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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-13093
PC QUOTE, INC.
Incorporated in the State of Delaware FEIN 36-313\1704
Principal Executive Offices:
300 South Wacker Drive, #300, Chicago, Illinois 60606
Telephone Number: (312) 913-2800
Securities registered pursuant to Section 12(b) of
the Act:
Common Stock, $.001 par Value
Securities registered pursuant to Section 12(g) of
the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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As of March 8, 1999, the aggregate market value of the Common Stock of the
Registrant (based upon the closing price of the Common Stock as reported by the
American Stock Exchange) on such date held by non-affiliates of the Registrant
was approximately $50,325,000.
As of March 8, 1999, there were 14,496,094 shares of Common Stock and 47,866
shares of Preferred Stock of the Registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: See Page 3
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Annual Meeting of Stockholders to be held in
1999 are incorporated by reference into Part III hereof.
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PART OF FORM 10-K DOCUMENT
PART I None
PART II None
PART III
ITEM 10 Directors, Executive Officers, Company's Proxy Statement
Promoters and Control Persons; to be filed in connection with
Compliance with Section 16(a) its Annual Meeting of
of the Exchange Act Stockholders
ITEM 11 Executive Compensation Company's Proxy Statement
to be filed in connection with
its Annual Meeting of
Stockholders
ITEM 12 Security Ownership of Company's Proxy Statement
Certain Beneficial Owners to be filed in connection with
and Management its Annual Meeting of
Stockholders
ITEM 13 Certain Relationships and Company's Proxy Statement
Related Transactions to be filed in connection with
its Annual Meeting of
Stockholders
PART IV
ITEM 14 Exhibits and Reports Exhibits as specified in Item
on Form 8-K 14 of this Report
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PC QUOTE, INC.
PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
In December 1998 the Company converted $6.7 million of current debt into
preferred equity and raised an additional $1.0 million in capital through a
private placement of Common Stock and warrants. Altogether, the Company
raised $9.2 million in capital in 1998 through the debt conversion, private
placement, exercise of warrants and other sales of Common Stock. These
transactions significantly improved the financial condition of the Company.
See the LIQUIDITY AND CAPITAL RESOURCES section of PART II - ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS of this Report.
GENERAL DEVELOPMENT OF BUSINESS
PC Quote, Inc. was incorporated in the State of Illinois on June 23, 1980 as
On-Line Response, Inc. and was incorporated in Delaware on August 12, 1987. We
are a premier provider of securities market data. We collect securities market
activity and financial news directly from stock, options and commodities
exchanges and other sources. We use the information to create a real-time
database of last sale, bid/ask and historical prices of more than 325,000
issues. The database includes all North American equities, the most
comprehensive options data, major stock indices, Level 1 NASDAQ-quoted stocks,
Level 2 NASDAQ market-maker quotes, mutual funds, money market funds, futures
contracts and options on futures contracts. We process the database into a
single digital data-feed, "HyperFeed(TM)", at our primary processing plant
located at our executive offices in Chicago, Illinois. We disseminate HyperFeed
to our customers by satellite, digital data landlines and over the Internet.
Software applications on our customers' computers access HyperFeed to allow the
user to monitor securities activity on an on-going real-time basis. The
applications also create a complete database of trading symbols, continuously
updated by the data feed. This database gives our customer instant access to
security prices. HyperFeed is used to create an equivalent database on our
computers, accessible to our Internet customers.
We derive our revenue from license fees charged for access to HyperFeed and from
license fees charged for a packaged HyperFeed plus analytical software service.
Our customer base consists primarily of professional investors, securities
brokers, dealers and traders, portfolio managers, brokerage firms, other
financial institutions, Internet web-sites, application developers and
redistributors of financial market data. Our Internet service is utilized by
individual and professional investors alike. Our Internet division, PCQuote.com,
sells advertising space on our web-site, www.pcquote.com, in addition to
subscriptions for delayed and real time market data. Its principal customers are
financial web-site advertisers, other Internet web-sites, individuals, and
businesses. Our customers are located primarily in the United States and North
America.
The following is a description of the principal services that we provide.
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PART I-ITEM 1. BUSINESS
PRODUCTS AND SERVICES
HYPERFEED(TM)
HyperFeed, the cornerstone of the services provided by PC Quote, is our digital
real-time market data feed. We use multiple redundant, high-speed data circuits
to gather information from securities exchanges and other sources. At our
production center in Chicago, these feeds are directed into multiple real-time
databases from which HyperFeed is generated. Data is broadcast to our customers
over dedicated digital data circuits at 1024 kilobytes per second and by
satellite at 112 kilobytes per second. HyperFeed contains all North American
stock, options, and commodity exchange issues including:
- Dynamic Nasdaq Level II market maker quotes;
- Dow Jones Composite News Service (up to 90-day retrieval of nine wires
"Broadtape", Professional Investor Report, Capital Markets Report,
International News Wire, World Equities Report, European Corporate
Report, Electronic Wall Street Journal, International Petroleum
Reports, Federal Filings); and
- Multiple levels of fundamental data.
HyperFeed underlies all of our other services, which capitalize on HyperFeed to
access, view and utilize data in a variety of ways.
An industry standard PC at our customer's site receives HyperFeed data and
creates real-time databases of securities activity, financial news and
fundamental information. Software applications supplied by us, by third parties,
or by our customer utilize our high-performance application program interfaces,
or APIs, to access the data. The data can then be used for virtually any
purpose, including third-party order execution systems, analytical modeling,
internal risk management, order matching or redistribution via the Internet or
wide area networks. Our customers pay monthly HyperFeed licensing fees and
per-user or per-unit charges.
We also provide access to HyperFeed via the Internet. Our Internet services,
like our satellite and landline services, support applications developed by us,
by third parties or by our customers, using Internet-enabled versions of our
APIs. We, and our customers, are able to benefit from the Internet's
substantially lower costs for service and communications, its ease of access and
its worldwide availability.
SOFTWARE APPLICATIONS AND SERVICES MARKETED BY REGISTRANT
To complement the HyperFeed database, we have high-end applications and
programming tools that we license to HyperFeed subscribers.
PC Quote 6.0 for Windows is a comprehensive suite of real-time professional
securities trading tools. Running under Microsoft(TM) Windows(TM) 3.1 or
Windows(TM) 95, or Windows NT(TM), PC Quote 6.0 offers unlimited quote pages,
charting, technical analysis, searchable news, time of sale and quote, Nasdaq
Level II market maker screens, options analytical tools, dynamic data exchange
into Microsoft(TM) Excel(TM), tickers, alerts, baskets and more. PC Quote 6.0
for Windows is available with our satellite, landline, and Internet services.
Our "Quote Tools" are custom applications using robust and easy-to-use APIs. The
Quote Tools enable a customer to build anything from real-time trading desktop
interfaces to web-sites with portfolio management and the latest in Internet
push technology.
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PART I-ITEM 1. BUSINESS
PRODUCTS AND SERVICES, CONTINUED
In 1995 we established an Internet web-site, www.pcquote.com, offering free
delayed quotes and other information to all visitors. We generate revenue by
selling advertising on our web-site's free quote pages, selling subscriptions to
real-time quote information, providing market information for other web-sites,
and offering development tools for Internet-based applications. Our web-site
also offers corporate profiles, financial news and press releases, and
information about our services.
PC Quote's Internet Business Services provide custom and template web-site
services and software development services to software vendors, financial
institutions, corporations, and Internet content providers. All of our Internet
services, including the web site, advertising, PC Quote 6.0 on the Internet, and
Quote Tools, can be wholesaled, private labeled, cloned or customized to meet a
customer's specific needs.
We are a quote service for the major office applications companies. In Microsoft
Excel's new 1997 version, Web Query technology features the ability to access
our data. In February 1997 Lotus Development Corporation also featured PC
Quote's data as the "in-the-box" feature for its SmartSuite application.
PATENTS, TRADEMARKS AND LICENSES
We do not have patent protection for our proprietary software. Although
applicable software is readily duplicated illegally by anyone having access
to appropriate hardware, we attempt to protect our proprietary software
through license agreements with our customers and common law trade secret
protection and non-disclosure contract provisions in our agreements with our
employees. We use security measures, including a hardware key, which
restricts access to our services unless proper password identification from a
PC Quote user is provided. As an additional safeguard, we provide only the
object code on our diskette and retain the source code.
HyperFeed(TM) is a service mark of PC Quote.
COMPETITION
The market for the on-line provision of financial information such as equities,
commodities, futures and options quotations and news through services and
software applications similar to those we provide includes a large number of
competitors and is subject to rapid change. We believe our primary competitors
include Bloomberg, Bridge Information Systems, the Comstock unit of Standard &
Poors, the ILX unit of Thomson Corporation, Reuters, Quote.com and Data
Broadcasting Corporation. Many of these competitors have significantly greater
financial, technical and marketing resources and greater name recognition than
we do.
SEASONALITY
We have not experienced any material seasonal fluctuations in our business.
Barring any prolonged period of investor inactivity in trading securities, we do
not believe that seasonality is material to our business activities.
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PART I ITEM 1. BUSINESS
RESEARCH AND DEVELOPMENT
Our systems development personnel expend their time and effort developing new
software programs and high-speed data delivery systems and expanding or
enhancing existing ones. Development efforts focus on providing a solution to
the informational and analytical needs of both the professional and private
investors. Development activity has increased with the implementation of
high-level design and prototyping tools. Our investment in software development
consists primarily of:
- enhancements to our existing Windows-based private network and
Internet services;
- development of new data analysis software and programmer tools; and
- application of new technology to increase the data volume and delivery
speed of our distribution system.
During the fiscal years ended December 31, 1998, 1997 and 1996, we expensed
$634,884, $873,579, and $706,618, respectively, for research and development.
ENVIRONMENT
Compliance with federal, state, and local provisions with respect to the
environment has not had a material adverse effect on our capital expenditures,
earnings, or competitive position.
EMPLOYEES
As of December 31, 1998, we employed 119 people, none of whom are represented by
a collective bargaining unit. We believe we have a satisfactory relationship
with our employees. From time to time we use the services of outside consultants
on an hourly basis.
GOVERNMENT CONTRACTS
We have no material contracts with the Government.
BACKLOGS
Due to the nature of our business, backlogs are not a typical occurrence in our
industry.
MAJOR CUSTOMERS
We did not have any customers that accounted for 10% or more of total revenue in
either 1998 or 1997. For information concerning 1996 major customers, see Note 8
of the Notes to Financial Statements.
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PART I-ITEM 1. BUSINESS
ITEM 2. PROPERTIES
Our executive offices and primary data center are located in approximately
15,000 square feet of leased space on the 3rd floor of 300 South Wacker Drive,
Chicago, Illinois. The lease for the premises expires on December 31, 2004.
Lease payments are subject to escalating base rent as well as adjustment for
changes in real estate taxes and other operating expenses. (See Note 6 of the
Notes to Financial Statements.)
We also lease approximately 5,000 square feet of office space in Aurora,
Illinois, through March 2000. The lease for 3,000 square feet of office space in
New York City was extended in September 1997 through July 2002. (See Note 6 of
the Notes to Financial Statements.)
ITEM 3. LEGAL PROCEEDINGS
Richard F. Chappetto, a former officer of PC Quote, filed a complaint against us
on December 31, 1996. The action entitled RICHARD F. CHAPPETTO VS. P.C. QUOTE,
INC., was filed in the Circuit Court of Cook County, Illinois bearing Case No.
96L015250. Mr. Chappetto's employment with PC Quote ceased on November 1, 1996.
Mr. Chappetto's complaint alleges that we breached various verbal and written
agreements by failing to pay certain commission, bonuses and severance pay and
failing to provide him with certain stock options. Mr. Chappetto sought monetary
damages of approximately $680,000. We filed a Motion to Dismiss a major portion
of the complaint which was granted in 1998. The remaining portion of the
complaint seeks monetary damages of approximately $70,000. We are vigorously
contesting the remaining matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matter was submitted to a vote of shareholders and approved at a
Special Meeting on December 17, 1998.
1. To consider and vote upon a proposal to approve the conversion of $6.7
million of debt owed to PICO Holdings, Inc. and Physicians Insurance
Company of Ohio into equity in the form of convertible preferred stock
of PC Quote, Inc. which would be convertible into a minimum of 4.8
million shares of common stock of PC Quote, Inc. and a warrant to
purchase a minimum of 3.1 million common shares, which together
represent 59% of the current shares outstanding and 37% of the shares
outstanding after conversion and exercise, and approve the Securities
Purchase Agreement made as of the 23rd day of September, 1998, by and
among PC Quote, Inc., PICO Holdings, Inc. and Physicians Insurance
Company of Ohio and the transactions contemplated thereunder.
The results of the shareholder vote was as follows:
<TABLE>
<CAPTION>
- ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
For Against Abstain Not Voted Total Voted
- ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Proposal #1 Shares 6,717,769 112,907 69,223 6,899,899
Pct of O/S 50.39% 0.85% 0.52% 51.76%
Pct of Voted 97.36% 1.64% 1.00% 100.00%
- ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
</TABLE>
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares of common stock are traded on the American Stock Exchange under the
symbol "PQT." The following tables show for 1998 and 1997 the high and low sales
prices of our Common Stock for the periods indicated, as reported by the
American Stock Exchange.
<TABLE>
<CAPTION>
1998 QUARTERLY INFORMATION HIGH LOW
- -------------------------- ---- ---
<S> <C> <C>
First 1-1/8 11/16
Second 4-15/16 11/16
Third 3-1/4 7/8
Fourth 3-3/4 1
<CAPTION>
1997 QUARTERLY INFORMATION HIGH LOW
- -------------------------- ---- ---
<S> <C> <C>
First 3-11/16 2-1/4
Second 2-1/2 1-1/8
Third 2-9/16 1-1/2
Fourth 2-1/4 7/8
</TABLE>
As of February 28, 1999, we had 459 stockholders of record of our Common Stock.
DIVIDEND POLICY
We have not paid dividends on our Common Stock and do not currently plan to do
so in the near future. In December 1998, we issued preferred stock that has a
dividend rate of 5%. Preferred dividends are payable if, and when, we declare a
dividend payment. We have not, and currently do not plan in the near future, to
declare any preferred dividend payments. Preferred dividends are cumulative and
the entire accumulated dividend must be paid prior to the payment of any
dividends to common stockholders.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
INCOME DATA:
<S> <C> <C> <C> <C> <C>
Net revenue $ 23,045,533 $ 17,119,372 $ 17,032,164 $ 13,391,982 $ 12,903,645
Operating income (loss) ($ 4,699,426) ($ 8,920,726) ($ 2,957,830) $ 1,559,995 $ 528,769
Income (loss) before income
taxes ($ 6,445,595) ($ 11,135,654) ($ 3,091,705) $ 1,376,597 $ 312,410
Net income (loss) ($ 6,449,208) ($ 11,141,416) ($ 3,255,969) $ 1,512,239 $ 305,410
Net income (loss) available
for common stockholders ($ 7,468,146) ($ 11,141,416) ($ 3,255,969) $ 1,512,239 $ 305,410
BALANCE SHEET DATA:
Total assets $ 10,053,367 $ 10,536,448 $ 11,554,070 $ 10,522,840 $ 9,071,731
Long term obligations $ 921,781 $ 2,833,734 $ 2,291,178 $ 712,904 $ 1,292,989
Stockholders' equity $ 2,915,271 $ 66,329 $ 5,331,577 $ 6,611,278 $ 4,830,369
PER SHARE DATA:
Basic net income (loss) ($0.57) ($1.33) ($0.45) $ 0.21 $ 0.04
Diluted net income (loss) ($0.57) ($1.33) ($0.45) $ 0.21 $ 0.04
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION - SAFE HARBOR DISCLOSURE
The following discussion and analysis contains historical information. It also
contains forward-looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, particularly
in reference to statements regarding our expectations, plans and objectives. You
can generally identify-forward-looking statements by the use of the words "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe," or "continue,"
or similar language. Forward-looking statements involve substantial risks and
uncertainties. You should give careful consideration to cautionary statements
made in this discussion and analysis. We base our statements on our current
expectations. Forward-looking statements may be impacted by a number of factors,
risks and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Our filings with the
Securities and Exchange Commission identify factors that could cause material
differences. Among these factors are our ability to:
(i) fund our current and future business strategies as a going-concern
either through continuing operations or external financing (see Note
14 of the Notes to Financial Statements);
(ii) attract and retain key employees;
(iii) compete successfully against competitive products and services;
(iv) maintain relationships with key suppliers and providers of market
data; and
(v) respond to the effect of economic and business conditions generally.
RECENT BUSINESS DEVELOPMENTS
NEW INTERNET DIVISION.
In December, 1998 we formed an internal Internet division, PCQuote.com. An
outgrowth of our financial content web site, www.pcquote.com, the new division's
objective is to provide a comprehensive array of investment tools to empower the
growing sophistication of the individual investor.
Continued growth in page views, increasing attractive demographics and
subsequent increase in advertising revenue led to our decision to segregate the
web site into its own business unit. As a distinct business unit, the new
division will afford us more flexibility in considering opportunities that are
available solely to the Internet web site business.
JB OXFORD.
In October, 1998, we entered into an agreement with JB Oxford & Co. (NASDAQ:
JBOH) to private-label our PC Quote 6.0 for Windows. With the addition of the
private-labeled version of PC Quote 6.0 for Windows, JB Oxford customers will
have instant access to a wider variety of investment tools, including real-time
streaming quotes, intra-day charting, time and sales and technical analysis. PC
Quote will be paid a monthly fee determined by the number of JB Oxford's clients
that subscribe to the service.
DOUBLECLICK DART.
In December, 1998, we selected DoubleClick's DART technology as our new ad
serving solution for our web site, www.pcquote.com. DART, or Dynamic Advertising
Recording and Targeting, will provide us with drastically increased efficiency
in ad inventory management and the ability to dynamically target advertisements
to visitors to our website.
We believe DoubleClick's DART provides us with the functionality to realize the
full value of every page impression not only on our own web site, but also on
each page we co-brand for partners. New productivity gained through the
implementation of the DART system will allow www.pcquote.com to drastically
increase total web site space available for advertising.
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PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS FOR 1998 COMPARED TO 1997
Total revenue increased 34.6% in 1998 to $23.0 million from $17.1 million in
1997. Our HyperFeed and LAN services and Internet services both posted increases
in 1998 over 1997. HyperFeed and LAN service revenue increased $700,000, or
5.9%, from $12.1 million in 1997 to $12.8 million in 1998. Revenue growth was
experienced through increased service offerings. Revenue from our Internet
services increased $5.2 million, or 104%, to $10.2 million in 1998 from $5.0
million in 1997. The growth is principally due to our PC Quote 6.0 Internet
service where the number of subscribers grew from 2,500 at the end of 1997 to
4,300 at the end of 1998.
Direct costs of services increased approximately 17.6% to $17.0 million in 1998
from $14.5 million in 1997. Principal components of the increase were royalties,
leased equipment, communication costs, and compensation directly attributable to
Internet services and PC Quote 6.0 subscriber growth, and payments to providers
of market data. Amortization of software development costs decreased from $1.9
million in 1997 to $1.8 million in 1998 due to certain 1998 projects not planned
for release until 1999.
Direct costs associated with HyperFeed and LAN services increased from $9.9
million in 1997 to $10.4 million in 1998. Increases in license and exchange fees
and the cost of customer support were offset to a degree by efficiencies in
data-feed operations and a decrease in amortization of software development
costs. The resulting gross margin increased slightly to $2.4 million in 1998
from $2.2 million in 1997.
Direct costs associated with Internet services increased to $6.6 million from
$4.6 million in 1997. The significant growth we experienced caused us to incur
increases in license and exchange fees, customer support and operations devoted
to these services. Software amortization also increased as more resources were
diverted to this portion of our business. The gross margin on Internet services
increased from $419,000 in 1997 to $3.6 million in 1998, as we were able to
leverage our infrastructure and support operations.
Total operating expenses declined $840,000, or 7.2%, as a result of the
restructuring in 1997 and subsequent cost containment efforts. Decreases from
restructuring charges and in general and administrative expenses were offset to
a degree by increases in sales expense and product and market development.
Sales costs increased 23.1% to $4.5 million in 1998 as compared to $3.7 million
in 1997. The increase was due to additional sales personnel added at the end of
1997 and early 1998, increased advertising expenditures and higher total
commission expense as a result of increased sales of our PC Quote 6.0 Internet
service offering.
General and administrative expenses decreased 16.2% to $3.3 million in 1998 from
$4.0 million in 1997. The decrease was principally due to reductions in
compensation and related employee costs, lower utilization of consultants and
external professionals and a decrease in bad debt expense as compared to the
prior year.
Product and market development costs increased 7.2% to $1.7 million in 1998 from
$1.6 million in 1997. The increase was due to an increase in the number of
personnel devoted to these efforts, in addition to costs of maintaining and
enhancing previously developed products and services.
Depreciation and amortization remained unchanged at $1.2 million year to year.
There were no restructuring charges recognized in 1998 like the $1.1 million
reported for 1997.
Interest expense was $1.8 million for 1998, a decrease of 21.6% from the $2.3
million recognized in 1997. The decrease reflects the absence of non-cash
amortization of $979,097 recognized in 1997 for the value of common stock
purchase warrants that were issued to PICO Holdings, Inc. This was offset by an
increase in interest expense amortization to $1,096,402 in 1998 from $674,992 in
1997 for the value of the $2.5 million convertible subordinated debenture's
beneficial conversion feature. Also included is interest on our bank term loan,
the convertible subordinated debenture and borrowings from PICO Holdings, Inc.
(See Note 2 and Note 3 of the Notes to Financial Statements.)
11
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PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, RESULTS OF OPERATIONS FOR 1998 COMPARED TO 1997,
CONTINUED
In December 1998 we converted current debt into convertible preferred stock. The
maximum conversion rates for the two series of preferred issued were set at and
above the closing market price of our common at the time the conversion was
approved by our Board in September 1998. Stockholder approval, obtained in
December, was a condition to closing the debt conversion transactions. The
market price of our common stock on the closing date was slightly higher than
the maximum conversion price agreed to in September. Accounting and SEC
pronouncements require this differential to be treated as non-cash preferred
dividends. Preferred dividends of $1,018,938 were recognized in 1998 with a
corresponding increase in additional paid-in-capital from the preferred
issuance. (See Note 3 of the Notes to Financial Statements.)
RESULTS OF OPERATIONS FOR 1997 COMPARED TO 1996
Total revenue increased 0.5% in 1997 to $17.1 million from $17.0 million in
1996. The increase is despite the loss of two major customers that used our
traditional direct data-feed service. (See Note 8 of the Notes to Financial
Statements.) The lost revenue from the two customers, $4.9 million, was offset
by an increase of approximately $900,000 in net new data-feed service revenue
and a $4.1 million increase in our Internet services revenue. Our Internet
services, launched in 1996, grew from $937,000 in 1996 to $5.0 million in 1997,
a 435% increase. The increase reflects professional and individual investors'
acceptance of the Internet as a medium for receiving delayed and real-time
market data.
Direct costs of services increased 31.4% to $14.5 million in 1997 from $11.0
million in 1996. Principal components of the increase were royalties, leased
equipment, communication costs, and compensation directly attributable to
Internet operations and sales of PC Quote 6.0, and payments to providers of
market data. Amortization of software development costs increased 53% to $1.9
million in 1997 from $1.2 million in 1996. The increase is the result of our
continued investment in our Internet and direct data feed services and delivery
mechanisms. Also contributing to the increase was our determination that our
1997 software projects should be amortized over a three-year period. We also
assessed the estimated future undiscounted cash flows for software projects
capitalized in earlier years with a five-year amortization period. Based on our
assessment, no adjustment to their net realizable value was necessary.
Direct costs associated with HyperFeed and LAN services increased from $9.7
million in 1996 to $9.9 million in 1997. Increases in license and exchange fees
and amortization of software development costs were offset to a degree by
decreases in the cost of customer support and data-feed operations related to
the two lost customers. Principally due to the lost customers, the resulting
gross margin decreased significantly from $6.4 million in 1996 to $2.2 million
in 1997.
Direct costs associated with Internet services increased to $4.6 million from
$1.3 million in 1996. The significant growth we experienced caused us to incur
increases in license and exchange fees, customer support and operations devoted
to these services. Software amortization also increased as more resources were
employed to develop this portion of our business. The resulting gross margin
increased from a negative $384,000 to a positive $419,000.
Total operating expenses increased $2.6 million, or 28.9%, as a result of the
restructuring in 1997 and increases in sales, general and administrative, and
product and market development incurred to improve operations and generate
replacement revenue growth.
Sales costs increased 16.8% to $3.6 million in 1997 as compared to $3.1 million
in 1996. The increase was mainly due to higher commission incentives and
increased sales of our PC Quote 6.0 Internet service offering.
General and administrative expenses increased 13.3% to $4.0 million from $3.5
million in 1996. The increase was principally due to higher utilization of
consultants and external professionals as compared to the prior year. The higher
utilization resulted from financing alternatives pursued by us during 1997, in
addition to professionals employed by us to assist in improving our operations.
12
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PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, RESULTS OF OPERATIONS FOR 1997 COMPARED TO 1996,
CONTINUED
Product and market development costs increased 39.3% to $1.6 million in 1997
from $1.1 million in 1996. We incurred additional personnel and related costs in
1997 in order to develop, market and brand our Internet service offerings.
Depreciation and amortization was unchanged at $1.2 million for 1997 and 1996.
We had a significant management reorganization and restructuring of operations
in June 1997. We wrote off approximately $572,000 of unamortized software
development costs related to previously capitalized software projects that were
discontinued. The management reorganization resulted in employment related
termination costs of $425,000. We also paid $150,000 to terminate a contractual
arrangement related to unprofitable operations. As a result, we recognized
restructuring expense of $1.1 million. (See Note 12 of the Notes to Financial
Statements.)
Interest expense was $2.3 million for 1997, an increase of 1,469% over the
$144,000 incurred in 1996. The increase reflects the recognition of:
- non-cash amortization of $674,992 for the value of the $2.5 million
convertible subordinated debenture's beneficial conversion feature,
and
- amortization of $979,097 for the value of the common stock purchase
warrants issued to PICO Holdings, Inc. in connection with a financing
arrangement.
