U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
__ 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 registrant 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
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 registrant's classes of
common equity, as of the latest practicable date: As of October 26, 1998,
registrant had outstanding 8,490,851 shares of Common Stock, $.01 par value per
share.
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
INDEX
Part 1. Financial Information
Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets (Unaudited)
as of September 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements
of Operations (Unaudited) for the three and nine
months ended September 30, 1998 and 1997 4
Consolidated Condensed Statements
of Cash Flows (Unaudited) for the nine months
ended September 30, 1998 and 1997 5
Notes to Consolidated Condensed
Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-15
Part 2. Other Information
Item 2. Sales of Unregistered Securities 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
September 30, December 31,
ASSETS 1998 1997
--------------- ----------------
Current assets:
Cash and cash equivalents $4,657,987 $3,533,622
Marketable securities (Note 6) 518,392 -
Accounts receivable (net of allowances of $336,964 in 2,511,571 2,993,299
1998 and $533,693 in 1997)
Investment in discontinued operations (Note 2) 816,580 4,037,432
Prepaid expenses and other current assets 223,832 224,801
--------------- ----------------
Total current assets 8,728,362 10,789,154
Deferred subscription expense 623,180 426,826
Property and equipment - net 419,529 556,070
Other assets 385,727 384,917
=============== ================
Total assets $10,156,798 $12,156,967
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,256,689 $2,093,987
Accrued expenses 778,230 803,502
Deferred revenue 167,034 343,250
--------------- ----------------
Total current liabilities 3,201,953 3,240,739
Deferred subscription revenue 2,248,562 2,661,129
--------------- ----------------
Total liabilities 5,450,515 5,901,868
--------------- ----------------
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 8,490,851 84,908 71,461
shares in 1998 and 7,146,071 shares in 1997
Additional paid-in capital 24,899,068 19,514,363
Accumulated deficit (19,946,257) (13,330,725)
Accumulated other comprehensive loss (Note 6) (331,436) -
--------------- ----------------
Total stockholders' equity 4,706,283 6,255,099
=============== ================
Total liabilities and stockholders' equity $10,156,798 $12,156,967
=============== ================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Ended Sept 30, Nine Months Ended Sept 30,
---------------------------------------------------------------
1998 1997 1998 1997
-------------- ------------- -------------- -------------
Revenues:
Advertising $2,915,518 $2,416,561 $8,107,316 $6,778,303
Circulation 835,715 893,165 2,605,576 3,012,876
List rental and other 296,478 369,738 950,322 953,175
-------------- ------------- -------------- -------------
Total revenues 4,047,711 3,679,464 11,663,214 10,744,354
-------------- ------------- -------------- -------------
Operating expenses
Editorial, production and distribution 2,818,854 2,483,837 8,687,742 6,808,713
Promotion and selling 1,609,155 1,516,473 4,857,883 4,358,746
General and administrative 932,156 1,110,066 3,825,309 3,253,191
Depreciation and amortization 80,888 103,055 232,467 235,652
-------------- ------------- -------------- ------------
Total operating expenses 5,441,053 5,213,431 17,603,401 14,656,302
-------------- ------------- -------------- ------------
Operating loss from continuing operations (1,393,342) (1,533,967) (5,940,187) (3,911,948)
Interest income 62,362 26,236 106,025 57,425
-------------- ------------- -------------- -------------
Loss from continuing operations (1,330,980) (1,507,731) (5,834,162) (3,854,523)
-------------- ------------- -------------- -------------
Discontinued operations (Note 2)
Income (loss) from discontinued operations - 1,473,224 (189,629) 85,328
Loss on disposal of discontinued operations (145,291) - (591,741) -
-------------- ------------- -------------- -------------
(Loss) income from discontinued operations (145,291) 1,473,224 (781,370) 85,328
-------------- ------------- -------------- -------------
Net loss ($1,476,271) ($34,507) ($6,615,532) ($3,769,195)
============== ============= ============== =============
Basic and dilutive (loss) income per common share:
Continuing operations ($0.16) ($0.23) ($0.76) ($0.60)
Discontinued operations ($0.02) $0.22 ($0.10) $0.01
============== ============= ============== =============
Net loss ($0.17) ($0.01) ($0.86) ($0.59)
============== ============= ============== =============
Average number of common shares used in
computing basic and dilutive
loss per common share 8,490,851 6,638,148 7,669,479 6,400,435
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
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<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Nine Months Ended September 30,
--------------------------------------------
1998 1997
-------------------- -------------------
Cash flows from operating activities:
Net loss ($6,615,532) ($3,769,195)
Less:
(Loss) income from discontinued operations (781,370) 85,328
-------------------- -------------------
Loss from continuing operations (5,834,162) (3,854,523)
Reconciliation of net loss to net cash
used in operating activities:
Depreciation and amortization 232,467 235,652
Loss on sale of equipment 2,634 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 481,728 86,931
Prepaid expenses and other current assets 969 (110,820)
Other assets (810) -
Deferred subscription expense (196,354) 350,087
Increase (decrease) in:
Accounts payable and accrued expenses 137,430 (21,271)
Deferred subscription revenue (412,567) (688,848)
Deferred revenue (176,216) 412,000
-------------------- -------------------
Net cash used in operating activities (5,764,881) (3,590,792)
-------------------- -------------------
Cash flows from investing activities:
Purchase of property and equipment (102,011) (128,983)
Proceeds from sale of equipment 3,451 -
Net cash provided by discontinued operations 1,589,654 1,144,611
-------------------- -------------------
Net cash provided by investing activities 1,491,094 1,015,628
-------------------- -------------------
Cash flows from financing activities:
Proceeds from exercise of stock options (Note 3) 398,152 736,786
Proceeds from issuance of common stock (Note 5) 5,000,000 2,250,000
-------------------- -------------------
Net cash provided by financing activities 5,398,152 2,986,786
-------------------- -------------------
Net increase in cash and cash equivalents 1,124,365 411,622
Cash and cash equivalents, beginning of period 3,533,622 1,544,451
==================== ===================
Cash and cash equivalents, end of period $4,657,987 $1,956,073
==================== ===================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements include the accounts of
Individual Investor Group, Inc. and its subsidiaries (the "Company"). Such
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and with the instructions
to Form 10-Q. 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
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report for the year ended December 31, 1997 on Form 10-KSB.
2. DISCONTINUED OPERATIONS
On April 30, 1998 the Company's Board of Directors decided to discontinue
the Company's investment management services business. A wholly owned subsidiary
of the Company, WisdomTree Capital Management, Inc. ("WTCM"), serves as general
partner of (and is an investor in) a domestic private investment fund. The
Company is also a limited partner in the fund. As a result of the Board's
decision, WTCM is dissolving the domestic investment fund, liquidating its
investments and distributing the net assets to all investors as promptly as
possible. In July 1998 the fund distributed $19,682,415 to its partners in cash
and securities. In October 1998 the fund distributed additional funds totaling
approximately $4,500,000 in cash to its partners. The remainder of the net
assets will be distributed as soon as the investments held by the fund are
liquidated. The operating results relating to investment management services
have been segregated from continuing operations and reported as a separate line
item on the statement of operations. As a result the Company has restated its
financial statements for the corresponding periods of the prior year.
Operating results from discontinued operations are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Investment management services revenues - $141,999 $137,183 $439,191
Net (depreciation) appreciation in fund - 1,371,887 (276,497) (159,283)
Operating expenses - (40,662) (50,315) (194,580)
=========== ============ ============= ============
(Loss) income from discontinued operations - $1,473,224 $(189,629) $85,328
=========== ============ ============= ============
</TABLE>
6
<PAGE>
Loss on disposal of discontinued operations totaled $145,291 and $591,741
for the three and nine months ended September 30, 1998, respectively. Under
generally accepted accounting principles, loss on disposal of discontinued
operations includes actual losses from the date the Board resolved to
discontinue the investment management services operations plus a provision for
additional losses based on management's best estimate of the amount to be
realized on dissolution of the fund, including applicable severance and legal
fees. Additional losses were incurred in the third quarter as a result of
changes in the market value of the fund's investments.
The fair market value of the Company's investment in the discontinued
operations decreased from $4,037,432 at December 31, 1997 to $816,580 at
September 30, 1998. The net depreciation in the Company's investment for the
three and nine months ended September 30, 1998 was $168,799 and $927,054,
respectively. In July 1998 the Company received $2,293,799 of its investment,
including cash of $1,443,997 and securities of $849,822 (valued as of June 30,
1998). In October 1998 the Company received an additional $524,432 in cash from
the fund. No assurance can be given that the Company will realize any further
amount with respect to its investment in the domestic fund. Moreover, the
securities received by the Company in July 1998 suffered a material decline in
value between June 30, 1998 and September 30, 1998, and subsequently through the
date of this Report. There can be no assurance that such securities will not
suffer further material declines in value.
Selected unaudited financial information for the fund as of September 30,
1998 and December 31, 1997 is as follows:
September 30, December 31,
1998 1997
Assets (at fair value) $ 7,195,281 $71,245,441
Liabilities 188,459 32,104,302
Partners' capital 7,006,822 39,141,139
The net losses for the fund for the three and nine months ended September
30, 1998 totaled $1,448,415 and $7,954,776, respectively, as compared to a net
gain of $16,544,302 and $3,242,622 for the corresponding periods in 1997.
The Company, through WTCM, also provides investment management services to
an offshore private investment fund. On May 21, 1998 the sole voting shareholder
of the offshore fund, in consultation with WTCM, resolved to wind up the fund
and appointed a liquidator to distribute the assets of the fund to its investors
in accordance with Cayman Islands law. In July 1998 approximately 55% of the net
assets of the offshore fund were distributed in cash to its investors. The
remainder of the net assets will be distributed promptly following the
liquidation of the investments held by the fund. The Company has no investment
in the offshore fund.
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 with respect to the domestic fund), subject to certain limitations,
calculated at each funds' year-end, which is December 31st for the domestic fund
and June 30th for the offshore fund. The amount of the special allocation for
the offshore fund for the year ended June 30, 1998 was $109,319. The Company
does not expect to receive a special allocation during 1998 from the domestic
fund based on the negative performance of that fund to date.
7
<PAGE>
3. STOCK OPTIONS
During the three and nine months ended September 30, 1998, the Company
granted 563,000 and 751,000 options, respectively, to purchase the Company's
Common Stock; 84,938 options were exercised year to date providing proceeds of
$398,152 (none were exercised in the third quarter); and 112,500 and 534,310
options were canceled, respectively. Of the total options granted in the third
quarter, 250,500 were under the Company's stock option plans and 312,500 were
outside the Company's plans, all of which expire at various dates through
September 2008.
4. LOSS PER COMMON SHARE
Net loss per basic and dilutive common share for the three and nine month
periods ended September 30, 1998 and 1997, respectively, were computed using the
weighted average number of common shares outstanding during each period. The
exercise of stock options and warrants were not assumed in the computation of
loss per common share, as the effect would have been antidilutive. Previously
reported net loss per share amounts are the same as required by the adoption of
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share," which became effective in the fourth quarter of 1997.
5. SALE OF COMMON STOCK
On June 26, 1998 the Company entered into a Stock Purchase Agreement with
Wise Partners, L.P. providing for the sale of 1,259,842 shares of Common Stock
for an aggregate purchase price of $5,000,000, which was based on the closing
"ask" price of the common stock on June 25, 1998. Wise Partners; L.P. is a
limited partnership of which the Chief Executive Officer of the Company,
Jonathan L. Steinberg, is the General Partner.
6. OTHER COMPREHENSIVE INCOME
During the year, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 requires the disclosure of comprehensive income, defined
as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources.
Comprehensive income is a more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has not
been recognized in the calculation of net income.
Comprehensive loss for the three and nine months ended September 30, 1998
and 1997, respectively, is presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Net loss $(1,476,271) $(34,507) $(6,615,532) $(3,769,195)
Accumulated other comprehensive loss:
Unrealized loss on securities (331,436) - (331,436) -
================ ============== ================= =================
Total comprehensive loss $(1,807,707) $(34,507) $(6,946,968) $(3,769,195)
================ ============== ================= =================
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in this Report and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result,"
"expects," "will continue," "estimates," "believes," "anticipates," 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.
Such forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from the results projected
in such forward-looking statements. These risks and uncertainties include those
set forth in Item 2 (entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations") of this Report, and in Item 1 (entitled
"Business") of Part I and in Item 6 (entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations") of Part II of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997, filed with the Securities and Exchange Commission. These forward-looking
statements speak only as of the date of this Report. The Company expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any
change in the Company's expectations with regard thereto or to reflect any
change in events, conditions or circumstances on which any such forward-looking
statement is based, in whole or in part.
Three and Nine Months Ended September 30, 1998 as Compared to the Three and
Nine Months Ended September 30, 1997
Loss from Continuing Operations
The Company's loss from continuing operations was $1,330,980 and $5,834,162
for the three and nine months ended September 30, 1998, respectively, a 12%
decrease and 51% increase from the corresponding periods of the previous fiscal
year. The decrease in the loss from continuing operations for the third quarter
of 1998 as compared to the third quarter of 1997 is due primarily to the
improved operating performance for Individual Investor and Ticker magazines as
well as lower general and administrative ("G&A") costs. The increase in the year
to date operating loss for 1998 as compared to the corresponding period of 1997
relates primarily to three factors: the continued investment in the development
of the Company's online service, the decrease in advertising pages and revenues
for Individual Investor magazine, and high levels of severance and hiring
expenses incurred relating to changes in senior management and key advertising
sales personnel.
