U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______ to _____________
Commission file number 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
-----------------------------------------
(Name of small business issuer in Its charter)
Delaware 13-3487784
- --------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Broad Street, 14th Floor, New York, New York 10004
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(Address of Principal Executive Offices) (Zip Code)
(212) 742-2277
----------------------------------------------
(Issuer's Telephone Number, Including Area Code)
The Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 as set forth in the pages attached hereto:
Item 3. Legal Proceedings
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
<PAGE>
PART I
ITEM 3. LEGAL PROCEEDINGS
In July 1997 certain former limited partners of WisdomTree Associates, L.P.
("WTA"), a domestic private investment fund of which WisdomTree Capital
Management, Inc., a wholly-owned subsidiary of Individual Investor Group, Inc.
("Company"), is the general partner, initiated an action in the Supreme Court of
the State of New York, County of New York, captioned Richard Tarlow and Sandra
Tarlow v. WisdomTree Associates, L.P., Bob Schmidt and Jonathan Steinberg, Index
No. 113819/97. Defendants moved to dismiss the action based on plaintiffs'
failure to file a complaint, and the action was dismissed without prejudice in
October 1997. In October 1998, plaintiffs moved to vacate the default judgment.
Defendants opposed the motion. On April 20, 1999, the court denied plaintiffs'
motion with respect to Messrs. Schmidt and Steinberg, but granted the motion
with respect to WTA, and plaintiffs will be permitted to file and serve a
complaint and proceed with the action solely with respect to this defendant. In
their motion plaintiffs alleged that defendants did not timely process
plaintiffs' request for redemption of their interest in WTA, which delay
allegedly caused plaintiffs to suffer approximately $470,000 in damages. WTA is
currently awaiting service of the complaint and intends to continue conducting a
vigorous defense. Due to the inherent uncertainty of litigation, the Company is
not able to reasonably estimate the potential losses, if any, that may be
incurred in relation to this litigation.
In April 1999 a stockholder of the Company initiated an action in the Court
of Chancery of the State of Delaware, New Castle County, captioned Michele S.
Criden v. Jonathan L. Steinberg, Bruce L. Sokoloff, Peter M. Ziemba and S.
Christopher Meigher III (C.A. No. 17082). The Company is named as a nominal
defendant in the action. Plaintiff alleges that the four individual defendants,
who comprise the entire Board of Directors of the Company, took improper action
(i) on November 19, 1998, in determining to amend the terms of options
previously granted to Jonathan Steinberg to reduce their exercise prices (which
ranged from $4.9375 to $7.50) to $1.25 (11% higher than the last sale price on
the trading date immediately preceding the date of such amendment), and (ii) on
December 23, 1998, in determining to grant replacement options to each of
Messrs. Sokoloff, Ziemba and Meigher, conditioned upon cancellation of their
existing options, which replacement options had an exercise price of $2.00 per
share (the last sale price of the Common Stock on the trading date immediately
preceding the date of the new grant), which was less than the exercise price of
options previously granted to them (which exercise prices ranged from $4.375 to
$10.50). Plaintiff claims that such actions constituted corporate waste and a
diversion of corporate assets for improper and unnecessary purposes and that the
directors breached their fiduciary duties, including their duty of loyalty, to
the Company and its stockholders. Plaintiff demands judgment (i) enjoining the
four directors from exercising any options at the reduced exercise price, (ii)
declaring a constructive trust of any proceeds resulting from the directors'
exercise of such options, (iii) damages, on behalf of the Company, for losses
and damages suffered and to be suffered in connection with the option
repricings, including interest thereon, and (iv) awarding plaintiff the costs of
this action, including reasonable attorney's fees. The Board of Directors
believed at the time, and continues to believe, that the actions taken on
November 19, 1998 and December 23, 1998, were proper.
In addition to the foregoing matters, the Company from time to time is
involved in ordinary and routine litigation incidental to its business; the
Company currently believes that there is no such pending legal proceeding that
would have a material adverse effect on the consolidated financial statements of
the Company.