Also included is interest on the bank term loan, the convertible subordinated
debenture and financing arrangement borrowings. (See Note 2 and Note 3 of the
Notes to Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
Net cash and cash equivalents were essentially unchanged at $1.1 million at
the end of 1998 and 1997. Expenditures for new equipment were 22% less in
1998 versus 1997 as a result of lower prices for computer equipment and
increased efficiencies implemented in our operations. Capitalized software
costs were 9.9% higher in 1998 than 1997 due to an increase in development
resources devoted to coding, testing and quality assurance of new service
offerings.
In December 1998 we converted $6.7 million of current debt into preferred
equity. The converted debt was comprised of:
- $2,500,000 convertible subordinated debenture principal balance;
- accrued interest on the convertible subordinated debenture in the amount
of $480,000;
- $3,250,000, including $1,000,000 borrowed in 1998, principal balance on
the loan facility with PICO Holdings, Inc.;
- $40,000 facility fee on the loan facility; and
- accrued interest on loan facility borrowings in the amount of $489,000.
We incurred approximately $27,000 in legal and associated costs to affect the
debt conversion. Interest expense related to the converted debt accounted for
approximately $1.7 million of the loss reported for 1998.
In January 1998 we completed a rights offering receiving approximately $3.0
million in gross proceeds from the sale of shares underlying exercised rights.
The entire proceeds were used to fulfill our obligation to repurchase shares.
13
<PAGE>
PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
We also received approximately $2.4 million in net proceeds from other sales
of common stock through:
- the exercise of previously issued warrants;
- the exercise of employee options;
- purchases under the employee stock purchase plan;
- issuance of shares to the Chairman and CEO in lieu of cash salary
payments;
- and o a $1.0 million private placement of common stock.
See Note 3 of the Notes to Financial Statements for additional details regarding
the debt conversion and financing transactions.
We reported a net loss of approximately $6.4 million and a net loss available
to common stockholders of approximately $7.5 million for the year ended
December 31, 1998. As of December 31, 1998, we had an accumulated deficit of
approximately $27.6 million and deficit working capital of $3.5 million.
These conditions raise doubt about our ability to continue as a going
concern. We have addressed, and continue to address, this doubt.
Total revenue in 1998 increased 34.6% to $23.0 million over 1997, while
direct costs of services increased only 17.6% to $17.0 million versus $14.5
million in 1997. The resulting gross margin increased 127% from $2.7 million
in 1997 to $6.0 million in 1998. The increase in revenue was principally due
to the growth in subscriptions to our Internet version of PC Quote 6.0 and
other Internet services. This together with operating cost containment
contributed to our gross margin improvement. We expect continued revenue
growth and gross margin improvement due to continued increases in
subscriptions to our current Internet services, new service offerings planned
for release in 1999 and planned reductions in expenses related to leased
equipment. We believe the anticipated revenue growth and improved margins
will result in our operations turning cash flow positive by the end of 1999.
Although we believe our gross margins will continue to improve, there can be
no assurances that generated cash flow will be sufficient to fund operations.
If generated cash flow is not sufficient to fund operations, we may have to
raise additional capital externally. We raised a substantial amount of
capital in 1998 through the debt conversion and exercise of warrants and
other sales of common stock. These transactions significantly improved our
financial condition. In order to minimize dilution to existing stockholders,
our objective is to raise the minimal amount of capital for operations, if
and when necessary. We believe we have the ability to raise external capital.
However, any capital raised could be costly to us and/or dilutive to
stockholders.
Additionally, we have explored, and continue to explore multiple alternatives
that may be available for the purpose of enhancing stockholder value. These
alternatives include a merger, a spin-off or sale of part of our business, a
strategic relationship or joint venture with another technology or financial
services firm and future equity financing to further fund our business. There
can be no assurances, however, that we will conclude a transaction. (See Note
14 of the Notes to Financial Statements.)
14
<PAGE>
PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
YEAR 2000 ISSUES
1. Overview
PC Quote does not have or use mainframe computers in its internal operations.
Consequently, we do not have the extent of Y2K issues other companies have that
depend on what is commonly known as "legacy" systems. We use PC's and "server
class" computers in our operations. Our end-user applications also run on the
same type of hardware. These systems still may have Y2K issues. We have
implemented a plan to attempt to assess, remediate, and correct any year 2000
critical issues. A "Year 2000" problem will occur where date-sensitive software
uses two digit year date fields, sorting the year 2000 ("00") before the year
1999 ("99"). The Year 2000 problem may result in data corruption and processing
errors occurring where software, technology equipment, or any other equipment or
process uses date-dependent software.
Our plan has been structured to address the following areas:
A. Processing Plant and Communications Network
B. PC Quote Retail Applications
C. Operational Infrastructure
2. State of Readiness
We have approached each of the above areas in four phases: assessment,
remediation, testing, and contingency planning. "Assessment" summarizes the
process of issue identification. "Remediation" refers to the process of taking
corrective action to best mitigate identified Year 2000 risks. "Testing" is the
process of validating a specific PC Quote remediation effort or confirming a
third party capability or certification of Year 2000 compliance. "Contingency
planning" means the process by which we identify an alternate course of action
and/or procedure in the event we cannot or fail to remediate or mitigate a known
Year 2000 risk. We may or may not engage in contingency planning for individual
subproject components where successful Year 2000 remediation has been validated
through the testing process or other methods.
PC Quote is preparing to participate in the full "end-to-end" Year 2000 scenario
test sponsored by the Financial Information Forum in conjunction with the
Securities Industry Association. This is an industry-wide test to provide
securities, options and futures exchanges and market data providers with the
ability to test their systems under simulated Year 2000 conditions. Time will
essentially be moved forward into the Year 2000. We are in preliminary testing
that uses test data from participating exchanges to identify non-compliant
components that will need to be replaced prior to the full test. This full
"end-to-end" test, from the exchanges through market data vendors to the
end-user software application, is scheduled for May 1, 1999.
The following is a status report on our state of readiness.
A. Processing Plant and Communications Network
Assessment phase has been completed. A full inventory has been taken of
the processing plant, our data-feed input, consolidation and output
process, and communications areas. We are currently in the remediation
and testing phases. This includes verifying Y2K compliance of outside
vendors and suppliers and testing all mission critical items. Testing
also includes all PC's, routers, modems, phone lines, Internet service
providers (ISP's), and production computers, known as servers, used
internally in the communications room. We are also checking our
outbound satellite, phone companies and ISP's distribution network, in
addition to some ISP's that our customers may use.
15
<PAGE>
PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, YEAR
2000 ISSUES, CONTINUED
The Testing completion status as of 3/1/99 is as follows.
<TABLE>
<CAPTION>
--------------------------------- ----------------------- --------------------
AREAS EQUIPMENT/SYSTEMS COMPLIANT
--------------------------------- ----------------------- --------------------
<S> <C> <C>
Processing Plant 301 164
--------------------------------- ----------------------- --------------------
Communications Network 35 14
--------------------------------- ----------------------- --------------------
</TABLE>
Testing is scheduled to be completed by 6/30/99.
B. PC Quote Retail Applications
Our retail applications include proprietary and 3rd party software
applications, licensed to our customers for use only with our
data-feed. These applications include Internet web-site and
browser-based applications, local area network (LAN) based
applications, and Windows NT client/server applications. One OS/2 based
application will become obsolete in 2000. Customers using this
application will be converted to a compliant application.
<TABLE>
<CAPTION>
--------------------------------- ---------------------- ---------------------
APPLICATIONS COMPLIANT
--------------------------------- ---------------------- ---------------------
<S> <C> <C>
PC Quote Customer Apps 14 12
--------------------------------- ---------------------- ---------------------
3rd Party Customer Apps 5 3
--------------------------------- ---------------------- ---------------------
</TABLE>
C. Operational Infrastructure
We are assessing our main facility and field offices for compliance in
the security systems, HVAC systems, pagers, phone system, utility
providers and other mission critical systems. We have started to
upgrade, at minimal cost, non-compliant equipment.
Based on our current assessment, we believe we will be able to meet
our Y2K compliance goals.
3. Costs
As part of the ordinary course of our business, we continually develop major
enhancements to our operating systems and applications. For instance, we spent
three years developing the first 100% Windows NT-based processing plant that was
put into production in 1998. In addition to many other benefits, it is fully Y2K
compliant. We have not in the past separately tracked the cost of Y2K
remediation, as these efforts were incorporated into our on-going maintenance
and equipment replacement program. We have started to track costs in 1999 and
have spent approximately $27,000 so far this year on the cost of Year 2000. This
includes internal personnel resources, hardware, software and equipment
replacement and upgrades necessary to be Y2K compliant. We will be upgrading
various administrative systems that use commercial third party software for
accounting, billing and customer management. The total remaining cost of
software, replacement equipment, and internal resources for remediation and
testing to become Y2K compliant is not expected to exceed $500,000.
Based upon currently available information, we do not believe that the cost of
Y2K compliance will have a material impact on our financial condition, results
of operations or liquidity.
16
<PAGE>
PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, YEAR 2000 ISSUES, CONTINUED
4. Risks
Achieving Y2K compliance depends on many factors. Some factors may be beyond our
control because we use services of others. Should our internal systems or the
internal system of one of our critical vendors fail to achieve Y2K compliance
and fail in the year 2000, our business and results of operations could be
adversely affected. For example:
A piece of communications equipment has an internal clock that is not
Y2K compliant. Although end-to-end testing is done, if for some reason,
we or a vendor of ours fail to detect the non-compliance. Y2K comes and
the clock shuts down, causing an inability to transmit over that
channel. Our customers on that channel do not receive our service. We
or our vendor have the cost of finding and fixing the problem. Our
customer could make a claim against us for the lost service. Many of
our customers have back-up systems in place with us which could
mitigate any damage caused by the disruption. In the event that there
are claims for damages, our contracts with our customers limit our
liability in such instances. However, if there were a large number of
customers affected for a prolonged period of time, we could be put in a
position of either granting credits or risk losing the customers and
our reputation could be adversely effected.
We have customers that use our Quote Tools to access our data-feed for
software applications. Quote Tools is a set of programmer tools known
as application programming interfaces or APIs for short. Our Quote
Tools are written and tested to be Y2K compliant. If for some reason
Y2K came and our Quote Tools did not function properly because of the
date change, we would have to spend money and resources to fix the bug.
If the bug could not be fixed, and we had no alternative solution, for
our customers using the service, we could lose the customers and
related revenue. Our contracts with our customers generally limit our
liability to total fees paid over the preceding year, which in 1998 was
under $200,000 for Quote Tools' customers.
5. Contingency Plans
All testing, including internal infrastructure, is scheduled to be completed by
6/30/99. We have not started extensive contingency planning because we are
concentrating our efforts on remediation and testing. We believe effective
contingency planning should not begin until after these phases are complete. We
expect to begin comprehensive contingency planning at the start of the third
quarter of 1999.
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We will implement the provisions of Statement of Financial Accounting Standards
No. 133, ("Statement 133") "Accounting for Derivative Instruments and Hedging
Activities" which is required to be adopted for financial statements issued for
the fiscal year ending December 31, 2000. Statement 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring us to recognize those items as assets
or liabilities in the statement of financial position and measure them at fair
value. We believe that adoption of Statement 133 will not have a material impact
on our financial statements.
In March 1998 the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. The
SOP provides guidance on accounting for the costs of computer software
developed or obtained for internal use and provides guidance for determining
whether computer software is for internal use. We will adopt the provisions
of SOP 98-1 effective January 1, 1999. We are currently reviewing our
software capitalization policies and evaluating the impact of this Statement
on our results of operations and financial position.
17
<PAGE>
PART II - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
OTHER
We do not believe general inflation materially impacts our sales and operating
results. We do not expect that current tax legislation will significantly affect
our future financial position, liquidity or operating results.
At December 31, 1998, we had federal income tax net operating loss carryforwards
of approximately $26,005,000 for federal income tax purposes and approximately
$24,843,000 for the alternative minimum tax. The net operating loss
carryforwards will expire, if not previously utilized, as follows: 1999:
$546,000; 2000: $1,370,000; 2001: $1,539,000; 2002: $560,000; 2003: $79,000;
2004: $576,000; 2005: $1,557,000 and thereafter $19,778,414. (See Note 5 of the
Notes to Financial Statements.)
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have a bank term loan that has an interest rate equal to the bank's prime
rate. We are exposed to market risk as the prime rate is subject to
fluctuations in the market. We do not believe the market risk is material to
our financial statements. At December 31, 1998 we had excess cash invested in
a money market account. We do not expect any material loss, if at all, on
this investment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
Pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, the
information called for by this Item is incorporated herein by reference to the
"Index of Financial Statements" that appears elsewhere in this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants that would
require disclosure in this Report.
18
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Information about PC Quote directors and executive officers will be included in
our proxy statement for our 1999 annual meeting of stockholders. This
information is incorporated by reference to that proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
Information about PC Quote executive compensation will be included in our proxy
statement for our 1999 annual meeting of stockholders. This information is
incorporated by reference to that proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information about security ownership of certain beneficial owners and management
will be included in our proxy statement for our 1999 annual meeting of
stockholders. This information is incorporated by reference to that proxy
statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information about certain relationships and related transactions will be
included in our proxy statement for our 1999 annual meeting of stockholders.
This information is incorporated by reference to that proxy statement.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Our financial statements are included in Item 8 of this report.
2. Financial Statement Schedules
The financial statement schedule for the valuation and qualifying accounts is
included in Item 8 of this report.
(b) REPORTS ON FORM 8-K:
In the fourth quarter of the period covered by this report, we filed a Report on
Form 8-K dated October 6, 1998 reporting, in Item 5. Other Events, the
Securities Purchase Agreement between PC Quote and PICO Holdings, Inc.
and Physicians Insurance Company of Ohio.
(c) EXHIBITS
3(a) Articles of Incorporation of Company, incorporated by reference to
Appendix B of Company's Proxy Statement dated July 2, 1987.
3(b) By-laws of the Company, as amended and restated, incorporated by
reference to Exhibit 3(b) to Company's Annual Report on Form 10-K
for the year ended December 31, 1987.
3(c) Certificate of Amendment, dated as of October 22, 1997, to
Company's Certificate of Incorporation, incorporated by reference
to Exhibit 4.12 of the Company's Report on Form 10-Q for the
quarter ended September 30, 1997.
3(d) Certificate of Amendment, dated as of December 18, 1998, to
Company's Certificate of Incorporation, located after the
Financial Statements of this report.
4(a) Specimen Common Share Certificate of the Company, incorporated by
reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-18, Commission File No. 2-90939C.
4(b) $2,500,000 Convertible Subordinated Debenture due 2001 issued by
the Company to Physicians Insurance Company of Ohio, Inc.,
incorporated by reference to Exhibit 4(b) to Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
4(c) Form of First Amendment to Convertible Subordinated Debenture and
Debenture Agreement, incorporated by reference to Exhibit 10.2 of
the Company's Report on Form 10-Q for the quarter ended June 30,
1997.
4(d) Form of Loan and Security Agreement dated as of May 5, 1997
between the Company and PICO Holdings, Inc., incorporated by
reference to Exhibit 10.1 of the Company's Report on Form 10-Q for
the quarter ended June 30, 1997.
4(e) Form of Promissory Note made by the Company to the order of PICO
Holdings, Inc., incorporated by reference to Exhibit 10.4 of the
Company's Report on Form 10-Q for the quarter ended June 30, 1997.
4(f) Form of Common Stock Purchase Warrant for 640,000 shares of the
Company's Common Stock issued to PICO Holdings, Inc., incorporated
by reference to Exhibit 10.3 of the Company's Report on Form 10-Q
for the quarter ended June 30, 1997.
4(g) Form of First Amendment to Loan and Security Agreement dated as of
August 8, 1997 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 10.5 of the Company's Report
on Form 10-Q for the quarter ended June 30, 1997.
20
<PAGE>
PART IV - ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
4(h) Form of Common Stock Purchase Warrant for 500,000 shares of the
Company's Common Stock issued to PICO Holdings, Inc., incorporated
by reference to Exhibit 10.6 of the Company's Report on Form 10-Q
for the quarter ended June 30, 1997.
4(i) Form of Second Amendment to Loan and Security Agreement dated as
of September 22, 1997 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 10.1 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(j) Form of Common Stock Purchase Warrant for 129,032 shares of the
Company's Common Stock issued to PICO Holdings, Inc., incorporated
by reference to Exhibit 4.1 of the Company's Report on Form 10-Q
for the quarter ended September 30, 1997.
4(k) Form of Stock And Warrant Purchase Agreement dated as of October
15, 1997 between the Company and Imprimis Investors LLC and
Wexford Spectrum Investors LLC, incorporated by reference to
Exhibit 10.2 of the Company's Report on Form 10-Q for the quarter
ended September 30, 1997.
4(l) Form of Common Stock Purchase Warrant for 350,000 shares of the
Company's Common Stock issued to Imprimis Investors LLC,
incorporated by reference to Exhibit 4.2 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(m) Form of Common Stock Purchase Warrant for 150,000 shares of the
Company's Common Stock issued to Wexford Spectrum Investors LLC,
incorporated by reference to Exhibit 4.3 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(n) Form of Common Stock Purchase Warrant for 101,500 shares of the
Company's Common Stock issued to Imprimis Investors LLC,
incorporated by reference to Exhibit 4.4 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(o) Form of Common Stock Purchase Warrant for 43,500 shares of the
Company's Common Stock issued to Wexford Spectrum Investors LLC,
incorporated by reference to Exhibit 4.5 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(p) Form of Common Stock Purchase Warrant for 38,500 shares of the
Company's Common Stock issued to Imprimis Investors LLC,
incorporated by reference to Exhibit 4.6 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(q) Form of Common Stock Purchase Warrant for 16,500 shares of the
Company's Common Stock issued to Wexford Spectrum Investors LLC,
incorporated by reference to Exhibit 4.7 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(r) Form of Common Stock Purchase Warrant for 175,000 shares of the
Company's Common Stock issued to Imprimis Investors LLC,
incorporated by reference to Exhibit 4.8 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(s) Form of Common Stock Purchase Warrant for 75,000 shares of the
Company's Common Stock issued to Wexford Spectrum Investors LLC,
incorporated by reference to Exhibit 4.9 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(t) Form of Common Stock Purchase Warrant for 35,000 shares of the
Company's Common Stock issued to Imprimis Investors LLC,
incorporated by reference to Exhibit 4.10 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
21
<PAGE>
PART IV - ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
4(u) Form of Common Stock Purchase Warrant for 15,000 shares of the
Company's Common Stock issued to Wexford Spectrum Investors LLC,
incorporated by reference to Exhibit 4.11 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1997.
4(v) Form of Third Amendment to Loan and Security Agreement dated as of
December 30, 1997 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(v) to Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
4(w) Form of Fourth Amendment to Loan and Security Agreement dated as
of February 5, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(w) to Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
4(x) Form of Fifth Amendment to Loan and Security Agreement dated as of
March 10, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(x) to Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
4(y) Form of First Amendment to the Amendment of the Convertible
Subordinated Debenture Agreement, dated as of March 30, 1998,
incorporated by reference to Exhibit 4(a) of the Company's Report
on Form 10-Q for the quarter ended March 31, 1998.
4(z) Form of Sixth Amendment to Loan and Security Agreement dated as of
May 5, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(b) of the Company's Report
on Form 10-Q for the quarter ended March 31, 1998.
4(aa) Form of Amendment No. 2 to the Amendment of the Convertible
Subordinated Debenture Agreement, dated as of May 11, 1998,
incorporated by reference to Exhibit 4(c) of the Company's Report
on Form 10-Q for the quarter ended March 31, 1998.
4(ab) Form of Seventh Amendment to Loan and Security Agreement dated as
of June 1, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(a) of the Company's Report
on Form 10-Q for the quarter ended June 30, 1998.
4(ac) Form of Amendment No. 3 to the Amendment of the Convertible
Subordinated Debenture Agreement, dated as of July 16, 1998,
incorporated by reference to Exhibit 4(b) of the Company's Report
on Form 10-Q for the quarter ended June 30, 1998.
4(ad) Form of Eighth Amendment to Loan and Security Agreement dated as
of July 24, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(c) of the Company's Report
on Form 10-Q for the quarter ended June 30, 1998.
4(ae) Form of Amendment No. 4 to the Amendment of the Convertible
Subordinated Debenture Agreement, dated as of July 24, 1998,
incorporated by reference to Exhibit 4(d) of the Company's Report
on Form 10-Q for the quarter ended June 30, 1998.
4(af) Form of Ninth Amendment to Loan and Security Agreement dated as of
July 31, 1998 between the Company and PICO Holdings, Inc.,
incorporated by reference to Exhibit 4(e) of the Company's Report
on Form 10-Q for the quarter ended June 30, 1998.
4(ag) Securities Purchase Agreement between PC Quote, Inc. and PICO
Holdings, Inc. and Physicians Insurance Company of Ohio dated as
of September 23, 1998, incorporated by reference to Exhibit 4.1 of
the Company's Report on Form 8-K dated October 6, 1998.
22
<PAGE>
PART IV - ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
4(ah) Form of Registration Rights Agreement between PC Quote, Inc. and
PICO Holdings, Inc. and Physicians Insurance Company of Ohio,
incorporated by reference to Exhibit 4.3 of the Company's Report
on Form 8-K dated October 6, 1998.
4(ai) Form of Common Stock Purchase Warrant issued to PICO Holdings,
Inc., incorporated by reference to Exhibit 4.4 of the Company's
Report on Form 8-K dated October 6, 1998.
4(aj) Form of First Amendment to Common Stock Purchase Warrant dated May
5, 1997, incorporated by reference to Exhibit 4.5 of the Company's
Report on Form 8-K dated October 6, 1998.
4(ak) Form of First Amendment to Common Stock Purchase Warrant dated
August 8, 1997, incorporated by reference to Exhibit 4.6 of the
Company's Report on Form 8-K dated October 6, 1998.
4(al) Form of First Amendment to Common Stock Purchase Warrant dated
September 22, 1997, incorporated by reference to Exhibit 4.7 of
the Company's Report on Form 8-K dated October 6, 1998.
4(am) Form of Second Amendment to Convertible Subordinated Debenture
dated as of September 23, 1998, incorporated by reference to
Exhibit 4(h) of the Company's Report on Form 10-Q for the quarter
ended September 30, 1998.
4(an) Form of Stock and Warrant Purchase Agreement between PC Quote,
Inc. and Howard Todd Horberg dated December 29, 1998, located
after the Financial Statements of this report.
4(ao) Form of Common Stock Purchase Warrant for 120,000 shares issued to
Howard Todd Horberg, located after the Financial Statements of
this report.
4(ap) Form of Stock and Warrant Purchase Agreement between PC Quote,
Inc. and Steve Levy dated December 29, 1998, located after the
Financial Statements of this report.
4(aq) Form of Common Stock Purchase Warrant for 120,000 shares issued to
Steve Levy, located after the Financial Statements of this report.
4(ar) Form of Stock and Warrant Purchase Agreement between PC Quote,
Inc. and Cranshire Capital, LP dated December 29, 1998, located
after the Financial Statements of this report.
4(as) Form of Common Stock Purchase Warrant for 80,000 shares issued to
Cranshire Capital, LP, located after the Financial Statements of
this report.
10(a) Vendor Agreement with the Option Price Reporting Authority,
incorporated by reference to Exhibit 10.4 of Company's
Registration Statement on Form S-18, Commission File No. 2-90939C.
10(b) Vendor Agreement with the New York Stock Exchange, Inc.,
incorporated by reference to Exhibit 10.5 of Company's
Registration Statement on Form S-18, Commission File No. 2-90939C.
10(c) Vendor Agreements with the National Association of Securities
Dealers, Inc. incorporated by reference to Exhibit 10(d) of
Company's Annual Report on Form 10-K for the year ended December
31, 1989.
10(d) Form of Employee Non-Disclosure Agreement, incorporated by
reference to Exhibit 10.10 of Company's Registration Statement on
Form S-18, Commission File No. 2-90939C.
10(e) Amended and Restated PC Quote, Inc. Employees' Combined Incentive
and Non-Statutory Stock Option Plan, incorporated by reference to
Appendix E to Company's Proxy Statement dated July 2, 1987 and
Company's Proxy Statement dated September 15, 1997.
23
<PAGE>
PART IV - ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
10(f) Lease regarding office space at 50 Broadway, New York City, dated
January 31, 1987, as amended by First Amendatory Agreement dated
May 18, 1987, by and between Company and 50 Broadway Joint
Venture, incorporated by reference to Exhibit 10(y) to Company's
Annual Report on Form 10-K for the year ended December 31, 1987.
10(g) Satellite Service Agreement dated June 12, 1991 between Company
and Space Com Systems, Inc. incorporated by reference to Exhibit
10(r) to Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10(h) Amendment to satellite service agreement dated September 6, 1991
between Company and SpaceCom Systems, Inc. incorporated by
reference to Exhibit 10(s) to Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10(i) Amendment to point-to-multipoint satellite network service
agreement dated November 22, 1989 between Company and GTE SpaceNet
Satellite Services Corporation incorporated by reference to
Exhibit 10(v) to Company's Annual Report on Form 10-KSB for the
year ended December 31, 1992.
10(j) Amendment to satellite service agreement dated October 4, 1993
between Company and SpaceCom Systems, Inc. incorporated by
reference to Exhibit 10(z) to Company's Annual Report on Form
10-KSB for the year ended December 31, 1993.
10(k) Satellite Service Agreement dated September 15, 1994 between
Company and SpaceCom Systems, Inc. incorporated by reference to
Exhibit 11(a) to Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
10(l) Satellite Service Agreement dated October 15, 1993 between Company
and SpaceCom Systems, Inc. incorporated by reference to Exhibit
11(b) to Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
10(m) Satellite Service Agreement dated June 1, 1993 between Company and
SpaceCom Systems, Inc. incorporated by reference to Exhibit 11(b)
to Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
10(n) Vendor Agreement with Global Information Systems Inc. incorporated
by reference to Exhibit 11(d) of Company's Annual Report on Form
10-K for the year ended December 31, 1994.
