<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PC QUOTE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
300 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON
OCTOBER 16, 1997
- ---------------------
TO THE STOCKHOLDERS OF
PC QUOTE, INC.:
The Annual Meeting of Stockholders of PC Quote, Inc., a Delaware corporation,
will be held on October 16, 1997 at 10:00 A.M. at The Metropolitan Club, 67th
Floor, Sears Tower, 233 South Wacker Drive, Chicago, Illinois, for the following
purposes:
1. To elect five (5) directors to hold office until the next annual meeting of
stockholders or until their successors shall have been elected and qualified.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the Company's total authorized Common Stock, to eliminate the Preferred
Stock, par value $1.312704617 per share, from the Company's authorized capital,
and to authorize the Company to issue up to Five Million (5,000,000) shares of
Preferred Stock, par value $0.001 per share.
3. To approve an amendment to the Company's Combined Incentive and Non-Statutory
Stock Option Plan (the "Option Plan") to increase the aggregate number of shares
of the Company's Common Stock which are reserved for issuance under the Option
Plan.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent auditors of
the Company for the year ending December 31, 1997.
5. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on August 19, 1997 are
entitled to notice of, and to vote at, the annual meeting and at any adjournment
thereof.
By order of the Board of Directors
DARLENE E. CZAJA
SECRETARY
Chicago, Illinois
September , 1997
<PAGE>
[LOGO]
300 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
- ------------------------------------------------------
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of PC Quote,
Inc. (the "Company"), for use at the Annual Meeting of Stockholders of the
Company, to be held October 16, 1997 at 10:00 a.m. at The Metropolitan Club,
67th Floor, Sears Tower, 233 South Wacker Drive, Chicago, Illinois. In addition
to solicitation of proxies by mail, proxies may be solicited by the Company's
directors, officers and regular employees by personal interview, telephone or
telegram, and the Company will request brokers and other fiduciaries to forward
proxy soliciting material to the beneficial owners of shares which are held of
record by them. The expense of all such solicitation, including printing and
mailing, will be paid by the Company. Any proxy may be revoked at any time
before its exercise, by written notice to the Secretary of the Company or by
attending the meeting and electing to vote in person. This Proxy Statement and
the accompanying proxy were initially mailed to stockholders on or about
September , 1997.
Only stockholders of the Company of record at the close of business on August
19, 1997 are entitled to vote at the meeting or any adjournment thereof. As of
that date there were outstanding 7,414,149 shares of Common Stock, each of which
is entitled to one vote on all matters voted upon at the annual meeting. Holders
of shares of Common Stock are not entitled to cumulate their votes in the
election of directors. A majority of the outstanding shares of Common Stock of
the Company, represented in person or by proxy, shall constitute a quorum at the
meeting.
The proposal to approve an amendment to the Company's Certificate of
Incorporation to increase the Company's total authorized Common Stock, eliminate
a certain class of Preferred Stock, and authorize a class of Preferred Stock,
par value $0.001 per share, shall be approved by the affirmative vote of 66 2/3%
of the shares of Common Stock outstanding as of August 19, 1997. Approval of the
proposals to (i) increase the number of shares of Common Stock reserved for
issuance under the Option Plan and (ii) ratify the appointment of independent
auditors shall be by the affirmative vote of a majority of the outstanding
shares of Common Stock. The directors nominated shall be elected by the
affirmative vote of a majority of the shares present and voting at the meeting.
In determining whether a quorum exists at the meeting for purposes of all
matters to be voted on, all votes "for" or "against," as well as all abstentions
(including votes to withhold authority to vote in certain cases), with respect
to the proposal receiving the most such votes, will be counted. Abstentions with
respect to a particular proposal will be counted as part of the base number of
votes to be used in determining if that particular proposal has received the
requisite percentage of base votes for approval, while broker non-votes will not
be counted in such base for such proposal. Thus, an abstention will have the
same effect as a vote "against" such proposal while a broker non-vote will have
no effect.
<PAGE>
ELECTION OF DIRECTORS
Two of the five directors elected at the 1996 annual meeting, Messrs. M. Blair
Hull and Alexander R. Piper III, resigned their positions in December 1996. A
third director, Paul DiBiasio, resigned his position in April 1997. In July
1997, the Board of Directors elected Jim Porter, the Company's newly appointed
Chief Executive Officer, and John Hart directors to fill the vacancies created
by two of those resignations, and it has no immediate plans to fill the vacancy
created by the resignation of the third director until the annual meeting.
On July 17, 1997, the Board of Directors voted to expand the Board of Directors
to a range of between two (2) and seven (7) members. A board of five (5)
directors will be elected to serve until the next annual meeting, or until their
successors are elected and shall have qualified. All of such directors shall be
elected by the holders of shares of Common Stock. The proxies returned pursuant
to this solicitation will be voted by the persons named therein for the election
as directors of the persons named below, which persons constitute the Board of
Directors' nominees for election of directors. If any nominee is unable to
accept the office of director (which is not presently anticipated), the persons
named in the proxies will vote for the election of such other persons as they
shall determine.
<TABLE>
<CAPTION>
Director
Name, Age, and Principal Occupation Since
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Louis J. Morgan, 60 ................................................................................ 1980
Chairman of the Board of the Company since May 1984. Mr. Morgan served as President of the Company
from August 1980 to May 1984. Since August 1980 he has also served as Treasurer of the Company.