The decrease in the loss from continuing operations for the third quarter
of 1998 as compared to the corresponding period of 1997 is due to revenues
growing 10% for the period while expenses grew by only 4%. For the three months
ended September 30, 1998, total revenues were $4,047,711 as compared to
$3,679,464 for the same period in 1997. For the three months ended September 30,
1998, total expenses were $5,441,053 as compared to $5,213,431 for the same
period in 1997. Individual Investor magazine made a positive contribution
(before deducting G&A expenses) of $43,785 for the third quarter of 1998 as
compared to a negative contribution (before deducting G&A expenses) of $34,823
in the corresponding period of 1997. This is primarily attributable to a 36%
9
<PAGE>
decrease in subscription promotion expenses for the magazine. Ticker
magazine made a negative contribution (before deducting G&A expenses) of $1,047
for the third quarter of 1998 as compared to a negative contribution (before
deducting G&A expenses) of $107,535 in the corresponding period of 1997,
resulting from a 70% increase in revenues, offset in part by a 34% increase in
operating expenses. The Company's online service, Individual Investor Online
(www.iionline.com), made a negative contribution (before deducting G&A expenses)
of $437,329 for the third quarter of 1998 as compared to a negative contribution
(before deducting G&A expenses) of $256,261 in the corresponding period of 1997.
This is due to higher levels of expenses incurred for the development and
redesign of the service, offset in part by an increase in revenues. In addition,
G&A expenses decreased by 16% for the third quarter of 1998 as compared to the
corresponding period of 1997.
The loss from continuing operations for the nine months ended September 30,
1998 includes a negative contribution (before deducting G&A expenses) of
$1,442,324 from the Company's online service, Individual Investor Online
(www.iionline.com), as compared to a negative contribution (before deducting G&A
expenses) of $590,629 in the corresponding period of 1997. This increase is due
to higher levels of expenses incurred for the development and redesign of the
service, offset in part by higher revenues. Individual Investor magazine
incurred a negative contribution (before deducting G&A expenses) of $312,746 for
the nine months ended September 30, 1998, as compared to a positive contribution
(before deducting G&A expenses) of $286,423 in the corresponding period of 1997.
This change is primarily due to a 5% decrease in advertising revenues in the
1998 period compared to the corresponding period of 1997, and an increase in
operating expenses related to a larger subscriber base. Ticker magazine incurred
a negative contribution (before deducting G&A expenses) of $165,577 for the nine
months ended September 30, 1998, as compared to a negative contribution (before
deducting G&A expenses) of $458,373 in the corresponding period of 1997. This
improvement for Ticker results primarily from a 90% increase in revenues offset
in part by a 38% increase in operating expenses. G&A expenses increased for the
year by 18% as compared to 1997.
Revenues
Revenues from continuing operations for the three and nine months ended
September 30, 1998 were $4,047,711 and $11,663,214, respectively, a 10% and 9%
increase from the corresponding periods of the previous fiscal year.
Advertising revenues for the three and nine months ended September 30, 1998
were $2,915,518 and $8,107,316, respectively, a 21% and 20% increase over the
corresponding periods of 1997. Of this increase, the Company's online service,
Individual Investor Online (www.iionline.com), generated $307,204 and $888,011
for the three and nine months ended September 30, 1998, respectively, compared
to $32,246 and $37,246 for the same periods in 1997. Ticker advertising revenues
for the three and nine months ended September 30, 1998 were $651,748 and
$1,638,653, respectively, a 72% and 90% increase from the corresponding periods
in 1997. This increase relates primarily to nine issues published in 1998
compared to seven in 1997, together with 20% circulation and rate increases
effected in February 1998. Individual Investor advertising revenues for the
three and nine months ended September 30, 1998 were $1,957,121 and $5,581,206,
respectively, a 2% and 5% decrease from the corresponding period of 1997. As a
result of the increase in paid circulation of Individual Investor, effective
November 1997 the Company increased its advertising rates by 18%. However, total
advertising pages for Individual Investor decreased by 41 and 90 total pages for
the three and nine months ended September 30, 1998, respectively, reflecting the
10
<PAGE>
fact that the sales department was in a period of transition. The Company went
without a Publisher from July 1997 until April 1998 and also terminated its West
Coast representative in May 1998 and replaced it with two in house
representatives located in Los Angeles and San Francisco, respectively, in July
1998.
Circulation revenues for the three and nine months ended September 30, 1998
were $835,715 and $2,605,576, respectively, a 6% and 14% decrease when compared
to the corresponding periods of the previous fiscal year. Individual Investor
subscription revenues for the three and nine months ended September 30, 1998,
were $564,744 and $1,788,910, respectively, a 1% increase and 3% decrease from
the corresponding periods of 1997. Special Situations Report subscription
revenues for the three and nine months ended September 30, 1998 were $104,581
and $301,979, respectively, a 41% and 55% decrease when compared to the
corresponding periods of 1997. The decline in Special Situations Report
subscription revenues results from a decrease in paid subscribers to 4,500 as of
September 30, 1998, as compared to 9,100 as of September 30, 1997. The Company
distributes Ticker free of charge by controlled distribution to financial
service professionals, and does not currently impose a charge for use of its
online service.
List rental and other revenues for the three and nine months ended
September 30, 1998 were $296,478 and $950,322, respectively, a 20% and 1%
decrease from the corresponding periods of the previous fiscal year. List rental
revenues for the three and nine months ended September 30, 1998 was $210,996 and
$600,521, respectively, a 23% and 18% decrease when compared to the
corresponding periods of the previous fiscal year. The decrease in list rental
revenue is primarily attributable to reduced demand and the decrease in the
number of subscribers to Special Situations Report. Other revenues for the three
and nine months ended September 30, 1998 were $85,482 and $349,801,
respectively, a 10% decrease and 60% increase from the corresponding periods of
the previous fiscal year. The year to date increase in other revenues is due
primarily to an increase in the sale of reprints from Individual Investor and
Ticker magazines and increased revenues generated from an affinity credit card
agreement.
Operating Expenses
Total operating expenses from continuing operations for the three and nine
months ended September 30, 1998 were $5,441,053 and $17,603,401 respectively, a
4% and 20% increase from the corresponding periods of the previous fiscal year.
Editorial, production and distribution expenses for the three and nine
months ended September 30, 1998 were $2,818,854 and $8,687,742, respectively, a
13% and 28% increase from the same periods of the previous fiscal year. The
increase in such expenses is primarily related to the continuing development,
redesign, and ongoing maintenance of the Company's online service Individual
Investor Online (www.iionline.com). The Company incurred online editorial and
production costs totaling $496,139 and $1,566,805 for the three and nine months
ended September 30, 1998, respectively, compared to $278,158 and $617,526 for
the corresponding periods of the previous fiscal year. Production and
distribution expenses relating to all three print publications for the three and
nine months ended September 30, 1998 were $1,506,614 and $4,651,003,
respectively, a 1% and 12% increase from the corresponding periods of 1997,
primarily due to additional copies printed for a larger subscriber base in both
Individual Investor and Ticker. Editorial costs for the three and nine months
ended September 30, 1998 were $572,202 and $1,761,924, respectively, a 10% and
19% increase from the corresponding periods of the previous fiscal year. This
was due mostly to an increase in staffing levels to aid the growth in the
Company's print publications and its online service.
11
<PAGE>
Promotion and selling expenses for the three and nine months ended
September 30, 1998 were $1,609,155 and $4,857,883, respectively, a 6% and 11%
increase from the corresponding periods of the previous fiscal year. This
increase primarily is due to online advertising expenses of $248,394 and
$763,529 for the three and nine months ended September 30, 1998, respectively,
compared to $10,348 of online advertising costs for the three and nine months
ended September 30, 1997. Subscription promotion expenses for the three and nine
months ended September 30, 1998 were $479,207 and $1,596,293, respectively, a
26% and 18% decrease from the corresponding periods of 1997. Advertising
salaries, commissions and other related costs for the Company's three
publications, for the three and nine months ended September 30, 1998, were
$802,755 and $2,282,728, respectively, as compared to $783,112 and $2,211,135
for the same periods in 1997.
General and administrative expenses for the three and nine months ended
September 30, 1998 were $932,156 and $3,825,309, respectively, as compared to
$1,110,066 and $3,253,191 for the same periods in 1997. The decrease of 16% for
the third quarter of 1998 as compared to the third quarter of 1997 relates
primarily to less salaries paid (the Company's President and General Counsel
were hired in September) and lower bad debt expenses compared to the
corresponding periods of 1997. Substantially all of the year to date increase as
compared to the prior year resulted from incremental expenses (severance, legal
fees and executive search fees) incurred in the second quarter totaling
approximately $560,000 relating to changes in senior management personnel and
key advertising sales personnel.
Depreciation and amortization expense for the three and nine months ended
September 30, 1998, were $80,888 and $232,467 respectively, as compared to
$103,055 and $235,652 for the same periods in 1997.
Interest and other income for the three and nine months ended September 30,
1998 were $62,362 and $106,025, respectively, compared to $26,236 and $57,426
for the same periods in 1997. These changes are primarily due to varying levels
of cash invested by the Company.
Discontinued Operations
On April 30, 1998 the Company's Board of Directors decided to discontinue
the Company's investment management services business. Accordingly, the
operating results relating to investment management services have been
segregated from continuing operations and reported as a separate line item on
the statement of operations.
Net loss from discontinued operations for the three and nine months ended
September 30, 1998 were $145,291 and $781,370 respectively, as compared to net
income of $1,473,224 and $85,328 for the same periods in 1997. Loss on disposal
of discontinued operations was $145,291 and $591,741 for the three and nine
months ended September 30, 1998. Under generally accepted accounting principles,
loss on disposal of discontinued operations includes actual losses from the date
the Board resolved to discontinue the investment management services business,
plus a provision for additional losses based on management's best estimate of
the amount to be realized on dissolution of the fund.
Net loss from discontinued operations includes revenues from investment
management services and net appreciation (depreciation) in fund. 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. Net appreciation (depreciation) in fund relates to the
12
<PAGE>
realized and unrealized earnings of the amount invested by the Company in the
domestic fund's portfolio which, because of the nature of the investments, will
vary significantly from period to period and may result in losses as well as
income. As of September 30, 1998 the value of the Company's investment in the
domestic fund was $816,580. As a result of the Board's decision, WTCM is
dissolving the domestic and offshore investment funds, liquidating fund
investments and distributing the net assets to all investors as promptly as
possible. In July 1998 the Company received $2,293,799 of its investment,
including cash of $1,443,997 and securities of $849,822 (valued as of June 30,
1998). In October 1998 the Company received an additional $524,432 in cash from
the fund. No assurance can be given that the Company will realize any further
amounts with respect to its investment the domestic fund.
Net Loss
The Company's net loss for the three and nine months ended September 30,
1998 was $1,476,271 and $6,615,532, respectively, as compared to a net loss of
$34,507 and $3,769,195 for the corresponding periods in 1997. No income taxes
were provided in 1998 or 1997 due to the net loss. The basic and dilutive net
loss per weighted average common share for the three and nine months ended
September 30, 1998 were ($0.17) and ($0.86), respectively, as compared to
($0.01) and ($0.59) for the corresponding periods in 1997.
Liquidity and Capital Resources
As of September 30, 1998, the Company had working capital of $5,526,409
including cash and cash equivalents totaling $4,657,987. As of September 30,
1998 the fair market value of the Company's investment in the discontinued
operations was $816,580, which may be available, subject to market fluctuations
and liquidity, to fund the Company's operations as the domestic fund is
liquidated and its assets are distributed to its partners. In July 1998 the
Company received $2,293,799 of its investment, including cash of $1,443,997 and
securities of $849,822 (valued as of June 30, 1998). In October 1998 the Company
received an additional $524,432 in cash from the fund. No assurance can be given
that the Company will realize any further amount with respect to its investment
upon final liquidation of the fund. Moreover, the securities received by the
Company in July 1998 suffered a material decline in value between June 30, 1998
and September 30, 1998, and subsequently through the date of this Report. There
can be no assurance that such securities will not suffer further material
declines in value that may have a material adverse affect on the Company's
financial performance.
On June 26, 1998 the Company entered into a Stock Purchase Agreement with
Wise Partners, L.P. providing for the sale of 1,259,842 shares of Common Stock
for an aggregate purchase price of $5,000,000, which was based on the closing
"ask" price of the common stock on June 25, 1998. 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, during the first
nine months of 1998 the Company received $398,152 from exercises of stock
options.
Management expects revenues to grow for the remainder of 1998 and in 1999
as the Company begins to implement changes made by a new management team,
including a new President hired in September 1998 and a new Publisher hired in
April 1998. Advertising sales are expected to increase for Individual Investor
and Ticker magazines due to the addition of new key sales personnel and the
effect of the increased awareness in the marketplace for both magazines begins
to take effect. Additionally, the Company expects to realize higher revenues
from operations of its online service Individual Investor Online
(www.iionline.com). There can be no assurance, however, that such growth will be
realized.
13
<PAGE>
The Company incurred a net loss of $1,476,271 and $6,615,532 for the three
and nine months ended September 30, 1998, respectively. The Company's current
levels of revenues are not sufficient to cover its expenses. Under its current
business plan, during the remainder of 1998 and for the year 1999, the Company
intends to control and reduce several of its expenses while continuing to invest
in its existing products. The Company anticipates losses to continue through
1999. Profitability may be achieved in future periods only if the Company can
substantially increase its revenues while controlling increases in expenses.
There can be no assurance that revenues will be substantially increased, or that
the increases in expenses can be controlled adequately to enable the Company to
attain profitability.
The Company plans to continue investing in its online service Individual
Investor Online (www.iionline.com), because it believes that this line of
business offers the greatest opportunity for generating substantial revenues
over the longer term. There can be no assurance, however, that the online
business in fact will generate substantial revenues, as the Company faces many
competitors in the business. No assurance can be given that advertising revenues
for Individual Investor and Ticker will increase because higher advertising
rates may not be accepted by advertisers, advertising pages may continue to
decline for Individual Investor, circulation may drop at either or both
Individual Investor and Ticker, and the advertising mix may change. Although the
Company has recently added key advertising sales personnel and has hired a new
publisher, no assurance can be given that these changes will result in
advertising revenue increases. The Company also believes that a further stock
market correction or "beaR" market would affect its ability to sell advertising
to the financial advertiser categories. The Company expects that the lease
expenses it will incur in connection with its anticipated relocation to new
space in early 1999 will be at a significantly higher rate per square foot and
that the Company will incur significant costs related to the relocation.