10(o) Lease regarding office space at 300 South Wacker Drive, Chicago,
Illinois dated June 1, 1994, by and between Company and
Markborough 300 WJ Limited Partnership, incorporated by reference
to Exhibit 11(e) to Company's Annual Report on Form 10-KSB for the
year ended December 31, 1994.
10(p) Agreement dated November 14, 1996 between the Company and
Physicians Insurance Company of Ohio, Inc., incorporated by
reference to Exhibit 10(p) to Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
10(q) Employment agreement dated July 16, 1996 between the Company and
Howard Meltzer, incorporated by reference to Exhibit 10(q) to
Company's Annual Report on Form 10-K for the year ended December
31, 1996.
10(r) Employment agreement dated December 2, 1996 between the Company
and Louis J. Morgan, incorporated by reference to Exhibit 10(r) to
Company's Annual Report on Form 10-K for the year ended December
31, 1996.
24
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PC QUOTE, INC.
By:
/s/ JIM R. PORTER
-------------------------------------------
Jim R. Porter, Chairman of the Board and
Chief Executive Officer
March 30, 1999
By:
/s/ JOHN E. JUSKA
--------------------------------------------
John E. Juska, Chief Financial Officer and
Principal Accounting Officer
March, 30, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ JIM R. PORTER
- ---------------------------------------------
Jim R. Porter, Chairman of the Board and
Chief Executive Officer
March 30, 1999
/s/ JOHN R. HART
- ---------------------------------------------
John R. Hart, Director
March 30, 1999
/s/ TIMOTHY K. KRAUSKOPF
- ---------------------------------------------
Timothy K. Krauskopf, Director
March 30, 1999
/s/ RONALD LANGLEY
- ---------------------------------------------
Ronald Langley, Director
March 30, 1999
/s/ LOUIS J. MORGAN
- ---------------------------------------------
Louis J. Morgan, Director
March 30, 1999
/s/ KENNETH J. SLEPICKA
- ---------------------------------------------
Kenneth J. Slepicka, Director
March 30, 1999
25
<PAGE>
CONTENTS
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORTS F-1-2
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Balance sheets F-3-4
Statements of operations F-5
Statements of stockholders' equity F-6
Statements of cash flows F-7-8
Notes to financial statements F-9-24
Auditors' reports on Schedule II F-25-26
Supplemental Schedule II F-27
- --------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
PC Quote, Inc.:
We have audited the accompanying balance sheets of PC Quote, Inc. as of
December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PC Quote, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that PC
Quote, Inc. will continue as a going concern. As more fully described in Note
14, the Company has experienced significant operating losses, which have
adversely affected the Company's current results of operations and liquidity.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 14. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
Chicago, Illinois
March 12, 1999
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
PC Quote, Inc.
Chicago, Illinois
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of PC Quote, Inc. for the year ended December 31, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of PC Quote,
Inc. for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that PC
Quote, Inc. will continue as a going concern. As more fully described in Note
14, the Company has experienced significant operating losses, which have
adversely affected the Company's current results of operations and liquidity.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 14. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ McGladrey & Pullen, LLP
Schaumburg, Illinois
March 7, 1997
F-2
<PAGE>
PC QUOTE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,139,785 $ 1,113,130
Accounts receivable, less allowance for doubtful
accounts of: 1998: $443,037; 1997: $346,000 1,490,139 1,435,450
Prepaid expenses and other current assets 114,011 61,981
------------ ------------
TOTAL CURRENT ASSETS 2,743,935 2,610,561
------------ ------------
Property and equipment
Satellite receiving equipment 525,730 895,126
Computer equipment 4,260,589 7,266,576
Communication equipment 1,254,010 2,716,415
Furniture and fixtures 252,050 293,240
Leasehold improvements 402,692 366,325
------------ ------------
6,695,071 11,537,682
Less: Accumulated depreciation and amortization 4,613,526 9,035,571
------------ ------------
2,081,545 2,502,111
------------ ------------
Software development costs, net of accumulated
amortization of: 1998: $4,442,673; 1997: $5,045,080 5,012,971 5,126,473
------------ ------------
Deposits and other assets 214,916 297,303
------------ ------------
TOTAL ASSETS $ 10,053,367 $ 10,536,448
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
PC QUOTE, INC.
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
---- ----
<S> <C> <C>
Current Liabilities
Note payable, bank, current $ 300,000 $ 300,000
Note payable, credit facility --- 2,250,000
Accounts payable 4,138,517 2,834,460
Accrued expenses 218,866 604,916
Accrued compensation 313,838 618,289
Accrued interest --- 388,253
Income taxes payable 3,161 5,192
Unearned revenue, current 1,241,933 635,275
------------ ------------
TOTAL CURRENT LIABILITIES 6,216,315 7,636,385
------------ ------------
Note payable, bank, noncurrent 499,634 799,634
Convertible subordinated debenture payable, net of
unamortized discount of $1,096,402 --- 1,403,598
Unearned revenue, noncurrent 261,027 442,953
Accrued expenses, noncurrent 161,120 187,549
------------ ------------
TOTAL NONCURRENT LIABILITIES 921,781 2,833,734
------------ ------------
TOTAL LIABILITIES 7,138,096 10,470,119
------------ ------------
Stockholders' Equity
Preferred Stock, $.001 par value; authorized 5,000,000; issued
and outstanding:
Series A 5% convertible: 19,075 at December 31, 1998 19 ---
Series B 5% convertible: 28,791 at December 31, 1998 29 ---
Common stock, $.001 par value; authorized 50,000,000 shares; issued
and outstanding 14,183,183 at December 31, 1998 and 12,436,800 at
December 31, 1997 14,183 12,437
Additional paid-in capital - Series A 5% convertible preferred stock 3,086,013 ---
Additional paid-in capital - Series B 5% convertible preferred stock 4,664,891 ---
Additional paid-in capital - common stock 19,950,981 17,386,591
Additional paid-in capital - convertible subordinated
debenture and warrants 2,750,491 2,750,491
Accumulated deficit (27,551,336) (20,083,190)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,915,271 66,329
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,053,367 $ 10,536,448
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
PC QUOTE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
HyperFeed and LAN Services $ 12,826,038 $ 12,110,998 $ 16,095,285
Internet Services 10,219,495 5,008,374 936,879
------------ ------------ ------------
TOTAL REVENUE 23,045,533 17,119,372 17,032,164
------------ ------------ ------------
DIRECT COST OF SERVICES
HyperFeed and LAN Services 10,413,295 9,865,330 9,680,978
Internet Services 6,586,139 4,589,736 1,320,830
------------ ------------ ------------
TOTAL DIRECT COST OF SERVICES 16,999,434 14,455,066 11,001,808
------------ ------------ ------------
GROSS MARGIN 6,046,099 2,664,306 6,030,356
------------ ------------ ------------
OPERATING EXPENSES
Sales 4,500,367 3,655,119 3,128,777
General and administrative 3,310,843 3,951,437 3,488,606
Product and market development 1,703,192 1,588,077 1,139,994
Depreciation and amortization 1,231,123 1,243,722 1,230,809
Restructuring charges --- 1,146,677 ---
------------ ------------ ------------
TOTAL OPERATING EXPENSE 10,745,525 11,585,032 8,988,186
------------ ------------ ------------
LOSS FROM OPERATIONS (4,699,426) (8,920,726) (2,957,830)
------------ ------------ ------------
INTEREST INCOME (EXPENSE)
Interest income 19,279 37,873 9,743
Interest expense (1,765,448) (2,252,801) (143,618)
------------ ------------ ------------
NET INTEREST EXPENSE (1,746,169) (2,214,928) (133,875)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (6,445,595) (11,135,654) (3,091,705)
INCOME TAXES 3,613 5,762 164,264
------------ ------------ ------------
NET LOSS (6,449,208) (11,141,416) (3,255,969)
Preferred dividends 1,018,938 --- ---
------------ ------------ ------------
NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS ($ 7,468,146) ($11,141,416) ($ 3,255,969)
------------ ------------ ------------
------------ ------------ ------------
Basic net loss per share ($0.57) ($1.33) ($0.45)
Diluted net loss per share ($0.57) ($1.33) ($0.45)
Weighted-average common shares outstanding 13,001,058 8,353,400 7,248,000
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
PC QUOTE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Series A Series B Series A Series B
5% 5% 5% 5%
Convertible Convertible Convertible Convertible
Preferred Preferred Preferred Preferred Common Common
Stock Stock Stock Stock Stock Stock
Shares Shares Amount Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Balances
- ------------------------------------------------------------------------------------------------------------------
12/31/95 --- --- $ --- $ --- 7,185,732 $ 7,186
- ------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- --- --- 169,889 170
- ------------------------------------------------------------------------------------------------------------------
Value assigned to
conversion feature of
convertible debentures --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
12/31/96 --- --- --- --- 7,355,621 7,356
- ------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- --- --- 5,081,179 5,081
- ------------------------------------------------------------------------------------------------------------------
Value assigned to
amendment of convertible
debenture and warrants
issued --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
Value assigned to
employee stock options
issued --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
12/31/97 --- --- --- --- 12,436,800 12,437
- ------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
Issuance of preferred
stock 19,075 28,791 19 29 --- ---
- ------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- --- --- 4,735,332 4,735
- ------------------------------------------------------------------------------------------------------------------
Purchase and retirement of
common stock --- --- --- --- (2,988,949) (2,989)
- ------------------------------------------------------------------------------------------------------------------
Value assigned to
beneficial conversion
feature of Series B
convertible preferred
stock --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
Value assigned to
employee stock options
issued --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
12/31/98 19,075 28,791 $ 19 $ 29 14,183,183 $ 14,183
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Additional Additional Additional
Paid-In Paid-In Paid-In
Capital Capital Additional Capital
Series A Series B Paid-In Convertible
Convertible Convertible Capital Debenture Accumulated
Preferred Preferred Common and Warrants Deficit Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Balances
- -------------------------------------------------------------------------------------------------------------------------
12/31/95 $ --- $ --- $ 12,289,897 $ --- ($5,685,805) $ 6,611,278
- -------------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- (3,255,969) (3,255,969)
- -------------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- 326,098 --- --- 326,268
- -------------------------------------------------------------------------------------------------------------------------
Value assigned to
conversion feature of
convertible debentures --- --- --- 1,650,000 --- 1,650,000
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
12/31/96 --- --- 12,615,995 1,650,000 (8,941,774) 5,331,577
- -------------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- (11,141,416) (11,141,416)
- -------------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- 4,751,520 --- --- 4,756,601
- -------------------------------------------------------------------------------------------------------------------------
Value assigned to
amendment of convertible
debenture and warrants
issued --- --- --- 1,100,491 --- 1,100,491
- -------------------------------------------------------------------------------------------------------------------------
Value assigned to
employee stock options
issued --- --- 19,076 --- --- 19,076
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
12/31/97 --- --- 17,386,591 2,750,491 (20,083,190) 66,329
- -------------------------------------------------------------------------------------------------------------------------
Net loss --- --- --- --- (6,449,208) (6,449,208)
- -------------------------------------------------------------------------------------------------------------------------
Issuance of preferred
stock 2,966,794 3,765,172 --- --- --- 6,732,014
- -------------------------------------------------------------------------------------------------------------------------
Issuance of common stock --- --- 5,432,571 --- --- 5,437,306
- ------------------------------------------------------------------------------------------------------------------------
Purchase and retirement of
common stock --- --- (2,985,960) --- --- (2,988,949)
- -------------------------------------------------------------------------------------------------------------------------
Value assigned to
beneficial conversion
feature of Series B
convertible preferred
stock 119,219 899,719 --- --- (1,018,938) ---
- -------------------------------------------------------------------------------------------------------------------------
Value assigned to
employee stock options
issued --- --- 117,779 --- --- 117,779
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
12/31/98 $ 3,086,013 $ 4,664,891 $ 19,950,981 $ 2,750,491 ($27,551,336) $ 2,915,271
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
PC QUOTE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($6,449,208) ($11,141,416) ($3,255,969)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of property and equipment 1,231,123 1,243,722 1,230,809
Provision for doubtful accounts 397,873 683,639 734,346
Amortization of software development costs 1,810,553 1,909,652 1,244,522
Amortization of deferred discount on convertible
subordinated debenture 1,096,402 674,992 ---
Amortization of deferred debt on warrants --- 979,097 ---
Interest on converted debt, net of conversion costs 553,761 --- ---
Common stock issued in lieu of cash compensation 91,522 --- ---
Common stock issued in lieu of cash payments for professional fees 163,725 --- ---
Write-off of capitalized software development costs 300,401 571,647 ---
Compensation value assigned to employee stock options granted 117,779 19,076 ---
Deferred income taxes --- --- 158,000
(Gain) on disposal of equipment --- --- (52,206)
Changes in assets and liabilities:
Accounts receivable (452,562) (1,018,836) (514,091)
Income tax refunds receivable --- 40,000 ---
Prepaid expenses and other current assets (52,030) 123,090 109,465
Deposits and other assets 82,387 55,879 (77,489)
Accounts payable 1,304,057 1,060,070 157,986
Accrued expenses (1,105,183) 880,089 345,727
Accrued interest and facility fee on converted debt 428,253 --- ---
Unearned revenue 424,732 (52,008) 329,176
Income taxes payable (2,031) (1,072) 6,264
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (58,446) (3,972,379) 416,540
----------- ----------- -----------
Cash Flows From Investing Activities:
Purchase of property and equipment (810,557) (1,037,569) (914,898)
Proceeds from sale of equipment --- 55,943 190,498
Software development costs capitalized (1,997,452) (1,817,927) (2,862,152)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,808,009) (2,799,553) (3,586,552)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 5,182,059 4,756,601 326,268
Purchase and retirement of common stock (2,988,949) --- ---
Proceeds from notes payable --- --- 2,500,000
Proceeds from issuance of convertible subordinated debenture --- --- 2,500,000
Borrowings under credit facility 1,000,000 2,250,000 ---
Principal payments under capital lease obligations --- (142,685) (578,222)
Principal payments on note payable, bank (300,000) (300,366) (1,300,000)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,983,110 6,563,550 3,448,046
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 26,655 (208,382) 278,034
Cash and cash equivalents:
Beginning of year 1,113,130 1,321,512 1,043,478
----------- ----------- -----------
End of year $ 1,139,785 $ 1,113,130 $ 1,321,512
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
PC QUOTE, INC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information
- --------------------------------------------------------------------------------------------------------------
Interest paid $ 83,925 $ 218,531 $ 143,618
- --------------------------------------------------------------------------------------------------------------
Income taxes paid $ 3,517 $ 6,834 $ 1,000
- --------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Noncash Investing and
Financing Activities
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital from issuance of convertible
subordinated debenture $ 1,650,000
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital from amendment of convertible
debenture agreement and issuance of warrants $ 1,100,491
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital from issuance of
employee stock options $ 117,779 $ 19,076
- --------------------------------------------------------------------------------------------------------------
Series A preferred stock issued for converted debt $ 19
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital - Series A preferred stock from
conversion of convertible subordinated debenture principal,
plus accrued interest, net of conversion costs $ 2,966,794
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital - Series A preferred stock -
value assigned to beneficial conversion feature of
preferred stock $ 119,219
- --------------------------------------------------------------------------------------------------------------
Series B preferred stock issued for converted debt $ 29
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital - Series B preferred stock -
from conversion of credit facility borrowings, plus facility
fee and accrued interest, net of conversion costs $ 3,765,172
- --------------------------------------------------------------------------------------------------------------
Additional paid-in-capital - Series B preferred stock -
value assigned to beneficial conversion feature of
preferred stock $ 899,719
- --------------------------------------------------------------------------------------------------------------
Convertible subordinated debenture principal balance
converted into Series A convertible preferred stock ($ 2,500,000)
- --------------------------------------------------------------------------------------------------------------
Credit facility borrowings converted into Series B
convertible preferred stock ($ 3,250,000)
- --------------------------------------------------------------------------------------------------------------
Common stock issued in lieu of cash compensation $ 91,522
- --------------------------------------------------------------------------------------------------------------
Common stock issued in lieu of cash payments for
professional fees $ 163,725
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
PC Quote, Inc. (PC Quote or the "Company") is a premier provider of
securities market data. We collect securities market activity and financial
news directly from stock, options and commodities exchanges and other
sources. We use the information to create a real-time database of last sale
and bid/ask prices of more than 325,000 issues. The database includes all
North American equities, the most comprehensive options data, major stock
indices, Level 1 NASDAQ-quoted stocks, Level 2 NASDAQ market-maker quotes,
mutual funds, money market funds, futures contracts and options on futures
contracts. We then process the database into a single data-feed,
"HyperFeed(TM)", at our primary processing plant located at our executive
offices in Chicago, Illinois. We disseminate HyperFeed to our customers by
satellite, digital data lines or over the Internet.
Software applications on our customers' computers access HyperFeed to allow
the user to monitor securities activity on an on-going real-time basis. The
applications also create a complete database of trading symbols, continuously
updated by the data feed. This database gives our customer instant access to
security prices. HyperFeed is used to create an equivalent database on our
computers, accessible to our Internet customers.
Our customer base consists primarily of professional investors, securities
brokers, dealers and traders, portfolio managers, brokerage firms, other
financial institutions, Internet web-sites, application developers and
redistributors of financial market data. Our Internet service is used by
individual and professional investors alike.
Our Internet division, PCQuote.com, maintains our web-site, www.pcquote.com,
which is a premier Internet financial web-site offering financial news and
delayed and real-time market data. Its principal customers are financial
web-site advertisers, other Internet web-sites, individuals, and businesses.
Significant accounting policies are as follows:
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: The Company considers all cash and cash
investments with an original maturity of three months or less to be cash
equivalents. The Company typically invests excess cash in a money market
account at a financial institution which management believes has a strong
credit rating.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation on owned assets is provided using the straight-line method over
the following estimated useful lives: satellite receiving, computer and
communications equipment: 3 to 5 years; furniture, fixtures and leasehold
improvements: 5 to 10 years. Leasehold improvements are amortized over the
lesser of the estimated useful lives or the terms of the respective leases.
Maintenance and repair costs are charged to earnings as incurred. Costs of
improvements are capitalized. Upon retirement or disposition, the cost and
related accumulated depreciation and amortization are removed from the
accounts and any gain or loss is included in the statements of operations.
F-9
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPMENT COSTS: The Company's continuing investment in software
development consists primarily of enhancements to its existing Windows-based
private network and Internet services, development of new data analysis
software and programmer tools designed to afford easy access to its data-feed
for data retrieval and analysis purposes, and application of new technology
to increase the data volume and delivery speed of its distribution system and
network.
Costs associated with the planning and design phase of software development,
including coding and testing activities necessary to establish technological
feasibility of computer software products to be licensed or otherwise
marketed, are charged to research and development as incurred. Once
technological feasibility has been determined, costs incurred in the
construction phase of software development including coding, testing, and
product quality assurance are capitalized.
Amortization commences at the time of capitalization or, in the case of a new
service offering, at the time the service becomes available for use.
Unamortized capitalized costs determined to be in excess of the net
realizable value of the product are expensed at the date of such
determination. The accumulated amortization and related software development
costs are removed from the respective accounts effective in the year
following full amortization.
PC Quote, Inc.'s policy is to amortize capitalized software costs by the
greater of (a) the ratio that current gross revenue for a product bear to the
total of current and anticipated future gross revenue for that product or (b)
the straight line method over the remaining estimated economic life of the
product including the period being reported on, principally three to five
years. The Company assesses the recoverability of its software development
costs against estimated future undiscounted cash flows. Given the highly
competitive environment and technological changes it is reasonably possible
that those estimates of anticipated future gross revenue, the remaining
estimated economic life of the product, or both may be reduced significantly.
FINANCIAL INSTRUMENTS: The Company has no financial instruments for which the
carrying value materially differs from fair value.
INCOME TAXES: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
F-10
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION: The Company principally derives its revenue from service
contracts for the provision of market data only ("HyperFeed license fees"),
service contracts for the provision of market data together with analytical
software ("PC Quote 6.0 license fees"), and the sale of advertising on its
web-site www.pcquote.com. Revenue from service contracts is recognized using
the percentage-of-completion method, ratably over the contract term as the
contracted services are rendered. Revenue from the sale of advertising is
recognized as the advertising is displayed on the web-site. HyperFeed license
fees and PC Quote 6.0 license fees for satellite and landline services are
generally billed one month in advance with 30-day payment terms. License fees
for PC Quote 6.0 on the Internet are generally paid by credit card within
five days prior to the month of service. These and other payments received
prior to services being rendered are classified as unearned revenue on the
balance sheet. Revenue and the related receivable for advance billings are
not reflected in the financial statements. Customers' deposits on service
contracts are classified as either current unearned revenue, if the contract
expires in one year or less, or non-current unearned revenue, if the contract
expiration date is greater than one year.
The Company adopted the provisions of Statement of Position (SOP) 97-2,
Software Revenue Recognition, on January 1, 1998. SOP 97-2 specifies the
following four criteria that must be met prior to recognizing revenue: (1)
persuasive evidence of the existence of an arrangement, (2) delivery, (3)
fixed or determinable fee, and (4) probable collection. In addition, revenue
earned on software arrangements involving multiple elements is allocated to
each element based on the relative fair value of the elements. When
applicable, revenue allocated to the Company's software products (including
specified upgrades/enhancements) is recognized upon delivery of the products.
Revenue allocated to post contract customer support is recognized ratably
over the term of the support and revenue allocated to service elements (such
as training and installation) is recognized as the services are performed.
COMPUTATION OF NET INCOME (LOSS) PER SHARE: In the fourth quarter of 1997,
the Company adopted SFAS No. 128, "Earnings Per Share," which established new
methods for computing and presenting earnings per share ("EPS") and replaced
the presentation of primary and fully-diluted EPS with basic ("Basic") and
diluted EPS. Basic earnings per share is based on the weighted average number
of shares outstanding and excludes the dilutive effect of unexercised common
stock equivalents. Diluted earnings per share includes the dilutive effect of
unexercised common stock equivalents. The Company has equity securities that,
if exercised, would have had a dilutive effect on EPS had the Company
generated income during 1998. The dilutive effect of such securities would
have been an additional 225,500 average shares outstanding during the year
ended December 31, 1998.
RECLASSIFICATION: Certain 1997 and 1996 balances have been reclassified to
conform to the 1998 presentation. During 1998, the Company examined the
components of its direct cost of services and other operating expenses in
connection with the establishment of a separate Internet services group. As a
result of its review, the Company identified costs which appear to be more
appropriately classified in other expense categories within the statements of
operations for the years ended December 31, 1997 and 1996. The
reclassification related primarily to the inclusion of the amortization of
software development costs within direct cost of services, depreciation and
amortization expenses being included in operating expenses from direct cost
of services, and selling, marketing and administrative costs being included
in operating expenses from direct cost of services. The result of the
reclassifications did not impact the Company's reported revenue or loss from
operations for any period presented.
NOTE 2. NOTE PAYABLE
The Company has a $1,500,000 term loan with a bank, payable in monthly
installments of $25,000 plus interest at prime (prime was 7.75% and 8.5% at
December 31, 1998 and 1997, respectively). The loan is collateralized by
substantially all assets of the Company. At December 31, 1998 and 1997, the
outstanding balance was $799,634 and $1,099,634, respectively.
F-11
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS
On November 14, 1996, the Company entered into an agreement (the "Debenture
Agreement") with Physicians Insurance Company of Ohio, ("Physicians"), a
wholly-owned subsidiary of PICO Holdings, Inc. ("PICO"), which then owned
approximately 30% of the Company's outstanding shares of Common Stock.
Pursuant to the Debenture Agreement, Physicians invested $2.5 million in the
Company in exchange for a Subordinated Convertible Debenture (the
"Debenture") in the principal amount of $2.5 million with interest at 1% over
prime. Interest was payable semiannually, beginning January 1, 1998.
Physicians made the investment and the Debenture was issued on December 2,
1996. The Debenture was to mature on December 31, 2001 and was convertible at
any time by Physicians into 1.25 million shares of Common Stock of the
Company (subject to adjustment in certain cases). Using the Black-Scholes
option-pricing model, a value of $1,650,000 was assigned by the Company to
the subordinated debenture's beneficial conversion feature and recognized as
additional paid in capital and unamortized discount upon issuance in 1996.
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 was
payable on September 30, 1997. All advances under the Loan Agreement were
secured by a pledge of substantially all of the assets of the Company. These
liens were subject to the prior lien of the Company's primary lender,
Lakeside Bank. PICO was also entitled to be paid a "facility fee" of $40,000
on the maturity date of the loan contemplated by the Loan Agreement.
In connection with the Loan Agreement, the Company and Physicians 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 was changed
to April 30, 1999 instead of December 31, 2001; (b) the Debenture could not
be prepaid or redeemed without the consent of Physicians; (c) the conversion
rate on the Debenture was 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); (d) certain
negative covenants were added to the Debenture Agreement; and (e) the rights
offering contemplated by the Debenture Agreement would be at such time as
determined by the Company and at a price as determined by Physicians.
Interest under the Debenture would continue to be payable in cash or, at the
option of Physicians, in shares of the Company's Common Stock at the market
value of such shares at the time of payment.
Also 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 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 was to expire on April 30, 2000. In lieu of exercising the Warrant
for cash, PICO may elect to receive 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
F-12
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS (CONTINUED)
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 connection with the May 5 transactions, using the Black-Scholes
option-pricing model, an aggregate value of $572,192 was assigned to the
value of the Debenture Amendment and Warrant and recorded as additional
paid-in-capital and discounts on the Debenture and the Loan.
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 $1.0 million 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 a minimum of 500,000 shares of
the Company's Common Stock. The terms of the additional warrant are
substantially the same as those contained in the 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. The additional warrant also provides for certain
piggyback registration rights and a one-time demand registration right. Using
the Black-Scholes option-pricing model, a value of $428,640 was assigned to
the value of the additional warrants issued and recorded as paid-in-capital
and discount on the loan.
