. HyperServer configured
servers can be integrated into a LAN, Ethernet, or Internet Service Provider to
disseminate data onto multiple desktops. End-users are able to view and
manipulate robust market data through any program or web application written
specifically to read and display the HyperFeed 2000 data.
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EXHIBIT A
FORM OF MAINTENANCE AGREEMENT
30
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EXHIBIT B
FORM OF DATAFEED LICENSE AGREEMENT
31
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EXHIBIT C
FORM OF SERVICES AGREEMENT
32
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EXHIBIT D
FORM OF NON-COMPETITION AGREEMENT
33
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EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
34
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EXHIBIT F
FORM OF TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
35
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EXHIBIT G
FORM OF SUBLEASE
36
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TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
THIS TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
("Agreement") is executed this 30th day of August 1999 and effective as of
April 1, 1999 (the "Effective Date"), by and between HYPERFEED TECHNOLOGIES,
INC., a Delaware corporation ("HyperFeed"), and PCQUOTE.COM, INC., a Delaware
corporation (the "Company").
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
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(y) the Taxing Jurisdiction's highest marginal tax rate applicable to the
taxable income of 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.
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"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) 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
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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.
"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).
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"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.
"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.
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"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.
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
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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 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.
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(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 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
Income 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.
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(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.
(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. Hyperfeed shall provide PCQuote.com with
schedules showing the calculation of the PCQuote.com Separate Tax Return Amount
at least fifteen (15) days before the due date (without extensions) of the
HyperFeed Consolidated Federal Returns.
(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
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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.
Hyperfeed shall provide PCQuote.com with schedules showing the calculation of
the PCQuote.com Separate Tax Return Amount at least fifteen (15) days before
the due date (without extensions) of the HyperFeed Consolidated Federal
Returns.
(c) Estimated Tax Payments.
(i) PCQuote.com shall pay to HyperFeed quarterly installments of
estimated Tax with respect to the period or periods beginning on or after the
date of the Contribution and ending on or before the termination of the
Effective Period. 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 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 by PCQuote.com of estimated Tax pursuant to Section 2.6(c)(i). 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.
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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 2 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 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 2 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 is required to make 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
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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.
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 PCQuote.com to the
extent that such Proceeding relates to items for which PCQuote.com is
responsible hereunder and the consent of PCQuote.com shall be required with
respect to the settlement of any item for which PCQuote.com would be responsible
hereunder.
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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, 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
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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 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
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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) and this
Section 5.2 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 other than Refunds (and any
interest thereon received from the applicable Taxing Jurisdiction) attributable
to the PCQuote.com Separate Tax Return Amount. 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") )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
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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 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
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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 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
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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
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.
19
<PAGE>
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 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.
20
<PAGE>
IN WITNESS WHEREOF, HyperFeed and the Company have duly executed this
Agreement as of the date first written above.
HYPERFEED TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ John E. Juska
----------------------------------
John E. Juska
Senior Vice President
PCQUOTE.COM, INC.,
a Delaware corporation
By: /s/ Timothy K. Krauskopf
----------------------------------
Timothy K. Krauskopf
President
21
<PAGE>
Exhibit 10.11
CONFIDENTIAL TREATMENT
PORTIONS INDICATED BY A
[***] HAVE BEEN OMITTED
AND FILED SEPARATELY
WITH THE COMMISSION
PCQUOTE
- -------------------------------------------------------------------------------
CO-BRANDING AGREEMENT
This agreement is made effective Oct. 11, 1996 by and between PC QUOTE,
INC. (hereinafter referred to as "PCQ"), a Delaware Corporation with its
principal place of business at 300 South Wacker Drive, Chicago, Illinois 60605
and AB Wately, Inc. (hereinafter referred to as "ABW") with its principal place
of business at 33 West 17th Street, New York, NY 10011. This agreement shall
apply to said ABW and all of its subsidiaries and related companies.
DEFINITIONS:
SOFTWARE
PC QUOTE 6.0-TM- for Windows on the Internet is a software application that
displays market data information, provided via the digital Hyperfeed, in the
form of quotes, charts, graphs, tables, board views, tickers and other
analytical tools.
HYPERFEED
The PC Quote proprietary digital data feed transmitted via satellite, land line,
or Internet with advanced compression technology, containing financial market
information obtained by PCQ from the institutions and exchanges listed in
Section 5 of this Agreement. This market data includes stock quotes, futures
and options trading, commodities, and other related information.
WITNESSETH:
NOW, THEREFORE, for good and valuable consideration, and in consideration of the
mutual covenants and conditions herein set forth, and with the intent to be
legally bound thereby, ABW and PCQ hereby agree to the following:
1. THE CO-BRANDED SERVICE
A. PCQ agrees to allow ABW to co-brand the PCQ SOFTWARE in order to
provide a value added service on ABW's World Wide Web site. The co-branded
SOFTWARE will be made available via ABW software housed at the ABW office listed
in this Agreement. The server will be accessed by all ABW subscribers in order
to download the SOFTWARE and receive the HYPERFEED.
<PAGE>
B. PCQ will provide a continuous HYPERFEED to the ABW servers;
however, PCQ will control the receipt of the HYPERFEED by ABW clients via a
remote access server on PCQ's site that will authorize each new ABW account.
ABW agrees to sign up all new subscribers to the co-branded service,
including execution of all applicable service and exchange agreements, will
send to PCQ the executed subscriber agreements before access to the quote
servers will be provided to ABW clients by PCQ. PCQ shall have the sole
ability to authorize access to the market data contained in the HYPERFEED by
ABW clients.
