<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
PC Quote, Inc.
--------------
(Name of Issuer)
Common Stock, $.001 par value per share
---------------------------------------
(Title of Class of Securities)
693236200
---------
(CUSIP Number)
James F. Mosier, Corporate Secretary and General Counsel
PICO Holdings, Inc.
875 Prospect Street
Suite 301
La Jolla, CA 92037
(619) 456-6022
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 5, 1997
------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 73 Pages
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AMENDMENT NO. 1
to
SCHEDULE 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
PICO Holdings, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(a) X
____
(b) ____
3. SEC USE ONLY:
4. SOURCE OF FUNDS (SEE INSTRUCTIONS):
PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): ____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
California
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 4,386,400 shares
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 4,386,400 shares
10. SHARED DISPOSITIVE POWER: None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
4,386,400 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS): ____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
45.2%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
HC
2
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AMENDMENT NO. 1
to
SCHEDULE 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Physicians Insurance Company of Ohio
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(a) X
____
(b) ____
3. SEC USE ONLY:
4. SOURCE OF FUNDS (SEE INSTRUCTIONS):
Not applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): ____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Ohio
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 3,746,400 shares
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 3,746,400 shares
10. SHARED DISPOSITIVE POWER: None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
3,746,400 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS): ____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
41.8%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
IC
3
<PAGE> 4
AMENDMENT NO. 1
to
SCHEDULE 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
American Physicians Life Insurance Company
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(a) X
____
(b) ____
3. SEC USE ONLY:
4. SOURCE OF FUNDS (SEE INSTRUCTIONS):
Not applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): ____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Ohio
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 96,400 shares
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 96,400 shares
10. SHARED DISPOSITIVE POWER: None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
96,400 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS): ____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
1.3%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
IC
4
<PAGE> 5
AMENDMENT NO. 1
to
SCHEDULE 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Physicians Investment Company
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(a) X
____
(b) ____
3. SEC USE ONLY:
4. SOURCE OF FUNDS (SEE INSTRUCTIONS):
Not applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): ____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Ohio
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 96,400 shares
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 96,400 shares
10. SHARED DISPOSITIVE POWER: None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
96,400 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS): ____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
1.3%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
HC
5
<PAGE> 6
Item 1. Security and Issuer.
This Amendment No. 1 to Schedule 13D ("Amendment No. 1")
relates to the shares of Common Stock, $.001 par value (the "PC Quote Shares"),
of PC Quote, Inc. ("PC Quote"). The address of the principal executive offices
of PC Quote is 300 South Wacker Drive, Chicago, Illinois 60606.
Item 2. Identity and Background.
The persons filing this Amendment No. 1 are PICO Holdings,
Inc. ("Holdings"), Physicians Insurance Company of Ohio ("Physicians"),
American Physicians Life Insurance Company ("APL") and Physicians Investment
Company ("PIC").
A. Holdings is a California insurance and investment holding company
which is the parent of Physicians and the indirect parent of each of APL and
PIC. In addition, Holdings is the direct parent of Citation Insurance Company
and the indirect parent of Citation National Insurance Company, which are
principally engaged in writing workers' compensation and commercial property
and casualty insurance. Holdings' business address is 875 Prospect Street,
Suite 301, La Jolla, California 92037.
The directors of Holdings include:
(i) S. Walter Foulkrod, III, Esq., whose business address is
S. Walter Foulkrod, III & Associates, P.O. Box 6600, Harrisburg, Pennsylvania
17112-0600. Mr. Foulkrod is an attorney and the owner of S. Walter Foulkrod,
III & Associates, Attorneys at Law. Mr. Foulkrod is a citizen of the United
States.
(ii) Richard D. Ruppert, MD, whose residence address is 2710
Falmouth Drive, P.O. Box 352855, Toledo, Ohio 43635-2855. Dr. Ruppert is a
physician and serves as Chairman of the Boards of APL and PIC. Dr. Ruppert is a
citizen of the United States.
(iii) Dr. Gary H. Weiss, whose business address is Level 24,
2 Market Street, Sydney 2000 Australia. Dr. Weiss is a barrister and solicitor
and serves as Executive Director of Guinness Peat Group plc, an investment
holding company. Dr. Weiss is a citizen of Australia and New Zealand.
(iv) John R. Hart, whose business address is 875 Prospect
Street, Suite 301, La Jolla, California 92037. Mr. Hart serves as President and
Chief Executive Officer of each of Holdings and Physicians. Mr. Hart is a
citizen of the United States.
(v) Ronald Langley, whose business address is 875 Prospect
Street, Suite 301, La Jolla, California 92037. Mr. Langley serves as Chairman
of the Board of each of Holdings and Physicians. Mr. Langley is a citizen of
Australia.
(vi) John D. Weil, whose business address is 200 North
Broadway, Suite 825, St. Louis, Missouri 63102-2573. Mr. Weil serves as
President of Clayton Management Company, a strategic investment company. Mr.
Weil is a citizen of the United States.
(vii) Dr. Marshall J. Burak, whose business address is
College of Business, San Jose State University, One Washington Square, San
Jose, California 95192-0065. Dr. Burak is Professor of Finance and Dean of the
6
<PAGE> 7
College of Business of San Jose State University. Dr. Burak is a citizen of the
United States.
(viii) Robert R. Broadbent, whose business address is Tower
City Center, 2900 Terminal Tower, Cleveland, Ohio 44113-2204. Mr. Broadbent is
a retail consultant. Mr. Broadbent is a citizen of the United States.
The executive officers of Holdings, in addition to Messrs.
Langley and Hart, are:
(i) Richard H. Sharpe, whose business address is 875 Prospect
Street, Suite 301, La Jolla, California 92037. Mr. Sharpe serves as Chief
Operating Officer of each of Holdings and Physicians. Mr. Sharpe is a citizen
of the United States.
(ii) Gary W. Burchfield, whose business address is 875
Prospect Street, Suite 301, La Jolla, California 92037. Mr. Burchfield serves
as Chief Financial Officer and Treasurer of each of Holdings and Physicians. He
is an United States citizen.
(iii) James F. Mosier, Esq., whose business address is 875
Prospect Street, Suite 301, La Jolla, California 92037. Mr. Mosier serves as
General Counsel and Corporate Secretary of each of Holdings and Physicians. He
is an United States citizen.
B. Physicians is an Ohio licensed insurance corporation which operates
primarily as a diversified investment and insurance company. Physicians'
business address is 13515 Yarmouth Drive, N.W., Pickerington, Ohio 43147.
The directors of Physicians are S. Walter Foulkrod, III, Esq.; Richard
D. Ruppert, MD; Dr. Gary H. Weiss; John R. Hart; Ronald Langley; and John D.
Weil. Each of their backgrounds has been described in Item 2(A) above.
The executive officers of Physicians, in addition to Messrs.
Langley and Hart, are:
(i) Richard H. Sharpe, whose background is described in Item
2(A) above.
(ii) Martha G. Althauser, Esq., whose business address is
Physicians Insurance Company of Ohio, 13515 Yarmouth Drive, N.W., Pickerington,
Ohio 43147. Ms. Althauser serves as Vice President, Claims of Physicians. She
is an United States citizen.
(iii) Gary W. Burchfield, whose background is described in
Item 2(A) above.
(iv) James F. Mosier, Esq., whose background is described in
Item 2(A) above.
C. APL is an Ohio corporation which is a wholly-owned indirect
subsidiary of Physicians. APL's principal business is selling life and health
insurance. APL's business address is 13515 Yarmouth Drive, N.W., Pickerington,
Ohio 43147.
The directors of APL are Ronald Langley, John R. Hart, Richard H.
Sharpe, Richard D. Ruppert, MD and Dr. Gary H. Weiss. Each of their backgrounds
has been described in Item 2(A) above.
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The executive officers of APL include:
(i) Richard D. Ruppert, MD, who serves as Chairman of the Board of
APL;
(ii) Richard H. Sharpe, who serves as President and Chief Executive
Officer of APL;
(iii) James F. Mosier, Esq., who serves as General Counsel and
Secretary of APL;
(iv) Loman H. Hartley, whose business address is American
Physicians Life Insurance Company, 13515 Yarmouth Drive, N.W., Pickerington,
Ohio 43147. Mr. Hartley serves as Vice President, Controller and Treasurer of
APL. He is an United States citizen.
(v) Joyce M. Domijan, whose business address is American Physicians
Life Insurance Company, 13515 Yarmouth Drive, N.W., Pickerington, Ohio 43147.
Ms. Domijan serves as Vice President, Operations of APL. She is an United
States citizen.
D. PIC is an Ohio corporation which is a wholly-owned direct
subsidiary of Physicians and the parent of APL. PIC was formed for the purpose
of holding the shares of APL and conducts no other business. PIC's business
address is 13515 Yarmouth Drive, N.W., Pickerington, Ohio 43147.
The directors of PIC are Ronald Langley, John R. Hart, Richard H.
Sharpe, Richard D. Ruppert, MD and Dr. Gary H. Weiss. Each of their backgrounds
has been described in Item 2(A) above.
The executive officers of PIC include Richard D. Ruppert, MD, who
serves as Chairman of the Board; Richard H. Sharpe, who serves as President and
Treasurer; and James F. Mosier, Esq., who serves as Secretary. Each of their
backgrounds has been described in Item 2(A) above.
E. Holdings is controlled by Guinness Peat Group plc ("GPG"), an
English investment holding company whose business address is Second Floor,
21-26 Garlick Hill, London EC4V 2AU England, as a result of GPG's ownership of
shares of Holdings. Based upon information contained in the Schedule 13D, and
Amendments No. 1, 2, 3 and 4 thereto, filed by GPG in respect of its beneficial
ownership of shares of Class A Common Stock of Physicians prior to the merger
transactions described in Item 2 of the Schedule 13D filed by the reporting
persons with the Securities and Exchange Commission (the "SEC") on December 16,
1996 (the "Reporting Persons' Schedule 13D"), whereby Physicians became a
wholly-owned subsidiary of Holdings (collectively, the "GPG Schedule 13D"),
Physicians is aware that the directors and executive officers of GPG are as
follows:
Directors and Executive Officers of GPG
(i) Maurice William Loomes, who is a citizen of Australia and whose
business address is Level 24, 2 Market Street, Sydney 2000 Australia. Mr.
Loomes is a director of GPG.
(ii) Anthony Ian Gibbs, who is a citizen of New Zealand and whose
business address is c/o Registry Managers (New Zealand Limited), Private Bag
92119, Auckland 1030 New Zealand. Mr. Gibbs is a director of GPG.
(iii) Sir Ron Brierley, who is a citizen of New Zealand and whose
business address is Guinness Peat Group plc, Second Floor, 21-26 Garlick
8
<PAGE> 9
Hill, London EC4V 2AU England. Sir Ron is Chairman of the Board and a director
of GPG.
