-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IuLxrj9jWCJeaUduOej6X5flJREtB8b3SoXYi39e5Li5yAGuNt/eTjrih7qeozWI B7Em/Nv5j1KwdZqJuT2G+g== 0000950152-99-001167.txt : 19990218 0000950152-99-001167.hdr.sgml : 19990218 ACCESSION NUMBER: 0000950152-99-001167 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990217 GROUP MEMBERS: PHYSICIANS INSURANCE COMPANY OF OHIO GROUP MEMBERS: PICO HOLDINGS INC /NEW SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PC QUOTE INC CENTRAL INDEX KEY: 0000745774 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 363131704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-36678 FILM NUMBER: 99543599 BUSINESS ADDRESS: STREET 1: 300 S WACKER DR STREET 2: STE 300 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129132800 MAIL ADDRESS: STREET 1: 300 S WACKER STREET 2: SUITE 300 CITY: CHICAGO STATE: IL ZIP: 60606 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PICO HOLDINGS INC /NEW CENTRAL INDEX KEY: 0000830122 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 942723335 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 875 PROSPECT ST STREET 2: STE 301 CITY: LA JOLLA STATE: CA ZIP: 92037 BUSINESS PHONE: 6194566022 MAIL ADDRESS: STREET 1: ONE ALMADEN BLVD STREET 2: STE 300 CITY: SAN JOSE STATE: CA ZIP: 95113-2213 FORMER COMPANY: FORMER CONFORMED NAME: CITATION INSURANCE GROUP DATE OF NAME CHANGE: 19940527 SC 13D/A 1 PICO HOLDINGS/PC QUOTE SCHEDULE 13D/AMENDMENT #5 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 5)* PC Quote, Inc. --------------- (Name of Issuer) Common Stock, $.001 par value per share ----------------------------------------- (Title of Class of Securities) 693236200 ---------------- (CUSIP Number) James F. Mosier, Corporate Secretary and General Counsel PICO Holdings, Inc. 875 Prospect Street, Suite 301 La Jolla, CA 92037 (619) 456-6022 ------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 18, 1998 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including exhibits. See Section 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP NO. 693236200 AMENDMENT NO. 5 TO SCHEDULE 13D 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): PICO Holdings, Inc. 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a) [X] (b) [ ] 3. SEC USE ONLY: 4. SOURCE OF FUNDS (SEE INSTRUCTIONS): OO 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [ ] 6. CITIZENSHIP OR PLACE OF ORGANIZATION: California NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7. SOLE VOTING POWER: 7,254,295 shares 8. SHARED VOTING POWER: 3,957,500 shares 9. SOLE DISPOSITIVE POWER: 7,254,295 shares 10. SHARED DISPOSITIVE POWER: 3,957,500 shares 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 11,211,795 shares 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS): [ ] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 50.8% 14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS): HC 2 3 CUSIP NO. 693236200 AMENDMENT NO. 5 TO SCHEDULE 13D 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): Physicians Insurance Company of Ohio 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a) [X] (b) [ ] 3. SEC USE ONLY: 4. SOURCE OF FUNDS (SEE INSTRUCTIONS): OO 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [ ] 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Ohio NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7. SOLE VOTING POWER: None 8. SHARED VOTING POWER: 3,957,500 shares 9. SOLE DISPOSITIVE POWER: None 10. SHARED DISPOSITIVE POWER: 3,957,500 shares 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 3,957,500 shares 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS): [ ] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 24.6% 14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS): IC 3 4 ITEM 1. SECURITY AND ISSUER. This Amendment No. 5 to Schedule 13D ("Amendment No. 5") relates to the shares of Common Stock, $.001 par value (the "PC Quote Shares"), of PC Quote, Inc. ("PC Quote"). The address of the principal executive offices of PC Quote is 300 South Wacker Drive, Chicago, Illinois 60606. ITEM 2. IDENTITY AND BACKGROUND. The persons filing this Amendment No. 5 are PICO Holdings, Inc. ("Holdings") and Physicians Insurance Company of Ohio ("Physicians"). ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Please see Item 4 below. ITEM 4. PURPOSE OF TRANSACTION. PURCHASE AND SALE OF PREFERRED STOCK; ISSUANCE OF NEW WARRANT On September 23, 1998, PC Quote entered into a Securities Purchase Agreement (the "Purchase Agreement") with Holdings and Physicians (collectively, the "Reporting Persons") providing for the conversion of the PC Quote debt owned by Holdings and Physicians into convertible preferred stock and a warrant to purchase PC Quote Shares. The PC Quote shareholders approved the transactions contemplated by the Purchase Agreement on December 17, 1998 and the closing of such transactions occurred on December 18, 1998 (the "Closing"). As described in the Reporting Persons' Amendment No. 4 to Schedule 13D ("Amendment No. 4"), Physicians was the holder of a Subordinated Convertible Debenture dated November 14, 1996, as amended (the "Debenture"), in the original principal amount of $2,500,000. On September 23, 1998, Physicians and PC Quote entered into a Second Amendment to Convertible Subordinated Debenture Due 2001 (the "Second Amendment") pursuant to which the conversion provisions of the Debenture were amended as additional consideration for Physicians entering into the Purchase Agreement. Pursuant to the Second Amendment, Physicians had the right, at any time on or before April 30, 1999 or the full payment of the Debenture, to convert the principal amount of the Debenture, plus all accrued interest as of the date of such conversion (collectively, the "Conversion Date Debenture Balance"), into shares of Series A Preferred Stock of PC Quote determined by dividing the following by 100: the number calculated from the division of the Conversion Date Debenture Balance by the lowest of the following numbers: (i) 1.5625; (ii) the closing sale price of the PC Quote Shares as reported on the American Stock Exchange ("AMEX") one day prior to the conversion date; or (iii) the average AMEX closing price of the PC Quote Shares over the 20-day period immediately preceding the conversion date. The other terms of the Debenture, as described in Amendment No. 4 remained the same. Also as described in Amendment No. 4, PC Quote was indebted to Holdings and its wholly-owned subsidiaries, Sequoia Insurance Company and Citation Insurance Company (the "Subsidiary Lenders"), in the aggregate original principal amount of $3,290,000. Pursuant to the terms of the Purchase Agreement, Physicians acquired 19,075 shares of Series A 5% Convertible Preferred Stock (the "Series A Preferred Stock") through the conversion of 4 5 the Debenture and Holdings was issued 28,791 shares of Series B 5% Convertible Preferred Stock (the "Series B Preferred Stock") in consideration for the cancellation of the indebtedness from PC Quote to Holdings and the Subsidiary Lenders. At the Closing, PC Quote issued to Holdings a warrant (the "New Warrant") to purchase 3,106,163 PC Quote Shares. The New Warrant has an exercise price of $1.575, subject to anti-dilution adjustment (the "New Warrant Exercise Price"), and an expiration date of April 30, 2005. EXTENSION OF TERM OF EXISTING WARRANTS At the Closing, PC Quote and Holdings entered into amendments of three Common Stock Purchase Warrants to purchase an aggregate of 949,032 PC Quote Shares (the "Existing Warrants") held by Holdings to extend the term thereof from April 30, 2000 to April 30, 2005. DIVIDENDS A holder of Series A Preferred Stock will be entitled to receive cash dividends, when and as declared by the PC Quote 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 Stock will be entitled to receive cash dividends, when and as declared by the PC Quote 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 will be computed on and paid for the actual number of days elapsed. Dividends will accrue on each share of Series A Preferred Stock and each share of Series B Preferred Stock from December 18, 1998 (the "Issuance Date"). No dividends may be declared on any other series or class or classes of stock of PC Quote 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 each quarter-yearly period. Dividends will be cumulative. No interest, or sum of money in lieu of interest, will 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, PC Quote may 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 PC Quote 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 PC Quote (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 PC Quote. CONVERSION OF PREFERRED STOCK A holder of Preferred Stock will have the right, at such holder's option, to convert the Preferred Stock into PC Quote Shares. If any Preferred Stock remains outstanding on the fifth anniversary after the Issuance Date, then such Preferred Stock will automatically convert to PC Quote Shares on such fifth anniversary. 