From 1962-1972, Mr. Morgan was employed as a securities broker and sales manager of a regional New
York Stock Exchange member brokerage firm. He was a member of the Chicago Board Options Exchange,
Inc. from 1973 to 1986 and served on the Systems Committee of the Chicago Board Options Exchange,
Inc. from 1980 through 1983.
Jim R. Porter, 57 .................................................................................. 1997
Chief Executive Officer of the Company since July 1997. President and Chief Executive Officer of
New Century Investment Research & Management, Inc. since 1993. Associate of Chicago Research &
Trading, Inc., a commodity trading firm, from 1990 to 1993. From 1979 to May 1990, a Principal and
Chief Executive Officer of First Options of Chicago, Inc., a securities, futures and options
clearing firm, and a Partner of Spear Leeds & Kellogg, a specialist firm on the New York Stock
Exchange. Mr. Porter has been in the securities and futures business since 1969 and has been a
member of principal exchanges such as the Chicago Board of Trade, the Chicago Mercantile Exchange
and the Chicago Board Options Exchange.
Ronald Langley, 52 ................................................................................. 1995
Chairman and director of publicly held PICO Holdings, Inc., since November 1996. Chairman of
Quaker Holdings Limited, an investment banking firm, since October 1992. Chairman since 1995, and
Director since 1993, of Physicians Insurance Company of Ohio, an insurance company. Chairman of
Summit Global Management, Inc., a subsidiary of PICO Holdings, Inc., which acts as a registered
investment adviser, since 1995. Chairman and director of Global Equity Corporation, an
international investment compnay, since 1995. Since 1994 Mr. Langley served as Chairman of the
Centurion Trust Company, a bank specializing in custodian services. Mr. Langley served as Chairman
of Pacific Southwest Corporation from 1989 to 1992.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director
Name, Age, and Principal Occupation Since
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
John R. Hart, 37 ................................................................................... 1997
Director, President and Chief Executive Officer of publicly held PICO Holdings, Inc. since
November 1996. President and Chief Executive Officer of Physicians Insurance Company of Ohio, an
insurance company, since 1995, and director since 1993. President and Chief Executive Officer of
Global Equity Corporation, an international investment company, since 1995. President of Quaker
Holdings Limited, an investment company, since 1991. Principal in Detwiler, Ryan & Company, Inc.,
an investment bank, from 1982 to 1991.
Timothy K. Krauskopf, 34 ...........................................................................
Head of Information Services at the Field Museum of Natural History since 1997. Co-Founder in
1990, Director since 1993, Vice President of Research and Development and Chief Technology Officer
of publicly held Spyglass, Inc., a software firm, from 1990 to 1997. Mr. Krauskopf has also served
as a Trustee of Northwestern University.
</TABLE>
The principal occupation of each of the above nominees for the past five years
has been as set forth in the above table.
The Company's Board of Directors has established an Audit Committee, a
Compensation Committee and an Incentive Stock Committee. Each of those
committees is comprised of all non-employee directors of the Company. Mr.
Langley currently serves on each committee. If elected, Messrs. Hart and
Krauskopf will also serve on each. None of such committee members are eligible
to receive options under the Company's Option Plans.
During the year ended December 31, 1996, the Board of Directors held six
meetings. Each of the directors attended, in person or by telephone, at least
75% of the total number of meetings of the Board of Directors and committees
thereof held during the period for which each individual was a director.
COMPENSATION OF DIRECTORS
On May 13, 1994, the Company adopted a policy of paying its non-employee
directors $4,000 per year and, in addition, $750 per meeting. Pursuant to this
policy, non-employee directors were paid an aggregate of $29,750 during the last
fiscal year.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Position Age
- ------------------------------------------------- ----------------------------------------------- ---
<S> <C> <C>
Louis J. Morgan.................................. Chairman and Treasurer 60
Jim R. Porter.................................... Chief Executive Officer 57
John E. Juska (1)................................ Chief Financial Officer 42
</TABLE>
- ---------
(1)Chief Financial Officer of the Company since July 1997. Mr. Juska served as
Vice President and Chief Financial Officer for the Chicago Mercantile
Exchange from 1994 to July 1997. Between 1986 and 1994, Mr. Juska served in
various other positions for the Chicago Mercantile Exchange, including as
Controller and as Vice President of Finance. Mr. Juska also previously served
as Treasurer of CME Depository Trust Company and GFX Corporation, both
wholly-owned subsidiaries of the Mercantile Exchange, and as a trustee of the
CME Pension Trust.
