Document:

Exhibit
10.1

 

EXECUTION
COPY

 

AMENDMENT
NO. 1 TO THIRD AMENDED AND RESTATED

CREDIT AND REIMBURSEMENT
AGREEMENT

 

Dated as of August 10,
2004

 

AMENDMENT NO.
1 TO THIRD AMENDED AND RESTATED CREDIT AND REIMBURSEMENT AGREEMENT (this “Amendment”) among The AES Corporation, a
Delaware corporation (the “Borrower”),
the Subsidiary Guarantors, the Bank Parties, CITICORP USA, INC., as
administrative agent (the “Agent”)
and CITIBANK, N.A., as Collateral Agent, for the Bank Parties (the “Collateral Agent”).  

 

PRELIMINARY
STATEMENTS

 

(1)           WHEREAS,
the Borrower is party to a Third Amended and Restated Credit and Reimbursement
Agreement dated as of March 17, 2004 (as amended, amended and restated,
supplemented or otherwise modified up to the date hereof, the “Credit Agreement”; capitalized terms used
herein but not defined shall be used herein as defined in the Credit Agreement)
among the Subsidiary Guarantors, the Bank Parties, CITIGROUP GLOBAL MARKETS,
INC., as Lead Arranger and Book Runner, BANC OF AMERICA SECURITIES LLC, as Lead
Arranger and Book Runner and as Co-Syndication Agent (for the Initial Term Loan
Facility), DEUTSCHE BANK SECURITIES INC., as Lead Arranger and Book Runner (for
the Initial Term Loan Facility), UNION BANK OF CALIFORNIA, N.A., as
Co-Syndication Agent (for the Initial Term Loan Facility) and as Lead Arranger
and Book Runner and as Syndication Agent (for the Revolving Credit Facility),  LEHMAN COMMERCIAL PAPER INC.,  as Co-Documentation Agent (for the Initial
Term Loan Facility), UBS SECURITIES LLC, as Co-Documentation Agent (for the
Initial Term Loan Facility), SOCIÉTÉ GÉNÉRALE, as Co-Documentation Agent (for
the Revolving Credit Facility), CREDIT LYONNAISE NEW YORK BRANCH, as
Co-Documentation Agent (for the Revolving Credit Facility), the Administrative
Agent and the Collateral Agent;

 

(2)           WHEREAS,
the Borrower has requested that the Bank Parties agree to amend the Credit
Agreement;

 

(3)           WHEREAS,
the Bank Parties have agreed, subject to the terms and conditions hereinafter
set forth, to amend the Credit Agreement in certain respects as set forth
below.

 

NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the sufficiency and receipt of all
of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1.           Amendments to
the Credit Agreement.  The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 2, hereby amended as
follows:

 

 

(a)           Section 1.01 of the Credit Agreement
is hereby amended as follows:

 

(i)            The following definitions shall be added in alphabetical
order to read as follows:

 

“Amendment No. 1”
means Amendment No. 1 to this Agreement, dated as of August __, 2004, among the
Borrower, the Subsidiary Guarantors, the Bank Parties, the Agent and the
Collateral Agent.

 

“Initial Term Loan Amendment Effective Date”
means the date that Amendment No. 1 to this Agreement becomes effective in
accordance with Sections 2(a) and 2(c) of Amendment No. 1.

 

“Permitted Business”
means, with respect to any Person, (i) a line of business which is
substantially the same line of business as one or more of the principal
businesses of such Person and its Subsidiaries, (ii) a line of business which
is complementary or ancillary to, one or more of the principal businesses of
such Person and its Subsidiaries, (iii) any infrastructure business, (iv) any
public utility business and (v) the ownership, extraction, processing,
transportation, distribution and sales of fossil fuels and derivatives thereof,
but, in each case, excluding trading activities or hedging transactions, other
than (x) such activities conducted in the ordinary course of business, (y) such
activities conducted in a manner consistent with past practices and (z) such activities
or transactions intended to enhance the performance of physical assets.

 

(ii)           The definition of “Base Rate Margin” in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“Base Rate Margin”
means (i) in respect of the Revolving Credit Loans, a rate per annum equal to
1.50% (subject to the provisions of Section 2.06(f) hereof), (ii) in respect of
the Initial Term Loans, a rate per annum equal to 1.25% (subject to the
provisions of Section 2.06(f) hereof), and (iii) in respect of the Incremental
Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent
and the Incremental Term Loan Banks.

 

(iii)          The definition of “Euro-Dollar Margin”
in Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“Euro-Dollar Margin”
means (i) in respect of the Revolving Credit Loans, a rate per annum equal to
2.50% (subject to the provisions of Section 2.06(f) hereof), (ii) respect of
the Initial Term Loans, a rate per annum equal to 2.25% (subject to the
provisions of Section 2.06(f) hereof) and (iii) in respect of the Incremental
Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent
and the Incremental Term Loan Banks.

 

(iv)          The definition of “Revolving Letter of Credit Commission Rate” in Section 1.01 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:

 

2

 

“Revolving Letter of
Credit Commission Rate” means a rate per annum equal to 2.50%.

 

(v)           The definition of “Termination Date” in
Section 1.01 of the Credit Agreement is hereby amended by amending and
restating clause (ii) therein to read as follows:

 

“(ii) the seventh anniversary
of the Initial Term Loan Amendment Effective Date, in the case of the Initial
Term Loan Facility (the “Initial Term Loan
Termination Date”) and”

 

(b)           Section 5.04 of the Credit Agreement
is hereby amended by amending and restating clause (a) therein in its entirety
to read as follows:

 

“(a) will continue, and will
cause each of AES BVI II, the Material AES Entities and the Pledged
Subsidiaries to continue, to engage in a Permitted Business;”

 

(c)           Section 5.13 of the Credit Agreement
is hereby amended by inserting the phrase “and thereafter” immediately after
the date “March 31, 2008” therein.

 

(d)           Section 5.14 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:

 

“The Borrower will maintain at the end of each fiscal
quarter of the Borrower, a Recourse Debt to Cash Flow Ratio of not more than
the ratio set forth below for each period set forth below:

 

	
  Four Fiscal Quarter Ending

  	
   

  	
  Maximum
  Recourse Debt

  to Cash Flow Ratio

  
	
  December 31, 2003

  	
   

  	
  8.5

  
	
  March 31, 2004

  	
   

  	
  8.5

  
	
  June 30, 2004

  	
   

  	
  8.5

  
	
  September 30, 2004

  	
   

  	
  8.5

  
	
  December 31, 2004

  	
   

  	
  8.5

  
	
  March 31,2005

  	
   

  	
  8.35

  
	
  June 30, 2005

  	
   

  	
  8.25

  
	
  September 30, 2005

  	
   

  	
  8.15

  
	
  December 31, 2005

  	
   

  	
  8.00

  
	
  March 31, 2006

  	
   

  	
  7.90

  
	
  June 30, 2006

  	
   

  	
  7.85

  
	
  September 30, 2006

  	
   

  	
  7.80

  
	
  December 31, 2006

  	
   

  	
  7.75

  
	
  March 31, 2007

  	
   

