U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
-----------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3487784
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1633 Broadway, 38th Floor, New York, New York 10019
(Address of principal executive offices)
(212) 843-2777
(Issuer's telephone number)
(Former name, former address and former fiscal quarter, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of July 31, 1997, issuer had
outstanding 6,610,776 shares of Common Stock, $.01 par value per share.
EXHIBIT INDEX - Page 16
Page 1 of 54 pages
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INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
June 30, 1997
ASSETS
Current assets:
Cash and cash equivalents $2,798,430
Accounts receivable (net of allowances of $575,368) 2,119,370
Prepaid expenses and other current assets 297,034
-----------
Total current assets 5,214,834
Deferred subscription expense 624,565
Investment in affiliate (Note 2) 2,516,330
Property and equipment - net 704,707
Other assets 387,540
===========
Total assets $9,447,976
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,497,917
Accrued expenses 647,219
Deferred revenue 302,103
------------
Total current liabilities 2,447,239
Deferred subscription revenue 2,732,522
------------
Total liabilities 5,179,761
------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares -
Common stock, $.01 par value; authorized
18,000,000 shares; issued and outstanding 6,610,776 66,107
Additional paid-in capital 16,307,186
Deficit (12,105,078)
------------
Total stockholders' equity 4,268,215
------------
============
Total liabilities and stockholders' equity $9,447,976
============
See Notes to Consolidated Condensed Financial Statements
2
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------------
<C> <C> <C> <C>
Revenues:
Financial Information Services:
Circulation $940,469 $1,443,666 $2,119,711 $2,831,691
Advertising 2,032,030 984,323 4,361,742 1,901,987
List rental and other 246,775 333,062 583,436 670,470
---------------- ---------------- ---------------- ----------------
Total financial information services revenues 3,219,274 2,761,051 7,064,889 5,404,148
Investment management services (Note 3) 176,019 378,449 297,193 511,710
Equity in net income (loss) of affiliate (Note 2) 134,147 998,227 (1,531,170) 291,957
---------------- ---------------- ---------------- ----------------
Total revenues 3,529,440 4,137,727 5,830,912 6,207,815
---------------- ---------------- ---------------- ----------------
Operating expenses:
Editorial, production and distribution 2,168,385 1,429,859 4,324,876 2,818,513
Promotion and selling 1,520,067 1,048,096 2,996,192 2,103,568
General and administrative 1,110,537 1,016,714 2,143,124 1,802,436
Depreciation and amortization 67,172 46,183 132,597 81,035
---------------- ---------------- ---------------- ----------------
Total operating expenses 4,866,161 3,540,852 9,596,789 6,805,552
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Operating (loss) income (1,336,721) 596,875 (3,765,877) (597,737)
---------------- ---------------- ---------------- ----------------
Interest and other income 20,246 55,321 31,189 128,411
---------------- ---------------- ---------------- ----------------
Net (loss) income ($1,316,475) $652,196 ($3,734,688) ($469,326)
---------------- ---------------- ---------------- ----------------
Dividends paid - - - -
(Loss) earnings per weighted average common
and equivalent shares ($0.21) $0.09 ($0.59) ($0.07)
Weighted average number of common
shares outstanding during the period 6,403,673 7,629,074 6,279,607 6,289,306
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------
1997 1996
--------------------- ---------------------
<C> <C>
Cash flows from operating activities:
Net loss ($3,734,688) ($469,326)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 132,597 81,035
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 461,902 (397,784)
Prepaid expenses and other assets (152,288) (286,209)
Deferred subscription expense 332,849 156,494
Increase (decrease) in:
Accounts payable and accrued expenses (592,755) (934,460)
Deferred revenue 302,103 -
Deferred subscription revenue (596,215) 243,198
--------------------- ---------------------
Net cash used in operating activities (3,846,495) (1,607,052)
--------------------- ---------------------
Cash flows from investing activities:
Purchase of property and equipment (118,925) (257,197)
Decrease in investment in affiliate 2,431,170 908,043
--------------------- ---------------------
Net cash provided by investing activities 2,312,245 650,846
--------------------- ---------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 538,229 91,245
Proceeds from issuance of Common Stock 2,250,000 -
Common Stock Repurchased - (2,453,335)
--------------------- ---------------------
Net cash provided by (used in) financing activities 2,788,229 (2,362,090)
--------------------- ---------------------
Net increase (decrease) in cash and cash equivalents 1,253,979 (3,318,296)
Cash and cash equivalents, beginning of period 1,544,451 6,276,987
===================== =====================
Cash and cash equivalents, end of period $2,798,430 $2,958,691
===================== =====================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
Individual Investor Group, Inc. and its subsidiaries (the "Company").
The accompanying consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and
footnotes as required by generally accepted accounting principles for
annual financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
considered necessary in order to make the financial statements not
misleading have been included. Operating results for the six months
ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report for the
fiscal year ended December 31, 1996 on Form 10-KSB.
Reclassifications. Equity in net loss of affiliate for the six
months ended June 30, 1997 has been recorded in operating revenues to
reflect such earnings and losses as part of the Company's core
operations. The equity in net loss of affiliate for the period ended
June 30, 1996 has been reclassified to conform with the current period
presentation.
2. INVESTMENT IN AFFILIATE
A wholly-owned subsidiary, WisdomTree Capital Management, Inc.
("WTCM"), serves as general partner of a domestic private investment
fund. The Company is also a limited partner in the fund. The value of
the Company's investment in the fund decreased from $4,947,500 at
December 31, 1996 to $2,516,330 at June 30, 1997. This decrease
resulted from net losses on the Company's investment in the fund and
from a withdrawal of $900,000 by the Company in February 1997. Selected
unaudited financial information for the fund (which is deemed to be an
affiliate) as of June 30, 1997 and for the six months then ended is as
follows:
Assets (at fair value) $58,814,851
Liabilities 26,006,423
Partners' Capital 32,808,428
Net loss for the fund ($13,480,913)
3. INVESTMENT MANAGEMENT SERVICES
The Company, through WTCM, provides investment management
services to the domestic fund referred to in Note 2, and to an offshore
private investment fund, which commenced operations in January 1996.
5
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The Company has no investment in the offshore fund. The Company is
entitled to receive a management fee equal to 1/4 of 1% of the net
asset value of the domestic fund, calculated as of the last business
day of each quarter, and a management fee equal to 1/8 of 1% of the net
asset value of the offshore fund, calculated monthly. Total management
fees for the six months ended June 30, 1997 were $178,203, as compared
to $317,922 in 1996.
WTCM is also entitled to receive a special allocation equal
to 20% of the net income, if any, of each of the funds (not including
income earned on its own investment), subject to certain limitations,
calculated at year end, which is December 31st for the domestic fund
and June 30th for the offshore fund. The special allocation for the
fiscal period ended June 30, 1997 and 1996, relating to the offshore
fund, totaled $61,617 and $149,788, respectively.
Total equity under management by the Company as of June 30,
1997 for both the domestic and offshore funds totaled approximately
$38.9 million.
4. STOCK OPTIONS
During the six months ended June 30, 1997, the Company granted
307,000 options to purchase the Company's common stock; 108,483 options
were exercised (providing proceeds of $538,229), and 142,167 options
were canceled. Of the total granted, all options were granted under the
Company's stock option plans which expire at various dates through June
2007.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
Earnings per share. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS No. 128") which simplifies the
standards for computing earnings per share previously required by
Accounting Principles Board Opinion No. 15 and establishes a new
standard for presenting earnings per share. The Company will begin
reporting earnings (loss) per share according to this new standard for
the year ended December 31, 1997, requiring all prior period earnings
per share data (including interim periods) to be restated to conform
with the provisions of the new statement. (Loss) earnings per share
amounts for the three and six months ended June 30, 1997 and 1996,
computed under this new standard are not expected to be materially
different from the per share disclosed in the accompanying financial
statements.
Disclosure of Information about Capital Structure. In February
1997, the Financial Accounting Standards Board issued SFAS No. 129,
"Disclosure of Information about Capital Structure", which requires an
entity to explain the pertinent rights and privileges of its various
securities outstanding. Management of the Company believes that
adoption of Statement No. 129 will not have a significant impact on the
Company's present disclosure.
6
<PAGE>
Reporting Comprehensive Income. In June 1997, the Financial
Accounting Standards Board issued SFAS No. 130, "Reporting
Comprehensive Income", which becomes effective for the Company's 1998
consolidated financial statements. SFAS No. 130 requires the disclosure
of comprehensive income, defined as the change in equity of a business
enterprise from transactions and other events and circumstances from
nonowner sources, in the Company's consolidated financial statements.
In the opinion of the Company's management, it is not anticipated that
the adoption of this new accounting standard will have a material
effect on the consolidated financial statements of the Company.
Disclosure about Segments of an Enterprise and Related
Information. In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", which becomes effective for the Company's 1998
consolidated financial statements. SFAS No. 131 requires that a public
business enterprise report certain financial and descriptive
information about its reportable operating segments. In the opinion of
the Company's management, it is not anticipated that the adoption of
this new accounting standard will have a material effect on the
consolidated financial statements of the Company.
6. SALE OF COMMON STOCK
On May 1, 1997 the Company entered into Stock Purchase
Agreements with two parties unrelated to the Company, providing in the
aggregate for the private sale of 328,678 shares of Common Stock for a
total purchase price of $2,000,000. These shares were sold pursuant to
an exemption from registration under the Securities Act of 1933. On
June 30, 1997 the Company entered into a Stock Purchase Agreement with
Wise Partners, L.P. providing for the sale of 31,496 shares of Common
Stock for an aggregate purchase price of $250,000. The Company granted
each of these investors registration rights in respect of the shares.
Wise Partners, L.P. is a limited partnership of which the Chief
Executive Officer of the Company, Jonathan L. Steinberg, is the General
Partner.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
When used in this Form 10-QSB and in future filings by the Company with
the Securities and Exchange Commission, the words or phrases "will likely
result," "management expects," or "the Company expects," "will continue," "is
anticipated," "estimated" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance
on any such forward-looking statements, each of which speak only as of the date
made. Such statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. The Company has no obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect anticipated events or circumstances occurring after the
date of such statements.
Results of Operations
Total revenues for the three and six months ended June 30, 1997 were
$3,529,440 and $5,830,912, respectively, a 15% and 6% decrease from the
corresponding periods of the previous fiscal year.
Revenues from financial information services were $3,219,274 and
$7,064,889, respectively, which represents an increase of 17% for the three
months and 31% for the six months ended June 30, 1997.
Circulation revenues for the three and six months ended June 30, 1997
were $940,469 and $2,119,711, respectively, a 35% and 25% decrease from the
corresponding periods of the previous fiscal year. Subscription revenues for the
Company's flagship magazine, Individual Investor, decreased by 37% and 33%,
respectively, for the quarter and year to date. Newsstand revenues for the
magazine increased by 7% and 29%, respectively. Subscription revenues for the
Company's newsletter, Special Situations Report, decreased 47% and 24%,
respectively, for the quarter and year to date. Management attributes the
decreases in circulation revenues of Individual Investor and Special Situations
Report to the reduction of direct mail and television campaigns in favor of
other sources for subscribers that will provide for continuing numbers of new
subscribers with lower marketing expenses but less subscription revenue.