(iv) Trevor J.N. Beyer, who is a citizen of New Zealand and whose
business address is Guinness Peat Group plc, Second Floor, 21-26 Garlick Hill,
London EC4V 2AU England. Mr. Beyer is a director of GPG.
(v) Blake A. Nixon, who is a citizen of New Zealand and whose
business address is Guinness Peat Group plc, Second Floor, 21-26 Garlick Hill,
London EC4V 2AU England. Mr. Nixon is a director and Executive Director in the
United Kingdom of GPG.
(vi) Dr. Gary H. Weiss, who is a director and Executive Director in
Australia of GPG. Dr. Weiss' background is described in Item 2(A) above.
(vii) J. Richard Russell, who is a citizen of Great Britain and
whose business address is Guinness Peat Group plc, Second Floor, 21-26 Garlick
Hill, London EC4V 2AU England. Mr. Russell is Secretary of GPG.
F. During the last five years, none of Holdings, Physicians, APL and
PIC and, to the best knowledge of Physicians, none of the individuals named in
Items 2(A), 2(B), 2(C) and 2(D), has been convicted in a criminal proceeding.
To the best knowledge of Physicians, based upon the information contained in
the GPG Schedule 13D, none of GPG or the individuals named in Item 2(E) has
been convicted in a criminal proceeding.
G. During the last five years, none of Holdings, Physicians, APL and
PIC and, to the best knowledge of Physicians, none of the individuals named in
Items 2(A), 2(B), 2(C) and 2(D), was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction resulting in a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws. To the best knowledge of Physicians,
based upon the information contained in the GPG Schedule 13D, none of GPG or
the individuals named in Item 2(E) has been a party to such a civil proceeding.
Item 3. Source and Amount of Funds or Other Consideration.
As described in the Reporting Persons' Schedule 13D, on December 2,
1996, pursuant to the Agreement, dated November 14, 1996 (the "PC Quote
November 1996 Agreement"), between Physicians and PC Quote, Physicians acquired
from PC Quote a Convertible Subordinated Debenture (the "Debenture") in the
principal amount of $2,500,000 due December 31, 2001 with interest at an annual
rate of 1% over the prime rate as announced from time to time by The Wall
Street Journal. The Debenture was convertible, at the election of Physicians,
into 1,250,000 PC Quote Shares.
On May 5, 1997, Holdings and PC Quote entered into a Loan and Security
Agreement (the "Loan Agreement"), under which Holdings agreed to make a secured
loan to PC Quote in an aggregate principal amount of up to $1,000,000 at a
fixed rate equal to 14% per annum. The entire principal balance and all accrued
interest due under the Loan Agreement are payable on September 30, 1997. All
advances under the Loan Agreement will be secured by a pledge of substantially
all of the assets of PC Quote. These liens are subject to the prior lien of PC
Quote's primary lender, Lakeside Bank. Holdings will be paid a "facility fee"
of $40,000, plus interest at a rate equal to 14% per annum, on the maturity
date of the loan contemplated by the Loan Agreement.
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<PAGE> 10
In connection with the Loan Agreement, Physicians and PC Quote entered
into a First Amendment to Convertible Subordinated Debenture Due 2001 and
Debenture Agreement (the "Debenture Amendment"), pursuant to which the terms of
the Debenture were restructured as follows: (a) the maturity date of the
Debenture is now April 30, 1999 instead of December 31, 2001; (b) the Debenture
may not be prepaid or redeemed without the consent of Physicians; and (c) the
conversion rate on the Debenture has been changed from $2.00 per share to the
lower of (i) the mean of the closing bid price per share for the 20 preceding
trading days (as reported by NASDAQ or such national securities exchange as the
PC Quote Shares are traded on) or (ii) $1.5625 per share (the market price of
PC Quote Shares on the date of the Debenture Amendment). Interest under the
Debenture will continue to be payable in cash or, at the option of Physicians,
in PC Quote Shares at their fair market value at the time of payment.
On May 5, 1997, in consideration of the loan by Holdings to PC Quote,
PC Quote issued a Common Stock Purchase Warrant (the "Warrant") to Holdings
entitling Holdings to purchase a minimum of 640,000 PC Quote Shares, at a price
per share (the "Warrant Price") equal to the lesser of (a) the mean of the
closing bid price per share for the 20 preceding trading days (as reported by
NASDAQ or such national securities exchange as the PC Quote Shares are traded
on) and (b) $1.5625 per share. The Warrant expires on April 30, 2000. In lieu
of exercising the Warrant for cash, Holdings may elect to receive PC Quote
Shares equal to the "value" of the Warrant determined in accordance with a
formula specified in the Warrant (the "Conversion Value"). The number of PC
Quote Shares subject to the Warrant and the Warrant Price will be adjusted to
reflect stock dividends; reclassifications or changes of outstanding securities
of PC Quote; any consolidation, merger or reorganization of PC Quote; stock
splits; issuances of rights, options or warrants to all holders of PC Quote
Shares exercisable at less than the current market price per share; and other
distributions to all holders of PC Quote Shares. In the event of any sale,
license or other disposition of all or substantially all of the assets of PC
Quote or any reorganization, consolidation or merger involving PC Quote in
which the holders of PC Quote securities before the transaction beneficially
own less than 50% of the outstanding voting securities of the surviving entity
(an "Acquisition"), if the successor entity does not assume the obligations of
the Warrant and Holdings has not fully exercised the Warrant, the unexercised
portion of the Warrant will be deemed automatically converted into PC Quote
Shares at the Conversion Value. Alternatively, Holdings may elect to cause PC
Quote to purchase the unexercised portion of the Warrant for cash upon the
closing of any Acquisition for an amount equal to (a) the fair market value of
any consideration that would have been received had Holdings exercised the
unexercised portion of the Warrant immediately before the record date for
determining stockholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price. The Warrant also provides
for certain piggyback registration rights and a one-time demand registration
right.
Item 4. Purpose of Transaction.
As described more fully in Item 3 of this Amendment No. 1 above, in
connection with the Loan Agreement, on May 5, 1997, the Debenture issued by PC
Quote to Physicians was restructured and the Warrant was issued to Holdings. In
addition, the Debenture was amended to eliminate the ability of PC Quote to
redeem the Debenture with stock at the closing of a "Rights" offering.
Pursuant to the Debenture Amendment, the provisions of the PC Quote
November 1996 Agreement addressing the "Rights" offering were amended to allow
PC Quote, at its option, to prepare and file a registration statement (the
"Registration Statement") with the SEC, and have the Registration Statement
10
<PAGE> 11
declared effective, for a Rights offering (the "Rights") to be made pro rata to
all of its shareholders, other than Physicians, consisting of 1,250,000 PC
Quote Shares at an exercise price determined by Physicians in its sole and
absolute discretion (the "Rights Price"). The Rights are to be
non-transferable, exercisable solely in cash, expire 30 days after issuance and
provide that Physicians will, at no cost to Physicians, exercise for cash at
the Rights Price, any Rights which expire unexercised. Physicians agreed that
within three business days from receipt of written notice from PC Quote to such
effect, to purchase at the Rights Price, all PC Quote Shares deliverable upon
exercise of all Rights which have expired unexercised.
Ronald Langley and Louis Morgan are currently the two members of the
Board of Directors of PC Quote. Paul DiBiasio, who had been a director of PC
Quote during the year ended December 31, 1996, resigned in April 1997. PC Quote
and Physicians have agreed not to effect the changes in the composition of the
PC Quote Board of Directors contemplated by the PC Quote November 1996
Agreement.
Item 5. Interest in Securities of the Issuer.
(A)(B) Beneficial Ownership of PC Quote Shares:
<TABLE>
<CAPTION>
PC QUOTE SHARES WHICH
MAY BE ACQUIRED UPON
CONVERSION OF THE
DEBENTURE AND/OR UPON TOTAL PC QUOTE PERCENT OF
PC QUOTE SHARES EXERCISE OF THE SHARES OUTSTANDING PC QUOTE
PERSON CURRENTLY HELD (1) WARRANT (1) BENEFICIALLY OWNED SHARES (2)
------ ------------------ ----------- ------------------ ----------
<S> <C> <C> <C> <C>
Holdings 2,146,400 (3)(4)(5) 2,240,000 (6)(7) 4,386,400 45.2%
Physicians 2,146,400 (3)(4)(5) 1,600,000 (6) 3,746,400 41.8%
APL 96,400 (4) 0 96,400 1.3%
PIC 96,400 (4) 0 96,400 1.3%
</TABLE>
- ---------------
(1) The beneficial owner has sole voting and investment power.
(2) The percent of the outstanding PC Quote Shares is based upon the number
of PC Quote Shares outstanding (7,365,254) and the number of PC Quote
Shares that the person may acquire upon conversion of the Debenture
and/or upon exercise of the Warrant.
(3) Includes 2,050,000 PC Quote Shares beneficially owned directly by
Physicians which is a direct subsidiary of Holdings.
(4) Includes 96,400 PC Quote Shares beneficially owned directly by APL,
which is a direct subsidiary of PIC and an indirect subsidiary of
Physicians and of Holdings.
(5) Does not include PC Quote Shares which may be acquired by Physicians as
a result of a Rights offering as described in Item 4 of this Amendment
No. 1.
(6) Includes 1,600,000 PC Quote Shares which may be acquired upon conversion
of the Debenture (assuming a Warrant Price of $1.5625 -- see discussion
in Item 3 of this Amendment No. 1 of determination of Warrant Price)
beneficially owned directly by Physicians.
(7) Includes 640,000 PC Quote Shares which may be acquired upon exercise of
the Warrant beneficially owned directly by Holdings.
(C) See Items 3 and 4 of this Amendment No. 1 above.
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<PAGE> 12
(D) See Items 5(A) and 5(B) of this Amendment No. 1 above.
(E) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
See Items 3 and 4 of this Amendment No. 1 above.
Item 7. Material to be Filed as Exhibits:
Exhibit A - Joint Filing Agreement, dated December 3, 1996, among PICO
Holdings, Inc., Physicians Insurance Company of Ohio, American
Physicians Life Insurance Company and Physicians Investment
Company [Incorporated herein by reference to Exhibit A to the
Reporting Persons' Schedule 13D filed with the SEC on December
16, 1996.]
Exhibit B - Loan and Security Agreement, dated as of May 5, 1997, between
PICO Holdings, Inc. and PC Quote, Inc.
Exhibit C - Promissory Note issued by PC Quote, Inc. to PICO Holdings,
Inc. on May 5, 1997
Exhibit D - First Amendment to Convertible Subordinated Debenture Due 2001
and Debenture Agreement, dated May 5, 1997, between PC Quote,
Inc. and Physicians Insurance Company of Ohio
Exhibit E - Common Stock Purchase Warrant issued on May 5, 1997 by PC
Quote, Inc. to PICO Holdings, Inc.