  	
  7.70

  
	
  June 30, 2007

  	
   

  	
  7.65

  
	
  September 30, 2007

  	
   

  	
  7.60

  
	
  December 31, 2007

  	
   

  	
  7.55

  
	
  March 31, 2008

  	
   

  	
  7.50

  
	
  June 30, 2008

  	
   

  	
  7.50

  

 

3

 

	
  September 30, 2008

  	
   

  	
  7.50

  
	
  December 31, 2008

  	
   

  	
  7.25

  
	
  March 31, 2009

  	
   

  	
  7.25

  
	
  June 30, 2009

  	
   

  	
  7.25

  
	
  September 30, 2009

  	
   

  	
  7.25

  
	
  December 31, 2009

  	
   

  	
  7.00

  
	
  March 31, 2010

  	
   

  	
  7.00

  
	
  June 30, 2010

  	
   

  	
  7.00

  
	
  September 30, 2010

  	
   

  	
  7.00

  
	
  December 31, 2010

  	
   

  	
  6.50

  
	
  March 31, 2011

  	
   

  	
  6.50

  
	
  June 30, 2011 and
  thereafter

  	
   

  	
  6.25

  

 

(e)           Section 5.16(a)(x) of the Credit Agreement
is hereby amended by amending and restating clause (B) therein in its entirety
to read as follows:

 

“(B) such Investment shall be in property and assets,
or in the Equity Interests of a Person owning property and assets, which are
part of a Permitted Business; and”

 

(f)            Section 5.18 of the Credit Agreement
is hereby amended by adding at the end of clause (iii) therein the following
proviso to read as follows:

 

“; provided,
further, however, that for the avoidance of doubt,
the transfer of AES GEH Holdings, LLC’s ownership interest in Global Energy
Holdings CV to AES GEH, Inc. and the subsequent dissolution of AES GEH
Holdings, LLC is permitted hereunder;”

 

SECTION 2.           Conditions to
Effectiveness.

 

(a)           Except to the extent set forth in
Sections 2(b) and (c) below, this Amendment shall become
effective when, and only when, and as of the date (the “Amendment
No. 1 Effective Date”) on which the
Agent shall have received counterparts of this Amendment executed by the
Borrower and each of the Subsidiary Guarantors and the Required Banks or, as to
any of the Required Banks, advice satisfactory to the Agent that such Bank
Party has executed this Amendment and (i) when, and only when, the Agent shall
have additionally received a certificate signed by a duly
authorized officer of the Borrower dated the Amendment No. 1 Effective Date, to
the effect that, after giving effect to this Amendment: (x) the
representations and warranties contained in each of the Financing Documents are
true and correct in all material respects on and as of the Amendment No. 1
Effective Date as though made on and as of such date (unless stated to relate
solely to an earlier date, in which case such representations and warranties
are true and correct in all material respects as of such earlier date); and
(y) no Default has occurred and is continuing, (ii) the Agent shall have received a
favorable opinion of the Assistant General Counsel of the Borrower regarding
the due authorization, execution and delivery of this Amendment and other
matters reasonably requested by the Agent and (iii) the Agent shall have received all fees due and payable
in connection with this Amendment and the

 

4

 

Agent
shall have received payment of all accrued fees and expenses of the Agent
(including the reasonable and accrued fees of counsel to the Agent invoiced on
or prior to the date hereof).

 

(b)           Section 1(a)(iv) and, solely to the
extent relating to Revolving Credit Loans, Sections 1(a)(ii) and 1(a)(iii) of
this Amendment shall become effective (i) when,
and only when, and as of the date (the “Revolver
Pricing Effective Date”) on which the
Agent shall have received counterparts of this Amendment executed by the
Borrower and each of the Subsidiary Guarantors and all of the Revolving Credit
Loan Banks or, as to any of the Revolving Credit Loan Banks, advice
satisfactory to the Agent that such Bank Party has executed this Amendment,
(ii) the Revolving Credit Loan Banks shall have received all fees due and
payable in connection with this Amendment and (iii) the Agent shall have
received a certificate signed by a duly authorized officer of the
Borrower dated the Revolver Pricing Effective Date, to the effect that, after
giving effect to this Amendment: (x) the representations and warranties
contained in each of the Financing Documents are true and correct in all
material respects on and as of the Revolver Pricing Effective Date as though
made on and as of such date (unless stated to relate solely to an earlier date,
in which case such representations and warranties are true and correct in all
material respects as of such earlier date); and (y) no Default has
occurred and is continuing.

 

(c)           The first two definitions in Section 1(a)(i), Section
1(a)(v), Sections 1(c) and 1(d), and, solely to the extent relating to the
Initial Term Loans, Sections 1(a)(ii) and 1(a)(iii) of this Amendment shall
become effective (i) when, and only when, and as of the date (the “Initial Term Loan Amendment Effective Date”) on which the Agent shall have received counterparts of this
Amendment executed by the Borrower and each of the Subsidiary Guarantors and
all of the Initial Term Loan Banks or, as to any of the Initial Term Loan
Banks, advice satisfactory to the Agent that such Bank Party has executed this
Amendment and (ii) the Agent shall have received a
certificate signed by a duly authorized officer of the Borrower dated the
Initial Term Loan Amendment Effective Date, to the effect that, after giving
effect to this Amendment: (x) the representations and warranties contained
in each of the Financing Documents are true and correct in all material
respects on and as of the Initial Term Loan Amendment Effective Date as though
made on and as of such date (unless stated to relate solely to an earlier date,
in which case such representations and warranties are true and correct in all
material respects as of such earlier date); and (y) no Default has
occurred and is continuing.

 

This Amendment is subject to the provisions of Section
10.05 of the Credit Agreement.

 

SECTION 3.           Representations
and Warranties.  The
Borrower represents and warrants as follows:

 

(a)           The representations and warranties
contained in each of the Financing Documents are correct in all material
respects on and as of the date of this Amendment, as though made on and as of
such date (unless stated to relate solely to an earlier date, in which case
such representations and warranties are true and correct in all material
respects as of such earlier date).

 

(b)           No
Default has occurred and is continuing on the date hereof.

 

5

 

SECTION 4.           Reference to and
Effect on the Financing Documents. 
(a) On and after the Amendment No. 1 Effective Date, the Revolver
Pricing Effective Date or the Initial Term Loan Amendment Effective Date, as
applicable, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit
Agreement, and each reference in the Notes and each of the other Financing
Documents to “the Agreement”, “thereunder”, “thereof”, or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement, as amended and
otherwise modified hereby.

 

(b)           The Credit Agreement, the Notes and
each of the other Financing Documents, as specifically amended by this
Amendment, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. 
Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Financing
Documents, in each case as amended by this Amendment.

 

(c)           The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of the Credit Agreement or
the other Financing Documents, nor constitute a waiver of any provision of the
Credit Agreement or the other Financing Documents.

