As filed with the Securities and Exchange Commission on October 29, 1999
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
INDIVIDUAL INVESTOR GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3487784
- ----------------------------- -----------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
125 Broad Street, 14th Floor
New York, NY 10004
(212) 742-2277
(Address and telephone number of principal executive offices)
-------------------
Jonathan L. Steinberg, Chief Executive Officer
125 Broad Street, 14th Floor
New York, NY 10004
(212) 742-2277
(Name, address and telephone number of agent for service)
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Copies to:
Peter M. Ziemba, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Facsimile
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
_____________________
If this form is a post-effective amendment filed pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
______________________
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Calculation of Registration Fee
Proposed
Maximum Proposed Amount
Amount to Offering Maximum of
Title of Shares to be be Price Per Aggregate Registration
Registered Registered Share Offering Price Fee
- -------------------- ---------- --------- -------------- -----------
Common Stock, $.01 2,149,434 $2.640625(1) $5,675,849.16 $1,577.89
par value
Common Stock, $.01 300,000 $2.640625 $792,187.50 $220.23
par value, underlying
Common Stock
Purchase Warrants(2)
Common Stock, $.01 943,396 $2.640625 $2,491,155.06 $692.54
par value, underlying
Series A Preferred
Stock(2) __________
TOTAL FEE . . . . . . . . . . . . . . . . . . . . . . . . $2,490.66
==========
(1) Based upon the market price of the Common Stock, as reported by The
Nasdaq Stock Market, Inc., on October 25, 1999, in accordance with Rule
457(c) of the Securities Act of 1933.
(2) Pursuant to Rule 416, there are also being registered additional shares
of Common Stock as may become issuable pursuant to the antidilution
provisions in the Common Stock Purchase Warrants and the Series A
Preferred Stock.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is incomplete and may be changed.
None of the selling stockholders may sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
of these securities is not permitted.
Subject to Completion, October 29, 1999.
Prospectus
INDIVIDUAL INVESTOR GROUP, INC.
3,392,830 Shares of Common Stock
This prospectus relates to up to 3,392,830 shares of common stock of
Individual Investor Group, Inc. that may be offered for resale for the account
of the selling stockholders set forth in this prospectus under the heading
"Selling Stockholders" beginning on page 16.
Our common stock is traded on the Nasdaq National Market under the
symbol INDI. On October 25, 1999, the last reported sale price of our common
stock was $2.5625.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _______ __, 1999.
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front page of this prospectus.
Table of Contents
Page
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Business Summary........................................................3
Risk Factors............................................................4
Use of Proceeds........................................................16
Selling Stockholders...................................................16
Plan of Distribution...................................................18
Legal Matters..........................................................19
Experts ..............................................................19
Where You Can Find More Information....................................19
____________________
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Business Summary
We are a company engaged primarily in providing financial information
services, including research and analysis of investment information, to
individuals and investment professionals. We provide this information through
print publications and online services.
We print and market three publications: Individual Investor magazine,
Ticker(sm) magazine, and Individual Investor's Special Situations Report.
Individual Investor magazine, a consumer-oriented monthly investment magazine,
offers commentary and opinion on investment ideas regarding public companies and
mutual funds believed to have higher earning potential than those of the general
market. Individual Investor magazine is distributed through subscriptions and
newsstands and has a circulation of approximately 500,000. Ticker(sm) magazine
is a monthly trade publication distributed without charge to a controlled
circulation of financial brokers, planners and advisers. Ticker(sm) has a
circulation of approximately 100,000. Individual Investor's Special Situations
Report is a subscription only, monthly newsletter with each issue featuring one
new stock investment recommendation, including a detailed research report
discussing the featured company's operating history, future plans and specific
financial projections.
Our online services include IndividualInvestor.com and
InsiderTrader.com (www.insidertrader.com). IndividualInvestor.com provides users
with continuously updated research, message boards, portfolio tracking,
analytical tools, news and financial information. InsiderTrader.com distributes
"insider" data filed with the Securities and Exchange Commission, and provides
proprietary research based on the data.
We also developed the INDI SmallCap 500(tm) index of small-cap stocks,
which is listed on the American Stock Exchange under the ticker symbol NDI.
Individual Investor Group was incorporated under the laws of the State
of Delaware on September 19, 1985. Our principal executive offices are located
at 125 Broad Street, 14th Floor, New York, New York 10004 and our telephone
number is (212) 742-2277.
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Risk Factors
You should carefully consider these risks, as well as those described
in our most recent Form 10-K, Form 10-Q and Form 8-K filings, before making an
investment decision. The risks described below are not the only risks we face.
Additional risks may also impair our business operations. If any of the
following risks occur, our business, results of operations or financial
condition could be materially adversely affected. If that happens, the trading
price of our common stock could decline, and you may lose all or part of your
investment. In the risk factors below, when we use the word "web," we are
referring to the portion of the Internet commonly referred to as the "world wide
web."
We have a history of losses and we anticipate that our losses will continue in
the future. As of June 30, 1999, we had an accumulated deficit of $25.5 million.
In the past ten years, the only calendar year during which we were profitable
was 1995. We expect to continue to incur net losses in 1999 and in subsequent
fiscal periods. We expect to continue to incur significant operating expenses
and, as a result, will need to generate significant revenues to achieve
profitability, which may not occur. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future.
We will need to raise additional capital in the future. Based on our current
business plan, we believe that our working capital and investments will be
sufficient to fund our operations and capital requirements at least through the
second quarter of fiscal 2000. Because we expect to incur continuing net losses,
we expect that we will need to raise additional capital from time to time in the
future. The availability of financing and the cost to us of financing will
depend on the many factors existing at the time we seek funding. These factors
may include our sources and amounts of revenues, our business development and
prospects and the state of the financial markets generally. It is possible that
additional financing may not be available to us, or, if available, the terms
upon which it may be obtained may be unfavorable to us and may result in
dilution of an investor's equity investment in us. Our failure to obtain
additional financing on favorable terms, or at all, would have a substantial
adverse effect on our future ability to conduct operations.
Our online services business has a limited operating history. We commenced our
online services operations in May 1997. Accordingly, we have only a limited
operating history upon which you can evaluate this business segment and its
prospects. An investor in our common stock must consider the risks, expenses and
difficulties frequently encountered by early stage businesses in new and rapidly
evolving markets, including web-based financial news and information companies.
Our quarterly financial results are subject to significant fluctuations. Our
quarterly operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside our control. For
example, in our print publications business, our revenues tend to reflect
seasonal patterns, with certain calendar quarters tending to be stronger than
others. Similar seasonal patterns may develop in the online services business as
well.
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We believe that quarter-to-quarter comparisons of our operating results
may not be a good indication of our future performance, nor would our operating
results for any particular quarter be indicative of future operating results. In
some future quarters, our operating results may be below the expectations of
public market analysts and investors. If that happens, the price of our common
stock may fall, perhaps dramatically.
We face intense competition in both our print publications business and our
online services business. An increasing number of financial news and information
sources compete for consumers' and advertisers' attention and spending. We
expect this competition to continue and to increase. We compete for advertisers,
readers, staff and outside contributors with many types of companies. These
competitors include:
-- online services or web sites focused on business, finance and
investing, such as CBS MarketWatch.com; The WallStreet Journal
Interactive Edition; TheStreet.com; The Motley Fool; Yahoo!
Finance; Silicon Investor; Microsoft Investor; SmartMoney.com;
Money.com and Multex.com;
-- publishers and distributors of traditional print media, such as
The Wall Street Journal; Barron's; Investors Business Daily;
Business Week; Fortune; Forbes; Money; Kiplinger's; Smart Money;
Worth; Registered Representative; Institutional Investor;
Research and On Wall Street;
-- publishers and distributors of radio and television programs
focused on business, finance and investing, such as Bloomberg
Business Radio and CNBC;
-- web "portal" companies, such as Yahoo!; Excite; Lycos; Snap!; Go
Network; and America Online; and
-- online brokerage firms, many of which provide financial and
investment news and information, such as Charles Schwab and
E*TRADE.
Our ability to compete depends on many factors, including the
originality, timeliness, comprehensiveness and trustworthiness of our content
and that of our competitors, the ease of use of services developed either by us
or our competitors and the effectiveness of our sales and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services and products. These
competitors may also engage in more extensive research and development,
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undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies to attract advertisers and make more attractive offers to existing and
potential employees, outside contributors, strategic partners and advertisers.
Our competitors may develop content that is equal or superior to ours or that
achieves greater market acceptance than ours. It is also possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully for advertisers, readers, staff or outside
contributors. Increased competition could result in price reductions, reduced
margins or loss of our market share. Any of these could materially adversely
affect our business, results of operations and financial condition.
Because our editorial content is focused on the financial markets, a prolonged
"bear market" may cause our businesses to suffer. Our editorial content is
highly focused on the financial markets. If the markets suffer a prolonged
downturn or "bear market," it is possible that our businesses might suffer
materially for two reasons. First, during a bear market, people may become less
interested in buying and selling securities, and thus less interested in our
research and analysis of securities. Less people might be interested in
subscribing to our print publications, and less people might be interested in
using our online services. Second, advertisers, particularly the financial
services advertisers that are our most important source of advertising revenue,
might decide to reduce their advertising budgets. Either of these developments
could cause our operations to suffer materially.
Because our editorial content is focused on research and analysis of specific
stocks, our businesses could suffer if our recommendations are poor. Our
editorial content is focused on research and analysis of specific stocks. We
frequently state that a particular company's stock is undervalued or overvalued
at the current prices. We believe that our research and analysis is of a high
quality, and we are proud to take a stand and to be held accountable for our
opinions. We believe our readers appreciate this editorial courage and find it
to be of greater value than stories on such topics as "the best cities in which
to live" and the like. Because we give these specific opinions, the wisdom of
our conclusions can be measured: did the stocks we said were undervalued go up,
and did the stocks we said were overvalued go down. If our opinions turn out to
be incorrect - and some of our opinions certainly will be - people may become
less interested in learning these opinions. They may be less interested in
subscribing to our print publications and less interested in using our online
services. If interest in our opinions declines, our operations could suffer
materially.
Our company may not be able to attract and retain qualified employees for our
print publications business. Many of our competitors in the print publications
business are larger than us and have a number of print titles. We only have two
magazines and one newsletter. There is a general perception in the employment
market that larger publishers are more prestigious or offer more varied career
opportunities. Although we believe our company offers an attractive work
environment and employment opportunity in our print publications business,
including offering our employees greater responsibility and the ability to have
a more meaningful impact on the product than would be the case at a magazine
with a larger staff, we may be perceived by many people as a less attractive
employer than a larger publisher. If we are unable to attract and retain
qualified employees for our print publications business, that business could
suffer materially.
Our company may not be able to attract and retain qualified employees for our
online service business. There is a general perception in the employment market
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for online employees that pure Internet companies offer a more attractive work
environment for a youthful workforce. This is based on the belief that the
Internet is a new and growing industry that offers a great future. In addition,
many employees in the Internet industry seek and often receive significant
portions of their compensation through stock options. The stock prices of many
pure Internet companies have increased dramatically during the past year or so.
Although we believe our company offers an attractive work environment and
employment opportunity in our online services business, we may be perceived by
many people as a less attractive employer than a pure Internet company. If we
are unable to attract and retain qualified employees for our online services
business, that business could suffer materially.
We depend on our editorial staff and outside contributors. Our success depends
substantially upon the efforts of our editorial staff and outside contributors
to produce original, timely, comprehensive and trustworthy content. Our writers
are not bound by employment agreements. Competition for financial journalists is
intense, and we may not be able to retain existing or attract additional
qualified writers in the future. If we lose the services of a large portion of
our editorial staff and outside contributors or are unable to attract additional
writers with appropriate qualifications, our business, results of operations and
financial condition could be materially adversely affected.
We depend on key management personnel. Our future success depends upon the
continued service of key management personnel. The loss of one or more of our
key management personnel could materially adversely affect our business, results
of operations and financial condition. Moreover, the costs that may arise in
connection with executive departures and replacements can be significant, as
they were during 1998.
We depend on certain advertisers and on independent advertising agents, to
generate revenue. In 1998, and continuing through the second quarter of 1999,
the majority of our print publications advertising revenue came from financial
services companies, followed by consumer advertisers and others. We were not
dependent upon any particular advertiser for our print publications revenues.
During the second quarter of 1999, approximately sixty percent of the online
services advertising revenue came from four brokerage firms offering online
trading. We expect that the majority of advertising revenues derived from our
online services operations will come from online brokerage firms. In the event
that online brokerage firms choose to scale back on their advertising (on the
Internet in general or on our web sites in particular), our online services
business, results of operations and financial condition could be materially
adversely affected.
If we do not continue to increase our revenue from financial services
advertisers or attract advertisers from non-financial industries, our business,
results of operations and financial condition could be materially adversely
affected. With respect to our online services in particular, advertising rates
are frequently measured on a "cost per thousand" clicks, or "CPM," basis. CPM
rates have fluctuated in the past and we expect CPM rates to continue to
fluctuate. CPM rates may experience industry-wide declines in the future, as the
supply of desirable online advertising space may be increasing at a rate greater
than the demand for that space by advertisers. We believe that we charge
advertising rates that are among the highest of financial web sites. However, we
cannot guarantee that we will be able to command premium rates in the future.
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Moreover, a number of advertisers that have been a source of a material portion
of our online services advertising revenues are purchasing advertising on a
"cost-per-action" basis, in which we are paid only when a user of our online
services takes the relevant action. The number of such completed actions is
usually a very small percent of the number of advertising impressions shown on
our web site. It is more difficult to accurately predict revenue that will be
received from cost-per-action ads than from CPM ads. An increased shift of our
important advertisers to cost-per-action ads could have a material adverse
effect on our online services advertising revenues.
In selling print advertising, we depend both on our internal
advertising sales department and on outside sales representatives to maintain
and increase our advertising sales. In selling online advertising, we depend
primarily upon our internal advertising sales department and an outside sales
agent. The success of our advertising sales efforts is subject to a number of
risks, including the competition we face from other companies in hiring and
retaining sales personnel and effective outside sales representatives, and the
length of time it takes new sales personnel to become productive. Our business,
results of operations and financial condition could be materially adversely
affected if we do not maintain an effective advertising sales department.