D. PCQ and Townsend shall retain title and all copyrights or
proprietary rights to the SOFTWARE and HYPERFEED provided to ABW and ABW's
clients pursuant to the Agreement. ABW will not provide any unauthorized
access to the co-branded service, nor reproduce or redistribute the service
in any way.
E. ABW agrees to include the following in the co-branded pages displaying
quotes: "All quotes provided by PC Quote, Inc." ABW also agrees to include the
following disclaimer on the access page to the co-branded service:
"PC Quote is not subject to liability for truth, accuracy,
or completeness of the market data information nor is PC
Quote liable for errors, mistakes or omissions in the data
or for any delays or interruptions in the end user's receipt
of the data. PC Quote does not warrant that the data
provided may be relied upon for trading purposes."
2. TERM
A. The initial term of this License Agreement shall be two (2) years from
the effective date of this Agreement. The effective date for purposes of this
Agreement is the contract date as specified on the signature page of this
Agreement. Neither PCQ nor ABW shall terminate or alter this Agreement except
as stated herein.
B. At the conclusion of the initial term, this entire Agreement shall
automatically renew itself for an additional one (1) year term unless either
party sends notice at least sixty (60) days before the anniversary of the
effective date of this Agreement. Notice expressing a desire to terminate this
Agreement will be sent by certified mail to the address indicated above. Said
termination will be effective as of the last day of the month in which this
anniversary occurs.
C. Notwithstanding the provisions of (A), and (B) above, should a party
to this Agreement be in material breach of the Agreement, the other party may
terminate the Agreement thirty (30) days after notice of said material breach is
received, and only if such material breach is not cured within thirty (30) days
of receipt of notice.
2
<PAGE>
3. PAYMENT FOR SERVICE
A. Beginning with the date specified on the fee schedule attached
hereto as Schedule A, or upon completion of the Installation and testing of
all equipment and services, which ever is later. ABW will commence payment
of a monthly fee for the right to permit access by ABW's clients to said
SOFTWARE and HYPERFEED.
B. The charges for the services set forth in this Agreement shall be
invoiced monthly. ABW agrees to pay said charges within thirty (30) days of
the monthly invoice date. ABW may issue a purchase order for billing
purposes. The invoices must reference that purchase order number and be sent
to the "Bill To" address stated on the purchase order. The terms of this
negotiated Agreement shall supercede those contained on that purchase order.
C. All payments will be made in US Dollars drawn on a US bank. ABW will
provide a complete list of all clients using the format described in Schedule B
with each payment.
D. Any payments which have not been received by PCQ within thirty (30)
days of the Invoice date shall be subject to a FINANCE CHARGE of 1.0% per month
which is a corresponding ANNUAL PERCENTAGE RATE of 12% on the outstanding
balance.
F. Any invoice submitted by PCQ shall be deemed correct unless ABW
advises PCQ in writing, within thirty (30) days of the receipt of the invoice,
that it disagrees with the invoice and specifies the nature of the disagreement.
G. Any sales, use, excise, value added and local property taxes will be
payable by ABW should such taxes be applicable.
H. In the event that any invoice is not paid by ABW within forty-five
(45) days after receipt, and when no discrepancy issues have been identified by
ABW which are in some stage of resolution, after giving notice to ABW, PCQ may
terminate this agreement and ABW's access to and use of SOFTWARE and HYPERFEED
provided hereunder unless ABW pays such invoice prior to the termination date
specified in the Termination Notice. The remedies contained herein are
cumulative and are in addition to all other rights and remedies available to PCQ
under this Agreement, by operation of law, or otherwise.
I. Upon termination as provided for in this Agreement, ABW will pay all
charges for services and fees for the entire month in which that termination
becomes effective.
4. TECHNICAL SUPPORT
A. ABW agrees to field all initial customer support requests and assist
its clients to the best of its knowledge and ability. If the support issue is
of a complex nature that ABW is unable to solve, ABW may forward the call on to
the PCQ technical support staff.
3
<PAGE>
5. EXCHANGE AUTHORIZATION
A. The ABW hereby acknowledges and agrees that the HYPERFEED provided
under this Agreement contains market information obtained, selected and
consolidated by PCQ under the authority of various agencies, including but
not limited to, the New York Stock Exchange, American Stock Exchange, Pacific
Stock Exchange, Midwest Stock Exchange, Chicago Board Options Exchange, the
Options Price Reporting Authority, the Consolidated Tape Association, Chicago
Board of Trade, Chicago Mercantile Exchange/International Monetary Market,
Kansas City Board of Trade, Minneapolis Grain Exchange, Commodities Exchange
Center, New York Futures Exchange, Mid-America Commodity Exchange, and
Consolidated Canadian Group and that the ABW's use of the service for
internal or external redistribution of date is authorized and regulated by
said agencies.
6. LIMITATIONS OF LIABILITY, REMEDIES ON DEFAULT
A. The information and data used in the HYPERFEED and SOFTWARE
provided under this Agreement, including option prices, stock prices,
commodity prices, dividends, dividend dates, volatilities, deltas and other
variables, are obtained by PCQ from the various exchanges and other sources
which are believed to be reliable and PCQ agrees to run reasonable control
checks thereon to verify that the data transmitted by PCQ is the same as the
data received from the various exchanges and other sources. However, PCQ
shall not be subject to liability for truth, accuracy, or completeness of the
information received by PCQ from the various exchanges and other sources and
conveyed to ABW or for errors, mistakes or omissions therein or for any
delays or interruptions of the HYPERFEED or SOFTWARE from whatever cause.