 

SECTION 5.           Affirmation of
Subsidiary Guarantors.  Each
Subsidiary Guarantor hereby consents to the amendments to the
Credit Agreement effected hereby, and hereby confirms and
agrees that, notwithstanding the effectiveness of this Amendment, the obligations
of such Subsidiary Guarantor contained in Article IX of the Credit Agreement,
as amended hereby, or in any other Financing Documents to which it is a party
are, and shall remain, in full force and effect and are hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of this
Amendment, each reference in Article IX of the Credit Agreement and in each of
the other Financing Documents to “the
Agreement”, “thereunder”,
“thereof” or words of like import
shall mean and be a reference to the Credit Agreement, as amended by this
Amendment.  Without limiting the
generality of the foregoing, the Collateral Documents to which such Subsidiary
Guarantor is a party and all of the Collateral described therein do, and shall
continue to secure, payment of all of the Secured Obligations (in each case, as
defined therein).

 

SECTION 6.           GOVERNING LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.           WAIVER OF JURY
TRIAL.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AMENDMENT OR THE ACTIONS OF THE COLLATERAL TRUSTEES OR THE AGENT IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

 

6

 

SECTION 8.           Execution in
Counterparts.  This Amendment
may be executed by one or more of the parties to this Amendment on any number
of separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

 

SECTION 9.           Costs and
Expenses.  The Borrower hereby agrees to pay all
reasonable costs and expenses associated with the preparation, execution,
delivery, administration, and enforcement of this Amendment, including, without
limitation, the fees and expenses of the Collateral Trustees’ and the Agent’s
counsel and other out-of-pocket expenses related hereto.  Delivery of an executed counterpart of a
signature page to this Amendment by telecopier shall
be effective as delivery of a manually executed counterpart of this Amendment.

 

7

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed and delivered by
their respective proper and duly authorized officers as of the day and year
first above written.

 

 

	
  THE AES CORPORATION,

  	
   

  
	
  as Borrower

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Barry J. Sharp

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Address:

  	
  1001 North 19th Street

  	
   

  
	
   

  	
  Arlington, VA 22209

  	
   

  
	
  Fax:

  	
  (703) 528-4510

  	
   

  
					

 

 

	
  SUBSIDIARY
  GUARANTORS:

  	
   

  
	
   

  	
   

  
	
  AES HAWAII MANAGEMENT
  COMPANY, INC.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  
	
  By 

  	
  Willard C. Hoagland, III

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AES NEW YORK FUNDING,
  L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  
	
  By

  	
  Willard C. Hoagland,
  III

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AES OKLAHOMA HOLDINGS,
  L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  
	
  By

  	
  Willard C. Hoagland,
  III

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AES WARRIOR RUN
  FUNDING, L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  
	
  By

  	
   Willard C. Hoagland, III

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
					

 

 

AGENTS:

 

	
  CITICORP USA, INC.,

  	 

	
  as Agent

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
  By 

  	
  /s/ Stuart Glen

  	
   

  	 

	
   

  	
  Title:

  	
   

  	 

	
   

  	
  Address:

  	
  388 Greenwich Street,
  21st Floor

  	 

	
   

  	
   

  	
  New York, NY 10013

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  Fax:

  	
  (212) 816-8098

  	 

	
   

  	
  Attention:

  	
  Stuart Glen

  	 

	
   

  	
  Email:

  	
  oploanswebadmin@citigroup.com

  	 

	
   

  
	
   

  
	
  CITIBANK N.A.,

  
	
  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   /s/ Stuart Glen

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
  388 Greenwich Street,
  21st Floor

  
	
   

  	
   

  	
  New York, NY 10013

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
  (212) 816-8098

  
	
   

  	
  Attention:

  	
  Stuart GlenExhibit 10.1

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

	
  $1,500,000

  	
   

  	
  November 2, 2004

  

 

FOR
VALUE RECEIVED, the undersigned, Hyperfeed Technologies, Inc., a Delaware
corporation (“Borrower”),
hereby promises to pay to PICO Holdings, Inc., a California corporation (“Lender”), the
principal sum or so much of the principal sum of One Million Five Hundred
Thousand Dollars ($1,500,000) as may from time to time have been advanced and
be outstanding, together with accrued interest as provided herein.  Section M of this Secured Convertible
Promissory Note (herein after the “Note”) contains certain defined terms used in
this Note.

 

A.                                   Principal.

 

1.                                       Advances.  Borrower may from time to time request
advances from Lender (individually an “Advance” and collectively the “Advances”) by giving
written notice to Lender in accordance with the terms hereof, which notice
shall indicate the amount of the Advance requested and the proposed use of the
Advance proceeds.  Provided that no Event
of Default is in existence and that the requested Advance would not cause an
Event of Default to occur, Lender shall make the Advance to Borrower within
five (5) days of receipt of Borrower’s notice. 
Lender shall not be obligated to make an Advance to the extent that such
Advance when aggregated with all Advances would exceed One Million Five Hundred
Thousand Dollars ($1,500,000) in the aggregate. 
Borrower shall not have the right to re-borrow any Advance to the extent
that it has been repaid.

 

2.                                       Use of
Proceeds.  The proceeds of
Advances shall be used exclusively for working capital and operating expenses
of the Borrower, and may not be used for payment of the Senior Indebtedness (as
defined below).

 

B.                                     Interest.  Interest on the unpaid principal balance of
this Note shall accrue at the rate of eight percent (8%) per annum compounded
monthly commencing on the date Lender first makes an Advance to Borrower, and
shall be payable in a single installment at maturity as set forth below.

 

C.                                     Payment.

 

1.                                       Scheduled
Payment.  Subject to the
provisions of Section C.4. below, the entire unpaid balance of principal
(subject to conversion of such principal as provided below) and all accrued and
unpaid interest shall be due and payable on the day prior to the first
anniversary of the date hereof (the “Maturity Date”). Payment of principal and
interest hereunder shall be made by check delivered to the Lender at the
address furnished to the Borrower for that purpose.

 

2.                                       Prepayment.  Subject to the provisions of Section C.4.
below, Borrower shall have the right at any time and from time to time to
prepay, in whole or in part, the principal of this Note, without payment of any
premium or penalty.  Any principal
prepayment shall be

 

 

accompanied by a payment of all
interest accrued on the amount prepaid through the date of such prepayment.

 

3.                                       Form of
Payment.  Principal and interest and all
other amounts due hereunder are to be paid in lawful money of the United States
of America in federal or other immediately available funds.

 

4.                                       Notice Prior
to Repayment. 
Borrower shall provide Lender with ten (10) business days prior written
notice of its intention to make repayment of this Note, whether before or after
the Maturity Date, so that Lender may elect, in its sole discretion, to
exercise its Conversion Rights (as defined herein).

 

D.                                    Conditions
of Advances.

 

1.                                       Conditions
Precedent to Initial Advance. 
The obligation of Lender to make the initial Advance is subject to the
condition precedent that Lender shall have received, in form and substance
satisfactory to Lender, the following:

 

(a)                                  this Note;

 

(b)                                 a
certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Note;

 

(c)                                  UCC National
Form Financing Statement;

 

(d)                                 payment of
the fees and Lender Expenses in the amount of $9659.00;

 

(e)                                  to provide
evidence of insurance which satisfies the requirements of Section 7 hereof; and

 

(f)                                    a stock
certificate representing the number of shares of Common Stock of the Borrower
equal to: (1) $75,000;  divided by (2)
the price per share of the Common Stock of the Borrower on the date of this
Note (such shares the “Commitment
Shares”) .