Based on the Company's business plan, the Company believes that its working
capital and its investments will be sufficient to fund its operations and
capital requirements through 1998. Thereafter, if revenues have not been
significantly increased above current and expected levels, the Company will need
to raise additional capital in order to sustain operations. The Company is
currently exploring its ability to obtain additional financing. No assurance can
be given as to the availability of additional financing or, if available, the
terms upon which it may be obtained. Any such additional financing may result in
dilution of an investor's equity investment in the Company. Failure to obtain
additional financing on favorable terms, or at all, will have a substantial
In August 1997 the Company retained the investment banking firm of Bear,
Stearns & Co. Inc. ("Bear Stearns") to assist the Company in exploring strategic
initiatives to enhance shareholder value, the process for which is continuing.
With the assistance of Bear Stearns since the time of such retention, the
Company has focused on various alternatives including identifying, evaluating,
and approaching potential strategic partners seeking investment positions in the
Company's financial information services business.
Year 2000
The Company has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 Issue". The Year 2000 Issue concerns the inability
of information systems, whether due to computer hardware or software, to
properly recognize and process date sensitive information relating to the year
2000 and beyond. Many of the world's computer systems currently record years in
14
<PAGE>
a two-digit format. Such computer systems may be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
in the U.S. and internationally. The potential costs and uncertainties
associated with the Year 2000 Issue will depend on a number of factors,
including software, hardware and the nature of the industry in which a company
operates. The Year 2000 Issue could have a material adverse effect on the
Company's results of operations and ability to conduct business.
To attempt to ensure that the Company's computer systems (including
computer hardware and computer software) are "Year 2000 Ready" (that is, are not
disrupted by the Year 2000 Issue), the Company developed a plan to assess, and
remediate where necessary, any Year 2000 Issue with respect to the Company's
computer systems, and appointed certain employees to administer such plan. The
plan contains four phases: first, identifying all computer hardware and software
being used by the Company; second, determining whether such hardware and
software is Year 2000 Ready; third, remediating any Year 2000 Issue with respect
to any particular piece of hardware or software; and fourth, performing a final
audit and test. The Company has made significant progress toward completing the
first two phases, and currently expects to complete these phases before January
1999. The Company has made significant progress toward completing phase three
with respect to software issues, and currently expects to complete phase three,
with respect to both software and hardware, before April 1999. The Company
intends to commence phase four upon the completion of the first three phases,
and currently expects to complete phase four before October 1999.
The Company currently believes that additional direct costs associated with
making the Company's systems Year 2000 Ready should not exceed $30,000 and that
such costs, together with any lost revenue associated with making the Company's
systems Year 2000 Ready, should not have a material adverse effect on the
Company's operating results or financial condition. The Company does not believe
that the diversion of employee resources required to address the Year 2000 Issue
would have a material effect on the Company's operating results or financial
condition. The Company does not currently have in place a contingency plan of
action in the event that it is not able to make its computer systems Year 2000
Ready, but will consider on an ongoing basis whether such a contingency plan
should be developed.
The dates on which the Company believes it will complete its Year 2000
readiness phases, and the costs associated with such efforts, are based on the
Company's current best estimates. However, there can be no guarantee that these
estimates will be achieved, or that there will not be a delay in, or increased
costs associated with, making the Company's systems Year 2000 Ready. Specific
factors that might cause differences between the estimates and actual results
include, but are not limited to, the availability and cost of personnel trained
in these areas, the ability to locate and correct all relevant computer code and
hardware devices (such as microcontrollers), timely responses to and corrections
by third-parties and suppliers, the ability to implement interfaces between the
new systems and the systems not being replaced, and similar uncertainties. Due
to the general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of third-parties and the
interconnection of global businesses, the Company cannot ensure its ability to
timely and cost-effectively resolve problems associated with the Year 2000
Issue, and a failure to do so could materially adversely affect the Company's
operations and business, and expose it to third-party liability.
The Company also faces risks and uncertainties to the extent that the third
party suppliers of products, services and systems on which the Company relies do
not have business systems or products that are Year 2000 Ready. The Company has
initiated communications with all of its significant suppliers and
15
<PAGE>
customers to determine the extent to which the Company's systems and
products are vulnerable to those third parties' failure to remediate their own
systems' Year 2000 Issues. There is no guarantee that the systems or products of
other companies on which the Company relies will be timely, if at all, made Year
2000 Ready, and such a failure by such other companies could have a material
adverse effect on the Company's systems and products. The Company is in the
process of identifying what actions may be needed to mitigate vulnerability to
problems related to enterprises with which the Company interacts, but does not
currently have in place a contingency plan of action in the event that the
failure by one or more third parties to make their computer systems Year 2000
Ready causes adverse effects to be suffered by the Company. The Conpany will
consider on an ongoing basis whether such a contingency plan should be
developed.
<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
PART II- OTHER INFORMATION
ITEM 2 - Sales of Unregistered Securities
<S> <C> <C> <C> <C> <C>
- ------------- ------------------ ------------ ------------------------------ --------------- ------------------------------
Date of sale Title of security Number Sold Consideration received and Exemption from If option, warrant or
description of underwriting registration convertible security, terms
or other discounts to market claimed of exercise or conversion
price afforded to purchasers
- ------------- ------------------ ------------ ------------------------------ --------------- ------------------------------
7/98 -9/98 Options to purchase 563,000 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 an exercise
prices ranging from $1.1875
to $3.50
</TABLE>
ITEM 5 - Other Information
As previously reported, in July 1997 certain former limited partners of
WisdomTree Associates, L.P. (the "Fund"), the domestic private investment fund
managed by a subsidiary of the Company (which fund is treated as a discontinued
operation as described elsewhere in this Report), initiated an action in the
Supreme Court of the State of New York, County of New York, captioned Richard
Tarlow and Sandra Tarlow v. WisdomTree Associates, L.P., Bob Schmidt and
Jonathan Steinberg, Index No. 113819/97. Defendants moved to dismiss the action
based on plaintiffs' failure to file a complaint, and the action was dismissed
without prejudice in October 1997. In October 1998, plaintiffs served notice of
motion to vacate the default judgment. Plaintiffs allege that defendants did not
timely process plaintiffs request for redemption of their interest in the Fund,
which delay allegedly caused plaintiffs to suffer approximately $470,000 in
damages. The Company is currently evaluating this matter, and intends to take
vigorous action to defend itself. Due to the inherent uncertainty of litigation,
the Company is not able to reasonably estimate the potential losses, if any,
that may be incurred in relation to this litigation.
16
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<S> <C> <C>
Exhibit Description Method of Filing
3.1 Amended and Restated Certificate of Filed herewith
Incorporation of Registrant dated August 19, 1991
3.2 Certificate of Amendment of Amended and Restated Filed herewith
Certificate of Incorporation of Registrant dated
May 26, 1993
3.3 Certificate of Amendment of Amended and Restated Incorporated by reference to
Certificate of Incorporation of Registrant Registrant's Form 10-QSB
dated June 18, 1997 for the quarter ended June 30, 1997.
3.4 Amended and Restated Certificate of Incorporation of Filed herewith
Registrant, as amended through June 18, 1997
3.5 Bylaws of Registrant Incorporated by reference to Exhibit
3.2 to the Registrant's Registration
Statement on Form S-18 (File No.
33-43551-NY) (the form "S-18")
4.1 Specimen Certificate for Common Stock of Registrant Incorporated by reference to Exhibit
4.1 to the Form S-18
10.1 Employment Agreement between Registrant and Brette Popper Filed herewith
dated September 14, 1998
10.2 Stock Option Agreement between Registrant and Brette Filed herewith
Popper dated September 14, 1998
10.3 Employment Agreement between Registrant and Gregory Filed herewith
Barton dated July 21, 1998
10.4 Stock Option Agreement between Registrant and Gregory Filed herewith
Barton dated September 14, 1998
10.5 Indemnification Agreement between Registrant and Brette Filed herewith
Popper dated September 14, 1998
10.6 Indemnification Agreement between Registrant and Gregory Filed herewith
Barton dated September 14, 1998
27 Financial Data Schedule September 30, 1998 Filed only with the electronic
submission of Form 10-Q in
accordance with the EDGAR
requirement
</TABLE>
(b) The Company did not file any reports on Form 8-K for the Quarter Ended
September 30, 1998
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: November 12, 1998
INDIVIDUAL INVESTOR GROUP, INC. (Registrant)
By: /s/ Jonathan L. Steinberg
Jonathan Steinberg, Chief Executive Officer
By: /s/ Henry G. Clark
Henry G. Clark, Vice President Finance
(Principal Financial and Accounting Officer)
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C> <C>
Exhibit No. Description Page
3.1 Amended and Restated Certificate of Incorporation of Registrant 20 - 27
dated August 19, 1991
3.2 Certificate of Amendment of Amended and Restated 28 - 29
Certificate of Incorporation of Registrant dated May 26, 1993
3.4 Amended and Restated Certificate of Incorporation of Registrant, 30 - 36
as amended through June 18, 1997
10.1 Employment Agreement with Brette Popper dated September 11, 1998 37 - 47
10.2 Stock Option Agreement with Brette Popper dated September 14, 1998 48 - 59
10.3 Employment Agreement with Gregory Barton dated July 21, 1998 60 - 61
10.4 Stock Option Agreement with Gregory Barton dated September 14, 1998 62 - 70
10.5 Indemnification Agreement with Brette Popper dated September 14, 1998 71 - 80
10.6 Indemnification Agreement with Gregory Barton dated September 14, 1998 81 - 90
27 Financial Data Schedule September 30, 1998 91
</TABLE>
19
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FINANCIAL DATA SYSTEMS, INC.
FINANCIAL DATA SYSTEMS, INC. (the "Corporation"), a corporation whose
Certificate of Incorporation originally was filed with the Secretary of State on
September 19, 1985 and which is organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That this Amended and Restated Certificate of Incorporation restates
and further amends the provisions of the Certificate of Incorporation of the
Corporation, as heretofore amended or supplemented, in accordance with the
applicable provisions of Sections 242 and 245 of the General Corporation Law of
Delaware.
SECOND: That the Board of Directors of the Corporation, by Unanimous
Written Consent dated August 19, 1991, in accordance with the applicable
provisions of Sections 141(f), 242, and 245 of the General Corporation Law of
Delaware, and the holder of a majority of the issued and outstanding Common
Stock, par value $.10 per share, of the Corporation, by Written Consent dated
August 19, 1991, in accordance with the applicable provisions of Sections 228,
242, and 245 of the General Corporation Law of Delaware, duly adopted
resolutions restating and further amending the Certificate of Incorporation of
the Corporation as set forth below.
THIRD: That this restatement and amendment shall be effective upon filing.
FOURTH: That the text of the Certificate of Incorporation of the
Corporation, as heretofore amended or supplemented, is hereby restated and
further amended to read in its entirety as follows:
20
<PAGE>
ARTICLE I
The name of the Corporation is Financial Data Systems, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is twelve million (12,000,000) shares, of which
ten million (10,000,000) shares shall be shares of Common Stock, with a par
value of one cent ($.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.
The Board of Directors of the Corporation hereby expressly is granted
authority to authorize, in accordance with Section 151(a) of the General
Corporation Law of the State of Delaware, from time to time the issuance of one
or more series of Preferred Stock and with respect to any such series to fix by
resolution or resolutions the numbers, powers, designations, preferences, and
relative, participating, optional, or other special rights of such series, and
the qualifications, limitations, or restrictions thereof, including but without
limiting the generality of the foregoing, the following:
21
<PAGE>
(1) entitling the holders thereof to cumulative, non-cumulative, or
partially cumulative dividends, or to no dividends;
(2) entitling the holders thereof to receive dividends payable on a
parity with, junior to, or in preference to, the dividends payable on any
other class or series of capital stock of the Corporation;
(3) entitling the holders thereof to rights upon the liquidation of,
or upon any distribution of the assets of, the Corporation, on a parity
with, junior to, or in preference to, the rights of any other class or
series of capital stock of the Corporation;
(4) providing for the conversion, at the option of the holder or of
the Corporation or both, of the shares of Preferred Stock into shares of
any other class or classes of capital stock of the Corporation or any
series of the same or any other class or classes or into property of the
Corporation or into the securities or properties of any other corporation
or person, or providing for no conversion;
(5) providing for the redemption, as a whole or in part, of the shares
of Preferred Stock at the option of the Corporation, in cash, bonds, or
other property, at such price or prices, within such period or periods, and
under such conditions as the Board of Directors shall so provide, including
provision for the creation of a sinking fund for the redemption thereof, or
providing for no redemption; and
(6) providing for the lack of voting rights or limited voting rights
or enjoying general, special, or multiple voting rights.
ARTICLE V
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation and for further definition,
limitation, and regulation of the powers of the Corporation and of its directors
and stockholders:
22
<PAGE>
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors;
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to, or repeal the Bylaws of the
Corporation;
(3) The number of directors of the Corporation shall be as from time
to time fixed by the Bylaws of the Corporation;
(4) In addition to the powers and authority expressly conferred upon
them herein or by statute, the directors hereby are empowered to exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of the General
Corporation Law of Delaware, this Amended and Restated Certificate of
Incorporation, and any Bylaws adopted by the stockholders; provided,
however, that no Bylaws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such Bylaws had not been adopted.