5 6 At any time or times on or after the Issuance Date, any holder of Preferred Stock will be entitled to convert any whole number of shares of Preferred Stock into fully paid and nonassessable PC Quote Shares (rounded to the nearest whole share). The number of PC Quote Shares issuable upon conversion of the Preferred Stock will be determined by multiplying the product of one hundred (100) and the number of shares of Preferred Stock to be converted into PC Quote Shares by: (i) in the case of Series A Preferred Stock, (A) $1.5625 PLUS (B) the amount of any accrued but unpaid dividends attributable to such Series A Preferred Stock, DIVIDED BY the lower of (X) $1.5625, (Y) the average Closing Sale Price (as defined) of the PC Quote Shares over the twenty-day period immediately prior to the day the Series A Preferred Stock is to be converted into PC Quote Shares; or (Z) the Closing Sale Price one day prior to the day the Series A Preferred Stock is to be converted into PC Quote Shares (the "Series A Conversion Rate"). (ii) in the case of Series B Preferred Stock, (A) $1.3125 PLUS (B) the amount of any accrued but unpaid dividend attributable to such Series B Preferred Stock, DIVIDED BY the lower of (X) $1.3125, (Y) the average Closing Sale Price of the PC Quote Shares over the twenty-day period immediately prior to the date the Series B Preferred Stock is to be converted into PC Quote Shares; or (Z) the Closing Sale Price one day prior to the day the Series B Preferred Stock is to be converted into PC Quote Shares (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 PC Quote, 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). VOTING RIGHTS OF PREFERRED STOCK The holders of Preferred Stock will 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 will have the number of votes equal to the number of PC Quote Shares into which the Preferred Stock then held by such holder is convertible, as adjusted from time to time. Holders of Preferred Stock will have the exclusive right to elect two of the five directors to the PC Quote Board. Ronald Langley, the Chairman of the Board of Holdings and Physicians, and John R. Hart, the President and Chief Executive Officer of Holdings and Physicians, have been elected to the Board of Directors of PC Quote. NEW WARRANT EXERCISE AND ADJUSTMENTS The holder of the New Warrant will have the right, at such holder's option, to exercise the New Warrant, or any portion thereof, and to purchase the corresponding whole number of PC Quote Shares, at the New Warrant Exercise Price, at any time after the Issuance Date until April 30, 2005. In lieu of exercising the New Warrant for cash, the holder may elect to receive PC Quote Shares equal to the "value" of the New Warrant determined in accordance with a formula specified in the New Warrant (the "Conversion Value"). The number of PC Quote Shares subject to the New Warrant and the New Warrant Exercise Price will be adjusted to reflect stock dividends; reclassifications or changes of outstanding securities of PC Quote; any consolidation, merger or reorganization of PC Quote; stock splits; issuances of rights, options or warrants to all holders of shares of PC Quote exercisable at less than the current market price per share; and other distributions 6 7 to all holders of PC Quote Shares. In the event of any sale, license or other disposition of all or substantially all of the assets of PC Quote or any reorganization, consolidation or merger involving PC Quote in which the holders of PC Quote'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 New Warrant and the holder has not fully exercised the New Warrant, the unexercised portion of the New Warrant will be deemed automatically converted into PC Quote Shares at the Conversion Value. Alternatively, the holder may elect to cause PC Quote to purchase the exercised portion of the New 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 New Warrant immediately before the record date for determining stockholders entitled to participate in the proceeds of the Acquisition, less (b) the aggregate New Warrant Exercise Price. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (A) (B) Beneficial Ownership of PC Quote Shares:
PC Quote Shares which may be Acquired upon Exercise of Existing Warrants or New Warrant or upon Conversion of Series A Preferred Total PC Quote Percent of PC Quote Shares Stock or Series B Shares Bene- Outstanding PC Person Currently Held Preferred Stock ficially Owned Quote Shares (1) ------ -------------- --------------- -------------- ---------------- Holdings 2,370,000 (2) (3) 8,841,795 (4) (5) 11,211,795 50.8% Physicians 2,050,000 (2) (3) 1,907,500 (5) 3,957,500 24.6% - ------------------- (1) The percent of the outstanding PC Quote Shares is based upon the number of PC Quote Shares outstanding as of February 3, 1999 (14,183,182), the number of PC Quote Shares that the person may acquire upon exercise of the Existing Warrants or the New Warrant and the number of PC Quote Shares that the person may acquire upon conversion of the Series A Preferred Stock or the Series B Preferred Stock. (2) Includes 2,050,000 PC Quote Shares beneficially owned directly by Physicians which is a direct subsidiary of Holdings. As a result of Holdings' status as parent of Physicians, Physicians and Holdings may be deemed to share voting and investment power with respect to these PC Quote Shares. (3) Does not include PC Quote Shares which may be acquired by Physicians as a result of a Rights offering as described in Item 4 of Amendment No. 1 to Schedule 13D filed by the Reporting Persons on June 11, 1997. (4) Includes 4,055,195 PC Quote Shares which may be acquired upon exercise of the Existing Warrants and the New Warrant beneficially owned directly by Holdings. Also includes 2,879,100 PC Quote Shares which may be acquired upon conversion of the Series B Preferred Stock beneficially owned directly by Holdings.