On September 22, 1997 the Company and PICO executed a second amendment to the
Loan Agreement to further increase the amount of the secured loan from PICO
to the Company from $2.0 million to $2.25 million. The terms of the Loan
Agreement otherwise remained substantially the same, except that the maturity
date was extended to December 31, 1997. In consideration of the amendment to
the Loan Agreement, the Company granted PICO another Common Stock Purchase
Warrant for up to 129,032 shares of Common Stock. The terms of such warrant
are substantially the same as contained in the Warrant, except that the
conversion price is the lesser of (a) $1.9375 per share or (b) the mean of
the closing bid price per share for the 20 trading days preceding exercise of
this warrant. This warrant also provides for certain piggyback registration
rights and a one-time demand registration right. Using the Black-Scholes
option-pricing model, a value of $99,659 was assigned to the value of the
additional warrants issued and recorded as paid-in-capital and discount on
the loan.
On December 30, 1997, February 5, 1998, March 10, 1998, May 5, 1998, June 1,
1998, and July 24, 1998, the Company and PICO executed the third, fourth,
fifth, sixth, seventh, and eighth amendments to the Loan Agreement,
respectively, extending the due date for borrowings by the Company, plus
accrued interest, to January 31, 1998, February 28, 1998, April 30, 1998, May
31, 1998, August 31, 1998, and December 31, 1998, respectively. No further
warrants were issued in connection with the third, fourth, fifth, sixth,
seventh, or eighth amendments to the loan agreement.
On May 19, 1998 PICO exercised a portion of one of their warrants and
purchased 320,000 shares of Common Stock of the Company for $500,000.
F-13
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS (CONTINUED)
On July 31, 1998 the Company and PICO executed the ninth amendment to the Loan
Agreement to further increase the amount of the secured loan from PICO to the
Company from $2.25 million to $3.25 million. No further warrants were issued in
connection with the ninth amendment.
On September 23, 1998 the Company entered into a Securities Purchase Agreement
(the "Securities Agreement"), subject to shareholder approval, with PICO and
Physicians. Under the terms of the Securities Agreement, the Company and
Physicians, as the holder of the Debenture in the principal amount of
$2,500,000, plus accrued interest in the amount of $423,123 as of September 23,
1998, plus interest accruing at the rate of $651 per day thereafter (such
principal and all accrued interest through the Closing Date, the "Debenture
Balance"), and PICO, to whom the Company was indebted in the principal amount of
$3,290,000, plus accrued interest in the amount of $377,742 as of September 23,
1998, plus interest accruing at the rate of $1,262 per day thereafter (such
principal and all accrued interest through the Closing Date, the "PICO
Indebtedness") provided for the purchase of Series A 5% Convertible Preferred
Stock by Physicians through the conversion of the Debenture Balance and for the
purchase of Series B 5% Convertible Preferred Stock by PICO in consideration for
the cancellation of the PICO Indebtedness.
Concurrently with the execution of the Securities Agreement, the Company and
Physicians entered into the Second Amendment to the Debenture and Debenture
Agreement to revise the conversion language therein in order to make it
consistent with the Securities Agreement.
Shareholder approval of the terms and conditions of the Securities Agreement for
the debt conversion and the transactions contemplated by the Securities
Agreement was obtained on December 17, 1998. The closing date for the Securities
Agreement transactions was December 18, 1998.
Subject to the terms and conditions of the Securities Agreement, Physicians
purchased and the Company issued to Physicians 19,075 shares of Series A 5%
Convertible Preferred Stock determined by dividing the Debenture Balance by one
hundred times $1.5625 (the Debenture conversion rate on the date of the
Securities Agreement). The Series A 5% Convertible Preferred Stock was deemed to
have a beneficial conversion feature because the fair market value of the
Company's common stock was in excess of its per share conversion price at the
date of issuance. The value of the beneficial conversion feature of $119,219 was
recorded in 1998 as an increase in additional paid in capital Series A preferred
stock and a decrease to retained earnings (preferred dividend)
Subject to the terms and conditions of the Securities Agreement, PICO purchased
and the Company issued to PICO on December 18, 1998, 28,791 shares of Series B
5% Convertible Preferred Stock determined by dividing the PICO Indebtedness by
one hundred times $1.3125 (the market price of the Company's Common Stock on
September 21, 1998, the date the Securities Agreement was approved by the
Company's Board of Directors). The Series B 5% Convertible Preferred Stock was
deemed to have a beneficial conversion feature because the fair market value of
the Company's common stock was in excess of its per share conversion price at
the date of issuance. The value of the beneficial conversion feature of $899,719
was recorded in 1998 as an increase in additional paid in capital Series B
preferred stock and a decrease to retained earnings (preferred dividend).
A holder of Series A Preferred is entitled to receive cash dividends, when and
as declared by the Board out of funds legally available for such purpose, in the
annual amount of 5% of the per share purchase price, payable quarterly on the
15th day of September, December, March and June, in each year. A holder of
Series B Preferred is entitled to receive cash dividends, when and as declared
by the Board out of funds legally available for such purpose, in the annual
amount of 5% of the per share purchase price, payable quarterly on the 15th day
of September, December, March and June, in each year. Dividends payable for any
period less than a full quarter shall be computed on and paid for the actual
number of days elapsed. Dividends shall accrue on each share of Preferred Stock
from the date of issue of such share of stock (the "Issuance Date").
F-14
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS (CONTINUED)
No dividends shall be declared on any other series or class or classes of stock
unless there shall be or have been declared on all shares of Preferred Stock
then outstanding the dividends for all quarter-yearly periods coinciding with or
ending before such quarter-yearly period. Dividends shall be cumulative. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment which is in arrears. If in any quarter-yearly dividend
period, dividends in the annual amount have not been declared and paid or set
apart for payment for such quarter-yearly dividend period and all preceding such
periods from the first day from which dividends are cumulative, then, until the
aggregate deficiency is declared and fully paid or set apart for payment, the
Company shall not (i) declare or pay or set apart for payment any dividends or
make any other distribution on any other capital stock or securities having an
equity interest in the Company ranking junior to or on a parity with the
Preferred Stock with respect to the payment of dividends or distribution of
assets on liquidation, dissolution or winding up of the Company (the "Secondary
Stock") (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase Secondary Stock) or (ii) make
any payment on account of the purchase, redemption, other retirement or
acquisition of any Secondary Stock with respect to the payment of dividends or
distribution of assets on liquidation, dissolution or winding up of the Company.
At any time or times on or after the Issuance Date, any holder of Preferred
Stock shall be entitled to convert any whole number of shares of Preferred Stock
into fully paid and nonassessable shares (rounded to the nearest whole share).
The number of shares of Common Stock issuable upon conversion of the Preferred
Stock shall be determined by multiplying the product of one hundred (100) and
the number of shares of Preferred Stock to be converted into Common Stock by:
(i) in the case of Series A Preferred, $1.5625 and then adding the
amount of any accrued but unpaid dividends attributable to such
Preferred Stock, and then dividing by the lower of (X) $1.5625, (Y) the
average Closing Sale Price of the Common Stock over the twenty-day
period immediately prior to the day the Series A Preferred is to be
converted into Common Stock; or (Z) the Closing Sale Price one day
prior to the day the Series A Preferred is to be converted into Common
Stock (the "Series A Conversion Rate").
(ii) in the case of Series B Preferred, $1.3125 and then adding the
amount of any accrued but unpaid dividends attributable to such
Preferred Stock, and then dividing by the lower of (X) $1.3125, (Y) the
average Closing Sale Price of the Common Stock over the twenty-day
period immediately prior to the day the Series B Preferred is to be
converted into Common Stock; or (Z) the Closing Sale Price one day
prior to the day the Series B Preferred is to be converted into Common
Stock (the "Series B Conversion Rate").
In order to prevent dilution of the rights granted, the Series A and Series B
Conversion Rates will be subject to adjustment for issuance of additional
securities of the Company, including common stock, options or convertible
securities, and reclassifications or changes of outstanding securities (by any
stock split, reverse stock split, combination, stock dividend, recapitalization
or otherwise).
If any Preferred Stock remains outstanding on the fifth anniversary after the
Issuance Date, then such Preferred Stock shall automatically convert to Common
Stock on such fifth anniversary.
The holders of Series A or Series B Preferred Stock shall be entitled to notice
of any shareholders' meeting and to vote upon any matter submitted to the
shareholders for a vote on the following basis. Each Holder of Preferred Stock
shall have the number of votes equal to the number of shares of Common Stock
into which the Preferred Stock then held by such holder is convertible, as
adjusted from time to time.
F-15
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS (CONTINUED)
Subject to the terms and conditions of the Securities Agreement, the Company
issued to PICO a warrant to purchase 3,106,163 shares of Common Stock of the
Company at an exercise price of $1.575 per share (120% of the Series B Closing
Price), and an expiration date of April 30, 2005. In lieu of exercising the
warrant for cash, the holder may elect to receive 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 exercise 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 the holder 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, the holder 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 the holder 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
exercise price.
Subject to the terms and conditions of the Securities Agreement, the Company and
PICO, as the holder of three Common Stock Purchase Warrants to purchase an
aggregate of 949,032 shares of Common Stock of the Company (the "Existing
Warrants"), each of which was to expire on April 30, 2000, entered into
Amendments of the Existing Warrants to extend the term of the Existing Warrants
until April 30, 2005.
In October 1997 Imprimis Investors LLC and Wexford Spectrum Investors LLC
(collectively, the "Wexford Affiliates") purchased five million shares of Common
Stock and warrants to purchase five hundred thousand shares of Common Stock at
an exercise price of $2.00 per share, exercisable at any time prior to October
15, 2002 (the "Initial Warrants"), in exchange for $5.0 million.
The Wexford Affiliates acquired the Common Stock and the Warrants for
investment purposes pursuant to a certain Stock and Warrant Purchase
Agreement dated October 15, 1997, between PC Quote and the Wexford Affiliates
(the "Purchase Agreement"). Up to four million of the shares of Common Stock
purchased by the Wexford Affiliates were subject to repurchase by PC Quote at
a purchase price of $1.00 per share pursuant to the terms of the Purchase
Agreement (the "Repurchase"). Pursuant to the terms of the Purchase
Agreement, PC Quote was required to use its best efforts to consummate the
Repurchase from the proceeds of a rights offering. In the event that the
rights offering was not completed on or prior to January 24, 1998, the
Wexford Affiliates would have been entitled to receive, out of escrow,
warrants to purchase an additional 250,000 shares of Common Stock with the
same terms as the Initial Warrants and, in the event the Rights Offering was
not completed on or prior to February 28, 1998, the Wexford Affiliates would
have been entitled to receive, out of escrow, warrants to purchase an
additional 250,000 shares of Common Stock with the same terms as the Initial
Warrants.
On October 31, 1997 the Company filed a Form S-2 Registration Statement with the
Securities and Exchange Commission for the rights offering. The Registration
Statement was amended on November 20, 1997 and became effective on November 21,
1997. The Company distributed 7,402,246 transferable subscription rights to
shareholders of record as of the close of business on November 21, 1997,
entitling them to purchase one additional share of Common Stock for each right
at a price of $1.00 per share.
F-16
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. FINANCING AND RELATED PARTY TRANSACTIONS (CONTINUED)
On January 23, 1998, the Company completed the rights offering. The Company
received approximately $3.0 million in gross proceeds from the sale of shares
underlying exercised rights. Pursuant to the Purchase Agreement, the entire
proceeds were used to fulfill the Company's obligation to repurchase shares from
the Wexford Affiliates, and the additional Warrants reverted back to the
Company.
During the second quarter of 1998, the Wexford Affiliates exercised a portion of
their warrants and purchased 143,300 shares of Common Stock of the Company for
$286,600. During the third quarter of 1998, the Wexford Affiliates exercised a
portion of their warrants and purchased 89,500 shares of Common Stock of the
Company for $179,000. (See Note 15.)
On December 29, 1998 the Company entered into Stock and Warrant Purchase
Agreements with three third-party investors. On December 30, 1998 the investors
purchased 640,000 shares of Common Stock and warrants to purchase 320,000 shares
of Common Stock at an exercise price of $1.875 per share, exercisable at any
time on or prior to December 30, 2001, in exchange for $1.0 million. The
investors acquired the Common Stock and warrants for investment purposes.
As a result of the foregoing, in connection with the Company's financing and
related party transactions, the Company has the following warrants for purchase
of shares of common stock, issued and outstanding at December 31, 1998.
<TABLE>
<CAPTION>
Number
of Expiration Exercise Remaining Life in Years at
Shares Date Price December 31, 1998
------ ---- ----- -----------------
<S> <C> <C> <C>
320,000 04/30/2005 (1) 6.33
500,000 04/30/2005 (2) 6.33
129,032 04/30/2005 (3) 6.33
3,106,163 04/30/2005 $1.575 6.33
320,000 12/30/2001 $1.875 3.00
267,200 10/15/2002 $2.00 3.79
</TABLE>
(1) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $1.5625 per share.
(2) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $2.00 per share.
(3) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $1.9375 per share.
F-17
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4. EMPLOYEE STOCK OPTIONS AND WARRANTS
The Company has an Employees' Combined Incentive and Non-Statutory Stock Option
Plan (the "Plan"). The Plan provides that at all times optional shares
outstanding plus shares available for grant equal 2,000,000 shares. Generally,
these options may be granted to key employees of the Company at a purchase price
equal to the fair value of the Company's common stock at date of grant and are
generally exercisable for a period of up to five years from the date of grant.
Other information with respect to the Plan is as follows:
<TABLE>
<CAPTION>
- ----------------------------------- ------------------ --------------------
Number Weighted-
of Average Price
Shares Per Share
--------------- ------------------
- ---------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1995 459,666 3.70
Granted 130,000 4.94
Exercised (89,663) (1.41)
Canceled (60,000) (3.88)
---------
Balance, December 31, 1996 440,003 4.51
Granted 636,612 1.61
Exercised (18,833) (0.90)
Canceled (283,917) (4.64)
--------
Balance, December 31, 1997 773,865 2.16
Granted 1,192,200 1.52
Exercised (95,015) (1.19)
Canceled (76,751) (2.39)
---------
Balance, December 31, 1998 1,794,299 1.78
---------
- ---------------------------------------------------------------------------
<CAPTION>
Shares
Exercisable Available
Shares for Grant
--------------- ------------------
- ---------------------------------------------------------------------------
<S> <C> <C>
December 31, 1998 1,457,466 205,701
December 31, 1997 592,113 1,226,135
December 31, 1996 157,338 559,997
</TABLE>
Options granted under the Plan generally become exercisable at an annual
cumulative rate of one-third of the total number of options granted. The price
for options outstanding at December 31, 1998 ranged from $0.9375 to $6.375 per
share.
F-18
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4. EMPLOYEE STOCK OPTIONS AND WARRANTS (CONTINUED)
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
provide pro forma net income and pro forma net income per share disclosures as
if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure provisions of SFAS No. 123. Had the Company determined
compensation cost based on the fair value at the grant date for its stock-based
compensation plans under SFAS No. 123, the Company's net loss and net loss per
share would have been for the years ended December 31, 1998, 1997 and 1996 the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Basic and Basic and Basic and
Diluted Diluted Diluted
Loss per Loss per Loss per
1998 Share 1997 Share 1996 Share
---- ---- ---- ----- ---- -----
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Net loss available for common
stockholders ($7,468,146) ($0.57) ($11,141,416) ($ 1.33) ($3,255,969) ($ 0.45)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Compensation expense related
to stock options granted (1,254,336) ( 0.10) (523,646) ( 0.06) (628,141) (0.09)
----------- ------ ----------- ------- ----------- -------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Pro forma net loss available
for common stockholders ($8,722,482) ($0.67) ($11,665,062) ($ 1.39) ($3,884,110) ($ 0.54)
------------ ------ ------------ ------- ----------- -------
------------ ------ ------------ ------- ----------- -------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each grant is estimated using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life 7.18 years 6.83 years 3 years
- ---------------------------------------------------------------------------------------------------------------------
Dividend rate 0% 0% 0%
- ---------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 5.16% 6.11% 6.0%
- ---------------------------------------------------------------------------------------------------------------------
Volatility factors 134% 123% 81%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted-average exercise price and weighted-average fair value of options
granted during 1998, 1997 and 1996 where the market price equals, exceeds or is
less than the exercise price at the time of grant is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Stock Price ______ Exercise Price
- ------------------------------------------------------------------------------------- -------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
Is Less Is Less Is Less
Equals Exceeds Than Equals Exceeds Than Equals Exceeds Than
------ ------- ---- ------ ------- ---- ------ ------- ----
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exercise price $1.29 $1.59 $1.75 $1.53 $1.69 $1.70 $4.94 --- ---
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Fair value of option $1.09 $2.01 $1.10 $1.29 $2.00 $0.96 $3.39 --- ---
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4. EMPLOYEE STOCK OPTIONS AND WARRANTS (CONTINUED)
Compensation expense from stock-based compensation awards recognized in the
Statement of Operations for 1998 and 1997 was $117,779 and $19,076,
respectively.
A further summary about options outstanding at December 31, 1998, is as follows:
<TABLE>
<CAPTION>
Weighted-Average
Remaining
Number Contractual Number
Exercise Price Outstanding Life Exercisable
----------------- ------------ ----------- -----------
<S> <C> <C> <C>
$ 0.9375 25,000 4.11 ---
$ 1.0000 34,328 2.09 34,328
$ 1.1250 215,000 4.69 33,333
$ 1.3750 587,902 7.60 521,236
$ 1.4375 301,168 3.85 266,668
$ 1.5000 41,000 3.90 17,000
$ 2.0000 487,901 8.45 487,901
$ 2.9375 5,000 4.38 ---
$ 5.3750 25,000 2.58 25,000
$ 6.3750 72,000 1.82 72,000
--------- ---------
1,794,299 6.30 1,457,466
--------- ---------
--------- ---------
</TABLE>
NOTE 5. INCOME TAXES
The deferred tax assets and liabilities consist of the following components as
of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1998 1997
---- ----
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
- ---------------------------------------------------------------------------------------------------------
Unearned revenue $ 526,036 $ 377,380
- ---------------------------------------------------------------------------------------------------------
Receivable allowances 155,063 121,100
- ---------------------------------------------------------------------------------------------------------
Property and equipment 266,800 196,800
- ---------------------------------------------------------------------------------------------------------
Accrued expenses 54,231 40,231
- ---------------------------------------------------------------------------------------------------------
Net operating loss carryforwards 9,101,895 8,114,160
- ---------------------------------------------------------------------------------------------------------
Research and development credit carryforward 106,000 106,000
---------- ----------
- ---------------------------------------------------------------------------------------------------------
10,210,025 8,955,671
- ---------------------------------------------------------------------------------------------------------
Valuation allowance (8,455,486) (6,753,591)
---------- ----------
- ---------------------------------------------------------------------------------------------------------
1,754,539 2,202,080
- ---------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
- ---------------------------------------------------------------------------------------------------------
Software capitalization (1,754,539) (2,202,080)
---------- ----------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Net current deferred tax asset --- ---
---------- ----------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
F-20
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5. INCOME TAXES (CONTINUED)
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion, or all, of the deferred
tax assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the scheduled
reversal of the caplitalized software, management believes it is more likely
than not that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at December 31, 1998.
Income tax expense for the years ended December 31, 1998, 1997, and 1996,
consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
- -------------------------------------------------------------------------------------------------------
State and local $ 3,613 $ 5,762 $ 6,264
- -------------------------------------------------------------------------------------------------------
Deferred --- --- 158,000
------- ------- --------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Total income tax expense $ 3,613 $ 5,762 $164,264
------- ------- --------
- -------------------------------------------------------------------------------------------------------
</TABLE>
Reconciliations of income tax expense computed at the statutory federal income
tax rate to the Company's income tax expense for the years ended December 31,
1998, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate provision ($ 2,257,223) ($ 3,899,496) ($1,051,200)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) resulting from:
- -----------------------------------------------------------------------------------------------------------------
Nondeductible expenses 393,613 8,468 26,000
- -----------------------------------------------------------------------------------------------------------------
State income taxes (net of federal benefit) 2,348 3,745 4,100
- -----------------------------------------------------------------------------------------------------------------
Change in valuation allowance 1,701,895 3,907,331 1,200,460
- -----------------------------------------------------------------------------------------------------------------
Other 162,980 (14,286) (15,096)
------------ ------------ -----------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
$ 3,613 $ 5,762 $ 164,264
------------ ------------ -----------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had federal income tax net operating loss
carryforwards of approximately $26,005,000 for federal income tax purposes and
approximately $24,843,000 for the alternative minimum tax. Approximately
$1,058,000 of these net operating losses relates to exercise of incentive
employee stock options and will be credited directly to stockholders' equity
when realized. The Company also had research and development credits of $106,000
which will expire in years 2010 to 2011 if not previously utilized. The future
utilization of these net operating losses and research and development credits
will be limited due to changes in Company ownership. The net operating loss
carryforwards will expire, if not previously utilized, as follows: 1999:
$546,000; 2000: $1,370,000; 2001: $1,539,000; 2002: $560,000; 2003: $79,000;
2004: $576,000; 2005: $1,557,000 and thereafter $19,778,414.
F-21
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6. LEASE COMMITMENTS
The Company is obligated, as lessee under certain noncancelable operating
leases, for lease payments for equipment and office space, as well as insurance,
maintenance and other executory costs associated with the leases. On September
1, 1994, the Company entered into a lease agreement in conjunction with the move
of its corporate headquarters, which is subject to escalating base rent, as well
as adjustments for changes in real estate taxes and other operating expenses.
Expense under the lease is recognized on a straight-line basis.
Future minimum lease payments for the Company as lessee as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
Operating
Leases
------
<S> <C>
Years ending December 31:
1999 $ 1,361,851
2000 321,553
2001 191,653
2002 153,514
2003 94,684
2004 and Thereafter 94,684
--------------
Total minimum lease payments $ 2,217,939
--------------
--------------
</TABLE>
Rental expense for operating leases was $3,187,945, $3,314,402 and $2,408,879
for the years ended December 31, 1998, 1997 and 1996, respectively.
NOTE 7. OTHER COMMITMENTS
Under an agreement for satellite transmission services, including "FM(3)"
satellite transmissions, the Company was required to pay a monthly base fee of
$52,888, plus related service fees, through the earlier of January 2006, the
original estimated end-of-life of the satellite, or the actual end-of-life of
the satellite. The Company expensed $679,680, $677,347 and $618,648 for the
years ended December 31, 1998, 1997 and 1996, respectively, for these services.
Under a Satellite Network Service agreement, which expired in November 1997, the
Company was required to pay an annual base fee of approximately $456,000, plus
related service fees. The Company expensed $272,950 and $653,083 in 1997 and
1996, respectively, for the base fee plus related service fees.
NOTE 8. MAJOR CUSTOMERS
The Company did not have any customers that accounted for 10% or more of total
revenue in either 1998 or 1997.
On January 25, 1995, the Company entered into an agreement with Global Financial
Services, (formerly Bridge Information Systems) ("Global"), whereby the Company
would provide domestic data to Global for $2,100,000 (1996) and $450,000 through
March 31, 1997. For the remainder of the contract term, amounts would be charged
on a per-site basis at December 31, 1996. In September 1996, the Company agreed
to accelerate the termination date of this agreement to January 1, 1997. For the
fiscal year ending December 31, 1996, Global accounted for revenue approximating
$3,414,000. In December 1996, the Company discontinued providing services to
Charles Schwab and Company that accounted for net revenue of approximately
$1,693,000 in 1996.
F-22
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9. DEFINED CONTRIBUTION PLAN
In 1993, the Company established a 401(k) retirement savings plan for employees
meeting certain eligibility requirements. Under the plan, the Company is
required to match employee contributions at 25% of the first 5% contributed by
an employee. The Company recorded expenses related to its matching of
contributions of $49,205, $36,200 and $30,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
NOTE 10. EMPLOYEE STOCK PURCHASE PLAN
In 1995, the Company established an employee stock purchase plan. The plan
allows employees to have up to 10% of their annual salary withheld to purchase
common stock of PC Quote, Inc. on the final day of each quarter at 85% of the
market price on either the first or last day of the quarter, whichever is lower.
The Company has reserved 500,000 shares of common stock for issuance pursuant to
the terms of the plan. Shares sold to employees totaled 288,513, 60,610 and
30,228 for the years ended December 31, 1998, 1997 and 1996, respectively.
NOTE 11. LITIGATION
On December 31, 1996, a lawsuit was filed against the Company, by a former
officer, alleging breach of various verbal and written agreements by failing to
pay certain commissions, bonuses and severance pay and failing to provide him
with certain stock options. The lawsuit sought monetary damages of approximately
$680,000. The Company filed a Motion to Dismiss a major portion of the complaint
which was granted in 1998. The remaining portion of the complaint seeks monetary
damages of approximately $70,000. The Company is vigorously contesting the
matter, but its legal counsel has indicated that the outcome of the lawsuit
cannot be determined at this time. Management believes the claim is without
merit; accordingly, no provision has been made in the financial statements for
any loss that may result from litigation.
NOTE 12. RESTRUCTURING
In June 1997, the Board of Directors of the Company approved a plan to
restucture the operations of the Company. The plan provided for the exiting
of certain activities and the termination of three senior executive's
employment agreements. The activities exited by the Company resulted in a
write off approximately $572,000 of unamortized software development costs
for previously capitalized software projects that were discontinued and a
payment of $150,000 for early termination of a contractual arrangement. The
management reorganization resulted in the Company incurring employment
related termination costs of $425,000. Management classified these costs as
"restructuring expense," as the costs at the time of recognition: 1) were not
associated with or did not benefit activities that would be continued, 2)
were not associated with or incurred to generate future revenue, and 3)
represented amounts to be incurred by the Company under a contractual
arrangement. Total restructuring costs recognized by the Company in 1997, as
a result of its reorganization plan, was $1.1 million. There was $97,195 of
restructuring costs included in accrued expenses at December 31, 1997, and
subsequently paid in 1998.
NOTE 13. RESEARCH AND DEVELOPMENT
During the fiscal years ended December 31, 1998,1997 and 1996, we expensed
$634,884, $873,579 and $709,618, respectively, for research and development.
These expenses are included in product and market development costs in the
statements of operations.