Individual Investor had average paid circulation of over 441,000 in the second
quarter of 1997, as compared to average paid circulation of over 336,000 in the
second quarter of 1996. As of June 1997, Special Situations Report had
approximately 10,000 paid subscribers as compared to 21,000 in June 1996. This
decrease is a direct result of the reduction of television campaign promotions.
Advertising revenues for the three and six months ended June 30, 1997
were $2,032,030 and $4,361,742, respectively, a 106% and 129% increase over the
corresponding periods of the previous fiscal year. This is a result of both a
greater number of advertising pages sold and increased advertising rates per
page. As a result of the increase in paid circulation of Individual Investor,
8
<PAGE>
effective June 1996 the Company increased its advertising rates for Individual
Investor by approximately 43%, and introduced an additional rate increase of
approximately 40% in November 1996. Management anticipates, but can give no
assurance, that in the near term there will be advertising revenue growth from
the rate increases implemented in 1996, and that the number of advertising pages
sold will continue to increase. Management also expects to continue to attract
higher margin consumer advertisers. The Company also launched a new publication,
Ticker (sm), in October 1996. Ticker, with a controlled circulation of 75,000
brokers and financial advisers, has sold advertising space to a number of
leading advertisers, resulting in revenues of $190,626 and $486,612 for the
quarter and year to date, respectively.
List rental and other revenues for the three and six months ended June
30, 1997 were $246,775 and $583,436, respectively, a 26% and 13% decrease from
the corresponding periods of the previous fiscal year. This decrease is a direct
result of changes in the mix of subscribers to Individual Investor with less
reliance on direct mail and television marketing efforts.
Investment management services revenues for the three and six months
ended June 30, 1997 were $176,019 and $297,193, respectively, a 53% and 42%
decrease from the corresponding periods of the previous fiscal year. Revenues
from investment management services are a combination of management fees, being
1 to 1-1/2 percent of assets under management, and a special profit allocation,
being 20% of defined performance, with additional revenues being contributed as
a result of the Company's portfolio consulting activities. Because total equity
managed by the Company was approximately $38.9 million as of June 30, 1997 as
compared to $69.9 million as of June 30, 1996, management fees earned by the
Company decreased for the quarter and six months ended June 30, 1997. In
addition, the special profit allocation relating to the offshore fund, which is
recognized annually in the second quarter, declined to $61,617 in 1997 from
$149,788 in 1996. During the three months ended June 30, 1997 investors in the
funds made net additional investment contributions in excess of withdrawals of
approximately $7.2 million and for the six months made net withdrawals of
approximately $11.2 million. The net decrease in assets under management in 1997
will mean lower management fees in 1997 as compared to 1996 and will negatively
impact the Company's potential revenues from special profit allocation revenues.
The Company also anticipates that investment management services revenues will
vary from period to period, because the managed funds are invested primarily in
the relatively volatile small-cap market. For the three months ended June 30,
1997, the managed funds experienced positive performance, which followed
significant negative performance in the first quarter of 1997, resulting in a
net loss for the six months. If negative performance continues, the Company's
special profit allocation will be adversely affected, and additional withdrawals
can be anticipated, which would in turn further impact the Company's management
fees and potential special profit allocation income. There can be no assurance
as to the funds' performance for 1997 or that each of the managed fund's asset
bases will be maintained at current levels by the investors participating in
such funds.
Equity in net income of affiliate totaled $134,147 for the quarter
ended June 30, 1997 as compared to net income of $998,227 in 1996. For the year
to date, equity in net loss of affiliate totaled $1,531,169 as compared to
equity in net income of affiliate of $291,957 in 1996. Equity in net income or
loss of affiliate directly relates to the realized and unrealized earnings of
the amount invested by the Company in the domestic fund's portfolio which,
9
<PAGE>
because of the nature of the investments as described above, will vary
significantly from period to period and may result in losses as well as income.
No assurance can be given that the Company will record income from its
investments in future periods.
Total operating expenses for the three and six months ended June 30,
1997 were $4,866,161 and $9,596,789, respectively, a 37% and 41% increase from
the corresponding periods of the previous fiscal year.
Editorial, production and distribution expenses for the three and six
months ended June 30, 1997 increased 52% and 53%, to $2,168,385 and $4,324,876,
respectively. The increase for the three and six months relates to additional
production and distribution expenses for Individual Investor, due to additional
copies printed for newsstand sales, and a larger subscriber base. These costs
include $311,853 and $626,180 for the three and six months, respectively, that
were incurred for the production, printing, editing, fulfillment and
distribution of the Company's new publication, Ticker, which mailed two issues
in the second quarter of 1997. The Company has also incurred expenses totaling
$181,242 and $284,570 during the three and six months, respectively, related to
the establishment of an online service. Management anticipates expenses relating
to online services to increase as development continues. While additional
investment is necessary to complete its development, management intends to incur
these expenses in a controlled manner to help achieve the Company's ultimate
goal of profitability. In addition, editorial, production and research salaries
and related expenses have increased because of the addition of personnel.
Staffing levels have been increased to aid growth in the Company's current
publications as well as to support the launch of Ticker and the online service.
Promotion and selling expenses for the three and six months ended June
30, 1997 increased 45% and 42%, to $1,520,067 and $2,996,192, respectively.
Advertising salaries, payroll taxes and commissions have increased as a result
of higher advertising revenues and new sales personnel added in 1997 in an
attempt to further increase advertising revenues, and to develop advertising for
Ticker. Additionally, there have been corresponding increases in sales related
travel, promotion, research and sales aids.
General and administrative expenses for the three and six months ended
June 30, 1997 increased 9% and 19%, to $1,110,537 and $2,143,124, respectively.
General and administrative salaries, payroll taxes, and employee benefits
increased for the three and six months ended June 30, 1997 as compared to the
corresponding periods of the previous year. These increases related to the
addition of personnel, as well as increases in compensation. Also, as a result
of hiring additional personnel, postage, telephone, office supplies and related
office expenses have increased.
Depreciation and amortization expense for the three and six months
ended June 30, 1997 increased 45% and 64%, to $67,172 and $132,597,
respectively. The increase in 1997 is primarily attributable to depreciation of
office furniture and computer equipment purchased for additional personnel.
Interest and other income for the three and six months ended June 30,
1997 decreased to $20,246 and $31,189, respectively, as compared to $55,321 and
$128,411 for the corresponding periods of the previous year. This decrease is
primarily due to reduced levels of cash invested by the Company.
10
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The Company's net losses for the three and six months ended June 30,
1997 were $1,316,475 and $3,734,668 as compared to net income of $652,196 for
the second quarter of 1996 and a net loss of $469,326 for the first half of
1996. No income taxes were provided in 1997 or 1996 due to the net loss and/or
the availability of loss carryforwards. The net loss per common and equivalent
share for the three and six months were $0.21 and $0.59, respectively, as
compared to net income per common and equivalent share of $0.09 for the second
quarter of 1996 and a net loss per common and equivalent share of $0.07 for the
first half of 1996.
Liquidity and Capital Resources
As of June 30, 1997, the Company had working capital of $2,767,595 and
cash and cash equivalents totaling $2,798,430. This represents an increase in
working capital of $999,784 and an increase in cash and cash equivalents of
$1,253,979 since December 31, 1996.
As of June 30, 1997, the total value of the Company's investment in the
domestic private investment fund was $2,516,330. This investment is available,
subject to market fluctuations and liquidity, to provide working capital to fund
the Company's operations. In February 1997, the Company redeemed $900,000 from
this investment. No assurance can be given that the Company's investment will
increase in value, and it may decline in value.
On May 1, 1997 the Company entered into Stock Purchase Agreements with
two parties unrelated to the Company, providing in the aggregate for the private
sale of 328,678 shares of Common Stock for a total purchase price of $2,000,000.
These shares were sold pursuant to an exemption from registration under the
Securities Act of 1933. On June 30, 1997 the Company entered into a Stock
Purchase Agreement with Wise Partners, L.P. providing for the sale of 31,496
shares of Common Stock for an aggregate purchase price of $250,000. The Company
granted each of these investors registration rights in respect of the shares.
Wise Partners, L.P. is a limited partnership of which the Chief Executive
Officer of the Company, Jonathan L. Steinberg, is the General Partner. In
addition, in 1997 the Company received proceeds from the exercise of stock
options totaling $538,229.
The Company will incur ongoing expenses in the development of its
business operations, which are expected to be funded by the Company's working
capital. Nevertheless, the Company believes that its cash, working capital and
investments will be sufficient to fund its operations and capital requirements
for the foreseeable future.
As a result of the current levels of expenses, the operating losses
incurred by the financial information services, and the fluctuations in
performance of the private investment funds, the Company anticipates that it
will continue to incur net losses in its quarterly results in the near-term.
The Company has retained the investment banking firm of Bear, Stearns &
Co. Inc. To assist the Company in exploring strategic initiatives to enhance
shareholder value. With the assistance of Bear Stearns, the Company will focus
on alternatives including identifying and evaluating potential strategic
partners seeking minority investment positions in the Company's businesses.
11
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INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
PART II- OTHER INFORMATION
ITEM 1 - Legal Proceedings
On July 31, 1997 , Richard and Sandra Tarlow, former limited partners
of WisdomTree Associates, L.P., the domestic private investment fund managed by
a subsidiary of the Company, initiated an action in the Supreme Court of the
State of New York against WisdomTree Associates, L.P. and each of Robert Schmidt
and Jonathan Steinberg individually. The Summons gives notice that the action is
"for breach of contract, breach of fiduciary duties owed by defendants to the
plaintiffs, conversion and fraud" and prays for money damages in excess of one
million dollars; but because the Summons was filed without a Complaint
plaintiffs have yet to set forth their claim with any definition or
particularity. Based on allegations made by the plaintiffs' attorney in a letter
dated June 3, 1997, WisdomTree Associates, L.P. believes plaintiffs' allegations
to be incorrect, without merit, and contrary to agreements signed by plaintiffs.
Moreover, because plaintiffs' net loss from their investment in WisdomTree
Associates, L.P. was $32,276.02, WisdomTree Associates, L.P. believes the amount
claimed in damages to be wholly excessive no matter what theory of claim is
presented. WisdomTree Associates, L.P. will vigorously defend against this
action.