3
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the past three years of (a)
the Company's Chief Executive Officer, (b) the Company's President and Chief
Operating Officer (who was employed by the Company from June 1996 to July 1997),
(c) the Company's Vice President, Finance and Chief Financial Officer (who was
employed by the Company from July 1996 to July 1997), and (d) the Company's two
most highly compensated officers other than executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Awards
-----------
Annual Compensation Shares
--------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation(1)
- ----------------------------------------- --------- ---------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Louis J. Morgan ......................... 1996 $ 251,562 $ 21,875 -- $ 13,752
Chairman of the Board, Chief Executive 1995 241,896 -- 30,000 13,419
Officer and Treasurer 1994 225,463 -- 20,000 11,509
Howard Meltzer(2) ....................... 1996 106,571 27,500 75,000 --
President and Chief Operating Officer 1995 -- -- -- --
1994 -- -- -- --
Michael Press(3) ........................ 1996 57,232 5,450 25,000 --
Vice President, Finance, Chief Financial 1995 -- -- -- --
Officer 1994 -- -- -- --
Michael J. Kreutzjans ................... 1996 152,705 11,911 -- 1,830
Vice President, Development Design 1995 145,619 -- 25,000 1,830
1994 79,365 -- 20,000 3,330
Jerry M. Traver ......................... 1996 211,539 4,813 -- --
Vice President, Sales and Marketing 1995 145,619 25,000 --
1994 79,365 20,000 --
</TABLE>
- ---------
(1)Represents the insurance premiums paid by the Company on life insurance
policies on which the named person's spouse is the beneficiary.
(2)Mr. Meltzer was employed by the Company from July 1996 through July 1997.
Represents amounts paid to Mr. Meltzer from June 1996 through December 1996.
(3)Mr. Press was employed by the Company from July 1996 through July 1997.
Represents amounts paid to Mr. Press from July 1996 through December 1996.
Mr. Richard Chappetto, the Company's former President, International Division,
and Chief Financial Officer, ceased his employment with the Company on November
1, 1996. During the last fiscal year the Company paid Mr. Chappetto cash
compensation of $159,566 in accordance with his September 1993 employment
agreement with the Company, which Agreement expired in September 1996.
4
<PAGE>
The following table shows the total number of Options granted to each of the
named persons during 1996 (both as the number of shares of Common Stock subject
to such Options and as a percentage of all Options granted to employees during
1996) and, for each of these grants, the exercise price per share of Common
Stock and option expiration date. Except for options granted to Mr. Meltzer, the
options will vest in three equal annual installments in 1997, 1998 and 1999 and
will be exercisable through July 16, 2001. The exercise price of these options
was fair market value (as defined in the Plan) at the date of grant. Of the
75,000 options granted to Mr. Meltzer, 25,000 vested immediately upon
commencement of his employment in July. The remaining 50,000 options were to
vest in equal annual installments through July, 1998. No SARs were granted in
1996.
OPTION/SAR GRANTS IN 1996 FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Price
Number of % of Total Appreciation for
Securities Options Granted Exercise or Option
Underlying Options to Employees in Base Price Expiration ----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5%(1) 10%(1)
- ------------------- ------------------- --------------- --------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis J. Morgan.... -- -- -- -- -- --
Howard Meltzer..... 75,000 57% 5.375 7-16-2001 $ 490,000 $ 590,215
Michael Press...... 25,000 19% 5.375 7-29-2001 163,333 196,738
Michael J.
Kreutzjans........ -- -- -- -- -- --
Jerry M. Traver.... -- -- -- -- -- --
</TABLE>
- ---------
(1)The dollar amounts under these columns are the result of calculations at the
5% appreciation and 10% appreciation rates for the full five-year terms of
the options as required by the SEC. The dollar amounts presented are not
intended to forecast possible future appreciation, if any, of the price of
the Common Stock.
The following table sets forth, for each of the named persons, the number of
shares they acquired on exercise of Options in 1996, the aggregate dollar value
realized upon exercise, the total number of shares of Common Stock underlying
unexercised Options and the aggregate dollar value of unexercised, in-the-money
Options, separately identifying the exercisable and unexercisable Options. No
SARs were outstanding in 1996.
AGGREGATED OPTION/SAR EXERCISES IN 1996
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End ($)(1)
Acquired on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------------------------------------ ----------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Louis J. Morgan........................... 25,000 57,813 35,166/33,334 30,729/15,834
Howard Meltzer............................ -- -- 25,000/50,000 --
Michael Press............................. -- -- /25,000 --
Michael J. Kreutzjans..................... 10,000 33,125 31,999/30,001 27,541/15,834
Jerry M. Traver........................... 13,000 135,688 13,999/30,001 4,478/15,834
</TABLE>
- ---------
(1)These values represent the excess, if any, of the fair market value of the
shares of Common Stock subject to Options on December 31, 1996 over the
respective option prices.
5
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
Effective as of December 2, 1996, the 1989 Employment Agreement between the
Company and Mr. Morgan was replaced by a new Employment Agreement. Mr. Morgan's
current agreement provides for his continued employment by the Company as
Chairman of the Board of Directors at an annual salary of $251,000, an amount
equal to his 1996 base compensation. Pursuant to the Agreement, the Company
nominated Mr. Morgan for election as a director at the next meeting of
shareholders. The Agreement expires December 2, 1997 unless extended by the
parties. The Employment Agreement also contains confidentiality and
nondisclosure provisions.
In June 1997, the Company and Mr. Porter entered into an Employment Agreement
(the "Porter Agreement") which provided for (i) the employment of Mr. Porter as
the Chief Executive Officer of the Company, (ii) an annual base salary for Mr.
Porter of $98,000, subject to semi-annual review and adjustment by the Board of
Directors, and (iii) the granting to Mr. Porter of an option to purchase shares
of the Company's Common Stock up to a maximum amount of 5% of the outstanding
shares of the Company's Common Stock (the "Maximum Amount"). Pursuant to the
Porter Agreement, the Maximum Amount was to increase to 6.88% of the Company's
outstanding shares upon the occurrence of certain events. Vesting of the shares
up to the Maximum Amount was to occur according to certain quarterly
installments scheduled in the Porter Agreement. The exercise price for the
shares underlying the option granted was to be equal to the market price of the
Company's Common Stock as of June 14, 1997 or, in certain circumstances, be
$2.00 per share. The Porter Agreement also provided that upon a change in
control of the Company Mr. Porter's option would become fully vested.