F-23
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 14. MANAGEMENT'S PLANS AND INTENTIONS FOR CONTINUING OPERATIONS
The Company incurred a net loss of approximately $6.4 million and reported a
net loss available to common stockholders of approximately $7.3 million for
the year ended December 31, 1998. As of December 31, 1998, the Company had an
accumulated deficit of approximately $27.6 million and deficit working
capital of $3.5 million. These conditions raise doubt about the Company's
ability to continue as a going concern. The Company has addressed, and
continues to address, this doubt.
The Company has significantly improved its gross margins through a
combination of revenue growth and operating cost containment. Management
expects this trend to continue in 1999, in part due to new service offerings
planned for release in 1999 that they believe will result in additional
revenue and increased margins. Although management believes the Company's
gross margins will continue to improve, there can be no assurances that
generated cash flow will be sufficient to fund operations. If generated cash
flow is not sufficient to fund operations, the Company may have to raise
additional capital externally. In December 1998 the Company converted $6.7
million of current debt into preferred equity and raised an additional $1.0
million in capital through a private placement of Common Stock. Interest
expense related to the converted debt accounted for approximately $1.7
million of the loss reported for 1998. Altogether, the Company raised $9.2
million in capital in 1998 through the debt conversion, private placement,
exercise of warrants and other sales of common stock. These transactions
significantly improved the financial condition of the Company. Management's
objective is to raise, if and when necessary, the minimal amount of capital
for operations in order to minimize dilution to existing stockholders.
Management believes it has the ability to raise additional capital, if
necessary. However, any capital raised could be costly to the Company and/or
dilutive to stockholders.
The Company has explored, and continues to explore multiple alternatives that
may be available to the Company for the purpose of enhancing shareholder value.
Such alternatives include a merger, a spin-off or sale of part of the Company's
business, a strategic relationship or joint venture with another technology or
financial services firm and other financing to further fund the Company's
business. There can be no assurances, however, that the Company will be
successful in concluding a transaction.
NOTE 15. SUBSEQUENT EVENTS
In February 1999 the Wexford Affiliates exercised the remaining potion of
their warrants and the Company issued 267,200 shares of common stock to them in
exchange for $534,400.
F-24
<PAGE>
PC QUOTE, INC.
SUPPLEMENTAL SCHEDULE II OF FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To the Board of Directors
PC Quote, Inc.:
Under date of March 12, 1999, we reported on the balance sheets of PC Quote,
Inc. as of December 31, 1998 and 1997 and the related statements of operations,
stockholders' equity and cash flows for the years then ended. In connection with
our audits of the aforementioned financial statements, we also audited the
related financial statement schedule of valuation and qualifying accounts for
the years ended December 31, 1998 and 1997. This financial schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the schedule based on our audits.
In our opinion, such financial statement schedule for the years ended December
31, 1998 and 1997, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the 1998 and 1997
information set forth therein.
KPMG LLP
Chicago, Illinois
March 12, 1999
F-25
<PAGE>
PC QUOTE, INC.
SUPPLEMENTAL SCHEDULE II OF FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To the Board of Directors
PC Quote, Inc.
Chicago, Illinois
Our audit of the financial statements of PC Quote, Inc. as of and for the year
ended December 31, 1996 included the 1996 information on Schedule II contained
herein. Such schedule is presented for purposes of complying with the Security
and Exchange Commission's rule and is not a required part of the basic financial
statements. In our opinion, such schedule presents fairly the 1996 information
set forth therein in conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Schaumburg, Illinois
March 7, 1997
F-26
<PAGE>
PC QUOTE, INC.
SUPPLEMENTAL SCHEDULE II TO THE FINANCIAL STATEMENTS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Balance at
Beginning of Charged to Deductions Balance at
Description Period Operations From Reserves End of Period
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Allowance for doubtful
Accounts/trade
Receivable in the
Balance sheets
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1998 $346,000 $397,873 ($300,836) $443,037
- ----------------------------------------------------------------------------------------------------
1997 234,000 683,639 (571,639) 346,000
- ----------------------------------------------------------------------------------------------------
1996 95,000 734,346 (595,346) 234,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE>
EXHIBIT 3(d)
CERTIFICATE OF DESIGNATIONS
OF SERIES A AND SERIES B
PREFERRED STOCK
OF PC QUOTE, INC.
PC Quote, Inc., a Delaware corporation (the "CORPORATION") hereby
certifies that the following resolutions were adopted by the Board of
Directors of PC Quote, Inc. (the "BOARD") on December 18, 1998, pursuant to
authority conferred upon the Board by the Certificate of Incorporation, as
amended, of the Corporation and Section 151(g) of the Delaware General
Corporation Law:
RESOLVED, that the Board hereby authorizes two series of the
Corporation's previously authorized Preferred Stock, par value $.001 per
share, and hereby states a designation of each series and number of shares,
and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
1. DESIGNATION AND AMOUNT. The Corporation hereby designates 19,075
shares of the Preferred Stock as Series A Preferred Stock (the "SERIES A
PREFERRED") and 28,791 shares of the Preferred Stock as Series B Preferred
Stock (the "SERIES B PREFERRED," collectively with the Series A Preferred,
the "PREFERRED STOCK").
2. DIVIDENDS.
(a) A holder of Series A Preferred shall be entitled to receive
cash dividends, when and as declared by the Board out of funds legally
available for such purpose, in the annual amount of $7.81 per share, payable
quarterly on the 15th day of September, December, March and June, in each
year. A holder of Series B Preferred shall be entitled to receive cash
dividends, when and as declared by the Board out of funds legally available
for such purpose, in the annual amount of $6.56 per share, payable quarterly
on the 15th day of September, December, March and June, in each year. If any
day described in the preceding two sentences is not a business day, dividends
shall be paid on the next business day, commencing on the first such day
after issuance. Dividends payable for any period less than a full quarter
shall be computed on and paid for the actual number of days elapsed.
Dividends shall accrue on each share of Preferred Stock from the date of
issue of such share of stock (the "ISSUANCE DATE"). Dividends shall be paid
to holders of record on a record date to be determined by the Board in
advance of the payment of each dividend.
(b) No dividends shall be declared on any other series or class or
classes of stock unless there shall be or have been declared on all shares of
Preferred Stock then outstanding the dividends for all quarter-yearly periods
coinciding with or ending before such quarter-yearly period. Dividends shall
be cumulative. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment which is in arrears. If in any
quarter-yearly dividend period, dividends in the annual amount have not been
declared and paid or set apart for payment for such quarter-yearly dividend
period and all preceding such periods from the first day from which dividends
are cumulative, then, until the aggregate deficiency is declared and fully
paid or set apart for payment, the Corporation shall not (i) declare or pay
or set apart for payment any dividends or make any other distribution on any
other capital stock or securities having an equity interest in the
Corporation ranking junior to or on a parity with the Preferred Stock with
respect to the payment of dividends or distribution of assets on liquidation,
dissolution or winding up of the Corporation (the "SECONDARY STOCK") (other
than dividends or distributions paid in shares of, or options, warrants or
rights to subscribe for or purchase Secondary Stock) or (ii) make any payment
on account of the
-1-
<PAGE>
purchase, redemption, other retirement or acquisition of any Secondary Stock
with respect to the payment of dividends or distribution of assets on
liquidation, dissolution or winding up of the Corporation.
3. CONVERSION OF PREFERRED STOCK. A holder of Preferred Stock shall
have the right, at such holder's option, to convert the Preferred Stock into
shares of the Corporation's common stock, par value $0.001 per share (the
"COMMON STOCK"), on the terms and conditions set forth in Sections 3(a) and
3(b). If any Preferred Stock remains outstanding on the fifth anniversary
after the Issuance Date, then such Preferred Stock shall automatically
convert to Common Stock on such fifth anniversary under the terms of Section
7(f).
- CONVERSION RIGHT. At any time or times on or after the
Issuance Date, any holder of Preferred Stock shall be entitled to convert any
whole number of shares of Preferred Stock into fully paid and nonassessable
shares (rounded to the nearest whole share in accordance with Section 7(h))
of Common Stock, at the Applicable Conversion Rate, adjusted in accordance
with Section 4, if applicable.
- APPLICABLE CONVERSION RATE. The number of shares of Common
Stock issuable upon conversion of the Preferred Stock pursuant to Section
3(a) shall be determined by multiplying the product of one hundred (100) and
the number of shares of Preferred Stock to be converted into Common Stock by:
(i) in the case of Series A Preferred, (A) the Series A
Closing Price (as defined in the Securities Purchase Agreement dated as of
September 23, 1998, among the Corporation, Pico Holdings, Inc., a California
corporation, and Physicians Insurance Corporation of Ohio, Inc., an Ohio
corporation (the "PURCHASE AGREEMENT")) AND THEN ADDING TO SUCH PRODUCT (B)
the amount of any accrued but unpaid dividends attributable to such Preferred
Stock, AND THEN DIVIDED BY the lower of (X) the Series A Closing Price, (Y)
the average Closing Sale Price of the Common Stock over the twenty-day period
immediately prior to the day the Series A Preferred is to be converted into
Common Stock; or (Z) the Closing Sale Price one day prior to the day the
Series A Preferred is to be converted into Common Stock (the "SERIES A
CONVERSION RATE").
(ii) in the case of Series B Preferred, (A) the Series B
Closing Price (as defined in the Purchase Agreement) AND THEN ADDING TO SUCH
PRODUCT (B) the amount of any accrued but unpaid dividends attributable to
such Preferred Stock, AND THEN DIVIDED BY the lower of (X) the Series B
Closing Price, (Y) the average Closing Sale Price of the Common Stock over
the twenty-day period immediately prior to the day the Series B Preferred is
to be converted into Common Stock; or (Z) the Closing Sale Price one day
prior to the day the Series B Preferred is to be converted into Common Stock
(the "SERIES B CONVERSION RATE").
4. ADJUSTMENT TO CONVERSION PRICE -- DILUTION AND OTHER EVENTS. In
order to prevent dilution of the rights granted under this Certificate of
Designations, the Series A and Series B Conversion Rates will be subject to
adjustment from time to time as provided in this Section 4.
(a) ADJUSTMENT OF CONVERSION PRICE DUE TO ISSUANCE OF ADDITIONAL
SECURITIES. If on or after the Closing Date, the Corporation issues or
sells, or is deemed under the terms of Section 4(a)(i) to have issued or
sold, any shares of Common Stock (other than the Preferred Stock and shares
of Common Stock deemed to have been issued by the Corporation in connection
with an Approved Stock Plan (as defined below)) for a consideration per share
less than the Applicable Price (as defined below), then after such issue or
sale, in addition to multiplying such number of shares by the Series A
Conversion Rate or the Series B Conversion Rate, as applicable, the number
-2-
<PAGE>
of shares of Preferred Stock to be converted into Common Stock shall be
multiplied by: the product of (i) the Applicable Price and (II) the number of
shares of Common Stock Deemed Outstanding (as defined in Section 4(a)(iii))
immediately after such issue or sale, divided by the sum of (a) the product
of the Applicable Price and the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, and (b) the
consideration, if any, received by the Corporation upon such issue or sale
(as determined in Section 4(a)(iv)). The "APPLICABLE PRICE" shall equal (x)
the Series A Closing Price if the calculation relates to Series A Preferred,
or (y) the Series B Closing Price if the calculation relates to Series B
Preferred, or (z) the lesser of the Series A Closing Price or the Series B
Closing Price if the calculation does not explicitly relate to either the
Series A Preferred or the Series B Preferred. For purposes of determining
the number of shares of Common Stock Deemed Outstanding under this Section
4(a), the following shall apply:
(i) ISSUANCE OF OPTIONS OR CONVERTIBLE SECURITIES. If the
Corporation in any manner grants (A) any rights or options to subscribe for
or to purchase Common Stock (other than pursuant to an Approved Stock Plan or
upon conversion of the Preferred Stock) or (B) any rights or options to
acquire any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being
herein called "CONVERTIBLE SECURITIES") or (C) any rights to subscribe for or
to purchase Convertible Securities, and the price per share for which Common
Stock is issuable upon the exercise of the rights or options described in
Sections 5(a)(i)(A) or (B) (together, the "OPTIONS") or upon conversion or
exchange of Convertible Securities is less than the Applicable Price, then
the total maximum number of shares of Common Stock issuable upon the (A)
exercise of such Options or (B) conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such
Options or (C) conversion or exchange of Convertible Securities, shall
increase the number of shares of Common Stock Deemed Outstanding and shall be
deemed to have been issued and sold by the Corporation for the price per
share specified in Section 4(a)(iv).
(ii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If the (A)
purchase price payable to exercise any Options, (B) additional consideration,
if any, payable upon the issue, conversion or exchange of any Convertible
Securities, or (C) rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock change at any time (including due to a
conversion price for Convertible Securities which varies with the market or
an index), the fraction to be used thereafter in the calculation described in
Section 4(a) shall be the fraction which would have been calculated at such
time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold; provided that no adjustment shall be made if such adjustment would
result in an increase to the Series A Conversion Price or the Series B
Conversion Price otherwise applicable.
(iii) CERTAIN DEFINITIONS. For purposes of determining
the additional fraction specified in Section 4(a), the following terms have
the meanings set forth below:
(A) "APPROVED STOCK PLAN" shall mean any contract, plan
or agreement which has been approved by the Board of the Corporation,
pursuant to which the Corporation's securities may be issued to any employee,
officer, director, consultant or other service provider.
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(B) "COMMON STOCK DEEMED OUTSTANDING" means, at any
given time, the number of shares of Common Stock actually outstanding at such
time, plus any additional shares of Common Stock deemed to be outstanding at
such time pursuant to Section 4(a)(i) regardless of whether the Options or
Convertible Securities are actually exercisable at such time, plus the number
of shares of Common Stock issuable upon conversion of the Preferred Stock.
Upon the expiration of any Options or any rights of conversion, exercise or
exchange under Convertible Securities which shall not have been exercised,
converted or exchanged, the Common Stock Deemed Outstanding shall include:
only the Common Stock, if any, actually issued upon the exercise of such
Options or exercise, conversion or exchange of such Convertible Securities.
(C) The "CLOSING SALE PRICE" shall be defined as the
last closing sale price of the Common Stock of the Corporation on the
American Stock Exchange, or if the American Stock Exchange is not the
principal securities exchange for the Common Stock, the last closing sale
price of the Common Stock on the principal securities exchange or other
trading market where the Common Stock is listed, or if the foregoing do not
apply, the last closing sale price of the Common Stock in the
over-the-counter market on the electronic bulletin board for the Common Stock
as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if no closing
sale price is reported for the Common Stock by Bloomberg, the last closing
bid price of the Common Stock as reported by Bloomberg, or, if no last
closing bid price is reported for the Common Stock by Bloomberg, the average
of the bid prices of any market makers for the Common Stock as reported in
the "pink sheets" by the National Quotation Bureau, Inc., or if the last
closing sale price cannot be calculated for the Common Stock on any of the
foregoing bases, then the fair market value as mutually determined by the
Corporation and the holders of a majority of the outstanding Preferred Stock
(including for purposes of this determination any Preferred Stock with
respect to which the Closing Sale Price is being determined).
(iv) ADJUSTMENT TO CONVERSION PRICE. For purposes of
determining the fraction to be used in the calculation described in Section
4(a), the following shall apply:
(1) CALCULATION OF CONSIDERATION RECEIVED. For
purposes of Section 4(a), the price per share for which Common Stock is
deemed issued upon exercise of Options or upon conversion or exchange of
Convertible Securities shall be determined by dividing (i) the total amount,
if any, received or receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (II) the total maximum
number of shares of Common Stock issuable upon exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. Subject to Section 4(a)(ii), no
additional adjustment to the Series A Conversion Price or the Series B
Conversion Price, as applicable, shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(2) CASH PROCEEDS. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the
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consideration received therefor will be deemed to be the net amount received
by the Corporation therefor.
(3) EXPIRATION OF CONVERSION RIGHTS. Upon the
expiration of any Options or any rights of conversion, exercise or exchange
under Convertible Securities which shall not have been exercised, converted
or exchanged, the consideration received therefor shall be deemed to be (i)
the consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or for the issue of all such
Convertible Securities which were actually exercised, converted or exchanged,
plus any additional consideration, if any, actually received by the
Corporation upon such exercise, conversion or exchange, and (ii) in the case
of Options for Convertible Securities, only the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to
which such Options were actually exercised.
(4) NONCASH CONSIDERATION. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
the Corporation will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Corporation will be the average of the Closing
Sale Prices of such securities for the five consecutive business days
immediately preceding the date of receipt (calculated as if the definition of
the Closing Sale Price relates to such securities rather than to Common
Stock).
(5) FAIR VALUE DEFINED. The fair value of any
consideration other than cash or securities will be determined jointly by the
Corporation and the holders of a majority of the Preferred Stock then
outstanding. If such parties are unable to reach agreement within ten (10)
business days after the occurrence of an event requiring valuation (the
"VALUATION EVENT"), the fair value of such consideration will be determined
within five (5) business days after the tenth (10th) business day following
the Valuation Event by an independent, reputable appraiser selected by the
Corporation. The determination of such appraiser shall be binding upon all
parties absent manifest error.
(6) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto,
the Options will be deemed to have been issued for a consideration of $.01.
(7) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by
or for the account of the Corporation, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock.
(8) RECORD DATE. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities, or (b) to subscribe for or purchase
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Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, for purposes of
determining the voting rights of the holders of Preferred Stock.
(b) ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION
OF COMMON STOCK.
(i) SUBDIVISIONS. If the Corporation at any time subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or
more classes of its outstanding shares of Common Stock into a greater number
of shares, thereafter, when any calculation is to be made of the number of
shares of Common Stock to be received for the Preferred Stock, the number of
shares of Preferred Stock shall be multiplied by the following fraction (in
addition to the Series A Conversion Rate or the Series B Conversion Rate, and
any adjustment in Section 4(a) as applicable): the number of shares which one
share of Common Stock prior to the subdivision was converted into upon the
subdivision, divided by one share of Common Stock.
(ii) COMBINATIONS. If the Corporation at any time combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
thereafter,, when any calculation is to be made of the number of shares of
Common Stock to be received for the Preferred Stock, the number of shares of
Preferred Stock shall be multiplied by the following fraction (in addition to
the Series A Conversion Rate or the Series B Conversion Rate, and any
adjustment in Section 4(a) as applicable): one share of Common Stock divided
by the number of shares which one share of Common Stock prior to the
combination was converted into upon the combination.
(c) CERTAIN EVENTS. If any event occurs of the type contemplated
to trigger an adjustment to the Series A Conversion Price or Series B
Conversion Price, as applicable, by the provisions of this Section 4, but
which event is not expressly provided for hereunder (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or other rights with equity features), then the Corporation's Board shall
make an appropriate adjustment in the applicable Conversion Price so as to
protect the rights of the holders of the Preferred Stock; provided, however,
that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 4.
5. NOTICES. Any notice required to be delivered pursuant to the terms
of this Certificate of Designations shall be delivered, unless otherwise
provided in this Certificate of Designations, in accordance with the terms,
and subject to the notice provisions of, the Securities Purchase Agreement.
(a) EVENTS. The Corporation will provide written notice to each
holder of the Preferred Stock at least twenty (20) days prior to the date on
which the Corporation closes its books or takes a record (i) with respect to
any dividend or distribution upon the Common Stock, (II) with respect to any
pro rata subscription offer to holders of Common Stock, or (III) for
determining rights to vote with respect to any Substantive Change,
dissolution or liquidation, provided, however that in no event shall such
notice be provided to such holder prior to such information being made known
to the public.
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(b) SUBSTANTIVE CHANGES. The Corporation will provide written
notice to each holder of the Preferred Stock at least twenty (20) days prior
to the date on which any Substantive Change, dissolution or liquidation will
take place, provided, however that in no event shall such notice be provided
to such holder prior to such information being made known to the public.
(c) DOCUMENTS. The Corporation will provide each holder of the
Preferred Stock with the following documents:
(i) monthly, quarterly and annual reports including variances
between planned and actual financial results; and
(ii) audited annual financial statements together with an
annual report, not later than ninety (90) days after the end of the fiscal
year of the Corporation.
(d) CONVERSION NOTICE. The holder of Preferred Stock will provide
written notice to the Corporation prior to exercising the conversion rights
specified in Section 3 hereof, as provided in Section 7 below.
6. PURCHASE RIGHTS. If at any time after the Issuance Date the
Corporation grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then
the holders of the Preferred Stock will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares
of Common Stock acquirable upon complete conversion of the Preferred Stock
(without taking into account any limitations or restrictions on the timing or
amount of conversions) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of the Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
7. MECHANICS OF CONVERSION.
(a) HOLDER'S DELIVERY REQUIREMENTS. To convert Preferred Stock
into full shares of Common Stock on any date (the "CONVERSION DATE"), the
holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m. Eastern Time, on such date, a copy of a
fully executed notice of conversion in the form attached hereto as EXHIBIT A
(the "CONVERSION NOTICE") to the Corporation and its designated transfer
agent (the "TRANSFER AGENT"), and (B) surrender to a common carrier, for
delivery to the Corporation or the Transfer Agent as soon as practicable
following such date, the original certificate(s) representing the Preferred
Stock being converted (or an indemnification undertaking with respect to such
shares in the case of their loss, theft or destruction) (the "PREFERRED STOCK
CERTIFICATE(S)") and the originally executed Conversion Notice. The
Preferred Stock shall be deemed to have been converted to Common Stock on the
Conversion Date.
(b) CORPORATION'S RESPONSE. Within forty-eight (48) hours of
receipt by the Corporation of a facsimile copy of a Conversion Notice, the
Corporation shall send, via facsimile, a confirmation of receipt of such
Conversion Notice to such holder. Upon receipt by the Corporation or the
Transfer Agent of the Preferred Stock Certificate(s) to be converted pursuant
to a Conversion
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Notice, together with the originally executed Conversion Notice, the
Corporation or the Transfer Agent (as applicable) shall, within the later of
one (1) business day after receipt of the Preferred Stock Certificates and
two (2) days after receipt of the Conversion Notice, (i) issue and surrender
to a common carrier for overnight delivery to the address specified in the
Conversion Notice, a certificate, registered in the name of the holder or its
designee, for the number of shares of Common Stock to which the holder shall
be entitled, or (II) credit such aggregate number of shares of Common Stock
to which the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Corporation. If the number of
shares of Preferred Stock represented by the Preferred Stock Certificate(s)
submitted for conversion is greater than the number of Preferred Stock being
converted, then the Corporation or Transfer Agent, as the case may be, shall,
as soon as practicable and in no event later than three business days after
receipt of the Preferred Stock Certificate(s) and at its own expense, issue
and deliver to the holder a new Preferred Stock Certificate representing the
number of Preferred Stock not converted.
(c) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the arithmetic calculation of the Series A Conversion Rate
or the Series B Conversion Rate, the Corporation shall promptly issue to the
holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder
via facsimile within two (2) business days of receipt of such holder's
Conversion Notice. If such holder and the Corporation are unable to agree
upon the determination of the Closing Sale Price or applicable Conversion
Rate within one (1) business day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Corporation shall within
one (1) business day submit via facsimile the disputed arithmetic calculation
of such Closing Sale Price or Conversion Rate to an independent, outside
accountant mutually agreed upon by the Corporation and a majority of the
holders of the Preferred Stock. If the Corporation cannot agree with the
holders of the Preferred Stock upon one accountant, then an accountant chosen
by the Corporation and an accountant chosen by the holders of the Preferred
Stock shall choose a third, independent, outside accountant who shall make
the disputed determinations or calculation and notify the Corporation and the
holder of the results no later than forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such investment bank's
or accountant's determination or calculation, as the case may be, shall be
binding upon all parties absent manifest error.
(d) RECORD HOLDER. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of Preferred Stock shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(e) CORPORATION'S FAILURE TO CONVERT. If within five (5) business
days after the Corporation's or the Transfer Agent's receipt of the Preferred
Stock Certificates to be converted and the Conversion Notice the Corporation
shall fail (1) to issue a certificate for the number of shares of Common
Stock to which a holder is entitled or to credit the holder's balance account
with The Depository Trust Corporation for such number of shares of Common
Stock to which the holder is entitled upon such holder's conversion of the
Preferred Stock, or (2) to issue a new Preferred Stock Certificate
representing the number of shares of Preferred Stock to which such holder is
entitled, pursuant to Section 7(b) in addition to all other available
remedies which such holder may pursue hereunder and under the Purchase
Agreement, the Corporation shall pay additional damages to such holder on
each date after such fifth (5th) business day that such conversion or
delivery of such
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Preferred Stock Certificates, as the case may be, is not timely effected in
an amount equal to 0.5% of the product of (x) the sum of the number of shares
of Common Stock not issued to the holder on a timely basis pursuant to
Section 7(b) and to which such holder is entitled and, in the event the
Corporation has failed to deliver a Preferred Stock Certificate to the holder
on a timely basis pursuant to Section 7(b) the number of shares of Common
Stock issuable upon conversion of the Preferred Stock represented by such
Preferred Stock Certificate as of the last possible date which the
Corporation could have issued such Preferred Stock Certificate to such holder
without violating Section 7(b); and (y) the Closing Sale Price of the Common
Stock on the last possible date which the Corporation could have issued such
Common Stock and the Preferred Stock Certificate, as the case may be, to such
holder without violating Section 7(b).
(f) MANDATORY CONVERSION. If any Preferred Stock remain
outstanding on the fifth (5th) anniversary after the Issuance Date, then all
such Preferred Stock shall be automatically converted as of such date as if
the holders of such Preferred Stock had given a Conversion Notice under
Section 3 and in accordance with this Section 7 on such fifth (5th)
anniversary. All holders of Preferred Stock shall thereupon surrender all
Preferred Stock Certificates, duly endorsed for cancellation, to the
Corporation or the Transfer Agent, provided that the Corporation has complied
with its obligations under this Section 7.
(g) PRO-RATA CONVERSION. In the event the Corporation receives a
Conversion Notice from more than one holder of Preferred Stock on the same
day and the Corporation is able to convert some, but not all, of the
Preferred Stock pursuant to this Section 7, the Corporation shall convert
from each holder of Preferred Stock electing to have Preferred Stock
converted at such time an amount equal to such holder's pro-rata amount
(based on the number of Preferred Stock held by such holder relative to the
number of Preferred Stock outstanding) of all Preferred Stock being converted
at such time.