2
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers and directors of the Company are as
follows:
Name Age Position
Jonathan L. Steinberg 34 Chairman of the Board and Chief Executive
Officer
Brette E. Popper 41 President and Chief Operating Officer
Gregory E. Barton 37 Vice President - Business and Legal
Affairs and General Counsel
Henry G. Clark 54 Vice President - Finance and Secretary
S. Christopher Meigher III 52 Director
Bruce L. Sokoloff 50 Director
Peter M. Ziemba 41 Director
Jonathan L. Steinberg founded the Company and has served as Chairman of the
Board of Directors of the Company since October 1988. Mr. Steinberg also served
as President from October 1988 to July 1994 and Treasurer of the Company from
October 1988 to June 1996. In addition, Mr. Steinberg is the Editor-in-Chief of
each of the Company's publications. From August 1986 to August 1988, Mr.
Steinberg was employed as an analyst in the Mergers and Acquisitions Department
of Bear, Stearns & Co. Inc., an investment banking firm. Mr. Steinberg is a
nephew by marriage of Bruce L. Sokoloff, a director of the Company.
Brette E. Popper has been President and Chief Operating Officer since
September 1998. From March 1998 until she joined the Company, Ms. Popper was
engaged as a marketing, advertising and management consultant by several
publishing companies. From January 1997 until February 1998 she served as
President of Quest Magazine and Vice President Business Development for Meigher
Communications, L.P., for whom she had performed consulting services since
September 1996. From 1985 until August 1996, Ms. Popper held various advertising
sales and management positions at USA Weekend, a division of Gannett Co., Inc.,
including serving as President and Publisher of USA Weekend from October 1990 to
August 1996.
Gregory E. Barton has been Vice President-Business and Legal Affairs and
General Counsel since September 1998. From September 1996 until August 1998, Mr.
Barton served as Vice President-Corporate and Legal Affairs and General Counsel
of Alliance Semiconductor Corporation, a manufacturer of integrated circuits,
and from May 1995 until September 1996 served as General Counsel of Alliance.
From 1986 to 1993, Mr. Barton had been an associate in the New York office of
the law firm Gibson, Dunn & Crutcher.
Henry G. Clark has been Vice President-Finance and Secretary since June
1998 and was Controller from November 1995 until June 1998. From January 1995
until October 1995 Mr. Clark was a self-employed financial consultant. Mr. Clark
was Chief Financial Officer/Controller of Seventh Generation, Inc. from July
1990 to March 1992 and then again from May 1993 to December 1994. Mr. Clark is a
Certified Public Accountant.
S. Christopher Meigher III has served as a director of the Company since
June 1998. Mr. Meigher has served as Chief Executive Officer of Meigher
Communications, L.P., a magazine publisher, for more than 5 years. Prior
thereto, Mr. Meigher was employed by Time, Inc. for 23 years and served in
numerous senior management positions, including serving as President of Time
Inc.'s New York Magazine Division from 1990 to 1992.
Bruce L. Sokoloff has served as a director of the Company since 1989. Mr.
Sokoloff has served as Senior Vice President - Administration of Reliance Group
Holdings, Inc., the holding company for several insurance and financial services
corporations, for more than five years and has been employed at Reliance Group
Holdings, Inc. since 1973. Mr. Sokoloff is an uncle by marriage of Jonathan L.
Steinberg.
3
<PAGE>
Peter M. Ziemba has served as a director of the Company since 1996. Mr.
Ziemba is an attorney and has been a partner of the law firm Graubard Mollen &
Miller for more than five years and has been employed there since 1982. Graubard
Mollen & Miller is outside general counsel to the Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities ("ten-percent
stockholders") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and ten-percent
stockholders also are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
furnished to it, and written representations that no other reports were
required, the Company believes that during the Company's fiscal year ended
December 31, 1998, all its officers, directors and ten-percent stockholders
complied with the Section 16(a) reporting requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation for the past three fiscal
years ended December 31, 1998, for the Company's Chief Executive Officer and
each other executive officer whose compensation exceeded $100,000 for the fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------------------------------
Salary Bonus Number of All Other
Name and Principal Position Year ($) ($) Options(1) (#) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jonathan L. Steinberg, 1998 230,000 -- -- --
Chief Executive Officer 1997 230,000 -- -- --
1996 160,000 -- 100,000 --
- ------------------------------------------------------------------------------------------------------------------------
Henry G. Clark 1998 113,083 -- 75,000 --
Vice President-Finance and Secretary 1997 90,000 9,000 10,000 --
1996 80,000 -- 20,000 --
- ------------------------------------------------------------------------------------------------------------------------
Robert H. Schmidt, 1998 104,415 -- -- 51,500
formerly President and Chief Operating 1997 222,927 -- 80,000 --
Officer(2) 1996 210,427 -- 80,000 --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include options that were granted or amended in 1998 pursuant to
the Company's offer to reprice the stock options held by its then-current
employees ("November 1998 Repricing").