This agreement does not violate any agency requirements and PCQ has the right
to enter into this agreement from its information providers.
B. PCQ shall not be responsible for, nor be in default under this
Agreement due to delays or failure of performance resulting from Internet
Service Provider delivery problems or failure, or any communication or
delivery problems associated with the Internet in general. Furthermore, PCQ
and ABW shall not be responsible for nor in default due to acts or causes
beyond its control, including but not limited to: acts of God, strikes,
lockouts, communications line or equipment failures, power failures,
earthquakes, or other disasters. Should such an occurrence render the
HYPERFEED or SOFTWARE inoperable or unavailable for a period over ten (10)
days, then ABW shall have the right to discount their billing in proportion
to the delay.
C. LIABILITY UNDER THIS AGREEMENT FROM ANY AND ALL CAUSES, INCLUDING,
BUT NOT LIMITED TO, PROGRAM MALFUNCTION OR OPERATIONAL NEGLIGENCE, SHALL BE
LIMITED TO GENERAL MONEY DAMAGES IN AN AMOUNT NOT TO EXCEED THE TOTAL CHARGES
PAID BY ABW FOR THE SERVICES DURING THE MOST RECENT TWELVE (12) MONTHS OF THE
AGREEMENT. SUCH LIMITATION SHALL BE THE EXTENT OF PCQ OR ABW'S LIABILITY
REGARDLESS OF THE FORM IN WHICH ANY LEGAL OR EQUITABLE ACTION MAY BE BROUGHT
AGAINST PCQ OR ABW, AND THE FOREGOING
4
<PAGE>
SHALL CONSTITUTE PCQ'S OR ABW'S SOLE REMEDY. IN NO EVENT WILL EITHER PARTY
BE RESPONSIBLE FOR LOST PROFITS OR SPECIAL INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHICH ABW OR PCQ INCUR OR EXPERIENCE ON ACCOUNT OF
ENTERING INTO OR RELYING ON THIS AGREEMENT, EVEN IF PCQ OR ABW HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
7. EXCLUSION OF WARRANTIES
It is expressly understood and agreed to by the parties hereto that
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, ALL WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE HEREBY EXCLUDED.
8. CONFIDENTIALITY OF PROPRIETARY INFORMATION
A. ABW understands and acknowledges the proprietary nature of the
HYPERFEED and SOFTWARE provided by PCQ and that said HYPERFEED and SOFTWARE
have been developed as a trade secret of PCQ and at its expense. ABW agrees
to hold said information in the same manner as ABW deals with its own
proprietary information and trade secrets. Furthermore, ABW agrees not to
attempt any reverse engineering of the HYPERFEED to decode the signals used
by PCQ in transmitting the information.
B. PCQ understands the proprietary nature of any information belonging
to ABW, and recognizes the harm that can be occasioned to user by disclosure
of information relative to ABW's activities, PCQ agrees to hold such
information in the same manner as PCQ deals with its own proprietary
information and trade secrets.
C. PCQ acknowledges the confidential nature of ABW's use of the
SOFTWARE and HYPERFEED during the initial term of this agreement. Due to the
unannounced platform on which ABW shall make available its electronic service
to its client during this initial term, PCQ shall in no way disclose to other
parties the substance nor acknowledge the existence of this agreement. Any
advertising or disclosure of the relationship between the parties, use of
either's marks, names or reference by the other shall be approved by both
parties prior to release.
9. INDEMNIFICATION
A. ABW hereby agrees to defend, indemnify and hold harmless PCQ, its
employees, agents, successors and assigns, harmless, including reasonable
attorney's fees, from and against any of the following:
1. Any and all claims, liabilities, and obligations claimed by any
third party or parties against PCQ and arising directly out of ABW's use of
the Service.
5
<PAGE>
2. Any and all claims, liabilities, or obligations resulting from
ABW's misrepresentations, negligence, willful misconduct, breach of
warranty or non-performance of any of the covenants or obligations under
this Agreement or from any misrepresentations or omissions made by ABW to
PCQ, including specifically, but not limited to, any authority required of
ABW pursuant to Section 6 hereof.
B. Such indemnification by ABW shall only be effective if the claim,
liability or obligation claimed by the third party is in no way related to
PCQ's negligence, willful misconduct or failure to perform any of its
obligations under this Agreement.
C. PCQ hereby agrees to defend, indemnify and hold ABW harmless,
including reasonable attorney's fees, from and against any claim that the
SOFTWARE or HYPERFEED infringes on the patent, copyright or other proprietary
rights of another, including any and all claims, liabilities, or obligations
resulting from PCQ's negligence, willful misconduct, misrepresentations,
breach of warranty or non-performance of any of the covenants or obligations
under this Agreement.
D. Such indemnification by PCQ shall only be effective if:
1. The claim, liability or obligation claimed by the third party is
in no way related to ABW's negligence, willful misconduct or failure to
perform any of its obligations under this Agreement.
2. ABW notifies PCQ promptly in writing of any claim or threatened
claim against ABW and thereafter cooperates with PCQ so that PCQ will not
be prejudiced in the defense, settlement or other handling thereof and ABW
permits PCQ, at PCQ's option and expense, to control the defense,
settlement or other handling of such claim.
10. ASSIGNMENT
This Agreement or any rights or obligations granted hereunder may not be
assigned by ABW without the prior written consent of PCQ.