(h) FRACTIONAL SHARES. The Corporation shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more
than one Preferred Share by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction of a
share of Common Stock, the Corporation shall round such fraction of a share
of Common Stock up or down to the nearest whole share.
(i) TAXES. The Corporation shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of shares of
Common Stock upon the conversion of the Preferred Stock.
(j) RESERVATION OF SHARES. The Corporation shall, so long as any
of the shares of Preferred Stock are outstanding, reserve and keep available
out of its authorized and unused Common Stock, solely for the purpose of
effecting the conversion of the Preferred Stock, such number of shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Stock then outstanding (without regard to
any limitations on conversions); provided that the number of shares of Common
Stock so reserved shall at no time be less than 150% of the number of shares
of Common Stock for which the shares of Preferred Stock are at any time
convertible. The initial number of shares of Common Stock reserved for
conversions of the Preferred Stock and each increase in the number of shares
so reserved shall be allocated pro rata among the holders of the Preferred
Stock based on the number of Preferred Stock held by each holder at the time
of issuance of the Preferred Stock or increase in the number of reserved
shares, as the case may be. In the event a holder shall sell or otherwise
transfer any of such holder's Preferred Stock, each
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transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common
Stock reserved and which remain allocated to any person or entity which does
not hold any Preferred Stock shall be allocated to the remaining holders of
Preferred Stock, pro rata based on the number of shares of Preferred Stock
then held by such holder.
(k) LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding
any other provision herein, the Corporation shall not be obligated to issue
any shares of Common Stock upon conversion of the Preferred Stock if the
issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Corporation may issue upon Conversion of the Preferred
Stock (the "EXCHANGE CAP") without breaching the Company's obligations under
the rules or regulations of the American Stock Exchange, except that such
limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by applicable rules and regulations
of the American Stock Exchange (or if the American Stock Exchange is not the
principal securities exchange for the Common Stock, then the principal
securities exchange) for issuances of Common Stock in excess of such amount
or (ii) obtains a written opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory
to the holders of a majority of the Preferred Stock then outstanding. Until
such approval or written opinion is obtained, no holder of Preferred Stock
pursuant to the Purchase Agreement shall be issued, upon conversion of
Preferred Stock, shares of Common Stock in an amount greater than the product
of (i) the Exchange Cap amount multiplied by (ii) a fraction, the numerator
of which is the number of shares of Preferred Stock issued to such holder
pursuant to the Purchase Agreement and the denominator of which is the
aggregate amount of all the Preferred Stock issued to the holders pursuant to
the Purchase Agreement (the "CAP ALLOCATION AMOUNT"). In the event that any
holder shall sell or otherwise transfer any of such holder's Preferred Stock,
the transferee shall be allocated a pro rata portion of such holder's Cap
Allocation Amount. In the event that any holder of Preferred Stock shall
convert all of such holder's Preferred Stock into a number of shares of
Common Stock which, in the aggregate, is less than such holder's Cap
Allocation Amount, then the difference between such holder's Cap Allocation
Amount and the number of shares of Common Stock actually issued to such
holder shall be allocated to the respective Cap Allocation Amounts of the
remaining holders of Preferred Stock on a pro rata basis in proportion to the
number of shares of Preferred Stock then held by each such holder.
8. VOTING RIGHTS. Except as otherwise required by law or as otherwise
explicitly provided herein, the holders of Preferred Stock and the holders of
Common Stock shall be entitled to notice of any shareholders' meeting and to
vote together as a single class upon any matter submitted to the shareholders
for a vote on the following basis:
(a) COMMON STOCK. Each share of Common Stock issued and
outstanding shall have one vote.
(b) PREFERRED STOCK. Each holder of Preferred Stock shall have
the number of votes equal to the number of shares of Common Stock into which
the Preferred Stock then held by such holder is convertible, as adjusted from
time to time under Section 4 hereof.
(c) DIRECTORS. Holders of Preferred Stock shall have the
exclusive right to elect two (2) of the five (5) directors to the Board, and
shall have such other voting rights as are expressly provided in this
Certificate of Designations. The Corporation shall provide the members of
the Board elected hereunder with (a) all written accounts prepared by
management; (b) the annual budget of the Corporation prepared for the next
succeeding fiscal year; (c) notification of any
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litigation or claim that may materially adversely affect the financial
affairs or business prospects of the Corporation; and (d) written or
electronic copies of all filings the Corporation makes with the Securities
and Exchange Commission or the American Stock Exchange (or if the American
Stock Exchange is not the principal securities exchange for the Common Stock,
then such principal securities exchange).
9. LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the Preferred Stock shall be entitled to receive
in cash out of the assets of the Corporation, whether from capital or from
earnings available for distribution to its stockholders (the "PREFERRED
FUNDS"), before any amount shall be paid to the holders of any of the capital
stock of the Corporation of any class junior in rank to the Preferred Stock
in respect of the preferences as to the distributions and payments on the
liquidation, dissolution and winding up of the Corporation, an amount per
share of Preferred Share equal to the Applicable Price plus all accrued but
unpaid dividends (such sum being referred to as the "LIQUIDATION VALUE");
provided that, if the Preferred Funds are insufficient to pay the full amount
due to the holders of Preferred Stock and holders of shares of other classes
or series of preferred stock of the Corporation that are of equal rank with
the Preferred Stock as to payments of Preferred Funds (the "PARI PASSU
SHARES"), then each holder of Preferred Stock and Pari Passu Shares shall
receive a percentage of the Preferred Funds equal to the full amount of
Preferred Funds payable to such holder as a liquidation preference, in
accordance with their respective Certificate of Designations, Preferences and
Rights, as a percentage of the full amount of Preferred Funds payable to all
holders of Preferred Stock and Pari Passu Shares.
The following events shall be deemed voluntary liquidation events
for purpose of this Section 9: (a) the purchase or redemption by the
Corporation of stock of any class, in any manner permitted by law, (b) the
consolidation or merger of the Corporation with or into any other Person, or
where more than 50% of the securities of the Corporation then outstanding do
not remain outstanding after such transaction, (c) the sale or transfer by
the Corporation of more than 50% of its assets, or (d) the sale or transfer
other than by the holders of Preferred Stock of more than 50% of the voting
power of the Corporation.
10. PREFERRED RANK; PARTICIPATION.
(a) RANK. All shares of Common Stock shall be of junior rank to
all Preferred Stock in respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Corporation.
The rights of the shares of Common Stock shall be subject to the preferences
and relative rights of the Preferred Stock.
(b) CHANGES TO PREFERENCES. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Stock, the Corporation shall not hereafter authorize or
issue additional or other capital stock that is of senior rank to the
Preferred Stock in respect of the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Corporation.
Without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Stock, the Corporation
shall not hereafter authorize or make any amendment to the Corporation's
Certificate of Incorporation or bylaws, or file any resolution of the Board
with the Secretary of State of the State of Delaware containing any
provisions, which would adversely affect or otherwise impair the rights
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or relative priority of the holders of the Preferred Stock relative to the
holders of the Common Stock or the holders of any other class of capital
stock (including, but not limited to any increase in the number of authorized
shares of the Corporation or in the number of shares issuable under any plan
to grant stock to employees, officers or directors of the Corporation).
(c) PAYMENTS. Subject to the rights of the holders, if any, of
the Pari Passu Shares, the holders of the Preferred Stock shall, as holders
of Preferred Stock, be entitled to such dividends paid and distributions made
to the holders of Common Stock to the same extent as if such holders of
Preferred Stock had converted the Preferred Stock into Common Stock (without
regard to any limitations on conversion herein or elsewhere) and had held
such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.
11. VOTE TO CHANGE THE TERMS OF OR ISSUE PREFERRED STOCK. So long as
any of the Preferred Stock remains outstanding, the Corporation, and any
subsidiary of the Corporation, shall not, without first obtaining the
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3)
of the then outstanding Preferred Stock:
(a) change this Certificate of Designations or the Corporation's
Certificate of Incorporation to amend, alter, change or repeal any of the
powers, designations, preferences and rights of the Preferred Stock;
(b) issue Preferred Stock other than pursuant to the Securities
Purchase Agreement;
(c) approve the merger of the Corporation with and into another
legal entity, or any reorganization of the Corporation or the sale of
substantially all of the stock or assets of the Corporation, or acquire all
or substantially all of the capital stock or property or another entity;
(d) pay any dividends or make any other distribution or payment on
account of or in redemption, retirement or purchase of any capital stock;
(e) make any change in the size or number of members of the Board
(currently five (5)) or the rights to elect members of the Board; or
(f) incur any debt of greater than $50,000, aggregating the
principal and interest due under the terms of such debt.
12. LOST OR STOLEN CERTIFICATES. Upon receipt by the Corporation of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Corporation and, in the case of mutilation,
upon surrender and cancellation of the Preferred Stock Certificate(s), the
Corporation shall execute and deliver new preferred stock certificate(s) of
like tenor and date; provided, however, the Corporation shall not be
obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Corporation to convert such Preferred Stock
into Common Stock.
-12-
<PAGE>
13. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under
this Certificate of Designations, at law or in equity (including a decree of
specific performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance with the provisions giving rise
to such remedy and nothing herein shall limit a holder's right to pursue
actual damages for any failure by the Corporation to comply with the terms of
this Certificate of Designations. Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the holder thereof and shall
not, except as expressly provided herein, be subject to any other obligation
of the Corporation (or the performance thereof). The Corporation
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the holders of the Preferred Stock and that the remedy at
law for any such breach may be inadequate. The Corporation therefore agrees
that, in the event of any such breach or threatened breach, the holders of
the Preferred Stock shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
14. SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designations shall limit or modify
any more general provision contained herein. This Certificate of
Designations shall be deemed to be jointly drafted by the Corporation and all
holders of Preferred Stock notwithstanding its adoption by the Board and
shall not be construed against any person as the drafter hereof.
15. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of a holder of Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of
the Corporation this 18th day of December, 1998.
PC QUOTE, INC.
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
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<PAGE>
EXHIBIT A
P.C. QUOTE, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights of Series A and Series B Convertible Preferred Stock (the "CERTIFICATE
OF DESIGNATIONS"). In accordance with and pursuant to the Certificate of
Designations, the undersigned hereby elects to convert the number of shares
of Series __ Convertible Preferred Stock, par value $0.001 per share (the
"PREFERRED STOCK"), of P.C. Quote, Inc., a Delaware corporation (the
"CORPORATION"), as indicated below into shares of Common Stock, par value
$0.001 per share (the "COMMON STOCK"), of the Corporation, by tendering the
stock certificate(s) representing the share(s) of Preferred Stock specified
below as of the date specified below.
Date of Conversion: _____________________________________________________
Number of Preferred Stock to be converted: _____________________________
Series of Preferred Stock to be converted: _____________________________
Stock certificate no(s). of Preferred Stock to be converted: ____________
Please confirm the following information:
Conversion Price: _______________________________________________________
Number of shares of Common Stock
to be issued: ___________________________________________________________
Please issue the Common Stock into which the Preferred Stock are being converted
and, if applicable, any check drawn on an account of the Corporation in the
following name and to the following address:
Issue to: ________________________________________________
________________________________________________
________________________________________________
________________________________________________
Facsimile Number: ________________________________________________
Authorization: ________________________________________________
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
Dated: ________________________________________________
Account Number:
(if electronic book entry transfer):___________________________________
Transaction Code Number
(if electronic book entry transfer):___________________________________
THIS NOTICE MUST BE DELIVERED TO CORPORATION AND TRANSFER AGENT
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Exhibit 4(an)
STOCK AND WARRANT PURCHASE AGREEMENT
BETWEEN
PC QUOTE, INC.
AND
HOWARD TODD HORBERG
DECEMBER 29, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S>
1. Definitions
2. Purchase and Sale of Shares and Warrant
3. Representations and Warranties of Buyer
(a) Buyer's Qualifications
(b) Authorization of Transaction
(c) Noncontravention
(d) Broker's Fees
(e) Investment
4. Representations and Warranties of Seller
(a) Authorization of Transaction
(b) Organization, Qualification, and Corporate Power
(c) Capitalization
(d) Noncontravention
(e) Brokers' Fees
(f) Title to Tangible Assets
(g) Financial Statements
(h) Tax Matters
(i) Real Property
(j) Intellectual Property
(k) Powers of Attorney
(l) Litigation
(m) Employee Benefits
(n) Absence of Certain Changes
(o) Patents, Trade Names, Trademarks, Etc.
(p) Insurance
(q) Environmental Protection
5. Pre-Closing Covenants
(a) General
(b) Notices and Consents
(c) Operation of Business
(d) Full Access
(e) Notice of Developments
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Registration Rights
(d) Negative Covenants
7. Additional Conditions Precedent
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(a) Conditions to Obligation of Buyer
(b) Conditions to Obligation of Sellers
8. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties
(b) Indemnification Provisions for Benefit of Buyer
(c) Indemnification Provisions for Benefit of Seller
(d) Matters Involving Third Parties
(e) Determination of Adverse Consequences
9. Termination
(a) Termination of Agreement
(b) Effect of Termination
10. Miscellaneous
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Amendments and Waivers
(j) Severability
(k) Expenses
(l) Construction
(m) Incorporation of Exhibits, Annexes, and Schedules
(n) The Closing
</TABLE>
ii
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STOCK AND WARRANT PURCHASE AGREEMENT
Agreement entered into as of December 29, 1998, by and between Howard
Todd Horberg (the "Buyer") and PC Quote, Inc., a Delaware corporation (the
"Seller"). Buyer and Seller are referred to collectively herein as the
"Parties."
This Agreement contemplates a transaction in which Buyer will purchase
from Seller, and Seller will sell to Buyer, an aggregate of 240,000 shares of
Seller's common stock, par value $0.001 per share (the "Common Stock"), for
an aggregate purchase price of Three Hundred Seventy-five Thousand Dollars
($375,000).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504.
"BUYER" has the meaning set forth in the preface above.
"CLOSING DATE" shall mean December 30, 1998 or such other time as the
parties may mutually agree.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Seller that is not already generally available to
the public.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4g below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
<PAGE>
"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8 below.
"KNOWLEDGE" means actual knowledge without independent investigation.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity (or any
department, agency, or political subdivision thereof) or any entity similar
to any of the foregoing.
"PURCHASE PRICE" has the meaning set forth in Section 2 below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SHARES" means Seller's shares of Common Stock.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8 below.
2. PURCHASE AND SALE OF SHARES AND Warrant
2.1 PURCHASE AND SALE OF SHARES. On the Closing Date, in the manner
set forth in this Section 2, upon the terms set forth in this Agreement,
Seller will sell, transfer and deliver to Buyer, and Buyer will purchase from
Seller, 240,000 Shares for an aggregate purchase price of Three Hundred
Seventy-five Thousand Dollars ($375,000) (the "Purchase Price"), in all cases
free and clear of all interests, liens, charges, encumbrances, equities,
claims, assessments and options of whatever nature.
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<PAGE>
(a) On the Closing Date, as a condition precedent to such closing, Seller
shall deliver to Buyer stock certificates representing an aggregate of 240,000
Shares in such names and denominations as buyer shall instruct Seller.
(b) Buyer shall deliver to Seller a certified check or wire transfer in
the amount of $375,000.
2.2 Purchase and Sale of Warrant. Subject to the terms and conditions of
this Agreement, the Company shall issue to Buyer a warrant (the "Warrant") to
purchase 120,000 Shares at an exercise price of $1.875 per Share, which Warrant
shall be substantially in the form attached hereto as EXHIBIT A.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing Date (as though made on and as of such Closing
Date as if such Closing Date were substituted for the date of this Agreement
throughout this Section 3).
(a) BUYER'S QUALIFICATIONS. Buyer (a) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in Seller and (b) has had
the opportunity to ask questions of, and receive answers from, Seller and
its management concerning the terms and conditions of the offering of the
Shares hereunder and to obtain additional information; and (c) is an
Accredited Investor.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms. Buyer is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject or (B)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer
is a party or by which it is bound or to which any of its assets is
subject.
(d) BROKERS' FEES. Buyer does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Seller could
become liable or obligated.
(e) INVESTMENT. Buyer is acquiring the Shares for investment
purposes and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that the statements contained in this Section 4 are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing Date (as though made on and as of such Closing
Date as if such Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments to be executed and delivered by Seller pursuant to this Agreement
and the transactions contemplated hereby and to perform its obligations
hereunder and thereunder. This Agreement and the other documents and
instruments to be executed and delivered by Seller
3
<PAGE>
pursuant to this Agreement and the transactions contemplated hereby
constitute the valid and legally binding obligations of Seller enforceable in
accordance with their respective terms.
(b) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Seller is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would
not have a material adverse effect on the condition (financial or otherwise)
of Seller. Seller has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties and
assets owned and used by it. Seller has no subsidiaries.
(c) CAPITALIZATION. The entire authorized capital stock of Seller
consists of 50,000,000 Shares, of which 13,477,462 Shares are issued and
outstanding and no Shares are held in treasury; and 5,000,000 Shares of
undesignated Preferred Stock, of which 19,075 and 28,791 shares designated as
Series A and Series B, respectively, Convertible Preferred Stock are
outstanding. All of the issued and outstanding Shares and Preferred Stock
have been duly authorized, are validly issued, fully paid, and nonassessable.
Except as set forth in Schedule 4(c) hereto, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require Seller to issue, sell, or otherwise cause to become outstanding
any of its capital stock. All such options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments and the Shares issuable upon exercise thereof have been duly
authorized, and when issued in accordance with their terms will be validly
issued, fully paid and non-assessable. There are no preemptive or first
refusal or similar rights binding on Seller to subscribe for or purchase from
Seller any Shares pursuant to any provisions of law, the Certificate of
Incorporation or By-laws of Seller or by agreement or otherwise. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Shares.
(d) NONCONTRAVENTION. Except as set forth in Schedule 4(d) hereto, to
the Knowledge of Seller, neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of
the Certificate of Incorporation or By-laws of Seller or (ii) conflict with,
result in breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which
Seller is bound or to which Seller or its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest
would not have a material adverse effect on the condition (financial or
otherwise) of Seller or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in Schedule
4(d) hereto, Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the condition (financial or otherwise) of Seller
or on the ability of the Parties to consummate the transactions contemplated
by this Agreement.
(e) BROKERS' FEES. Seller does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(f) TITLE TO TANGIBLE ASSETS. Seller has good title to, or a valid
leasehold interest in, the tangible assets it uses regularly in the conduct
of its businesses.
(g) FINANCIAL STATEMENTS. Attached hereto are copies of Seller's
annual report on Form 10-K for the year ended December 31, 1997 and its
Quarterly Report on Form 10-Q for each of the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998. Included in such reports are the
following financial statements (collectively the "Financial Statements"):
(i) audited consolidated balance sheets for the years ending December 31,
1997 and 1996 and statements of income, changes in stockholders' equity, and
cash flow as of and
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<PAGE>
for the years ended December 31, 1997, 1996 and 1995 for the Company; and
(ii) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998 (the "QUARTERLY FINANCIAL
STATEMENTS"). The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and present fairly the financial
condition of Seller as of such dates and the results of operations of Seller
for such periods; PROVIDED, HOWEVER, that the Quarterly Financial Statements
are subject to normal year-end adjustments and lack footnotes and other
presentation items.
(h) TAX MATTERS.
(i) Seller has filed all Income Tax Returns that it was required to
file, and has paid all Income Taxes shown thereon as owing, except where
the failure to file Income Tax Returns or to pay Income Taxes would not
have a material adverse effect on the condition (financial or otherwise) of
Seller.
(ii) Seller has not waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income
Tax assessment or deficiency.
(iii) Seller is not a party to any Income Tax allocation or
sharing agreement.
(i) REAL PROPERTY
Seller does not own any real property.
(j) INTELLECTUAL PROPERTY. Except as set forth in Schedule 4(j), the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
proprietary rights necessary for its business as now conducted without any
conflict with, or infringement of, the rights of others. The Company has not
received any communication alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights of any
other person or entity. The Company is not aware that any of its employees are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of the Company or that would
conflict with the Company's business. Neither the execution or delivery of this
Agreement, nor the carrying on of the Company's business as now conducted by the
employees of the Company, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant or instrument under which any such
employee is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company. To the
Company's knowledge, its officers and employees are not making improper use of
any confidential information or trade secrets of others, including those of any
former employer.
(k) POWERS OF ATTORNEY. Except as set forth in Schedule 4(k), there are
no outstanding powers of attorney executed on behalf of Seller.
(l) LITIGATION. Schedule 4(l) hereto sets forth each instance in which
Seller (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction, except where the
injunction, judgment, order, decree, ruling, action, suit, proceeding, hearing,
or investigation would not have a material adverse effect on the condition
(financial or otherwise), assets, liabilities, earnings or business of Seller.
5
<PAGE>
(m) Employee Benefits.
(i) Schedule 4(m) hereto lists each Employee Benefit Plan that is
sponsored, maintained or contributed to or required to be contributed to by
the Seller or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Seller would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Code,
except where the failure to comply would not have a material adverse
effect on the condition (financial or otherwise) of Seller.
(B) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(C) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
(D) Seller has made available to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(E) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted.
(F) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending, except where the action, suit, proceeding, hearing, or
investigation would not have a material adverse effect on the
condition (financial or otherwise) of Seller.
(G) Neither Seller nor any ERISA Affiliate has incurred any
liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(H) The aggregate withdrawal liability of Seller and any and all
ERISA Affiliates, computed as if a complete withdrawal by Seller and
such ERISA Affiliates had occurred under each Multiemployer Plan on
the date hereof, would not exceed $10,000.
(n) ABSENCE OF CERTAIN CHANGES. With respect to the business of Seller,
except as and to the extent set forth in the Company's reports on Form 10-Q for
the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, since
December 31, 1997, Seller has not:
(i) suffered any material adverse change in its condition (financial
or otherwise), assets, liabilities (absolute, accrued, contingent or
otherwise), business, prospects or operations, or experienced any labor
difficulty, or suffered any casualty loss (whether or not insured);
6
<PAGE>
(ii) paid, discharged or satisfied any claim, lien, encumbrance or
liability (whether absolute, accrued, contingent or otherwise and whether
due or to become due), other than claims, liens, encumbrances or
liabilities (i) which are reflected or reserved against in the Financial
Statements, and which were paid, discharged or satisfied since the date of
the most recent Financial Statements in the ordinary course of business and
consistent with past practice, or (ii) which were incurred and paid,
discharged or satisfied since the date of the most recent Financial
Statements in the ordinary course of business and consistent with past
practice;
(iii) permitted or allowed any of the properties or assets, real,
principal or mixed, tangible or intangible, of or used by Seller, to be
mortgaged, pledged or subjected to any lien or encumbrance;
(iv) written down or written up the value of any inventory, or written
off as uncollectible any notes or accounts receivable or any portion
thereof, except for write-downs, write-ups and write-offs in the ordinary
course of business consistent with past practice;
(v) cancelled any other debts or claims, or waived any rights of
substantial value, or sold, transferred or otherwise disposed of any of the
properties or assets, real, personal or mixed, tangible or intangible,
except in the ordinary course of business and consistent with past
practice;
(vi) disposed of or permitted to lapse any patent, trademark, assumed
name, service mark, trade name or copyright application or license or under
which Seller has any right or license, or disposed of or disclosed to any
person any trade secret, formula, process or know-how of Seller or under
which Seller has any right or license;
(vii) granted any general uniform increase in the compensation of
employees (including, without limitation, any increase or change pursuant
to any bonus, pension, profit-sharing, retirement or other plan or
commitment);
(viii) made any change in any method of accounting or accounting
practice or policy; made any loan or advance (other than advances to
employees in the ordinary course of business or travel and expenses
disbursement in accordance with the past practice, but not in excess of
$10,000 at any one time outstanding) to any person who is an officer,
director or employee of Seller;
(ix) declared or paid any dividend or purchased any of its outstanding
shares of capital stock;
(x) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 4(n);
(o) INSURANCE. The Company holds and maintains valid policies covering
such casualties and contingencies and of such types and amounts as is customary
for companies similarly situated. The Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a material
adverse effect.
(q) ENVIRONMENTAL PROTECTION.
In connection with its business operations, Seller has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes; to the best of its knowledge after
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due investigation, Seller is in compliance in all material respects with all
terms and conditions of the required permits, licenses and authorizations,
and is also in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand latter
issued, entered, promulgated or approved thereunder. Seller is not aware of,
and has not received notice of, past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the omission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing Date or
(ii) termination of this Agreement.
(a) GENERAL. Each of the Parties will use his or its reasonable best
efforts to take any action and to do all things reasonably necessary in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions
precedent to closing.
(b) NOTICES AND CONSENTS. Each party will give any notices to third
parties, and will use its reasonable best efforts to obtain any third party
consents, that Buyer reasonably may request in connection with the matters
referred to in Sections 3 and 4 above.
(c) OPERATION OF BUSINESS. Except for transactions contemplated
hereby, Seller will not engage in, take any action, or enter into any
transaction outside the Ordinary Course of Business.
(d) FULL ACCESS. Seller will permit representatives of Buyer to have
full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Seller, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents
of or pertaining to Seller. Buyer will treat and hold as such any
Confidential Information received from Seller in the course of the reviews
contemplated by this Section 5(d), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, will return to Seller all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession.
(e) NOTICE OF DEVELOPMENTS. Seller shall notify Buyer of any
development causing a breach of any of the representations and warranties in
Section 4 above. Unless Buyer have the right to terminate this Agreement
pursuant to Section 9(a)(ii) below by reason of the development and exercise
that right within the period referred to in Section 9(a)(ii) below, the
written notice pursuant to this Section 5(e)(i) will be deemed to have
amended the relevant Schedule, if any, to have qualified the representations
and warranties contained in Section 4 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing.
(a) GENERAL. In case at any time after any Closing Date any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting Party is entitled to indemnification therefor under Section 8
below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to any Closing Date involving
Seller, each of the other Parties shall cooperate with him or it and his or
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8
below).