ARTICLE VI
The number of directors to constitute the whole Board of Directors shall be
such number as shall be set forth in the Bylaws and as shall be fixed from time
to time by resolution of the Board of Directors or by the stockholders of the
Corporation. The Board of Directors shall be divided into three classes as
nearly equal in number as may be, with the term of office of one class expiring
each year. At each annual meeting of the stockholders, successors to the
directors whose terms shall then expire shall be elected to hold office for
terms expiring at the third succeeding annual meeting of stockholders. In case
of any vacancies, by reason of an increase in the number of directors or
otherwise, each additional director may be elected by the Board of Directors
until the end of the term he is elected to fill and until his successor shall be
23
<PAGE>
elected and qualified in the class to which such director is assigned and for
the term or remainder of the term of such class. Directors shall continue in
office until others are chosen and qualified in their stead. When the number of
directors is changed, any newly created directorships or any decrease in
directorships shall be so assigned among the classes by a majority of the
directors then in office, though less than a quorum, as to make all classes as
nearly equal in number as may be feasible. No decrease in the number of
directors shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies, and
other features of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, and such directors selected
shall not be divided into classes pursuant to this Article VI unless expressly
provided by such terms.
ARTICLE VII
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, pursuant to Section 102 (b) (7) of the General
Corporation Law of Delaware. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (1) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the General Corporation
Law of Delaware, or (4) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article VII shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
24
<PAGE>
ARTICLE VIII
The Corporation, to the fullest extent permitted by Section 145 of the
general Corporation Law of Delaware, as the same may be amended and supplemented
from time to time, or by any successor thereto, shall indemnify any and all
persons whom it shall have power to indemnify under such Section from and
against any and all of the expenses, liabilities, and other matters referred to
in or covered by such Section, and, to the fullest extent permitted by such
Section, shall advance expenses incurred by such persons in defending civil or
criminal actions, suits, and proceedings. The indemnification and advancement of
expenses provided for herein shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. Such indemnification and advancement of expenses shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the General Corporation Law of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of the General Corporation Law of Delaware or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of the General Corporation Law of Delaware,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
25
<PAGE>
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE XI
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XII
The amount of the authorized stock of the Corporation of any class or
classes may be increased or decreased by the affirmative vote of the holders of
a majority of the stock of the Corporation entitled to vote.
ARTICLE XIII
Elections of directors need not be by ballot unless the Bylaws of the
Corporation shall so provide.
26
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and attested by its
Secretary this 19th day of August, 1991.
/s/ Jonathan Steinberg
By: Jonathan Steinberg
Title: President
Attest:
/s/ Scot Rosenblum
By: Scot Rosenblum
Title: Secretary
27
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FINANCIAL DATA SYSTEMS, INC.
- -------------------------------------------------------------------------------
Adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware
- -------------------------------------------------------------------------------
The undersigned, being the President and Secretary, respectively, of
Financial Data Systems, Inc., a Delaware Corporation ("Corporation"), do hereby
certify as follows:
FIRST, that the Amended and Restated Certificate of Incorporation of the
Corporation has been amended by striking out Article FIRST an substituting in
lieu thereof the following:
FIRST. The name of the Corporation is
"INDIVIDUAL INVESTOR GROUP, INC."
SECOND, that such amendment to the Amended and Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware by the affirmative vote
of the holders of a majority of the outstanding shares of the Corporation
entitled to vote thereon at a meeting of stockholders.
THIRD, that such amendment shall take effect on the first day of June,
1993.
28
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Jonathan L. Steinberg, its President and attested to by Scot A.
Rosenblum, its Secretary, this 26th day of May, 1993.
FINANCIAL DATA SYSTEMS, INC.
By: /s/ Jonathan Steinberg
Jonathan L. Steinberg,
President, Treasurer
and Chairman
ATTEST:
/s/ Scot Rosenblum
Scot A. Rosenblum,
Secretary
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INDIVIDUAL INVESTOR GROUP, INC.
(as amended through June 18, 1997)
ARTICLE I
The name of the Corporation is "INDIVIDUAL INVESTOR GROUP, INC."
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
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 shall be shares of Common Stock, with a par
value of one ce t ($.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.
The Board of Directors of the Corporation hereby expressly is granted
authority to authorize, in accordance with Section 151(a) of the General
Corporation Law of the State of Delaware, from time to time the issuance of one
or more series of Preferred Stock and with respect to any such series to fix by
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resolution or resolutions the numbers, powers, designations, preferences, and
relative, participating, optional, or other special rights of such series, and
the qualifications, limitations, or restrictions thereof, including but without
limiting the generality of the foregoing, the following:
(1) entitling the holders thereof to cumulative, non-cumulative, or
partially cumulative dividends, or to no dividends;
(2) entitling the holders thereof to receive dividends payable on a
parity with, junior to, or in preference to, the dividends payable on any
other class or series of capital stock of the Corporation;
(3) entitling the holders thereof to rights upon the liquidation of,
or upon any distribution of the assets of, the Corporation, on a parity
with, junior to, or in preference to, the rights of any other class or
series of capital stock of the Corporation;
(4) providing for the conversion, at the option of the holder or of
the Corporation or both, of the shares of Preferred Stock into shares of
any other class or classes of capital stock of the Corporation or any
series of the same or any other class or classes or into property of the
Corporation or into the securities or properties of any other corporation
or person, or providing for no conversion;
(5) providing for the redemption, as a whole or in part, of the shares
of Preferred Stock at the option of the Corporation, in cash, bonds, or
other property, at such price or prices, within such period or periods, and
under such conditions as the Board of Directors shall so provide, including
provision for the creation of a sinking fund for the redemption thereof, or
providing for no redemption; and
(6) providing for the lack of voting rights or limited voting rights
or enjoying general, special, or multiple voting rights.
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ARTICLE V
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation and for further definition,
limitation, and regulation of the powers of the Corporation and of its directors
and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors;
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to, or repeal the Bylaws of the
Corporation;
(3) The number of directors of the Corporation shall be as from time
to time fixed by the Bylaws of the Corporation;
(4) In addition to the powers and authority expressly conferred upon
them herein or by statute, the directors hereby are empowered to exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of the General
Corporation Law of Delaware, this Amended and Restated Certificate of
Incorporation, and any Bylaws adopted by the stockholders; provided,
however, that no Bylaws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such Bylaws had not been adopted.
ARTICLE VI
The number of directors to constitute the whole Board of Directors shall be
such number as shall be set forth in the Bylaws and as shall be fixed from time
to time by resolution of the Board of Directors or by the stockholders of the
Corporation. The Board of Directors shall be divided into three classes as
nearly equal in number as may be, with the term of office of one class expiring
each year. At each annual meeting of the stockholders, successors to the
directors whose terms shall then expire shall be elected to hold office for
terms expiring at the third succeeding annual meeting of stockholders. In case
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of any vacancies, by reason of an increase in the number of directors or
otherwise, each additional director may be elected by the Board of Directors
until the end of the term he is elected to fill and until his successor shall be
elected and qualified in the class to which such director is assigned and for
the term or remainder of the term of such class. Directors shall continue in
office until others are chosen and qualified in their stead. When the number of
directors is changed, any newly created directorships or any decrease in
directorships shall be so assigned among the classes by a majority of the
directors then in office, though less than a quorum, as to make all classes as
nearly equal in number as may be feasible. No decrease in the number of
directors shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies, and
other features of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, and such directors selected
shall not be divided into classes pursuant to this Article VI unless expressly
provided by such terms.
ARTICLE VII
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, pursuant to Section 102 (b) (7) of the General
Corporation Law of Delaware. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (1) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the General Corporation
Law of Delaware, or (4) for any transaction from which the director derived an
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improper personal benefit. No amendment to or repeal of this Article VII shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
ARTICLE VIII
The Corporation, to the fullest extent permitted by Section 145 of the
general Corporation Law of Delaware, as the same may be amended and supplemented
from time to time, or by any successor thereto, shall indemnify any and all
persons whom it shall have power to indemnify under such Section from and
against any and all of the expenses, liabilities, and other matters referred to
in or covered by such Section, and, to the fullest extent permitted by such
Section, shall advance expenses incurred by such persons in defending civil or
criminal actions, suits, and proceedings. The indemnification and advancement of
expenses provided for herein shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. Such indemnification and advancement of expenses shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the General Corporation Law of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
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ARTICLE X
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of the General Corporation Law of Delaware or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of the General Corporation Law of Delaware,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE XI
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
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ARTICLE XII
The amount of the authorized stock of the Corporation of any class or
classes may be increased or decreased by the affirmative vote of the holders of
a majority of the stock of the Corporation entitled to vote.
ARTICLE XIII
Elections of directors need not be by ballot unless the Bylaws of the
Corporation shall so provide.
36
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of September 11, 1998 between Individual
Investor Group, Inc., a Delaware corporation with offices at 1633 Broadway, New
York, New York 10019 ("Company"), and Brette Popper, residing at 522 West End
Avenue, Apartment 15A, New York, New York 10024 ("Executive").
W I T N E S S E T H:
WHEREAS, Company desires to employ the Executive and Executive desires to
be employed by Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment and Duties. (a) Company hereby agrees to employ Executive and
Executive hereby agrees to be employed by the Company and to serve as the
President and Chief Operating Officer of the Company. The Executive's shall
supervise the day-to-day operation of the Company's business and shall have such
other executive duties and responsibilities consistent with that position and
assigned to Executive by the Chairman and Chief Executive Officer of the Company
from time to time. Executive shall be subordinate to the Chief Executive Officer
of the Company and shall report to the Chief Executive Officer. Executive shall
use Executive's best efforts to promote the interests of the Company and devote
Executive's full business time, attention and skill to the business and affairs
of the Company.
(b) The Chief Executive Officer of the Company will assess Executive's
performance and contribution to achieving the business goals of the Company
as established from time to time by the Board of Directors and, as a result
of such assessment, after completion of one year of employment hereunder,
will consider and recommend to the Board of Directors whether Executive
should be nominated to become a member thereof.
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2. Term of Employment. The term of Executive's employment hereunder
("Term") shall commence on September 14, 1998 (the "Effective Date") and shall
continue until December 31, 1999 unless terminated earlier as hereinafter
provided in this Agreement, or unless extended by mutual agreement of the
Company and Executive. Pending any negotiations for renewal of this Agreement
beyond the Term, if Executive continues to be employed by the Company, her
compensation hereunder shall be continued while she remains employed.
3. Compensation.
(a) Salary. In consideration for all the services to be performed
under this Agreement, the Company shall pay Executive a base salary, in
equal installments no less frequently than semi-monthly, at the rate of
$225,000 per year during the Term.
(b) Bonuses. The Company will pay Executive a bonus equal to
Executive's base salary in respect of the first fiscal year during the Term
of this Agreement for which the Company reports a pre-tax income of $1.00
or greater, after deduction for the bonuses payable to employees (other
than the Chairman and Chief Executive Officer) with respect to such fiscal
year, including the bonus to Executive provided herein. The bonus will be
determined by reference to the audited, consolidated financial statements
of the Company, prepared in accordance with generally accepted accounting
principles, consistently applied. The bonus will be paid not later than the
filing date of the Form 10-K for the fiscal year in which the bonus is
earned. The bonus will be deemed earned and payable as of the last day of
the fiscal year provided Executive is employed by the Company as of such
date, even if Executive is not employed by the Company after that date. The
Executive and the Company shall mutually determine the amounts of bonuses
to be paid to Executive in subsequent fiscal years and the performance
targets upon which such bonuses will be paid.
(c) Expenses. The Company shall reimburse Executive for all reasonable
and necessary expenses incurred in the execution of Executive's duties
hereunder upon Executive's submission to the Company of invoices, receipts
and other documentation evidencing such expenses in accordance with the
Company's policies and procedures.
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(d) Vacation. Executive shall be entitled to four weeks of paid
vacation per annum during the Term. Such vacation may be taken by Executive
at such times as generally do not interfere with the business of the
Company and as approved by the Company's Chief Executive Officer. Annual
vacation time shall not cumulate from year to year.
(e) Other Executive Benefits. Executive shall be entitled to
participate, on the same basis and subject to the same qualifications as
other employees of the Company, in any medical or disability insurance,
sick leave, holiday, pension-401(K) and other related benefit plans and
policies in effect with respect to senior management personnel of Company.
(f) Stock Options. On the Effective Date the Company will enter into a
stock option agreement in the form of the agreement attached hereto as
Exhibit A pursuant to which Executive will have the right to purchase up to
250,000 shares of Common Stock exercisable at a price equal to the last
sale price of a share of Common Stock on the trading day immediately
preceding the Effective Date.
4. Travel. Executive shall undertake all reasonable travel required by
Company in connection with the performance of Executive's duties hereunder.
5. Non-Competition; Protection of Confidential Information; Intellectual
Property; and Corporate Opportunities .
(a) Executive agrees that Executive's services hereunder are of a
special, unique and extraordinary character, and that Executive's position
with the Company places her in a position of confidence and trust.
Executive further acknowledges that in the course of rendering services to
the Company, Executive will obtain knowledge of confidential information
and trade secrets of the Company. Accordingly, Executive agrees that during
the Term and for a one (1) year period thereafter, Executive shall not
directly or indirectly:
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(i) in any geographic area where the Company conducts business,
engage or participate in, directly or indirectly (whether as an
officer, director, employee, partner, consultant, holder of an equity
or debt investment, lender, or in any other manner or capacity), any
publishing business which is, or as a result of Executive's engagement
or participation would become, competitive with the financial
publishing business in which the Company is engaged at that time,
(ii) deal, directly or indirectly, in any manner with any
customers doing business with the Company (except in connection with
the performance of the duties and obligations of Executive during the
Term of Employment) in soliciting business for an entity which
publishes any publication substantially similar to the publications
published by the Company,
(iii) solicit, directly or indirectly, any officer, director,
employee, or agent of the Company to become an officer, director,
employee, or agent of Employee or anyone else,
(iv) engage or participate in, directly or indirectly, any
business conducted under any name that shall be the same as or similar
to the name of the Company or any trade name used by it, o
(v) disparage the reputation of the Company or its publications.