ITEM 2 - Sales of Unregistered Securities
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Consideration received and Exemption If option, warrant or
Date of sale Title of security Number description of underwriting from convertible security,
Sold or other discounts to registration terms of exercise or
market price afforded to claimed conversion
purchasers
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/97 -6/97 options to purchase 223,100 options granted - no Section 4(2) vesting over a period of
common stock granted consideration received by three to five years from
to employees, Company until exercise date of grant, subject to
directors and certain conditions of
consultants continued service;
exercisable for a period
lasting ten years from
date of grant at exercise
prices ranging from $5.88
to $8.50
- ----------------------------------------------------------------------------------------------------------------------------
05/01/97 Sales of Securities 328,678 The Company received Section 4(2)
$2,000,000 in consideration
for these shares
- ----------------------------------------------------------------------------------------------------------------------------
06/30/97 Sales of Securities 31,496 The Company received Section 4(2)
to Wise Partners, $250,000 in consideration
L.P. for these shares.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
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ITEM 4 - Submission of Matters to a Vote of Security Holders
On June 18, 1997, the Company held the annual meeting of stockholders for
the following proposals: a) to elect Mr. Jonathan Steinberg and Mr. Scot
Rosenblum as directors of the Company for a term of three years, b) to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock and Preferred Stock, and c) to approve and adopt the 1996
Management Incentive Plan.
The shares of Common Stock voted on the election of Mr. Jonathan Steinberg
and Mr. Scot Rosenblum were as follows: 5,689,403 shares were cast in favor and
33,070 shares were withheld for the election of Mr. Steinberg and 5,689,703
shares were cast in favor of and 32,570 shares were withheld for the election of
Mr. Rosenblum.
The shares of Common Stock voted on the matter to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock to 18,000,000 and the number of authorized shares of Preferred
Stock to 2,000,000 were as follows:
For Against Abstention Broker Non-Votes
3,377,297 143,594 21,000 2,180,582
The shares of Common Stock voted on the matter to approve the 1996
Management Incentive Plan were as follows:
For Against Abstention Broker Non-Votes
3,384,836 136,905 20,150 2,180,582
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Amendment
10.1 Stock Purchase Agreement, dated May 1, 1997, for 164,339 shares
of the Company's Common Stock.
10.2 Stock Purchase Agreement, dated May 1, 1997, for 164,339 shares
of the Company's Common Stock.
10.3 Stock Purchase Agreement, dated June 30, 1997, between
Registrant and Wise Partners L.P.
10.4 Form of Stock Option Agreement, dated May 9, 1997, between
Registrant and each of Jonathan Steinberg, Robert Schmidt,
Scot Rosenblum and Michael Kaplan.
13
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27 Financial Data Schedule June 30, 1997
(b) Reports on Form 8-K filed during the Quarter Ended June 30,
1997. On May 1, 1997, the Company filed a report on Form
8-K to report under Item 5, Other Events, the sale of an
aggregate 328,678 shares of Common Stock for a total purchase
price of $2,000,000. The sale was pursuant to an exemption from
regulation under the Securities Act of 1933. In connection
with the report of the sale of shares, the Company filed
unaudited, proforma, consolidated condensed financial
statements as of April 30, 1997.
14
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
DATE: August 13, 1997
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Jonathan L. Steinberg
-------------------------
Jonathan Steinberg, CEO and Chairman of the Board
By: /s/ Scot A. Rosenblum
--------------------------
Scot Rosenblum, Vice President and Chief Financial
officer
By: /s/ Henry G. Clark
--------------------------
Henry G. Clark, Controller
(Principal Accounting Officer)
15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
3.1 Certificate of Amendment 17
10.1 Stock Purchase Agreement, dated May 1, 1997 18
for 164,339 shares of the Company's Common Stock.
10.2 Stock Purchase Agreement, dated May 1, 1997 26
for 164,339 shares of the Company's Common Stock.
10.3 Stock Purchase Agreement, dated June 30, 1997 34
between Registrant and Wise Partners L.P.
10.4 Form of Stock Option Agreement, dated May 9, 1997, 41
between Registrant and each of Jonathan Steinberg,
Robert Schmidt, Scot Rosenblum and Michael Kaplan.
27 Financial Data Schedule June 30, 1997 54
16
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INDIVIDUAL INVESTOR GROUP, INC.
Pursuant to the General Corporation Law of the State of Delaware ("GCL"),
it is hereby certified that:
1. The present name of the corporation (hereinafter called the
"corporation") is Individual Investor Group, Inc. The name under which the
corporation was incorporated was Financial Data Systems, Inc. The date of filing
the original certificate of incorporation of the corporation with the Secretary
of State of the State of Delaware was September 19, 1985.
2. The certificate of incorporation of the corporation is hereby amended by
deleting the first paragraph of Article Fourth and in its stead substituting the
following:
The total number of shares of all classes of stock that the
Corporation shall have authority to issue is twenty million (20,000,000)
shares, of which eighteen million (18,000,000) shares will be shares of
Common Stock, with a par value of one cent ($.01) per share, and two
million (2,000,000) shares shall be shares of Preferred Stock, with a par
value of one cent ($.01) per share.
3. Except as otherwise amended hereby, the provisions of the certificate of
incorporation of the corporation are in full force and effect.
4. The amendment to the certificate of incorporation has been duly adopted
in accordance with the provisions of Section 242 of the GCL, by resolution of
the Board of Directors of the corporation and by affirmative vote of the holders
of a majority of the outstanding stock entitled to vote thereon at a meeting of
stockholders.
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Amendment on this 18th day of June 1997.
/s/ Robert Schmidt
-----------------------
Robert Schmidt, President
ATTEST:
/s/ Scot A. Rosenblum
- ----------------------------
Scot A. Rosenblum, Secretary
17
EXHIBIT 10.1
THIS STOCK PURCHASE AGREEMENT, dated as of May 1, 1997 (the "Agreement"),
is between INDIVIDUAL INVESTOR GROUP, INC., a Delaware corporation (the
"Company"), and the HYATT ANN BASS SUCCESSOR TRUST, a trust established under
the laws of the State of Texas (the "Buyer").
1. PURCHASE AND SALE. Subject to the terms and conditions herein set forth,
the Company hereby sells and delivers to Buyer and Buyer hereby purchases from
the Company, for an aggregate purchase price of One Million Dollars
($1,000,000), an aggregate of One Hundred Sixty-Four Three Hundred Thirty-Nine
(164,339) shares (the "Shares") of the Company's common stock, $.01 par value
per share (the "Common Stock"). The Company will deliver to Buyer, within Thirty
(30) days of the effective date of this Agreement, stock certificates
representing the Shares indicating the Buyer as the sole owner of the Shares.
The Buyer hereby makes payment to the Company, by delivery of a bank check or
certified check payable to the order of the Company or by wire transfer to an
account designated by the Company, in the amount of One Million Dollars
($1,000,000).
2. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents and warrants to and covenants with Buyer as follows:
2.1 Organization. The Company is duly organized, validly existing and in
good standing in the State of Delaware.
2.2 Authority; Execution and Delivery, Etc. The execution, delivery, and
performance of this Agreement has been duly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company or its
stockholders are required. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid, and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity. The Shares have been duly authorized and are legally and validly
issued, fully paid and non-assessable. The Company hereby conveys marketable
title to the Shares to the Buyer, free and clear of all liens and encumbrances.
2.3 Financial Condition. The consolidated financial statements of the
Company included in the Disclosure Documents (as defined in Section 2.5) fairly
present on a consolidated basis the financial position, the results of
operations, the changes in financial position and the changes in stockholders'
equity and the other information purported to be shown therein of the Company
and its consolidated subsidiaries at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
18
<PAGE>
2.4 Subsequent Events. Subsequent to the respective dates as of which
information is given in the Disclosure Documents, except as described therein,
there has not been any material adverse change in the condition (financial or
otherwise), earnings, businesses, properties or prospects of the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course of
business, the Company and its subsidiaries have not sustained any material loss
or interference with their businesses or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, and since the date of the latest balance sheet included in the
Disclosure Documents, neither the Company nor any of its subsidiaries has
incurred or undertaken any liability or obligation, indirect or contingent,
except for liabilities or obligations incurred or undertaken in the ordinary
course of business and except for any such liabilities or obligations as are
reflected in the Disclosure Documents.
2.5 Disclosure. The Company has provided to Buyer true, correct and
complete copies of its 1996 Annual Report; Form 10-KSB for the fiscal year ended
December 31, 1996; the draft dated April 29, 1997 of the Quarterly Report on
Form 10-QSB for the fiscal quarter ended March 31, 1997; and its Notice of
Annual Meeting of Stockholders and Proxy Statement relating to its Annual
Meeting of Stockholders to be held on June 18, 1997 (collectively, the
"Disclosure Documents"). As of their respective dates, the Disclosure Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, and
the rules and regulations of the Securities and Exchange Commission (the "SEC")
thereunder applicable to such Disclosure Documents and none of the Disclosure
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Except to the extent information contained in
any Disclosure Document has been revised or superseded by a later-filed
Disclosure Document, none of the Disclosure Documents contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The financial
statements of the Company included in the Disclosure Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be permitted by
the rules of the SEC) and fairly present the financial position of the Company
as at the dates thereof and the results of its operations and cash flows for the
periods then ended.
2.6 Nasdaq Compliance. Upon execution and fulfillment of this Agreement,
the Company shall have satisfied all conditions necessary to be in compliance
with the criteria for continued inclusion in the Nasdaq National Market System.
From and after the date hereof, the Company shall use its best efforts to cause
its continued inclusion in the Nasdaq National Market System.
3. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the
Company as follows:
(a) Buyer is aware that my investment involves a substantial degree of
risk, including, but not limited to the following: (i) subject to Section
2.6, the Company's Common Stock may by removed from the Nasdaq National
Market System since the Company at March 31, 1997 was not in compliance
19
<PAGE>
with the requirements for continued inclusion as a result of not meeting
the tangible net asset requirement of Four Million Dollars
($4,000,000);(ii) the Company has had substantial operating losses for the
fiscal year ended December 31, 1996 and for the fiscal quarter ended March
31, 1997 and expects to continue to incur losses in the future; (iii) the
Company has experienced and will continue to experience substantial
fluctuations in its operating income (loss) from quarter to quarter and
year to year; (iv) the Company may need additional financing in the future
to fund operating losses; (v) management and the existing principal
stockholders of the Company beneficially own a substantial amount of the
outstanding voting stock of the Company and accordingly are in a position
to substantially influence the election of all directors of the Company and
the vote on matters requiring stockholder approval; (vi) the Company's
success will to a significant extent rely upon the continued services and
abilities of Jonathan Steinberg. Buyer acknowledge and is aware that there
is no assurance as to the future performance of the Company.
(b) Buyer is purchasing the Shares for its own account for investment
and not with a view to or in connection with a distribution of the Shares,
nor with any present intention of selling or otherwise disposing of all or
any part of the Shares, except as contemplated in Section 5.1 below.
Subject to Section 5.1 below, Buyer agrees that Buyer must bear the
economic risk of its investment because, among other reasons, the Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under the securities laws of any state and,
therefore, cannot be resold, pledged, assigned, or otherwise disposed of
until they are registered under the Securities Act and under applicable
securities laws of certain states or an exemption from such registration is
available. Promptly upon Buyer's request, after the expiration of the
two-year holding period provided for in the SEC's Rule 144(k), the Company
will exchange the Buyer's stock certificate (legended as aforesaid) for a
new certificate with no restrictive legends thereon, suitable for transfer
in the public securities markets, subject to the Buyer's providing the
Company wit such usual and customary representations in connection
therewith as the Company may reasonably request.