7 8 (5) Includes 1,907,500 PC Quote Shares which may be acquired upon conversion of the Series A Preferred Stock beneficially owned by Physicians. (C) See Item 4. (D) See Items 5(A) and 5(B) of this Amendment No. 5 above. (E) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. See Item 4 of this Amendment No. 5 above. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit A - Joint Filing Agreement, dated February 5, 1999, between PICO Holdings, Inc. and Physicians Insurance Company of Ohio Exhibit B - Securities Purchase Agreement, made as of September 23, 1998, among PC Quote, Inc., PICO Holdings, Inc. and Physicians Insurance Company of Ohio [Incorporated herein by reference to Exhibit 4.1 to PC Quote's Current Report on Form 8-K, dated October 6, 1998 and filed on October 6, 1998 (the "PC Quote Form 8-K")] Exhibit C - Form of Certificate of Designations of Series A and Series B Preferred Stock of PC Quote [Incorporated herein by reference to Exhibit 4.2 to the PC Quote Form 8-K] Exhibit D - Form of Registration Rights Agreement among PC Quote, Inc., PICO Holdings, Inc. and Physicians Insurance Company of Ohio [Incorporated herein by reference to Exhibit 4.3 to the PC Quote Form 8-K] Exhibit E - Common Stock Purchase Warrant issued to PICO Holdings, Inc. by PC Quote, Inc. on December 18, 1998 Exhibit F - Form of First Amendment to Common Stock Purchase Warrant between PC Quote, Inc. and PICO Holdings, Inc. with respect to Common Stock Purchase Warrant granted on May 5, 1997 [Incorporated herein by reference to Exhibit 4.5 to the PC Quote Form 8-K] Exhibit G - Form of First Amendment to Common Stock Purchase Warrant between PC Quote, Inc. and PICO Holdings, Inc. with respect to Common Stock Purchase Warrant granted on August 8, 1997 [Incorporated herein by reference to Exhibit 4.6 to the PC Quote Form 8-K] Exhibit H - Form of First Amendment to Common Stock Purchase Warrant between PC Quote, Inc. and PICO Holdings, Inc. with respect to Common Stock Purchase Warrant granted on September 22, 1997 [Incorporated herein by reference to Exhibit 4.7 to the PC Quote Form 8-K] 8 9 Exhibit I - Second Amendment to Convertible Subordinated Debenture Due 2001, dated as of September 23, 1998, between Physicians Insurance Company of Ohio and PC Quote, Inc. 9 10 SIGNATURES ---------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: February 5, 1999 PICO HOLDINGS, INC. By: /s/ James F. Mosier ---------------------------------- James F. Mosier, General Counsel and Secretary Date: February 5, 1999 PHYSICIANS INSURANCE COMPANY OF OHIO By: /s/ James F. Mosier ---------------------------------- James F. Mosier, General Counsel and Secretary 10 EX-99.A 2 EXHIBIT 99(A) 1 EXHIBIT A JOINT FILING AGREEMENT ---------------------- In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, the persons named below hereby agree to the joint filing on behalf of each of them of a statement on Schedule 13D (including any amendments thereto) with respect to the shares of Common Stock of PC Quote, Inc. beneficially owned by each of them and further agree that this Joint Filing Agreement be included as an exhibit to such joint filings. IN WITNESS WHEREOF, the undersigned hereby execute this Joint Filing Agreement as of the 5th day of February, 1999. PICO HOLDINGS, INC. By: /s/ James F. Mosier -------------------------------------- James F. Mosier, General Counsel and Secretary PHYSICIANS INSURANCE COMPANY OF OHIO By: /s/ James F. Mosier -------------------------------------- James F. Mosier, General Counsel and Secretary EX-99.E 3 EXHIBIT 99(E) 1 EXHIBIT E Common Stock Purchase Warrant issued to PICO Holdings, Inc. by PC Quote, Inc. on December 18, 1998 2 Common Stock Warrant 3,106,163 Shares THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. Void after April 30, 2005 COMMON STOCK PURCHASE WARRANT THIS CERTIFIES THAT, for value received, PICO HOLDINGS, INC., a California corporation, is entitled to purchase a minimum of Three Million One Hundred Six Thousand One Hundred Sixty-Three (3,106,163) shares of Common Stock of PC QUOTE, INC., a Delaware corporation, at a price per share (the "Warrant Price") equal to $1,575, 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, and any stock into which such Common Stock may hereafter be exchanged. (e) "Company" shall mean PC QUOTE, INC., a Delaware corporation, and any corporation which shall succeed to or assume the obligations of PC QUOTE, INC., under this Warrant. 