 

(g)                                 such other
documents, and completion of such other matters, as Lender may reasonably deem
necessary or appropriate.

 

2.                                       Conditions
Precedent to all Advances. 
The obligation of Lender to make any Advance, is further subject to the
following conditions:

 

(a)                                  the
representations and warranties contained herein shall be true and correct in
all material respects on and as of the date of such request for Advance and on
the effective date of each Advance as though made at and as of each such date,
and no Event of Default shall have occurred and be continuing, or would exist
after giving effect to such Advance (provided, however, that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such date).  The making of each

 

2

 

Advance shall be deemed to be a
representation and warranty by Borrower on the date of such Advance as to the
material accuracy of the facts referred to in this Section.

 

(b)                                 Borrower has
borrowed the maximum amount permissible under the Senior Loan Documents (as
defined below), as amended, such amount has been outstanding for at least forty
five (45) days and Borrower has provided evidence of the foregoing reasonably
satisfactory to Lender.  Lender may waive
the requirements of this Section D.2.(b) by providing writing of such waiver to
Borrower.

 

(c)
                               Borrower’s
tangible net worth, as determined in accordance with U.S. general accepted
accounting principals, at the end of the calendar month prior such Advance, is
at least $3,000,000.

 

(d)                                 Borrower’s
ratio of EBITDA (earnings before interest, taxes, depreciation and
amortization) to debt service at the end of the calendar month prior to such
Advance is at least 3.00 to 1.00.

 

Notwithstanding the foregoing, Lender may waive
the requirements of Section D.2.(c) and Section D.2.(d) by providing writing of
such waiver to Borrower.

 

E.                                      Security
Interest.

 

1.                                       Grant of
Security Interest. 
Borrower grants and pledges to Lender a continuing security interest in
all presently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all Secured Obligations and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents. Such security interest constitutes a valid, perfected
security interest in the presently existing Collateral, and will constitute a
valid, perfected security interest in Collateral acquired after the date hereof
in each case, subject to any Lien permitted hereunder and Permitted Liens.

 

F.                                      Subordination.  Except as provided in the immediately
following sentence, for so long as no event of default on the Senior
Indebtedness (as defined below) has occurred and is continuing, Borrower shall
make no payment of principal on account of the Senior Indebtedness until prior
payment in full of the Secured Obligations. 
Notwithstanding the preceding sentence, if for any period the Borrower
does not maintain (1) tangible net worth, as determined in accordance with U.S.
general accepted accounting principals (as determined as the end of each
calendar month) of at least $3,000,000 and (2) a ratio of EBITDA (earnings
before interest, taxes, depreciation and amortization) to debt service (as
determined at the end of each calendar month) of at least 3.00 to 1.00,
Borrower shall not be prohibited hereunder from making  payments of principal on account of the
Senior Indebtedness prior to payment in full of the Secured Obligations during
such period.  After, and during the
continuance of, an event of default on the Senior Indebtedness, the
indebtedness evidenced by this Note is expressly subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness of
Borrower.

 

1.                                       Definition
of Senior Indebtedness.  “Senior Indebtedness”
means the principal of (and premium, if any), unpaid interest on and amounts
reimbursed, fees, expenses, costs of

 

3

 

enforcement and other amounts
due in connection with any indebtedness of Borrower with respect to that
certain Promissory Note and that certain Security Agreement, each dated as of
June 1, 2004, by and between Borrower and Lakeside Bank (the “Senior Loan Documents”).

 

2.                                       Insolvency
Proceedings. 
If there shall occur any receivership, insolvency, assignment for the
benefit of creditors, bankruptcy, reorganization, or arrangements with
creditors (whether or not pursuant to bankruptcy or other insolvency laws),
sale of all or substantially all of the assets, dissolution, liquidation, or
any other marshaling of the assets and liabilities of Borrower, no amount shall
be paid by Borrower in respect of the principal of, interest on or other
amounts due with respect to this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be paid in full.

 

3.                                       Subrogation.  After, and during the continuance of, an
event of default on the Senior Indebtedness, subject to the payment in full of
all Senior Indebtedness, Lender’s rights under this Note shall be subrogated to
the rights of the holder(s) of such Senior Indebtedness (to the extent of the
payments or distributions made to the holder(s) of such Senior Indebtedness
pursuant to the provisions of this Section) to receive payments and
distributions of assets of  Borrower
applicable to the Senior Indebtedness. 
No such payments or distributions applicable to the Senior Indebtedness
shall, as between Borrower and its creditors, other than the holders of Senior
Indebtedness and Lender, be deemed to be a payment by Borrower to or on account
of this Note; and for purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness to which Lender would
be entitled except for the provisions of this Section shall, as between
Borrower and its creditors, other than the holders of Senior Indebtedness and
Lender, be deemed to be a payment by Borrower to or on account of the Senior
Indebtedness.

 

G.                                     Representations
and Warranties. 
Borrower represents and warrants to Lender that:

 

1.                                       Collateral.  Borrower is the true and lawful owner of the
Collateral, having good and marketable title thereto, free and clear of any and
all Liens other than Liens and security interests granted to Lender hereunder
and the Permitted Liens set forth on the Schedule.  Borrower shall not create or assume or permit
to exist any such Lien on or against any of the Collateral except as created or
permitted by the Loan Documents and Permitted Liens, and Borrower shall
promptly notify Lender of any such other Lien against the Collateral and shall
defend the Collateral against, and take all such action as may be necessary to
remove or discharge, any such Lien.

 

2.                                       Due
Authorization; No Conflict. 
The execution, delivery, and performance of the Loan Documents are
within Borrower’s powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower’s
Certificate of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound.  Borrower is not in
default under any material agreement to which it is a party or by which it is
bound.

 

3.                                       Intellectual
Property Collateral. 
Borrower is the sole owner of the Intellectual Property Collateral,
except for non-exclusive licenses granted by Borrower to its customers in the

 

4

 

ordinary course of
business.  No part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim, to the knowledge of Borrower, has been made that any part
of the Intellectual Property Collateral violates the rights of any third
party.  Except as set forth in the
Schedule of Exceptions, Borrower is not a party to, or bound by, any agreement
that restricts the grant by Borrower of a security interest in Borrower’s
rights under such agreement.

 

4.                                       Name;
Location of Chief Executive Office. 
Except as set for in this Section 4, Borrower has not done business
under any name other than that specified on the signature page hereof and under
the names of PCQuote.com and PCQuote, Inc. (through June 30, 2003) and under
the name of HyperWare, Inc since June 30, 2003. 
The chief executive office of Borrower is located at the address listed
in Section M.3. hereof.  All of Borrower’s
inventory and equipment are located at the 
address located in Section M.3 and the addresses in New York (50
Broadway, Suite 2900, New York, NY 
10004), California (388 Market St, Suite 1050, San Francisco, CA  94111), Aurora (600 N. Commons Drive, Suite
100, Aurora, IL  60504 and 4313 Western
Avenue, Lisle, IL 60532.