(c) Buyer has the financial ability to bear the economic risk of its
investment in the Company (including its complete loss), has adequate means
for providing for its current needs and personal contingencies and has no
need for liquidity with respect to its investment in the Company.
(d) Buyer or Buyer's representative has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Company and Buyer has obtained, in its
judgment, sufficient information from the Company to evaluate the merits
and risks of an investment in the Company. Buyer has had full opportunity
to ask questions and receive satisfactory answers concerning all matters
pertaining to its investment and all such questions have been answered to
its full satisfaction. Buyer has been provided an opportunity to obtain any
additional information concerning the Company and all other information to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense. Buyer has received no representation or
warranty from the Company with respect to its investment in the Company,
and has relied solely upon its own investigation in making a decision to
invest in the Company.
(e) Buyer is an "accredited investor" as defined in Section 2(15) of
the Securities Act and in Rule 501 promulgated thereunder.
20
<PAGE>
(f) This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of the Buyer
enforceable against the Buyer in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights in general or general
principles of equity.
4. RESTRICTIONS ON TRANSFER.
4.1 Restrictions on Transfer. Buyer agrees that it will not sell, transfer,
or otherwise dispose of any of the Shares, except pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act and the Company has received an
opinion of counsel satisfactory to the Company that such exemption is available.
4.2 Legend. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR
IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
EXEMPTION IS AVAILABLE."
5. REGISTRATION RIGHTS.
5.1 Piggyback Registration. From the date of this agreement until the
second anniversary thereof, if the Company proposes to file a registration
statement under the Securities Act with respect to an offering for its own
account of any class of security (other than a registration statement on Form
S-4 or S-8 or successor forms thereto or filed in connection with an exchange
offer or business combination or an offering of securities solely to the
Company's existing stockholders), then the Company shall in each case give
written notice of such proposed filing to the Buyer at least thirty days before
the anticipated filing date, and such notice shall offer the Buyer the
opportunity to register such number of shares of Common Stock of the Company as
the Buyer may request. Upon the written request of the Buyer made within twenty
days of receipt of such notice, the Company shall use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Buyer to include such shares in such offering on the same terms and
conditions as any shares of Common Stock of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering delivers a written opinion to the Buyer that the total number of
shares which it, the Company and any other persons or entities intend to include
in such offering may adversely affect the success or offering price of such
offering, then the number of shares to be offered for the account of the Buyer
shall be reduced pro rata to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter (or, if applicable, excluding such shares entirely),
provided that if shares are being offered for the account of other persons or
entities as well as the Company, such reduction shall not represent a greater
fraction of the number of shares intended to be offered by the Buyer than the
fraction of similar reductions imposed on such other persons or entities other
than the Company over the amount of securities they intended to offer.
21
<PAGE>
In the event that the registration proposed by the Company is an
underwritten primary offering of its securities and the Buyer does not sell its
securities to the underwriter of the Company's securities in connection with
such offering, the Buyer shall, to the extent permitted by applicable law or
regulation, refrain from selling any of its securities during the period of
distribution of the Company's securities by such underwriter in the primary
offering and the period in which the underwriter participates in the aftermarket
and for such additional period requested by the underwriter, provided, however,
that the Buyer shall, in any event, be entitled to sell its securities in
connection with such registration statement commencing on the 90th day after the
effective date of such registration statement.
5.2 Blue Sky. In connection with the registration of its securities
pursuant to Section 5.1, the Company shall use all reasonable efforts to
register and qualify its securities covered by such registration statement under
such securities or Blue Sky laws of such jurisdictions within the United States
as the Buyer shall reasonably request and do any and all such other acts and
things as may be reasonably necessary or advisable to enable the Buyer to
consummate the disposition in such jurisdictions of the securities held by the
Buyer; provided that the Company shall not be required to consent to general
service of process, to qualify, to do business or subject itself to tax
liability in any jurisdiction in which it has not, as of the effective date of
such registration, qualified to do business.
5.3 Expenses. All expenses in connection with registrations of the Shares
shall be borne by the Company except for underwriting discounts and commissions,
applicable transfer taxes, expenses associated with blue sky registrations
requested by Buyer pursuant to Section 5.2, and expenses of counsel to the
Buyer, which shall be borne by the Buyer.
5.4 Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Buyer and its affiliates and each of their
officers, directors, trustees, agents and employees and each person, if any, who
controls the Buyer ("Controlling Person") within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) to which it may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended ("Exchange Act") or any other
statute or at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement (a "Registration Statement") in which the Buyer's
securities shall be included or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to the
Buyer by the Buyer expressly for use in the Registration Statement. The Company
agrees promptly to notify the Buyer of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Shares in connection with
the Registration Statement.
(b) If any action is brought against the Buyer in respect of which
indemnity may be sought against the Company pursuant to Section 5, Buyer shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of Buyer) and payment of actual
expenses. Buyer shall have the right to employ its own counsel in any such case,
22
<PAGE>
but the fees and expenses of such counsel shall be at the expense of Buyer
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) the Buyer shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the Buyer), in any of which
events the fees and expenses of not more than one additional firm of attorneys
selected by Buyer and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if Buyer shall assume
the defense of such action as provided above, the Company shall have the right
to approve the terms of any settlement of such action which approval shall not
be unreasonably withheld.
(c) Buyer agrees to indemnify and hold harmless each of the Company, its
directors, officers and employees and any underwriter (as defined in the
Securities Act) and each Controlling Person of the Company, against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to Buyer, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to Buyer
in the Registration Statement, and in strict conformity with, written
information furnished to the Company by Buyer expressly for use in the
Registration Statement. In case any action shall be brought against the Company
or any other person so indemnified based on the Registration Statement, and in
respect of which indemnity may be sought against Buyer, Buyer shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to Buyer by the provisions of
paragraph (b) above.
5.5 Contribution.
(a) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Section 5 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Securities Act, the Exchange Act, or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under this Section 5, then, and in each such
case, the Company and Buyer shall contribute, in proportion to their relative
fault, to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Buyer, as incurred; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(b) Within fifteen days after receipt by any party to this Agreement (or
its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
23
<PAGE>
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any Claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5 are intended to supersede,
to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available.
6. MISCELLANEOUS.
6.1 Expenses. Each party shall be liable for its own expenses in connection
with the transactions contemplated by this Agreement.
6.2 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement is sought.
6.3 Successors and Assigns. All covenants and agreements in this Agreement
contained by or on behalf of either of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the Company and of
Buyer, whether so expressed or not.
6.4 Notices, Etc. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or mailed by
certified or registered mail first-class, postage prepaid:
If to the Company: with a copy to:
Individual Investor Group, Inc. Graubard Mollen & Miller
1633 Broadway, 38th Floor 600 Third Avenue
New York, New York 10019 New York, New York 10016
Attention: Mr. Jonathan L. Steinberg Attn: Peter M. Ziemba, Esq.
If to the Buyer: with a copy to:
Hyatt Ann Bass Successor Trust William P. Hallman, Jr.
c/o R. Cotham 201 Main Street, Suite 2200
201 Main Street, Suite 2600 Forth Worth, Texas 76102
Fort Worth, Texas 76102
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (i) if
delivered by hand, at the time of receipt thereof and (ii) if sent by registered
or certified first-class mail, postage prepaid, five business days thereafter.
Any party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
24
<PAGE>
6.5 Governing Law. This Agreement is being delivered and is intended to be
performed in the State of New York and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such State.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
COMPANY: BUYER:
INDIVIDUAL INVESTOR GROUP, INC. HYATT ANN BASS SUCCESSOR TRUST
BY: Panther City Production Company, Trustee
By: /s/ Jonathan L. Steinberg BY: /s/ W.R. Cotham
------------------------- ------------------
Jonathan L. Steinberg W.R. Cotham
Chief Executive Officer President
25
EXHIBIT 10.2
THIS STOCK PURCHASE AGREEMENT, dated as of May 1, 1997 (the "Agreement"),
is between INDIVIDUAL INVESTOR GROUP, INC., a Delaware corporation (the
"Company"), and the SAMANTHA SIMS BASS SUCCESSOR TRUST, a trust established
under the laws of the State of Texas (the "Buyer").
1. PURCHASE AND SALE. Subject to the terms and conditions herein set forth,
the Company hereby sells and delivers to Buyer and Buyer hereby purchases from
the Company, for an aggregate purchase price of One Million Dollars
($1,000,000), an aggregate of One Hundred Sixty-Four Three Hundred Thirty-Nine
(164,339) shares (the "Shares") of the Company's common stock, $.01 par value
per share (the "Common Stock"). The Company will deliver to Buyer, within Thirty
(30) days of the effective date of this Agreement, stock certificates
representing the Shares indicating the Buyer as the sole owner of the Shares.
The Buyer hereby makes payment to the Company, by delivery of a bank check or
certified check payable to the order of the Company or by wire transfer to an
account designated by the Company, in the amount of One Million Dollars
($1,000,000).
2. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents and warrants to and covenants with Buyer as follows:
2.1 Organization. The Company is duly organized, validly existing and in
good standing in the State of Delaware.
2.2 Authority; Execution and Delivery, Etc. The execution, delivery, and
performance of this Agreement has been duly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company or its
stockholders are required. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid, and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity. The Shares have been duly authorized and are legally and validly
issued, fully paid and non-assessable. The Company hereby conveys marketable
title to the Shares to the Buyer, free and clear of all liens and encumbrances.
2.3 Financial Condition. The consolidated financial statements of the
Company included in the Disclosure Documents (as defined in Section 2.5) fairly
present on a consolidated basis the financial position, the results of
operations, the changes in financial position and the changes in stockholders'
equity and the other information purported to be shown therein of the Company
and its consolidated subsidiaries at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
26
<PAGE>
2.4 Subsequent Events. Subsequent to the respective dates as of which
information is given in the Disclosure Documents, except as described therein,
there has not been any material adverse change in the condition (financial or
otherwise), earnings, businesses, properties or prospects of the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course of
business, the Company and its subsidiaries have not sustained any material loss
or interference with their businesses or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, and since the date of the latest balance sheet included in the
Disclosure Documents, neither the Company nor any of its subsidiaries has
incurred or undertaken any liability or obligation, indirect or contingent,
except for liabilities or obligations incurred or undertaken in the ordinary
course of business and except for any such liabilities or obligations as are
reflected in the Disclosure Documents.
2.5 Disclosure. The Company has provided to Buyer true, correct and
complete copies of its 1996 Annual Report; Form 10-KSB for the fiscal year ended
December 31, 1996; the draft dated April 29, 1997 of the Quarterly Report on
Form 10-QSB for the fiscal quarter ended March 31, 1997; and its Notice of
Annual Meeting of Stockholders and Proxy Statement relating to its Annual
Meeting of Stockholders to be held on June 18, 1997 (collectively, the
"Disclosure Documents"). As of their respective dates, the Disclosure Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, and
the rules and regulations of the Securities and Exchange Commission (the "SEC")
thereunder applicable to such Disclosure Documents and none of the Disclosure
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Except to the extent information contained in
any Disclosure Document has been revised or superseded by a later-filed
Disclosure Document, none of the Disclosure Documents contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The financial
statements of the Company included in the Disclosure Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be permitted by
the rules of the SEC) and fairly present the financial position of the Company
as at the dates thereof and the results of its operations and cash flows for the
periods then ended.