Ownership, in the aggregate, of less than 1% of the outstanding shares of
capital stock of any corporation with revenues in excess of $100,000,000 and one
or more classes of its capital stock listed on a national securities exchange or
publicly-traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. In addition, the Company agrees that Executive's
role as a shareholder, officer and/or director of Swaps Monitor Publications,
Inc. (a publisher of financial information whose focus is other than providing
investment information tailored to the individual investor) is not and shall not
be considered to be in violation of any provision of this Section 5(a).
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(b) Executive also agrees that either during the Term or at any other
time thereafter, Executive shall not divulge, furnish, or make accessible
to anyone (other than in the regular course of business of the Company) any
knowledge or information with respect to confidential or secret processes,
inventions, discoveries, improvements, formulae, plans, material, devices,
ideas, or other know-how, whether intellectual property or not, with
respect to any confidential or secret engineering, development, or research
work or with respect to any other confidential or secret aspects of the
Company's business (including, without limitation, customer lists,
subscription lists, supplier lists, and pricing arrangements with
customers, subscribers, advertisers or suppliers). Executive further agrees
that during the Term or at any other time thereafter, Executive shall not
make use of, nor permit to be used, any confidential notes, memoranda,
specifications, programs, data, information or other materials of any
nature whether oral or written relating to any matter within the scope of
the business of the Company or concerning any of its dealings or affairs
otherwise than for the benefit of the Company, it being agreed that any of
the foregoing shall be and remain the sole and exclusive property of the
Company and that immediately upon the termination of Executive's
employment, Executive shall deliver any or all copies of the foregoing to
the Company.
(c) During the Term, Executive shall disclose to the Company all
ideas, marketing concepts, slogans, advertising campaigns, characters,
proposals and plans invented or developed by Executive which relate
directly or indirectly to the business of the Company or arise out of
Executive's employment with the Company or the use of the Company's
property or resources including, without limitation, any ideas, proposals
and plans which may be copyrighted, trademarked, patented or otherwise
protected (collectively, "Intellectual Property"). Executive agrees that
all such Intellectual Property are and will be the property of the Company.
Executive expressly understands and agrees that any and all Intellectual
Property constitute a "work for hire" under the U.S. Copyright Law. In the
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event any Intellectual Property is not regarded as a "work for hire,"
Executive hereby assigns to the Company the sole and exclusive right to
Intellectual Property. Executive agrees that Executive will promptly
disclose to the Company any and all Intellectual Property, and that, upon
request of the Company, Executive will execute and deliver any and all
documents or instruments and take any other action which the Company shall
deem necessary to assign to and vest completely in the Company, to perfect
trademark, copyright and patent protection with respect to, or to otherwise
protect the Company's trade secrets and proprietary interest in the
Intellectual Property. Upon disclosure of any Intellectual Property to the
Company, during the Term and at any time thereafter, Executive will, at the
request and expense of the Company, sign, execute, make and do all such
deeds, documents, acts and things as the Company and its duly authorized
agents may reasonably require: (i) to apply for, obtain and vest in the
name of the Company alone (unless the Company otherwise directs)
trademarks, copyrights or other analogous protection in any country
throughout the world and when so obtained or vested to renew and restore
the same; and (ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications
for revocation of such trademarks, copyrights, patents or other analogous
protection. In the event the Company does not, within five (5) days,
execute and deliver such documents reasonably necessary to vest in the
Company all right, title and interest in such Intellectual Property,
Executive hereby irrevocably designates and appoints the Company and its
duly authorized officers and agents as Executive's agent and
attorney-in-fact, to act for and in Executive's behalf and stead to execute
and file any such application or applications and to do all other lawfully
permitted acts to further the prosecution and issuance of trademarks,
copyright or this analogous protection thereon with the same legal force
and effect as if executed by Employee. The obligations of this Section 5(c)
shall continue after the termination of Executive's employment with respect
to such Intellectual Property conceived of or developed by Executive while
employed by the Company. The Company agrees to pay any and all copyright,
trademark and patent fees and expenses or this costs incurred by Executive
for any assistance rendered to the Company pursuant to this paragraph.
(d) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 5(a), (b) or (c), the Company shall have
the right and remedy:
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(i) to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction, it being
acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique, and extraordinary
character and that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company; and
(ii) to require Executive to account for and pay over to the
Company all compensation, profits, monies, accruals, increments, or
this benefits (collectively "Benefits") derived or received by
Executive as the result of any transactions constituting a breach of
any of the provisions of Sections 5(a), (b) or (c) and Executive
hereby agrees to account for and pay over such Benefits to the
Company.
Each of the rights and remedies enumerated in this Section 5(d) shall be
independent of the other, and shall be severally enforceable, and such rights
and remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or equity. If any provision of
Sections 5(a), (b) or (c) is held to be unenforceable because of the scope,
duration, or area of its applicability, the tribunal making such determination
shall have the power to modify such scope, duration, or area, or all of them,
and such provision or provisions shall then be applicable in such modified form.
6. Executive's Representations. Executive represents and warrants that:
(a) Executive has the right to enter into this Agreement and is
not subject to any contract, commitment, agreement, arrangement or
restriction of any kind which would prevent Executive from performing
Executive's duties and obligations hereunder; and
(b) Executive is currently in good health and to the best of
Executive's knowledge, Executive is not subject to any undisclosed
medical condition which might have a material effect on Executive's
ability to perform satisfactorily Executive's services hereunder.
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7. Death of Executive. In the event of Executive's death during the Term,
this Agreement shall terminate as of the date of death, and the Company shall no
longer be under any obligation to Executive or her legal representatives
pursuant to this Agreement except for (i) any base salary accrued and unpaid,
(ii) any earned but unpaid bonus and (iii) any expenses incurred but
unreimbursed under Section 3(c) hereof, to the date of death.
8. Disability. If, during the Term, Executive shall be unable to perform
the duties required of her pursuant to this Agreement due to any "disability"
(as hereinafter defined), the Company shall have the right to terminate
Executive's employment hereunder by giving not less than 14 days' prior written
notice to Employee, at the end of which 14-day period Executive's employment
hereunder shall be terminated and the Company shall no longer be under any
obligation to the Executive or her legal representatives pursuant to this
Agreement except for (i) any base salary accrued and unpaid, (ii) any earned but
unpaid bonus and (iii) any expenses incurred but unreimbursed under Section 3(c)
hereof, to the date of termination. As used in this Agreement, the term
"disability" shall mean the earlier to occur of either of the following events:
(i) the determination by a physician selected by the Company, duly licensed in
New York with a medical specialty appropriate for such determination (which
determination shall be binding and conclusive for the purpose of this Section
8), that the Executive is either physically or mentally, permanently disabled or
incapacitated or otherwise so disabled or incapacitated that she will be unable
to perform her obligations to, or duties for, the Company pursuant to this
Agreement for ninety (90) consecutive days or a period in excess of one hundred
fifty (150) days out of any period of three hundred sixty (360) consecutive
days, or (ii) the Employee, because of physical or mental disability or
incapacity, was unable to perform her obligations to, or duties for, the Company
pursuant to this Agreement on a full-time basis for ninety (90) consecutive days
or a period in excess of one hundred fifty (150) days out of any period of three
hundred sixty (360) consecutive days. The failure of the Executive to submit to
an examination of a physician under this Section 8 shall automatically result in
a determination of disability hereunder.
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9. Termination.
(a) In addition to Sections 7 and 8 herein, Executive's employment
hereunder may be terminated at any time by the Company upon the happening
of any one or more of the following occurrences (hereinafter referred to as
"termination for cause"):
(i) The willful or continued failure of Executive to perform her
obligations under this Agreement, or the material breach of any other
provision of this Agreement by Executive, after her receipt of written
notice from the Company of such failure and a reasonable opportunity
to cure (not to exceed 10 days) has been given to the Executive;
(ii) The indictment of Executive for any crime which constitutes
a felony in the jurisdiction involved or any conviction of, or plea of
guilty or nolo contendere to, any crime involving moral turpitude or
which tends to bring to the Company into disrepute;
(iii) Executive's commission of any act of fraud,
misappropriation, embezzlement or similar willful and malicious
conduct against the Company; or
(iv) Executive's commission of an act or failure to act that
involves willful misconduct, bad faith or gross negligence of
Employee.
(b) Upon the termination of the Executive's employment pursuant to
Section 9(a), the Company shall have no further obligations to the
Executive hereunder.
(c) If the Company shall terminate Executive's employment other than
pursuant to Sections 7, 8 or 9 (a), the Company shall pay Executive, within
thirty (30) days of termination, severance pay equal to the lesser of six
month's base salary or the salary remaining to be paid through the end of
the Term (as if there had been no termination), and the Company shall have
no further obligations to Executive hereunder except for (i) any salary
accrued and unpaid, (ii) any earned but unpaid bonus and (iii) any expenses
incurred but unreimbursed under Section 3(c) thereof, to the date of
termination.
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10. Policy on Insider Trading. Executive agrees to abide by the compliance
policies of the Company relating to buying and selling securities of the Company
and of companies which are the subject of articles in the Company's publications
or of the Company's investment-related products, as such policy exists from time
to time. Executive shall sign all such acknowledgments of the compliance
policies as may be requested from time to time and cooperate fully with the
Company and its agents in the implementation of the compliance policies.
11. Assignment. This Agreement is a personal contract and Executive may not
sell, transfer or assign her rights, interests and obligations hereunder. Any
assignment by the Executive contrary to this paragraph shall be null and void of
no force and effect. The rights and obligations of Company hereunder shall be
binding upon and run in favor of the successors and assigns of Company.
12. Entire Understanding; Governing Law. This Agreement and the Option
Agreement referred to in Section 3(f) represents the entire agreement and
understanding between the parties with respect to the subject matter thereof and
supersedes all prior agreements and understandings. This Agreement shall be
governed by, and construed in accordance with, the internal laws of New York
without regard to principles of conflicts of law.
13. Modification; Waiver. This Agreement may not be amended, modified or
amended, nor may any term or provision be waived unless such modification,
amendment or waiver is in writing and signed by the party against whom
enforcement of any such modification, amendment or waiver is sought.
14. Headings. Section headings contained in this Agreement are for
convenience of reference only and shall not be considered a part of this
Agreement.
15. Severability. If any provision or if any part of any provision of this
Agreement is found to be unenforceable, illegal or contrary to public policy by
a court of competent jurisdiction, the parties agree that this Agreement shall
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remain in full force and effect except for such provision or part of any such
provision held to be unenforceable.
16. Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given upon delivery if
delivered in person or by overnight courier (e.g. Federal Express), or on the
third business day following deposit in the United States mail, if sent by
registered or certified mail, return receipt requested, addressed to the address
of the party to receive notice set forth herein, or to such this address as a
party shall designate by notice in writing given to the this party in accordance
with the terms hereof, except that notices regarding changes in address shall be
effective only upon receipt.
IN WITNESS WHEREOF, Company and Executive has signed this Agreement as of
the day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:/s/Jonathan Steinberg
Jonathan L. Steinberg
Chairman and Chief Executive Officer
/s/Brette Popper
Brette Popper
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STOCK OPTION AGREEMENT
AGREEMENT dated as of the 14 day of September, 1998, by and between
Individual Investor Group, Inc., a Delaware corporation ("Company"), and Brette
Popper ("Employee").
WHEREAS, the Company and Employee have entered into an Employment Agreement
dated September 11, 1998 pursuant to which Employee will be employed by the
Company ("Employment Agreement");
WHEREAS, on September 14, 1998 ("Grant Date"), the Stock Option Committee
of the Board of Directors of the Company authorized the grant to the Employee of
an option ("Option") to purchase an aggregate of 250,000 shares of the
authorized but unissued Common Stock of the Company, $.01 par value ("Common
Stock"), conditioned upon the Employee's acceptance thereof upon the terms and
conditions set forth in this Agreement and the terms of the Employment
Agreement; and
WHEREAS, the Employee desires to acquire the Option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants the Employee the Option
to purchase all or any part of an aggregate of 250,000 shares of Common Stock
("Option Shares") on the terms and conditions set forth herein and subject to
the provisions of the Employment Agreement.
2. Non-Incentive Stock Option. The Option represented hereby is not
intended to be an Option which qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended.
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3. Exercise Price. The exercise price of the Option is $1.1875 per share,
subject to adjustment as hereinafter provided.
4. Exercisability. This Option is exercisable, subject to the terms and
conditions of this Agreement, as follows: (i) the right to purchase 62,500 of
the Option Shares shall be exercisable on or after September 14, 1999, (ii) the
right to purchase an additional 62,500 of the Option Shares shall be exercisable
on and after September 14, 2000 (iii) the right to purchase an additional 62,500
of the Option Shares shall be exercisable on and after September 14, 2001 and
(iv) the right to purchase an additional 62,500 of the Option Shares shall be
exercisable on or after September 14, 2002. After a portion of the Option
becomes exercisable, it shall remain exercisable, except as otherwise provided
herein, until the close of business on September 14, 2008 ("Exercise Period").
5. Effect of Termination of Employment.
5.1. Termination Due to Death. If Employee's employment by the Company
terminates by reason of death, the portion of the Option, if any, that was
exercisable as of the date of death may thereafter be exercised by the
legal representative of the estate or by the legatee of the Employee under
the will of the Employee, for a period of one year from the date of such
death or until 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 death.
5.2. Termination Due to Disability. If Employee's employment by the
Company terminates by reason of Disability (as such term is defined in the
Employment Agreement), the portion of the Option, if any, that was
exercisable as of the date of termination of employment may thereafter be
exercised by the Employee for a period of one year from the date of the
termination of employment or until 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 the termination of employment shall
immediately terminate upon the termination of employment.