 

5.                                       Litigation.  There are no actions or proceedings pending
by or against Borrower before any court or administrative agency in which an
adverse decision could have a material adverse effect on the business assets or
financial condition of Borrower, or a material adverse effect on Borrower’s
interest or Lender’s security interest in the Collateral (collectively, a “Material
Adverse Effect”).

 

6.                                       Solvency,
Payment of Debts. 
Borrower is solvent and able to pay its debts (including trade debts) as
they mature.

 

7.                                       Taxes.  Borrower has filed or caused to be filed all
tax returns required to be filed by Borrower, and has paid, or has made
adequate provision for the payment of, all taxes reflected in such tax returns.

 

8.                                       Government
Consents.  Borrower has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for, and the absence of which would not cause a material adverse
effect upon, the continued operation of Borrower’s business as currently
conducted.

 

H.                                    Affirmative
Covenants. Borrower covenants and agrees that, until payment in full
of all Secured Obligations, and until such time that Lender has no further
obligation to make an Advance, Borrower shall do all of the following

 

1.                                       Repayment of
Other Indebtedness. 
Borrower hereby agrees that it will not make any payment of principal in
connection with the Senior Indebtedness, or permit any of its subsidiaries to
make any such payment, except in accordance with Section F hereof.  With respect to indebtedness other than the
Senior Indebtedness, Borrower hereby agrees that it will not repay any
indebtedness, or permit any of its subsidiaries to make any such payment,
incurred after the date hereof.

 

5

 

2.                                       Perfection
of Security Interest. 
Borrower agrees to take all actions requested by Lender and reasonably
necessary to perfect, to continue the perfection of, and to otherwise give
notice of, the Lien granted hereunder, including, but not limited to, execution
of financing statements.

 

3.                                       Good
Standing.  Borrower shall
maintain its corporate existence in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to be so
qualified could have a Material Adverse Effect upon the Borrower.   Borrower shall maintain in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.

 

4.                                       Government
Compliance. 
Borrower shall meet the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA.  Borrower shall comply with all statutes,
laws, ordinances and government rules and regulations to which it is subject,
noncompliance with which could have a Material Adverse Effect.

 

5.                                       Financial
Statements, Reports, Certificates. 
Borrower shall deliver to Lender such budgets, projections, operating
plans, financial statements and other financial information as Lender may
reasonably request from time to time, including, but not limited to monthly
variance reports and monthly cash flow reports.

 

6.                                       Taxes.  Borrower shall make due and timely payment or
deposit of all federal and state income taxes, and all other material local
taxes, assessments, or contributions required of it by law.

 

7.                                       Insurance.

 

(a)                                  Borrower, at
its expense, shall keep the Collateral insured against loss or damage in such
amounts as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrower’s business is conducted on the date
hereof.  Borrower shall also maintain
insurance relating to Borrower’s business, ownership and use of the Collateral
in amounts and of a type that are customary to businesses similar to Borrower’s.

 

(b)                                 All such
policies of insurance shall be in such form, with such companies, and in such
amounts as are reasonably satisfactory to Lender.  Subject to the Lien in favor of the Senior
Indebtedness, all such policies of property insurance shall contain a lender’s
loss payable endorsement, in a form satisfactory to Lender, showing Lender as
an additional loss payee thereof, and all liability insurance policies shall
show Lender as an additional insured and shall specify that the insurer must
give at least twenty (20) days notice to Lender before canceling its policy for
any reason.  Upon Lender’s request,
Borrower shall deliver to Lender certified copies of such policies of insurance
and evidence of the payments of all premiums therefor.  All proceeds payable under any such policy
shall, at the option of Lender, be payable to Lender to be applied on account
of the obligations under the Loan Documents.

 

8.                                       Registration
of Intellectual Property Rights.

 

(a)                                  (intentionally
left blank)

 

6

 

(b)                                 Borrower
shall (i) protect, defend and maintain the validity and enforceability of
the Trademarks, Patents and Copyrights which are necessary to the conduct of
its business, (ii) use its reasonable efforts to detect infringements of
the Trademarks, Patents and Copyrights and promptly advise Lender in writing of
infringements detected and (iii) not allow any Trademarks, Patents or
Copyrights to be abandoned, forfeited or dedicated to the public without the
written consent of Lender, which shall not be unreasonably withheld.

 

(c)                                  Lender may
audit Borrower’s Intellectual Property Collateral to confirm compliance with
this Section, provided such audit may not occur more often than twice per year,
unless an Event of Default has occurred and is continuing.  Lender have the right, but not the
obligation, to take, at Borrower’s sole reasonable expense, any actions that
Borrower is required under this Section to take but which Borrower fails to
take, after fifteen (15) calendar days’ notice to Borrower.  Borrower shall reimburse and indemnify Lender
for all reasonable costs and reasonable expenses incurred in the exercise of
its rights under this Section.

 

9.                                       Filings.  Borrower shall file all reports and other
information and documents which it is required to file with the Securities and
Exchange Commission or The NASDAQ Stock Market, in connection with this Note or
otherwise.

 

10.                                 Further
Assurances. 
At any time and from time to time Borrower shall execute and deliver
such further instruments and take such further action as may reasonably be
requested by Lender to effect the purposes of this Note.

 

I.                                         Negative
Covenants. Borrower covenants and agrees that, until payment in full
of all Secured Obligations, and until such time as Lender has no further
obligation to make an Advance, Borrower will not do any of the following
without express written consent of Lender:

 

1.                                       Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively, a “Transfer”), all or any part of its business or property,
other than:  (i) Transfers of
inventory in the ordinary course of business; (ii) Transfers of
non-exclusive licenses for the use of the property of Borrower in the ordinary
course of business; or (iii) Transfers of worn-out or obsolete equipment.

 

2.                                       Change in
Business; Change in Control or Executive Office.  Engage in any business other than the
businesses currently engaged in by Borrower and any business substantially
similar or related thereto (or incidental thereto); or without thirty (30) days
prior written notification to Lender, relocate its chief executive office or
state of incorporation; or without Lender’s prior written consent, change the
date on which its fiscal year ends.

 

3.                                       Mergers or
Acquisitions. 
Merge or consolidate or agree to 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.

 

4.                                       Indebtedness. Create,
incur, assume or be or remain liable with respect to any indebtedness for
borrowed money (other than trade debt), other than the Senior Indebtedness.

 

7

 

5.                                       Encumbrances.  Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any accounts, except for
Permitted Liens and Liens disclosed on the Schedule.  Agree with any Person other than Lender -not
to grant a security interest in, or otherwise encumber, any of its property.

 

6.                                       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 that Borrower may repurchase the stock of former
employees pursuant to stock repurchase agreements as long as an Event of
Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase.