12
<PAGE> 13
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: June 2, 1997 PICO HOLDINGS, INC.
By: /s/ JAMES F. MOSIER
----------------------------------
James F. Mosier,
General Counsel and Secretary
PHYSICIANS INSURANCE COMPANY OF OHIO
By: /s/ JAMES F. MOSIER
----------------------------------
James F. Mosier,
General Counsel and Secretary
AMERICAN PHYSICIANS LIFE INSURANCE
COMPANY
By: /s/ JAMES F. MOSIER
----------------------------------
James F. Mosier,
General Counsel and Secretary
PHYSICIANS INVESTMENT COMPANY
By: /s/ JAMES F. MOSIER
----------------------------------
James F. Mosier, Secretary
13
<PAGE> 1
Exhibit B
Loan and Security Agreement, dated as of May 5, 1997,
between PICO Holdings, Inc. and PC Quote, Inc.
<PAGE> 2
- --------------------------------------------------------------------------------
PICO HOLDINGS, INC., A CALIFORNIA CORPORATION
LOAN TO
PC QUOTE, INC., A DELAWARE CORPORATION
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION.................................................................. 1
1.1 Definitions.......................................................................... 1
1.2 Accounting Terms..................................................................... 6
2. LOAN AND TERMS OF PAYMENT..................................................................... 6
2.1 Advances............................................................................. 6
2.2 Overadvances......................................................................... 6
2.3 Interest Rates and Payments.......................................................... 6
2.4 Crediting Payments................................................................... 7
2.5 Fees................................................................................. 7
2.6 Term................................................................................. 7
3. CONDITIONS OF LOANS........................................................................... 7
3.1 Conditions Precedent to Initial Advance.............................................. 7
3.2 Conditions Precedent to all Advances................................................. 8
4. CREATION OF SECURITY INTEREST................................................................. 8
4.1 Grant of Security Interest........................................................... 8
4.2 Delivery of Additional Documentation Required........................................ 8
4.3 Lender's Rights Upon Default......................................................... 9
4.4 Right to Inspect..................................................................... 9
5. REPRESENTATIONS AND WARRANTIES................................................................ 9
5.1 Due Organization and Qualification................................................... 9
5.2 Due Authorization; No Conflict....................................................... 9
5.3 No Prior Encumbrances................................................................ 9
5.4 Name; Location of Chief Executive Office............................................. 9
5.5 Litigation........................................................................... 9
5.6 No Material Adverse Change in Financial Statements................................... 9
5.7 Regulatory Compliance................................................................ 10
5.8 Taxes................................................................................ 10
5.9 Government Consents.................................................................. 10
5.10 Full Disclosure...................................................................... 10
6. AFFIRMATIVE COVENANTS......................................................................... 10
6.1 Good Standing........................................................................ 10
6.2 Government Compliance................................................................ 10
6.3 Financial Statements, Reports, Certificates.......................................... 11
6.4 Taxes................................................................................ 11
6.5 Insurance............................................................................ 12
6.6 Principal Depository................................................................. 12
6.7 Quick Ratio.......................................................................... 12
6.8 Current Ratio........................................................................ 12
6.9 Registration of Intellectual Property Rights......................................... 12
6.10 Further Assurances................................................................... 12
</TABLE>
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<TABLE>
<S> <C> <C>
7. NEGATIVE COVENANTS............................................................................ 12
7.1 Dispositions......................................................................... 12
7.2 Change in Business................................................................... 13
7.3 Mergers or Acquisitions.............................................................. 13
7.4 Encumbrances......................................................................... 13
7.5 Distributions........................................................................ 13
7.6 Investments.......................................................................... 13
7.7 Transactions with Affiliates......................................................... 13
7.8 Subordinated Debt.................................................................... 13
7.9 Compliance........................................................................... 13
8. EVENTS OF DEFAULT............................................................................. 14
8.1 Payment Default...................................................................... 14
8.2 Covenant Default..................................................................... 14
8.3 Budget Default....................................................................... 14
8.4 Material Adverse Change.............................................................. 14
8.5 Attachment........................................................................... 14
8.6 Insolvency........................................................................... 15
8.7 Litigation........................................................................... 15
8.8 Subordinated Debt.................................................................... 15
8.9 Judgments............................................................................ 15
8.10 Misrepresentations................................................................... 15
9. LENDER'S RIGHTS AND REMEDIES.................................................................. 15
9.1 Rights and Remedies.................................................................. 15
9.2 Power of Attorney.................................................................... 16
9.3 Accounts Collection.................................................................. 16
9.4 Lender Expenses...................................................................... 16
9.5 Lender's Liability for Collateral.................................................... 17
9.6 Remedies Cumulative.................................................................. 17
9.7 Demand; Protest...................................................................... 17
10. NOTICES....................................................................................... 17
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................................................... 18
12. GENERAL PROVISIONS............................................................................ 18
12.1 Successors and Assigns............................................................... 18
12.2 Indemnification...................................................................... 18
12.3 Time of Essence...................................................................... 18
12.4 Severability of Provisions........................................................... 18
12.5 Amendments in Writing, Integration................................................... 18
12.6 Counterparts......................................................................... 18
12.7 Survival............................................................................. 19
12.8 Confidentiality...................................................................... 19
</TABLE>
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<PAGE> 5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
May 5, 1997, by and between PICO HOLDINGS, INC., a California corporation
("Lender") and PC QUOTE, INC., a Delaware corporation ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Lender, and
Lender desires to extend credit to Borrower. This Agreement sets forth the
terms on which Lender will extend credit to Borrower in a principal amount of
up to One Million Dollars ($1,000,000), and Borrower will repay the amounts
owing to Lender.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means an Advance under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday,
Sunday, or other day which is a legal holiday in the State of Illinois.
"Closing Date" means the date of this Agreement.
"Code" means the Illinois Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
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"Committed Line" means the credit available to Borrower
under the Revolving Facility in an amount of up to One Million Dollars
($1,000,000).
"Contingent Obligation" means, as applied to any Person,
any direct or rect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of Borrower or
any Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed
at the end of a given day.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced
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<PAGE> 7
by notes, bonds, debentures or similar instruments, (c) all capital lease
obligations and (d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as ded,
and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any
note or notes executed by Borrower, and any other agreement entered into between
Borrower and Lender in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse effect
on (i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means September 30, 1997.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest,
Expenses and other amounts owed to Lender by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Lender may have obtained by
assignment or otherwise.
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<PAGE> 8
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Lender pursuant to the terms and provisions of any instrument, or agreement now
or hereafter in existence between Borrower and Lender.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Lender arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the
ordinary course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Lender.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Lender's security interests;
(c) Liens (i) upon or in any equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property
4
<PAGE> 9
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred by Lender in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Lender's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Loan Documents, whether or not
suit is brought.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which
Borrower may request Lender to issue cash advances, as specified in Section 2.1
hereof.
"Schedule" means the schedule of exceptions attached
hereto.
"Subordinated Debt" means any debt incurred by Borrower
that is subordinated to the debt owing by Borrower to Lender on terms acceptable
to Lender (and identified as being such by Borrower and Lender).
"Subsidiary" means any corporation in which one hundred
percent (100%) of the stock of which is, at the time as of which any
determination is being made, owned by Borrower.
"Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries minus, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, and (c) all reserves
not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"Weekly Budget" means the budget prepared weekly by
Borrower, and approved by Lender, setting forth (i) Borrower's income and
expense projections for a seven-day period commencing on a Sunday and ending on
the following Saturday, and (ii) adjustments or corrections as to income and
expense projections contained in the previous Weekly Budget for
5
<PAGE> 10
actual income received and expenses incurred by Borrower. The Weekly Budget
must be certified by Louis Morgan, Michael Press and Howard Meltzer as being
true, accurate and complete, to the bet of their knowledge, exercise in good
faith. In the event any of the foregoing persons is no longer employed by
Borrower, the certification shall be made by the persons employed by Borrower
performing similar functions and duties.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Advances. Subject to and upon the terms and conditions of
this Agreement, and provided that no uncured Event of Default exists, Lender
agrees to make Advances to Borrower in an amount equal to the cash needed (such
amount not to exceed the difference by which disbursements exceed revenue)
under the applicable Weekly Budget, provided the Advances shall not exceed an
aggregate amount in excess of the Committed Line. Lender shall not be obligated
to make an Advance for any amount in excess of the cash needs of Borrower
supported by the applicable Weekly Budget. Subject to the terms and conditions
of this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid
and reborrowed at any time during the term of this Agreement.
Whenever Borrower desires an Advance, Borrower will notify
Lender by facsimile transmission or telephone no later than 10:00 a.m.
California time, at least two days prior to the Business Day upon which the
Advance is to be made. Each such notification shall be promptly confirmed by an
Advance Request Form in substantially the form of Exhibit B hereto. Lender is
authorized to make Advances under this Agreement based upon instructions
received from a Responsible Officer. Lender shall be entitled to rely on any
telephonic notice given by a person who Lender reasonably believes to be a
Responsible Officer, and Borrower shall indemnify and hold Lender harmless for
any damages or loss suffered by Lender as a result of such reliance. Lender
will wire the amount of Advances made under this Section 2.1 to Borrower's.
The Revolving Facility shall terminate on the Maturity Date,
at which time all Advances under this Section 2.1 and other amounts due under
this Agreement shall be immediately due and payable.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Lender pursuant to Section 2.1 of
this Agreement is greater than the Committed Line, Borrower shall immediately
pay to Lender, in cash, the amount of such excess.
2.3 Interest Rates and Payments.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Advances shall bear interest, on the Daily Balance, at a fixed rate
equal to fourteen percent (14%) per annum.
(b) Default Rate. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at a rate equal to
nineteen percent (19%) per annum.
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<PAGE> 11
(c) Payments. Interest hereunder shall be due and
payable on the Maturity Date. Lender shall, at its option, charge all Expenses
against the Committed Line, in which case those amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 Crediting Payments. Any wire transfer or payment received
by Lender after 12:00 noon California time shall be deemed to have been
received by Lender as of the opening of business on the immediately following
Business Day. Whenever any payment to Lender under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional interest shall accrue and be payable for the period of such
extension.
2.5 Fees. Borrower shall pay to Lender the following:
(a) Facility Fee. A Facility Fee equal to Forty
Thousand Dollars ($40,000.00), which fee shall be due on the Closing Date and
shall be fully earned and nonrefundable. Borrower may defer payment of the
Facility Fee until the Maturity Date in which case the Facility Fee shall become
part of the Obligations and bear interest as set forth in Section 2.3 above from
the Closing Date until paid.