11. APPLICABLE LAW AND VENUE
This Agreement shall be interpreted, construed and enforced in all
respects in accordance with the laws of the State of Illinois, except with
regards to its rules regarding choice of law. Each party irrevocably
consents to the jurisdiction of the courts of the State of Illinois and the
federal courts situated in the State of Illinois, in connection with any
action to enforce the provisions of this Agreement, to recover damages or
other relief for breach or default under this Agreement, or otherwise arising
under or by reason of this Agreement.
12. SEVERABILITY AND SURVIVAL
A. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this
6
<PAGE>
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
B. The provisions dealing with indemnification and confidentiality and
any other section of this Agreement, unless specifically stated otherwise,
which may reasonably be interpreted or construed as surviving the completion,
expiration, termination or cancellation of this Agreement, shall survive the
completion, expiration, termination or cancellation of this Agreement.
13. MISCELLANEOUS PROVISIONS
A. The parties to this Agreement are independent contractors with
requisite corporate power and authority to enter into this Agreement and
carry out the transactions contemplated hereby. Neither party is a ABW or
representative of the other party. Neither party shall have any right, power
or authority to enter into any agreement for or on behalf of, or incur any
obligation or liability of, or to otherwise bind, the other party. This
Agreement shall not be interpreted or construed to create an association,
joint venture or partnership between the parties or to impose any partnership
obligation or liability upon either party.
B. Any notice, approval, request, authorization, direction or other
communication under this Agreement shall be given in writing and shall be
deemed to have been delivered and given for all purposes, (i) on the delivery
date if delivered personally to the party to whom the same is directed, or
(ii) three business days after the mailing date, whether or not actually
received, if sent by registered U.S. mail postage and charges prepaid, to the
address of the party to whom the same is directed as set forth in the
introductory paragraph of this Agreement. Either party may change its
address specified above by giving the other party notice of such change in
accordance with this Section 13.B.
All notices delivered to ABW shall be delivered to the address above,
attention:
Harry Simpson
AB Watley
C. The failure of either party to insist upon or enforce strict
performance by the other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely upon any
such provision of right in that or any other instance; rather, the same shall
be and remain in full force and effect.
14. ENTIRE AGREEMENT
A. As used herein, the term "Agreement" includes any written amendments,
modifications or supplements made in accordance herewith.
7
<PAGE>
B. ABW and PCQ acknowledge that they have read this Agreement,
understand it, and agree to be bound by its terms and further acknowledge and
agree that it constitutes the entire agreement of the parties hereto and
supersedes all other proposals, oral or written, and all other communications
between the parties relating to the subject matter hereof and this Agreement
may not be modified or terminated orally. No amendment to this Agreement
shall be effective unless it is in writing and signed by duly authorized
representatives of both parties.
IN WITNESS WHEREOF, the parties hereto hereby execute this Agreement.
AGREED TO:
PC QUOTE, INC.
By: /s/ Richard F. Chappeto
------------------------------------
Name: Richard F. Chappeto
Title: Vice President
Date: 10-11-96
A.B. WATLEY, INC.
By: /s/ Steven Malin
------------------------------------
Name: Steven Malin
Title: Director
Date: 10-11-96
8
<PAGE>
SCHEDULE A
TO THE CO-BRANDING AGREEMENT BETWEEN
PC QUOTE, INC. AND A.B. WATLEY, INC. DATED OCTOBER 11, 1996
SCHEDULE OF SERVICES AND FEES
I. Monthly Software and Hyperfeed per terminal fees payable by ABW to PCQ:
Level A. (equivalent to the PCW 6.0 Level 1) Includes [ *** ]
$[ *** ]/month/ABW client
Level B. (equivalent to PCW 6.0 Level II) Includes [ *** ]
$[ *** ]/month/ABW client
Level C. Includes [ *** ]
$[ *** ]/month/ABW client
plus $[ *** ]/trade executed via this level of
service
Level D. Includes [ *** ]
$[ *** ]/month/ABW client
The above schedule of monthly service fees includes [ *** ]. It
does not include [ *** ]. These ABW client fees will be paid to
PCQ on a monthly basis.
II. If an existing PCQ client migrates to the ABW service, or if PCQ brings an
Ultimate Trader client to ABW, ABW shall pay to PCQ an additional
$[ *** ] per executed trade for every trade conducted by this client
during the course of this Agreement.
By: PC Quote, Inc. By: A.B. Watley, Inc.
/s/ Richard F. Chappeto /s/ Steven Malin
- ---------------------------- ----------------
<PAGE>
[LOGO]
AMENDMENT TO SECTION 2, PART B OF THE CO-BRANDING AGREEMENT
This amendment to Section 2 (titled "Term"), Part B of the Co-Branding
Agreement is made effective December 9, 1996 by and between PC Quote, Inc.
(hereinafter referred to as "PCQ") and A.B. Watley, Inc. (hereinafter
referred to as "ABW"), who are also the parties contracted in the
aforementioned Co-Branding Agreement. This Amendment shall apply to said PCQ
and ABW and all of their subsidiaries and related companies.
Provided both PCQ and ABW agree to a renewal of the entire Co-Branding
Agreement for a third year: at the conclusion of the third year, the entire
Co-Branding Agreement shall automatically review itself for an additional one
(1) year term unless either party sends notice at least sixty (60) days
before the third anniversary of the effective date of this Agreement. Notice
expressing a desire to terminate this Agreement or change any of the terms of
this Agreement will be sent by certified mail to the address indicated in the
Agreement. Said termination will be effective as of the last day of the
month in which this anniversary occurs.