 

7.                                       Investments.  Directly or indirectly acquire or own, or
make any investment in or to any Person, or permit any of its subsidiaries so
to do, other than investments set forth on the Schedule; or maintain or invest
any of its property with a Person unless such Person has entered into a control
agreement with Lender, in form and substance satisfactory to Lender; or suffer
or permit any subsidiary to be a party to, or be bound by, an agreement that
restricts such subsidiary from paying dividends or otherwise distributing
property to Borrower.

 

8.                                       Transactions
with Affiliates. 
Directly or indirectly enter into or permit to exist any material
transaction with any affiliate of Borrower except for transactions that are in
the ordinary course of Borrower’s business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person.

 

9.                                       Negative
Pledge Agreements. 
Other than the Senior Loan Documents, permit the inclusion in any
contract to which it becomes a party of any provisions that could restrict or
invalidate the creation of a security interest in any of Borrower’s property.

 

J.                                        Events of
Default.

 

1.                                       Definition
of Event of Default. 
The occurrence of any one or more of the following events shall
constitute an “Event of
Default” hereunder:

 

(a)                                  Borrower’s
breach of the obligation to pay any amount of the Secured Obligations on the
date that it is due and payable;

 

(b)                                 Borrower’s
failure to perform, keep or observe any of its covenants, conditions, promises,
agreements or obligations under any of the Loan Documents or any other
agreement with any Person if such failure may have a material adverse effect on
Borrower’s assets, operations or condition, financial or otherwise;

 

(c)                                  Borrower’s
commencement of voluntary bankruptcy proceedings, or Borrower’s filing of a
petition or answer or consent seeking reorganization or release, under the
federal Bankruptcy Code, or any other applicable federal or state law relating
to creditor rights and remedies, or Borrower’s consent to the filing of any
such petition or the appointment of a receiver, liquidator, assignee, trustee
or other similar official of Borrower or of any

 

8

 

substantial part of its
property, or Borrower’s making of an assignment for the benefit of creditors,
or the taking of corporate action in furtherance of such action;

 

(d)                                 the loss,
theft, damage or destruction of, or sale (other than in the ordinary course of
business), lease or furnishing under a contract of service of, any material
portion of the Collateral;

 

(e)                                  the creation
(whether voluntary or involuntary) of, or any attempt to create, any Lien upon
any of the Collateral, other than the Permitted Liens, or any levy, seizure or
attachment of any material portion thereof;

 

(f)                                    the
occurrence and continuance of any default under any lease or agreement for
borrowed money that gives the lessor or the creditor of such indebtedness, as
applicable, the right to accelerate the lease payments or the  indebtedness, as applicable, or the right to
exercise any rights or remedies with respect to any of the Collateral; or

 

(g)                                 the entry of
any judgment or order against Borrower which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution.

 

2.                                       Rights and
Remedies on Event of Default.

 

(a)                                  During the
continuance of an Event of Default, - Lender shall have the right, itself or
through any of its agents, with or without notice to Borrower (as provided
below), as to any or all of the Collateral, by any available judicial
procedure, or without judicial process (provided, however, that it is in
compliance with the UCC), to exercise any and all rights afforded to a secured
party under the UCC or other applicable law.  Without limiting the generality of the
foregoing, Lender shall  — have the right
to sell or otherwise dispose of all or any part of the Collateral, either at
public or private sale, in lots or in bulk, for cash or for credit, with or
without warranties or representations, and upon such terms and conditions, all
as Lender, in its reasonable discretion, may deem advisable, and it shall have
the right to purchase at any such sale. 
Borrower agrees that a notice sent at least fifteen (15) days before the
time of any intended public sale or of the time after which any private sale or
other disposition of the Collateral is to be made shall be reasonable notice of
such sale or other disposition.  The
proceeds of any such sale, or other Collateral disposition shall be applied,
first to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like, and to Lender’s reasonable attorneys’ fees and
legal expenses, and then to the Secured Obligations and to the payment of any
other amounts required by applicable law, after which Lender shall account to
Borrower for any surplus proceeds.  If,
upon the sale or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which Lender is legally entitled, Borrower
shall be liable for the deficiency, together with interest thereon, and the
reasonable fees of any attorneys Lender’s employs to collect such deficiency; provided,
however, that the foregoing shall not be deemed to require Lender to
resort to or initiate proceedings against the Collateral prior to the
collection of any such deficiency from Borrower.  To the extent permitted by applicable law,
Borrower waives all claims, damages and demands against Lender arising out of
the retention or sale or lease of the Collateral or other exercise of Lender’s
rights and remedies with respect thereto.

 

9

 

(b)                                 To the
extent permitted by law, Borrower covenants that it will not at any time insist
upon or plead, or in any manner whatever claim or take any benefit or advantage
of, any stay or extension law now or at any time hereafter in force, nor claim,
take or insist upon any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisal of the Collateral
or any part thereof, prior to any sale or sales thereof to be made pursuant to
any provision herein contained, or the decree, judgment or order of any court
of competent jurisdiction; or, after such sale or sales, claim or exercise any
right under any statute now or hereafter made or enacted by any state or
otherwise to redeem the property so sold or any part thereof, and, to the full
extent legally permitted, hereby expressly waives all benefit and advantage of
any such law or laws, and covenants that it will not invoke or utilize any such
law or laws or otherwise hinder, delay or impede the execution of any power
herein granted and delegated to Lender, but will suffer and permit the
execution of every such power as though no such power, law or laws had been
made or enacted.

 

(c)                                  Any sale,
whether under any power of sale hereby given or by virtue of judicial
proceedings, shall operate to divest all Borrower’s right, title, interest,
claim and demand whatsoever, either at law or in equity, in and to the
Collateral sold, and shall be a perpetual bar, both at law and in equity,
against Borrower, its successors and assigns, and against all persons and
entities claiming the Collateral sold or any part thereof under, by or through
Borrower, its successors or assigns.

 

(d)                                 Borrower
appoints Lender, and any officer, employee or agent of Lender, with full power
of substitution, as Borrower’s true and lawful attorney-in-fact, effective as
of the date hereof, with power, in its own name or in the name of Borrower,
during the continuance of an Event of Default -, to endorse any notes, checks,
drafts, money orders, or other instruments of payment in respect of the
Collateral that may come into Lender’s possession, to sign and endorse any drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to Collateral; to pay or discharge taxes
or Liens at any time levied or placed on or threatened against the Collateral;
to demand, collect, issue receipt for, compromise, settle and sue for monies
due in respect of the Collateral; to notify persons and entities obligated with
respect to the Collateral to make payments directly to Lender; and, generally,
to do, at Lender’s option and at Borrower’s expense, at any time, or from time
to time, all acts and things which Lender deems necessary to protect, preserve
and realize upon the Collateral and Lender’s security interest therein to
effect the intent of the Loan Documents, all as fully and effectually as
Borrower might or could do; and Borrower hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof.  This power of attorney shall be irrevocable
as long as any of the Secured Obligations are outstanding.

 

(e)                                  All of
Lender’s rights and remedies with respect to the Collateral, whether
established hereby or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.