In July 1997, the Company and Mr. Juska entered into an Employment Agreement
(the "Juska Agreement") which provided for (i) the employment of Mr. Juska as
the Chief Financial Officer of the Company, (ii) a minimum annual base salary
for Mr. Juska of $80,000, and (iii) the granting to Mr. Juska of an option to
purchase up to an aggregate of 10,000 shares of Common Stock at an exercise
price of $1.50 per share and vesting ratably over three years.
In July 1996, the Company and Mr. Meltzer entered into an Employment Agreement
(the "July 1996 Agreement"). It provided for (i) the employment of Mr. Meltzer
as President and Chief Operating Officer of the Company, (ii) a minimum annual
base salary of $190,000 for the three years beginning July 16, 1996 unless Mr.
Meltzer's employment was earlier terminated in accordance with the July 1996
Agreement, and (iii) the granting of certain stock options during its term.
Further, the July 1996 Agreement provided that upon termination of Mr. Meltzer's
employment under certain circumstances, Mr. Meltzer would be entitled to
additional compensation in an amount equal to his annual base salary. The July
1996 Agreement also contained confidentiality and non-compete provisions. In
July 1997 Mr. Meltzer ceased his employment with the Company and in lieu of the
July 1996 Agreement, entered into a severance agreement which provides, among
other things, that (i) Mr. Meltzer continue to receive semi-monthly through
March 31, 1998 payments equal to those previously made on his minimum annual
base salary of $190,000 as established in the July 1996 Agreement; (ii) Mr.
Meltzer continue to be eligible to participate in certain of the Company's
employee benefit plans for up to eighteen months, subject to earlier termination
upon Mr. Meltzer's subsequent employment; (iii) certain options to purchase up
to an aggregate of 125,000 shares of the Company's Common Stock which were
granted Mr. Meltzer pursuant to Employees' Stock Option Plan Agreements between
Mr. Meltzer and the Company dated July 16, 1997 and January 31, 1997 become
immediately exercisable and expire on December 31, 1997; (iv) the Company pay up
to $20,000 for outplacement services to be utilized by Mr. Meltzer; and (v) the
Company and Mr. Meltzer agree to comply with certain covenants relating to
confidentiality and mutual releases from liability and waivers of claims.
In July 1996, Michael Press commenced his employment as Vice President, Finance,
and Chief Financial Officer. On that date, Mr. Press entered into a letter
agreement with the Company (the "July 1996 Letter Agreement") which provided
that in the event his employment with the Company were to
6
<PAGE>
be terminated for any reason he would receive an amount equal to one year of his
compensation. In July 1997, Mr. Press ceased his employment with the Company and
in lieu of the July 1996 Letter Agreement, entered into a settlement agreement
which provides, among other things, that (i) Mr. Press continue to receive
semi-monthly through March 31, 1998 his base salary of $135,000 as established
in the July 1996 Letter Agreement; (ii) Mr. Press continue to be eligible to
participate in certain of the Company's employee benefit plans for up to twelve
months, subject to earlier termination upon Mr. Press's subsequent employment;
(iii) all options granted Mr. Press pursuant to his Employees' Stock Option Plan
Agreement with the Company dated July 29, 1996 become immediately exercisable
and expire July 30, 2001; and (iv) the Company and Mr. Press agree to comply
with certain covenants relating to confidentiality and mutual releases from
liability and waivers of claims.
STOCK PLANS
EMPLOYEE STOCK PURCHASE PLAN. As of August 1997, the Company had reserved an
aggregate of 250,000 shares of common stock for issuance under the Company's
1995 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is
intended to qualify under Section 423 of the Internal Revenue Code of 1986 and
permits eligible employees of the Company to purchase Common Stock through
payroll deductions of up to 10% of their annual salary in any calendar year to a
maximum of $5,000 per offering. The Purchase Plan has four three month offering
periods beginning on the first day of each quarter. No employee may purchase
more than 5% of the outstanding voting capital stock of the Company or an amount
more than $20,000 worth of stock in any calendar year. The purchase price of
Common Stock purchased under the Purchase Plan equals 85% of the market value of
the common stock, as calculated in the Purchase Plan, on the first or last day
of an offering period, whichever is lower. During 1996, 30,177 shares were sold
to employees in accordance with the Plan.
INCENTIVE STOCK PLAN. The Company has reserved an aggregate of 1,000,000 shares
of Common Stock for issuance under its Combined Incentive and Non-Statutory
Stock Option Plan, which may be granted to employees and officers of the
Company. The Plan is administered by the Company's Incentive Stock Committee.
Options may be granted to employees and officers of the Company at a purchase
price equal to the fair market value (as defined in the Plan) of the Company's
Common Stock at the date of grant, vest ratably over a three year period, and
are exercisable for a period of up to five years from the date of grant. During
the past fiscal year, options for 75,000 shares were granted under the Plan.