Provided both PCQ and ABW agree to a renewal of the entire Co-Branding
Agreement for a fourth year: at the conclusion of the fourth year, the
entire Co-Branding Agreement shall automatically renew itself for an
additional one (1) year term unless either party sends notice at least sixty
(60) days before the fourth anniversary of the effective date of this
Agreement. Notice expressing a desire to terminate this Agreement or change
any of the terms of this Agreement will be sent by certified mail to the
address indicated in the Agreement. Said termination will be effective as of
the last day of the month in which this anniversary occurs.
AGREED TO BY:
/s/ Steven Malin /s/ Howard Meltzer
- ---------------------------------- ----------------------------------
A.B. Watley, Inc. PC Quote, Inc.
Mr. Steven Malin Mr. Howard Meltzer
Director President
Date: 12/5/96 Date: 12/12/96
<PAGE>
[LOGO]
SECOND AMENDMENT
TO
CO-BRANDING AGREEMENT
THIS SECOND AMENDMENT TO CO-BRANDING AGREEMENT (this "Amendment") is
made and entered into, effective for all purposes and in all respects as of
the 23rd day of February, 1998, by and between PC QUOTE, INC., with its
principal place of business at 300 South Wacker Drive, Chicago, Illinois
60605 ("PCQ") and A.B. Watley, Inc., with its principal place of business at
33 West 17th Street, New York, New York 10011 ("ABW").
WHEREAS, PCQ and ABW have executed that certain Co-Branding Agreement
dated October 11, 1996, as amended on December 10, 1996 (as so amended, the
"Agreement");
WHEREAS, the parties hereto desire to further amend the Agreement to
modify the provisions of the Agreement regarding automatic renewal of the
term thereof; and
WHEREAS, the parties hereto desire to set forth herein the terms and
conditions of their agreements and understandings with respect to the
foregoing.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises for the parties contained herein and of other good valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending legally to be bound, hereby covenant and agree
as follows:
1. The preamble hereto is incorporated herein and, by this reference, is
made a substantive part hereof.
2. The text of Section 2.A. and B. of the Agreement is hereby deleted in
its entirety and the following language is inserted in its stead:
A. The initial term of this License Agreement shall expire
on December 31, 2000. Neither PCQ nor ABW shall terminate
or alter this Agreement except as stated herein.
B. Unless written notice of non-renewal is given by one
party to the other not later than December 31, 1999, this
Agreement shall be automatically renewed until December 31,
2001. Thereafter, unless written notice of non-renewal is
given by one party to the other not later than each one-year
anniversary of December 31, 1999, this Agreement shall be
automatically renewed for a further two (2) year term. By
way of example: (i) if notice of non-renewal is not
received by December 31, 2000, this Agreement shall be in
full force and effect through December 31, 2002 and (ii) if
notice of non-renewal is not received by December 31, 2001,
this Agreement shall be in full force and effect through
December 31, 2003 and so on. Notice expressing a desire to
terminate this Agreement at the end of the then-current term
will be sent via certified mail to the address specified in
this Agreement.
<PAGE>
3. To the extent, if any, that provision of this Agreement conflicts with
or differs from any provision of the Agreement, such provision of this Second
Amendment shall prevail and govern for all purposes and in all respects.
4. Except as modified hereby, the Agreement and its terms and provisions
are hereby ratified and confirmed for all purposes and in all respects.
5. This Second Amendment may be executed in several counterparts, each of
which shall be deemed an original but all of which collectively shall constitute
the same instrument.
IN WITNESS WHEREOF, the undersigned parties have hereunto affixed their
signatures and seals as of the day and year first above written.
PC QUOTE, INC.
By: /s/ Scott Clyde
-------------------------------------
Name: Scott Clyde
Title: VP
A. B. WATLEY, INC.
By: /s/ Robert Malin
-------------------------------------
Name: Robert Malin
Title: President
<PAGE>
EXHIBIT 10.13
SUBLEASE
THIS SUBLEASE is executed this 30th day of August 1999 and effective as of
April 1, 1999 (the "Effective Date"), by and between HYPERFEED TECHNOLOGIES,
INC. (formerly PC Quote, Inc.), a Delaware corporation ("Sublessor"), and
PCQUOTE.COM, INC., a Delaware corporation ("Sublessee").
RECITALS:
WHEREAS, Sublessor is the tenant under a certain Lease dated June of
1994 by and between Sublessor, as tenant, and W9/LWS Real Estate Limited
Partnership, successor in interest to Markborough 300WJ Limited Partnership,
as landlord ("Lessor"), which lease was amended by an Amendment to Lease
dated May 12, 1999 (collectively, the "Lease"), for premises more
particularly described in the Lease and known as 300 South Wacker Drive,
Suites 300 and 1130, Chicago, Illinois (the "Premises"), a copy of which
Lease is attached hereto as EXHIBIT "A" and hereby made a part hereof; and
WHEREAS, Sublessee is desirous of subleasing a portion of the Premises
in such specific areas and square footage as Sublessor and Sublessee may
agree, from time to time, not to exceed 7,000 square feet (the "Demised
Premises") from the Sublessor; and Sublessor is desirous of subleasing the
Demised Premises to the Sublessee pursuant to the terms and conditions of
this Sublease.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:
ARTICLE 1
SUBLEASE
SECTION 1.1 SUBLEASING OF DEMISED PREMISES. Effective as of the
Effective Date, Sublessor hereby subleases to Sublessee and Sublessee hereby
hires from the Sublessor the Demised Premises.