 

K.                                    Conversion
Right.

 

1.                                       Conversion
Right.  Lender shall have
the right (the “Conversion
Right”), in its sole discretion, at any time and from time to
time to elect to convert all or any part of the Secured

 

10

 

Obligations into that number of
shares of Common Stock of Borrower as is obtained by dividing (a) the total
amount of Secured Obligations by (b) the lesser of the (i) price per share
of the Common Stock on the date of the Lender’s election to exercise its
Conversion Right or (ii) the price per share of the Common Stock on the
date hereof.  Notwithstanding the
foregoing, at no time shall the number of shares of Common Stock issued, or
issuable, in aggregate, pursuant to the Conversion Right be greater than Six
Hundred Eleven Thousand (611,000) shares minus the Commitment Shares.

 

2.                                       Exercise of
Conversion Right. 
To convert any of the Secured Obligations into shares of Common Stock,
Lender shall deliver to Borrower a written notice of election to exercise the
Conversion Right (the “Conversion
Notice”).  Borrower shall,
as soon as practicable thereafter, issue and deliver to Lender a certificate or
certificates, registered in Lender’s name, for the number of shares of Common
Stock to which Lender shall be entitled by virtue of such exercise.  The conversion of the Secured Obligations
shall be deemed to have been made on the date that Borrower receives the
Conversion Notice (the “Conversion
Date”) and Lender shall be treated for all purposes as the
record holder of the Conversion Shares as of such date.

 

3.                                       Fractional
Shares.  Borrower shall not
issue fractional shares of Common Stock or scrip representing fractional shares
of Common Stock upon exercise of the Conversion Right.  As to any fractional share of Common Stock
which Lender would otherwise be entitled to purchase from Borrower upon such
exercise, Borrower shall purchase from Lender such fractional share at a price
equal to an amount calculated by multiplying such fractional share (calculated
to the nearest 1/100th of a share) by the price per share of Common Stock on
the Conversion Date.  Payment of such
amount shall be made in cash or by check payable to the order of Lender at the
time of delivery of any certificate or certificates arising upon such exercise.

 

L.                                      Registration
Rights.  Concurrent with the
execution and delivery of this Note, Borrower shall take all actions necessary
to cause Lender, upon the exercise of the Conversion Right provided for herein,
to have the similar registration and similar liquidity rights as the rights
granted to the participants in HyperFeed’s Private Placement dated May 15, 2003
and during the term of this Note no stockholder of Borrower shall have more
favorable registration or other liquidity rights than the rights granted to
Lender pursuant to this Section.

 

M.                                 Other
Provisions.

 

1.                                       Definitions.  As used herein, the following terms shall
have the following meanings:

 

“Lender Expenses”
means all reasonable costs or expenses (including reasonable attorneys’ fees
and expenses) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; reasonable Collateral
audit fees; and Lender’s reasonable attorneys’ fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.

 

11

 

“Collateral” means the
Intellectual Property Collateral and the property described on Exhibit A
attached hereto.

 

“Copyrights” means any
and all copyright rights, copyright applications, copyright registrations and
like protections in each work or authorship and derivative work thereof,
whether published or unpublished and whether or not the same also constitutes a
trade secret, now or hereafter existing, created, acquired or held.

 

“Intellectual Property Collateral” means all of Borrower’s
right, title, and interest in and to the following:

 

(a)                                  Copyrights,
Trademarks and Patents;

 

(b)                                 Any and all
trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created,
acquired or held;

 

(c)                                  Any and all
design rights which may be available to Borrower now or hereafter existing,
created, acquired or held;

 

(d)                                 Any and all
claims for damages by way of past, present and future infringement of any of
the rights included above, with the right, but not the obligation, to sue for
and collect such damages for said use or infringement of the intellectual
property rights identified above;

 

(e)                                  All licenses
or other rights to use any of the Copyrights, Patents or Trademarks, and all
license fees and royalties arising from such use to the extent permitted by
such license or rights;

 

(f)                                    All
amendments, renewals and extensions of any of the Copyrights, Trademarks or
Patents; and

 

(g)                                 All proceeds
and products of the foregoing, including without limitation all payments under
insurance or any indemnity or warranty payable in respect of any of the
foregoing.

 

“Insolvency Proceeding”
means any proceeding commenced by conforms to J.1(c) any Person under any
provision of the United States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.

 

“Lien” means any lien
(statutory or other), mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, charge, claim or other encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest) and any
agreement to give or refrain from giving a lien,

 

12

 

mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge,
claim or other encumbrance of any kind.

 

“Loan Documents”
means, collectively, this Note, any note or notes executed by Borrower and
issued to Lender, and any other agreement entered into in connection with this
Note, all as amended or extended from time to time.

 

“Patents” means all
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

 

“Permitted Liens”
means:  (i) Liens imposed by law, such as
carriers’, warehousemen’s, materialmen’s and mechanics’ liens, or Liens arising
out of judgments or awards against Borrower with respect to which Borrower at
the time shall currently be prosecuting an appeal or proceedings for review;
(ii) Liens for taxes not yet subject to penalties for non­payment and Liens for
taxes the payment of which is being contested in good faith and by appropriate
proceedings and for which, to the extent required by U.S. generally accepted
accounting principles then in effect, proper and adequate book reserves relating
thereto are established by Borrower; (iii) Liens securing the Senior
Indebtedness (iv) liens securing the purchase price or lease of any goods,
which liens attached only to the goods being purchased or leased, (v) liens
securing security bonds, bid bonds, performance bonds and other similar items,
(vi) liens in the form of deposits or pledges 
in connection with worker’s compensation, social security unemployment
compensation or other similar matter, and (vii) liens existing as of the date
hereof.

 

“Person” means any
individual, sole proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
person or governmental agency.

 

“Secured Obligations”
means all debt, principal, interest, Lender Expenses and other amounts owed to
Lender by Borrower pursuant to the Loan Documents, whether absolute or
contingent, due or to become due, now existing or hereafter arising, including
any interest that accrues after the commencement of an Insolvency Proceeding
and including any debt, liability, or obligation owing from Borrower to others
that Lender may have obtained by assignment or otherwise.

 

“Trademarks” means any
trademark and servicemark rights, whether registered or not, applications to
register and registrations of the same and like protections, and the entire
goodwill of the business of Borrower connected with and symbolized by such
trademarks.

 

“UCC” means the Uniform
Commercial Code in effect from time to time in the relevant jurisdiction.

 

2.                                       Governing
Law; Venue. 
The Loan Documents shall be governed by the laws of the State of
California, without giving effect to conflicts of law principles.  Borrower and Lender agree that all actions or
proceedings arising in connection with the Loan Documents shall be tried and
litigated only in the state and federal courts located in the City of San
Diego, County of San

 

13

 

Diego, State of California or,
at Lender’s option, any court in which Lender determines it is necessary or
appropriate to initiate legal or equitable proceedings in order to exercise,
preserve, protect or defend any of its rights and remedies under the Loan Documents
or otherwise or to exercise, preserve, protect or defend its Lien, and the
priority thereof, against the Collateral, and which has subject matter
jurisdiction over the matter in controversy. 
Borrower waives any right it may have to assert the doctrine of forum
non conveniens or to object to such venue, and consents to any court ordered
relief.  Borrower waives personal service
of process and agrees that a summons and complaint commencing an action or
proceeding in any such court shall be promptly served and shall confer personal
jurisdiction if served by registered or certified mail to Borrower.  The choice of forum set forth herein shall
not be deemed to preclude the enforcement of any judgment obtained in such
forum, or the taking of any action under the Loan Documents to enforce the
same, in any appropriate jurisdiction.