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5.3. Other Termination.
5.3.1. If Employee's employment is terminated by the Company for
cause (as defined in Section 9(a) of the Employment Agreement), this
Option, whether or not exercisable, shall immediately expire.
5.3.2. If Employee's employment is terminated by the Company
without cause (as defined in Section 9(a) of the Employment
Agreement), the portion of the Option, if any, that was exercisable as
of the date of termination of employment may thereafter be exercised
by the Employee for a period of one year from the date of the
termination of employment or until 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 the termination of
employment shall immediately terminate upon the termination of
employment.
5.3.3. If Employee terminates her employment with the Company,
this Option, whether or not exercisable, shall immediately expire.
6. Withholding Tax. Not later than the date as of which an amount first
becomes includible in the gross income of the Employee for Federal income tax
purposes with respect to the Option, the Employee shall notify the Company of
the amount and, to the extent required, pay to the Company, or make arrangements
satisfactory to the Board 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 obligations of the Company pursuant to this Agreement shall be
conditional upon such payment or arrangements with the Company and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Employee from the Company.
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7. Adjustments. In the event of any recapitalization, dividend (other than
cash dividend), stock split, reverse stock split, or other change in capital
structure of the Company affecting the number of issued shares of Common Stock,
the Company shall proportionally adjust the number and kind of Option Shares and
the exercise price of the Option in order to prevent the dilution or enlargement
of the Employee's proportionate interest in the Company and Employee's rights
hereunder immediately prior to the reorganization, recapitalization,
consolidation, dividend, stock split, reverse stock split or other change,
provided that the number of Option Shares shall always be a whole number.
8. Acceleration of Vesting on Change of Control. Notwithstanding the
provisions of Sections 4, in the event of a "change of control" (as defined
below) while the Employee is employed by the Company, the vesting of this Option
shall accelerate and all the Option Shares shall be purchasable by Employee
simultaneous with such change of control. For the purposes of this Agreement, a
change of control shall mean (i) the acquisition by any "person" (as defined in
Section 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")), other than a stockholder of the Company that, as of the date
of this Agreement, is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of 10% or more of the outstanding voting securities of
the Company, of more than 50% of the combined voting power of the then
outstanding voting securities of the Company or (ii) the sale by the Company of
all, or substantially all, of the assets of the Company to one or more
purchasers, in one or a series of related transactions, where the transaction or
transactions require approval pursuant to Delaware law by the stockholders of
the Company.
9. Method of Exercise.
9.1. Notice to the Company. The Option shall be exercised in whole or
in part by written notice in substantially the form attached hereto as
Exhibit A 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.
9.2. Delivery of Option Shares. The Company shall deliver a
certificate for the Option Shares to the Employee as soon as practicable
after payment therefor.
9.3. Payment of Purchase Price. The Employee shall make payments by
wire transfer, certified or bank check, in each case payable to the order
of the Company. Alternatively, the Employee may make arrangements
satisfactory to the Company with a bank or a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise
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date a sufficient number of the Option Shares being purchased so that the
net proceeds of the sale transaction will at least equal the Exercise Price
multiplied by the number of Option Shares being purchased pursuant to such
exercise, plus the amount of any applicable withholding taxes and pursuant
to which the bank or broker undertakes to deliver the full Exercise Price
multiplied by the number of Option Shares being purchased pursuant to such
exercise, plus the amount of any applicable withholding taxes to the
Company on a date satisfactory to the Company, but no later than the date
on which the sale transaction would settle in the ordinary course of
business.
10. Nonassignability. The Option shall not be assignable or transferable
except by will or by the laws of descent and distribution in the event of the
death of the Employee. No transfer of the Option by the Employee 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.
11. Company Representations. The Company hereby represents and warrants to
the Employee that:
(a) the Company, by appropriate and all required action, is duly
authorized to enter into this Agreement and consummate all of the
transactions contemplated hereunder; and
(b) the Option Shares, when issued and delivered by the Company to the
Employee in accordance with the terms and conditions hereof, will be duly
and validly issued and fully paid and non-assessable.
12. Employee Representations. The Employee hereby represents and warrants
to the Company that:
(a) she is acquiring the Option and shall acquire the Option Shares
for her own account and not with a view towards the distribution thereof;
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(b) she has received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders;
(c) she understands that she must bear the economic risk of the
investment in the Option Shares, which cannot be sold by her unless they
are registered under the Securities Act of 1933 ("1933 Act") or an
exemption therefrom is available thereunder;
(d) she has had both the opportunity to ask questions and receive
answers from the officers and directors 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 clause (b) above;
(e) she is aware that 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 1933 Act or an exemption therefrom as
provided herein; and
(i) The certificates evidencing the Option Shares may bear the
following legends:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933. The shares may not be sold or transferred in the absence of such
registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14, 1998,
a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
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13. Restriction on Transfer of Option and Option Shares. Anything in this
Agreement to the contrary notwithstanding and in addition to the provisions of
Section 10 of this Agreement, the Employee hereby agrees that she shall not
sell, transfer by any means or otherwise dispose of the Option Shares acquired
by her without registration under the 1933 Act, or in the event that they are
not so registered, unless (i) an exemption from the 1933 Act registration
requirements is available thereunder, and (ii) the Employee has furnished the
Company with notice of such proposed transfer and the Company's legal counsel,
in its reasonable opinion, shall deem such proposed transfer to be so exempt.
14. Registration Right. The Company agrees to file a registration statement
("Registration Statement") on Form S-8 (or successor form) to register the
Option Shares for issuance to Employee on or prior to the date the Option or any
portion thereof first becomes exercisable. The Company will bear all expenses
and pay all fees incurred in connection with the filing and modification or
amendment of the Registration Statement, exclusive of underwriting discounts,
and commissions payable in respect of the sale of the Common Stock and any
counsel for the Employee. Moreover, if the Company fails to comply with the
provisions of this Section 14, the Company shall, in addition to any other
equitable or other relief available to the Employee, be liable for any and all
incidental, special and consequential damages and damages due to loss of profits
sustained by the Employee.
15. Miscellaneous.
15.1. Notices. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given upon
delivery if delivered in person or by overnight courier (e.g. Federal
Express), or on the third business day following deposit in the United
States mail, if sent by registered or certified mail, return receipt
requested, addressed to the address of the party to receive notice set
forth herein, or to such this address as a party shall designate by
notice in writing given to the this party in accordance with the terms
hereof, except that notices regarding changes in address shall be
effective only upon receipt.
15.2. Stockholder Rights. The Employee shall not have any of the
rights of a stockholder with respect to the Option Shares until such
shares have been issued after the due exercise of the Option. Nothing
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contained in this Agreement shall be deemed to confer upon Employee
any right to continued employment with the Company or any subsidiary
thereof, nor shall it interfere in any way with the right of the
Company to terminate Employee in accordance with the provisions
regarding such termination set forth in Employee's Employment
Agreement with the Company, or if there exists no such agreement, to
terminate Employee at will.
15.3. 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.
15.4. Entire Agreement. This Agreement and the Employment
Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof. This Agreement may not be
amended except by writing executed by the party to be charged.
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15.5. Binding Effect; Successors. 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, expressed or
implied, is intended to confer on any person other than the parties
hereto and as provided above, their respective heirs, successors,
assigns and representatives any rights, remedies, obligations or
liabilities.
15.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Internal laws of the State of New
York without regard to principles of conflicts of law.
15.7.Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC. Address:
1633 Broadway, 38th Floor
New York, New York 10019
By:/s/Jonathan Steinberg
Jonathan L. Steinberg
Chairman and Chief Executive Officer
EMPLOYEE: Address:
522 West End Avenue
Apartment 15A
New York, New York 10024
/s/Brette Popper
Brette Popper
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
DATE
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
Attention: Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of September 14, 1998
("Agreement") with Individual Investor Group, Inc. ("Company"), I hereby
irrevocably elect to exercise the right to purchase _________ shares of the
Company's common stock, par value $.01 per share ("Common Stock"), which are
being purchased for investment and not for resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
+--+ a [personal check] [certified check] [bank check] payable to the order
+--+ "Individual Investor Group, Inc." in the sum of $_________; and/or
+--+ confirmation of wire transfer in the amount of $_____________.
+--+
I hereby represent, warrant to, and agree with, the Company that:
(i) I have acquired the Option and shall acquire the Option Shares for
my own account and not with a view towards the distribution thereof;
(ii) I have received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders;
(iii) I understand that I must bear the economic risk of the
investment in the Option Shares, which cannot be sold by me unless they are
registered under the Securities Act of 1933 ("1933 Act") or an exemption
therefrom is available thereunder;
(iv) I have had both the opportunity to ask questions and receive
answers from the officers and directors 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 clause (ii) above;
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(v) I am aware that 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 1933 Act or an exemption therefrom as provided
herein;
(vi) my rights with respect to the Option Shares shall, in all
respects, be subject to the terms and conditions of this Agreement and the
Employment Agreement; and
(vii) the certificates evidencing the Option Shares may bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities Act
of 1933. The shares may not be sold or transferred in the absence of
such registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14, 1998,
a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
(Signature) (Address)
(Print Name) (Address)
(Social Security Number)
Mr. Jonathan L. Steinberg
November 4, 1998
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GREGORY E. BARTON
461 Burgess Drive # 11
Menlo Park, California 94025
(650) 329-9489
July 21, 1998
VIA TELECOPY ONLY (212-843-2791)
Mr. Jonathan L. Steinberg
Chief Executive Officer
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
Dear Jono,
I am pleased and excited to have the opportunity to work with you taking
Individual Investor Group, Inc. ("INDI") to its next level of success. As we
discussed, this letter sets forth the primary terms of the offer of employment
that has been extended to me by INDI, and I agree to accept employment with INDI
in accordance with these terms:
Position: I will be appointed Vice President of Business and Legal Affairs,
and General Counsel, of INDI.
Salary: My starting base salary will be $200,000 per annum, which will be
paid in accordance with INDI's normal payroll policies in effect from
time to time.
Sign-on Bonus: I will be paid a one-time sign-on bonus of $5,000 on my
first day of work.
StockOption: I will promptly be granted an option (the "Option") to
purchase 150,000 shares of INDI common stock pursuant to one of INDI's
Stock Option Plans for which a Form S-8 registration is in effect (the
"Plan"). The per share exercise price of the Option shall be the fair
market value of INDI common stock on the date of grant as determined
in accordance with the Plan. The Option shall be an incentive stock
option to the maximum extent permitted by law. The Option shall be
exercisable as to 37,500 shares on each of the first four
anniversaries of my employment start date (thus a total of four years
is required before all shares subject to the Option may be exercised),
and shall expire 10 years after grant. In the event of a change in
control of INDI, all shares subject to the Option shall immediately
become exercisable.
Severance: In the event that, within the first year of employment, either
(a) I am terminated without cause or (b) my job responsibilities or
title are materially diminished and I resign, I shall be paid a
severance equal to six months' salary, in addition to any other sums
or benefits to which I may be entitled.
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Miscellaneous: I will be covered by INDI's employee group insurance plan,
summaries of which will be provided to me. I will be entitled to
participate in INDI's 401(k) plan. I will receive four weeks of paid
vacation each year. I will commence work on a date to be agreed upon,
which date shall be on or before September 15, 1998.
This letter sets forth the entire agreement of the parties with respect to
the subject matter hereof, and supersedes all other discussions, whether written
or oral. The terms of this letter may not be modified or amended except in a
writing signed by each of the parties hereto. A signature received via facsimile
shall be deemed an original for all purposes.
If you agree with the above, please sign this letter and fax it to me (at
408-383-4944). I look forward to receiving your signature, and working with you
closely creating INDI's exciting future!
Sincerely,
/s/ Gregory Barton
Gregory E. Barton
AGREED AND ACCEPTED
Individual Investor Group, Inc.
By: /s/ Jonathan Steinberg
Jonathan L. Steinberg
Chief Executive Officer
Date: 7/21/98
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INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made as of the 14th day of September, 1998, by and between
INDIVIDUAL INVESTOR GROUP, INC., a Delaware corporation ("Company"), and
Gregory E. Barton ("Employee").
WHEREAS, on September 14, 1998 ("Grant Date"), pursuant to the terms and
conditions of the Company's 1996 Performance Equity Plan ("Plan"), the Board of
Directors of the Company ("Board") authorized the grant to the Employee of an
option ("Option") to purchase an aggregate of 150,000 shares of the authorized
but unissued Common Stock of the Company, $.01 par value ("Common Stock"),
conditioned upon the Employee's acceptance thereof upon the terms and conditions
set forth in this Agreement and subject to the terms of the Plan; and
WHEREAS, the Employee desires to acquire the Option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants the Employee the Option
to purchase all or any part of an aggregate of 150,000 shares of Common Stock
("Option Shares") on the terms and conditions set forth herein and subject to
the provisions of the Plan.
2. Incentive Stock Option. The Option represented hereby is intended to be
an Option which qualifies as an "Incentive Stock Option" under Section 422 of
the Internal Revenue Code of 1986, as amended.
3. Exercise Price. The exercise price of the Option is $1.1875 per share,
subject to adjustment as hereinafter provided.
4. Exercisability. This Option is exercisable, subject to the terms and
conditions of the Plan, as follows: (i) the right to purchase 37,500 of the
Option Shares shall be exercisable on September 14, 1999, (ii) the right to
purchase an additional 37,500 of the Option Shares shall be exercisable on and
after September 14, 2000, (iii) the right to purchase an additional 37,500 of
the Option Shares shall be exercisable on and after September 14, 2001 and (iv)
the right to purchase the remaining 37,500 of the Options Shares shall be
exercisable on and after September 14, 2002. After a portion of the Option
becomes exercisable, it shall remain exercisable, except as otherwise provided
herein, until the close of business on September 14, 2008, ("Exercise Period").