Additional risks associated with online advertising. No standards have been
widely accepted to measure the effectiveness of web advertising. If standards do
not develop, existing advertisers may not continue or increase their levels of
web advertising. If standards develop and we are unable to meet those standards,
advertisers may not continue advertising on our site. Furthermore, advertisers
that have traditionally relied upon other advertising media may be reluctant to
advertise on the web. If advertisers perceive the Internet or our web site to be
a limited or an ineffective advertising medium, they may be reluctant to devote
a portion of their advertising budget to Internet advertising or to advertising
on our web site. Our business, results of operations and financial condition
could be materially adversely affected if the market for web advertising
declines or develops more slowly than expected.
Different pricing models are used to sell advertising on the web. It is
difficult to predict which, if any, will emerge as the industry standard. This
uncertainty makes it difficult to project our future advertising rates and
revenues. We cannot assure you that we will be successful under alternative
pricing models that may emerge. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to a web user's computer are
available. Widespread adoption of this software could materially adversely
affect the commercial viability of web advertising, which could materially
adversely affect our advertising revenues. Risks associated with our list rental
revenue. The ability to earn revenue from list rental depends in large degree
upon three factors: first, the number of subscribers on the list; second, the
demographic characteristics of the subscribers on the list (such as age, income
and wealth); and third, the degree to which previous rentals of the list have
produced favorable results for the renter. This last factor is affected by the
manner in which the subscribers have been added. For example, new subscribers
from direct-to-publisher sources (such as direct mail and insert cards in the
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magazine) typically are more valuable than subscribers obtained from
subscription agencies by means of reduced introductory rates or the use of
airline frequent flyer miles.
We use an independent party, Rickard List Marketing, to promote the
rental of our subscriber lists. The revenue we earn from list rentals thus also
depends in part upon the efforts our agent makes.
We depend on independent parties to publish our print publications. We depend
upon an independent party, Quebecor, to print our print publications and to
deliver the printed copies to the United States Post Office for mailing to our
subscribers. If our printer's business is disrupted for any reason, such as fire
or other natural disaster, labor strife, supply shortages, or machinery
problems, we might not be able to distribute our publications in a timely
manner. Since magazines typically are printed only shortly before the time they
are to be mailed to subscribers, any disruption at our printer could prevent our
magazines from being distributed in a timely manner. If we don't distribute our
magazines on time, our subscribers may become dissatisfied and cancel their
subscriptions. If a disruption at our printer delays our ability to distribute
Individual Investor magazine to newsstands, we may lose newsstand sales. In the
event of a disruption, our insurance may not cover all of our losses. Any of
these developments may cause our operating results to suffer materially.
We depend on independent parties to distribute Individual Investor magazine to
newsstands. We depend upon independent parties (the largest of which is
International Circulation Distributors, a subsidiary of The Hearst Corporation)
to distribute Individual Investor magazine to newsstands. If the business of our
distributors is disrupted for any reason, such as labor strife or natural
disaster, we might not be able to distribute Individual Investor magazine to
newsstands in a timely manner. Since our distributors typically pickup
Individual Investor magazine for newsstand distribution only shortly before the
time the magazine is to be delivered, any disruption at our distributors could
prevent the magazine from being distributed to newsstands in a timely manner. If
a disruption at our distributors delays our ability to deliver Individual
Investor magazine to newsstands, we may lose newsstand sales. Any of these
developments may cause our operating results to suffer materially.
We depend on independent parties to obtain the majority of the subscribers to
Individual Investor magazine. We depend upon independent parties to obtain the
majority of the subscribers to Individual Investor magazine. These agencies
include American Family Publishers, Publishers Clearing House and NewSub
services. These agencies obtain subscribers primarily through use of direct mail
campaigns. If the positive response to the promotion of Individual Investor
magazine by these agencies is not great enough, or if the agencies believe
that we may fail to fulfill a subscription, they may stop promoting our
magazine. This could cause our subscriber base to shrink, which would lower our
subscription revenue and reduce our advertising rate base, which would lead to
lower advertising revenue. Also, many publications compete for services of
subscription agencies, and one or more of these subscription agencies may choose
not to continue to market Individual Investor in order to better serve one of
our competitors. Any of those developments could cause our operating results to
suffer materially.
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We may incorrectly forecast our success in obtaining and renewing subscriptions.
We attempt to accurately forecast the number of subscribers to our print
publications. We run the risk that our forecasts will be incorrect, either too
high or too low. Our forecast could be too high if the number of new subscribers
that we obtain is less than the amount we projected. Our forecast also could be
too high if we get less renewal orders from existing subscribers. If our
subscriber base is less than our projections, we will earn less subscription
revenue and our advertising rate base will be lower, which would lead to lower
advertising revenue. This could cause our operating results to suffer
materially.
Our forecast could be too low if we obtain more new subscribers than
projected, or if we receive more renewal orders than projected from existing
subscribers. If our subscriber base is higher than we projected, we would earn
more subscription revenue than projected, but have higher than expected
production and distribution costs. We might not be able to increase our
advertising rate base immediately. This could lead to our operating results
being worse than projected.
We depend on independent parties to manage our subscriber files. We depend upon
an independent party to manage our subscriber files. This party receives
subscription orders and payments for our print publications, sends renewal and
invoice notices to subscribers and generates subscribers' labels and circulation
reports for us. If the business of this party is disrupted, we may become unable
to process subscription requests, or send out renewal notices or invoices, or
deliver our print publications. If this were to happen, our insurance might not
cover all of our losses. Any of those developments could cause our operating
results to suffer materially.
We need to manage our growth. Although our print publications business has not
experienced rapid growth in the recent past, our online services, which
commenced in May 1997, have experienced rapid growth. This growth has placed a
strain on our managerial, operational and financial resources. We expect this
strain to increase with anticipated future growth in both print publications and
online services. To manage our growth, we must continue to implement and improve
our managerial controls and procedures and our operational and financial
systems. In addition, our future success will depend on our ability to expand,
train and manage our workforce, in particular our editorial, advertising sales
and business development staff. We cannot assure you that we have made adequate
allowances for the costs and risks associated with this expansion, that our
systems, procedures or controls will be adequate to support our operations, or
that our management will be able to successfully offer and expand our services.
If we are unable to manage our growth effectively, our business, results of
operations and financial condition could be materially adversely affected.
We need to establish and maintain relationships with other web sites to promote
the growth of our online services business. For us to maintain and increase the
traffic to our web sites, it is important for us to establish and maintain
content distribution relationships with highly- trafficked web sites operated by
other companies. There is intense competition for relationships with these
sites. Although we have not paid any material sum with respect to our
relationships to date, it is possible that, in the future, we might be required
to pay fees in order to establish or maintain relationships with these sites. It
also is possible, however, that we may be able to charge fees in connection with
these relationships in the future. Additionally, many of these sites compete
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with our web sites as providers of financial information, and these sites may
become less willing to establish or maintain strategic relationships with us in
the future. We may be unable to enter into relationships with these sites on
commercially reasonable terms or at all. Even if we enter into such
relationships, they may not attract significant numbers of viewers to our web
sites.
Increased traffic to our web sites may strain our systems and impair our online
services business. On occasion, we have experienced significant spikes in
traffic on our web site. In addition, the number of users of our online services
has increased over time and we are seeking to increase our user base further.
Accordingly, our web site must accommodate a high volume of traffic, often at
unexpected times. Our web site has in the past, and may in the future,
experience slower response times than usual or other problems for a variety of
reasons. These occurrences could cause our readers to perceive our web site as
not functioning properly and, therefore, cause them to use other methods to
obtain their financial news and information. In such a case, our business,
results of operations and financial condition could be materially adversely
affected.
We face a risk of system failure for our online services business. Our ability
to provide timely information and continuous news updates depends on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Similarly, our ability to track, measure and
report the delivery of advertisements on our site depends largely on the
efficient and uninterrupted operation of a third-party system maintained by
DoubleClick. These systems and operations are vulnerable to damage or
interruption from human error, natural disasters, telecommunication failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We do not have a formal disaster recovery plan for the event of such
damage or interruption. Any system failure that causes an interruption in our
service or a decrease in responsiveness of our web site could result in reduced
traffic, reduced revenue and harm to our reputation, brand and our relations
with our advertisers. Our insurance policies may not adequately compensate us
for any losses that we may incur because of any failures in our system or
interruptions in our delivery of content. Our business, results of operations
and financial condition could be materially adversely affected by any event,
damage or failure that interrupts or delays our operations.
We may not successfully develop new and enhanced services and features for our
online services to the satisfaction of our customers. We intend to introduce
additional and enhanced services in order to retain the current users of our
online services and to attract new users. If we introduce a service that is not
favorably received or fail to introduce certain new or enhanced services, our
current users may choose a competitive service over ours. We may also experience
difficulties that could delay or prevent us from introducing new services.
Furthermore, the new services we may introduce could contain errors that are
discovered after the services are introduced. If that happens, we may need to
significantly modify the design or implementation of the services on our web
sites to correct these errors. Our business, results of operations and financial
condition could be materially adversely affected if we experience difficulties
in introducing new services or if these new services are not accepted by our
users.
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We depend on the continued growth in use and efficient operation of the web. The
web- based information market is new and rapidly evolving. Our business would be
materially adversely affected if web usage does not continue to grow or grows
slowly. Web usage may be inhibited for a number of reasons, such as:
-- inadequate network infrastructure;
-- security concerns;
-- inconsistent quality of service; and
-- unavailability of cost-effective, high-speed access to the Internet.
The users of our online services depend on Internet service providers,
online service providers and other web site operators for access to our web
site. Many of these services have experienced significant service outages in the
past and could experience service outages, delays and other difficulties due to
system failures unrelated to our systems. These occurrences could cause our
readers to perceive the web in general or our web site in particular as an
unreliable medium and, therefore, cause them to use other media to obtain their
financial news and information. We also depend on certain information providers
to deliver information and data feeds to us on a timely basis. Our web site
could experience disruptions or interruptions in service due to the failure or
delay in the transmission or receipt of this information, which could have a
material adverse effect on our business, results of operations and financial
condition.
Government regulation and legal uncertainties relating to the web. Certain
existing laws or regulations specifically regulate communications or commerce on
the web. Further, laws and regulations that address issues such as user privacy,
pricing, online content regulation, taxation and the characteristics and quality
of online products and services are under consideration by federal, state, local
and foreign governments and agencies. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet service
providers and online services providers in a manner similar to the regulation of
long distance telephone carriers and to impose access fees on such companies.
That regulation, if imposed, could increase the cost of transmitting data over
the web. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as intellectual property ownership and
infringement, libel, obscenity and personal privacy are applicable to the web.
The Federal Trade Commission and government agencies in certain states have been
investigating certain Internet companies regarding their use of personal
information. We could incur additional expenses if any new regulations regarding
the use of personal information are introduced or if these agencies chose to
investigate our privacy practices. Any new laws or regulations relating to the
web, or certain applications or interpretations of existing laws, could decrease
the growth in the use of the web, decrease the demand for our web site or
otherwise materially adversely affect our business.
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Web security concerns could hinder Internet commerce. Concern about the
transmission of confidential information over the Internet has been a
significant barrier to electronic commerce and communications over the web. Any
well-publicized compromise of security could deter people from using the web or
from using it to conduct transactions that involve the transmission of
confidential information, such as signing up for a paid subscription, executing
stock trades or purchasing goods or services. Because many of our advertisers
seek to advertise on our web site to encourage people to use the web to purchase
goods or services, our business, results of operations and financial condition
could be materially adversely affected if Internet users significantly reduce
their use of the web because of security concerns. We may also incur significant
costs to protect ourselves against the threat of security breaches or to
alleviate problems caused by such breaches.
Our efforts to build positive brand recognition may not be successful. We
believe that maintaining and growing awareness about our brands (including
Individual Investor, IndividualInvestor.com, Ticker, Magic 25 and the INDI
SmallCap 500) is an important aspect of our efforts to continue to attract
subscribers and readers. The importance of positive brand recognition will
increase in the future because of the growing number of providers of financial
information. We cannot assure you that our efforts to build positive brand
recognition will be successful.
In order to build positive brand recognition, it is very important that
we maintain our reputation as a trustworthy source of investment ideas,
research, analysis and news. The occurrence of certain events, including our
misreporting a news story or the non-disclosure of a financial interest by one
or more of our employees in a security that we write about, could harm our
reputation for trustworthiness. These events could result in a significant
reduction in the number of our readers, which could materially adversely affect
our business, results of operations and financial condition.
Control of the Company by Principal Stockholders. At the present time, Jonathan
Steinberg, Wise Partners, L.P. (a partnership controlled by Jonathan Steinberg),
Saul Steinberg (who is Jonathan's father) and Reliance Financial Services
Corporation (a substantial portion of the common stock of Reliance Financial
Services Corporation's parent, Reliance Group Holdings, Inc., is beneficially
owned by Saul Steinberg, members of his family and affiliated trust),
beneficially own approximately 42.4% of the outstanding shares of common stock
of our company. As a result of their ownership of common stock, they will be
able to significantly influence all matters requiring approval by our
stockholders, including the election of our directors. Because it would be very
difficult for another company to acquire our company without the approval of the
Steinbergs, other companies might not view our company as an attractive takeover
candidate. Our stockholders therefore may have less of a chance to benefit from
any possible takeover of our company, than they would if the Steinbergs did not
have as much influence.
We rely on our intellectual property. To protect our rights to our intellectual
property, we rely on a combination of trademark and copyright law, trade secret
protection, confidentiality agreements and other contractual arrangements with
our employees, affiliates, clients, strategic partners and others. The
protective steps we have taken may be inadequate to deter misappropriation of
our proprietary information. We may be unable to detect the unauthorized use of,
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<PAGE>
or take appropriate steps to enforce, our intellectual property rights. We have
registered certain of our trademarks in the United States and we have pending
U.S. applications for other trademarks. Effective trademark, copyright and trade
secret protection may not be available in every country in which we offer or
intend to offer our services.
We are somewhat dependent upon the use of certain trademarks in our
operation, including the marks Individual Investor, IndividualInvestor.com,
Ticker, Magic 25 and the INDI SmallCap 500. We have a perpetual license for use
of the trademark Individual Investor. To perfect our interests in the mark,
however, we filed suit in 1997 against the licensor and a third party whom we
believed was infringing the mark. The litigation was resolved favorably to us,
with an agreement by the third party not to further infringe the mark. We
commenced negotiations with the licensor to obtain assignment of the mark, but
did not reach an agreement. Although we will continuously monitor and may seek
enforcement against any perceived infringement of the mark, we cannot assure you
that our efforts will be successful.