 

3.                                       Notices.  Any notice or communication required or
desired to be served, given or delivered hereunder shall be in the form and
manner specified below, and shall be addressed to the party to be notified as
follows:

 

	
  If to Lender:

  	
   

  	
  James F. Mosier, Esq.

  
	
   

  	
   

  	
  General Counsel and Secretary

  
	
   

  	
   

  	
  PICO Holdings, Inc.

  
	
   

  	
   

  	
  875 Prospect Street, Suit 301

  
	
   

  	
   

  	
  La Jolla, CA 92037

  
	
   

  	
   

  	
  Phone: 858.456.6022

  
	
   

  	
   

  	
  Fax: 858.456.6480

  
	
   

  	
   

  	
   

  
	
  If to Borrower:

  	
   

  	
  Randall J. Frapart

  
	
   

  	
   

  	
  Senior Vice President and Chief

  Financial Officer

  
	
   

  	
   

  	
  Hyperfeed Technologies, Inc.

  
	
   

  	
   

  	
  300 South Wacker Drive, #300

  
	
   

  	
   

  	
  Chicago, IL 60606

  

 

or to such other address as each party designates to the other by
notice in the manner herein prescribed. 
Notice shall be deemed given hereunder if (i) delivered personally or
otherwise actually received, (ii) sent by national overnight delivery service,
(iii) mailed by first-class United States mail, postage prepaid, registered or
certified, with return receipt requested, or (iv) sent via telecopy machine
with a duplicate signed copy sent on the same day as provided in clause (ii)
above.  Notice mailed as provided in
clause (iii) above shall be effective upon the expiration of three (3) business
days after its deposit in the United States mail, and notice telecopied as
provided in clause (iv) above shall be effective upon receipt of such telecopy
if the duplicate signed copy is sent under clause (iv) above.  Notice given in any other manner described in
this section shall be effective upon receipt by the addressee thereof; provided,
however, that if any notice is tendered to an addressee and delivery
thereof is refused by such addressee, such notice shall be effective upon such
tender unless expressly set forth in such notice.

 

14

 

4.                                       Lender’s
Rights; Borrower Waivers. 
Lender’s acceptance of partial or delinquent payment from Borrower
hereunder, or Lender’s failure to exercise any right hereunder, shall not
constitute a waiver of any obligation of Borrower hereunder, or any right of
Lender hereunder, and shall not affect in any way the right to require full
performance at any time thereafter.  
Borrower waives presentment, diligence, demand of payment, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.  In any action on this Note, Lender need not
produce or file the original of this Note, but need only file a photocopy of
this Note certified by Lender be a true and correct copy of this Note in all
material respects.

 

5.                                       Enforcement
Costs.  Borrower shall pay
all reasonable costs and expenses, including, without limitation, reasonable
attorneys’ fees and expenses Lender expends or incurs in connection with the
enforcement of the Loan Documents, the collection of any sums due thereunder,
any actions for declaratory relief in any way related to the Loan Documents, or
the protection or preservation of any rights of the holder thereunder.

 

6.                                       Severability.  Whenever possible each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision is prohibited by or invalid under
applicable law, it shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of the provision or the
remaining provisions of this Note.

 

7.                                       Amendment
Provisions. 
This Note may not be amended or modified, nor may any of its terms be
waived, except by written instruments signed by Borrower and Lender.

 

8.                                       Binding
Effect.  This Note shall be
binding upon, and shall inure to the benefit of, Borrower and the holder hereof
and their respective successors and assigns; provided, however,
that Borrower’s rights and obligations shall not be assigned or delegated
without Lender’s prior written consent, given in its sole discretion, and any
purported assignment or delegation without such consent shall be void ab
initio.

 

9.                                       Time of
Essence.  Time is of the
essence of each and every provision of this Note.

 

10.                                 Headings.  Section headings used in this Note have been
set forth herein for convenience of reference only.  Unless the contrary is compelled by the
context, everything contained in each section hereof applies equally to this
entire Note.

 

 

[The remainder of this page is intentionally left blank.]

 

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Note to be
executed as of the date first above written.

 

 

	
   

  	
  BORROWER:

  
	
   

  	
  HYPERFEED
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randall
  J. Frapart

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
  PICO
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Max Webb

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
						

 

16

 

	
  DEBTOR:

  	
   

  	
  Hyperfeed Technologies, Inc.

  
	
  SECURED PARTY:

  	
   

  	
  PICO Holdings, Inc.

  

 

EXHIBIT
A

 

COLLATERAL
DESCRIPTION ATTACHMENT

TO SECURED CONVERTIBLE PROMISSORY NOTE

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

 

(a)                                all
accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including payment intangibles and
software), goods (including fixtures), instruments (including promissory
notes), inventory (including all goods held for sale or lease or to be
furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

 

(b)                               all
common law and statutory copyrights and copyright registrations, applications
for registration, now existing or hereafter arising, in the United States of
America or in any foreign jurisdiction, obtained or to be obtained on or in
connection with any of the forgoing, or any parts thereof or any underlying or
component elements of any of the forgoing, together with the right to copyright
and all rights to renew or extend such copyrights and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of copyright;

 

(c)                                all
trademarks, service marks, trade names and service names and the goodwill
associated therewith, together with the right to trademark and all rights to
renew or extend such trademarks and the right (but not the obligation) of
Secured Party to sue in its own name and/or in the name of the Debtor for past,
present and future infringements of trademark;

 

(d)                               all
(i) patents and patent applications filed in the United States Patent and
Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation, the
inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Debtor is licensor or  licensee, (iii) income, royalties, damages,
payments, accounts and accounts receivable now or hereafter due and/or payable
under and with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) right
(but not the obligation) to sue in the name of Debtor and/or in the name of
Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions
in which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

 

(e)                                any
and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment.  All terms above have the meanings given to
them in the California Uniform Commercial Code, as amended or supplemented from
time to time, including revised Division 9 of the Uniform Commercial
Code-Secured Transactions, added by Stats. 1999, c.991 (S.B. 45), Section 35,
operative July 1, 2004.

 

 

EXHIBIT B

Copyrights

 

	
  Description

  	
   

  	
  Registration

  Number

  	
   

  	
  Registration

  Date

  	
   

  
	
  None

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

Patents

 

	
  Description

  	
   

  	
  Registration/

  Application

  Number

  	
   

  	
  Registration/

  Application Date

  	
   

  
	
  None

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT D

Trademarks

 

	
  Description

  	
   

  	
  Registration/

  Application

  Number

  	
   

  	
  Registration/

  Application Date

  	
   

  
	
  None

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule of Exceptions

 

Section G3

 

Borrower is a
party to Senior Indebtedness (as defined in F1) which is secured by
Intellectual Property Collateral, among other things.

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