(b) Financial Examination and Appraisal Fees. Lender's
out-of-pocket expenses for Lender's audits of Borrower's Accounts, and for each
appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Lender or its agents;
(c) Expenses. Upon the date hereof, all Expenses
incurred by Lender through the Closing Date, including reasonable attorneys'
fees and expenses, and, after the date hereof, all Expenses incurred by Lender,
including reasonable attorneys' fees and expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for a term ending on the Maturity Date. Notwithstanding the foregoing,
Lender shall have the right to terminate its obligation to make Advances under
this Agreement immediately and without notice upon the occurrence and during
the continuance of an Event of Default. Notwithstanding termination, Lender's
Lien on the Collateral shall remain in effect for so long as any Obligations
are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation
of Lender to make the initial Advance is subject to the condition precedent
that Lender shall have received, in form and substance satisfactory to Lender,
the following:
(a) this Agreement and any other loan documents
contemplated by this Agreement;
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<PAGE> 12
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) a warrant to purchase stock of Borrower, duly
executed, in the form of Exhibit E attached hereto.
(d) financing statements (Forms UCC-1);
(e) a first amendment in form and substance acceptable
to Lender, amending a certain Subordinated Debenture in favor of Physicians
Insurance Company of Ohio, an Ohio corporation;
(f) payment of the Lender Expenses then due specified
in Section 2.5 hereof; and
(g) such other documents, and completion of such other
matters, as Lender may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of
Lender to make each Advance, including the initial Advance, is further subject
to the following conditions:
(a) timely receipt by Lender of the Advance
Request Form as provided
in Section 2.1; and
(b) timely receipt by Lender of the Weekly Budget, on or
before the first day of the week covered by any such Weekly Budget;
(c) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Advance Request Form and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges
to Lender a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower
of each of its covenants and duties under the Loan Documents. Except as set
forth in the Schedule, such security interest constitutes a valid security
interest in the presently existing Collateral, junior in priority only to
Permitted Liens and such security interest will constitute a valid security
interest in Collateral acquired after the date hereof, junior in priority only
to Permitted Liens.
4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Lender, at the request of
Lender, all Negotiable Collateral, all financing statements and other documents
that Lender may reasonably request, in form satisfactory to Lender, to perfect
and continue perfected Lender's security interests in the
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<PAGE> 13
Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents.
4.3 Lender's Rights Upon Default. In the event of a default
by the Borrower under this Agreement, Lender shall be entitled to exercise any
and all rights and remedies available to Lender under the Illinois Uniform
Commercial Code and all other rights and remedies at law in equity available to
secured creditors in the State of Illinois. Borrower further acknowledges that
five (5) days' notice of any public or private sale of the Collateral is
commercially reasonable under all circumstances.
4.4 Right to Inspect. Lender (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's
Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in, and
is in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound.
5.3 No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens.
5.4 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.5 Litigation. Except as set forth in the Schedule and as
disclosed in Borrower's most recent Form 10K filing with the Securities and
Exchange Commission and in its 1996 audited statement, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court
or administrative agency in which an adverse decision could have a Material
Adverse Effect or a material adverse effect on Borrower's interest or Lender's
security interest in the Collateral. Borrower does not have knowledge of any
such pending or threatened actions or proceedings.
5.6 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Lender fairly present in all material
respects Borrower's consolidated financial
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<PAGE> 14
condition as of the date thereof and Borrower's consolidated results of
operations for the period then ended. There has not been a material adverse
change in the consolidated financial condition of Borrower since the date of
the most recent of such financial statements submitted to Lender. The
representations and warranties contained in this Section 5.6 are made to the
best of Borrower's knowledge exercised in good faith.
5.7 Regulatory Compliance. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940. Borrower is
not engaged principally, or as one of the important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T and U of the Board of Governors of the
Federal Reserve System). Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.8 Taxes. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.9 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of Borrower's business as currently
conducted.
5.10 Full Disclosure. To the best of Borrower's knowledge,
exercised in good faith, no representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Lender contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Lender may have any commitment
to make an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of
its Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to
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comply, with all statutes, laws, ordinances and government rules and
regulations to which it is subject, noncompliance with which could have a
Material Adverse Effect or a material adverse effect on the Collateral or the
priority of Lender's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Lender: (a) as soon as available, but in any event within
forty (40) days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period; (b) as soon as available, but in any event within ninety
(90) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of
an independent certified public accounting firm reasonably acceptable to
Lender; (c) within five (5) days upon becoming available, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K and 10-Q filed with the Securities and Exchange Commission; (d)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages
or costs to Borrower or any Subsidiary of Fifty Thousand Dollars ($50,000) or
more; and (e) such budgets, sales projections, operating plans or other
financial information as Lender may reasonably request from time to time. Any
and all financial information to be provided hereunder by Borrower to Lender
shall be certified by Louis Morgan, Michael Press and Howard Meltzer, as true,
accurate and complete, to the best of their knowledge, exercise in good faith.
In the event that one or more of the foregoing persons is no longer employed by
Borrower, the certification shall be made by the persons employed by the
Borrower performing similar duties and functions.
On the first business day of each week in which this Revolving
Facility is outstanding, Borrower shall deliver to Lender a Weekly Budget
signed by a Responsible Officer in substantially the form of Exhibit C hereto.
Borrower shall deliver to Lender with the monthly financial statements
a Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
Lender shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every two (2) months unless an Event of Default
has occurred and is continuing.
6.4 Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Lender, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability,
and local, state, and federal income taxes, and will, upon request, furnish
Lender with proof satisfactory to Lender indicating that Borrower or a
Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment if the amount or validity of such payment
is contested in good faith by appropriate proceedings and is reserved against
(to the extent required by GAAP) by Borrower.
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6.5 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as reasonably satisfactory to
Lender. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Lender, showing Lender as an
additional loss payee thereof and all liability insurance policies shall show
the Lender as an additional insured, and shall specify that the insurer must
give at least twenty (20) days notice to Lender before canceling its policy for
any reason. Upon Lender's request, Borrower shall deliver to Lender certified
copies of such policies of insurance and evidence of the payments of all
premiums therefor. All proceeds payable under any such policy shall, at the
option of Lender, be payable to Lender to be applied on account of the
Obligations.
6.6 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Lakeside Bank, an Illinois
banking corporation.
6.7 Quick Ratio. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Quick Assets to Current Liabilities of at
least .1 to 1.0.
6.8 Current Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Current Assets to Current Liabilities of
at least .12 to 1.0.
6.9 Registration of Intellectual Property Rights. If
Borrower registers or causes to be registered with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, any
intellectual property rights covered by the blanket description contained in
Exhibit A, Borrower shall notify Lender in writing before the effective date of
such registration, and Borrower shall execute and deliver such additional
instruments and documents from time to time as Lender shall reasonably request
to perfect Lender's security interest in such additional intellectual property
rights.
6.10 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Lender to effect the purposes
of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Lender may have any commitment to make any
Advances, Borrower will not do any of the following:
7.1 Dispositions. Without the prior written consent of
Lender, which shall not be unreasonably withheld, convey, sell, lease, transfer
or otherwise dispose of (collectively, a "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of non-exclusive licenses and similar arrangements for the
use
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<PAGE> 17
of the property of Borrower or its Subsidiaries; or (ii) Transfers of worn-out
or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any
of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material change in
Borrower's ownership. Borrower will not, without thirty (30) days prior written
notification to Lender, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person.
7.4 Encumbrances. Create, incur, assume or suffer to exist
any Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.5 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.6 Investments. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.7 Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person.
7.8 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Lender's prior written consent.
7.9 Compliance. Become an "investment company" controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Lender's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
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8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal
of, or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Lender Expenses, within thirty (30) days of
receipt by Borrower of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any
obligation under Article 6 or violates any of the covenants contained in
Article 7 of this Agreement, or fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Lender and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten (10) days after Borrower receives notice
thereof or any officer of Borrower becomes aware thereof; provided, however,
that if the default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured within such ten
(10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default (provided that no Advances will be required
to be made during such cure period);
8.3 Budget Default. Borrower's actual weekly cash flow shall
be more than $20,000 less than that set forth in any Weekly Budget. Such Event
of Default shall not be curable.
8.4 Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Lender's
security interests in the Collateral;
8.5 Attachment. If any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
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8.6 Insolvency. If an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and is
not dismissed or stayed within ten (10) days (provided that no Advances will be
made prior to the dismissal of such Insolvency Proceeding);
8.7 Litigation. If Borrower is named as a defendant in any
legal action that could result in damages or costs to Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000.00) or more;
8.8 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Lender;
8.9 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.10 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Lender by any Responsible
Officer pursuant to this Agreement or to induce Lender to enter into this
Agreement or any other Loan Document.
9. LENDER'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Lender may, at its election, without notice
of its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Lender);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Lender;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Lender
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Lender considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Lender so requires, and to make the Collateral available to Lender
as Lender may designate. Borrower authorizes Lender to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Lender's determination appears to be prior or superior
to its security interest (other than Permitted Liens) and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Lender a license to enter into
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possession of such premises and to occupy the same, without charge, in order to
exercise any of Lender's rights or remedies provided herein, at law, in equity,
or otherwise;
(e) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Lender is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Lender's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit;
(f) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Lender determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Lender deems appropriate;
(g) Lender may credit bid and purchase at any public
sale; and
(h) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Lender (and any of Lender's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Lender's security interest in the
Accounts; (b) endorse Borrower's name on any checks or other forms of payment or
security that may come into Lender's possession; (c) sign Borrower's name on any
invoice or bill of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; and (e) settle and
adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Lender determines to be reasonable;
provided Lender may exercise such power of attorney to sign the name of Borrower
on any of the documents described in Section 4.2 regardless of whether an Event
of Default has occurred. The appointment of Lender as Borrower's attorney in
fact, and each and every one of Lender's rights and powers, being coupled with
an interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Lender's obligation to provide advances hereunder is
terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Lender may notify any Person owing funds to Borrower of Lender's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Lender, receive in trust all
payments as Lender's trustee, and immediately deliver such payments to Lender
in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Lender Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Lender may do any or all of the
following: (a) make payment of the same or
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any part thereof; or (b) set up such reserves under the Revolving Facility as
Lender deems necessary to protect Lender from the exposure created by such
failure. Any amounts so paid or deposited by Lender shall constitute Lender
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Lender shall not constitute a waiver by Lender
of any Event of Default under this Agreement.
9.5 Lender's Liability for Collateral. Lender shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency, or
other person whomsoever. All risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Lender's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Lender of one right or remedy shall be deemed an election, and no waiver by
Lender of any Event of Default on Borrower's part shall be deemed a continuing
waiver. No delay by Lender shall constitute a waiver, election, or acquiescence
by it. No waiver by Lender shall be effective unless made in a written document
signed on behalf of Lender and then shall be effective only in the specific
instance and for the specific purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Lender on which Borrower may in any way be
liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Lender, as the case may be, at
its addresses set forth below:
If to Borrower: PC QUOTE, INC.
