Quad City Holdings, Inc.
Velie Plantation
3551 7th Street
Suite 204
Moline, Illinois 61265
Notice to Stockholders
Recently you received a copy of Quad City Holdings, Inc.'s annual report to
stockholders which also included a copy of Quad City's Annual Report on Form
10-K that was to be filed with the Securities and Exchange Commission. We want
to tell you about a development that occurred after the date of the mailing of
the annual report to stockholders, but immediately prior to the actual filing of
the Form 10-K with the Securities and Exchange Commission. The copy of the Form
10-K that you received stated in Item 3 that Quad City is not aware of any legal
proceedings against it or its subsidiaries. Due to a very recent development,
that statement is no longer correct. Following is the statement that Quad City
has added to Item 3 of the Form 10-K that has now been filed with the Securities
and Exchange Commission. Accordingly, the annual report to stockholders that you
received is amended and supplemented by the following statement:
Bancard is the holder of an account receivable in the
approximate amount of $1,500,000 owing from PMT Services, Inc. ("PMT").
PMT is a subsidiary of Nova Corporation (trading symbol NIS on the New
York Stock Exchange). This receivable arises pursuant to Bancard's
provision of electronic credit card sales authorization and settlement
services to PMT pursuant to a written contract that includes PMT's
obligation to indemnify Bancard for credit card chargeback losses
arising from those services. PMT has failed to timely pay Bancard for
monthly invoices, including service charges and substantial chargeback
losses, for the period of May, 2000 through September, 2000. Bancard
intends to vigorously pursue collection of this receivable. On
September 25, 2000, PMT filed a lawsuit in federal court in Los
Angeles, California, against Bancard and Quad City. This lawsuit
alleges tortious acts and breaches of contract by Bancard, Quad City
and others and seeks recovery from Bancard and Quad City of not less
than $3,600,000 of alleged actual damages, plus punitive damages.
Bancard and Quad City first received a copy of the complaint on
September 27, 2000 and, accordingly, have not had an opportunity to
fully evaluate the allegations contained in the complaint. However,
based on a preliminary evaluation of the complaint, Bancard and Quad
City believe the allegations to be without merit and intend to
vigorously defend the suit.
We apologize for any inconvenience or confusion this may have caused.
September 29, 2000