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5. Effect of Termination of Employment.
5.1. Termination Due to Death. If Employee's employment by the Company
terminates by reason of death, the portion of the Option, if any, that was
exercisable as of the date of death may thereafter be exercised by the
legal representative of the estate or by the legatee of the Employee under
the will of the Employee, for a period of one year from the date of such
death or until 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 death.
5.2. Termination Due to Disability. If Employee's employment by the
Company terminates by reason of Disability (as such term is defined in the
Plan), the portion of the Option, if any, that was exercisable as of the
date of termination of employment may thereafter be exercised by the
Employee for a period of one year from the date of the termination of
employment or until 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 the termination of employment shall immediately terminate
upon the termination of employment.
5.3. Other Termination.
5.3.1. If Employee's employment is terminated by the Company or
the Employee for any reason other than (i) death, (ii) Disability or
(iii) or as set forth in Section 5.3.2, the Option, whether or not
then exercisable shall immediately expire on the date of termination.
5.3.2. If Employee's employment is terminated by the Company
without cause or for Normal Retirement (as such term is defined in the
Plan), the portion of the Option, if any, that was exercisable as of
the date of termination of employment may thereafter be exercised by
the Employee for a period of three months from the date of the
termination of employment or until 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 the termination of
employment shall immediately terminate upon the termination of
employment.
5.3.3. If Employee terminates his employment with the Company,
this Option, whether or not exercisable, shall immediately expire.
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6. Withholding Tax. Not later than the date as of which an amount first
becomes includible in the gross income of the Employee for Federal income tax
purposes with respect to the Option, the Employee 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 obligations of the Company under the Plan
and pursuant to this Agreement shall be conditional upon such payment or
arrangements with the Company and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Employee from the Company.
7. Adjustments. In the event of any merger, reorganization, consolidation,
recapitalization, consolidation, recapitalization, dividend (other than cash
dividend), stock split, reverse stock split, or other change in corporate
structure affecting the number of issued shares of Common Stock, the Company
shall proportionally adjust the number and kind of Option Shares and the
exercise price of the Option in order to prevent the dilution or enlargement of
the Employee's proportionate interest in the Company and Employee's rights
hereunder, provided that the number of Option Shares shall always be a whole
number.
8. Acceleration of Vesting on Change of Control. Notwithstanding the
provisions of Section 4, in the event of a "change of control" (as defined
below) while the Employee is employed by the Company, the vesting of this Option
shall accelerate and all the Option Shares shall be purchasable by Employee
simultaneous with such change of control. For the purposes of this Agreement, a
change of control shall mean (i) the acquisition by any "person" (as defined in
Section 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")), other than a stockholder of the Company that, as of the date
of this Agreement, is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of 10% or more of the outstanding voting securities of
the Company, of more than 50% of the combined voting power of the then
outstanding voting securities of the Company or (ii) the sale by the Company of
all, or substantially all, of the assets of the Company to one or more
purchasers, in one or a series of related transactions, where the transaction or
transactions require approval pursuant to Delaware law by the stockholders of
the Company.
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9. Method of Exercise.
9.1. Notice to the Company. The Option shall be exercised in
whole or in part by written notice in substantially the form attached
hereto as Exhibit A 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.
9.2. Delivery of Option Shares. The Company shall deliver a
certificate for the Option Shares to the Employee as soon as
practicable after payment therefor.
9.3. Payment of Purchase Price. The Employee shall make payments
by wire transfer, certified or bank check, in each case payable to the
order of the Company. Alternatively, the Employee may make
arrangements satisfactory to the Company with a bank or a broker who
is a member of the National Association of Securities Dealers, Inc. to
sell on the exercise date a sufficient number of the Option Shares
being purchased so that the net proceeds of the sale transaction will
at least equal the Exercise Price multiplied by the number of Option
Shares being purchased pursuant to such exercise, plus the amount of
any applicable withholding taxes and pursuant to which the bank or
broker undertakes to deliver the full Exercise Price multiplied by the
number of Option Shares being purchased pursuant to such exercise,
plus the amount of any applicable withholding taxes to the Company on
a date satisfactory to the Company, but no later than the date on
which the sale transaction would settle in the ordinary course of
business.
10. Nonassignability. The Option shall not be assignable or transferable
except by will or by the laws of descent and distribution in the event of the
death of the Employee. No transfer of the Option by the Employee 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.
11. Company Representations. The Company hereby represents and warrants to
the Employee that:
(a) the Company, by appropriate and all required action, is duly
authorized to enter into this Agreement and consummate all of the
transactions contemplated hereunder; and
(b) the Option Shares, when issued and delivered by the Company to the
Employee in accordance with the terms and conditions hereof, will be duly
and validly issued and fully paid and non-assessable.
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12. Employee Representations. The Employee hereby represents and warrants
to the Company that:
(a) he is acquiring the Option and shall acquire the Option Shares for
his or her own account and not with a view towards the distribution
thereof;
(b) he has received a copy of all reports and documents required to be
filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders and a copy of the Plan in effect as of the date of this
Agreement;
(c) he understands that he must bear the economic risk of the
investment in the Option Shares, which cannot be sold by his unless they
are registered under the Securities Act of 1933 ("1933 Act") or an
exemption therefrom is available thereunder;
(d) he has had both the opportunity to ask questions and receive
answers from the officers and directors 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 clause (b) above;
(e) he is aware that 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 1933 Act or an exemption therefrom as provided
herein; and
(i) In the absence of registration under the 1993 Act, the
certificates evidencing the Option Shares shall bear the following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14,
1998, a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
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13. Restriction on Transfer of Stock Option Agreement and Option Shares.
Anything in this Agreement to the contrary notwithstanding and in addition to
the provisions of Section 12 of this Agreement, the Employee hereby agrees that
he shall not sell, transfer by any means or otherwise dispose of the Option
Shares acquired by him without registration under the 1933 Act, or in the event
that they are not so registered, unless (i) an exemption from the 1933 Act
registration requirements is available thereunder, and (ii) the Employee has
furnished the Company with notice of such proposed transfer and the Company's
legal counsel, in its reasonable opinion, shall deem such proposed transfer to
be so exempt.
14. Miscellaneous.
14.1. 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 be either delivered personally
or sent by registered or certified mail, or by private courier, return
receipt requested, postage prepaid to the parties at their respective
addresses set forth herein, or to such other address as either shall have
specified by notice in writing to the other. Notice shall be deemed duly
given hereunder when delivered or mailed as provided herein.
14.2. Plan Paramount; Conflicts with Plan. This Agreement and the
Option shall, in all respects, be subject to the terms and conditions of
the Plan, whether or not stated herein. In the event of a conflict between
the provisions of the Plan and the provisions of this Agreement, the
provisions of the Plan shall in all respects be controlling.
14.3. Stockholder Rights. The Employee shall not have any of the
rights of a stockholder with respect to the Option Shares until such shares
have been issued after the due exercise of the Option. Nothing contained in
this Agreement shall be deemed to confer upon Employee any right to
continued employment with the Company or any subsidiary thereof, nor shall
it interfere in any way with the right of the Company to terminate Employee
in accordance with the provisions regarding such termination set forth in
Employee's written agreement with the Company, or if there exists no such
agreement, to terminate Employee at will.
14.4. 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.
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14.5. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof.
This Agreement may not be amended except by writing executed by the party
to be charged.
14.6. Binding Effect; Successors. 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, expressed or implied, is
intended to confer on any person other than the parties hereto and as
provided above, their respective heirs, successors, assigns and
representatives any rights, remedies, obligations or liabilities.
14.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without regard to
choice of law provisions).
14.8. Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC. Address:
1633 Broadway, 38th Floor
New York, New York 10019
By: /s/ Jonathan Steinberg
EMPLOYEE: Address:
22 East 36th Street, Apartment 3D
New York, New York 10016
/s/ Gregory Barton
Gregory E. Barton
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
DATE
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
Attention: Stock Option Committee of
the Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of September 14, 1998
("Agreement") with Individual Investor Group, Inc. ("Company"), I hereby
irrevocably elect to exercise the right to purchase _________ shares of the
Company's common stock, par value $.01 per share ("Common Stock"), which are
being purchased for investment and not for resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
a [personal check] [certified check] [bank check payable to the order
of "Individual Investor Group, Inc." in the sum of $_________ and/or;
confirmation of wire transfer in the amount of $_____________.
I hereby represent, warrant to, and agree with, the Company that:
(i) I have acquired the Option and shall acquire the Option Shares for
my own account and not with a view towards the distribution thereof;
(ii) I have received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders;
(iii) I understand that I must bear the economic risk of the
investment in the Option Shares, which cannot be sold by me unless they are
registered under the Securities Act of 1933 ("1933 Act") or an exemption
therefrom is available thereunder and that the Company is under no
obligation to register the Option Shares for sale under the 1933 Act;
(iv) I have had both the opportunity to ask questions and receive
answers from the officers and directors 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 clause (ii) above;
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(v) I am aware that 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 1933 Act or an exemption therefrom as provided
herein;
(vi) my rights with respect to the Option Shares shall, in all
respects, be subject to the terms and conditions of this Company's 1996
Stock Option Plan and this Agreement; and
(vii) the certificates evidencing the Option Shares shall bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14,
1998, a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
(Signature) (Address)
(Print Name) (Address)
(Social Security Number)
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INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of the14th day of September, 1998
("Agreement"), by and between Individual Investor Group, Inc., a Delaware
corporation ("Corporation"), and Brette Popper ("Indemnitee"):
WHEREAS, highly competent persons recently have become more reluctant to
serve publicly-held corporations as directors, officers, or in other capacities,
unless they are provided with better protection from the risk of claims and
actions against them arising out of their service to and activities on behalf of
such corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties related to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation ("Board") has determined
that the inability to attract and retain such persons is detrimental to the best
interests of the Corporation's stockholders and that such persons should be
assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation to
obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law so that such persons will serve or continue to serve
the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of Article
VIII of the By-laws of the Corporation, and Article VIII of the Amended and
Restated Certificate of Incorporation of the Corporation and any resolutions
adopted pursuant thereto and shall neither be deemed to be a substitute therefor
nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve and to take on additional service
for or on behalf of the Corporation on the condition that he be indemnified
according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
1 Definitions.
For purposes of this Agreement:
1.1 "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated
under the Securities Exchange Act of 1934, as amended ("Act"), whether or
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not the Corporation is then subject to such reporting requirement provided,
however, 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 Act) is or becomes "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined
voting power of the then outstanding securities of the Corporation without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Corporation is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which
members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (iii)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this purpose
any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of
such period) cease for any reason to constitute at least a majority of the
Board.
1.2 "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of
any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request
of the Corporation.
1.3 "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
1.4 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a
witness in a Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is,
nor in the past five years has been, retained to represent: (i) the
Corporation or Indemnitee in any other matter material to either such
party, or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or Indemnitee
in an action to determine Indemnitee's rights under this Agreement.
1.6 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any
other proceeding, whether civil, criminal, administrative or investigative,
except one initiated by an Indemnitee pursuant to Section 11 of this
Agreement to enforce his rights under this Agreement.
2 Services by Indemnitee.
Indemnitee agrees to serve as President and Chief Operating Officer of the
Corporation. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law).
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3 Indemnification - General.
The Corporation shall indemnify, and advance Expenses to, Indemnitee as
provided in this Agreement to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
4 Proceedings Other Than Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to any threatened, pending or completed Proceeding, other than
a Proceeding by or in the right of the Corporation. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
5 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to any threatened, pending or completed Proceeding brought by
or in the right of the Corporation to procure a judgment in its favor. Pursuant
to this Section, Indemnitee shall be indemnified against Expenses actually and
reasonably incurred by him or on his behalf in connection with any such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation. Notwithstanding
the foregoing, no indemnification against such Expenses shall be made in respect
of any claim, issue or matter in any such proceeding as to which Indemnitee
shall have been adjudged to be liable to the Corporation if applicable law
prohibits such indemnification unless the Court of Chancery of the State of
Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine that indemnification against Expenses may nevertheless
be made by the Corporation.
6 Indemnification for Expenses of Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a party to and is successful,
on the merits or otherwise, in any Proceeding, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Corporation shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or on his behalf in connection with each successfully resolved claim, issue
or matter. For the purposes of this Section and without limiting the foregoing,
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the termination of any claim, issue or matter in any such Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
7 Indemnification for Expenses as a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
8 Advancement of Expenses.
The Corporation shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after the
receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses.
9 Procedure for Determination of Entitlement to Indemnification.
9.1 To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee
is entitled to indemnification. The Secretary of the Corporation shall,
promptly upon receipt of any such request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.
9.2 Upon written request by Indemnitee for indemnification pursuant to
Section 9.1 hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in such case: (i)
if a Change in Control shall have occurred, by Independent Counsel (unless
Indemnitee shall request that such determination be made by the Board or
the stockholders, in which case in the manner provided for in clauses (ii)
or (iii) of this Section 9.2) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee); (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors, or (B) if a quorum of the Board
consisting of Disinterested Directors is not obtainable, or even if such
quorum is obtainable, if such quorum of Disinterested Directors so directs,
either (x) by Independent Counsel in a written opinion to the Board, a copy
of which shall be delivered to Indemnitee, or (y) by the stockholders of
the Corporation, as determined by such quorum of Disinterested Directors,
or a quorum of the Board, as the case may be; or (iii) as provided in
Section 10.2 of this Agreement. If it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from
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disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
with the person, persons or entity making such determination shall be borne
by the Corporation (irrespective of the determination as to Indemnitee's
entitlement to indemnification) and the Corporation hereby indemnifies and
agrees to hold Indemnitee harmless therefrom.