300 South Wacker Drive, Suite 300
Chicago, IL 60606
Att'n: Louis J. Morgan
Fax: (312) 913-2959
If to Lender: PICO HOLDINGS, INC.
6101 Camino de la Costa
La Jolla, CA 92037
Att'n: John R. Hart
Fax: (619) 454-1170
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The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Illinois, without regard to
principles of conflicts of law. BORROWER AND LENDER EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
Lender's Initials ______ Borrower's Initials ______
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Lender's prior written consent,
which consent may be granted or withheld in Lender's sole discretion.
12.2 Indemnification. Borrower shall defend, indemnify and
hold harmless Lender and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Lender Expenses in any way suffered, incurred, or paid by
Lender as a result of or in any way arising out of, following, or consequential
to transactions between Lender and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and
expenses), except for losses caused by Lender's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement
cannot be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed
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and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Lender
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Lender have run,
provided that so long as the obligations set forth in the first sentence of
this Section 12.7 have been satisfied, and Lender has no commitment to make any
Advances or to make any other loans to Borrower, Lender shall release all
security interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality. In handling any confidential
information Lender shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Lender in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Lender and
(v) as Lender may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information
that either: (a) is in the public domain or in the knowledge or possession of
Lender when disclosed to Lender, or becomes part of the public domain after
disclosure to Lender through no fault of Lender; or (b) is disclosed to Lender
by a third party, provided Lender does not have actual knowledge that such
third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
PC QUOTE, INC., PICO HOLDINGS, INC., a California
a Delaware corporation corporation
By: /s/ LOUIS J. MORGAN By:
------------------------------- -------------------------------
Louis J. Morgan, Chairman
------------------------------- -------------------------------
[Print Name and Office [Print Name and Office
of Person Signing] of Person Signing]
Attested
By: /s/ DARLENE E. CZAJA
--------------------------------------
Darlene E. Czaja, Corp. Secratary
--------------------------------------
[Print Name and Office of Person Signing]
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind, including,
but not limited to any trade secrets, source codes, computer software and other
intellectual property used by the Company in connection with its internet web
page;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired; all trade secret rights, including all rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof.
20
<PAGE> 25
EXHIBIT B
LOAN ADVANCE REQUEST FORM
TO: DATE:
---------------------------------
FAX#: TIME:
---------------------------------
FROM:
-------------------------------------------------------------------------
(BORROWER)
REQUESTED BY:
-----------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
---------------------------------------------------------
PHONE NUMBER:
-----------------------------------------------------------------
TO ACCOUNT #
------------------------------------------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
------------------------
OTHER INSTRUCTIONS:
-----------------------------------------------------------
-----------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
21
<PAGE> 26
EXHIBIT C
WEEKLY BUDGET
[Sample Form]
22
<PAGE> 27
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: PICO HOLDINGS, INC.
FROM: PC QUOTE, INC.
The undersigned authorized officer of ___________________ hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Lender (the "Agreement"), (i) Borrower
is in complete compliance for the period ending _____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
<S> <C> <C>
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ -------- ----------
[Monthly] financial statements [Monthly] within 30 days Yes No
Annual (CPA Audited) [(CPA REVIEWED)] FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- ------ ----------
Maintain on a Monthly [QUARTERLY] Basis:
Minimum Quick Ratio _____:1.0 _____:1.0 Yes No
Minimum Current Ratio _____:1.0 _____:1.0 Yes No
$________ $________ Yes No
Maximum Debt/Tangible Net Worth _____:1.0 _____:1.0 Yes No
</TABLE>
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
- -----------------------------------------------------
SIGNATURE
- -----------------------------------------------------
TITLE
- -----------------------------------------------------
DATE
23
<PAGE> 28
DISBURSEMENT REQUEST AND AUTHORIZATION
BORROWER: PC QUOTE INC. LENDER: PICO HOLDINGS, INC.
================================================================================
LOAN TYPE. This is a Fixed Rate, Revolving Line of Credit of a principal
amount up to $1,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $
-------------
Undisbursed Funds $
-------------
Principal $
-------------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $
-------------
$ Loan Fee
--------------
Other Charges Paid in Cash: $
-------------
$ UCC Filing Fees
--------------
$ Outside Counsel Fees and
-------------- Expenses (Estimate)
Total Charges Paid in Cash $
-------------
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED AS OF _______________ , 19___.
BORROWER:
- -----------------------------------------------------
- -----------------------------------------------------
Authorized Officer
================================================================================
<PAGE> 29
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: PC QUOTE, INC. LENDER: PICO HOLDINGS, INC.
================================================================================
INSURANCE REQUIREMENTS. PC QUOTE, INC. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or
the providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Lender with
stipulation that coverage will not be
cancelled or diminished without a minimum
of twenty (20) days' prior written notice
to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Lender. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Lender.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, on
or before closing, evidence of the required insurance as provided above, with an
effective date of ___________________ , 19___, or earlier. Grantor acknowledges
and agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Lender may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at the
option of Lender, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF
LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Lender to provide to any person (including any insurance
agent or company) all information Lender deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
___________________ , 19___.
GRANTOR:
PC QUOTE, INC.
- -----------------------------------------------------
X
---------------------------------------------------
Authorized Officer
================================================================================
<PAGE> 30
CORPORATE RESOLUTIONS TO BORROW
================================================================================
BORROWER: PC QUOTE, INC.
================================================================================
I, the undersigned Secretary or Assistant Secretary of PC QUOTE, INC.
("Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
I FURTHER CERTIFY that Ronald Langley, one of the Directors of this
Corporation excused himself from the meeting and voting, because he has a
business, financial or professional relationship with PICO HOLDINGS, INC.
("Lender").
I FURTHER CERTIFY that the Directors of this Corporation adopted the
following resolutions with full knowledge that the Lender is affiliated with
Physicians Insurance Company of Ohio, a shareholder of this Corporation and the
holder of a Convertible Subordinated Debenture Due 2001.
I FURTHER CERTIFY that the corporate borrowing authorized hereby is on
as good of terms and conditions, or better, as is available to the Corporation
from any other sources.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
- ----------------------- ---------------------- ----------------------------
- ----------------------- ---------------------- ----------------------------
- ----------------------- ---------------------- ----------------------------
acting for an on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Lender, on such terms
as may be agreed upon between the officers, employees, or agents and Lender,
such sum or sums of money as in their judgment should be borrowed, without
limitation, including such sums as are specified in that certain Loan and
Security Agreement dated as of May 5, 1997 (the "Loan Agreement").
1
<PAGE> 31
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion
of the notes.
GRANT SECURITY. To grant a security interest to Lender in the
Collateral described in the Loan Agreement, which security interest shall
secure all of the Corporation's Obligations, as described in the Loan
Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all
drafts, trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation may have
an interest, and either to receive cash for the same or to cause such proceeds
to be credited to the account of the Corporation with Lender, or to cause such
other disposition of the proceeds derived therefrom as they may deem advisable.
ISSUE WARRANTS. To issue warrants to purchase the Corporation's
capital stock, for such series and number, and on such terms, as an officer of
the Corporation shall deem appropriate.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Lender may rely on these Resolutions until written notice of
their revocation shall have been delivered to and received by Lender. Any such
notice shall not affect any of the Corporation's agreements or commitments in
effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names;
that the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have not
been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
19___ and attest that the signatures set opposite the names listed above are
their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
--------------------------------------
2
<PAGE> 32
EXHIBIT E
FORM OF WARRANT
<PAGE> 1
Exhibit C
Promissory Note issued by PC Quote, Inc.
to PICO Holdings, Inc. on May 5, 1997
46
<PAGE> 2
PROMISSORY NOTE
U.S.$1,000,000 May 5, 1997
For value received, the undersigned ("Maker") promises to pay to the
order of PICO HOLDINGS, INC., a California corporation ("Payee"), at
, or at such other place as Payee, or
the holder hereof, may from time to time designate in writing, the principal
amount of up to One Million Dollars ($1,000,000) or so much thereof as may be
advanced by Payee to Maker under that certain Loan and Security Agreement of
even date herewith (the "Loan Agreement") together with interest on unpaid
principal from time to time outstanding hereunder at the rate of interest set
forth in the Loan Agreement. Principal and interest shall be payable in lawful
money of the United States.
Principal and interest shall be payable in accordance with the terms
of the Loan Agreement. The entire principal balance and all accrued interest
shall be due and payable September 30, 1997 (the "Maturity Date"), or at such
earlier date as all sums hereunder are declared due as a result of an Event of
Default. All payments shall be applied first to late charges and all other
charges due hereunder, then to accrued interest, then to the principal balance.
At the option of Payee, it shall be an "Event of Default" hereunder if
(i) Maker fails to pay when due any sum payable under this Note, or (ii) any
default or Event of Default occurs under the Loan Agreement. Upon the
occurrence of an Event of Default, then at the option of Payee, the entire sum
of principal, interest and all other charges due under this Note and the Loan
Agreement shall become immediately due and payable.
Under no circumstances shall the amount paid or agreed to be paid to
Payee, or its successors or assigns, for the loan, use, forbearance or
detention of money exceed the maximum, if any, permissible under applicable
law. If, from any circumstances, Payee, or its successors or assigns, should
ever receive as interest an amount that would exceed the highest lawful rate,
such amount as would be excessive interest shall be applied to the reduction of
the unpaid principal balance of this Note and not the payment of interest. This
provision shall control every other provision of this Note and all agreements
between Maker and Payee and their successors and assigns.
Maker agrees: (i) to pay all costs of collection and reasonable
attorneys' fees incurred by Payee, or the holder hereof, on account of such
collection, whether or not suit is filed hereon, (ii) to waive presentment,
protest, notice of protest, demand, notice of dishonor and diligence in
collection, (iii) to waive the right to plead any statute of limitations as a
defense to the full extent permitted by law, (iv) that no failure on the part
of Payee, or the holder hereof, to exercise any power, right or privilege
hereunder,
1
<PAGE> 3
or to insist upon prompt compliance with the terms hereof, shall constitute a
waiver thereof, and (v) to releases of any party to or security for this Note.
No provision of this Note may be amended, modified, supplemented,
changed, waived, discharged or terminated unless Payee consents thereto in
writing. In case any one or more of the provisions contained in this Note
should be held to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. This Note shall be
binding upon and inure to the benefit of Maker, Payee and their respective
successors and assigns. Time is of the essence of this Note and the performance
of each of the covenants and agreements contained herein. This Note shall be
governed by and construed in accordance with the laws of the State of Illinois.