SECTION 1.2 INCORPORATION OF LEASE. Except as otherwise specifically
set forth herein, each and every provision of the Lease is hereby
incorporated herein in its entirety as if fully set forth herein.
SECTION 1.3 SUBLEASE SUBJECT TO LEASE. This Sublease is in all
respects subject and subordinate to the terms and conditions of the Lease and
to any and all leases, mortgages or other agreements to which the Lease shall
at any time be subject and subordinate. Sublessor represents and warrants
that annexed hereto is a true and accurate copy of the Lease, and that all
rent due under the Lease is paid through the date hereof and there are no
defaults of any kind beyond any applicable grace periods under the Lease as
of the date hereof and such Lease is in full force and
<PAGE>
effect.
SECTION 1.4 SUBLESSEE'S ASSUMPTION OF DUTIES UNDER THE LEASE. As of
the Commencement Date (as hereinafter defined), except as otherwise provided
herein, Sublessee agrees to assume, be subject to and to perform each and
every condition and obligation to be performed by Sublessor on or after the
Commencement Date under the provisions of the Lease or to which Sublessor is
subject thereunder relating to the Demised Premises, except those terms of
the Lease which are expressly inconsistent with the terms of this Sublease.
SECTION 1.5 SERVICES. Notwithstanding anything to the contrary
contained in this Sublease, it is understood and agreed that any and all
construction, work, maintenance, cleaning, repairs, replacements, facilities
and services (collectively, the "Services") to be made and/or furnished to
the Demised Premises pursuant to any provisions of the Lease will be
furnished by Lessor directly to Sublessee and not by Sublessor to Sublessee.
Sublessor shall in no event be liable to Sublessee, nor shall Sublessee's
obligations hereunder be impaired or the performance thereof be excused,
because of any failure or delay on the Lessor's part in furnishing such
Services. Sublessee shall look solely to Lessor for the performance of such
Services, and Sublessor makes no representations hereunder (either express or
implied) as to the availability or adequacy of such Services.
SECTION 1.6 POSSESSION. Notwithstanding anything to the contrary
contained in this Sublease, Sublessee has inspected the Demised Premises and
hereby agrees to accept the same "as is," on the date hereof, without any
representations, warranties or obligations (either express or implied) on the
part of Sublessor to perform any fit-ups, maintenance, alterations,
improvements, replacements, repairs, work or other services thereto or with
respect to the condition thereof. Notwithstanding the foregoing, Sublessor
shall, at Sublessor's sole cost, complete such alterations to the Premises as
are necessary to separate and demise the Demised Premises from the Premises
including, to the extent reasonably required, the installation of demising
walls and modification of systems, and Sublessor shall deliver the Demised
Premises to Sublessor "broom clean," vacant with all mechanical systems,
plumbing, electrical and HVAC systems in good working order.
ARTICLE 2
TERM, TERMINATION AND RENT
SECTION 2.1 QUIET ENJOYMENT. Sublessor hereby agrees that so long as
Sublessee is in compliance with the terms hereof and of the Lease, Sublessee
shall have the right to quiet enjoyment of the Demised Premises without
hindrance or molestation by Sublessor.
SECTION 2.2 TERM. The term of this Sublease (the "Term") shall be
for the period commencing on the Effective Date (the "Commencement Date") and
ending on the earlier of (i) last day of the term of the Lease, as such Lease
term may be renewed or extended, or (ii) the date upon which this Sublease is
terminated pursuant to Section 2.3 below (the "Termination Date").
SECTION 2.3 TERMINATION. Sublessee shall have the right to terminate
this Sublease at the end of any calendar month provided Sublessee shall have
delivered to Sublessor written
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<PAGE>
notice of termination no later than the fifteenth day of such calendar month.
SECTION 2.4 RENT. Sublessee and Sublessor agree that the amounts
paid by Sublessee to Sublessor under that certain Services Agreement dated
August 30, 1999 by and between Sublessor and Sublessee shall satisfy all
obligations of Sublessee to pay any rent under this Sublease and shall be
construed as the "Rent" under this Sublease. It is understood and agreed
that payments of Rent shall be "gross" to Sublessor and that Sublessee shall
have no obligation to pay any other amounts which are or become payable
during the term of the Lease for taxes or operating expenses (except
utilities, for which an equitable split shall be reasonably determined by
Sublessor and Sublessee based upon occupied square footage and usage).
Rent shall be payable without demand, and without offset, counterclaim,
or set off, except as otherwise expressly set forth herein.
ARTICLE 3
PERMITTED USE
SECTION 3.1 PERMITTED USE. The Demised Premises shall be used and
occupied only for such purpose or purposes as Sublessor is allowed to use the
Premises pursuant to the Lease.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 DEFAULT BY SUBLESSEE. In the event that Sublessee shall
be in default of any covenant, term or condition of this Sublease which
causes a default under the provisions of the Lease (any of the foregoing
being a "Default"), Sublessor, on giving the notice required under the Lease
and subject to the right, if any, of Sublessor to cure any such default as
may be provided Sublessor in the Lease as incorporated hereby by reference,
shall have available to it all of the remedies available to Lessor under the
Lease as if Sublessor had caused the corresponding default or failure to
occur under the Lease (the "Basic Remedies"). In the event there occurs any
other default under this Sublease which does not cause a Default, Sublessor,
after ten (10) days written notice to Sublessee in the event of a
non-monetary default and after seven (7) days written notice in the event of
the failure to make payment of any installment of Rent, and Sublessee's
failure promptly to cure such default within the applicable number of days,
or where such default cannot be remedied within the applicable number of
days, if Sublessee shall not commence the remedying thereof within such
applicable number of days and shall not proceed with due diligence to remedy
it, may pursue any of the Basic Remedies. The Basic Remedies shall be in
addition to all other remedies available to Sublessor at law or in equity.