9.3 If required, Independent Counsel shall be selected as follows: (i)
if a Change of Control shall not have occurred, Independent Counsel shall
be selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected
or (ii) if a Change of Control shall have occurred, Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board, in which event (i) shall apply), and
Indemnitee shall give written notice to the Corporation advising it of the
identity of Independent Counsel so selected. In either event, Indemnitee or
the Corporation, as the case may be, may, within seven days after such
written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee, as the case may be, a written objection to
such selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant
to Section 9.1 hereof, no Independent Counsel shall have been selected and
not objected to, either the Corporation or Indemnitee may petition the
Court of Chancery of the State of Delaware, or other court of competent
jurisdiction, for resolution of any objection which shall have been made by
the Corporation or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person
selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
9.2 hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its actions pursuant to this Agreement, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of
this Section 9.3, regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement date of any
judicial proceeding or arbitration pursuant to Section 11.1(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
10 Presumptions and Effects of Certain Proceedings.
10.1 If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
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Section 9.1 of this Agreement, and the Corporation shall have the burden of
proof to overcome that presumption in connection with the making by any
person, persons or entity of any determination contrary to that
presumption.
10.2 If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after
receipt by the Corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law provided, however,
that such 60-day period may be extended for a reasonable time, not to
exceed an additional 30 days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto and provided, further,
that the foregoing provisions of this Section 10.2 shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9.2 of this Agreement and if (A) within 15
days after receipt by the Corporation of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 9.2 of this
Agreement.
10.3 The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation or, with
respect to any criminal Proceeding, that Indemnitee had reasonable cause to
believe that his conduct was unlawful.
11 Remedies of Indemnitee.
11.1 In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made
pursuant to Section 8 of this Agreement, (iii) the determination of
indemnification is to be made by Independent Counsel pursuant to Section
9.2 of this Agreement and such determination shall not have been made and
delivered in a written opinion within 90 days after receipt by the
Corporation of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 7 of this Agreement within
ten days after receipt by the Corporation of a written request therefor, or
(v) payment of indemnification is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification
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or such determination is deemed to have been made pursuant to Section 9 or
10 of this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, the Indemnitee, at his option, may
seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association. Indemnitee
shall commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee first
has the right to commence such proceeding pursuant to this Section 11.1.
The Corporation shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
11.2 In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination.
11.3 If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) prohibition of such indemnification under
applicable law.
11.4 The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.
11.5 In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Corporation, and shall be indemnified
by the Corporation against, any and all expenses (of the kinds described in
the definition of Expenses) actually and reasonably incurred by him in such
judicial adjudication or arbitration, but only if he prevails therein. If
it shall be determined in such judicial adjudication or arbitration that
Indemnitee is entitled to receive some but less than all of the
indemnification or advancement of expenses sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration
shall be appropriately prorated.
12 Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
12.1 The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under
applicable law, the certificate of incorporation or by-laws of the
Corporation, any agreement, a vote of stockholders or a resolution of
directors, or otherwise. No amendment, alteration or repeal of this
Agreement or any provision hereof shall be effective as to any Indemnitee
with respect to any action taken or omitted by such Indemnitee in his
Corporate Status prior to such amendment, alteration or repeal.
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12.2 To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person serves at the request of the
Corporation, Indemnitee shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee, agent or fiduciary
under such policy or policies.
12.3 In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to
enforce such rights.
12.4 The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
13 Duration of Agreement.
This Agreement shall continue until and terminate upon the later of: (a)
ten years after the date that Indemnitee shall have ceased to serve as an
officer of the Corporation, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and or any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
14 Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
15 Exception to Right of Indemnification or Advancement of Expenses.
Except as provided in Section 11.5, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agreement with respect to
any Proceeding, or any claim therein, brought or made by him against the
Corporation.
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16 Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together
shall constitute one and the same Agreement.
17 Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
18 Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
19 Notice by Indemnitee.
Indemnitee agrees promptly to notify the Corporation in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating any Proceeding or matter which may be subject to
indemnification or advancement of Expenses covered hereunder.
20 Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom such notice or other communication shall
have been directed, or (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:
If to Indemnitee, to:
Brette Popper
522 West End Avenue, Apartment 15A
New York, New York 10024
If to the Corporation, to:
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
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or to such other address or such other person as Indemnitee or the
Corporation shall designate in writing in accordance with this Section, except
that notices regarding changes in notices shall be effective only upon receipt.
21 Governing Law.
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
22 Miscellaneous.
Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above
written.
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Jonathan Steinberg
Jonathan L. Steinberg
Chief Executive Officer
INDEMNITEE
/s/ Brette Popper
Brette Popper
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INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of the 14th day of September, 1998
("Agreement"), by and between Individual Investor Group, Inc., a Delaware
corporation ("Corporation"), and Gregory E. Barton ("Indemnitee"):
WHEREAS, highly competent persons recently have become more reluctant to
serve publicly-held corporations as directors, officers, or in other capacities,
unless they are provided with better protection from the risk of claims and
actions against them arising out of their service to and activities on behalf of
such corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties related to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation ("Board") has determined
that the inability to attract and retain such persons is detrimental to the best
interests of the Corporation's stockholders and that such persons should be
assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation to
obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law so that such persons will serve or continue to serve
the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of Article
VIII of the By-laws of the Corporation, and Article VIII of the Amended and
Restated Certificate of Incorporation of the Corporation and any resolutions
adopted pursuant thereto and shall neither be deemed to be a substitute therefor
nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve and to take on additional service
for or on behalf of the Corporation on the condition that he be indemnified
according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
1 Definitions.
For purposes of this Agreement:
1.1 "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated
under the Securities Exchange Act of 1934, as amended ("Act"), whether or
not the Corporation is then subject to such reporting requirement provided,
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however, 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 Act) is or becomes "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined
voting power of the then outstanding securities of the Corporation without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Corporation is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which
members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (iii)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this purpose
any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of
such period) cease for any reason to constitute at least a majority of the
Board.
1.2 "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of
any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request
of the Corporation.
1.3 "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
1.4 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a
witness in a Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is,
nor in the past five years has been, retained to represent: (i) the
Corporation or Indemnitee in any other matter material to either such
party, or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or Indemnitee
in an action to determine Indemnitee's rights under this Agreement.
1.6 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any
other proceeding, whether civil, criminal, administrative or investigative,
except one initiated by an Indemnitee pursuant to Section 11 of this
Agreement to enforce his rights under this Agreement.
2 Services by Indemnitee.
Indemnitee agrees to serve as Vice President of Business and Legal Affairs
and General Counsel of the Corporation. Indemnitee may at any time and for any
reason resign from such position (subject to any other contractual obligation or
any obligation imposed by operation of law).
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3 Indemnification - General.
The Corporation shall indemnify, and advance Expenses to, Indemnitee as
provided in this Agreement to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
4 Proceedings Other Than Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to any threatened, pending or completed Proceeding, other than
a Proceeding by or in the right of the Corporation. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
5 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to any threatened, pending or completed Proceeding brought by
or in the right of the Corporation to procure a judgment in its favor. Pursuant
to this Section, Indemnitee shall be indemnified against Expenses actually and
reasonably incurred by him or on his behalf in connection with any such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation. Notwithstanding
the foregoing, no indemnification against such Expenses shall be made in respect
of any claim, issue or matter in any such proceeding as to which Indemnitee
shall have been adjudged to be liable to the Corporation if applicable law
prohibits such indemnification unless the Court of Chancery of the State of
Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine that indemnification against Expenses may nevertheless
be made by the Corporation.
6 Indemnification for Expenses of Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a party to and is successful,
on the merits or otherwise, in any Proceeding, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Corporation shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or on his behalf in connection with each successfully resolved claim, issue
or matter. For the purposes of this Section and without limiting the foregoing,
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the termination of any claim, issue or matter in any such Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
7 Indemnification for Expenses as a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
8 Advancement of Expenses.
The Corporation shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after the
receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses.
9 Procedure for Determination of Entitlement to Indemnification.
9.1 To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee
is entitled to indemnification. The Secretary of the Corporation shall,
promptly upon receipt of any such request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.
9.2 Upon written request by Indemnitee for indemnification pursuant to
Section 9.1 hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in such case: (i)
if a Change in Control shall have occurred, by Independent Counsel (unless
Indemnitee shall request that such determination be made by the Board or
the stockholders, in which case in the manner provided for in clauses (ii)
or (iii) of this Section 9.2) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee); (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors, or (B) if a quorum of the Board
consisting of Disinterested Directors is not obtainable, or even if such
quorum is obtainable, if such quorum of Disinterested Directors so directs,
either (x) by Independent Counsel in a written opinion to the Board, a copy
of which shall be delivered to Indemnitee, or (y) by the stockholders of
the Corporation, as determined by such quorum of Disinterested Directors,
or a quorum of the Board, as the case may be; or (iii) as provided in
Section 10.2 of this Agreement. If it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from
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disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
with the person, persons or entity making such determination shall be borne
by the Corporation (irrespective of the determination as to Indemnitee's
entitlement to indemnification) and the Corporation hereby indemnifies and
agrees to hold Indemnitee harmless therefrom.
9.3 If required, Independent Counsel shall be selected as follows: (i)
if a Change of Control shall not have occurred, Independent Counsel shall
be selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected
or (ii) if a Change of Control shall have occurred, Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board, in which event (i) shall apply), and
Indemnitee shall give written notice to the Corporation advising it of the
identity of Independent Counsel so selected. In either event, Indemnitee or
the Corporation, as the case may be, may, within seven days after such
written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee, as the case may be, a written objection to
such selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant
to Section 9.1 hereof, no Independent Counsel shall have been selected and
not objected to, either the Corporation or Indemnitee may petition the
Court of Chancery of the State of Delaware, or other court of competent
jurisdiction, for resolution of any objection which shall have been made by
the Corporation or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person
selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
9.2 hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its actions pursuant to this Agreement, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of
this Section 9.3, regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement date of any
judicial proceeding or arbitration pursuant to Section 11.1(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
10 Presumptions and Effects of Certain Proceedings.
10.1 If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
Section 9.1 of this Agreement, and the Corporation shall have the burden of
proof to overcome that presumption in connection with the making by any
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person, persons or entity of any determination contrary to that
presumption.
10.2 If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after
receipt by the Corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law provided, however,
that such 60-day period may be extended for a reasonable time, not to
exceed an additional 30 days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto and provided, further,
that the foregoing provisions of this Section 10.2 shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9.2 of this Agreement and if (A) within 15
days after receipt by the Corporation of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 9.2 of this
Agreement.
10.3 The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation or, with
respect to any criminal Proceeding, that Indemnitee had reasonable cause to
believe that his conduct was unlawful.
11 Remedies of Indemnitee.
11.1 In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made
pursuant to Section 8 of this Agreement, (iii) the determination of
indemnification is to be made by Independent Counsel pursuant to Section
9.2 of this Agreement and such determination shall not have been made and
delivered in a written opinion within 90 days after receipt by the
Corporation of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 7 of this Agreement within
ten days after receipt by the Corporation of a written request therefor, or
(v) payment of indemnification is not made within ten days after a
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determination has been made that Indemnitee is entitled to indemnification
or such determination is deemed to have been made pursuant to Section 9 or
10 of this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, the Indemnitee, at his option, may
seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association. Indemnitee
shall commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee first
has the right to commence such proceeding pursuant to this Section 11.1.
The Corporation shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
11.2 In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination.
11.3 If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) prohibition of such indemnification under
applicable law.
11.4 The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.
11.5 In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Corporation, and shall be indemnified
by the Corporation against, any and all expenses (of the kinds described in
the definition of Expenses) actually and reasonably incurred by him in such
judicial adjudication or arbitration, but only if he prevails therein. If
it shall be determined in such judicial adjudication or arbitration that
Indemnitee is entitled to receive some but less than all of the
indemnification or advancement of expenses sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration
shall be appropriately prorated.
12 Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
12.1 The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under
applicable law, the certificate of incorporation or by-laws of the
Corporation, any agreement, a vote of stockholders or a resolution of
directors, or otherwise. No amendment, alteration or repeal of this
Agreement or any provision hereof shall be effective as to any Indemnitee
with respect to any action taken or omitted by such Indemnitee in his
Corporate Status prior to such amendment, alteration or repeal.
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12.2 To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person serves at the request of the
Corporation, Indemnitee shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee, agent or fiduciary
under such policy or policies.
12.3 In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to
enforce such rights.
12.4 The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
13 Duration of Agreement.
This Agreement shall continue until and terminate upon the later of: (a)
ten years after the date that Indemnitee shall have ceased to serve as an
officer of the Corporation, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and or any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
14 Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
15 Exception to Right of Indemnification or Advancement of Expenses.
Except as provided in Section 11.5, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agreement with respect to
any Proceeding, or any claim therein, brought or made by him against the
Corporation.
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16 Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together
shall constitute one and the same Agreement.
17 Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
18 Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
19 Notice by Indemnitee.
Indemnitee agrees promptly to notify the Corporation in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating any Proceeding or matter which may be subject to
indemnification or advancement of Expenses covered hereunder.
20 Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom such notice or other communication shall
have been directed, or (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:
If to Indemnitee, to:
Gregory E. Barton
22 East 36th Street, Apartment 3D
New York, New York 10016
If to the Corporation, to:
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
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or to such other address or such other person as Indemnitee or the
Corporation shall designate in writing in accordance with this Section, except
that notices regarding changes in notices shall be effective only upon receipt.
21 Governing Law.
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
22 Miscellaneous.
Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Jonathan Steinberg
Jonathan L. Steinberg
Chief Executive Officer
INDEMNITEE
/s/ Gregory Barton
Gregory E. Barton
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE CONPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000880631
<NAME> INDIVIDUAL INVESTOR GROUP, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
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