401(K) PLAN. The Company maintains a 401(k) retirement savings plan for
employees meeting certain eligibility requirements. Under the Plan, the Company
matches contributions made by employees to the 401(k) Plan up to 25% of the
first 5% contributed by an employee. During the last fiscal year, the Company
made matching contributions of approximately $31,678 under the 401(k) Plan.
AMENDMENT OF CERTIFICATE OF INCORPORATION
In August 1997, the Company's Board of Directors proposed and recommended that
the Company's stockholders approve and adopt an amendment to the Company's
Certificate of Incorporation that would increase the Company's total authorized
Common Stock from 10,000,000 shares to 50,000,000 shares, eliminate the
Preferred Stock, par value $1.312704617 per share, from the Company's authorized
capital, and to authorize the Company to issue up to 5,000,000 shares of
Preferred Stock, par value $0.001 per share. The Company's stockholders are
asked to approve this amendment.
The proposed amendment provides that Article Fourth of the Certificate be
amended in its entirety to read as follows:
"FOURTH:
A. AUTHORIZED SHARES. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is Fifty-five Million
(55,000,000), consisting of Fifty Million
7
<PAGE>
(50,000,000) shares of Common Stock, $0.001 par value per share (the
"COMMON STOCK"), and Five Million (5,000,000) shares of Preferred stock,
$0.001 par value per share (the "PREFERRED STOCK").
B. PREFERRED STOCK. The Board of Directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being
hereinafter referred to as a "PREFERRED STOCK DESIGNATION"), to establish
from time to time the number of shares to be included in each such series,
and to fix the designations, powers, preferences and rights of the shares
of each such series and any qualifications, limitations or restrictions
thereof. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
Common Stock, without a vote of the holders of the Preferred Stock, or of
any series thereof, unless a vote of any such holders is required pursuant
to the terms of any Preferred Stock Designation.
C. COMMON STOCK. Except as otherwise provided by the General Corporation Law
of the State of Delaware, by this Certificate of Incorporation or any
amendments hereto or by a Preferred Stock Designation, all of the voting
power of the Corporation shall be vested in the holders of the Common
Stock, and each holder of Common Stock shall have one (1) vote for each
share of Common Stock held by such holder on all matters voted upon by the
stockholders.
REASONS FOR THE PROPOSAL. As of August 19, 1997, there were 7,414,149 shares of
Common Stock issued and outstanding and 1,754,162 shares reserved for issuance
under the Company's Employee Stock Purchase Plan, the Option Plan and pursuant
to the option granted Mr. Porter. As of that date, an additional 2,740,000
shares of Common Stock are reserved for issuance to PICO Holdings, Inc. and its
wholly-owned subsidiary, Physicians Insurance Company of Ohio what are
collectively referred to as ("PICO") upon conversion of a certain Subordinated
Convertible Debenture and upon exercise of any or all of the Company's Common
Stock Purchase Warrants held by PICO. See "Certain Transactions."
The Company's Board of Directors believes that it is desirable for the Company
to have available additional authorized but unissued shares of Common Stock to
provide the Company with shares of Common Stock to be used for shares issuable
pursuant to the Employee Stock Purchase Plan, the Option Plan, shares issuable
upon the exercise of options by Mr. Porter, shares issuable to PICO pursuant to
PICO's conversion of a certain Subordinated Convertible Debenture and/or
pursuant to PICO's exercise of any or all of the Company's Common Stock Purchase
Warrants held by PICO, general corporate purposes and future equity financings.
Approval of the proposed amendment now will eliminate the delay and expense
which otherwise would be incurred if stockholder approval were required to
increase the authorized number of shares of Common Stock for possible future
transactions involving the issuance of additional shares.
The Company's Certificate of Incorporation authorized the issuance of 2,500,000
shares of Preferred Stock, par value $1.312704617 per share. An aggregate of
1,523,572 shares of this Preferred Stock was issued to Bridge Data Corporation.
All of such shares were subsequently converted into Common Stock by Bridge.
Therefore, as of August 19, 1997, there were no issued and outstanding shares of
Preferred Stock. Since the Preferred Stock, par value $1.312704617 per share,
was authorized expressly for a specific purpose, the issuance to Bridge, which
purpose is no longer applicable to the Company's operations, the Company
recommends that the Certificate of Incorporation be amended to eliminate the
authorization of such Preferred Stock.
The Company's Board of Directors believes it is desirable for the Company to
authorize for issuance Five Million (5,000,000) shares of Preferred Stock, par
value $0.001 per share. Authorization of such Preferred Stock will provide the
Company flexibility to issue shares of Preferred Stock for general corporate
purposes and for future equity financing. Subject to the provisions of the
Company's Certificate of Incorporation and limitations prescribed by law, the
Board of Directors shall be expressly authorized to adopt resolutions to issue
shares of such Preferred Stock, to fix the number of such
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<PAGE>
shares and to change the number of such shares constituting any series, and to
provide for or change the voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, including dividend rights (including whether dividends are
cumulative), dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights and liquidation preferences of
the shares constituting any class or series of such Preferred Stock, in each
case without any further action or vote by the stockholders. The Company has no
current plans to issue any shares of such Preferred Stock.