SECTION 4.2 PARTIAL INVALIDITY. If any term or provision of this
Sublease, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, as finally determined by a court or
arbitrator, as applicable, of competent jurisdiction, the remainder of this
Sublease or the application of such term or provision to persons or
circumstances other than those as to which it is determined to be invalid or
unenforceable, shall not be affected thereby, and each term and the
provisions of this Sublease shall be valid and
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<PAGE>
enforceable to the fullest extent permitted by law.
SECTION 4.3 REFERENCE TO NUMBER. Whenever the context hereof
requires, references herein made to the singular number shall be understood
as including the plural, and likewise the plural shall be understood as
denoting the singular and specific enumeration shall not exclude the general
but shall be considered as cumulative.
SECTION 4.4 CHOICE OF LAW. This Sublease shall be enforced and
construed according to the laws of the State of Illinois.
SECTION 4.5 BINDING EFFECT. This Sublease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
SECTION 4.6 SUBLEASE CONTINGENT UPON CONSENT. It is understood and
agreed that this Sublease is subject to and contingent upon the consent in
writing by Lessor to this Sublease.
SECTION 4.7 ENTIRE AGREEMENT. This Sublease supersedes all prior
agreements and understandings of, and constitutes the entire agreement
between, the parties hereto with respect to the subject matter hereof and
cannot be modified or amended except in a writing expressly referring hereto
signed by the party to be bound thereby.
SECTION 4.8 SECTION HEADINGS. Article and section headings used in
this Sublease are for convenience of reference only and are not part of this
Sublease for any other purpose and shall not be used or referred to in
interpreting any provision hereof.
SECTION 4.9 NO WAIVER. The failure of either party hereto to enforce
any provision of this Sublease or the Lease or to restrict its performance
hereunder to its obligations stated herein shall not be construed as a waiver
or modification of any provision hereof nor shall it constitute a forfeiture
by that party of any rights to future enforcement of, or performance in
accordance with any provisions of this Sublease or the Lease.
SECTION 4.10 INSURANCE. Sublessee shall obtain and keep in full force
and effect during the entire term of this Sublease, at its sole cost and
expense, the insurance required to be carried by Sublessor under the Lease
with respect to the Demised Premises. All such insurance is to be written,
in form reasonably satisfactory to Sublessor, by reputable and solvent
insurance companies of recognized standing and admitted to do business in the
State of Illinois and which shall be reasonably acceptable to Sublessor.
Sublessee will include in such liability insurance policy a provision to the
effect that the same will be non-cancelable except upon thirty (30) days
advance written notice to Sublessor and that the act or omission of Subtenant
will not invalidate the policy as to Sublessor. The original insurance
policies or appropriate certificates shall be promptly deposited with
Sublessor, together with any renewals, replacements or endorsements thereto.
Sublessor shall be named an additional insured on all such policies.
SECTION 4.11 WAIVER OF SUBROGATION. Notwithstanding anything in this
Sublease to the contrary, Sublessor and Sublessee each hereby waive any and
all rights of recovery, claim,
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actions or causes of action against the other and its officers, directors,
shareholders or partners, as the case may be, and the respective agents,
employees, successors and assigns of each of them, for any loss or damage
that may occur to the Demised Premises or the building within which same are
located or any improvements thereto or any personal property located therein
by reason of fire, the elements, or any other cause insured against under
valid and collectible fire and extended coverage of insurance policies under
or related to the Lease and/or this Sublease, regardless of causes of origin,
including negligence, except in any case which would render this waiver void
under law, to the extent that such loss or damage is recoverable under said
insurance policies.
SECTION 4.12 ASSIGNMENT AND SUBLETTING. Sublessee shall not assign or
mortgage this Sublease or sublet all or any portion of the Demised Premises,
or allow any other person or entity to occupy the Demised Premises without
the prior written consent of Sublessor, which consent shall not be
unreasonably withheld.
SECTION 4.13 CONFLICTS. In the event of any conflict between the
terms and conditions of the Lease and this Sublease, with respect to the
obligations and rights of Sublessor and Sublessee to each other, this
Sublease shall govern and control in each instance.
SECTION 4.14 NOTICES. Any notice, demand or other communication
required or which may be given hereunder shall be sent to the relevant
addresses first set forth above (or such other addresses as the parties may
designate by written notice given in accordance with this Paragraph) and
shall be delivered personally, sent by reputable overnight courier service or
sent by certified or registered mail, return receipt requested, postage
prepaid, and shall be deemed given when so delivered personally or when
indicated to have been delivered or by signed receipt for overnight delivery
or certified or registered mail.
SECTION 4.15 BROKER'S COMMISSION. Each party represents and warrants
to the other that they have not dealt with any broker in connection with this
Sublease and each party shall indemnify and hold the other harmless against
and from all liabilities arising from any claims for brokers or agents
commissions related hereto caused or incurred by it, including costs and
reasonable attorneys' fees in connection therewith.
SECTION 4.16 CHARGES DUE TO SUBLESSOR DEFAULT. Sublessee shall not be
required to pay any amounts Sublessor may be required to pay by reason of its
own default under the Lease, including, but not limited to, late charges or
penalties, during the term of this Sublease except to the extent Sublessor's
default is caused by the act or omission of Sublessee.