Additionally, we are somewhat dependent upon the ability to protect our
proprietary content through the laws of copyright, unfair competition and other
law. We cannot assure you, however, that the laws will give us meaningful
protection.
We may be liable for information published in our print publications or on our
online services. We may be subject to claims for defamation, libel, copyright or
trademark infringement or based on other theories relating to the information we
publish in our print publications or through our online services. We could also
be subject to claims based upon the content that is accessible from our web site
through links to other web sites. Our insurance may not adequately protect us
against these claims.
Year 2000 risks. We have 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. To attempt to ensure that our computer systems will not be
disrupted by the Year 2000 Issue, we developed a plan to assess, and to fix
where necessary, any Year 2000 Issue with respect to our computer systems. We
have identified the fixes that should be made to our computer systems in light
of the Year 2000 Issue, have completed most of our repair efforts, and currently
expect to complete our repair efforts and test our systems before December 1999.
We currently believe that total direct costs associated with making our
systems "Year 2000 Ready" (that is, not disrupted by the Year 2000 Issue) should
not exceed $30,000. We do not believe that the diversion of employee resources
required to address the Year 2000 Issue will have a material effect on our
operating results or financial condition. We do not currently have in place a
contingency plan of action in the event that we are not able to make our
computer systems Year 2000 Ready, but will consider on an ongoing basis whether
such a contingency plan should be developed.
The dates on which we believe we will complete our Year 2000 plan, and
the costs associated with the efforts, are based on our current best estimates.
However, we cannot guarantee that these estimates will be achieved, or that
there will not be a delay in, or increased costs associated with, making our
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<PAGE>
systems Year 2000 Ready. Specific factors that might cause differences between
the estimates and actual results include the following: 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 Issue, resulting in part from the uncertainty of the Year 2000 readiness of
third parties and the interconnection of global businesses, we cannot guarantee
that will be able to resolve, in a timely or cost-effective fashion, any
problems associated with the Year 2000 Issue. If we fail to resolve, in a timely
and cost-effective fashion, any problems associated with the Year 2000 Issue,
our operations and business could be materially adversely affected. If that
happens, we also could incur liabilities to third parties.
We also face risks and uncertainties to the extent that the independent
suppliers of products, services and systems on which we rely do not have
business systems or products that are Year 2000 Ready. We have communicated with
significant suppliers and customers to determine the extent to which our systems
and products are vulnerable to those third parties' failure to fix their own
systems' Year 2000 Issues. The systems or products of other companies on which
we rely might not be made Year 2000 Ready in time to prevent disruption. If the
systems of any of those third parties are disrupted, our operations and business
could be materially adversely affected. We are in the process of identifying
what actions may be needed to reduce our vulnerability to problems related to
the companies with which we interact, but we do 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 us to suffer
material adverse effects. We will consider on an ongoing basis whether such a
contingency plan should be developed.
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Use of Proceeds
We will not receive any proceeds from the sale of the shares by the
selling stockholders. However, we will receive $646,875 from the exercise by
certain selling stockholders of their warrants if they are all exercised. If
received, these proceeds will be used for working capital.
Selling Stockholders
The following table provides certain information with respect to the
selling stockholders' beneficial ownership of our common stock as of October 27,
1999, and as adjusted to give effect to the sale of all of the shares offered
hereby. See "Plan of Distribution." Except as otherwise indicated, the number of
shares reflected in the table has been determined in accordance with Rule 13d-3
promulgated under the Exchange Act. Under this rule, each selling stockholder is
deemed to own beneficially the number of shares issuable upon exercise of
warrants or options it holds that are exercisable within 60 days from the date
of this prospectus. For purposes of presentation, it is assumed that the selling
stockholders will exercise all of the warrants or options and then resell all of
the shares received as a consequence of such exercise. Unless otherwise
indicated, each of the selling stockholders possesses sole voting and investment
power with respect to the securities shown.
Shares Beneficially Shares Beneficially
Owned Owned
Before Offering After Offering
--------------------- ---------------------
Number
Number of
of Per- Shares Number Per-
Name Shares centage Offered of Shares centage
- ---- ----------- ------- --------- --------- -------
Wise Partners, L.P. (1) 1,781,133 17.2% 1,781,133 -0- -0-
Telescan, Inc. 1,147,431 11.2% 368,301 779,130 7.6%
Great American Life 471,698 4.4% 471,698 -0- -0-
Insurance Company
Great American 471,698 4.4% 471,698 -0- -0-
Insurance Company
GKN Securities Corp. 262,500 2.5% 262,500 -0- -0-
David Nussbaum 13,000 * 13,000 -0- -0-
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Shares Beneficially Shares Beneficially
Owned Owned
Before Offering After Offering
--------------------- ---------------------
Number
Number of
of Per- Shares Number Per-
Name Shares centage Offered of Shares centage
- ---- ----------- ------- --------- --------- -------
Kevin Neumark 9,000 * 9,000 -0- -0-
Barry King 5,000 * 5,000 -0- -0-
Steven Levine 4,000 * 4,000 -0- -0-
Robert Gladstone 4,000 * 4,000 -0- -0-
Scott Naft 1,500 * 1,500 -0- -0-
Burton Lefcort 1,000 * 1,000 -0- -0-
- ---------------------
*Less than 1 percent
(1) Does not include 1,584,010 shares of common stock (including 680,000 shares
issuable upon exercise of option) beneficially owned by Jonathan Steinberg,
the general partner of Wise, and 1,288,090 shares of common stock
(including 666,666 shares owned by Reliance Financial Services Corporation)
beneficially owned by Saul Steinberg, the limited partner of Wise.
On June 30, 1997, we entered into a Stock Purchase Agreement with Wise
Partners, L.P. pursuant to which Wise purchased 31,496 shares of our common
stock for $250,000. On December 31, 1997, we entered into a second Stock
Purchase Agreement with Wise in which Wise purchased 489,795 shares of our
common stock for $3 million. Then, on June 26, 1998, we entered into a third
Stock Purchase Agreement with Wise in which Wise purchased 1,259,842 shares of
common stock for $5 million. The purchase price for each purchase was the
closing ask price of our common stock on the trading day immediately preceeding
the date of each agreement. The proceeds of these sales were used for working
capital. Wise is a partnership of which the general partner is Jonathan
Steinberg, our Chief Executive Officer and a director of the company, and of
which the sole limited partner is Saul Steinberg. Jonathan Steinberg and Saul
Steinberg, directly and indirectly, beneficially own 42.4% of the outstanding
shares of common stock of our company.
On December 16, 1998, we entered into a two-year Financial Advisory and
Investment Banking Agreement with EarlyBirdCapital.com Inc. (formerly known as
Southeast Research Partners, Inc.), pursuant to which it provides financial
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<PAGE>
consulting and investment banking advice to us. Under this agreement, we pay
EarlyBirdCapital a monthly fee of $5,000 and issued warrants to designees of
EarlyBirdCapital to purchase 300,000 shares of common stock until December 16,
2002 at an exercise price of $2.15625. In accordance with EarlyBirdCapital's
instructions, these warrants were issued to GKN Securities Corp., David
Nussbaum, Kevin Neumark, Barry King, Steven Levine, Robert Gladstone, Burton
Lefcort and Scott Naft. GKN Securities Corp. is a "sister" company of
EarlyBirdCapital and each of the indviduals is associated with GKN Securities.
We are able to terminate this agreement any time after 12 months from the
effective date of the agreement as long as we provide EarlyBirdCapital prior
written notice. If we terminate the agreement, we may cancel 150,000 of the
warrants that have been issued and are currently held by GKN Securities Corp.
On November 30, 1998, we entered into Stock Purchase Agreements with
Great American Insurance Company and Great American Life Insurance Company.
Pursuant to these agreements, each of these companies purchased 5,000 shares of
our Series A Preferred Stock for $1 million. Under each of these agreements, the
5,000 shares of preferred stock will be convertible commencing December 2, 1999
into 471,698 shares of our common stock based on a conversion price of $2.12,
subject to adjustment. The proceeds of these sales of preferred stock were used
for working capital.
On September 29, 1999, in exchange for a three-year license to use
several of Telescan, Inc.'s proprietary technology and investment analytic tools
on our financial information websites, we issued to Telescan 368,301 shares of
our common stock valued at $3.08 per share. On the same date, Telescan also
purchased 779,130 shares of our common stock for $3 million in cash, at a price
of $3.85 per share. Telescan owns an aggregate of 1,147,431 shares of our common
stock.
Plan of Distribution
The shares offered by the selling stockholders may be sold from time to
time in transactions in The Nasdaq Stock Market, in negotiated transactions, or
a combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
selling stockholders may sell their shares directly to purchasers or to or
through broker-dealers (including GKN Securities Corp. and EarlyBirdCapital),
which may act as agents or principals. These broker-dealers may receive
compensation in the form of discounts, concessions or commission from the
selling stockholders. None of the selling stockholders have entered into
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares. The selling stockholders and
any broker-dealer that assist in the sale of the common stock may be deemed to
be underwriters within the meaning of Section 2(a)(11) of the Securities Act.
The selling stockholders may agree to indemnify any agents, dealers or
broker-dealers that participates in transactions involving sales of the common
stock against certain liabilities, including liabilities arising under the
Securities Act. From time to time, the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of a default, be deemed
to be the selling stockholder for purposes hereof.
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<PAGE>
We are responsible for all costs, expenses and fees incurred in
registering the shares offered hereby. The selling stockholders are responsible
for brokerage commissions, if any, attributable to the sale of such securities.
Legal Matters
The legality of the securities offered hereby has been passed upon by
Graubard Mollen & Miller, New York, New York.
Experts
The financial statements of the Company and its consolidated
subsidiaries, except the Company's unconsolidated investment in WisdomTree
Associates, L.P., as of December 31, 1998 and 1997 and for each of the three
years in the period ended December 31, 1998, incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, have been audited by Deloitte & Touche LLP as stated in their
report which is incorporated herein by reference. The financial statements
of WisdomTree Associates, L.P. not presented separately within the Annual Report
on Form 10-K have been audited by Ernst & Young LLP, as stated in their report
which is incorporated by reference in this prospectus. Such financial
statements of the Company and its consolidated subsidiaries are incorporated
herein in reliance upon the respective reports of such firms given upon their
authority as experts in accounting and auditing. All of the foregoing firms are
independent auditors.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Our SEC filings
are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference room.
The SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, until all of the securities are
sold.
o Annual Report on Forms 10-K and 10-K/A for the year ended
December 31, 1998;
o Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999;
o Proxy Statement dated May 7, 1999, for its 1999 Annual Meeting of
Stockholders;
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<PAGE>
o Current Report on Form 8-K dated June 2, 1999; and
o The description of our common stock that is contained in our
Registration Statement on our Form 8-A filed November 19, 1991,
file number 1-10932.
Potential investors may obtain a copy of any of our SEC filings without
charge by written or oral request directed to Individual Investor Group,
Attention: Investor Relations, 125 Broad Street, 14th Floor, New York, New York
10004, (212) 742-2277.
20
<PAGE>
Part II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all
expenses payable by us in connection with the registration of the common stock,
other than underwriting discounts and commissions:
SEC filing fee.................................................... $ 2,491
-----------
The Nasdaq Stock Market, Inc. fee for listing additional shares.... 40,000
-----------
Legal fees and expenses............................................ 15,000
-----------
Accounting fees and expenses....................................... 5,000
-----------
Miscellaneous...................................................... 5,000
-----------
Total..................................................... $ 67,491
-----------
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe that such person's conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
In the case of an action by or in the right of the corporation, Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action in
II-1
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any of the capacities set forth above against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in and not opposed to the
best interests of the corporation, except that indemnification is not permitted
in respect of any claim, issue, or matter as to which such person is adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
deems proper. Section 145 further provides: that a Delaware corporation is
required to indemnify a director, officer, employee, or agent against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with any action, suit, or proceeding or in defense of any claim,
issue, or matter therein as to which such person has been successful on the
merits or otherwise; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of such person's heirs, executors, and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer against any such liability asserted against such person in any such
capacity or arising out of such person's status as such whether or not the
corporation would have the power to indemnify him against liability under
Section 145. A Delaware corporation may provide indemnification only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct. Such determination is to be made (i)
by the board of directors by a majority vote of a quorum consisting of directors
who were not party to such action, suit, or proceeding, or (ii) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Article VIII of the Amended and Restated Certificate of Incorporation
of the Company and Article VIII of the Bylaws of the Company provides for
indemnification of directors and officers of the Company to the fullest extent
permitted by law, as now in effect or later amended. Article VIII of the Bylaws
provides that expenses incurred by an officer of director in defending a civil
or criminal action, suit, or proceeding may be paid by the Company in advance of
final disposition upon receipt of an undertaking by or on behalf of such person
to repay such amount if it ultimately is determined that such person is not
entitled to be indemnified by the Company.
The Company may provide liability insurance for each director and
officer for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers of the Company. The
Company currently maintains such liability insurance.
Article VII of the Company's Amended and Restated Certificate of
Incorporation eliminates the personal liability of the directors of the Company
to the fullest extent permitted by the provisions of Section 102 of the Delaware
General Corporation Law, as the same may be amended and supplemented.
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<PAGE>
Additionally, the Company has entered into Indemnification Agreements
with certain of its directors and officers whereby the Company has agreed to
indemnify, and advance expenses to, each indemnitee to the fullest extent
permitted by applicable law. The Indemnification Agreements will continue until
and terminate upon the later of (i) ten years after the date that the indemnitee
has ceased to serve as a director or officer of the Company or any entity which
the indemnitee served at the request of the Company, or (ii) the final
termination of all pending proceedings in respect of which the indemnitee is
granted rights of indemnification or advancement of expenses or any proceeding
commenced by the indemnitee.