2.6 Nasdaq Compliance. Upon execution and fulfillment of this Agreement,
the Company shall have satisfied all conditions necessary to be in compliance
with the criteria for continued inclusion in the Nasdaq National Market System.
From and after the date hereof, the Company shall use its best efforts to cause
its continued inclusion in the Nasdaq National Market System.
3. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the
Company as follows:
(a) Buyer is aware that my investment involves a substantial degree of
risk, including, but not limited to the following: (i) subject to Section 2.6,
the Company's Common Stock may by removed from the Nasdaq National Market System
since the Company at March 31, 1997 was not in compliance
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with the requirements for continued inclusion as a result of not meeting the
tangible net asset requirement of Four Million Dollars ($4,000,000);(ii) the
Company has had substantial operating losses for the fiscal year ended December
31, 1996 and for the fiscal quarter ended March 31, 1997 and expects to continue
to incur losses in the future; (iii) the Company has experienced and will
continue to experience substantial fluctuations in its operating income (loss)
from quarter to quarter and year to year; (iv) the Company may need additional
financing in the future to fund operating losses; (v) management and the
existing principal stockholders of the Company beneficially own a substantial
amount of the outstanding voting stock of the Company and accordingly are in a
position to substantially influence the election of all directors of the Company
and the vote on matters requiring stockholder approval; (vi) the Company's
success will to a significant extent rely upon the continued services and
abilities of Jonathan Steinberg. Buyer acknowledge and is aware that there is no
assurance as to the future performance of the Company.
(b) Buyer is purchasing the Shares for its own account for investment and
not with a view to or in connection with a distribution of the Shares, nor with
any present intention of selling or otherwise disposing of all or any part of
the Shares, except as contemplated in Section 5.1 below. Subject to Section 5.1
below, Buyer agrees that Buyer must bear the economic risk of its investment
because, among other reasons, the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state and, therefore, cannot be resold, pledged,
assigned, or otherwise disposed of until they are registered under the
Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. Promptly upon Buyer's request,
after the expiration of the two-year holding period provided for in the SEC's
Rule 144(k), the Company will exchange the Buyer's stock certificate (legended
as aforesaid) for a new certificate with no restrictive legends thereon,
suitable for transfer in the public securities markets, subject to the Buyer's
providing the Company wit such usual and customary representations in connection
therewith as the Company may reasonably request.
(c) Buyer has the financial ability to bear the economic risk of its
investment in the Company (including its complete loss), has adequate means for
providing for its current needs and personal contingencies and has no need for
liquidity with respect to its investment in the Company.
(d) Buyer or Buyer's representative has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Company and Buyer has obtained, in its judgment,
sufficient information from the Company to evaluate the merits and risks of an
investment in the Company. Buyer has had full opportunity to ask questions and
receive satisfactory answers concerning all matters pertaining to its investment
and all such questions have been answered to its full satisfaction. Buyer has
been provided an opportunity to obtain any additional information concerning the
Company and all other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense. Buyer has
received no representation or warranty from the Company with respect to its
investment in the Company, and has relied solely upon its own investigation in
making a decision to invest in the Company.
(e) Buyer is an "accredited investor" as defined in Section 2(15) of the
Securities Act and in Rule 501 promulgated thereunder.
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(f) This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights in general or general principles of equity.
4. RESTRICTIONS ON TRANSFER.
4.1 Restrictions on Transfer. Buyer agrees that it will not sell, transfer,
or otherwise dispose of any of the Shares, except pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act and the Company has received an
opinion of counsel satisfactory to the Company that such exemption is available.
4.2 Legend. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR
IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
EXEMPTION IS AVAILABLE."
5. REGISTRATION RIGHTS.
5.1 Piggyback Registration. From the date of this agreement until the
second anniversary thereof, if the Company proposes to file a registration
statement under the Securities Act with respect to an offering for its own
account of any class of security (other than a registration statement on Form
S-4 or S-8 or successor forms thereto or filed in connection with an exchange
offer or business combination or an offering of securities solely to the
Company's existing stockholders), then the Company shall in each case give
written notice of such proposed filing to the Buyer at least thirty days before
the anticipated filing date, and such notice shall offer the Buyer the
opportunity to register such number of shares of Common Stock of the Company as
the Buyer may request. Upon the written request of the Buyer made within twenty
days of receipt of such notice, the Company shall use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Buyer to include such shares in such offering on the same terms and
conditions as any shares of Common Stock of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering delivers a written opinion to the Buyer that the total number of
shares which it, the Company and any other persons or entities intend to include
in such offering may adversely affect the success or offering price of such
offering, then the number of shares to be offered for the account of the Buyer
shall be reduced pro rata to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter (or, if applicable, excluding such shares entirely),
provided that if shares are being offered for the account of other persons or
entities as well as the Company, such reduction shall not represent a greater
fraction of the number of shares intended to be offered by the Buyer than the
fraction of similar reductions imposed on such other persons or entities other
than the Company over the amount of securities they intended to offer. In the
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event that the registration proposed by the Company is an underwritten primary
offering of its securities and the Buyer does not sell its securities to the
underwriter of the Company's securities in connection with such offering, the
Buyer shall, to the extent permitted by applicable law or regulation, refrain
from selling any of its securities during the period of distribution of the
Company's securities by such underwriter in the primary offering and the period
in which the underwriter participates in the aftermarket and for such additional
period requested by the underwriter, provided, however, that the Buyer shall, in
any event, be entitled to sell its securities in connection with such
registration statement commencing on the 90th day after the effective date of
such registration statement.
5.2 Blue Sky. In connection with the registration of its securities
pursuant to Section 5.1, the Company shall use all reasonable efforts to
register and qualify its securities covered by such registration statement under
such securities or Blue Sky laws of such jurisdictions within the United States
as the Buyer shall reasonably request and do any and all such other acts and
things as may be reasonably necessary or advisable to enable the Buyer to
consummate the disposition in such jurisdictions of the securities held by the
Buyer; provided that the Company shall not be required to consent to general
service of process, to qualify, to do business or subject itself to tax
liability in any jurisdiction in which it has not, as of the effective date of
such registration, qualified to do business.
5.3 Expenses. All expenses in connection with registrations of the Shares
shall be borne by the Company except for underwriting discounts and commissions,
applicable transfer taxes, expenses associated with blue sky registrations
requested by Buyer pursuant to Section 5.2, and expenses of counsel to the
Buyer, which shall be borne by the Buyer.
5.4 Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Buyer and its affiliates and each of their
officers, directors, trustees, agents and employees and each person, if any, who
controls the Buyer ("Controlling Person") within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) to which it may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended ("Exchange Act") or any other
statute or at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement (a "Registration Statement") in which the Buyer's
securities shall be included or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to the
Buyer by the Buyer expressly for use in the Registration Statement. The Company
agrees promptly to notify the Buyer of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Shares in connection with
the Registration Statement.
(b) If any action is brought against the Buyer in respect of which
indemnity may be sought against the Company pursuant to Section 5, Buyer shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of Buyer) and payment of actual
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expenses. Buyer shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of Buyer
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) the Buyer shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the Buyer), in any of which
events the fees and expenses of not more than one additional firm of attorneys
selected by Buyer and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if Buyer shall assume
the defense of such action as provided above, the Company shall have the right
to approve the terms of any settlement of such action which approval shall not
be unreasonably withheld.
(c) Buyer agrees to indemnify and hold harmless each of the Company, its
directors, officers and employees and any underwriter (as defined in the
Securities Act) and each Controlling Person of the Company, against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to Buyer, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to Buyer
in the Registration Statement, and in strict conformity with, written
information furnished to the Company by Buyer expressly for use in the
Registration Statement. In case any action shall be brought against the Company
or any other person so indemnified based on the Registration Statement, and in
respect of which indemnity may be sought against Buyer, Buyer shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to Buyer by the provisions of
paragraph (b) above.
5.5 Contribution.
(a) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Section 5 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Securities Act, the Exchange Act, or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under this Section 5, then, and in each such
case, the Company and Buyer shall contribute, in proportion to their relative
fault, to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Buyer, as incurred; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(b) Within fifteen days after receipt by any party to this Agreement (or
its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
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seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any Claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5 are intended to supersede,
to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available.
6. MISCELLANEOUS.
6.1 Expenses. Each party shall be liable for its own expenses in connection
with the transactions contemplated by this Agreement.
6.2 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement is sought.
6.3 Successors and Assigns. All covenants and agreements in this Agreement
contained by or on behalf of either of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the Company and of
Buyer, whether so expressed or not.
6.4 Notices, Etc. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or mailed by
certified or registered mail first-class, postage prepaid:
If to the Company: with a copy to:
Individual Investor Group, Inc. Graubard Mollen & Miller
1633 Broadway, 38th Floor 600 Third Avenue
New York, New York 10019 New York, New York 10016
Attention: Mr. Jonathan L. Steinberg Attn:Peter M. Ziemba, Esq.
If to the Buyer: with a copy to:
Samantha Sims Bass Successor Trust William P. Hallman, Jr.
c/o R. Cotham 201 Main Street, Suite 2200
201 Main Street, Suite 2600 Forth Worth, Texas 76102
Fort Worth, Texas 76102
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (i) if
delivered by hand, at the time of receipt thereof and (ii) if sent by registered
or certified first-class mail, postage prepaid, five business days thereafter.
Any party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
6.5 Governing Law. This Agreement is being delivered and is intended to be
performed in the State of New York and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such State.
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IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
COMPANY: BUYER:
INDIVIDUAL INVESTOR GROUP, INC. SAMANTHA SIMS BASS SUCCESSOR TRUST
BY: Panther City Production Company, Trustee
By: /s/ Jonathan L. Steinberg BY: /s/ W.R. Cotham
------------------------- -----------------
Jonathan L. Steinberg W.R. Cotham
Chief Executive Officer President
33
EXHIBIT 10.3
This STOCK PURCHASE AGREEMENT, dated as of June 30, 1997 (the "Agreement"),
is between INDIVIDUAL INVESTOR GROUP, INC., a Delaware corporation (is the
"Company"), and WISE PARTNERS, L.P., a Limited Partnership organized and
existing under the laws of the State of Delaware (the "Buyer").
1. PURCHASE AND SALE. Subject to the terms and conditions herein set forth,
the Company hereby sells and delivers to Buyer and Buyer hereby purchases from
the Company, for an aggregate purchase price of Two Hundred Fifty Thousand
Dollars ($250,000), an aggregate of Thirty-One Thousand Four Hundred Ninety-Six
(31,496) shares (the "Shares") of the Company's common stock, $.01 par value per
share (the "Common Stock"). The Company will deliver to Buyer, within Thirty
(30) days of the effective date of this Agreement, stock certificates
representing the Shares indicating the Buyer as the sole owner of the Shares.