2 3 (f) "Date of Grant" shall mean December 18, 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 the Company's Common Stock, as described in the Company's Certificate of Incorporation. 2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is issued in consideration for the renegotiation of the terms of a promissory note issued by the Company and held by PICO HOLDINGS, INC. ("PICO") and the purchase of preferred stock in the Company by PICO pursuant to that certain Securities Purchase Agreement (the "Purchase Agreement") dated September 23, 1998 by and among the Company, PICO and PHYSICIANS INSURANCE COMPANY OF OHIO ("PHYSICIANS"). 3. TERM. The purchase right represented by this Warrant is exercisable only during the period commencing upon the Date of Grant and ending on April 30, 2005. 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, to the principal office of the Company and (ii) payment to the Company of an amount equal to the product of the Warrant Price, as adjusted under Section 5, multiplied by the number of Shares then being purchased pursuant to one of the payment methods permitted under Section 4(b) below. (b) METHOD OF PAYMENT. Payment shall be made either (1) by check drawn on a United States bank and for United States funds made payable to the Company, or (2) by wire transfer of United States funds for the account of the Company. (c) NET ISSUE EXERCISE. Notwithstanding any provisions herein to the contrary, in lieu of payment of the exercise price in cash, the Holder may elect to receive Shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with a properly endorsed notice of exercise and notice of such election in which event the Company shall issue to the Holder a number of Shares computed using the following formula: 3 4 Y (A-B) X = ---------------- A Where X = the number of shares of Common Stock to be issued to the Holder, Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation), A = the fair market value of one share of the Company's Common Stock (at the date of such calculation), and B = the Warrant Price, as adjusted. For purposes of the above calculation, fair market value of one Share shall be determined by the Company's Board of Directors in good faith; provided, however, that where there exists a public market for the Company's Common Stock at the time of such exercise, fair market value shall mean the average over the preceding twenty trading days (or such fewer number of days as such public market has existed) of the mean of the closing bid and asked prices on the over-the-counter market as reported by American Stock Exchange, or if the Common Stock is then traded on a national securities exchange other than the American Stock Exchange, the average over the preceding twenty trading days (or such fewer number of days as the Common Stock has been so traded) of the closing sale prices on the principal national securities exchange or the National Market on which it is so traded. (d) DELIVERY OF CERTIFICATE. In the event of any exercise of the purchase right represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within ten days of delivery of the Notice of Exercise and, unless this Warrant has been fully exercised or has expired, a new warrant representing the portion of the Shares with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within such ten day period. (e) NO FRACTIONAL SHARES. No fractional Shares shall be issued in connection with any exercise hereunder, but in lieu of such fractional Shares the Company shall make a cash payment therefor upon the basis of the fair market value per Share as of the date of exercise. 4 5 (f) COMPANY'S REPRESENTATIONS. (i) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer under applicable federal and state securities laws. During the period within which the purchase right represented by this Warrant may be exercised, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of the purchase right represented by this Warrant, a sufficient number of Shares to provide for the exercise of the purchase right represented by this Warrant; (ii) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights; (iii) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be inconsistent with the Company's Certificate of Incorporation or Bylaws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound, or require the registration or filing with or the taking of any action in respect of or by, any federal, state or local government authority or agency (other than such consents, approvals, notices, actions, or filings as have already been obtained or made, as the case may be). 