Maker:
PC QUOTE, INC., a Delaware corporation
By: /s/ Louis J. Morgan
----------------------------
Its: Chairman
Attested By: /s/ Darlene E. Czaja
----------------------------
Its: Corp. Secretary
2
<PAGE> 1
Exhibit D
First Amendment to Convertible Subordinated Debenture
Due 2001 and Debenture Agreement, dated May 5, 1997,
between PC Quote, Inc. and Physicians Insurance
Company of Ohio
49
<PAGE> 2
FIRST AMENDMENT
TO CONVERTIBLE SUBORDINATED
DEBENTURE DUE 2001
AND DEBENTURE AGREEMENT
PC QUOTE, INC., a corporation duly organized and existing under the
laws of Delaware (the "Company"), and PHYSICIANS INSURANCE COMPANY OF OHIO, a
corporation duly organized and existing under the laws of Ohio ("PICO"), for
value received, hereby amend and modify that certain Convertible Subordinated
Debenture Due 2001 issued by the Company to PICO on or about November 27, 1996
(the "Debenture") and the Debenture Agreement described below.
RECITALS
A. Any defined terms used in this First Amendment shall have the same
meaning as ascribed to such terms in the Debenture.
B. Pursuant to a certain Agreement dated November 14, 1996, by and
between the Company and PICO (the "Debenture Agreement"), PICO agreed to
purchase from the Company the Debenture in the principal amount of $2,500,000
due December 31, 2001, with interest at an annual rate of 1% over the Prime
Rate as announced from time to time by The Wall Street Journal. The Debenture
and the Debenture Agreement are attached hereto as Exhibits A and B,
respectively.
C. Pursuant to Paragraph 7 of the Debenture Agreement, the Company
agreed to prepare and file with the Securities & Exchange Commission a
Registration Statement for a rights offering to be made pro rata to all its
shareholders except PICO consisting of 1,250,000 shares of common stock at an
exercise price of $2 per share, and PICO agreed to exercise for $2 cash per
share any such right which expires unexercised (the "Rights Offering"). For
various reasons, PICO asserts that it is not required to underwrite the Rights
Offering.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Company and PICO amend and modify the Debenture and
the Debenture Agreement as follows:
A. Add the following provisions to the Debenture:
1. Due Date. The principal portion of the Debenture, along with all
accrued but unpaid interest, shall be fully due and payable on April 30, 1999
(the "Due Date").
2. No Prepayment. The principal portion of the Debenture may not be
paid, in whole or in part, prior to the Due Date, as amended herein, without
the written consent of PICO.
3. Conversion Rate. The first sentence of the fourth full paragraph
on page 2 of the Debenture shall be amended to read:
1
<PAGE> 3
The registered holder of this Debenture has the right, at its sole
option, at any time on or prior to the later to occur of the close of
business on April 30, 1999 or the full payment of this debenture, to
convert the principal amount of the Debenture plus any accrued, but
unpaid, interest into fully paid and nonassessable shares of Common
Stock at the conversion price of the lesser of (a) the mean of the
closing bid price per share for the twenty (20) preceding trading days
(or such fewer number of days as such public market has existed (as
reported by NASDAQ or such national securities exchange as the Common
Stock is traded on)), or (b) $1.5625 per share (as adjusted in
accordance with this paragraph ), upon surrender of this Debenture to
the Company at its executive offices, accompanied by written notice of
conversion duly executed.
4. Additional Event of Default. The occurrence of an "Event of
Default" under any Senior Indebtedness shall constitute an "Event of Default"
under the Debenture.
5. Affirmative Covenants.
The Company covenants and agrees that, until payment in full of
this Debenture, it shall do all of the following:
5.1 Good Standing. The Company shall maintain its and each of its
subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. "Material Adverse
Effect" means a material adverse effect on (i) the business operations or
condition (financial or otherwise) of the Company and its subsidiaries taken as
a whole or (ii) the ability of the Company to pay this Debenture or otherwise
perform its obligations under this Debenture. The Company shall maintain, and
shall cause each of its subsidiaries to maintain, to the extent consistent with
prudent management of the Company's business, in force all licenses, approvals
and agreements, the loss of which could have a Material Adverse Effect.
5.2 Government Compliance. The Company shall meet, and shall cause
each subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. The Company shall comply, and
shall cause each subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.
5.3 Principal Depository. The Company shall maintain its principal
depository and operating accounts with Lakeside Bank, an Illinois banking
corporation.
5.4 Quick Ratio. The Company shall maintain, as of the last day of
each calendar month, a ratio of Quick Assets to Current Liabilities of at least
.1 to 1.0. From and after December 31, 1997, the Company shall maintain, as of
the last day of each calendar month, a ratio of Quick Assets to Current
Liabilities of at least 1.15 to 1.0.
5.5 Current Ratio. The Company shall maintain, as of the last day
of each calendar month, a ratio of Current Assets to Current Liabilities of at
least .12 to 1.0. From and
2
<PAGE> 4
after December 31, 1997, the Company shall maintain, as of the last day of each
calendar month, a ratio of Current Assets to Current Liabilities of at least
1.15 to 1.0.
5.6 Debt-Net Worth Ratio. From and after December 31, 1997, the
Company shall maintain, as of the last day of each calendar month, a ratio of
Total Liabilities less Subordinated Debt to Tangible Subordinated Debt of not
more than 1.0 to 1.0.
5.7 Financial Statements, Reports, Certificates. The Company shall
deliver to PICO: (a) as soon as available, but in any event within forty (40)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering the Company consolidated operations during such
period; (b) as soon as available, but in any event within ninety (90) days
after the end of the Company's fiscal year, audited consolidated financial
statements of the Company prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of
an independent certified public accounting firm reasonably acceptable to PICO;
(c) within five (5) days upon becoming available, copies of all statements,
reports and notices sent or made available generally by the Company to its
security holders and all reports on Form 10-K and 10-Q filed with the
Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against the
Company or any subsidiary that could result in damages or costs to the Company
or any subsidiary of Fifty Thousand Dollars ($50,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
PICO may reasonably request from time to time. Any and all financial
information to be provided hereunder by the Company to PICO shall be certified
by Louis Morgan, Michael Press and Howard Meltzer, as true, accurate and
complete, to the best of their knowledge, exercise in good faith. In the event
that one or more of the foregoing persons is no longer employed by the Company,
the certification shall be made by the persons employed by the Company
performing similar duties and functions.
PICO shall have a right from time to time hereafter to audit the
Company's accounts at the Company's expense, provided that such audits will be
conducted no more often than every two (2) months unless an Event of Default
has occurred and is continuing.
6. Negative Covenants. The Company covenants and agrees that so
long as any principal and interest on this Debenture is unpaid and outstanding,
the Company will not do any of the following:
6.1 Dispositions. Without the prior written consent of PICO,
such consent not to be unreasonably withheld, convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any of its
subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of non-exclusive licenses and similar arrangements for the
use of the property of the Company or its subsidiaries; or (ii) Transfers of
worn-out or obsolete equipment.
6.2 Change in Business. Engage in any business, or permit any of
its subsidiaries to engage in any business, other than the businesses currently
engaged in by the Company and any business substantially similar or related
thereto (or incidental thereto), or suffer a material change in the Company's
ownership. The Company will not, without 30 days prior written notification to
PICO, relocate its chief executive office.
3
<PAGE> 5
6.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its subsidiaries to acquire, all or
substantially all of the capital stock or property of another entity.
6.4 Encumbrances. Create, incur, assume or suffer to exist any
lien or encumbrance with respect to any of its property, or assign or otherwise
convey any right to receive income, including the sale of any accounts, or
permit any of its subsidiaries so to do, except for an existing blanket lien in
favor of Lakeside Bank on all personal property of the Company and a blanket
lien in favor of PICO Holdings, Inc., a California corporation, on all personal
property of the Company.
6.5 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
6.6 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any entity, or permit any of its subsidiaries so to do,
other than Permitted Investments (as defined in the Loan and Security Agreement
of even date herewith between the Company, as borrower, and PICO Holdings,
Inc., as lender).
6.7 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any affiliate of the
Company except for transactions that are in the ordinary course of the
Company's business, upon fair and reasonable terms that are no less favorable
to the Company than would be obtained in an arm's length transaction with a
nonaffiliated party.
6.8 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect, or permit any of its
subsidiaries to do any of the foregoing.
7. Full Force and Effect. Except as expressly amended hereby, the
Debenture shall remain unaltered and in full force and effect.
B. Delete the following provisions of the Debenture:
1. Redemption by the Company. Delete the first full paragraph of
page 4 of the Debenture concerning the Company's ability to redeem the
Debenture with stock at the closing of the Rights Offering (as defined in the
Debenture Agreement). Accordingly, it is the intent of the parties that the
Company shall not have the right to redeem the Debenture for stock at any time,
except upon the option of PICO.
C. Amend the Debenture as follows:
1. Amend Due Date. Delete December 31, 2001 as the date on which
the Debenture matures and replace such date with April 30, 1999, hereinbefore
defined as the Due Date.
4
<PAGE> 6
2. Amend Definition of Senior Indebtedness. The first sentence of
the first paragraph of page 3 is amended to read as follows: "The Indebtedness
evidenced by this Debenture is expressly subordinated and subject to the prior
payment in full of all secured indebtedness of the Company to Lakeside Bank and
PICO Holdings, Inc. whether outstanding at the date hereof or incurred after
the date hereof ("Senior Indebtedness")."
D. Amend the Debenture Agreement as follows:
1. Extinguishment of Underwriting of Rights Offering. Paragraph 7
of the Debenture Agreement is hereby amended to read as follows:
Rights Offering: PC Quote and PICO each agree as follows:
A. PC Quote may, at its option, prepare and file with the
Securities and Exchange Commission a Registration Statement (the
"Registration Statement"), and have such Registration Statement
declared effective, for a Rights offering to be made pro rata to
all its Shareholders except PICO consisting of 1,250,000 shares
of Common Stock at an exercise price per share to be determined
by PICO in its sole and absolute discretion (the "Price"). Such
Rights will be nontransferable, exercisable solely in cash, will
expire 30 days after issuance, and will provide that PICO shall,
at no cost to PICO, exercise for cash per share in an amount
equal to the Price any such Right which expires unexercised.
B. PICO agrees within three (3) business days from receipt of
written notice from PC Quote to such effect, to purchase for
cash in an amount equal to the Price all shares of Common Stock
deliverable upon the exercise of all Rights which have expired
unexercised.
/////
/////
/////
/////
/////
/////
/////
/////
/////
/////
5
<PAGE> 7
C. To the extent permissible under applicable federal and state
securities laws, PC Quote agrees to include in the Registration
statement those shares of Common Stock issuable to PICO upon
conversion or redemption of the Debenture and any other shares
of PC Quote common stock then owned by PICO.
The Company has caused this instrument to be signed manually or by
facsimile by the duly authorized officers.
Dated: May 5, 1997.