EFFECT OF INCREASE. The additional shares of Common Stock may be issued,
subject to certain exceptions, by the Board of Directors at such times, in such
amounts and upon such terms as the Board may determine without further approval
of the stockholders. The Company's current stockholders could suffer a dilution
of voting rights, net income and net tangible book value per share of Common
Stock as the result of any such issuance of Common Stock depending on the number
of shares issued and the purpose, terms and conditions of the issuance. The
additional shares of Common Stock could have an "anti-takeover" effect in that
they could discourage an attempt to obtain control of the Company by means of a
merger, tender offer, proxy contest or otherwise and could make the removal of
the present management of the Company more difficult. Such shares could be
issued for the purpose of making more difficult, time-consuming or costly an
acquisition of a controlling interest in the Company deemed undesirable by the
Board of Directors, even if such acquisition is desired by certain stockholders
of the Company. The Company's stockholders have no preemptive rights to
subscribe for additional shares of Common Stock or Preferred Stock when issued.
The issuance of Preferred Stock, par value $0.001 per share, pursuant to the
authority of the Company's Board of Directors as described above could adversely
affect the rights of the holders of Common Stock. For example, a particular
class or series of such Preferred Stock may rank prior to the Common Stock as to
dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of Common Stock. Accordingly, the
issuance of such Preferred Stock could cause the holders of Common Stock to
suffer a dilution of voting rights, net income and net tangible book value per
share, and could otherwise adversely affect the market price of the Common
Stock. In addition, the authorization of such Preferred Stock could have a
similar "anti-takeover" effect to that described above.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION TO (i) INCREASE THE COMPANY'S TOTAL
AUTHORIZED COMMON STOCK (ii) ELIMINATE THE COMPANY'S PREFERRED STOCK, PAR VALUE
$1.312704617 PER SHARE, AND (iii) AUTHORIZE A CLASS OF PREFERRED STOCK, PAR
VALUE $0.001 PER SHARE.
AMENDMENT OF OPTION PLAN
In August 1997, the Company's Board or Directors proposed and recommended that
the Company's stockholders approve and adopt an amendment to the Company's
Combined Incentive and Non-Statutory Stock Option Plan (the "Option Plan") that
would increase that number of shares reserved for issuance under the Option Plan
from 1,000,000 to 2,000,000. The Company's stockholders are asked to approve
this amendment.
REASONS FOR THE PROPOSAL. As of August 19, 1997, the Company had granted
options to purchase a total of 521,503 shares of Common Stock pursuant to the
Option Plan. Consequently, the Company was only able to grant options to
purchase 478,497 shares of Common Stock under the Option Plan.
The Company's Board of Directors believes that it is desirable for the Company
to have additional shares of Common Stock reserved for issuance under the Option
Plan to provide the Company with the continued ability to attract, develop,
reward and retain key employees and to provide such employees incentives which
directly align the employees' interest with those of the Company's stockholders.
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<PAGE>
EFFECT OF INCREASE. Options to purchase additional shares of Common Stock may
be granted to certain key employees upon the terms and subject to the conditions
of the Option Plan in such amounts as the Incentive Stock Committee of the Board
may determine without further approval by the stockholders. Upon the exercise of
any options so granted, the Company's current stockholders could suffer a
dilution of voting rights, net income and net tangible book value per share of
the Common Stock as a result of any issuance of Common Stock upon such exercise.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE OPTION PLAN.
APPROVAL OF INDEPENDENT AUDITORS
For the years ended December 31, 1996 and 1995, the Company's independent
auditors were McGladrey & Pullen LLP. In March 1997, McGladrey & Pullen LLP
informed the Company that it declined to stand for reelection as the Company's
independent auditors. There have been no disagreements between the Company and
McGladrey & Pullen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which would have
caused McGladrey & Pullen LLP to make reference thereto in its reports on the
Company's financial statement for such years.
In August 1997, the Company's Board of Directors appointed KPMG Peat Marwick
LLP, a certified public accounting firm, as independent auditors for the Company
for the year ending December 31, 1997. A representative of KPMG Peat Marwick LLP
is expected to be present at the annual meeting and will have an opportunity to
make an independent statement if he or she desires to do so. The representative
is expected to be available to respond to appropriate questions.
If the stockholders do not ratify KPMG Peat Marwick LLP as the Company's
independent auditors, the Board of Directors will reconsider, but is not
obligated to change its decision appointing that firm as the Company's
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF KPMG PEAT MARWICK
LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of August 19, 1997 regarding the
beneficial ownership of shares of the Common Stock of the Company by each
nominee and by all directors and officers as a group.
<TABLE>
<CAPTION>
Beneficial
Ownership
of Shares of Percent of
Name Common Stock Class
- ------------------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
Louis J. Morgan(1)....................................................... 374,932 5.1
Jim R. Porter(2)......................................................... 82,514 1.1
John E. Juska(3)......................................................... 3,333 --
Ronald Langley(4)........................................................ 4,886,400 48
John R. Hart(4).......................................................... 4,886,400 48
Timothy K. Krauskopf..................................................... -- --
All Directors and Officers as a Group (6 persons)(1)(2)(3)(4)............ 5,347,179 72.1
</TABLE>
- ---------
(1)Does not include 275,100 shares of Common Stock held by Mr. Morgan's spouse,
as to which shares Mr. Morgan disclaims any voting or investment power.
Includes 35,166 shares of Common Stock which may be acquired upon exercise of
presently exercisable options.
(2)Includes 76,514 shares of Common Stock which may be acquired upon exercise of
presently exercisable options.