5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of securities issuable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or from time to time on or after the date hereof the holders of the Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock of the Company by way of dividend then, and in each case, the Holder of this Warrant shall, upon the exercise hereof, be entitled to receive, in addition to the number of Shares 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. 5 6 (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 paragraphs (a) and (c); in each such case, the terms of this Section 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 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 shall be combined into a smaller number of Shares, the Warrant Price in effect immediately prior to such combination shall thereby be proportionately increased and the number of Shares receivable upon exercise of the Warrant shall be proportionately decreased. (d) RIGHTS, OPTIONS OR WARRANTS. If the Company issues rights, options or warrants to all holders of its Shares, without any charge to such holders, entitling them (for a period expiring within 45 days after the record date mentioned below in this paragraph (d)) to subscribe for or to purchase Shares at a price per share lower than the then current market price per Share at the record date mentioned below (as defined in paragraph (f) below), the number of Shares thereafter purchasable upon exercise of each Warrant shall be determined by multiplying the number of Shares theretofore purchasable upon exercise of each Warrant by a fraction, of which the numerator shall be the number of Shares outstanding on such record date plus the number of additional Shares offered for subscription or purchase, and of which the denominator shall be the number of Shares outstanding on such record date plus the number of Shares which the aggregate offering price of the total number of Shares so offered would purchase at the then current market price per Share. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective retroactively to immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. (e) OTHER DISTRIBUTIONS. If the Company distributes to all holders of its Shares of stock other than Common Stock or evidences of its indebtedness or assets (excluding cash dividends payable out of consolidated earnings or retained earnings and dividends or distributions referred to in paragraph (a) above) or rights, options or warrants or convertible or exchangeable securities containing the right to subscribe for or purchase Shares (excluding those referenced in Section (2) above), then in each case the number of Shares thereafter issuable upon the exercise of each warrant shall be determined by multiplying the number of Shares theretofore issuable upon the exercise of each Warrant, by a fraction, of which the numerator shall be the current market price per Share (as defined in paragraph (f) below) on the record date mentioned below in this paragraph (e), and of which the denominator shall be the current market price per Share on such record date, less 6 7 the then fair value (as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the shares of stock other than the Common Stock or assets or evidences of indebtedness so distributed or of such subscription rights, options or warrants, or of such convertible or exchangeable securities applicable to one Share. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to immediately after the record date for the determination of stockholders entitled to receive such distribution. (f) CURRENT MARKET PRICE. For the purposes of any computation under paragraphs (d) and (c) of this Section 5, the current market price per Share at any date shall be the average of the daily closing prices for fifteen consecutive trading days commencing twenty trading days before the date of such computation. The closing price for each day shall be the closing sale price or in case no such reported sale takes place on such day, the average of the closing bid and asked prices for such day, in either case on the American Stock Exchange or such other principal national securities exchange or National Market on which the Shares are listed or admitted to trading, or if they are not listed or admitted to trading on any national securities exchange or the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market, but are traded in the over-the-counter market, the average of the representative closing bid and asked quotations for the Common Stock, on the NASDAQ system or any comparable system, or, in case no sale is publicly reported, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers selected by the Company for that purpose. (g) 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 Warrant 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 this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Shares so purchasable immediately thereafter. (h) CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish 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. 