(2) Mr. Schmidt served as President and Chief Operating Officer until May 1998.
See "Compensation Arrangements for Former Executive Officers" below.
Compensation Arrangements for Current Executive Officers
Jonathan L. Steinberg does not have a written employment agreement and
since 1997 he has received an annual base salary of $230,000.
The Company employs Brette E. Popper pursuant to a written employment
agreement expiring on December 31, 1999. Ms. Popper's annual base salary is
$225,000. In addition, the Company agreed to pay Ms. Popper a bonus equal to her
base salary in respect of the first fiscal year during the term of her agreement
for which the Company reports a pre-tax income of $1.00 or greater, after
deduction for bonuses payable to employees (other than the Company's Chief
4
<PAGE>
Executive Officer, but including her bonus). Ms. Popper agreed to certain
restrictive covenants restricting her from engaging in competition with the
Company for a period of one year after the cessation of her employment. In
connection with her employment, on September 14, 1998, the Company granted to
Ms. Popper ten-year options to purchase 250,000 shares of Common Stock
exercisable at $1.1875 (the fair market value of the Common Stock on the date of
grant). The options vest as to 62,500 shares on September 14 in each of 1999,
2000, 2001 and 2002. The options provide that the event of a change in control
of the Company, all options not yet vested shall vest and become immediately
exercisable. The Company also agreed to file a registration statement on Form
S-8 to register the shares underlying the options by September 14, 1999.
The Company employs Gregory E. Barton pursuant to a written employment
agreement which provides for an annual base salary of $200,000. Mr. Barton also
received a $5,000 bonus effective upon the first day of his employment. Although
the agreement does not have a specific term of employment, if, within the first
year of employment, Mr. Barton is either terminated without cause or his job
responsibilities or titles are materially diminished and he resigns, the Company
agreed to pay Mr. Barton a severance payment equal to six month's salary. In
connection with his employment, on September 14, 1998, Mr. Barton was granted
ten-year options to purchase 150,000 shares of the Company's Common Stock with
an exercise price of $1.1875 per share (the fair market value of the Common
Stock on the date of the grant). The options vest as to 37,500 shares on
September 14 in each of 1999, 2000, 2001 and 2002. In the event of a change of
control of the Company, all options not yet vested shall vest and become
immediately exercisable.
Henry G. Clark does not have a written employment agreement and he
presently receives an annual base salary of $125,000.
Compensation Arrangements for Former Executive Officers
The Company formerly employed Robert H. Schmidt as President and Chief
Operating Officer pursuant to an employment agreement expiring July 27, 1998,
which was renewable for successive one-year periods automatically unless
terminated under the notice provisions set forth in the agreement. Mr. Schmidt's
annual base compensation at the time his employment ceased was $212,500. The
Company also was obligated to pay for life insurance benefits for Mr. Schmidt up
to an annual premium amount of $10,000. The agreement contained a
non-competition provision for a period of one year following cessation of
employment. Mr. Schmidt and the Company agreed to end Mr. Schmidt's employment
as of June 15, 1998, pursuant to a severance arrangement under which Mr. Schmidt
was paid $51,500 and permitted to exercise from September 13, 1998 through
September 13, 2002, options to purchase an aggregate of 498,335 shares of Common
Stock that were previously granted and vested through June 1, 1998. The Company
also agreed to maintain medical coverage for Mr. Schmidt through December 31,
1998. Mr. Schmidt agreed that, prior to June 15, 1999, he would not be
associated with a competitive company in the business of financial publishing or
solicit the services of any employees or directors of the Company.
The Company formerly employed Scot A. Rosenblum as Executive Vice
President, Chief Financial Officer and Secretary without a written employment
agreement. At the time his employment ceased, he was receiving an annual base
salary of $200,000. Effective as of June 23, 1998, Mr. Rosenblum terminated his
employment. In connection with such termination, in consideration for Mr.