(c) REGISTRATION RIGHTS. Buyer shall be afforded such registration
rights as are set forth in the Registration Rights Agreement, substantially
in the form attached hereto as EXHIBIT B.
(d) NEGATIVE COVENANTS. Seller covenants and agrees that, until the
Closing Date, Seller will not do any of the following without the prior
written consent of Buyer, which shall not be unreasonably withheld:
(i) DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose
of (each of the foregoing, a "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 Seller's services; or (ii) Transfers of
worn-out or obsolete equipment.
(ii) MERGERS OR ACQUISITIONS. Merge or consolidate with or into any
other business organization, or acquire all or substantially all of the
capital stock or property of another Person.
(iii) DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or
purchase of any capital stock except with respect to any obligations in
existence as of the date hereof and set forth on Schedule 6(h) hereto.
(iv) TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Seller
except for transactions involving agreements that are in place at the date
hereof or that are in the ordinary course of Seller's business, upon fair
and reasonable terms that are no less favorable to Seller than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7. ADDITIONAL CONDITIONS PRECEDENT.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(i) the representations and warranties of Seller set forth in Section
4 above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date ;
(iii) there shall not be any injunction, judgment, order, or
decree enjoining the transactions contemplated by this Agreement;
(iv) all actions to be taken by Seller in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 7(a) upon execution of a
writing so stating at or prior to the Closing Date.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
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(i) the representations and warranties of Buyer set forth in Section
3 above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing Date;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) all actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to Seller.
Seller may waive any condition specified in this Section 7(b) if it executes a
writing so stating at or prior to the Closing Date.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Buyer and Seller contained in Section 3 and
Section 4, respectively above, shall survive this Agreement and continue in full
force and effect for a period of one year thereafter.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the event Seller
breaches any of its representations, warranties, or covenants contained herein,
it shall so notify Buyer and provided that Buyer makes a written claim for
indemnification against Seller pursuant to Section 10 below within such survival
period, then Seller agrees to indemnify Buyer from and against the entirety of
any Adverse Consequences Buyer shall suffer through and after the date of the
claim for indemnification caused by the breach.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event Buyer
breaches any of its representations, warranties, or covenants contained herein,
it shall so notify Seller and provided that Seller makes a written claim for
indemnification against Buyer pursuant to Section 10 below within such survival
period, then buyer agrees to indemnify Seller from and against the entirety of
any Adverse Consequences Seller shall suffer through and after the date of the
claim for indemnification caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party
shall promptly (and in any event within [five business days] after
receiving notice of the Third Party Claim) notify each Indemnifying Party
thereof in writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party; provided,
HOWEVER, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense
of the Third Party Claim as provided in Section 8(c)(ii) above, however,
the Indemnified Party may defend against the Third Party Claim in any
manner he or it reasonably may deem appropriate.
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(iv) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of each of the Indemnifying
Parties, not to be unreasonably withheld.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage in determining
Adverse Consequences for purposes of this Section 8. All indemnification
payments under this Section 8 shall be deemed adjustments to the Purchase Price.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement as
provided below
(i) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing Date;
(ii) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing Date in the event (A) Seller has
given Buyer any notice pursuant to Section 5(e) above and (B) the
development that is the subject of the notice has had, or reasonably
believes will have, a material adverse effect upon the condition (financial
or otherwise) of Seller;
(iii) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing Date (A) in the event Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Buyer have notified Seller of the
breach, and the breach has continued without cure for a period of 10 days
after the notice of breach or (B) if the Closing shall not have occurred on
or before December 30, 1998, by reason of the failure of any condition
precedent Section 7 hereof (unless the failure results primarily from any
breach by Buyer of any material representation, warranty, or covenant
contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing Date (A) in the event either Buyer
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, Seller has notified each Buyer
of the breach, and the breach has continued without cure for a period of 10
days after the notice of breach or (B) if the Closing shall not have
occurred on or before December 30, 1998, by reason of the failure of any
condition precedent Section 7 hereof (unless the failure results primarily
from Seller breaching any material representation, warranty, or covenant
contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 9(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 5(d) above shall survive
termination.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing Date, without the prior written approval of
Buyer and Seller; PROVIDED, HOWEVER, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the other.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Seller:
P.C. Quote, Inc.
300 South Wacker, Suite 300
Chicago, Illinois 60606
Attn: Jim Porter
If to Buyer:
Howard Todd Horberg
100 Sheridan Road
Highland Park, Illinois 60035
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions
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hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) EXPENSES. Each Party bears its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) THE CLOSING. The closing of the transactions contemplated by this
Agreement shall take place at the offices of the Company in Chicago, Illinois,
commencing at 3:00 p.m. local time on the Closing Date or on such other time,
date and location mutually agreed by the Parties.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
PC QUOTE, INC.
By:__________________________ By:_______________________________
Name: John E. Juska Name: Howard Todd Horberg
Title: Chief Financial Officer
Seller Buyer
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EXHIBIT (ao)
Common Stock Purchase Warrant
120,000 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 December 30, 2001
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Howard Todd Horberg (herein after
referred to as "Purchaser") is entitled to purchase up to One Hundred Twenty
Thousand (120,000) Shares of Common Stock of PC QUOTE, INC., a Delaware
corporation, at a price of $1.875 per Share (the "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.
(d) "Common Stock" shall mean shares of the Company's presently or
subsequently authorized common stock, par value $0.001, and any stock for
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 December 30, 1998.
(g) "Exercise Date" shall mean the effective date of the delivery
of the Notice of Exercise pursuant to Section 4 below.
(h) "Holder" shall mean any person who shall at the time be the
registered holder of this Warrant.
(i) "Shares" shall mean shares of Common Stock.
<PAGE>
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is
issued in consideration of the purchase price paid by Purchaser to the
Company as set forth in that certain Stock and Warrant Purchase Agreement
dated as of the date hereof and made and entered into by and between the
Company and Purchaser.
3. TERM. The purchase right represented by this Warrant is
exercisable only during the period commencing upon the Date of Grant and
ending on December 30, 2001.
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
cashier's or certified 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.
(c) 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 five 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.
(d) 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.
(e) 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 non-assessable, 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).
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5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of
Shares 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
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) ADJUSTMENTS TO WARRANT PRICE. Whenever the number of Shares
purchasable upon exercise of this 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.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish 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.
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(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.
7. NOTICES; INFORMATION; REGISTRATION.
(a) NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to effect any reclassification or recapitalization of Common Stock; (b)
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 (c) 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 at least 14 days prior written notice of the
date on which a record will be taken for such action.
(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.
(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
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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 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.
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<PAGE>
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: December 30, 1998. PC QUOTE, INC., a Delaware corporation
By:________________________________________
John E. Juska, Chief Financial Officer
By:________________________________________
Alicia VanDeVeer, Assistant Secretary
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<PAGE>
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 cashier's or certified check drawn on a United
States bank and for United States funds made payable to the
Company in the amount of $_____________; or
[ ] 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.
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 ID No.:_____________________
HOLDER:
________________________________________________
By:________________________________________
Date: _____________________ Title:___________________________
<PAGE>
EXHIBIT B
STATEMENT OF REGISTRATION RIGHTS
1. DEFINITIONS. For purposes of the Stock and Warrant Purchase
Agreement 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 in connection with the Agreement and shares issued or issuable
upon exercise of the Warrant;
(c) The term "Holder" means the original holder of the Shares and
Warrant and any transferee of the Warrant; and
(d) The term "Warrant" means the original Warrant issued in
connection with the Stock and Warrant Purchase Agreement, dated as of
December 29, 1998, between the Company, as Seller, and Howard Todd Horberg,
as Buyer, and all Warrants issued as a result of the transfer of such
original Warrant.
2. COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes at any time before December 30, 2001 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 for its own account 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
December 30, 2001, 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 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
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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 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
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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 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.
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 herein 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 n 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 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
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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 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 of at least
120,000 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
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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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EXHIBIT (ap)
STOCK AND WARRANT PURCHASE AGREEMENT
BETWEEN
PC QUOTE, INC.
AND
STEVE LEVY
DECEMBER 29, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S>
1. Definitions
2. Purchase and Sale of Shares and Warrant
3. Representations and Warranties of Buyer
(a) Buyer's Qualifications
(b) Authorization of Transaction
(c) Noncontravention
(d) Broker's Fees
(e) Investment
4. Representations and Warranties of Seller
(a) Authorization of Transaction
(b) Organization, Qualification, and Corporate Power
(c) Capitalization
(d) Noncontravention
(e) Brokers' Fees
(f) Title to Tangible Assets
(g) Financial Statements
(h) Tax Matters
(i) Real Property
(j) Intellectual Property
(k) Powers of Attorney
(l) Litigation
(m) Employee Benefits
(n) Absence of Certain Changes
(o) Patents, Trade Names, Trademarks, Etc.
(p) Insurance
(q) Environmental Protection
5. Pre-Closing Covenants
(a) General
(b) Notices and Consents
(c) Operation of Business
(d) Full Access
(e) Notice of Developments
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Registration Rights
(d) Negative Covenants
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<C> <S>
7. Additional Conditions Precedent
(a) Conditions to Obligation of Buyer
(b) Conditions to Obligation of Sellers
8. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties
(b) Indemnification Provisions for Benefit of Buyer
(c) Indemnification Provisions for Benefit of Seller
(d) Matters Involving Third Parties
(e) Determination of Adverse Consequences
9. Termination
(a) Termination of Agreement
(b) Effect of Termination
10. Miscellaneous
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Amendments and Waivers
(j) Severability
(k) Expenses
(l) Construction
(m) Incorporation of Exhibits, Annexes, and Schedules
(n) The Closing
</TABLE>
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STOCK AND WARRANT PURCHASE AGREEMENT
Agreement entered into as of December 29, 1998, by and between Steve
Levy (the "Buyer") and PC Quote, Inc., a Delaware corporation (the "Seller").
Buyer and Seller are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
from Seller, and Seller will sell to Buyer, an aggregate of 240,000 shares of
Seller's common stock, par value $0.001 per share (the "Common Stock"), for
an aggregate purchase price of Three Hundred Seventy-five Thousand Dollars
($375,000).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504.
"BUYER" has the meaning set forth in the preface above.
"CLOSING DATE" shall mean December 30, 1998 or such other time as the
parties may mutually agree.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Seller that is not already generally available to
the public.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4g below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
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"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8 below.
"KNOWLEDGE" means actual knowledge without independent investigation.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity (or any
department, agency, or political subdivision thereof) or any entity similar
to any of the foregoing.
"PURCHASE PRICE" has the meaning set forth in Section 2 below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SHARES" means Seller's shares of Common Stock.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8 below.
3. PURCHASE AND SALE OF SHARES AND Warrant
3.1 PURCHASE AND SALE OF SHARES. On the Closing Date, in the manner
set forth in this Section 2, upon the terms set forth in this Agreement,
Seller will sell, transfer and deliver to Buyer, and Buyer will purchase from
Seller, 240,000 Shares for an aggregate purchase price of Three Hundred
Seventy-five Thousand Dollars ($375,000) (the "Purchase Price"), in all cases
free and clear of all interests, liens, charges, encumbrances, equities,
claims, assessments and options of whatever nature.
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(a) On the Closing Date, as a condition precedent to such closing,
Seller shall deliver to Buyer stock certificates representing an aggregate of
240,000 Shares in such names and denominations as buyer shall instruct Seller.
(b) Buyer shall deliver to Seller a certified check or wire transfer in
the amount of $375,000.
2.2 Purchase and Sale of Warrant. Subject to the terms and conditions
of this Agreement, the Company shall issue to Buyer a warrant (the "Warrant")
to purchase 120,000 Shares at an exercise price of $1.875 per Share, which
Warrant shall be substantially in the form attached hereto as EXHIBIT A.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made on and as of such
Closing Date as if such Closing Date were substituted for the date of this
Agreement throughout this Section 3).
(a) BUYER'S QUALIFICATIONS. Buyer (a) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in Seller and (b) has had
the opportunity to ask questions of, and receive answers from, Seller and
its management concerning the terms and conditions of the offering of the
Shares hereunder and to obtain additional information; and (c) is an
Accredited Investor.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms. Buyer is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject or (B)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer
is a party or by which it is bound or to which any of its assets is
subject.
(d) BROKERS' FEES. Buyer does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Seller could
become liable or obligated.
(e) INVESTMENT. Buyer is acquiring the Shares for investment
purposes and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that the statements contained in this Section 4 are true,
correct and complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made on and as of such
Closing Date as if such Closing Date were substituted for the date of this
Agreement throughout this Section 4).
(a) AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments to be executed and delivered by Seller pursuant to this Agreement
and the transactions contemplated hereby and to perform its obligations
hereunder and thereunder. This Agreement and the other documents and
instruments to be executed and delivered by Seller
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pursuant to this Agreement and the transactions contemplated hereby
constitute the valid and legally binding obligations of Seller enforceable in
accordance with their respective terms.
(b) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Seller is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would
not have a material adverse effect on the condition (financial or otherwise)
of Seller. Seller has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties and
assets owned and used by it. Seller has no subsidiaries.
(c) CAPITALIZATION. The entire authorized capital stock of Seller
consists of 50,000,000 Shares, of which 13,477,462 Shares are issued and
outstanding and no Shares are held in treasury; and 5,000,000 Shares of
undesignated Preferred Stock, of which 19,075 and 28,791 shares designated as
Series A and Series B, respectively, Convertible Preferred Stock are
outstanding. All of the issued and outstanding Shares and Preferred Stock
have been duly authorized, are validly issued, fully paid, and nonassessable.
Except as set forth in Schedule 4(c) hereto, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require Seller to issue, sell, or otherwise cause to become outstanding
any of its capital stock. All such options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments and the Shares issuable upon exercise thereof have been duly
authorized, and when issued in accordance with their terms will be validly
issued, fully paid and non-assessable. There are no preemptive or first
refusal or similar rights binding on Seller to subscribe for or purchase from
Seller any Shares pursuant to any provisions of law, the Certificate of
Incorporation or By-laws of Seller or by agreement or otherwise. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Shares.
(d) NONCONTRAVENTION. Except as set forth in Schedule 4(d) hereto, to
the Knowledge of Seller, neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of
the Certificate of Incorporation or By-laws of Seller or (ii) conflict with,
result in breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which
Seller is bound or to which Seller or its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest
would not have a material adverse effect on the condition (financial or
otherwise) of Seller or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in Schedule
4(d) hereto, Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the condition (financial or otherwise) of Seller
or on the ability of the Parties to consummate the transactions contemplated
by this Agreement.
(e) BROKERS' FEES. Seller does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(f) TITLE TO TANGIBLE ASSETS. Seller has good title to, or a valid
leasehold interest in, the tangible assets it uses regularly in the conduct
of its businesses.
(g) FINANCIAL STATEMENTS. Attached hereto are copies of Seller's
annual report on Form 10-K for the year ended December 31, 1997 and its
Quarterly Report on Form 10-Q for each of the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998. Included in such reports are the
following financial statements (collectively the "Financial Statements"):
(i) audited consolidated balance sheets for the years ending December 31,
1997 and 1996 and statements of income, changes in stockholders' equity, and
cash flow as of and for the years ended December 31, 1997, 1996 and 1995 for
the Company; and (ii) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and
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for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998
(the "QUARTERLY FINANCIAL STATEMENTS"). The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present fairly
the financial condition of Seller as of such dates and the results of
operations of Seller for such periods; PROVIDED, HOWEVER, that the Quarterly
Financial Statements are subject to normal year-end adjustments and lack
footnotes and other presentation items.
(h) TAX MATTERS.
(i) Seller has filed all Income Tax Returns that it was required to
file, and has paid all Income Taxes shown thereon as owing, except where
the failure to file Income Tax Returns or to pay Income Taxes would not
have a material adverse effect on the condition (financial or otherwise) of
Seller.
(ii) Seller has not waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income
Tax assessment or deficiency.
(iii) Seller is not a party to any Income Tax allocation or
sharing agreement.
(i) REAL PROPERTY
Seller does not own any real property.
(j) INTELLECTUAL PROPERTY. Except as set forth in Schedule 4(j), the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and proprietary rights necessary for its business as now conducted without
any conflict with, or infringement of, the rights of others. The Company has
not received any communication alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks,
service marks, trade names, copyrights, trade secrets or other proprietary
rights of any other person or entity. The Company is not aware that any of
its employees are obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interest of the
Company or that would conflict with the Company's business. Neither the
execution or delivery of this Agreement, nor the carrying on of the Company's
business as now conducted by the employees of the Company, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. The
Company does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to
their employment by the Company. To the Company's knowledge, its officers
and employees are not making improper use of any confidential information or
trade secrets of others, including those of any former employer.
(k) POWERS OF ATTORNEY. Except as set forth in Schedule 4(k), there
are no outstanding powers of attorney executed on behalf of Seller.
(l) LITIGATION. Schedule 4(l) hereto sets forth each instance in which
Seller (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction,
except where the injunction, judgment, order, decree, ruling, action, suit,
proceeding, hearing, or investigation would not have a material adverse
effect on the condition (financial or otherwise), assets, liabilities,
earnings or business of Seller.
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(m) Employee Benefits.
(i) Schedule 4(m) hereto lists each Employee Benefit Plan that is
sponsored, maintained or contributed to or required to be contributed to by
the Seller or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Seller would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Code,
except where the failure to comply would not have a material adverse
effect on the condition (financial or otherwise) of Seller.
(B) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(C) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
(D) Seller has made available to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(E) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted.
(F) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending, except where the action, suit, proceeding, hearing, or
investigation would not have a material adverse effect on the
condition (financial or otherwise) of Seller.
(G) Neither Seller nor any ERISA Affiliate has incurred any
liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(H) The aggregate withdrawal liability of Seller and any and all
ERISA Affiliates, computed as if a complete withdrawal by Seller and
such ERISA Affiliates had occurred under each Multiemployer Plan on
the date hereof, would not exceed $10,000.
(n) ABSENCE OF CERTAIN CHANGES. With respect to the business of
Seller, except as and to the extent set forth in the Company's reports on
Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September
30, 1998, since December 31, 1997, Seller has not:
(i) suffered any material adverse change in its condition (financial
or otherwise), assets, liabilities (absolute, accrued, contingent or
otherwise), business, prospects or operations, or experienced any labor
difficulty, or suffered any casualty loss (whether or not insured);
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(ii) paid, discharged or satisfied any claim, lien, encumbrance or
liability (whether absolute, accrued, contingent or otherwise and whether
due or to become due), other than claims, liens, encumbrances or
liabilities (i) which are reflected or reserved against in the Financial
Statements, and which were paid, discharged or satisfied since the date of
the most recent Financial Statements in the ordinary course of business and
consistent with past practice, or (ii) which were incurred and paid,
discharged or satisfied since the date of the most recent Financial
Statements in the ordinary course of business and consistent with past
practice;
(iii) permitted or allowed any of the properties or assets, real,
principal or mixed, tangible or intangible, of or used by Seller, to be
mortgaged, pledged or subjected to any lien or encumbrance;
(iv) written down or written up the value of any inventory, or written
off as uncollectible any notes or accounts receivable or any portion
thereof, except for write-downs, write-ups and write-offs in the ordinary
course of business consistent with past practice;
(v) cancelled any other debts or claims, or waived any rights of
substantial value, or sold, transferred or otherwise disposed of any of the
properties or assets, real, personal or mixed, tangible or intangible,
except in the ordinary course of business and consistent with past
practice;
(vi) disposed of or permitted to lapse any patent, trademark, assumed
name, service mark, trade name or copyright application or license or under
which Seller has any right or license, or disposed of or disclosed to any
person any trade secret, formula, process or know-how of Seller or under
which Seller has any right or license;
(vii) granted any general uniform increase in the compensation of
employees (including, without limitation, any increase or change pursuant
to any bonus, pension, profit-sharing, retirement or other plan or
commitment);
(viii) made any change in any method of accounting or accounting
practice or policy; made any loan or advance (other than advances to
employees in the ordinary course of business or travel and expenses
disbursement in accordance with the past practice, but not in excess of
$10,000 at any one time outstanding) to any person who is an officer,
director or employee of Seller;
(ix) declared or paid any dividend or purchased any of its outstanding
shares of capital stock;
(x) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 4(n);
(o) INSURANCE. The Company holds and maintains valid policies covering
such casualties and contingencies and of such types and amounts as is
customary for companies similarly situated. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not have a material adverse effect.
(q) ENVIRONMENTAL PROTECTION.
In connection with its business operations, Seller has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes; to the best of its knowledge after
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due investigation, Seller is in compliance in all material respects with all
terms and conditions of the required permits, licenses and authorizations,
and is also in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand latter
issued, entered, promulgated or approved thereunder. Seller is not aware of,
and has not received notice of, past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the omission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing Date or
(ii) termination of this Agreement.
(a) GENERAL. Each of the Parties will use his or its reasonable best
efforts to take any action and to do all things reasonably necessary in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions
precedent to closing.
(b) NOTICES AND CONSENTS. Each party will give any notices to third
parties, and will use its reasonable best efforts to obtain any third party
consents, that Buyer reasonably may request in connection with the matters
referred to in Sections 3 and 4 above.
(c) OPERATION OF BUSINESS. Except for transactions contemplated
hereby, Seller will not engage in, take any action, or enter into any
transaction outside the Ordinary Course of Business.
(d) FULL ACCESS. Seller will permit representatives of Buyer to have
full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Seller, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents
of or pertaining to Seller. Buyer will treat and hold as such any
Confidential Information received from Seller in the course of the reviews
contemplated by this Section 5(d), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, will return to Seller all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession.
(e) NOTICE OF DEVELOPMENTS. Seller shall notify Buyer of any
development causing a breach of any of the representations and warranties in
Section 4 above. Unless Buyer have the right to terminate this Agreement
pursuant to Section 9(a)(ii) below by reason of the development and exercise
that right within the period referred to in Section 9(a)(ii) below, the
written notice pursuant to this Section 5(e)(i) will be deemed to have
amended the relevant Schedule, if any, to have qualified the representations
and warranties contained in Section 4 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing.
(a) GENERAL. In case at any time after any Closing Date any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting Party is entitled to indemnification therefor under Section 8
below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to any Closing Date involving
Seller, each of the other Parties shall cooperate with him or it and his or
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8
below).
(c) REGISTRATION RIGHTS. Buyer shall be afforded such registration
rights as are set forth in the Registration Rights Agreement, substantially
in the form attached hereto as EXHIBIT B.
(d) NEGATIVE COVENANTS. Seller covenants and agrees that, until the
Closing Date, Seller will not do any of the following without the prior
written consent of Buyer, which shall not be unreasonably withheld:
(i) DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose
of (each of the foregoing, a "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 Seller's services; or (ii) Transfers of
worn-out or obsolete equipment.
(ii) MERGERS OR ACQUISITIONS. Merge or consolidate with or into any
other business organization, or acquire all or substantially all of the
capital stock or property of another Person.
(iii) DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or
purchase of any capital stock except with respect to any obligations in
existence as of the date hereof and set forth on Schedule 6(h) hereto.
(iv) TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Seller
except for transactions involving agreements that are in place at the date
hereof or that are in the ordinary course of Seller's business, upon fair
and reasonable terms that are no less favorable to Seller than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7. ADDITIONAL CONDITIONS PRECEDENT.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(i) the representations and warranties of Seller set forth in Section
4 above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date ;
(iii) there shall not be any injunction, judgment, order, or
decree enjoining the transactions contemplated by this Agreement;
(iv) all actions to be taken by Seller in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 7(a) upon execution
of a writing so stating at or prior to the Closing Date.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
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(i) the representations and warranties of Buyer set forth in Section
3 above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing Date;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) all actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to Seller.
Seller may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing Date.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Buyer and Seller contained in Section 3 and
Section 4, respectively above, shall survive this Agreement and continue in
full force and effect for a period of one year thereafter.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the event
Seller breaches any of its representations, warranties, or covenants
contained herein, it shall so notify Buyer and provided that Buyer makes a
written claim for indemnification against Seller pursuant to Section 10 below
within such survival period, then Seller agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer shall suffer through
and after the date of the claim for indemnification caused by the breach.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event
Buyer breaches any of its representations, warranties, or covenants contained
herein, it shall so notify Seller and provided that Seller makes a written
claim for indemnification against Buyer pursuant to Section 10 below within
such survival period, then buyer agrees to indemnify Seller from and against
the entirety of any Adverse Consequences Seller shall suffer through and
after the date of the claim for indemnification caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party
shall promptly (and in any event within [five business days] after
receiving notice of the Third Party Claim) notify each Indemnifying Party
thereof in writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party; provided,
HOWEVER, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense
of the Third Party Claim as provided in Section 8(c)(ii) above, however,
the Indemnified Party may defend against the Third Party Claim in any
manner he or it reasonably may deem appropriate.
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(iv) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of each of the Indemnifying
Parties, not to be unreasonably withheld.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage in
determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to
the Purchase Price.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement as
provided below
(i) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing Date;
(ii) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing Date in the event (A) Seller has
given Buyer any notice pursuant to Section 5(e) above and (B) the
development that is the subject of the notice has had, or reasonably
believes will have, a material adverse effect upon the condition (financial
or otherwise) of Seller;
(iii) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing Date (A) in the event Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Buyer have notified Seller of the
breach, and the breach has continued without cure for a period of 10 days
after the notice of breach or (B) if the Closing shall not have occurred on
or before December 30, 1998, by reason of the failure of any condition
precedent Section 7 hereof (unless the failure results primarily from any
breach by Buyer of any material representation, warranty, or covenant
contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing Date (A) in the event either Buyer
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, Seller has notified each Buyer
of the breach, and the breach has continued without cure for a period of 10
days after the notice of breach or (B) if the Closing shall not have
occurred on or before December 30, 1998, by reason of the failure of any
condition precedent Section 7 hereof (unless the failure results primarily
from Seller breaching any material representation, warranty, or covenant
contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 9(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 5(d) above shall survive
termination.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing Date, without the prior written
approval of Buyer and Seller; PROVIDED, HOWEVER, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party will use its reasonable best efforts to
advise the other Parties prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his or its rights, interests, or obligations hereunder without the
prior written approval of the other.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Seller:
P.C. Quote, Inc.