The Buyer hereby makes payment to the Company, by delivery of a bank check or
certified check payable to the order of the Company or by wire transfer to an
account designated by the Company, in the amount of Two Hundred Fifty Thousand
Dollars ($250,000).
2. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents and warrants to and covenants with Buyer as follows:
2.1 Organization. The Company is duly organized, validly existing and in
good standing in the State of Delaware.
2.2 Authority; Execution and Delivery, Etc. The execution, delivery, and
performance of this Agreement has been duly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company or its
stockholders are required. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid, and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity. The Shares have been duly authorized and are legally and validly
issued, fully paid and non-assessable. The Company hereby conveys marketable
title to the Shares to the Buyer, free and clear of all liens and encumbrances.
3. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the
Company as follows:
(a) Buyer is a Limited Partnership organized and existing in good standing
under the laws of the State of Delaware and Jonathan Steinberg, an individual
residing in the State of New York, is the sole General Partner of Buyer.
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(b) Buyer is aware that my investment involves a substantial degree of
risk, including, but not limited to the following: (i) the Company has had
substantial operating losses for the fiscal year ended December 31, 1996 and for
the fiscal quarter ended March 31, 1997 and expects to continue to incur losses
in the future; (ii) the Company has experienced and will continue to experience
substantial fluctuations in its operating income (loss) from quarter to quarter
and year to year; (iii) the Company may need additional financing in the future
to fund operating losses; (iv) management and the existing principal
stockholders of the Company beneficially own a substantial amount of the
outstanding voting stock of the Company and accordingly are in a position to
substantially influence the election of all directors of the Company and the
vote on matters requiring stockholder approval; (v) the Company's success will
to a significant extent rely upon the continued services and abilities of
Jonathan Steinberg, who is the Chairman and Chief Executive Officer of the
Company. Buyer acknowledge and is aware that there is no assurance as to the
future performance of the Company.
(c) Buyer is purchasing the Shares for his own account for investment and
not with a view to or in connection with a distribution of the Shares, nor with
any present intention of selling or otherwise disposing of all or any part of
the Shares, except as contemplated in Section 5.1 below. Subject to Section 5.1
below, Buyer agrees that Buyer must bear the economic risk of its investment
because, among other reasons, the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state and, therefore, cannot be resold, pledged,
assigned, or otherwise disposed of until they are registered under the
Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. Promptly upon Buyer's request,
after the expiration of the two-year holding period provided for in the SEC's
Rule 144(k), the Company will exchange the Buyer's stock certificate (legended
as aforesaid) for a new certificate with no restrictive legends thereon,
suitable for transfer in the public securities markets, subject to the Buyer's
providing the Company wit such usual and customary representations in connection
therewith as the Company may reasonably request.
(d) Buyer has the financial ability to bear the economic risk of its
investment in the Company (including its complete loss), has adequate means for
providing for its current needs and personal contingencies and has no need for
liquidity with respect to its investment in the Company.
(e) Buyer has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Company and Buyer has obtained, in its judgment, sufficient information from
the Company to evaluate the merits and risks of an investment in the Company.
Buyer has had full opportunity to ask questions and receive satisfactory answers
concerning all matters pertaining to its investment and all such questions have
been answered to its full satisfaction. Buyer has been provided an opportunity
to obtain any additional information concerning the Company and all other
information to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense. Buyer has received no representation
or warranty from the Company with respect to its investment in the Company, and
has relied solely upon its own investigation in making a decision to invest in
the Company.
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(f) Buyer is an "accredited investor" as defined in Section 2(15) of the
Securities Act and in Rule 501 promulgated thereunder.
(g) This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights in general or general principles of equity.
4. RESTRICTIONS ON TRANSFER.
4.1 Restrictions on Transfer. Buyer agrees that it will not sell, transfer,
or otherwise dispose of any of the Shares, except pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act and the Company has received an
opinion of counsel satisfactory to the Company that such exemption is available.
4.2 Legend. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH EXEMPTION IS AVAILABLE."
5. REGISTRATION RIGHTS.
5.1 Piggyback Registration. From the date of this agreement until the
second anniversary thereof, if the Company proposes to file a registration
statement under the Securities Act with respect to an offering for its own
account of any class of security (other than a registration statement on Form
S-4 or S-8 or successor forms thereto or filed in connection with an exchange
offer or business combination or an offering of securities solely to the
Company's existing stockholders), then the Company shall in each case give
written notice of such proposed filing to the Buyer at least thirty days before
the anticipated filing date, and such notice shall offer the Buyer the
opportunity to register such number of shares of Common Stock of the Company as
the Buyer may request. Upon the written request of the Buyer made within twenty
days of receipt of such notice, the Company shall use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Buyer to include such shares in such offering on the same terms and
conditions as any shares of Common Stock of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
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such offering delivers a written opinion to the Buyer that the total number of
shares which it, the Company and any other persons or entities intend to include
in such offering may adversely affect the success or offering price of such
offering, then the number of shares to be offered for the account of the Buyer
shall be reduced pro rata to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter (or, if applicable, excluding such shares entirely),
provided that if shares are being offered for the account of other persons or
entities as well as the Company, such reduction shall not represent a greater
fraction of the number of shares intended to be offered by the Buyer than the
fraction of similar reductions imposed on such other persons or entities other
than the Company over the amount of securities they intended to offer. In the
event that the registration proposed by the Company is an underwritten primary
offering of its securities and the Buyer does not sell its securities to the
underwriter of the Company's securities in connection with such offering, the
Buyer shall, to the extent permitted by applicable law or regulation, refrain
from selling any of its securities during the period of distribution of the
Company's securities by such underwriter in the primary offering and the period
in which the underwriter participates in the aftermarket and for such additional
period requested by the underwriter, provided, however, that the Buyer shall, in
any event, be entitled to sell its securities in connection with such
registration statement commencing on the 90th day after the effective date of
such registration statement.
5.2 Blue Sky. In connection with the registration of its securities
pursuant to Section 5.1, the Company shall use all reasonable efforts to
register and qualify its securities covered by such registration statement under
such securities or Blue Sky laws of such jurisdictions within the United States
as the Buyer shall reasonably request and do any and all such other acts and
things as may be reasonably necessary or advisable to enable the Buyer to
consummate the disposition in such jurisdictions of the securities held by the
Buyer; provided that the Company shall not be required to consent to general
service of process, to qualify, to do business or subject itself to tax
liability in any jurisdiction in which it has not, as of the effective date of
such registration, qualified to do business.
5.3 Expenses. All expenses in connection with registrations of the Shares
shall be borne by the Company except for underwriting discounts and commissions,
applicable transfer taxes, expenses associated with blue sky registrations
requested by Buyer pursuant to Section 5.2, and expenses of counsel to the
Buyer, which shall be borne by the Buyer.
5.4 Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Buyer and its affiliates and each of their
officers, directors, trustees, agents and employees and each person, if any, who
controls the Buyer ("Controlling Person") within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) to which it may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended ("Exchange Act") or any other
statute or at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement (a "Registration Statement") in which the Buyer's
securities shall be included or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
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misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to the
Buyer by the Buyer expressly for use in the Registration Statement. The Company
agrees promptly to notify the Buyer of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Shares in connection with
the Registration Statement.
(b) If any action is brought against the Buyer in respect of which
indemnity may be sought against the Company pursuant to Section 5, Buyer shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of Buyer) and payment of actual
expenses. Buyer shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of Buyer
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) the Buyer shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the Buyer), in any of which
events the fees and expenses of not more than one additional firm of attorneys
selected by Buyer and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if Buyer shall assume
the defense of such action as provided above, the Company shall have the right
to approve the terms of any settlement of such action which approval shall not
be unreasonably withheld.
(c) Buyer agrees to indemnify and hold harmless each of the Company, its
directors, officers and employees and any underwriter (as defined in the
Securities Act) and each Controlling Person of the Company, against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to Buyer, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to Buyer
in the Registration Statement, and in strict conformity with, written
information furnished to the Company by Buyer expressly for use in the
Registration Statement. In case any action shall be brought against the Company
or any other person so indemnified based on the Registration Statement, and in
respect of which indemnity may be sought against Buyer, Buyer shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to Buyer by the provisions of
paragraph (b) above.
5.5 Contribution.
(a) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Section 5 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Securities Act, the Exchange Act, or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under this Section 5, then, and in each such
case, the Company and Buyer shall contribute, in proportion to their relative
38
<PAGE>
fault, to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Buyer, as incurred; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(b) Within fifteen days after receipt by any party to this Agreement (or
its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any Claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5 are intended to supersede,
to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available.
6. MISCELLANEOUS.
6.1 Expenses. Each party shall be liable for its own expenses in connection
with the transactions contemplated by this Agreement.
6.2 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement is sought.
6.3 Successors and Assigns. All covenants and agreements in this Agreement
contained by or on behalf of either of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the Company and of
Buyer, whether so expressed or not.
6.4 Notices, Etc. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or mailed by
certified or registered mail first-class, postage prepaid:
If to the Company: with a copy to:
Individual Investor Group, Inc. Graubard Mollen & Miller
1633 Broadway, 38th Floor 600 Third Avenue
New York, New York 10019 New York, New York 10016
Attention: Mr. Jonathan L. Steinberg Attn: Peter M. Ziemba, Esq.
39
<PAGE>
If to the Buyer:
Wise Partners, L.P.
c/o Jonathan Steinberg
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (i) if
delivered by hand, at the time of receipt thereof and (ii) if sent by registered
or certified first-class mail, postage prepaid, five business days thereafter.
Any party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
6.5 Governing Law. This Agreement is being delivered and is intended to be
performed in the State of New York and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such State.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
COMPANY: BUYER:
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Scot Rosenblum By: /s/ Jonathan Steinberg
---------------------- -------------------------
Scot Rosenblum Jonathan Steinberg
Senior Vice President
40
EXHIBIT 10.4
STOCK OPTION AGREEMENT
AGREEMENT, made as of May 9, 1997, between Individual Investor Group, Inc.,
a corporation organized and existing under the laws of the State of Delaware
corporation, having a principal address at 1633 Broadway, 38th Floor, New York,
New York 10019 (the "Company"), and __________________________, an individual
residing at __________________________, ____________________, ________________
____________ ("Executive").
WHEREAS, as of May 9, 1997, the Board of Directors of the Company: (i)
authorized the grant to Executive of an option to purchase shares of the common
stock of the Company, par value $.01 per share (the "Common Stock"), and (ii)
directed the consolidation, restatement and amendment of all options heretofore
granted to Executive by the Company, including the immediate grant; all pursuant
to the terms and conditions set forth in this Agreement, and;
WHEREAS, Executive desires the options granted and restated in this
Agreement;
IT IS AGREED:
1. Restatement, Consolidation, Amendment and Additional Grant.
The Company hereby acknowledges, consolidates, amends and restates the
options heretofore granted to Executive by this consolidated Agreement, which
shall be deemed to supersede any and all other agreements with respect to such
prior grants. Additionally, the Company hereby grants Executive the option to
purchase all or any part of an aggregate of the number of authorized but as yet
unissued shares of Common Stock indicated under the Date of Grant 5/9/97 header
on the Option Schedule attached hereto as Exhibit A and made a part hereof (the
"Option Schedule"). Further, the restated and consolidated options shall be
deemed amended, and the additional grant options shall be issued, pursuant to
the terms and conditions set forth herein and on the Option Schedule and, if
applicable, the terms of the Company's stock option plans as indicated on the
Option Schedule. (Any grants to be included in the terms of this Option
Agreement where the grants are made after the date hereof may be so included by
the addition of such grant with relevant information on the Option Schedule,
signed by the Company and Executive, and; the consolidated options described by
this Agreement and any such subsequently approved options shall hereinafter be
referred to as the "Option", and all shares of Common Stock issuable thereunder
shall hereinafter be referred to as the "Option Shares".)