Rosenblum agreeing to certain restrictions on the sale of shares of Common Stock
issuable upon exercise of any options he held, the Company agreed that the
options to purchase 374,413 shares of Common Stock that were previously granted
and vested through June 23, 1998, may be exercised by Mr. Rosenblum until the
earlier of September 22, 2002, or ten years from the date of the original grant
of the applicable option.
The Company formerly employed Michael Kaplan as Vice President and General
Counsel without a written employment agreement. At the time his employment
ended, he was receiving an annual base salary of $170,000. Mr. Kaplan and the
Company agreed to end Mr. Kaplan's employment as of May 15, 1998 pursuant to an
agreement under which Mr. Kaplan was paid $120,000 and permitted to exercise
from August 13, 1998 through August 13, 1999, options to purchase an aggregate
of 50,000 shares of Common Stock that were previously granted and vested through
May 9, 1998.
5
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth the stock options granted in the last fiscal
year to the Company's executive officers identified in the Summary Compensation
Table above, but excludes options granted in exchange for old options or amended
pursuant to the November 1998 Repricing, which options are described in a
subsequent table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTIONS GRANTED IN LAST FISCAL YEAR
- --------------------------- --------------- ------------------- ----------------- --------------- -----------------------
Potential Realizable
Value
Percent of at Assumed
Number of Total Options Annual Rates
Securities Granted to of Stock Price
Underlying Employees in Exercise Appreciation for
Options Fiscal Year Price Expiration Option Term(2) ($)
Name of Executive Granted (#) (%)(1) Per Share ($) Date 5% 10%
- --------------------------- --------------- ------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Henry G. Clark 25,000(3) 3.1 4.50 06/15/08 70,751 179,296
50,000(4) 6.2 1.25 11/19/08 35,375 89,648
- --------------------------- --------------- ------------------- ----------------- --------------- -----------------------
</TABLE>
(1) Reflects percentage of total options granted to employees in 1998, net of
options repriced pursuant to the November 1998 Repricing (a total of
1,479,801 options were exchanged for new options or amended pursuant to the
November 1998 Repricing).
(2) The above information concerning five per cent and ten per cent assumed
annual rates of compounded stock price appreciation is mandated by the
Securities and Exchange Commission. There is no assurance provided to any
executive officer or to any other optionee that there will be appreciation
of the stock price over the option term or that the optionee will realize
any gains with respect to the options.
(3) These options became exercisable as to 6,250 shares of Common Stock on June
15 in each of 1999, 2000, 2001 and 2002. These options were included in the
November 1998 Repricing and, accordingly, were exchanged for similar
options with an exercise price of $1.25. Based upon the assumed rates of
compounded stock price appreciation, these repriced options as of the
repricing date would have a potential realizable value of $19,653 and
$49,804, respectively.
(4) These options become exercisable as to 12,500 shares of Common Stock on
November 19 in each of 1999, 2000, 2001 and 2002.
The following table sets forth the fiscal year end option values of
outstanding options at December 31, 1998 and the dollar value of unexercised,
in-the-money options for the Company's executive officers identified in the
Summary Compensation table above.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATED FISCAL YEAR END OPTION VALUES
- --------------------------- --------------------------------------------- ------------------------------------------
Number of Securities Underlying Unexercised Dollar Value of Unexercised in-the-Money
Options at Fiscal Year End: Options at Fiscal Year End(1)
---------------------- ---------------------- -------------------- ---------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
- --------------------------- ---------------------- ---------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
Jonathan L. Steinberg -- 680,000 -- 1,445,000
Henry G. Clark -- 115,000 -- 244,375
Robert H. Schmidt 498,335 -- 0 --
</TABLE>
(footnote on following page)
6
<PAGE>
(1) These values are based on the difference between the closing sale price
of the Common Stock on December 31, 1998 ($3.375) and the exercise prices of the
options, multiplied by the number of shares of Common Stock subject to the
options.
Option Repricings
The following table sets forth information concerning the repricing or
amendment of options held by the Company's executive officers identified in the
Summary Compensation Table in 1998 and discussed elsewhere in this Proxy
Statement. There has not been any other repricing of options granted by the
Company since the Company completed its initial public offering in 1991.