SECTION 4.17 OBSERVANCE OF LEASE. Each party hereto agrees to refrain
from doing or causing to be done, or suffering or permitting to be done, any
thing or act which could constitute a default under the Lease, or might cause
the Lease, or the rights granted under the Lease, to be canceled, terminated,
forfeited or surrendered. Each party agrees that it will indemnify the other
against any direct loss, liability, and expense (including, without
limitation, reasonable attorneys' fees and costs) arising out of any default
under the Lease caused by the indemnifying party.
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<PAGE>
SECTION 4.18 SUBLESSOR REPRESENTATIONS AND WARRANTIES. Sublessor
represents and warrants that (i) the Lease has not been amended, and remains in
full force and effect, (ii) Sublessor has not received any default notice from
Lessor or given any default notice to Lessor under the Lease, and (iii) to the
knowledge of Sublessor there does not exist any condition which, with the giving
of notice or passage of time, or both, would constitute an event of default by
Sublessor under the Lease.
SECTION 4.19 LESSOR'S CONSENT. Sublessor represents and warrants Lessor
has consented to this Sublease by delivery of a writing, signed by Lessor,
consenting to this Sublease.
SECTION 4.20 LESSOR NOTICES. Within three (3) days after receipt by
Sublessor, Sublessor shall deliver to Sublessee any notices of default,
statements, bills and/or invoices Sublessor receives from Lessor under the Lease
to the extent Sublessee is responsible therefor.
SECTION 4.21 CONSENTS. Whenever the consent or approval of Lessor is
obtained by Sublessee (as may be required under the Lease) such consent shall
also be deemed to be the consent or approval of Sublessor, provided that the
Sublessor does not incur any increased liability as a result thereof. Sublessee
agrees to send to Sublessor copies of all requests by Sublessee for Lessor's
consent or approval and copies any consents or approvals received by Sublessee
from Lessor.
SECTION 4.22 HAZARDOUS SUBSTANCES. Anything to the contrary contained
herein or in the Lease notwithstanding, Sublessor warrants and represents that
Sublessor has not placed or installed, or permitted to be placed or installed,
in the Demised Premises any Hazardous Substances or Wastes. Sublessor shall
indemnity and hold harmless Sublessee from and against any and all liabilities
(including sums paid in settlement of claims), damages, claims, losses,
penalties, judgments, causes of action, costs and expenses (including the
reasonable fees and expenses of counsel and the reasonable fees of consultants
and experts selected by Sublessee) which may be incurred by Sublessee relating
to or arising out of any breach by Sublessor of the representations and/or
warranties contained in this paragraph. Without limiting the generality of the
forgoing, the indemnification provided for in this paragraph shall specifically
cover costs incurred, to the extent caused by Sublessor, in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of the presence of Hazardous Substances or Wastes
caused by Sublessor in the Demised Premises, the soil under the Demised Premises
or the ground water or soil vapor on or under the land upon which the Demised
Premises is erected. The foregoing indemnity shall survive the expiration or
sooner termination
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of this Sublease.
SECTION 4.23 Sublessor represents and warrants to Sublessee that to its
knowledge all work performed in the Demised Premises by Sublessor was done in
compliance with all laws and ordinances. Sublessor shall be responsible for the
removal of record or any and all violations affecting the Demised Premises as of
the date of this Sublease to the extent any such violations are the
responsibility of Sublessor under the Lease.
* * * * *
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<PAGE>
* * * * *
IN WITNESS WHEREOF the parties have executed this Sublease as of the
date and year set forth above.
SUBLESSOR: SUBLESSEE:
HYPERFEED TECHNOLOGIES, INC., PCQUOTE.COM, INC.,
(formerly PC Quote, Inc.) a Delaware corporation
a Delaware corporation
By: /s/ John E. Juska By: /s/ Timothy K. Krauskopf
Name: John E. Juska Name: Timothy K. Krauskopf
Its: Senior Vice President Its: President
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EXHIBIT 10.14
AMENDMENT #1
This amendment is hereby made to that certain Software License and Distributor
Agreement dated May 28, 1999 (Agreement") by and between Townsend Analytics,
Ltd. ("Townsend") and PC Quote.Com, Inc. ("PQT").
The parties hereby agree to amend the Agreement as follows:
Section 2.C.(ix) of Schedule 2 is hereby deleted in its entirety and replaced
with the following:
The initial term of the license to Watley shall end on December 31, 2000
and shall not be renewed without written permission of TAL.
Notwithstanding anything to the contrary contained in the Agreement, the parties
agree that PQT may grant A.B. Watley the right to redistribute the Product
through the Internet ("Internet Redistribution Right") subject to an existing
agreement between PQT (as assigned from PC Quote, Inc.) and A.B. Watley, and TAL
and Watley. This right will continue through December 31, 2000. Thereafter, the
Internet Redistribution Right may extended by the prior written agreement of the
parties.
Townsend Analytics, Ltd. PC Quote.Com, Inc.
/s/ Margwen C. Townsend /s/ Jim Porter
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Authorized Signature Authorized Signature
Margwen C. Townsend Jim Porter
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Printed Name Printed Name
Vice President CEO
- ------------------------------------ -------------------------------------
Title Title
8-12-99 8-12-99
- ------------------------------------ -------------------------------------
Date Date
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
PCQuote.com, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG LLP
Chicago
August 30, 1999