300 South Wacker, Suite 300
Chicago, Illinois 60606
Attn: Jim Porter
If to Buyer:
Steve Levy
1776 Clendenin Lane
Riverwoods, Illinois 60015
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the
State of or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
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hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) EXPENSES. Each Party bears its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) THE CLOSING. The closing of the transactions contemplated by this
Agreement shall take place at the offices of the Company in Chicago,
Illinois, commencing at 3:00 p.m. local time on the Closing Date or on such
other time, date and location mutually agreed by the Parties.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
PC QUOTE, INC.
By: __________________________ By: _____________________________
Name: John E. Juska Name: Steve Levy
Title: Chief Financial Officer
Seller Buyer
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EXHIBIT (aq)
Common Stock Purchase Warrant
120,000 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 December 30, 2001
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Steve Levy (herein after referred to
as "Purchaser") is entitled to purchase up to One Hundred Twenty Thousand
(120,000) Shares of Common Stock of PC QUOTE, INC., a Delaware corporation,
at a price of $1.875 per Share (the "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.
(d) "Common Stock" shall mean shares of the Company's presently or
subsequently authorized common stock, par value $0.001, and any stock for
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 December 30, 1998.
(g) "Exercise Date" shall mean the effective date of the delivery
of the Notice of Exercise pursuant to Section 4 below.
(h) "Holder" shall mean any person who shall at the time be the
registered holder of this Warrant.
(i) "Shares" shall mean shares of Common Stock.
<PAGE>
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is
issued in consideration of the purchase price paid by Purchaser to the
Company as set forth in that certain Stock and Warrant Purchase Agreement
dated as of the date hereof and made and entered into by and between the
Company and Purchaser.
3. TERM. The purchase right represented by this Warrant is
exercisable only during the period commencing upon the Date of Grant and
ending on December 30, 2001.
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
cashier's or certified 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.
(c) 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 five 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.
(d) 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.
(e) 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 non-assessable, 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).
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5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of
Shares 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
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) ADJUSTMENTS TO WARRANT PRICE. Whenever the number of Shares
purchasable upon exercise of this 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.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish 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.
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(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.
7. NOTICES; INFORMATION; REGISTRATION.
(a) NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to effect any reclassification or recapitalization of Common Stock; (b)
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 (c) 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 at least 14 days prior written notice of the
date on which a record will be taken for such action.
(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.
(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
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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 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.
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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: December 30, 1998. PC QUOTE, INC., a Delaware corporation
By: _________________________________
John E. Juska, Chief Financial Officer
By: _________________________________
Alicia VanDeVeer, Assistant 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 cashier's or certified check drawn on a United
States bank and for United States funds made payable to the
Company in the amount of $_____________; or
[ ] 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.
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 ID No.: ___________________
HOLDER:
_______________________________________
By: ___________________________
Date: _________________________ Title: ________________________
<PAGE>
EXHIBIT B
STATEMENT OF REGISTRATION RIGHTS
1. DEFINITIONS. For purposes of the Stock and Warrant Purchase
Agreement 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 in connection with the Agreement and shares issued or issuable
upon exercise of the Warrant;
(c) The term "Holder" means the original holder of the Shares and
Warrant and any transferee of the Warrant; and
(d) The term "Warrant" means the original Warrant issued in
connection with the Stock and Warrant Purchase Agreement, dated as of
December 29, 1998, between the Company, as Seller, and Steve Levy, as Buyer,
and all Warrants issued as a result of the transfer of such original Warrant.
2. COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes at any time before December 30, 2001 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 for its own account 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
December 30, 2001, 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 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
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<PAGE>
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 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
ii
<PAGE>
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 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.
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 herein 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 n 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 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
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<PAGE>
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 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 of at least
120,000 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
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<PAGE>
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
v
<PAGE>
EXHIBIT (ar)
STOCK AND WARRANT PURCHASE AGREEMENT
BETWEEN
PC QUOTE, INC.
AND
CRANSHIRE CAPITAL, LP
DECEMBER 29, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S>
1. Definitions
2. Purchase and Sale of Shares and Warrant
3. Representations and Warranties of Buyer
(a) Buyer's Qualifications
(b) Authorization of Transaction
(c) Noncontravention
(d) Broker's Fees
(e) Investment
4. Representations and Warranties of Seller
(a) Authorization of Transaction
(b) Organization, Qualification, and Corporate Power
(c) Capitalization
(d) Noncontravention
(e) Brokers' Fees
(f) Title to Tangible Assets
(g) Financial Statements
(h) Tax Matters
(i) Real Property
(j) Intellectual Property
(k) Powers of Attorney
(l) Litigation
(m) Employee Benefits
(n) Absence of Certain Changes
(o) Patents, Trade Names, Trademarks, Etc.
(p) Insurance
(q) Environmental Protection
5. Pre-Closing Covenants
(a) General
(b) Notices and Consents
(c) Operation of Business
(d) Full Access
(e) Notice of Developments
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Registration Rights
(d) Negative Covenants
7. Additional Conditions Precedent
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<PAGE>
(a) Conditions to Obligation of Buyer
(b) Conditions to Obligation of Sellers
8. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties
(b) Indemnification Provisions for Benefit of Buyer
(c) Indemnification Provisions for Benefit of Seller
(d) Matters Involving Third Parties
(e) Determination of Adverse Consequences
9. Termination
(a) Termination of Agreement
(b) Effect of Termination
10. Miscellaneous
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Amendments and Waivers
(j) Severability
(k) Expenses
(l) Construction
(m) Incorporation of Exhibits, Annexes, and Schedules
(n) The Closing
</TABLE>
ii
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
Agreement entered into as of December 29, 1998, by and between Cranshire
Capital, LP, an Illinois Limited Partnership, (the "Buyer") and PC Quote,
Inc., a Delaware corporation (the "Seller"). Buyer and Seller are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
from Seller, and Seller will sell to Buyer, an aggregate of 160,000 shares of
Seller's common stock, par value $0.001 per share (the "Common Stock"), for
an aggregate purchase price of Two Hundred Fifty Thousand Dollars ($250,000).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504.
"BUYER" has the meaning set forth in the preface above.
"CLOSING DATE" shall mean December 30, 1998 or such other time as the
parties may mutually agree.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Seller that is not already generally available to
the public.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4g below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
<PAGE>
"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8 below.
"KNOWLEDGE" means actual knowledge without independent investigation.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity (or any
department, agency, or political subdivision thereof) or any entity similar
to any of the foregoing.
"PURCHASE PRICE" has the meaning set forth in Section 2 below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SHARES" means Seller's shares of Common Stock.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8 below.
4. PURCHASE AND SALE OF SHARES AND Warrant
4.1 PURCHASE AND SALE OF SHARES. On the Closing Date, in the manner
set forth in this Section 2, upon the terms set forth in this Agreement,
Seller will sell, transfer and deliver to Buyer, and Buyer will purchase from
Seller, 160,000 Shares for an aggregate purchase price of Two Hundred Fifty
Thousand Dollars ($250,000) (the "Purchase Price"), in all cases free and
clear of all interests, liens, charges, encumbrances, equities, claims,
assessments and options of whatever nature.
2
<PAGE>
(a) On the Closing Date, as a condition precedent to such closing,
Seller shall deliver to Buyer stock certificates representing an aggregate of
160,000 Shares in such names and denominations as buyer shall instruct Seller.
(b) Buyer shall deliver to Seller a certified check or wire transfer in
the amount of $250,000.
2.2 Purchase and Sale of Warrant. Subject to the terms and conditions
of this Agreement, the Company shall issue to Buyer a warrant (the "Warrant")
to purchase 80,000 Shares at an exercise price of $1.875 per Share, which
Warrant shall be substantially in the form attached hereto as EXHIBIT A.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made on and as of such
Closing Date as if such Closing Date were substituted for the date of this
Agreement throughout this Section 3).
(a) BUYER'S QUALIFICATIONS. Buyer (a) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in Seller and (b) has had
the opportunity to ask questions of, and receive answers from, Seller and
its management concerning the terms and conditions of the offering of the
Shares hereunder and to obtain additional information; and (c) is an
Accredited Investor.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms. Buyer is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject or (B)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer
is a party or by which it is bound or to which any of its assets is
subject.
(d) BROKERS' FEES. Buyer does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Seller could
become liable or obligated.
(e) INVESTMENT. Buyer is acquiring the Shares for investment
purposes and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that the statements contained in this Section 4 are true,
correct and complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made on and as of such
Closing Date as if such Closing Date were substituted for the date of this
Agreement throughout this Section 4).
(a) AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments to be executed and delivered by Seller pursuant to this Agreement
and the transactions contemplated hereby and to perform its obligations
hereunder and thereunder. This Agreement and the other documents and
instruments to be executed and delivered by Seller
3
<PAGE>
pursuant to this Agreement and the transactions contemplated hereby
constitute the valid and legally binding obligations of Seller enforceable in
accordance with their respective terms.
(b) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Seller is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would
not have a material adverse effect on the condition (financial or otherwise)
of Seller. Seller has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties and
assets owned and used by it. Seller has no subsidiaries.
(c) CAPITALIZATION. The entire authorized capital stock of Seller
consists of 50,000,000 Shares, of which 13,477,462 Shares are issued and
outstanding and no Shares are held in treasury; and 5,000,000 Shares of
undesignated Preferred Stock, of which 19,075 and 28,791 shares designated as
Series A and Series B, respectively, Convertible Preferred Stock are
outstanding. All of the issued and outstanding Shares and Preferred Stock
have been duly authorized, are validly issued, fully paid, and nonassessable.
Except as set forth in Schedule 4(c) hereto, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require Seller to issue, sell, or otherwise cause to become outstanding
any of its capital stock. All such options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments and the Shares issuable upon exercise thereof have been duly
authorized, and when issued in accordance with their terms will be validly
issued, fully paid and non-assessable. There are no preemptive or first
refusal or similar rights binding on Seller to subscribe for or purchase from
Seller any Shares pursuant to any provisions of law, the Certificate of
Incorporation or By-laws of Seller or by agreement or otherwise. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Shares.
(d) NONCONTRAVENTION. Except as set forth in Schedule 4(d) hereto, to
the Knowledge of Seller, neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of
the Certificate of Incorporation or By-laws of Seller or (ii) conflict with,
result in breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which
Seller is bound or to which Seller or its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest
would not have a material adverse effect on the condition (financial or
otherwise) of Seller or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in Schedule
4(d) hereto, Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the condition (financial or otherwise) of Seller
or on the ability of the Parties to consummate the transactions contemplated
by this Agreement.
(e) BROKERS' FEES. Seller does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(f) TITLE TO TANGIBLE ASSETS. Seller has good title to, or a valid
leasehold interest in, the tangible assets it uses regularly in the conduct
of its businesses.
(g) FINANCIAL STATEMENTS. Attached hereto are copies of Seller's
annual report on Form 10-K for the year ended December 31, 1997 and its
Quarterly Report on Form 10-Q for each of the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998. Included in such reports are the
following financial statements (collectively the "Financial Statements"):
(i) audited consolidated balance sheets for the years ending December 31,
1997 and 1996 and statements of income, changes in stockholders' equity, and
cash flow as of and
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for the years ended December 31, 1997, 1996 and 1995 for the Company; and
(ii) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998 (the "QUARTERLY FINANCIAL
STATEMENTS"). The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and present fairly the financial
condition of Seller as of such dates and the results of operations of Seller
for such periods; PROVIDED, HOWEVER, that the Quarterly Financial Statements
are subject to normal year-end adjustments and lack footnotes and other
presentation items.
(h) TAX MATTERS.
(i) Seller has filed all Income Tax Returns that it was required to
file, and has paid all Income Taxes shown thereon as owing, except where
the failure to file Income Tax Returns or to pay Income Taxes would not
have a material adverse effect on the condition (financial or otherwise) of
Seller.
(ii) Seller has not waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income
Tax assessment or deficiency.
(iii) Seller is not a party to any Income Tax allocation or
sharing agreement.
(i) REAL PROPERTY
Seller does not own any real property.
(j) INTELLECTUAL PROPERTY. Except as set forth in Schedule 4(j), the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and proprietary rights necessary for its business as now conducted without
any conflict with, or infringement of, the rights of others. The Company has
not received any communication alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks,
service marks, trade names, copyrights, trade secrets or other proprietary
rights of any other person or entity. The Company is not aware that any of
its employees are obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interest of the
Company or that would conflict with the Company's business. Neither the
execution or delivery of this Agreement, nor the carrying on of the Company's
business as now conducted by the employees of the Company, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. The
Company does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to
their employment by the Company. To the Company's knowledge, its officers
and employees are not making improper use of any confidential information or
trade secrets of others, including those of any former employer.
(k) POWERS OF ATTORNEY. Except as set forth in Schedule 4(k), there
are no outstanding powers of attorney executed on behalf of Seller.
(l) LITIGATION. Schedule 4(l) hereto sets forth each instance in which
Seller (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction,
except where the injunction, judgment, order, decree, ruling, action, suit,
proceeding, hearing, or investigation would not have a material adverse
effect on the condition (financial or otherwise), assets, liabilities,
earnings or business of Seller.
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(m) Employee Benefits.
(i) Schedule 4(m) hereto lists each Employee Benefit Plan that is
sponsored, maintained or contributed to or required to be contributed to by
the Seller or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Seller would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Code,
except where the failure to comply would not have a material adverse
effect on the condition (financial or otherwise) of Seller.
(B) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(C) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
(D) Seller has made available to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(E) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted.
(F) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending, except where the action, suit, proceeding, hearing, or
investigation would not have a material adverse effect on the
condition (financial or otherwise) of Seller.
(G) Neither Seller nor any ERISA Affiliate has incurred any
liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(H) The aggregate withdrawal liability of Seller and any and
all ERISA Affiliates, computed as if a complete withdrawal by
Seller and such ERISA Affiliates had occurred under each
Multiemployer Plan on the date hereof, would not exceed $10,000.
(n) ABSENCE OF CERTAIN CHANGES. With respect to the business of
Seller, except as and to the extent set forth in the Company's reports on
Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September
30, 1998, since December 31, 1997, Seller has not:
(i) suffered any material adverse change in its condition
(financial or otherwise), assets, liabilities (absolute, accrued,
contingent or otherwise), business, prospects or operations, or
experienced any labor difficulty, or suffered any casualty loss
(whether or not insured);
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(ii) paid, discharged or satisfied any claim, lien, encumbrance
or liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due), other than claims, liens, encumbrances or
liabilities (i) which are reflected or reserved against in the Financial
Statements, and which were paid, discharged or satisfied since the date
of the most recent Financial Statements in the ordinary course of
business and consistent with past practice, or (ii) which were incurred
and paid, discharged or satisfied since the date of the most recent
Financial Statements in the ordinary course of business and consistent
with past practice;
(iii) permitted or allowed any of the properties or assets, real,
principal or mixed, tangible or intangible, of or used by Seller, to be
mortgaged, pledged or subjected to any lien or encumbrance;
(iv) written down or written up the value of any inventory, or
written off as uncollectible any notes or accounts receivable or any
portion thereof, except for write-downs, write-ups and write-offs in the
ordinary course of business consistent with past practice;
(v) cancelled any other debts or claims, or waived any rights of
substantial value, or sold, transferred or otherwise disposed of any of the
properties or assets, real, personal or mixed, tangible or intangible,
except in the ordinary course of business and consistent with past
practice;
(vi) disposed of or permitted to lapse any patent, trademark,
assumed name, service mark, trade name or copyright application or
license or under which Seller has any right or license, or disposed of or
disclosed to any person any trade secret, formula, process or know-how of
Seller or under which Seller has any right or license;
(vii) granted any general uniform increase in the compensation of
employees (including, without limitation, any increase or change pursuant
to any bonus, pension, profit-sharing, retirement or other plan or
commitment);
(viii) made any change in any method of accounting or accounting
practice or policy; made any loan or advance (other than advances to
employees in the ordinary course of business or travel and expenses
disbursement in accordance with the past practice, but not in excess of
$10,000 at any one time outstanding) to any person who is an officer,
director or employee of Seller;
(ix) declared or paid any dividend or purchased any of its
outstanding shares of capital stock;
(x) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 4(n);
(o) INSURANCE. The Company holds and maintains valid policies covering
such casualties and contingencies and of such types and amounts as is
customary for companies similarly situated. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not have a material adverse effect.
(q) ENVIRONMENTAL PROTECTION.
In connection with its business operations, Seller has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes; to the best of its knowledge after
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due investigation, Seller is in compliance in all material respects with all
terms and conditions of the required permits, licenses and authorizations,
and is also in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand latter
issued, entered, promulgated or approved thereunder. Seller is not aware of,
and has not received notice of, past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the omission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing Date or
(ii) termination of this Agreement.
(a) GENERAL. Each of the Parties will use his or its reasonable best
efforts to take any action and to do all things reasonably necessary in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions
precedent to closing.
(b) NOTICES AND CONSENTS. Each party will give any notices to third
parties, and will use its reasonable best efforts to obtain any third party
consents, that Buyer reasonably may request in connection with the matters
referred to in Sections 3 and 4 above.
(c) OPERATION OF BUSINESS. Except for transactions contemplated
hereby, Seller will not engage in, take any action, or enter into any
transaction outside the Ordinary Course of Business.
(d) FULL ACCESS. Seller will permit representatives of Buyer to have
full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Seller, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents
of or pertaining to Seller. Buyer will treat and hold as such any
Confidential Information received from Seller in the course of the reviews
contemplated by this Section 5(d), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, will return to Seller all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession.
(e) NOTICE OF DEVELOPMENTS. Seller shall notify Buyer of any
development causing a breach of any of the representations and warranties in
Section 4 above. Unless Buyer have the right to terminate this Agreement
pursuant to Section 9(a)(ii) below by reason of the development and exercise
that right within the period referred to in Section 9(a)(ii) below, the
written notice pursuant to this Section 5(e)(i) will be deemed to have
amended the relevant Schedule, if any, to have qualified the representations
and warranties contained in Section 4 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing.
(a) GENERAL. In case at any time after any Closing Date any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting Party is entitled to indemnification therefor under Section 8
below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to any Closing Date involving
Seller, each of the other Parties shall cooperate with him or it and his or
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8
below).
(c) REGISTRATION RIGHTS. Buyer shall be afforded such registration
rights as are set forth in the Registration Rights Agreement, substantially
in the form attached hereto as EXHIBIT B.
(d) NEGATIVE COVENANTS. Seller covenants and agrees that, until the
Closing Date, Seller will not do any of the following without the prior
written consent of Buyer, which shall not be unreasonably withheld:
(i) DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (each of the foregoing, a "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 Seller's services; or
(ii) Transfers of worn-out or obsolete equipment.
(ii) MERGERS OR ACQUISITIONS. Merge or consolidate with or into any
other business organization, or acquire all or substantially all of the
capital stock or property of another Person.
(iii) DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or
purchase of any capital stock except with respect to any obligations in
existence as of the date hereof and set forth on Schedule 6(h) hereto.
(iv) TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of
Seller except for transactions involving agreements that are in place at
the date hereof or that are in the ordinary course of Seller's business,
upon fair and reasonable terms that are no less favorable to Seller than
would be obtained in an arm's length transaction with a nonaffiliated
Person.
7. ADDITIONAL CONDITIONS PRECEDENT.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(i) the representations and warranties of Seller set forth in
Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date ;
(iii) there shall not be any injunction, judgment, order, or
decree enjoining the transactions contemplated by this Agreement;
(iv) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in form
and substance to Buyer.
Buyer may waive any condition specified in this Section 7(a) upon execution of a
writing so stating at or prior to the Closing Date.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
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(i) the representations and warranties of Buyer set forth in
Section 3 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) all actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to Seller.
Seller may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing Date.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Buyer and Seller contained in Section 3 and
Section 4, respectively above, shall survive this Agreement and continue in
full force and effect for a period of one year thereafter.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the event
Seller breaches any of its representations, warranties, or covenants
contained herein, it shall so notify Buyer and provided that Buyer makes a
written claim for indemnification against Seller pursuant to Section 10 below
within such survival period, then Seller agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer shall suffer through
and after the date of the claim for indemnification caused by the breach.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event
Buyer breaches any of its representations, warranties, or covenants contained
herein, it shall so notify Seller and provided that Seller makes a written
claim for indemnification against Buyer pursuant to Section 10 below within
such survival period, then buyer agrees to indemnify Seller from and against
the entirety of any Adverse Consequences Seller shall suffer through and
after the date of the claim for indemnification caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party
shall promptly (and in any event within [five business days] after
receiving notice of the Third Party Claim) notify each Indemnifying Party
thereof in writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party; provided,
HOWEVER, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense
of the Third Party Claim as provided in Section 8(c)(ii) above, however,
the Indemnified Party may defend against the Third Party Claim in any
manner he or it reasonably may deem appropriate.
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(iv) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of each of the Indemnifying
Parties, not to be unreasonably withheld.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage in
determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to
the Purchase Price.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
as provided below
(i) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing Date;
(ii) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing Date in the event (A) Seller has
given Buyer any notice pursuant to Section 5(e) above and (B) the
development that is the subject of the notice has had, or reasonably
believes will have, a material adverse effect upon the condition (financial
or otherwise) of Seller;
(iii) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing Date (A) in the event Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Buyer have notified Seller of the
breach, and the breach has continued without cure for a period of 10 days
after the notice of breach or (B) if the Closing shall not have occurred on
or before December 30, 1998, by reason of the failure of any condition
precedent Section 7 hereof (unless the failure results primarily from any
breach by Buyer of any material representation, warranty, or covenant
contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing Date (A) in the event either Buyer
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, Seller has notified each Buyer
of the breach, and the breach has continued without cure for a period of 10
days after the notice of breach or (B) if the Closing shall not have
occurred on or before December 30, 1998, by reason of the failure of any
condition precedent Section 7 hereof (unless the failure results primarily
from Seller breaching any material representation, warranty, or covenant
contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party (except for any liability of any Party then in breach); PROVIDED,
HOWEVER, that the confidentiality provisions contained in Section 5(d) above
shall survive termination.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing Date, without the prior written
approval of Buyer and Seller; PROVIDED, HOWEVER, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party will use its reasonable best efforts to
advise the other Parties prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his or its rights, interests, or obligations hereunder without the
prior written approval of the other.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Seller:
P.C. Quote, Inc.
300 South Wacker, Suite 300
Chicago, Illinois 60606
Attn: Jim Porter
If to Buyer:
Cranshire Capital, LP
770 Frontage Road
Suite 134
Northfield, Illinois 60093
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the
State of or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
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hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) EXPENSES. Each Party bears its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) THE CLOSING. The closing of the transactions contemplated by this
Agreement shall take place at the offices of the Company in Chicago, Illinois,
commencing at 3:00 p.m. local time on the Closing Date or on such other time,
date and location mutually agreed by the Parties.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
PC QUOTE, INC. CRANSHIRE CAPITAL, LP
By:__________________________ By: ________________________
Name: John E. Juska Name:
Title: Chief Financial Officer Title:
Seller Buyer
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EXHIBIT (as)
Common Stock Purchase Warrant
80,000 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 December 30, 2001
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Cranshire Capital, LP, an Illinois
Limited Partnership, (herein after referred to as "Purchaser") is entitled to
purchase up to Eighty Thousand (80,000) Shares of Common Stock of PC QUOTE,
INC., a Delaware corporation, at a price of $1.875 per Share (the "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.
(d) "Common Stock" shall mean shares of the Company's
presently or subsequently authorized common stock, par value $0.001, and any
stock for 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 December 30, 1998.
(g) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Section 4 below.
(h) "Holder" shall mean any person who shall at the time be
the registered holder of this Warrant.
(i) "Shares" shall mean shares of Common Stock.
<PAGE>
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant
is issued in consideration of the purchase price paid by Purchaser to the
Company as set forth in that certain Stock and Warrant Purchase Agreement
dated as of the date hereof and made and entered into by and between the
Company and Purchaser.
3. TERM. The purchase right represented by this Warrant is
exercisable only during the period commencing upon the Date of Grant and
ending on December 30, 2001.
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
cashier's or certified 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.
(c) 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 five 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.
(d) 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.
(e) 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 non-assessable, 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).
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5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
of Shares 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
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) ADJUSTMENTS TO WARRANT PRICE. Whenever the number of
Shares purchasable upon exercise of this 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.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment of
the Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish 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.
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(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.
7. NOTICES; INFORMATION; REGISTRATION.
(a) NOTICE OF CERTAIN EVENTS. If the Company proposes at
any time (a) to effect any reclassification or recapitalization of Common
Stock; (b) 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 (c) 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 at least 14 days prior written notice of the
date on which a record will be taken for such action.
(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.
(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
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<PAGE>
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 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.
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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: December 30, 1998. PC QUOTE, INC., a Delaware
corporation
By: ________________________
John E. Juska,
Chief Financial Officer
By: _________________________
Alicia VanDeVeer,
Assistant 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 cashier's or certified check drawn on a
United States bank and for United States funds made payable
to the Company in the amount of $_____________; or
[ ] 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.
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 ID No.: ______________
HOLDER:
________________________________
By: _______________________
Date: _____________________ Title: ________________
<PAGE>
EXHIBIT B
STATEMENT OF REGISTRATION RIGHTS
1. DEFINITIONS. For purposes of the Stock and Warrant Purchase
Agreement 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 in connection with the Agreement and shares issued or
issuable upon exercise of the Warrant;
(c) The term "Holder" means the original holder of the
Shares and Warrant and any transferee of the Warrant; and
(d) The term "Warrant" means the original Warrant issued in
connection with the Stock and Warrant Purchase Agreement, dated as of
December 29, 1998, between the Company, as Seller, and Cranshire Capital, LP,
as Buyer, and all Warrants issued as a result of the transfer of such
original Warrant.
2. COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes at any time before December 30, 2001 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 for its own account 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 December 30, 2001, 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 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
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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 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
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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 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.
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 herein 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 n 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 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;
4
<PAGE>
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 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;
5
<PAGE>
(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 of at
least 80,000 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.
6
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