Attest: P C QUOTE, INC.,
a Delaware corporation
By: /s/ Darlene E. Czaja By: /s/ Louis J. Morgan
--------------------------- -----------------------------
, Secretary Title: Chairman
Attest: PHYSICIANS INSURANCE COMPANY OF OHIO,
an Ohio corporation
By: By:
--------------------------- -----------------------------
, Secretary Title:
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<PAGE> 1
Exhibit E
Common Stock Purchase Warrant issued on May 5, 1997 by
PC Quote, Inc. to PICO Holdings, Inc.
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<PAGE> 2
Common Stock Warrant
Minimum 640,000 Shares
(subject to adjustment)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
Void after April 30, 2000
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, PICO HOLDINGS, INC., a
California corporation, is entitled to purchase a minimum of Six Hundred Forty
Thousand (640,000) shares of Common Stock ("Warrant Shares") of PC QUOTE, INC.,
a Delaware corporation, at a price per share equal to the mean of the closing
bid price per share for the twenty (20) preceding trading days (or such fewer
number of days as such public market has existed) as reported by NASDAQ or such
national securities exchange as the Common Stock (as defined below) is traded
on, but in no event shall the price be greater than $1.5625 per share ("Warrant
Price"), subject to adjustments and all other terms and conditions set forth in
this Warrant.
1. Definitions. As used herein, the following terms, unless the
context otherwise requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Acquisition" shall mean any sale, license, or other
disposition of all or substantially all of the assets of the Company, or any
reorganization, consolidation, or merger of the Company where the holders of
the Company's securities before the transaction beneficially own less than 50%
of the outstanding voting securities of the surviving entity after the
transaction.
(c) "Commission" shall mean the Securities and Exchange Commission,
or any other Federal agency at the time administering the Act.
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<PAGE> 3
(d) "Common Stock" shall mean shares of the Company's presently or
subsequently authorized Common Stock, and any stock into which such Common
Stock may hereafter be exchanged.
(e) "Company" shall mean PC QUOTE, INC., a Delaware corporation,
and any corporation which shall succeed to or assume the obligations of PC
QUOTE, INC., under this Warrant.
(f) "Date of Grant" shall mean May 5, 1997.
(g) "Exercise Date" shall mean the effective date of the delivery
of the Notice of Exercise pursuant to Sections 4 and 11 below.
(h) "Holder" shall mean any person who shall at the time be the
registered holder of this Warrant.
(i) "Notes" shall mean (i) the Convertible Subordinated Debenture,
as amended, held by Physicians Insurance of Ohio, and (ii) other indebtedness
of the Company in the aggregate principal amount of up to $1,000,000, owed to
PICO HOLDINGS, INC., which credit shall have been extended concurrently with
the issuance of this Warrant.
(j) "Shares" shall mean shares of the Company's Common Stock, as
described in the Company's Certificate of Incorporation.
2. Issuance of Warrant and Consideration Therefor. This Warrant is
issued in consideration of the loan by PICO HOLDINGS, INC. to the Company as
described in the Notes issued concurrently with this Warrant by the Company.
3. Term. The purchase right represented by this Warrant is exercisable
only during the period commencing upon the Date of Grant and ending on April
30, 2000.
4. Method of Exercise and Payment.
(a) Method of Exercise. Subject to Section 3 hereof and compliance
with all applicable Federal and state securities laws, the purchase right
represented by this Warrant may be exercised, in whole or in part and from time
to time, by the Holder by (i) surrender of this Warrant and delivery of the
Notice of Exercise (the form of which is attached hereto as Exhibit A), duly
executed, at the principal office of the Company and (ii) payment to the
Company of an amount equal to the product of the then applicable Warrant Price
multiplied by the number of Shares then being purchased pursuant to one of the
payment methods permitted under Section 4(b) below.
(b) Method of Payment. Payment shall be made either (1) by check
drawn on a United States bank and for United States funds made payable to the
Company, or (2) by wire transfer of United States funds for the account of the
Company.
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<PAGE> 4
(c) Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with a properly endorsed notice of
exercise and notice of such election in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
Y (A-B)
X = -------
A
Where X = the number of shares of Common Stock to be issued to the Holder,
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being canceled (at the date of such calculation),
A = the fair market value of one share of the Company's Common Stock (at
the date of such calculation), and
B = the Warrant Price (as adjusted to the date of such calculation).
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that where there exists a public market for the Company's
Common Stock at the time of such exercise, fair market value shall mean the
average over the preceding twenty trading days (or such fewer number of days as
such public market has existed) of the mean of the closing bid and asked prices
on the over-the-counter market as reported by Nasdaq, or if the Common Stock is
then traded on a national securities exchange or the Nasdaq National Market,
the average over the preceding twenty trading days (or such fewer number of
days as the Common Stock has been so traded) of the closing sale prices on the
principal national securities exchange or the National Market on which it is so
traded.
(d) Delivery of Certificate. In the event of any exercise of the
purchase right represented by this Warrant, certificates for the Shares so
purchased shall be delivered to the Holder within ten days of delivery of the
Notice of Exercise and, unless this Warrant has been fully exercised or has
expired, a new warrant representing the portion of the Shares with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Holder within such ten day period.
(e) No Fractional Shares. No fractional shares shall be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the fair
market value per Share as of the date of exercise.
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<PAGE> 5
(f) Company's Representations.
(i) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer under applicable federal
and state securities laws. During the period within which the purchase right
represented by this Warrant may be exercised, the Company shall at all times
use its best efforts to have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Shares to provide for the exercise of the purchase right
represented by this Warrant;
(ii) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditors' rights;
(iii) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be inconsistent with the Company's Certificate of
Incorporation or Bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not conflict with or contravene any provision of, or constitute a default
under, any material indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound, or require the registration or
filing with or the taking of any action in respect of or by, any federal, state
or local government authority or agency (other than such consents, approvals,
notices, actions, or filings as have already been obtained or made, as the case
may be).
5. Adjustment of Warrant Price and Number of Shares. The number of
securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Adjustment for Dividends in Stock. In case at any time or from
time to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock of the
Company by way of dividend then, and in each case, the Holder of this Warrant
shall, upon the exercise hereof, be entitled to receive, in addition to the
number of shares of Common Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of such other or additional
stock of the Company which such Holder would hold on the date of such exercise
had it been the holder of record of such Common Stock on the date hereof and
had thereafter, during the period from the date hereof to and including the
date of such exercise, retained such shares and/or all other additional stock
receivable by it as aforesaid
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<PAGE> 6
during such period, giving effect to all adjustments called for during such
period by paragraphs (b) and (c) of this Section 5.
(b) Adjustment for Reclassification or Reorganization. In case of
any reclassification or change of the outstanding securities of the Company or
of any consolidation, merger or reorganization of the Company on or after the
date hereof, then and in each such case the Holder of this Warrant, upon the
exercise hereof at any time after the consummation of such reclassification,
change, consolidation, merger or reorganization, shall be entitled to receive,
in lieu of or in addition to the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to
the shares of stock or other securities property receivable upon the exercise
of this Warrant after such consummation.
(c) Stock Splits and Reverse Stock Splits. If, at any time on or
after the date hereof, the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of this Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number
of shares receivable upon exercise of the Warrant shall be proportionately
decreased.
(d) Rights, Options or Warrants. If the Company issues rights,
options or warrants to all holders of its shares of Common Stock, without any
charge to such holders, entitling them (for a period expiring within 45 days
after the record date mentioned below in this paragraph (d)) to subscribe for
or to purchase shares of Common Stock at a price per share lower than the then
current market price per share of Common Stock at the record date mentioned
below (as defined in paragraph (f) below), the number of Shares thereafter
purchasable upon exercise of each Warrant shall be determined by multiplying
the number of Shares theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the denominator shall
be the number of shares of Common Stock outstanding on such record date plus
the number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at the then current market
price per share of Common Stock. Such adjustment shall be made whenever such
rights, options or warrants are issued, and shall become effective
retroactively to immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
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<PAGE> 7
(e) Other Distributions. If the Company distributes to all holders
of its shares of Common Stock shares of stock other than Common Stock or
evidences of its indebtedness or assets (excluding cash dividends payable out
of consolidated earnings or retained earnings and dividends or distributions
referred to in paragraph (a) above) or rights, options or warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding those referenced in paragraph (2)
above), then in each case the number of Shares thereafter issuable upon the
exercise of each warrant shall be determined by multiplying the number of
Shares theretofore issuable upon the exercise of each Warrant, by a fraction,
of which the numerator shall be the current market price per share of Common
Stock (as defined in paragraph (f) below) on the record date mentioned below in
this paragraph (e), and of which the denominator shall be the current market
price per share of Common Stock on such record date, less the then fair value
(as determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the shares of stock other
than the Common Stock or assets or evidences of indebtedness so distributed or
of such subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to immediately after
the record date for the determination of stockholders entitled to receive such
distribution.
(f) Current Market Price. For the purposes of any computation under
paragraphs (d) and (c) of this Section 5, the current market price per share of
Common Stock at any date shall be the average of the daily closing prices for
fifteen consecutive trading days commencing twenty trading days before the date
of such computation. The closing price for each day shall be the closing sale
price or in case no such reported sale takes place on such day, the average of
the closing bid and asked prices for such day, in either case on the principal
national securities exchange or the Nasdaq National Market on which the shares
are listed or admitted to trading, or if they are not listed or admitted to
trading on any national securities exchange or the Nasdaq National Market, but
are traded in the over-the-counter market, the average of the representative
closing bid and asked quotations for the Common Stock, on the NASDAQ system or
any comparable system, or if the Common Stock or, in case no sale is publicly
reported, the average of the closing bid and asked prices as furnished by two
members of the NASD selected from time to time by the Company for that purpose.
(g) Adjustments to Warrant Price. Whenever the number of Shares
purchasable upon exercise of each Warrant is adjusted, as herein provided, the
Warrant Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately thereafter.
(h) Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish
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<PAGE> 8
the Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish the Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
6. Acquisitions
(a) Assumption of Warrant. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of
this Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing.
(b) Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and the Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall be deemed to have been automatically converted pursuant
to Section 4(c) and thereafter the Holder shall participate in the acquisition
on the same terms as other holders of the same class of securities of the
Company.
(c) Purchase Right. Notwithstanding the foregoing, at the election
of the Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by the
Holder in consideration of the Shares had the Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
stockholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
7. Notices; Information; Registration.
(a) Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its Common Stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of Common
Stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company
shall give the Holder (1) at least 20 days prior written notice of the date on
which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of Common Stock will be
entitled thereto) or in respect of the matters referred to in (c) and (d) above
for determining rights to vote, if any; (2) in the case of the matters referred
to in (c) and (d) above at least 20 days prior written notice of the
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<PAGE> 9
date when the same will take place (and specifying the date on which the
holders of Common Stock will be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same notice as
is given to the holders of such registration rights.
(b) Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
stockholders of the Company, (b) within ninety days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company audited by independent public accountants of recognized standing and
(c) within forty-five days after the end of each of the first three quarters of
each fiscal year, the Company's quarterly, unaudited financial statements.