7 8 (b) NONASSUMPTION. If upon the closing of any Acquisition the successor entity does not assume the obligations of this Warrant and the Holder has not otherwise exercised this Warrant in full, then the unexercised portion of this Warrant shall be deemed to have been automatically converted pursuant to Section 4(c) and thereafter the Holder shall participate in the acquisition on the same terms as other holders of the same class of securities of the Company. (c) PURCHASE RIGHT. Notwithstanding the foregoing, at the election of the Holder, the Company shall purchase the unexercised portion of this Warrant for cash upon the closing of any Acquisition for an amount equal to (a) the fair market value of any consideration that would have been received by the Holder in consideration of the Shares had the Holder exercised the unexercised portion of this Warrant immediately before the record date for determining the stockholders entitled to participate in the proceeds of the Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event less than zero. 7. NOTICES; INFORMATION; REGISTRATION. (a) NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of Common Stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company's securities for cash, then, in connection with each such event, the Company shall give the Holder (1) at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of Common Stock will be entitled thereto) or in respect of the matters referred to in (c) and (d) above for determining rights to vote, if any; (2) in the case of the matters referred to in (c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of Common Stock will be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights. (b) INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any of the Shares acquired on exercise of this Warrant, 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 underlying this Warrant shall be "Registrable Securities" under that certain Registration Rights Agreement, dated December 18, 1998, among the Company, PICO and PHYSICIANS. 8 9 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 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 9 10 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 California. 10 11 15. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections and Subsections of this Warrant are for convenience only and are not to be considered in construing this Warrant. All pronouns used in this Warrant shall be deemed to include masculine, feminine and neuter forms. 16. ATTORNEYS' FEES. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys' fees. Dated: December 18, 1998. PC QUOTE, INC., a Delaware corporation By: /s/ Jim R. Porter -------------------------------------- Jim R. Porter, Chairman of the Board and Chief Executive Officer By: /s/ John E. Juska -------------------------------------- John E. Juska, Secretary 11 12 EXHIBIT A NOTICE OF EXERCISE ------------------ TO: PC QUOTE, INC. 1. The undersigned Holder of the attached Common Stock Purchase Warrant hereby elects to exercise its purchase right under such Warrant with respect to ________________ Shares, as defined in the Warrant. 2. The undersigned Holder elects to pay the aggregate Warrant Price for such Shares (the "Exercise Shares") in the following manner: [ ] by the enclosed check drawn on a United States bank and for United States funds made payable to the Company in the amount of $_____________; [ ] by wire transfer of United States funds to the account of the Company in the amount of $___________, which transfer has been made before or simultaneously with the delivery of this Notice pursuant to the instructions of the Company; or [ ] pursuant to the Net Exercise provisions set forth in Section 4(c) of the Warrant. 3. Please issue a stock certificate or certificates representing the appropriate number of Shares in the name of the undersigned or in such other names as is specified below: Name: _______________________________ Address:_____________________________ _____________________________________ _____________________________________ TIN:_________________________________ HOLDER: By:__________________________________ Name: Title: Date: _______________________ EX-99.I 4 EXHIBIT 99(I) 1 EXHIBIT I Second Amendment to Convertible Subordinated Debenture Due 2001, dated as of September 23, 1998, between Physicians Insurance Company of Ohio and PC Quote, Inc. 2 SECOND AMENDMENT TO CONVERTIBLE SUBORDINATED DEBENTURE DUE 2001 THIS SECOND AMENDMENT TO CONVERTIBLE SUBORDINATED DEBENTURE DUE 2001 is entered into as of this 23rd day of September, 1998, by and between PHYSICIANS INSURANCE COMPANY OF OHIO, an Ohio corporation ("Physicians"), and PC QUOTE, INC., a Delaware corporation (the "Company"). RECITALS -------- A. Physicians is the holder of that certain Convertible