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<PAGE>
Item 16. Exhibits
Incorporated
by
Reference
Exhibit from No. in
Number Description Document Document Page
- -------- ------------ --------- -------- ------
3.1 Amended and Restated Certificate of A 3.2
Incorporation of Registrant, as amended
through June 22, 1999
3.2 By-Laws of Registrant amended through A 3.3
April 27, 1999
4.1 Specimen Certificate for Common Stock B 4.1
of Registrant
5.1 Opinion of Graubard Mollen & Miller - - Filed
(including Consent) Herewith
10.1 Form of Warrant dated December 16, A 10.1
1998 for GKN Securities Corp., David
Nussbaum, Kevin Neumark, Barry
King, Stephen Levine, Robert
Gladstone, Burton Lefcort and Scott
Naft
10.2 Stock Purchase Agreement dated as of C 10.1
November 30, 1998 between Registrant
and Great American Insurance Company
10.3 Stock Purchase Agreement dated as of C 10.2
November 30, 1998 between Registrant
and Great American Life Insurance
Company
10.4 Letter dated as of April 28, 1999 A 10.2
between Registrant, Great American
Life Insurance Company and Great
American Insurance Company
10.5 Stock Purchase Agreement dated as of D 10.3
June 30, 1997 between Registrant and
Wise Partners L.P.
10.6 Stock Purchase Agreement dated as of E 10.6
December 31, 1997 between Registrant
and Wise Partners L.P.
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<PAGE>
Incorporated
by
Reference
Exhibit from No. in
Number Description Document Document Page
- -------- ------------ --------- -------- ------
10.7 Stock Purchase Agreement dated as of E 10.3
June 26, 1998 between Registrant and
Wise Partners L.P.
10.8 Stock Purchase Agreement dated as of - - Filed
September 29, 1999 between Registrant Herewith
and Telescan, Inc.
10.9 Letter Agreement dated as of September - - Filed
29, 1999 between Registrant and Herewith
Telescan, Inc.
10.10 Stock Purchase Agreement dated May 1, D 10.1
1997, for 164,339 shares of the
Company's Common Stock
10.11 Stock Purchase Agreement dated May 1, D 10.2
1997, for 164,339 shares of the
Company's Common Stock
10.12 Indemnification Agreement, dated B 10.2
August 19, 1991, between Registrant
and Bruce L. Sokoloff
10.13 Indemnification Agreement, dated B 10.3
August 19, 1991, between Registrant
and Jonathan L. Steinberg
10.14 Indemnification Agreement, dated G 10.3
October 8, 1998, between Registrant and
Henry G. Clark
10.15 Indemnification Agreement, dated June G 10.4
19, 1996, between Registrant and Peter
M. Ziemba
10.16 Indemnification Agreement, dated H 10.5
September 14, 1998, between Registrant
and Brette Popper
10.17 Indemnification Agreement, dated H 10.6
September 14, 1998, between Registrant
and Gregory Barton
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<PAGE>
Incorporated
by
Reference
Exhibit from No. in
Number Description Document Document Page
- -------- ------------ --------- -------- ------
10.18 Indemnification Agreement, dated June I 10.1
17, 1998, between Registrant and S.
Christopher Meigher III
10.19 Agreement with Robert Schmidt dated F 10.1
May 25, 1998
10.20 Agreement with Scot Rosenblum dated F 10.2
June 20, 1998
10.21 Agreement with Michael J. Kaplan J 10.1
dated April 1, 1998
10.22 Form of 1991 Stock Option Plan of B 10.13
Registrant
10.23 Form of 1993 Stock Option Plan of K 4.2
Registrant
10.24 Form of 1996 Performance Equity Plan L 10.43
of Registrant
10.25 Form of 1996 Management Incentive M 4.10
Plan of Registrant
10.26 Trademark License Agreement dated N 10.25
June 19, 1992 between Registrant and
the American Association of Individual
Investors, Inc.
10.27 Form of Stock Option Agreement, dated D 10.4
May 9, 1997 between Registrant and
each of Jonathan Steinberg, Robert
Schmidt, Scot Rosenblum and Michael
Kaplan
10.28 Agreement dated as of November 19, G 10.21
1998 between Registrant and Jonathan
Steinberg.
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<PAGE>
Incorporated
by
Reference
Exhibit from No. in
Number Description Document Document Page
- -------- ------------ --------- -------- ------
10.29 Stock Option Agreement between H 10.2
Registrant and Brette Popper dated
September 14, 1998
10.30 Stock Option Agreement between H 10.4
Registrant and Gregory Barton dated
September 14, 1998
10.31 Employment Agreement between H 10.1
Registrant and Brette Popper dated
September 11, 1998
10.32 Employment Agreement between H 10.3
Registrant and Gregory Barton dated
July 21, 1998
10.33 Form of Partnership Agreement for O 10.37
WisdomTree Associates, L.P.
10.34 WisdomTree Capital Advisors, LLC O 10.38
Agreement dated November 1, 1995
10.35 Agreement between WisdomTree O 10.39
Offshore L.T.D. and WisdomTree
Capital Management, Inc. and
WisdomTree Capital Advisors, LLC
dated December 1, 1995
10.36 Office sublease, dated December 8, L 10.41
1995 between Registrant and Porter
Novelli, Inc.
10.37 Office sublease, dated January 1996 L 10.42
between the Registrant and VCH
Publishers, Inc.
10.38 Lease, dated November 30, 1998 G 10.31
between Registrant and 125 Broad Unit
C LLC
II-7
<PAGE>
Incorporated
by
Reference
Exhibit from No. in
Number Description Document Document Page
- -------- ------------ --------- -------- ------
10.39 Office Leaes, dated January 10, 1994 P 10.22
between the Registrant and 333 7th
Avenue Realty Co.
10.40 Agreement, dated as of June 2, 1999, Q 10.1
between Registrant, Kirlin Holding
Corp. and VentureHighway.com Inc.
10.41 Stockholder Agreement, dated as of Q 10.2
June 2, 1999, between Registrant, Kirlin
Holding Corp. and
VentureHighway.com Inc.
10.42 Securities Purchase Agreement, dated as Q 10.3
of June 2, 1999, between Registrant and
Kirlin Holding Corp.
11 Computation of (Loss) Income Per G 11
Share
21 Subsidiaries of the Registrant G 21
23.1 Consent of Graubard Mollen & Miller - -
(included in Exhibit 5.1)
23.2 Consent of Independent Auditors - - Filed
Deloitte & Touche LLP Herewith
23.3 Consent of Independent Auditors Ernst - - Filed
& Young LLP Herewith
27.1 Financial Data Schedule March 31, R 27
1999
27.2 Financial Data Schedule June 30, 1999 R 27
27.3 Financial Data Schedule June 30, 1998 F 27
27.4 Financial Data Schedule June 30, 1997 F 27.3
99.1 Press Release, dated June 2, 1999 Q 99.1
- ---------------------
A. Registrant's Form 10-Q for the quarter ended June 30, 1999.
B. Registrant's Form S-18 (No. 33-43551-NY).
C. Registrant's Form 8-K filed December 14, 1998.
II-8
<PAGE>
D. Registrant's Form 10-QSB filed 6/30/97.
E. Schedule 13D filed on behalf of Jonathan Steinberg on 1/13/98.
F. Registrant's Form 10-Q for the quarter ended June 30, 1998.
G. Registrant's Form 10-K for the year ended December 31, 1998.
H. Registrant's Form 10-Q for the quarter ended September 30, 1998.
I. Registrant's Form10-Q for the quarter ended March 31, 1999.
J. Registrant's Form 10-Q for the quarter ended March 31, 1998
K. Registrant's Registration Statement on Form S-8 (File No. 33-72266).
L. Registrant's Form 10-KSB for the year ended December 31, 1995.
M. Registrant's Registration Statement on Form S-8 (File No. 333-17697).
N. Registrant's Form 10-KSB for the year ended December 31, 1992.
O. Registrant's Form 10-KSB for the year ended December 31, 1994.
P. Registrant's Form 10-KSB for the year ended December 31, 1993.
Q. Registrant's Form 8-K filed 6/16/99.
R. Filed only with electronic submission on Form 10-K in accordance with EDGAR
requirement.
II-9
<PAGE>
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
1. To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
2. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) any deviation from the low or high end
of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
3. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
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<PAGE>
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-11
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on October 29, 1999.
Individual Investor Group, Inc.
By: /s/ Jonathan L. Steinberg
-----------------------------------
Jonathan L. Steinberg,
Chief Executive Officer and Director
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonathan L. Steinberg and Gregory E.
Barton his true and lawful attorneys-in-fact and agents, each acting alone, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments to this
registration statement, including post-effective amendments, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the SEC, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, and hereby ratifies and confirms all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Jonathan L. Steinberg Chief Executive Officer and October 29, 1999
- ------------------------- Director (Principal Executive
Jonathan L. Steinberg Officer)
/s/ David Allen Chief Financial Officer October 29, 1999
- -------------------------
David Allen
/s/ Henry G. Clark Vice President - Finance October 29, 1999
- ------------------------- (Principal Accounting Officer)
Henry G. Clark
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<PAGE>
/s/ S. Christopher Meigher Director October 29, 1999
- ------------------------
S. Christopher Meigher
/s/ Bruce L. Sokoloff Director October 29, 1999
- -------------------------
Bruce L. Sokoloff
/s/ Peter M. Ziemba Director October 29, 1999
- -------------------------
Peter M. Ziemba
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
October 29, 1999
Individual Investor Group, Inc.
125 Broad Street
14th Floor
New York, New York 10004
Dear Sirs:
Reference is made to the Registration Statement on Form S-3
("Registration Statement") filed by Individual Investor Group, Inc. ("Company"),
a Delaware corporation, under the Securities Act of 1933, as amended ("Act"),
with respect to an aggregate of 3,392,832 shares of common stock, par value $.01
per share ("Common Stock"),to be offered for resale by certain individuals and
entities ("Selling Stockholders") of which 2,149,434 shares of Common Stock are
issued and outstanding, having been sold to certain of the Selling Stockholders,
943,396 shares of Common Stock to be issued to upon conversion of the Company's
outstanding Series A Preferred Stock, par value $.01 per share ("Preferred
Stock"), issued to two of the Selling Stockholders and 300,000 shares of Common
Stock are to be issued pursuant to various warrant agreements ("Consulting
Warrants") held by certain of the Selling Stockholders entered into by the
Company in connection with a Financial Consulting Services Agreement between
EarlyBirdCapital.com Inc. (formerly Southeast Research Partners, Inc.).
We have examined such documents and considered such legal matters as we
have deemed necessary and relevant as the basis for the opinion set forth below.
With respect to such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as reproduced
or certified copies, and the authenticity of the originals of those latter
documents. As to questions of fact material to this opinion, we have, to the
extent deemed appropriate, relied upon certain representations of certain
officers and employees of the Company.
Based upon the foregoing, it is our opinion that:
1. The Common Stock issued and outstanding, held by certain of the
Selling Stockholders was duly authorized and was legally issued, and is fully
paid and nonassessable.
2. The Common Stock to be issued by the Company upon conversion of the
Preferred Stock and upon exercise of the Consulting Warrants have been duly
authorized and, when sold in the manner provided in the Certificate of
Designations regarding the Preferred Stock and agreements governing the
Consulting Warrants, as the case may be, will be legally issued, fully paid and
nonassessable.
In giving this opinion, we have assumed that the agreements governing
the Consulting Warrants have been authorized by the board of directors of the
Company and duly executed and that all certificates for the Company's shares of
Common Stock, prior to their issuance, will be duly executed on behalf of the
Company by the Company's transfer agent and registered by the Company's
registrar, if necessary, and will conform, except as to denominations, to
specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, to the use of our name as your counsel and to all
references made to us in the Registration Statement and in the Prospectus
<PAGE>
forming a part thereof. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Graubard Mollen & Miller
-----------------------------
GRAUBARD MOLLEN & MILLER
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of September 29,
1999 (the "Effective Date"), is entered into between INDIVIDUAL INVESTOR GROUP,
INC., a Delaware corporation with its principal place of business at 125 Broad
Street, 14th Floor, New York, New York 10004 (the "Company"), and TELESCAN,
INC., a Delaware corporation, having its principal place of business at 5959
Corporate Drive, Suite 2000, Houston, Texas 77036 (the "Buyer").
1. SALE AND ISSUANCE OF COMMON STOCK.
1.1 Subject to the terms and conditions of this Agreement, at the
Closing (as defined below) Buyer agrees to purchase from the Company, and the
Company agrees to sell, issue and deliver to Buyer, the number of shares (the
"Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock") obtained by dividing THREE MILLION DOLLARS ($3,000,000) (the "Purchase
Price") by the Purchase Price Per Share (as defined below) of the Common Stock.
As used herein, "Purchase Price Per Share" shall mean one hundred and
twenty-five percent (125%) of the average of the last sale prices of the Common
Stock, as reported by Nasdaq, for the seven business days prior to the date of
the Closing.
2. CLOSING.
2.1 The closing of the transaction contemplated by the Agreement (the
"Closing") shall occur as soon as practicable following execution of the
Agreement, but in any event not more than fourteen (14) days following execution
of the Agreement.
3. CLOSING ITEMS.
3.1 At the Closing, the Company shall deliver, or cause to be
delivered, to Buyer resolutions of the board of directors of the Company
authorizing the execution, delivery and consummation of this Agreement, the
issuance of the Shares and the other matters contemplated hereby, certified as
to their due adoption and continued validity by the Secretary of the Company.
3.2 Promptly (and in no event more than five (5) business days) after
the Closing, the Company shall deliver, or cause to be delivered, to Buyer one
or more certificates (as requested by Buyer) representing in the aggregate the
Shares.
3.3 At the Closing, Buyer shall deliver, or cause to be delivered, by
wire transfer to the Company to the account the Company shall specify, the
Purchase Price in immediately available funds.
<PAGE>
4. FURTHER ASSURANCES. Each party shall execute such additional documents and
take such other actions as the other party or parties may reasonably request to
consummate the transactions contemplated hereby and otherwise as may be
necessary to effectively carry out the terms and provisions of this Agreement.
5. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby represents
and warrants to and covenants with Buyer as follows:
5.1 Organization. The Company is duly organized, validly existing and
in good standing in the State of Delaware. The Company has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and as presently proposed to be
conducted and to execute, deliver and perform this Agreement. The Company is
duly licensed, authorized and qualified to do business and is in good standing
in all jurisdictions (domestic or foreign) in which the conduct of its business
or the ownership or leasing of its properties requires it to be so licensed,
authorized or qualified, except where its failure to be so licensed, authorized
or qualified would not have a material adverse effect, singularly or in the
aggregate, on the results of operations, financial condition, properties,
business or prospects of the Company (a "Material Adverse Effect").
5.2 Authority; Execution and Delivery, Etc. The execution, delivery,
and performance of this Agreement has been duly authorized by the Company's
Board of Directors and no other corporate proceedings on the part of the Company
or its stockholders are required. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights in general or
general principles of equity.