(3)Includes 3,333 shares of Common Stock which may be acquired upon exercise of
presently exercisable options.
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<PAGE>
(4)Mr. Langley, a Director of the Company since 1995, is a Director of PICO
Holdings, Inc. ("PICO"). Mr. Hart, a Director of the Company since 1997, is
President and Chief Executive Officer of PICO. As such, Mr. Langley and Mr.
Hart each may be deemed to beneficially own the 4,536,400 shares of Common
Stock of the Company beneficially owned by PICO. This number of shares deemed
beneficially owned includes an aggregate of 2,740,000 shares of Common Stock
which are issuable to PICO upon conversion of the Subordinated Debenture
and/or exercise of warrants issued to PICO in connection with various Company
financings. Such shares are deemed outstanding for computing the percentage
beneficially owned by PICO, but are not deemed outstanding for computing the
percentage beneficially owned by any other person. See "Principal
Stockholders." Mr. Langley and Mr. Hart each disclaim beneficial ownership of
these shares within the meaning of 13d-3 of the Securities and Exchange Act
of 1934.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of August 19, 1997 regarding each
person other than directors of the Company who were known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock. Each person
named has sole voting and investment power with respect to the shares
beneficially owned by such person. The information presented in the table is
derived from a Schedule 13D filed with the SEC by the named person on May 5,
1997.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership Percent of
Name and Address of Beneficial Owner of Shares(1) Class(1)
- ---------------------------------------------------------------------- -------------------- ---------------
<S> <C> <C>
PICO Holdings, Inc.................................................... 4,886,400--Direct 48%
875 Prospect Street, Suite 301
La Jolla, California 92037
</TABLE>
- ---------
(1)Includes an aggregate of 2,740,000 shares of Common Stock issuable to PICO
upon conversion of the Subordinated Debenture and/or exercise of warrants
issued to PICO in connection with various Company financings. Such shares are
deemed outstanding for computing the percentage beneficially owned by PICO,
but are not deemed outstanding for computing the percentage beneficially
owned by any other person.
CERTAIN TRANSACTIONS
On November 14, 1996, the Company entered into an agreement with PICO, which
then owned approximately 30% of the Company's outstanding shares of Common
Stock. Pursuant to the Agreement, PICO loaned $2.5 million to the Company in
exchange for a Convertible Subordinated Debenture (the "Debenture") in the
principal amount of $2.5 million with interest at 1% over prime. PICO made the
investment and the Debenture was issued on December 2, 1996. The Debenture was
to mature on December 31, 2001 and is convertible at any time by PICO into 1.25
million shares of common stock of the Company (subject to adjustment in certain
cases).
On May 5, 1997, the Company and PICO entered into a Loan and Security Agreement
(the "Loan Agreement"), under which PICO agreed to make a secured loan to the
Company in an aggregate principal amount of up to $1.0 million at a fixed rate
equal to 14% per annum. Unless otherwise extended, 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 are secured by a pledge of
substantially all of the assets of the Company. These liens are subject to the
prior lien of the Company's primary lender, Lakeside Bank. PICO will be paid a
"facility fee" of $40,000, plus interest at a rate equal to 14% per annum. The
Company may defer payment of the facility fee until the maturity date of the
loan contemplated by the Loan Agreement.
In connection with the Loan Agreement, PICO and the Company entered into a First
Amendment to the Debenture 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 written
consent of PICO; 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 trading days preceding exercise of the Debenture or (ii)
$1.5625 per share (the market price of the Company's Common Stock on the date of
the Debenture Amendment). Interest under the Debenture will continue to be
payable in cash or, at the option of PICO, in shares of the Company's Common
Stock at their fair market value at the time of payment.
On May 5, 1997, in consideration of the loan by PICO to the Company, the Company
issued a Common Stock Purchase Warrant (the "Warrant") to PICO entitling PICO to
purchase a minimum of 640,000 shares of the Company's Common Stock, at a price
per share (the "Warrant Price") equal to
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<PAGE>
the lesser of (a) the mean of the closing bid price per share for the 20 trading
days preceding exercise of the Warrant or (b) $1.5625 per share (the market
value of the Company's Common Stock on the date the Warrant was issued). The
Warrant expires on April 30, 2000. In lieu of exercising the Warrant for cash,
PICO may elect to receive the shares of the Company's Common Stock equal to the
"value" of the Warrant determined in accordance with a formula specified in the
Warrant (the "Conversion Value"). The number of shares of the Company's Common
Stock subject to the Warrant and the Warrant Price will be adjusted to reflect
stock dividends; reclassifications or changes of outstanding securities of the
Company; any consolidation, merger or reorganization of the Company; stock
splits; issuances of rights, options or warrants to all holders of shares of the
Company's Common Stock exercisable at less than the current market price per
share; and other distributions to all holders of shares of the Company's Common
Stock. In the event of any sale, license or other disposition of all or
substantially all of the assets of the Company or any reorganization,
consolidation or merger involving the Company in which the holders of the
Company's 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 PICO has
not fully exercised the Warrant, the unexercised portion of the Warrant will be
deemed automatically converted into shares of the Company's Common Stock at the
Conversion Value. Alternatively, PICO may elect to cause the Company 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 PICO 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.