Subordinated Debenture Due 2001, in the principal amount of $2,500,000, plus accrued interest, issued by the Company on November 14, 1996, as amended by the First Amendment to Convertible Subordinated Debenture Due 2001 and Debenture Agreement, dated May 5, 1997, and as further amended by Amendments Nos. 1-4 of the First Amendment to Convertible Subordinated Debenture Due 2001 and Debenture Agreement. The Convertible Subordinated Debenture Due 2001, as amended, is hereinafter referred to as the "Debenture." B. Concurrently herewith, the Company, Physicians and PICO Holdings, Inc., are entering into a Securities Purchase Agreement, pursuant to which certain debt obligations of the Company held by Physicians and PICO Holdings, Inc. will be converted into equity. C. As additional consideration for Physicians entering into the Securities Purchase Agreement, the Company has agreed to amend the conversion provisions of the Debenture as provided in this Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth herein and in the Debenture, and for other good and valuable consideration, the receipt and sufficiency which is hereby acknowledged, the parties hereto agree as follows: 1. The fourth full paragraph of page 2 of APPENDIX A of the Debenture, is hereby amended and restated in its entirety as follows: The registered holder of this Debenture has the right, at its option, at any time on or prior to the later to occur of the close of business on April 30, 1999 or the full payment of this Debenture, to convert the principal amount hereof, plus all accrued interest as of the date of such conversion (collectively, the "Debenture Balance"), into the number of fully paid and nonassessable shares of Series A Preferred Stock of the Company determined by dividing the following by 100: the number calculated from the division of the Debenture Balance by the lowest of the following numbers (i) 1.5625, (ii) the closing sale price of the Company's Common 3 Stock as reported by the American Stock Exchange ("AMEX") one day prior to the conversion date (the "AMEX Closing Price") or (iii) the average AMEX Closing Price of the Company's Common Stock over the 20-day period immediately preceding the conversion date (the "Average AMEX Price"). The number resulting from the above calculation which is to be divided by 100 is hereinafter referred to as the "Conversion Price." Such conversion shall require surrender of this Debenture to the Company at its executive offices accompanied by written notice of conversion duly executed. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares prior to conversion, the Conversion Price shall be proportionately reduced and the number of shares of Common Stock obtainable upon conversion shall be proportionately increased. If the Company at any time combines (by reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares prior to conversion, the Conversion Price shall be proportionately increased and the number of shares of Common Stock obtainable upon conversion shall be proportionately decreased. The Company shall not issue fractional shares or script representing fractions of shares of Common Stock upon any such conversion, but shall make an adjustment therefor in cash on the basis of the current market value of such fractional interest. In the case of consolidation, merger, or sale or transfer of substantially all of the Company's assets with, into or to any person or entity or related group of persons or entities which is not a subsidiary of the Company, the Conversion Price shall be proportionately adjusted and the number of shares of Common Stock obtainable upon conversion shall be proportionately adjusted so that the rights of the holder hereof shall be equitably preserved. Notwithstanding, anything to the contrary contained in this Debenture, in no event will there be any adjustment in the Conversion Price or the number of shares of Common Stock deliverable upon conversion upon the Company's rights offering contemplated by the Agreement. 2. Except as expressly provided herein, all of the terms and provisions of the Debenture shall remain in full force and effect. 3. The provisions of this Amendment shall be performed and interpreted in accordance with the laws of the State of Illinois without reference to conflicts of laws principles. 4. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. -3- 4 IN WITNESS WHEREOF, the parties have executed this Second Amendment to Convertible Subordinated Debenture Due 2001 as of the date first above written. PC QUOTE, INC. By: /s/ John E. Juska -------------------------------------- Name: John E. Juska Title: Chief Financial Officer PHYSICIANS INSURANCE COMPANY OF OHIO By: /s/ James F. Mosier -------------------------------------- Name: James F. Mosier Title: Secretary -4- -----END PRIVACY-ENHANCED MESSAGE-----