5.3 Financial Condition. The consolidated financial statements of the
Company included in the Disclosure Documents (as described in Section 5.11)
fairly present on a consolidated basis the financial position, the results of
operations, the changes in financial position and the changes in stockholders'
equity and the other information purported to be shown therein of the Company
and its consolidated subsidiaries at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
5.4 Validly Issued Shares. The Shares to be issued, sold and delivered
in accordance with the terms of this Agreement for the consideration set out
herein, will, upon issuance in accordance with the terms hereof, be duly and
validly issued, fully paid and nonassessable, free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
federal and state securities laws. The issuance of the Shares to Buyer pursuant
to this Agreement will comply with all applicable laws, including federal and
state securities laws, and will not violate the preemptive rights of any person.
- 2-
<PAGE>
5.5 Consents. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to the Company in connection with the execution and delivery of
this Agreement, or the consummation by the Company of the transactions
contemplated hereby, which has not already been obtained, except for the filing
of any notices of sale required to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
or Securities Exchange Act of 1934, as amended (the "Exchange Act") or with the
Nasdaq Stock Market, or such post closing filings as may be required under
applicable state securities laws which will be timely filed within the
applicable periods therefor.
5.6 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company,
nor does the Company have any actual knowledge that there is any basis for the
foregoing, except for those disclosed in the Disclosure Documents, those for
which there has been no manifestation by a potential claimant of an awareness of
a possible claim and for which the Company has not determined that it is
probable that a claim will be asserted, and those which, if adversely
determined, would not reasonably be expected to have a Material Adverse Effect.
The foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving the prior employment or
engagement of any of the Company's employees or consultant, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers or their current
employers/clients (in the case of consultants), or their obligations under any
agreements with such employers/clients. The Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
5.7 Compliance with Other Instruments. The Company is not in violation
or default in any material respect of any provision of its Restated and Amended
Certificate of Incorporation, as amended, or bylaws, or in any material respect
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound, or, to the best of its knowledge, of any
provision of any federal or state statute, rule or regulation applicable to the
Company; except where such violation or default would not reasonably be expected
to have a Material Adverse Effect. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event that results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties, except where such violation, default, event, suspension, revocation,
impairment, forfeiture or nonrenewal would not reasonably be expected to have a
Material Adverse Effect.
-3-
<PAGE>
5.8 Material Facts. The Company has provided Buyer with all the
information reasonably available to it that Buyer has requested for deciding
whether to purchase the Shares. The representations and warranties by the
Company contained in this Agreement, when taken together with the Disclosure
Documents, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading,
except, with respect to assumptions, projections and expressions of opinions or
predictions contained in the documents or written materials furnished by the
Company, the Company represents only that such assumptions, projections and
expressions of opinions and predictions were made in good faith and the Company
believes that there is a reasonable basis therefor.
5.9 Compliance with Laws. To the best knowledge of the Company, the
Company is in compliance in all material respects with all applicable statutes,
laws, ordinances, rules, regulations and orders of any governmental entity,
except where non-compliance would not reasonably be expected to have a Material
Adverse Effect, and the Company has not received any notice or other
communication whether oral or written from any governmental entity, arbitrator
or any other person regarding any such violation or failure.
5.10 Subsequent Events. Subsequent to the respective dates as of which
information is given in the Disclosure Documents, except as described therein,
there has not been any Material Adverse Effect on the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course of
business, the Company and its subsidiaries have not sustained any material loss
or interference with their businesses or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, and since the date of the latest balance sheet included in the
Disclosure Documents, neither the Company nor any of its subsidiaries has
incurred or undertaken any liability or obligation, indirect or contingent,
except for liabilities or obligations incurred or undertaken in the ordinary
course of business and except for any such liabilities or obligations as are
reflected in the Disclosure Documents.
5.11 Disclosure. The Company has provided to Buyer true, correct and
complete copies of its Annual Report on Form 10-K for the fiscal year ended
December 31 1998; its Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998; its Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1999 and June 30, 1999; its Notice of Annual Meeting of
Stockholders and Proxy Statement relating to its annual meeting of stockholders
held on June 22, 1999; and its Current Report on Form 8-K dated June 2, 1999
(collectively, the "Disclosure Documents").
6. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the Company
as follows:
6.1 Buyer is aware that its investment in the Company involves a
substantial degree of risk, including, but not limited to the following: (i) if
the Company fails to meet the maintenance criteria for continued inclusion on
the Nasdaq National Market System ("NMS"), including but not limited to, the
requirement that the Company maintain minimum net tangible assets of at least
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<PAGE>
$4,000,000 and the requirement that the minimum bid price of the Common Stock is
at least $1.00, it may be delisted from the NMS; (ii) the Company has had
substantial operating losses for the fiscal year ended December 31, 1998 and for
the fiscal quarters ended March 31, 1999 and June 30, 1999 and expects to
continue to incur losses in the future; (iii) the Company will need additional
financing in the future to fund operating losses and for capital investment in
its current and proposed business operations; (iv) the Company's development of
its internet products is not currently generating sufficient revenue to cover
development and operating expenses, and may not be profitable in the future; (v)
management and the existing principal stockholders of the Company beneficially
own a substantial amount of the outstanding voting stock of the Company and
accordingly are in a position to substantially influence the election of all
directors of the Company and the vote on matters requiring stockholder approval;
and (vi) the Company's success will to a significant extent rely upon the
continued services and abilities of Jonathan Steinberg. Buyer acknowledges and
is aware that there is no assurance as to the future performance of the Company.
6.2 Buyer is purchasing the Shares for its own account for investment
and not with a view to or in connection with a distribution of the Shares, nor
with any present intention of selling or otherwise disposing of all or any part
of the Shares, except as contemplated in Section 8 below. Subject to Section 8
below, Buyer agrees that it must bear the economic risk of its investment
because, among other reasons, the Shares have not been registered under the
Securities Act, or under the securities laws of any state and, therefore, cannot
be resold, pledged, assigned, or otherwise disposed of unless and until they are
registered under the Securities Act and under applicable securities laws of
certain states, or an exemption from such registration is available.
6.3 Buyer has the financial ability to bear the economic risk of its
investment in the Company (including its complete loss), has adequate means for
providing for its current needs and has no need for liquidity with respect to
its investment in the Company.
6.4 Buyer has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Company and has obtained, in its judgment, sufficient information from the
Company to evaluate the merits and risks of an investment in the Company. Buyer
has had full opportunity to ask questions and receive satisfactory answers
concerning all matters pertaining to its investment and all such questions have
been answered to its full satisfaction. Buyer has been provided an opportunity
to obtain any additional information concerning the Company and all other
information to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense. Buyer has received no representation
or warranty from the Company with respect to its investment in the Company, and
Buyer has relied solely upon its own investigation in making a decision to
invest in the Company.
6.5 Buyer is an "accredited investor" as defined in Section 2(15) of
the Securities Act and in Rule 501 promulgated thereunder.
-5-
<PAGE>
6.6 The execution, delivery, and performance of this Agreement has been
duly authorized by Buyer and no other corporate proceedings on the part of Buyer
or its stockholders are required. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid, and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity.
7. RESTRICTIONS ON TRANSFER.
7.1 Restrictions on Transfer. Buyer agrees that it will not sell,
transfer, or otherwise dispose of any of the Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act and the Company has received
an opinion of counsel satisfactory to the Company that such exemption is
available.
7.2 Legend. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH EXEMPTION IS AVAILABLE."
8. REGISTRATION RIGHTS.
8.1 Piggyback Registration. From the date of this Agreement until the
second anniversary of the issuance of the Shares to Buyer, if the Company
proposes to file a registration statement under the Securities Act
("Registration Statement") with respect to an offering for its own account of
any class of security (other than a registration statement filed pursuant to the
License and Service Agreement of even date herewith between the Company and
Buyer or a registration statement on Form S-4 or S-8 or successor forms thereto
or filed in connection with an exchange offer or business combination or an
offering of securities solely to the Company's existing stockholders), then the
Company shall in each case give written notice of such proposed filing to Buyer
at least thirty (30) days before the anticipated filing date, and such notice
shall offer Buyer the opportunity to register such number of the Shares as Buyer
may request (the "Registrable Shares"). Upon the written request of Buyer made
within twenty (20) days of receipt of such notice, the Company shall use its
best efforts to register the Registrable Shares on the Registration Statement,
provided however, that (i) the Company shall not be obligated to register any
Registrable Shares if the Company shall promptly deliver to Buyer an opinion of
counsel, reasonably satisfactory to Buyer, stating that such securities are
saleable without restriction under an exemption from the registration
requirements of the Securities Act or shall become so saleable within ninety
(90) days of the filing of the Registration Statement; and (ii) if, in the
written opinion of the Company's managing underwriter or underwriters, if any,
for such offering, the inclusion of the Registrable Shares, when added to the
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<PAGE>
securities being registered by the Company or the selling stockholder(s), will
exceed the maximum amount of the Company's securities which can be marketed (a)
at a price reasonably related to their then current market value, or (b) without
materially and adversely affecting the entire offering, in which case Buyer
shall agree to the following if and as requested by the managing underwriter:
(1) to withdraw the Registrable Shares from inclusion on the Registration
Statement; (2) to include the Registrable Shares on the Registration Statement,
but not to sell any Registrable Shares, without the consent of the managing
underwriter, for a period of one hundred and eighty (180) days from the
effective date of the Registration Statement or (3) to reduce the amount of
Registrable Shares to be included in the Registration Statement to the amount
recommended by such managing underwriter; provided that if securities are being
offered for the account of other persons or entities as well as the Company (and
the underwriters), such reduction shall not represent a greater fraction of the
number of Registrable Shares requested to be registered by Buyer than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities requested to be registered by such holders.
8.2 Expenses. All expenses in connection with registrations of the
Registrable Shares shall be borne by the Company except for underwriting
discounts and commissions, applicable transfer taxes and expenses of counsel to
Buyer, which shall be borne by Buyer.
8.3 Information Relating to Buyer. Buyer agrees that in connection with
any Registration Statement which registers its Registrable Shares, that it will
provide to the Company all information and execute and deliver all documents,
agreements, certificates and other items at its expense, as the Company and/or
its counsel reasonably request, and the failure to provide such information or
items shall permit the Company to exclude the Registrable Shares from any
Registration Statement, or not have declared effective any Registration
Statement filed by the Company pursuant to Section 8.1.
8.4 Indemnification.
8.4.1 Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless Buyer and its directors, officers,
employees and each person, if any (a "Controlling Person") who controls Buyer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other expenses
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever) to which it may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement in which Buyer's securities shall be included or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company with respect to Buyer by Buyer or its agents, in writing, expressly for
use in any such registration statement. The Company agrees promptly to notify
Buyer of the commencement of any litigation or proceedings against the Company
-7-
<PAGE>
or any of its officers, directors or controlling persons in connection with the
issue and sale of the Registrable Shares in connection with any such
registration statement.
8.4.2 If any action is brought against Buyer in respect of
which indemnity may be sought against the Company pursuant to this Section 8.4,
Buyer shall promptly notify the Company in writing of the institution of such
action and the Company shall assume the defense of such action, including the
employment and fees of counsel and payment of actual expenses. Buyer shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of Buyer unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action, or (ii) the Company shall not have employed
counsel to have charge of the defense of such action, or (iii) Buyer shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the Company (in which case
the Company shall not have the right to direct the defense of such action on
behalf of Buyer), in any of which events the reasonable fees and expenses of not
more than one additional firm of attorneys selected by Buyer and/or controlling
person shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if Buyer shall assume the defense of such action as provided
above, the Company shall have the right to approve the terms of any settlement
of such action which approval shall not be unreasonably withheld.
8.4.3 Buyer agrees to indemnify and hold harmless each of the
Company, its directors, officers and employees, any underwriter (as defined in
the Securities Act) and each Controlling Person of the Company, against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to Buyer, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions directly relating to
Buyer in any such registration statement furnished to the Company by Buyer or
its agents, in writing, expressly for use in any such registration statement. In
case any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, and in respect of which
indemnity may be sought against Buyer, Buyer shall have the rights and duties
given to the Company, and the Company and each other person so indemnified shall
have the rights and duties given to Buyer by the provisions of paragraph 8.4.2
above.
8.5 Contribution.
(a) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under Section 8.4 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8.4 provides for indemnification in such
case, or (ii) contribution under the Securities Act, the Exchange Act, or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under Section 8.4, then, and in each such
case, the Company and Buyer shall contribute, in proportion to their relative
fault, to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Buyer, as incurred; provided, that, no person guilty of a fraudulent
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<PAGE>
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(b) Within fifteen days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 8 are intended to supersede,
to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available.
9. MISCELLANEOUS.
9.1 Expenses. Each party shall be liable for its own expenses in
connection with the transactions contemplated by this Agreement.
9.2 Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the Company
and of Buyer, whether so expressed or not.
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<PAGE>
9.3 Notices, Etc. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person,
by overnight courier or mailed by certified or registered mail first-class,
postage prepaid:
If to the Company: with a copy to:
Individual Investor Group, Inc. Graubard Mollen & Miller
125 Broad Street, 14th Floor 600 Third Avenue
New York, New York 10004 New York, New York 10016
Attention: General Counsel Attn: Peter M. Ziemba, Esq.
fax: 212-742-0742 fax: 212-818-8881
If to Buyer: with a copy to:
Telescan, Inc. Telescan, Inc.
5959 Corporate Drive, Suite 2000 5959 Corporate Drive, Suite 2000
Houston, Texas 77036 Houston, Texas 77036
Attention: Roger C. Wadsworth Attn: General Counsel
fax: 281-588-9843 fax: 281-588-9843
Any such notice, request, demand or other communication hereunder shall
be deemed to have been duly given or made and to have become effective (i) if
delivered by hand or overnight courier, at the time of receipt thereof and (ii)
if sent by registered or certified first-class mail, postage prepaid, five
business days thereafter. Any party may, by written notice to the other, change
the address to which notices to such party are to be delivered or mailed.
9.4 Governing Law. This Agreement is being delivered and is intended to
be performed in the State of New York and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such State, without reference to principles of choice of law.
9.5 Entire Agreement. This Agreement, together with any exhibits hereto
(which exhibits are an integral part hereof), constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements, understandings, negotiations, representations and
proposals, written or oral, with respect to such subject matter. Each party
represents that it is not relying on any representations, whether written or
oral, not set forth in this Agreement, in determining to execute this Agreement.