2. Defined Terms
"Act" Securities Act of 1933, as amended.
"Beneficial As defined in Rule 13d-3 under the
Owner(s)"
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Exchange Act, except that the provisions of Ruled
13d-3(d)(2) which exclude certain persons from the Rule
shall not exclude those persons from being deemed Beneficial
Owner(s) for purposes of this Agreement.
"Change of Control" A transaction after the date hereof which would be required
to be reported in response to Item 6(e) of Schedule 14A (or
in response to any similar item on any similar schedule or
form for reporting to the government) of Regulation 14A
promulgated under the Exchange Act, whether or not the
Company is then subject tffo such reporting requirement;
provided that, without limitation, such a change in control
shall be deemed to have occurred if after the date hereof:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than Jonathan Steinberg
and/or Saul Steinberg, becomes the "beneficial owner",
directly or indirectly, of securities of the Company
representing Forty percent (40%) or more of the combined
voting power of the Company's then outstanding securities
ordinarily having the right to vote at elections of
directors, or (ii) individuals other than those who
constitute the Board on the date of this Agreement and/or
Saul Steinberg (the "Incumbent Board") shall constitute or
have the right to nominate (other than the general right to
nominate that holders of the Company's outstanding voting
securities may possess), appoint or constitute a majority of
the members of the Board; provided however, that any person
becoming a Director subsequent to the date of this Agreement
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least Two-Thirds
(2/3) of the Directors comprising the then current Board
shall be considered a member of the Incumbent Board.
Notwithstanding the foregoing, no "Change of Control" shall
be deemed to have occurred if it arises from a transaction
directly involving Executive.
"Disability" If Executive shall have been unable substantially to perform
his usual duties due to physical or mental illness for a
period in excess of Two Hundred Forty (240) days (whether or
not consecutive) or One Hundred Twenty (120) days
consecutively during any Twelve (12) month period.
"Exchange Act" Securities Exchange Act of 1934, as amended
"Exercise Period" Ten (10) years from the date of grant indicated on the
Option Schedule
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"Fair Market Value" Determined as of the date of exercise, as follows: (i) if
the Common Stock is listed on a national securities exchange
or quoted on the Nasdaq National Market or Nasdaq SmallCap
Market, the last sale price of the Common Stock in the
principal trading market for the Common stock on the last
trading day preceding such date, as reported by the exchange
or Nasdaq, as the case may be; (ii) if the Common Stock is
not listed on a national securities exchange or quoted on
the Nasdaq National Market or Nasdaq SmallCap Market, but is
traded in the over-the-counter market, the closing bid price
of the Common Stock on the last trading day preceding such
date for which such quotations are reported by the national
Quotation Bureau, Inc. or similar publisher of such
quotations, and; (iii) if the fair market value of the
Common Stock cannot be determined pursuant to clause (i) or
(ii) above, such price as the Company shall reasonably
determine in good faith.
"Good Reason" Without the written consent of Executive, either: (i)
Executive's authorities, duties, job title or position of
responsibility, or the nature of Executive's duties or the
scope of his responsibilities, is materially diminished, and
that diminution is not corrected by the Company within
Fifteen (15) days after written notice from Executive
describing the diminution alleged to constitute Good Reason,
or; (ii) Executive's base salary is reduced.
"Just Cause" Conviction of, or plea of nolo contendere to, a felony
directly involving the Company.
"Premium Value" The amount, if any, by which th e Fair Market Value
exceeds the exercise price of Option Shares.
"Substantial
Transaction" Any transaction: (i) involving the sale, issuance or
reservation of a number of shares of capital stock which
would result in any "person" (as such term is used in
sections 13(d) and 14(d) of the Exchange act) becoming a
"beneficial owner", directly or indirectly, of securities of
the Company representing Twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities ordinarily having the right to vote at elections
of directors and, in connection with such transaction, such
"person" shall obtain the right to appoint, nominate (other
than the general right of nomination that holders of the
43
<PAGE>
Company's outstanding voting securities may possess) or
elect (other than the general right to vote that holders of
the Company's outstanding voting securities may possess) at
least One-Third (1/3) of the members of the Company's Board;
(ii) involving the grant or sale of an option or other right
to conduct a Change of Control transaction at any time in
the future, and/or; (iii) any retention by the Company of an
investment banking or other consulting firm, which retention
has been approved by the Company's Board, for the purpose of
seeking to effect a Substantial Transaction (within the
meaning of clause (i) or (ii) above) or a Change of Control
transaction; provided, however, that if Executive remains in
the employ of the Company One (1) year after the initial
retention of such investment banking or consulting firm and
a Substantial Transaction (within the meaning of clause (i)
or (ii) above) or a change of Control transaction has not
occurred within One (1) year of such initial retention, the
mere retention of such investment banking or consulting firm
shall thereafter no longer de deemed a Substantial
Transaction, unless and to the extent that the Board,
effective following the expiration of such One (1) year
period, affirmatively approves the continued retention of
such investment banking or consulting firm. Notwithstanding
the foregoing, no transaction directly involving Executive
shall be deemed a "Substantial Transaction".
3. Termination of Employment / Change of Control
(A) If Executive's employment is terminated by the Company for any reason
or for no reason but without Just Cause, or is terminated by Executive for any
reason or for no reason but without Good Reason, the portion of the Option, if
any, that was exercisable as of the date of termination of employment, may be
exercised for a period of One (1) year from the termination of employment or
until the expiration of the Exercise Period, whichever is shorter; unless
specifically provided otherwise in the Option Schedule. The portion of the
Option, if any, that is not exercisable as of the date of termination of
employment, as above provided, shall immediately terminate upon the termination
of employment.
(B) If Executive's employment is terminated by the Company for Just Cause
the Option, including vested and unvested aspects, shall thereupon terminate,
and the Company may also require Executive to return to the Company the Premium
Value of any Option Shares purchased under this Agreement by Executive within
the Six (6) month period prior to the date of such termination.
(C) In the event of Executive's death or Disability, the portion, if any,
of the Option that was exercisable as of the date of death may thereafter be
exercised by Executive's guardian, legal representative or legatee under the
will, as the case may be, of Executive for a period of One (1) year from the
44
<PAGE>
date of death or Disability, or the expiration of the Exercise Period, whichever
period is shorter. The portion of the Option, if any, that was not exercisable
as of the date of death shall immediately terminate upon Executive's death or
Disability. (D) In the event (i) of a Change of Control, (ii) following a
Substantial Transaction, Executive is terminated by the Company for any reason
or for no reason but other than for Just Cause, and/or (iii) Executive
terminates employment at any time for Good Reason; the Option shall be
accelerated and be immediately exercisable as to all the Option Shares under
this Option and remain exercisable throughout the Exercise Period.
4. Exercise and Company Option to Acquire
(A) Subject to the terms and conditions of the Agreement, during the
Exercise Period the Option, once vested in whole or in part, may be exercised in
whole or in part to the extent it has become vested, and on such occasion or
occasions as Executive may desire, by written notice to the Company, in
substantially the form attached hereto as Exhibit B, directed to the Company at
its principal place of business accompanied by full payment, as hereinafter
provided, of the exercise price for the number of Option Shares specified in the
notice. Such notice shall state the election to exercise the Option and the
number of Option Shares in respect to which it is being exercised, and shall
contain a representation and agreement by the person or persons so exercising
the Option that the Option Shares are being purchased for investment and not
with a view to the distribution or resale thereof, and shall be signed by the
person or persons so exercising the Option.
(B) Payment of the purchase price shall be made by wire transfer, check,
bank draft or money order payable to the order of the Company; provided however,
that at the election of Executive and in Executive's sole discretion, the
purchase price for any or all of the Option Shares to be acquired may be paid in
whole or in parts by: (i) the surrender of shares of Common Stock of the Company
held by or for the account of Executive with a Fair Market Value equal to the
exercise price multiplied by the number of Option Shares to be purchased, or
(ii) the surrender of an exercisable but unexercised portion of the Option in
addition to that portion of the Option being exercised, having a Premium Value
equal to the Option exercise price of the Option being exercised multiplied by
the number of Option Shares to be purchased, or (iii) the surrender of only the
Option being exercised (with no further consideration as to the exercise price),
whereupon Executive shall receive from the Company a number of shares of Common
Stock with a Fair Market Value equal to the Premium Value of the Option Shares
being so tendered (rather than the Fair Market Value of the Option Shares).
Notwithstanding the foregoing, the Company shall have the right to reject
payment in the form of Common Stock if in the opinion of counsel for the
Company, (i) it could result in an event of "recapture" under Section 16(b) of
the Exchange Act; (ii) such tendered shares of Common Stock may not be sold or
transferred to the Company or counsel to the Company otherwise determines that
such transfer is illegal or objectionable.
(C) Company Option to Acquire
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<PAGE>
In the case of each Option exercise hereunder, the Company shall have the
superseding option and right of acquiring the Option rights being exercised and
the Option Shares to be otherwise issued thereunder at a price equal to the
Premium Value of the exercised Option Shares on the date of Notice of Exercise.
To elect this option/right, the Company shall tender such payment to Executive
within Five (5) business days of the Notice of Exercise.
(D) The Company shall promptly issue Common Stock certificates for any
Option Shares purchased hereunder, after the Five (5) business day period
following exercise set forth in paragraph (C) above. Executive shall have all of
the rights of a stockholder with respect to the Option Share Common Stock
purchased hereunder as of the close of business on the date of exercise,
provided such exercise is in accordance with the terms of this Agreement subject
to forfeiture if the Company shall have elected to exercise its option/right in
paragraph (C) above.
(E) The Company hereby represents and warrants to Executive that the Option
Shares, when issued and delivered by the Company to Executive in accordance with
the terms and conditions hereof, will be fully paid, duly and validly issued,
and non-assessable.
5. Non-Transferability and Registration
(A) The Option shall not be assignable or transferable except in the event
of the death of Executive by will or by the laws of descent and distribution. No
transfer of the Option by Executive by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of the will and such
other evidence as the Company may deem necessary to establish the validity of
the transfer and the acceptance by the transferee or transferees of the terms
and conditions of the Option.