(c) Registration Under Securities Act of 1933. The Company agrees
that the Shares shall be subject to the registration rights set forth on
Exhibit B.
8. Compliance with Act; Transferability and Negotiability of Warrant;
Disposition of Shares.
(a) Compliance with Act. The Holder, by acceptance hereof, agrees
that this Warrant and the Shares to be issued upon the exercise hereof are
being acquired solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution thereof and that it
will not offer, sell or otherwise dispose of this Warrant or any Shares to be
issued upon the exercise hereof except under circumstances which will not
result in a violation of the Act. This Warrant and the Shares to be issued upon
the exercise hereof (unless registered under the Act) shall be imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.
In addition, this Warrant and the Shares to be issued upon the exercise hereof
shall bear any legends required by the securities laws of any applicable
states.
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(b) Transferability and Negotiability of Warrant. This Warrant may
not be transferred or assigned in whole or in part without compliance with all
applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions satisfactory to the Company, if requested by the Company and the
transfer is to a person other than a general partner or affiliate of the
initial Holder). Subject to the provisions of this Warrant with respect to
compliance with the Act, title to this Warrant may be transferred by
endorsement and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery. The Company shall act promptly to
record transfers of this Warrant on its books, but the Company may treat the
registered holder of this Warrant as the absolute owner of this Warrant for all
purposes, notwithstanding any notice to the contrary.
(c) Disposition of Shares. With respect to any offer, sale,
transfer or other disposition of any Shares acquired pursuant to the exercise
of this Warrant prior to registration of such Shares, except for any such
offer, sale, transfer or other disposition of Shares to an affiliate of the
initial Holder, the Holder and each subsequent holder of this Warrant agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, and if such transfer is not pursuant to Rule 144, a written opinion of
legal counsel for such holder, if requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification of such Shares. Notwithstanding the foregoing, such Shares may be
offered, sold or otherwise disposed of in accordance with Rule 144, provided
that the Company shall have been furnished with such information as the Company
may reasonably request to provide a reasonable assurance that the provisions of
Rule 144 have been satisfied. Each certificate representing the Shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a restrictive
legend as to the applicable restrictions on transferability in order to insure
compliance with the Act, unless in the aforesaid opinion of legal counsel for
the holder, such legend is not required in order to insure compliance with the
Act.
9. Rights of Stockholders. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Shares or any other securities of
the Company which may at any time be issuable on the exercise of this Warrant
for any purpose, nor shall anything contained herein be construed to confer
upon the Holder, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or, except as expressly required herein, to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until
this Warrant shall have been exercised and the Shares issuable upon exercise
hereof shall have become deliverable, as provided herein.
10. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably
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<PAGE> 11
satisfactory in form and amount to the Company or, in the case of mutilation,
on surrender and cancellation of this Warrant, the Company at its expense shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor.
11. Exchange of Warrant. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, and subject to the
provisions of this Warrant with respect to compliance with the Act, the Company
at its expense shall issue to or on the order of the Holder a new warrant or
warrants of like tenor, in the name of the Holder or as the Holder (on payment
by the Holder of any applicable transfer taxes) may direct, for the number of
Shares issuable upon exercise thereof.
12. Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
13. Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
14. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
15. Titles and Subtitles; Forms of Pronouns. The titles of the
Sections and Subsections of this Warrant are for convenience only and are not
to be considered in construing this Warrant. All pronouns used in this Warrant
shall be deemed to include masculine, feminine and neuter forms.
16. Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
Dated: May 5, 1997. PC QUOTE, INC., a Delaware corporation
By: /s/ Louis J. Morgan
--------------------------
, President
Attested By: /s/ Darlene E. Czaja
--------------------------
, Secretary
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EXHIBIT A
NOTICE OF EXERCISE
TO: PC QUOTE, INC.
1. The undersigned Holder of the attached Common Stock Purchase
Warrant hereby elects to exercise its purchase right under such Warrant with
respect to ________________ Shares, as defined in the Warrant.
2. The undersigned Holder elects to pay the aggregate Warrant Price
for such Shares (the "Exercise Shares") in the following manner:
[ ] by the enclosed check drawn on a United States bank and for
United States funds made payable to the Company in the amount
of $_____________;
[ ] by wire transfer of United States funds to the account of the
Company in the amount of $___________, which transfer has been
made before or simultaneously with the delivery of this Notice
pursuant to the instructions of the Company; or
[ ] pursuant to the Net Exercise provisions set forth in Section
4(c) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of Shares in the name of the undersigned or in such other
names as is specified below:
Name: ___________________________
Address: ________________________
Tax Ident. No.: _________________
HOLDER:
_______________________________
By: ___________________________
Date: ______________ Title: ________________________
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<PAGE> 13
EXHIBIT B
STATEMENT OF REGISTRATION RIGHTS
1. Definitions. For purpose of the Warrant to which this Statement of
Registration Rights is attached as Exhibit B:
(a) The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of effectiveness of such registration
statement or document;
(b) The term "Registrable Securities" means the shares of Common
Stock issued or issuable upon exercise of the Warrant;
(c) The term "Holder" means the original holder of the Warrant and
any transferee of the Warrant; and
(d) The term "Warrant" means the original Warrants issued in
connection with the Company's initial public offering and all Warrants issued
as a result of the transfer of such original Warrants.
2. Company Registration. If (but without any obligation to do so) the
Company proposes at any time before April 30, 2000 to register (including for
this purpose a registration effected by the Company for stockholders other than
Holder) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give Holder written notice of such
registration. Upon the written request of Holder given within twenty days after
mailing of such notice by the Company, the Company shall, subject to the
provisions of Section 8 hereof and Section 5 of the Warrant, cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.
3. Demand Registration. In case the Company shall, at any time before
April 30, 2000, receive from Holders holding 40% or more of the outstanding
Registrable Securities a written request (to be exercised only once) that the
Company effect a registration and any related qualification or compliance with
respect to all or a part of the Registrable Securities (which registration
shall at the election of Holder either be for a registration for a primary
issuance of the Shares upon the exercise of the Warrant or the resale of the
Shares previously issued upon exercise of the Warrant at the election
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of Holder) owned by such Holder, the Company will promptly notify each other
Holder (if any) of such request and will:
(a) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of a Holder's
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other holder of registration
rights joining in such request as are specified in a written request given
within 20 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 3: (1) if
the Company has effected a registration of Registrable Securities pursuant to
this Section 3 within the preceding 12 months; (2) if the Company shall furnish
to Holder a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the registration statement for a period of not more than 60
days after receipt of the request of Holder under this Section 3; provided,
however, that the Company shall not utilize this right more than once in any
twelve-month period; or (3) in any jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance; and,
(b) subject to the foregoing, file a registration statement
covering the Registrable Securities and other securities so requested to be
registered promptly after receipt of the request or requests of Holder, and in
any event within 30 days of receipt of such request.
4. Obligation of the Company. Subject to the terms of the Warrant, in
the event that the Company is to effect the registration of any Registrable
Securities pursuant to Section 2 or 3 hereof, the Company shall promptly:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the
holders of a majority of the securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days, or
such shorter period as is required to dispose of all securities covered by such
registration statement.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other
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documents as Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by Holder.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by Holder, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions or to agree to any
restrictions as to the conduct of its business in the ordinary course thereof.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such underwriting agreement.
(f) Notify Holder at any time when a prospectus relating to
Registrable Securities of Holder covered by such registration statement is
required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
(g) Furnish, at the request of Holder, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to the Warrant, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to Holder and (ii) a
letter dated such date, from the independent certified public accountants of
the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to Holder.
5. Availability of Rule 144. Notwithstanding anything in the Warrant
or this Statement of Registration Rights to the contrary, the Company shall not
be obligated to effect any such registration, qualification or compliance,
pursuant to Section 2 or 3, if application of Rule 144 would allow Holder
requesting a registration under Section 2 or 3 to dispose of the Registrable
Securities for which a registration is demanded within a single 90-day period.
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to the Warrant that the
selling Holder shall
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furnish to the Company such information regarding itself, the Registrable
Securities held by Holder, and the intended method of disposition of such
securities as shall be required to effect the registration of their Registrable
Securities.
7. Expenses. The Company shall bear and pay all expenses (other than
underwriting discounts and commissions) incurred in connection with any
registration, filing or qualification of Registrable Securities, including
(without limitation) all registration, filing, and qualification fees, legal,
printers and accounting fees relating thereto, and the cost of any reasonable
fees or disbursements of counsel for Holder.
8. Underwriting Requirements. In connection with any registrations in
which Registrable Securities have a right to be included pursuant to Section 2
hereof and which involves an underwriting of securities being issued by the
Company, the Company shall not be required, under Section 2 hereof, to include
any of Holder's securities in such underwriting unless Holder accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering, the securities so included to be apportioned pro rata
among the selling Holder and other shareholders holding contractual
registration rights according to the total amount of securities entitled to be
included therein owned by each selling stockholder or in such other proportions
as shall mutually be agreed to by Holder and each other selling stockholder.
9. Indemnification. In the event any Registrable Securities are
included in a registration statement filed by the Company:
(a) The Company will indemnify and holder harmless Holder, its
officers, directors, and agents, any underwriter (as defined in the Act) for
Holder and each person, if any, who controls Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) asserted by a third party to which they may become subject under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation of the Company of the Act, the 1934 Act, any state securities law or
any
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rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will reimburse Holder, any of its officers or
directors, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by such Holder, underwriter or
controlling person.
(b) Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company with the meaning of the Act, any
underwriter and any other shareholder selling securities in such registration
statement or any of its directors or officers or any person who controls such
shareholder, against any losses, claims, damages, or liabilities (joint or
several) asserted by a third party to which the Company or any such director,
officer, controlling person, or underwriter or controlling person, or other
such shareholder or director, officer or controlling person may become subject,
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by Holder expressly for use in connection with
such registration; and Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or controlling person, other shareholder, officer,
director, or controlling person, as incurred, in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the obligations of Holder hereunder shall be limited to an amount
equal to the net proceeds (equal to the offering price less the exercise price,
expenses and underwriting commissions and discounts) to such Holder of Shares
sold as contemplated herein. Notwithstanding the foregoing, the indemnity
agreement contained in this Section 9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Holder, which consent shall not
be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying part under this Section 9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
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have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 9.
10. Reports Under the 1934 Act. With a view to making available to
Holder the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit Holder to sell securities of
the Company to the public without registration the Company will endeavor to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(b) take such action as is necessary to enable Holder to utilize an
abbreviated registration statement for the sale of its Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to Holder, so long as Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144, the Act and
the 1934 Act, or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing Holder of any rule or regulation of
the SEC which permits the selling of any such securities without registration
or pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to the Warrant may be assigned by
Holder to a permitted transferee or assignee of the Warrant or of at least
400,000 Shares, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
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