9.6 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the party against whom enforcement is sought.
9.7 Severability. If any provision of this Agreement is held invalid,
illegal or unenforceable in any respect (an "Impaired Provision"), (a) such
Impaired Provision shall be interpreted in such a manner as to preserve, to the
maximum extent possible, the intent of the parties, (b) the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
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<PAGE>
or impaired thereby, and (c) such decision shall not affect the validity,
legality or enforceability of such Impaired Provision under other circumstances.
The parties agree to negotiate in good faith and agree upon a provision to
substitute for the Impaired Provision in the circumstances in which the Impaired
Provision is invalid, illegal or unenforceable.
9.8 Negotiation. The parties acknowledge that they are entering into
this Agreement after consulting with counsel and based upon equal bargaining
power, with all parties participating in its preparation. The parties
acknowledge and agree that the attorneys for each party have had an equal
opportunity to participate in the negotiation and preparation of this Agreement.
The terms of this Agreement shall not be interpreted in favor of or against any
party on account of the draftsperson, but shall be interpreted solely for the
purpose of fairly effectuating the intent of the parties hereto.
9.9 Counterparts and Facsimile/Photocopy Signatures; Authority of
Signatories. This Agreement may be executed in counterparts, and when each Party
has signed and delivered at least one such counterpart, each counterpart shall
be deemed an original, and, when taken together with other signed counterparts,
shall constitute one Agreement, which shall be binding upon and effective as to
all parties. A signature received via facsimile or photocopy shall be deemed an
original for all purposes. Each party represents that the person signing this
Agreement on the party's behalf has been duly authorized to execute this
Agreement on behalf of such party, and all of the signatories hereto signing in
a representative capacity warrant and represent that they have been duly
authorized by and on behalf of their respective principals to execute this
Agreement.
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<PAGE>
9.10 Headings. The Article and Section headings used herein are for
convenience only and do not define, limit or construe the content of such
sections. All references in this Agreement to Article and Section numbers refer
to Articles and Sections of this Agreement, unless otherwise indicated.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:________________________________
Name: ______________________
Title: ______________________
TELESCAN, INC.
By:________________________________
Name: ______________________
Title: ______________________
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September 29, 1999
Mr. Jonathan Steinberg
Individual Investor Group, Inc.
125 Broad Street
14th Floor
New York, NY 10004
Re: Binding Letter Agreement
Dear Jonathan:
1. This letter (the "Letter Agreement") dated as of September 29, 1999 (the
"Effective Date") will confirm our agreement that, subject to the terms and
conditions hereof, Individual Investor Group, Inc. ("II") and Telescan,
Inc. ("Telescan") shall enter into a License and Service Agreement (the
"License and Service Agreement) in accordance with and containing the terms
contained in this Letter Agreement and the License and Service Agreement
Term Sheet attached hereto as Attachment 1. The parties intend that the
License and Service Agreement when executed shall supersede this Letter
Agreement.
2. II shall license the Telescan Features (defined on Attachment 1) to be
received and displayed on (a) all websites owned and operated by or on
behalf II and (b) ConvertInvestor.com (collectively, "II Websites"). With
respect to each II Website, II shall have the sole discretion to select
which, if any, Telescan Features shall be displayed on such II Website.
3. II shall pay the License Fee (defined on Attachment 1) for each of the
Telescan Enterprise Technology Licenses (defined on Attachment 1). II shall
pay the Aggregate License Fee (defined on Attachment 1) upon execution of
this Letter Agreement. Telescan represents that the pricing and terms under
this Letter Agreement with respect to the Telescan Enterprise Technology
Licenses (defined on Attachment 1) and the Service (defined on Attachment
1) are equivalent to and no worse than the pricing and terms upon which
Telescan is currently providing equivalent products and/or services (except
pursuant to agreements entered into by Telescan more than one year prior to
the Effective Date, so long as not all current customers of such products
and/or services are so excluded) .
4. II shall pay the Aggregate License Fee (defined on Attachment 1) by issuing
and delivering to Telescan a certificate reflecting the number of shares of
II common stock obtained by dividing the Aggregate License Fee by the
average of the closing prices of II common stock as reported by Nasdaq over
the seven business days prior to the Effective Date. II shall file at its
expense, within thirty (30) days of the execution of this Letter Agreement,
a registration statement with respect to the shares issued pursuant to this
paragraph. In connection with the issuance of the License Fee Shares, the
parties shall execute a Stock Purchase Agreement in substantially the form
set forth on Attachment 3.
5. Telescan shall provide the Service (defined on Attachment 1) and the
Development Work (defined on Attachment 1) to any of the II Websites that
II may designate (the "Telescan Hosted II Sites; II Websites that are not
Telescan Hosted II Sites shall be referred to as "Licensed Sites").
Telescan also shall provide the Service and Development Work to pages of
Licensed II Sites containing Telescan Features (the "Telescan Feature
Pages"). Each Telescan Feature Page shall have the branding of the
applicable Licensed II Site. II will be responsible for the site
navigation, architecture and development of the "look and feel" of the II
Websites and the Telescan Feature Pages. If II desires Telescan to perform
any work beyond the Service, the parties will mutually agree upon the fees
to be paid to Telescan for such additional work; Telescan agrees that such
fees will not exceed the lowest rates it is then-currently charging to
third parties for similar development work, excluding work performed
pursuant to agreements entered into more than one year prior to the
Effective Date; in the event Telescan receives non-cash consideration with
respect to such development work, the rate for such development work shall
be based upon the fair market value of the consideration received. Each
page of the Telescan Hosted II Sites and each Telescan Feature Page shall
include a "Powered by Telescan" logo (164 x 41 pixel size) and Telescan's
copyright information in the footer of the page.
6. If Telescan purchases, licenses or otherwise acquires the rights to any New
Feature (as defined on Attachment 1), Telescan will promptly notify II in
writing of the availability of such New Feature. Upon request from II and
<PAGE>
the agreement of the parties upon any additional charges and fees
("Additional Charges") to be paid by II for such New Feature, Telescan will
add such New Feature to the Service (upon such addition, the New Feature
shall be deemed a Telescan Feature). The Additional Charges shall not
exceed (a) with respect to incremental fees, costs and expenses that
Telescan would incur to provide the New Feature to II (e.g., a per look-up
fee with respect to real-time quotes), the amount of such incremental fees,
costs and expenses (i.e., without a mark-up) and (b) with respect to any
other fees, costs and expenses incurred by Telescan with respect to the
licensing or acquisition of the New Feature (e.g., a one-time licensing
fee, or the purchase price for the feature), the amount of such fees, costs
and expenses multiplied by a fraction that reflects the reasonably
anticipated usage of the New Feature by II during the Term (defined below)
as a proportion of the total reasonably anticipated usage of the New
Feature by Telescan and its licensees (including II) over the useful life
of the feature.
7. For providing the Service to the Telescan Hosted II Sites, Telescan shall
receive 15% of the Net Revenue (defined on Attachment 1) received with
respect to the Telescan Hosted II Sites. For providing the Service to the
Telescan Feature Pages, Telescan shall receive 15% of the Net Revenue
received with respect to the Telescan Feature Pages. II shall pay such fees
within 30 days of the end of the calendar month in which the Net Revenue is
collected by II. To the extent that II receives applicable Net Revenue in
the form of non-cash consideration, II shall pay Telescan one of the
following, at II's election: (a) cash equal to 15% of the Fair Market Value
(defined below) of the non-cash consideration; (b) 15% of the non-cash
consideration in kind; or (c) the number of shares of II common stock
obtained by dividing (i) 15% of the Fair Market Value by (ii) the average
of the closing price of II common stock as reported by Nasdaq over the
seven business days prior to the issuance. As used herein, "Fair Market
Value" means the value of the non-cash consideration received by II, as
reflected on II's quarterly income statements (excluding any gains or
losses related to the sale or other disposition of assets). If II wishes to
pay Telescan pursuant to clause (b), II must notify Telescan in writing of
II's election. Within ten (10) calendar days of II's notice, Telescan may
notify II in writing that Telescan rejects the proposed form of payment; if
Telescan timely delivers such written notice, then, notwithstanding the
foregoing, II shall pay Telescan pursuant to clause (a) or clause (c), at
II's election.
8. Telescan will provide the Service for the Term so long as II renders all
compensation due Telescan under this Letter Agreement and the License and
Service Agreement. Prior to the execution of the License and Service
Agreement, if Telescan has materially breached this Letter Agreement, II
must inform Telescan of the material breach of service in writing (the
"Default Notice") to Telescan at the address set forth below. Telescan
agrees that it will use reasonable efforts to correct any such material
breach as promptly as possible. If after thirty (30) days after receipt of
the Default Notice, Telescan has not made reasonable efforts to correct the
material breach, the contract will be considered in default ("Material
Default") and II may terminate this Letter Agreement upon written notice to
Telescan ("Termination Notice"). In the event that II terminates this
Letter Agreement as a result of any such Material Default, Telescan will
remit to II (within 30 days of the Termination Notice) liquidated damages
in the amount of one thousand dollars ($1,000) for each day commencing with
the date of the Default Notice and ending on the third anniversary of the
Effective Date. The parties agree that the actual damages suffered by II as
a result of a Material Default would be difficult to ascertain, and each
party agrees that the liquidated damages set forth above are reasonable
estimates of the harm that II would be expected to suffer. The License and
Service Agreement shall contain a provision providing for the payment to II
of liquidated damages as calculated above, in the event of termination of
the License and Service Agreement due to a material breach of the License
and Service Agreement with respect to which material breach Telescan did
not, within 30 days after receipt of the Default Notice, make reasonable
efforts to correct.
9. II shall reimburse Telescan for all actual royalties, license fees or other
similar fees payable by Telescan (without a mark-up) to third party data,
content and service providers associated with providing the Service. Such
payment shall be made by II within 30 days of receipt of an invoice
therefor, setting forth the calculation of such amount in reasonable detail
and providing such supporting documentation as II reasonably may request.
The current list of Data Vendors and Content Providers is set forth in
Attachment 2. Telescan shall provide II promptly after request with a list
of the royalties, license fees and other similar fees payable by Telescan
to third party data, content and service providers associated with
providing the Service.
10. Telescan shall provide Usage and Tracking Reports to II on a weekly basis.
The Usage and Tracking Reports shall contain the following information:
usage reports including pages viewed with segments of the Telescan Hosted
II Sites and Telescan Feature Pages; inbound link reports including the
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number of successful coded URL page requests from links originating outside
of the Telescan Hosted II Sites and Telescan Feature Pages; and information
sufficient to establish and monitor each of the metrics defined in the
License and Service Agreement. Telescan shall also collect requested and
defined survey information, store it in a database, and provide a nightly
FTP file available for import by II. (Additional work required to provide
this file will be billed and paid at Telescan's then-current published
rates.) The parties shall not use or disclose, other than to further the
performance of their obligations under the License and Service Agreement,
any confidential information of the other party, during the Term or for a
period of one year thereafter.
11. The "Term" of the License and Service Agreement shall be 3 years from the
Effective Date.
12. II will (in its reasonable discretion) define the advertising inventory on
the Telescan Hosted II Sites and the Telescan Feature Pages. II will have
sole responsibility for serving the advertising. II shall use reasonable
efforts to sell the advertising inventory, but does not warrant that any
particular level of advertising will be sold or that any particular level
of revenue will be collected with respect to such sales. If II does not
sell the entire advertising inventory, the parties will agree upon a plan
by which Telescan can sell a portion of the advertising inventory (subject
to II's reasonable approval as to advertisers and creative). In such case,
Telescan will be entitled to keep 15% of the Net Revenue from such sales
and would remit the balance to II, within 30 days of Telescan's receipt of
such revenue.
13. Telescan will take a project management approach in the execution of its
duties as they relate to the Service. Telescan will collaborate with II on
the design, development, management and maintenance of Telescan Hosted II
Sites and Telescan Feature Pages strategic to II's internet initiatives. On
an as-needed basis, Telescan will participate in II product planning and
strategy sessions in order to suggest various combinations, customizations
and implementations of Telescan technologies.
14. Telescan will provide phone-based technical support on issues related to
the successful operation of the Service to II customer service
representatives, on a 24 hours per day, seven days per week basis. Telescan
will provide e-mail based technical support on issues related to the
successful operation of the Service to II customer service representatives
during weekdays between 8:00 a.m. and 5:00 p.m., Central Time.
15. If II should choose to use newsletters provided by Telescan or its
subsidiaries on the II Websites, II will remit 85% of the Net Revenue
received from those subscriptions to Telescan. If II should choose to use
third-party newsletters on the II Websites, II will remit 15% of the Net
Revenue received from those subscriptions to Telescan.
16. The parties agree that the following information shall be deemed
"Confidential Information" as to which II is the "Disclosing Party," as
those terms are used in the Mutual Confidentiality Agreement dated as of
July 26, 1999 between the parties: (a) operating metrics and financial
performance of Telescan Hosted II Sites and Telescan Feature Pages; (b)
calculation of Net Revenue of Telescan Hosted II Sites and Telescan Feature
Pages; and (c) information related to the planning or evaluation of
potential new Telescan Hosted II Sites and Telescan Feature Pages.
17. II and Telescan shall mutually agree on the form and content of any public
announcement which shall be made concerning this letter agreement or the
transactions contemplated hereby, and neither II nor Telescan shall make
any such public announcement or disclosure relating to this letter
agreement or the transactions contemplated hereby without the consent of
the other; provided that nothing herein shall prohibit II or Telescan, upon
notice to the other party, from making any public filing or disclosure
required by law or the policy of any exchange on which such party's (or its
parent's) securities are listed.
18. Performance by the parties pursuant to this Letter Agreement shall be as
independent contractors. Nothing contained herein or done under the terms
of this Letter Agreement shall constitute the parties entering into a joint
venture or partnership, or shall constitute any party the agent of any
other party for any purpose.
19. If any provision of this Letter Agreement is held invalid, illegal or
unenforceable in any respect (an "Impaired Provision"), (a) such Impaired
Provision shall be interpreted in such a manner as to preserve, to the
maximum extent possible, the intent of the parties, (b) the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby, and (c) such decision shall not affect
the validity, legality or enforceability of such Impaired Provision under
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<PAGE>
other circumstances. The parties agree to negotiate in good faith and agree
upon a provision to substitute for the Impaired Provision in the
circumstances in which the Impaired Provision is invalid, illegal or
unenforceable.