(B) Anything in this Agreement to the contrary notwithstanding, Executive
hereby agrees that Executive shall not sell, transfer by any means, or otherwise
dispose of the Option Shares acquired by Executive without registration under
the Act, or in the event that they are not so registered, unless an exemption
from the Act is available thereunder and same is evidenced by an opinion of
counsel to Executive satisfactory to the Company
(C) Executive hereby acknowledges that:
(i) All reports and documents required to be filed by the Company with
the Securities and Exchange Commission pursuant to the Exchange Act within
the last Twelve (12) months have been made available to Executive for
inspection;
(ii) In Executive's position with the Company, Executive has had both
the opportunity to ask questions of and receive answers from the Officers
of the Company and all persons acting on its behalf concerning the terms
and conditions of the offer made hereunder and to obtain any additional
information to the extent the Company possesses or may possess such
information or can acquire it without unreasonable effort or expense
necessary to verify the accuracy of the information obtained pursuant to
subparagraph (i) above;
46
<PAGE>
(iii) The Company shall place stop transfer orders with its transfer
agent against the transfer of the Option Shares in the absence of
registration under the Act or an exemption therefrom, and;
(iv) The certificate evidencing the Option Shares may bear an
appropriate legend as reasonably determined by counsel to the Company. . 7.
Miscellaneous
(A) Anti-Dilution
In the event of any change in the number of outstanding shares of Common
Stock or other capital stock of the Company occurring as the result of a
reorganization, recapitalization, combination or exchange of shares, stock
split, reverse stock split or stock dividend on the Common Stock or other
capital stock, or similar change in the corporate structure or capitalization of
the Company or in its shares, then in any such event, the number of shares of
Common Stock that may be purchased upon exercise of the Option shall be
appropriately adjusted in number, exercise price and/or kind as determined in
good faith by the Board of Directors of the Company so as to avoid any dilutive
effect any such transaction(s) may have on the holding and relative position and
rights of the shares underlying the Option. If the Company shall not be the
surviving corporation in any merger, combination or consolidation, then, as a
condition of such merger, combination or consolidation, lawful and fair
provision shall be made whereby the Executive shall thereafter have the right to
purchase and receive, upon the terms and conditions specified in the Agreement
and in lieu of the Common Stock of the Company immediately theretofore
purchasable upon the exercise of the rights represented thereby, such shares of
stock or other securities of the surviving corporation(s) as may be issued or
payable with respect to or in exchange of the number of shares of Common Stock
of the Company immediately theretofore purchasable upon the exercise of the
rights represented hereby. The Company shall not effect any such merger,
combination or consolidation unless prior to or at the consummation thereof the
surviving corporation shall assume by written instrument executed and delivered
to the Executive evidence of the surviving corporation's obligation to deliver
such shares of stock or other securities of the surviving corporation in
accordance with the foregoing provisions. If the Company shall be the surviving
corporation in any merger, combination or consolidation, this Option shall
pertain and apply to the Option Shares to which the Executive is entitled
hereunder, without adjustment for issuance by the Company of any securities in
the merger, combination or consolidation. In the event of a change in the par
value of the shares of Common Stock which are subject to this Option, this
Option will be deemed to pertain to the shares resulting from any such change.
47
<PAGE>
(B) Withholding Tax
Not later than the date as of which an amount first becomes includible in
the gross income of Executive for Federal income tax purposes with respect to
the Option, Executive shall pay to the Company, or make arrangements
satisfactory to the Company, regarding the payment of any Federal, State and
local taxes of any kind required by law to be withheld or paid with respect to
such amount. The obligation of the Company to issue Option Shares pursuant to
this Agreement shall be conditioned upon such payment or arrangements with the
Company and the Company shall, to the extent permitted law, have the right to
deduct any such taxes from any payment of any kind otherwise due to Executive
from the Company.
(C) Notices
All notices, requests, deliveries, payments, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall either be delivered personally or sent by
certified mail, return receipt requested, postage prepaid, or by Federal Express
next business day service with signed receipt required, to the parties at their
respective addresses set forth below, or to such other address as either shall
have specified by notice in the writing to the other, and shall be deemed duly
given hereunder when so delivered.
(D) Waiver
The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
(E) Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and to the extent not prohibited herein, their respective heirs,
successors, assigns and representatives. Nothing in this Agreement, expresses or
implied, is intended to confer on any person other than the parties hereto,
their respective heirs, successors, assignees and representatives, any rights,
remedies, obligations or liabilities.
(F) Choice of Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflict of law principles.
(G) Entire Agreement
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
INDIVIDUAL INVESTOR GROUP, INC.:
-----------------------------------
Jonathan Steinberg, Chairman and CEO
EXECUTIVE:
------------------------------------
49
<PAGE>
JONATHAN STEINBERG
OPTION SCHEDULE
<TABLE>
<CAPTION>
Date of Number of Vested as of Date Number Per Share Special
Grant Shares 5/9/97 Additional Vesting Exercise Terms
<S> <C> <C> <C> <C> <C> <C>
4/7/94 500,000 250,000 4.9375
4/7/98 125,000 6.65
4/7/99 125,000 7.50
6/23/95 80,000 26,667 5.75
6/23/97 26,667 5.75
6/23/98 26,666 5.75
11/4/96 100,000 (1)
11/4/97 33,333 7.50
11/4/98 33,333 7.50
11/4/99 33,334 7.50
5/9/97 Not Applicable
</TABLE>
(1) Issued under the 1996 Management Incentive Program.
50
<PAGE>
ROBERT SCHMIDT
OPTION SCHEDULE
<TABLE>
<CAPTION>
Date of Number of Vested as of Date Number Per Share Special
Grant Shares 5/9/97 Additional Vesting Exercise Terms
<S> <C> <C> <C> <C> <C> <C>
7/27/94 400,000 283,333.33 5.25 (1)
6/1/97 8,333.33 5.25 (1)
7/1/97 8,333.33 5.25 (1)
8/1/97 8,333.33 5.75 (1)
9/1/97 8,333.33 5.75 (1)
10/1/97 8,333.33 5.75 (1)
11/1/97 8,333.33 5.75 (1)
12/1/97 8,333.33 5.75 (1)
1/1/98 8,333.33 5.75 (1)
2/1/98 8,333.33 5.75 (1)
3/1/98 8,333.33 5.75 (1)
4/1/98 8,333.33 5.75 (1)
5/1/98 8,333.33 5.75 (1)
6/1/98 8,333.33 5.75 (1)
7/1/98 8,333.33 5.75 (1)
6/23/95 80,000 26,667 5.75
6/23/97 26,667 5.75
6/23/98 26,666 5.75
11/4/96 80,000
11/4/97 26,667 7.50 (2)
11/4/98 26,667 7.50 (2)
11/4/99 26,666 7.50 (2)
5/9/97 80,000
5/9/98 26,667 5.88 (2)
5/9/99 26,667 5.88 (2)
5/9/00 26,666 5.88 (2)
</TABLE>
(1) In the event of a termination of Mr. Schmidt's employment pursuant to
the conditions of Sections 3(A) and/or 3(D)(iii) above, the then vested
portion of the Option, plus the lesser of (i) One Hundred Thousand
(100,000) additional Option Shares, or (ii) the total number of Option
Shares scheduled to become exercisable under the Option on and after
the date of termination of employment, may be exercised until the
expiration of the Exercise Period; provided that the remainder, if any,
of the Option that was not exercisable as of the date of termination of
employment, as hereinbefore qualified, shall immediately terminate upon
the termination of employment.
(2) Issued under the 1996 Management Incentive Plan.
51
<PAGE>
SCOT ROSENBLUM
OPTION SCHEDULE
<TABLE>
<CAPTION>
Date of Number of Vested as of Date Number Per Share Special
Grant Shares 5/9/97 Additional Vesting Exercise Terms
<S> <C> <C> <C> <C> <C> <C>
10/3/90 20,935 20,935 0.24
29,728 29,728 0.41
12/4/91 135,000 135,000 3.00 (1)
8/31/94 100,000 66,666.33 4.25
6/1/97 2,083.33 4.25
7/1/97 2,083.33 4.25
8/1/97 2,083.33 4.25
9/1/97 2,083.33 6.75
10/1/97 2,083.33 6.75
11/1/97 2,083.33 6.75
12/1/97 2,083.33 6.75
1/1/98 2,083.33 6.75
2/1/98 2,083.33 6.75
3/1/98 2,083.33 6.75
4/1/98 2,083.33 6.75
5/1/98 2,083.33 6.75
6/1/98 2,083.33 6.75
7/1/98 2,083.33 6.75
8/1/98 2,083.33 6.75
9/1/98 2,083.33 6.75
6/23/95 50,000 16,667 5.75
6/23/97 16,667 5.75
6/23/98 16,666 5.75
11/4/96 60,000
11/4/97 20,000 7.50 (2)
11/4/98 20,000 7.50 (2)
11/4/99 20,000 7.50 (2)
5/9/97 75,000
5/9/98 25,000 5.88 (2)
5/9/99 25,000 5.88 (2)
5/9/00 25,000 5.88 (2)
</TABLE>
(1) Issued under the 1991 Stock Option Plan, and intended to qualify as an
Incentive Stock Option with respect to 99,999 shares (35,001
non-qualified shares).
(2) Issued under the 1996 Management Incentive Plan.
52
<PAGE>
MICHAEL KAPLAN
OPTION SCHEDULE
<TABLE>
<CAPTION>
Date of Number of Vested as of Date Number Per Share Special
Grant Shares 5/9/97 Additional Vesting Exercise Terms
<S> <C> <C> <C> <C> <C>
9/30/96 25,000
9/30/97 8,333.33 8.00 (1)
9/30/98 8,333.33 8.00 (1)
9/30/99 8,333.33 8.00 (1)
1/1/97 25,000
1/1/98 8,333.33 7.25 (1)
1/1/99 8,333.33 7.25 (1)
1/1/00 8,333.33 7.25 (1)
5/9/97 50,000
12/31/97 16,667 5.88 (2)
12/31/98 16,667 5.88 (2)
12/31/99 16,666 5.88 (2)
5/9/97 50,000
5/9/98 16,667 5.88 (2)
5/9/99 16,667 5.88 (2)
5/9/00 16,666 5.88 (2)
</TABLE>
(1) Issued under the 1996 Performance Equity Plan, and intended to qualify as
Incentive Stock Options.
(2) Issued under the 1996 Management Incentive Plan.
53
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,798,430
<SECURITIES> 0
<RECEIVABLES> 2,694,738
<ALLOWANCES> 575,368
<INVENTORY> 0
<CURRENT-ASSETS> 5,214,834
<PP&E> 1,152,229
<DEPRECIATION> 447,522
<TOTAL-ASSETS> 9,447,976
<CURRENT-LIABILITIES> 2,447,239
<BONDS> 0
0
0
<COMMON> 66,107
<OTHER-SE> 4,202,108
<TOTAL-LIABILITY-AND-EQUITY> 4,268,215
<SALES> 7,064,889
<TOTAL-REVENUES> 5,830,912
<CGS> 4,324,876
<TOTAL-COSTS> 9,596,789
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,734,688)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,734,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,734,688)
<EPS-PRIMARY> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