In August 1997, the Company and PICO agreed to amend the Loan Agreement and
related documents to increase the amount of the secured loan from PICO to the
Company from an amount up to $1.0 million to an amount up to $2.0 million. The
terms of the Loan Agreement otherwise remained substantially the same, except
that the "facility fee" of $40,000 was eliminated for new advances. In
connection with the increase of the loan amount pursuant to such Amendment, the
Company granted PICO an additional Common Stock Purchase Warrant for 500,000
shares of the Company's Common Stock. The terms of the additional Warrant are
substantially the same as those contained in the May 1997 Warrant, except that
the conversion price is the lesser of (a) $2.00 per share or (b) the mean of the
closing bid price per share for the 20 trading days preceding exercise of the
additional Warrant.
During the last fiscal year, the Company was engaged in a marketing venture with
Global Financial Services, Inc. (formerly Bridge Information Systems, Inc.),
which owned 1,523,572 shares of the Company's Common Stock until selling its
holdings in the Company in a private sale in 1995. That agreement resulted in
the marketing of a product that combined the features of the Company's price
quote system with the analytical features of Global's information system
products. During its last fiscal year, the Company recorded revenues of
$3,920,000 in connection with this venture.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
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<PAGE>
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during the two fiscal years ended December 31, 1996,
the Company's officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
TO OUR STOCKHOLDERS:
In 1996 and prior years, the entire Board of Directors was generally responsible
for administering the Company's executive compensation programs. The Company's
Incentive Stock Committee administers the Company's Option Plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is intended to attract, develop,
reward and retain quality management talent. It is the philosophy of the Company
that executive compensation should recognize an individuals' contribution to the
Company and be competitive with compensation offered by other computer software
and service companies. To further align executive officers' interests with those
of the stockholders, the Company's executive compensation program also relies on
stock option awards tied to increases in stockholder value.
COMPENSATION COMPONENTS
The components of the Company's executive compensation program are as follows:
base salary and stock option awards.
BASE SALARY. In 1996, Messrs. Morgan and Meltzer entered into employment
agreements with the Company, which agreements provided for annual base salary
commitments. The Board has established annual increases to base salaries to be
paid to the Company's executive officers. In setting each increase, the
Committee takes into account several factors such as an individual's experience,
responsibilities, management and leadership abilities and job performance in the
prior year.
BONUS. In 1996 the Company instituted a cash bonus program which provided for
monthly bonuses of 15% of each participant's base salary. 8 employees were
entitled to participate in the program. In August 1996 the Company decided to
discontinue the bonus program.
STOCK OPTIONS. The Board of Directors believes stock options are a key
long-term incentive vehicle because they provide executives with the opportunity
to acquire or increase an equity interest in the Company and to share in the
appreciation of the value of its Common Stock. Stock option grants, therefore,
directly align the executive's interest with those of the stockholders.
Stock options are granted to the executive officers and other key managers by
the Company's Incentive Stock Committee under the Company's Incentive Stock
Option Plan generally every 12 months. Options are granted with a three year
vesting and a five year exercise period in order to encourage executives and
managers to take a long-term view of the impact of their individual
contributions to the Company. In determining the number of options to be awarded
to each individual, the Committee considers the executive's level of management
responsibility and potential impact on the Company's profitability and growth.
During the 1996 fiscal year, options were granted to the Company's Chief
Operating Officer and Chief Financial Officer at an option price equal to the
fair market value of the Company's stock on the date of grant. During the last
fiscal year, no options were granted to other key executives (including the
Company's Chief Executive Officer).
14
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The Board of Directors established 1996 compensation of Louis J. Morgan, the
Company's Chief Executive Officer, based upon his employment agreement which
initially established his annual base salary.
<TABLE>
<S> <C>
Louis J. Morgan Ronald Langley
</TABLE>
15
<PAGE>
COMPARATIVE CUMULATIVE SHAREHOLDER RETURN
The graph presented below compares the five year cumulative total return of PC
Quote, Inc., the AMEX Market Value index, and the Standard & Poor's Computer
Software index from December 31, 1991 to December 31, 1996. Total return is
based on an assumed investment of $100 on December 31, 1991.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FIVE YEAR TOTAL RETURN
<S> <C> <C> <C>
PCQT Amex Market Value Index S&P Computer Software Index
1991 $100.00 $100.00 $100.00
1992 75.62 101.05 118.01
1993 242.85 120.78 150.04
1994 171.42 109.77 176.91
1995 1814.22 138.77 248.22
1996 299.99 147.64 368.9
</TABLE>
16
<PAGE>
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended December
31, 1996, including financial statements, accompanies this Proxy Statement.
However, no action is proposed to be taken at the meeting with respect to the
Annual Report, and it is not to be considered as constituting any part of the
proxy soliciting material.
STOCKHOLDER PROPOSALS
From time to time stockholders may present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
annual meeting. To be considered, proposals must be submitted on a timely basis.
Proposals for the 1998 stockholders' meeting must be received by the Company no
later than February 28, 1998. Any such proposals, as well as any questions
related thereto, should be directed to the Secretary of the Company.
OTHER MATTERS
Management knows of no other business likely to be brought before the meeting.
If other matters do come before the meeting, the persons named in the form of
proxy or their substitute will vote said proxy according to their best judgment.
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 is available without charge to stockholders upon written
request to the Company's Chief Financial Officer.
By order of the Board of Directors
DARLENE E. CZAJA
SECRETARY
16