20. This Letter Agreement and its attachments (the "Documents") represent the
entire agreement of the parties with respect to the subject matter hereof,
and supersede all other discussions, whether written or oral. The terms of
the Documents may not be modified or amended except in a writing signed by
each party.
21. The failure of any party hereto to enforce, or the delay by any party in
enforcing, any of its rights under the Documents shall not be deemed a
waiver or a continuing waiver of such rights or a modification of the
Documents, and such party may enforce any or all such rights at any time
thereafter, subject to any applicable statute of limitations. No waiver of
a particular breach or default of the Documents shall be deemed a waiver of
any other breach or default of the Documents. All rights and remedies,
whether conferred by the Documents, by any other instrument or by law,
shall be cumulative, and may be exercised singularly or concurrently.
22. Neither party may assign the Documents or any rights under the Documents
without the express written permission of the other parties, and any
attempt to do so shall be null and void; provided however that either party
may assign all or any portion of its rights under the Documents to any
entity that it controls, is controlled by or under common control with.
Subject to the foregoing, the Documents shall be binding upon and shall
inure to the benefit of the respective permitted successors and assigns of
the parties.
23. Each of the Documents may be executed in counterparts, and when each party
has signed and delivered at least one such counterpart, each counterpart
shall be deemed an original, and, when taken together with other signed
counterparts of such Document, shall constitute one instrument, which shall
be binding upon and effective as to all parties. A signature received via
facsimile or photocopy shall be deemed an original for all purposes.
24. If the foregoing correctly sets forth your understanding of our intentions
with respect to the matters discussed herein, please indicate the same by
executing a copy of this Letter Agreement as provided below and returning
the same to the undersigned.
25. Any notice or communication required or permitted to be given under this
Letter Agreement shall be deemed delivered if sent by: (i) personal
delivery, with proof of delivery; (ii) expedited delivery service (e.g.;
Federal Express, DHL), with proof of delivery; (iii) registered or
certified U.S. mail, eturn receipt requested; or (iv) facsimile or telex
transmission, provided each transmission is confirmed. Each such notice
shall be deemed delivered if addressed as provided below (or to such
different addresses or to the attention of such other persons as may be
designated from time to time by such party by written notice to the other
parties in accordance with this Section). Any such notice or communication
shall be deemed to have been delivered: (a) upon the date of delivery
pursuant to clause (i) or (ii); (b) upon receipt of a transmission
confirmation if sent by facsimile or telex; or (c) in the case of U.S.
mail, five (5) calendar days after deposit, postage pre-paid, in the mails
of the U.S.
If to Telescan: If to II:
Telescan, Inc. Individual Investor Group, Inc.
5959 Corporate Drive, Suite 2000 125 Broad Street, 14th Floor
Houston, Texas 77036 New York, New York 10004
tel: 281-588-9700 tel: 212-742-2200
fax: 281-588-9843 fax: 212-742-0742
Attn: Roger C. Wadsworth Attn: General Counsel
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26. This Letter Agreement shall become binding upon each of the parties,
simultaneously with the execution of the Stock Purchase Agreement of
approximately even date herewith between the parties related to the
purchase of II common stock for a payment of three million dollars.
Telescan, Inc. Individual Investor Group, Inc.
By: _________________________ By: _________________________
Name: _________________________ Name: _________________________
Title: _________________________ Title: _________________________
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Attachment 1
License and Services Agreement Term Sheet
1. The "Telescan Enterprise Technology Licenses" means perpetual, worldwide,
non-exclusive licenses to the following, and the "License Fee" attributable to
each Telescan Enterprise Technology License shall be as set forth below.
Telescan Enterprise Technology License License Fee
----------------------------------------------- -----------
> Host System Software and Technology License: $72,000
> Base Internet Technology License: $62,500
> Base SQL Interface Technology License: $62,500
> Base Quotes License: $37,500
> Base News License: $37,500
> Base Technical Charting License: $37,500
> Base Portfolio Tracker License: $225,000
> Base ProSearch Technology License: $375,000
> Add on: ProSearch - "Telescan Rankings" License Upgrade $225,000
2. The "Aggregate License Fee" means One Million One Hundred Thirty-Four
Thousand and Five Hundred US Dollars. ($1,134,500), which equals the sum of the
License Fees for each Telescan Enterprise Technology License set forth above.
3. The "Service" means all hosting services, maintenance and support necessary
to enable the Telescan Hosted II Sites and Telescan Feature Pages to operate in
a manner reasonably acceptable to II, including without limitation (a) writing
the computer code necessary to allow the Telescan Hosted II Sites and Telescan
Feature Pages to be functional, (b) hosting and database management of all
Telescan Hosted II Sites and Telescan Feature Pages, (c) parsing of all data for
presentation and integration into the Telescan Hosted II Sites and Telescan
Feature Pages, (d) network and bandwidth management, (e) server management,
problem management and resolution and load balancing, (f) customer registration
and authentication, (g) customer service support and (h) a reasonable level of
redundant and back-up systems.
4. The "Development Work" means, for each II Website: (a) the development work
needed to bring such website (or the applicable pages thereof) up on the
Service, not to exceed four man-weeks of effort - if the level of requested work
exceeds four man-weeks, II will be responsible for the excess hours, and all
such work will be performed at then-current Telescan rates; and (b) commencing
upon the initial launch of a Telescan Hosted II Site or Telescan Feature Page,
development work not to exceed two man-days in order to enact changes or
modifications that II may request - if the level of requested work exceeds two
man-days, II will be responsible for the excess hours, and all such work will be
performed at then-current Telescan rates, excluding work performed pursuant to
agreements entered into more than one year prior to the Effective Date; in the
event Telescan receives non-cash consideration with respect to such development
work, the rate for such development work shall be based upon the fair market
value of the consideration received. As used herein, a "man-day" and "man-week"
mean eight hours of effort of a person possessing reasonable skills in the
necessary work. The then-current Telescan rates charged pursuant to this
paragraph shall not exceed the lowest rates charged by Telescan to third parties
for similar development work.
5. "Telescan Features" means all current and future technology, tools, content
and applications incorporated into Telescan's wallstreetcity.com website
("WSC"), including those developed or acquired by Telescan during the Term, and
including all of the data and content listed on Attachment 2 hereto. "Telescan
Features" shall not include any Telescan Restricted Features or New Features
(except that Telescan Features will include New Features that are added to the
Service pursuant to the agreement of the parties).
-6-
<PAGE>
6. "New Features" means any new technology, tools, content and applications
licensed by Telescan from a third party or acquired by Telescan from a third
party (through a significant outlay of resources or via acquisition) with the
right to provide such licensed or acquired New Feature through WSC, or to
Telescan's alliance partners such as II, or as an II Restricted Feature.
7. "II Restricted Features" means all updates, upgrades, additions, and
revisions to the Telescan Features and New Features developed by Telescan for II
on a "work for hire" or exclusive basis, such that Telescan is contractually
restricted from providing the same to its other customers or to WSC.
8. "Telescan Restricted Features" means any updates, upgrades, additions and
revisions to Telescan Features or new features developed by Telescan for third
parties on a "work for hire" or an exclusive basis such that Telescan is
contractually restricted from providing the same to II, provided that Telescan
will not agree to any such restriction unless it applies to all of its other
customers and to WSC.
9. "Net Revenue" means Gross Revenue less Specified Expenses. "Gross Revenues"
means all revenue, fees, charges and other amounts collected from end users,
advertisers, sponsors and other users of the Telescan Hosted II Sites and
Telescan Feature Pages (net of refunds and make-goods), including without
limitation all online charges, sponsorship fees, subscription fees, vendor fees,
insertion fees, product sales fees, and advertising charges, that were earned
during the Term. "Specified Expenses" means the following expenses incurred by
or on behalf of II in connection with the Service:
(i) All state sales and use taxes.
(ii) All merchant fees payable to any credit card issuers, check or other
processing fees, credits for services and bad debt incurred in
connection with the Service by II or Telescan, as applicable.
(iii) All royalties, license fees or other similar fees payable to third
party data and service providers.
(iv) As to any product sold on the Service, the actual cost paid to third
parties by II for that product (net of rebates).
(v) As to any advertisement sold on or in connection with the Service, II's
actual cost of any commissions paid to II sales personnel or third
parties for the procurement of advertisements, sponsorships or other
promotions (and, if applicable, Telescan's actual cost of any
commissions paid to Telescan sales personnel or third parties for the
procurement of advertisements, sponsorships or other promotions).
-7-
<PAGE>
Attachment 2
Data Vendors and Content Providers - As Of July, 1999
North American Quotes
---------------------
American CME
New York MACE
NASDAQ Toronto
OPRA Montreal
NYMEX Vancouver
CYMEX Alberta
CEC Winnipeg
CBOT
Other North American Security Feeds
-----------------------------------
Dow Jones Index Feed
Iverson Financial - Dividends & Splits
Muller Data - End of day h/l/v pricing file
International Quotes
--------------------
Dow Jones Global Index Feed
News Wire Feeds
---------------
o Interactive Sports Wire
o Comtex o ITAR/TASS News Agency
o A&G Information Services o M2 Communications
o Africa News Service o Newsbytes News Network
o AsiaInfo Services, Inc. o PR Newswire
o Business Wire o South American Business Information
o Canadian Corporate News o The Sports Network
o The Content Factory o States News Service
o Cineman o United Press International (UPI)
o Compass Middle East Wire o U.S. Newswire
o FedNet Government News o Washington Technology
o Futures World News (FWN) o Xinhua News Agency
o InfoLatina o World Entertainment News Network
o Inter Press Service (IPS) o Ziff-Wire Highlights
-8-
<PAGE>
ATTACHMENT 2
------------
Data Vendors and Content Providers
----------------------------------
- continued -
Fundamentals, Earnings, Research, Commentary, etc.
--------------------------------------------------
Daily Market Consensus
Market Guide - Fundamentals
Vickers - Insider Trading (and Institutional Holders)
Zack's - Earnings Estimates
S&P Industry Groups
Macro*World Price Forecasts
J & J Mutual Funds
IDEA
Soon To Be Added
----------------
INVESTools.com - 3rd Qtr. 1999
Hoovers Capsules & Profiles - 3rd Qtr. 1999
Hoovers IPO Central - 3rd Qtr. 1999.
Microcap 1000 - 3rd Qtr. 1999
Media General Fundamental Information - 1st Qtr. 2000
-9-
<PAGE>
Attachment 3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of September 29,
1999 (the "Effective Date"), is entered into between INDIVIDUAL INVESTOR GROUP,
INC., a Delaware corporation with its principal place of business at 125 Broad
Street, 14th Floor, New York, New York 10004 (the "Company"), and TELESCAN,
INC., a Delaware corporation, having its principal place of business at 5959
Corporate Drive, Suite 2000, Houston, Texas 77036 (the "Buyer").
1. SALE AND ISSUANCE OF COMMON STOCK.
1.1 Subject to the terms and conditions of this Agreement, at the
Closing (as defined below) Buyer agrees to purchase from the Company, and the
Company agrees to sell, issue and deliver to Buyer, the number of shares (the
"Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock") obtained by dividing ONE MILLION ONE HUNDRED THIRTY-FOUR THOUSAND AND
FIVE HUNDRED DOLLARS ($1,134,500) (the "Purchase Price") by the Purchase Price
Per Share (as defined below) of the Common Stock. As used herein, "Purchase
Price Per Share" shall mean the average of the last sale prices of the Common
Stock, as reported by Nasdaq, for the seven business days prior to the date of
the Closing.
2. CLOSING.
2.1 The closing of the transaction contemplated by the Agreement (the
"Closing") is conditioned upon (a) the closing of that certain Stock Purchase
Agreement of approximately even date herewith between the parties related to the
purchase of Common Stock for a payment of three million dollars and (b) the
execution of the binding letter agreement between the parties dated as of
September 29, 1999 concerning a License and Service Agreement (the "Letter
Agreement").
3. CLOSING ITEMS.
3.1 At the Closing, the Company shall deliver, or cause to be
delivered, to Buyer resolutions of the board of directors of the Company
authorizing the execution, delivery and consummation of this Agreement, the
issuance of the Shares and the other matters contemplated hereby, certified as
to their due adoption and continued validity by the Secretary of the Company.
3.2 Promptly (and in no event more than five (5) business days) after
the Closing, the Company shall deliver, or cause to be delivered, to Buyer one
or more certificates (as requested by Buyer) representing in the aggregate the
Shares.
<PAGE>
3.3 At the Closing, Buyer shall deliver, or cause to be delivered, an
executed copy of the Letter Agreement.
4. FURTHER ASSURANCES. Each party shall execute such additional documents and
take such other actions as the other party or parties may reasonably request to
consummate the transactions contemplated hereby and otherwise as may be
necessary to effectively carry out the terms and provisions of this Agreement.
5. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby represents
and warrants to and covenants with Buyer as follows:
5.1 Organization. The Company is duly organized, validly existing and
in good standing in the State of Delaware. The Company has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and as presently proposed to be
conducted and to execute, deliver and perform this Agreement. The Company is
duly licensed, authorized and qualified to do business and is in good standing
in all jurisdictions (domestic or foreign) in which the conduct of its business
or the ownership or leasing of its properties requires it to be so licensed,
authorized or qualified, except where its failure to be so licensed, authorized
or qualified would not have a material adverse effect, singularly or in the
aggregate, on the results of operations, financial condition, properties,
business or prospects of the Company (a "Material Adverse Effect").
5.2 Authority; Execution and Delivery, Etc. The execution, delivery,
and performance of this Agreement has been duly authorized by the Company's
Board of Directors and no other corporate proceedings on the part of the Company
or its stockholders are required. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights in general or
general principles of equity.
5.3 Financial Condition. The consolidated financial statements of the
Company included in the Disclosure Documents (as described in Section 5.11)
fairly present on a consolidated basis the financial position, the results of
operations, the changes in financial position and the changes in stockholders'
equity and the other information purported to be shown therein of the Company
and its consolidated subsidiaries at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
2
<PAGE>
5.4 Validly Issued Shares. The Shares to be issued, sold and delivered
in accordance with the terms of this Agreement for the consideration set out
herein, will, upon issuance in accordance with the terms hereof, be duly and
validly issued, fully paid and nonassessable, free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
federal and state securities laws. The issuance of the Shares to Buyer pursuant
to this Agreement will comply with all applicable laws, including federal and
state securities laws, and will not violate the preemptive rights of any person.
5.5 Consents. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to the Company in connection with the execution and delivery of
this Agreement, or the consummation by the Company of the transactions
contemplated hereby, which has not already been obtained, except for the filing
of any notices of sale required to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
or Securities Exchange Act of 1934, as amended (the "Exchange Act") or with the
Nasdaq Stock Market, or such post closing filings as may be required under
applicable state securities laws which will be timely filed within the
applicable periods therefor.
5.6 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company,
nor does the Company have any actual knowledge that there is any basis for the
foregoing, except for those disclosed in the Disclosure Documents, those for
which there has been no manifestation by a potential claimant of an awareness of
a possible claim and for which the Company has not determined that it is
probable that a claim will be asserted, and those which, if adversely
determined, would not reasonably be expected to have a Material Adverse Effect.
The foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving the prior employment or
engagement of any of the Company's employees or consultant, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers or their current
employers/clients (in the case of consultants), or their obligations under any
agreements with such employers/clients. The Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
3
<PAGE>
5.7 Compliance with Other Instruments. The Company is not in violation
or default in any material respect of any provision of its Restated and Amended
Certificate of Incorporation, as amended, or bylaws, or in any material respect
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound, or, to the best of its knowledge, of any
provision of any federal or state statute, rule or regulation applicable to the
Company; except where such violation or default would not reasonably be expected
to have a Material Adverse Effect. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event that results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties, except where such violation, default, event, suspension, revocation,
impairment, forfeiture or nonrenewal would not reasonably be expected to have a
Material Adverse Effect.
5.8 Material Facts. The Company has provided Buyer with all the
information reasonably available to it that Buyer has requested for deciding
whether to purchase the Shares. The representations and warranties by the
Company contained in this Agreement, when taken together with the Disclosure
Documents, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading,
except, with respect to assumptions, projections and expressions of opinions or
predictions contained in the documents or written materials furnished by the
Company, the Company represents only that such assumptions, projections and
expressions of opinions and predictions were made in good faith and the Company
believes that there is a reasonable basis therefor.
5.9 Compliance with Laws. To the best knowledge of the Company, the
Company is in compliance in all material respects with all applicable statutes,
laws, ordinances, rules, regulations and orders of any governmental entity,
except where non-compliance would not reasonably be expected to have a Material
Adverse Effect, and the Company has not received any notice or other
communication whether oral or written from any governmental entity, arbitrator
or any other person regarding any such violation or failure.
5.10 Subsequent Events. Subsequent to the respective dates as of which
information is given in the Disclosure Documents, except as described therein,
there has not been any Material Adverse Effect on the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course of
business, the Company and its subsidiaries have not sustained any material loss
or interference with their businesses or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, and since the date of the latest balance sheet included in the
Disclosure Documents, neither the Company nor any of its subsidiaries has
incurred or undertaken any liability or obligation, indirect or contingent,
except for liabilities or obligations incurred or undertaken in the ordinary
course of business and except for any such liabilities or obligations as are
reflected in the Disclosure Documents.
4
<PAGE>
5.11 Disclosure. The Company has provided to Buyer true, correct and
complete copies of its Annual Report on Form 10-K for the fiscal year ended
December 31 1998; its Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998; its Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1999 and June 30, 1999; its Notice of Annual Meeting of
Stockholders and Proxy Statement relating to its annual meeting of stockholders
held on June 22, 1999; and its Current Report on Form 8-K dated June 2, 1999
(collectively, the "Disclosure Documents").
6. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the Company
as follows:
6.1 Buyer is aware that its investment in the Company involves a
substantial degree of risk, including, but not limited to the following: (i) if
the Company fails to meet the maintenance criteria for continued inclusion on
the Nasdaq National Market System ("NMS"), including but not limited to, the
requirement that the Company maintain minimum net tangible assets of at least
$4,000,000 and the requirement that the minimum bid price of the Common Stock is
at least $1.00, it may be delisted from the NMS; (ii) the Company has had
substantial operating losses for the fiscal year ended December 31, 1998 and for
the fiscal quarters ended March 31, 1999 and June 30, 1999 and expects to
continue to incur losses in the future; (iii) the Company will need additional
financing in the future to fund operating losses and for capital investment in
its current and proposed business operations; (iv) the Company's development of
its internet products is not currently generating sufficient revenue to cover
development and operating expenses, and may not be profitable in the future; (v)
management and the existing principal stockholders of the Company beneficially
own a substantial amount of the outstanding voting stock of the Company and
accordingly are in a position to substantially influence the election of all
directors of the Company and the vote on matters requiring stockholder approval;
and (vi) the Company's success will to a significant extent rely upon the
continued services and abilities of Jonathan Steinberg. Buyer acknowledges and
is aware that there is no assurance as to the future performance of the Company.
5
<PAGE>
6.2 Buyer is purchasing the Shares for its own account for investment
and not with a view to or in connection with a distribution of the Shares, nor
with any present intention of selling or otherwise disposing of all or any part
of the Shares, except as contemplated in Section 8 below. Subject to Section 8
below, Buyer agrees that it must bear the economic risk of its investment
because, among other reasons, the Shares have not been registered under the
Securities Act, or under the securities laws of any state and, therefore, cannot
be resold, pledged, assigned, or otherwise disposed of unless and until they are
registered under the Securities Act and under applicable securities laws of
certain states, or an exemption from such registration is available.
6.3 Buyer has the financial ability to bear the economic risk of its
investment in the Company (including its complete loss), has adequate means for
providing for its current needs and has no need for liquidity with respect to
its investment in the Company.
6.4 Buyer has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Company and has obtained, in its judgment, sufficient information from the
Company to evaluate the merits and risks of an investment in the Company. Buyer
has had full opportunity to ask questions and receive satisfactory answers
concerning all matters pertaining to its investment and all such questions have
been answered to its full satisfaction. Buyer has been provided an opportunity
to obtain any additional information concerning the Company and all other
information to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense. Buyer has received no representation
or warranty from the Company with respect to its investment in the Company, and
Buyer has relied solely upon its own investigation in making a decision to
invest in the Company.
6.5 Buyer is an "accredited investor" as defined in Section 2(15) of
the Securities Act and in Rule 501 promulgated thereunder.
6.6 The execution, delivery, and performance of this Agreement has been
duly authorized by Buyer and no other corporate proceedings on the part of Buyer
or its stockholders are required. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid, and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity.
7. RESTRICTIONS ON TRANSFER.
7.1 Restrictions on Transfer. Buyer agrees that it will not sell,
transfer, or otherwise dispose of any of the Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act and the Company has received
an opinion of counsel satisfactory to the Company that such exemption is
available.
6
<PAGE>
7.2 Legend. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH EXEMPTION IS AVAILABLE."
8. REGISTRATION RIGHTS.
8.1 Filing of Registration Statement. Within thirty (30) days after the
Closing Date, the Company shall file a registration statement under the
Securities Act ("Registration Statement") with respect to the Shares.
8.2 Expenses. All expenses in connection with the Registration
Statement shall be borne by the Company except for applicable transfer taxes and
expenses of counsel to Buyer, which shall be borne by Buyer.
8.3 Information Relating to Buyer. Buyer agrees that in connection with
the Registration Statement it will provide to the Company all information and
execute and deliver all documents, agreements, certificates and other items at
its expense, as the Company and/or its counsel reasonably request, and the
failure to provide such information or items shall permit the Company to delay
the filing of, or not have declared effective, the Registration Statement filed
by the Company pursuant to Section 8.1.
8.4 Indemnification.
8.4.1 Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless Buyer and its directors, officers,
employees and each person, if any (a "Controlling Person") who controls Buyer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other expenses
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever) to which it may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement in which Buyer's securities shall be included or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company with respect to Buyer by Buyer or its agents, in writing, expressly for
use in any such registration statement. The Company agrees promptly to notify
7
<PAGE>
Buyer of the commencement of any litigation or proceedings against the Company
or any of its officers, directors or controlling persons in connection with the
issue and sale of the Shares in connection with any such registration statement.
8.4.2 If any action is brought against Buyer in respect of
which indemnity may be sought against the Company pursuant to this Section 8.4,
Buyer shall promptly notify the Company in writing of the institution of such
action and the Company shall assume the defense of such action, including the
employment and fees of counsel and payment of actual expenses. Buyer shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of Buyer unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action, or (ii) the Company shall not have employed
counsel to have charge of the defense of such action, or (iii) Buyer shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the Company (in which case
the Company shall not have the right to direct the defense of such action on
behalf of Buyer), in any of which events the reasonable fees and expenses of not
more than one additional firm of attorneys selected by Buyer and/or controlling
person shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if Buyer shall assume the defense of such action as provided
above, the Company shall have the right to approve the terms of any settlement
of such action which approval shall not be unreasonably withheld.
8.4.3 Buyer agrees to indemnify and hold harmless each of the
Company, its directors, officers and employees, any underwriter (as defined in
the Securities Act) and each Controlling Person of the Company, against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to Buyer, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions directly relating to
Buyer in any such registration statement furnished to the Company by Buyer or
its agents, in writing, expressly for use in any such registration statement. In
case any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, and in respect of which
indemnity may be sought against Buyer, Buyer shall have the rights and duties
given to the Company, and the Company and each other person so indemnified shall
have the rights and duties given to Buyer by the provisions of paragraph 8.4.2
above.
8.5 Contribution.
(a) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under Section 8.4 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8.4 provides for indemnification in such
case, or (ii) contribution under the Securities Act, the Exchange Act, or
8
<PAGE>
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under Section 8.4, then, and in each such
case, the Company and Buyer shall contribute, in proportion to their relative
fault, to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Buyer, as incurred; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(b) Within fifteen days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 8 are intended to supersede,
to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available.
9. MISCELLANEOUS.
9.1 Expenses. Each party shall be liable for its own expenses in
connection with the transactions contemplated by this Agreement.
9.2 Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the Company
and of Buyer, whether so expressed or not.
9
<PAGE>
9.3 Notices, Etc. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person,
by overnight courier or mailed by certified or registered mail first-class,
postage prepaid:
If to the Company: with a copy to:
Individual Investor Group, Inc. Graubard Mollen & Miller
125 Broad Street, 14th Floor 600 Third Avenue
New York, New York 10004 New York, New York 10016
Attention: General Counsel Attn: Peter M. Ziemba, Esq.
fax: 212-742-0742 fax: 212-818-8881
If to Buyer: with a copy to:
Telescan, Inc. Telescan, Inc.
5959 Corporate Drive, Suite 2000 5959 Corporate Drive, Suite 2000
Houston, Texas 77036 Houston, Texas 77036
Attention: Roger C. Wadsworth Attn: General Counsel
fax: 281-588-9843 fax: 281-588-9843
Any such notice, request, demand or other communication hereunder shall
be deemed to have been duly given or made and to have become effective (i) if
delivered by hand or overnight courier, at the time of receipt thereof and (ii)
if sent by registered or certified first-class mail, postage prepaid, five
business days thereafter. Any party may, by written notice to the other, change
the address to which notices to such party are to be delivered or mailed.
9.4 Governing Law. This Agreement is being delivered and is intended to
be performed in the State of New York and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such State, without reference to principles of choice of law.
9.5 Entire Agreement. This Agreement, together with any exhibits hereto
(which exhibits are an integral part hereof), constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements, understandings, negotiations, representations and
proposals, written or oral, with respect to such subject matter. Each party
represents that it is not relying on any representations, whether written or
oral, not set forth in this Agreement, in determining to execute this Agreement.
9.6 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the party against whom enforcement is sought.
9.7 Severability. If any provision of this Agreement is held invalid,
illegal or unenforceable in any respect (an "Impaired Provision"), (a) such
Impaired Provision shall be interpreted in such a manner as to preserve, to the
maximum extent possible, the intent of the parties, (b) the validity, legality
10
<PAGE>
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby, and (c) such decision shall not affect the validity,
legality or enforceability of such Impaired Provision under other circumstances.
The parties agree to negotiate in good faith and agree upon a provision to
substitute for the Impaired Provision in the circumstances in which the Impaired
Provision is invalid, illegal or unenforceable.
9.8 Negotiation. The parties acknowledge that they are entering into
this Agreement after consulting with counsel and based upon equal bargaining
power, with all parties participating in its preparation. The parties
acknowledge and agree that the attorneys for each party have had an equal
opportunity to participate in the negotiation and preparation of this Agreement.
The terms of this Agreement shall not be interpreted in favor of or against any
party on account of the draftsperson, but shall be interpreted solely for the
purpose of fairly effectuating the intent of the parties hereto.
9.9 Counterparts and Facsimile/Photocopy Signatures; Authority of
Signatories. This Agreement may be executed in counterparts, and when each Party
has signed and delivered at least one such counterpart, each counterpart shall
be deemed an original, and, when taken together with other signed counterparts,
shall constitute one Agreement, which shall be binding upon and effective as to
all parties. A signature received via facsimile or photocopy shall be deemed an
original for all purposes. Each party represents that the person signing this
Agreement on the party's behalf has been duly authorized to execute this
Agreement on behalf of such party, and all of the signatories hereto signing in
a representative capacity warrant and represent that they have been duly
authorized by and on behalf of their respective principals to execute this
Agreement.
11
<PAGE>
9.10 Headings. The Article and Section headings used herein are for
convenience only and do not define, limit or construe the content of such
sections. All references in this Agreement to Article and Section numbers refer
to Articles and Sections of this Agreement, unless otherwise indicated.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:________________________________
Name: ______________________
Title: ______________________
TELESCAN, INC.
By:________________________________
Name: ______________________
Title: ______________________
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Individual Investor Group, Inc. on Form S-3 of our report dated March 12, 1999,
appearing in the Annual Report on Form 10-K of Individual Investor Group, Inc.
for the year ended December 31, 1998 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
New York, New York
October 29, 1999
Exhibit 23.3
Independent Auditors' Consent
WisdomTree Associates, L.P.
We consent to the incorporation by reference therein of our report dated
February 27, 1998, with respect to the financial statements of WisdomTree
Associates, L.P. incorporated by reference in the Annual Report (Form 10-K) of
Individual Investor Group, Inc. for the year ended December 31, 1998, in the
Registration Statement (Form S-3) of Individual Investor Group, Inc. filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
New York, New York
October 29, 1999
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,332,163
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