<TABLE>
<CAPTION>
- --------------------------- ----------- ---------------- ------------------ --------------- ------------- ---------------
Length of
Original
Number of Option Term
Securities Exercise Remaining at
Underlying Market Price of Price at Time Date of
Options Stock at Time of of Repricing New Repricing or
Name and Principal Repriced or Repricing or or Amendment Exercise Amendment
Position Date Amended (#) Amendment ($) ($) Price ($) (Years)
- --------------------------- ----------- ---------------- ------------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan L. Steinberg 11/19/98 250,000 1.125 4.9375 1.25 5.4
Chairman and Chief 125,000 1.125 6.25 1.25 5.4
Executive Officer 125,000 1.125 7.50 1.25 5.4
80,000 1.125 5.75 1.25 6.6
100,000 1.125 7.50 1.25 8.0
- --------------------------- ----------- ---------------- ------------------ --------------- ------------- ---------------
Henry G. Clark 11/19/98 10,000 1.125 4.25 1.25 7.0
Vice President- 10,000 1.125 6.375 1.25 7.3
Finance and Secretary 10,000 1.125 7.50 1.25 8.0
10,000 1.125 6.875 1.25 9.0
25,000 1.125 4.50 1.25 9.6
- --------------------------- ----------- ---------------- ------------------ --------------- ------------- ---------------
</TABLE>
Stock Option Plans
1991 Stock Option Plan
In 1991, the Company adopted the 1991 Stock Option Plan ("1991 Plan")
covering 200,000 shares of the Company's Common Stock pursuant to which
officers, directors and key employees of the Company are eligible to receive
incentive or non-qualified stock options. The 1991 Plan, which expires in
October 2001, is administered by the Stock Option Committee of the Board of
Directors pursuant to the powers delegated to it by the Board of Directors. To
the extent permitted under the express provisions of the 1991 Plan, the Stock
Option Committee has authority to determine the selection of participants,
allotment of shares, price, and other conditions of purchase of options and
administration of the 1991 Plan in order to attract and retain persons
instrumental to the success of the Company.
1993 Stock Option Plan
In 1993, the Company adopted the 1993 Stock Option Plan ("1993 Plan")
covering 500,000 shares of the Company's Common Stock pursuant to which
officers, directors, key employees and consultants of the Company are eligible
to receive incentive or non-qualified stock options, stock appreciation rights,
restricted stock awards, deferred stock, stock reload options and other stock
based awards. The 1993 Plan will terminate at such time no further awards may be
granted and awards granted are no longer outstanding, provided that incentive
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options may only be granted until February 16, 2003. The 1993 Plan is
administered by the Stock Option Committee pursuant to the powers delegated to
it by the Board of Directors. To the extent permitted under the provisions of
the 1993 Plan, the Stock Option Committee has authority to determine the
selection of participants, allotment of shares, price, and other conditions of
purchase of awards and administration of the 1993 Plan in order to attract and
retain persons instrumental to the success of the Company.
1996 Performance Equity Plan
In 1996, the Company adopted the 1996 Performance Equity Plan ("1996 Plan")
covering 1,000,000 shares of the Company's Common Stock pursuant to which
officers, directors, key employees and consultants of the Company are eligible
to receive incentive or non-qualified stock options, stock appreciation rights,
restricted stock awards, deferred stock, stock reload options and other stock
based awards. The 1996 Plan will terminate at such time no further awards may be
granted and awards granted are no longer outstanding, provided that incentive
options may only be granted until March 18, 2006. The 1996 Plan is administered
by the Stock Option Committee pursuant to the powers delegated to it by the
Board of Directors. To the extent permitted under the provisions of the 1996
Plan, the Stock Option Committee has authority to determine the selection of
participants, allotment of shares, price, and other conditions of purchase of
awards and administration of the 1996 Plan in order to attract and retain
persons instrumental to the success of the Company.
1996 Management Incentive Plan
In 1996, the Company adopted the 1996 Management Incentive Plan
("Management Incentive Plan") covering 500,000 shares of the Company's Common
Stock, pursuant to which executives of the Company or its subsidiaries are
eligible to receive incentive or non-qualified stock options, stock appreciation
rights, restricted stock awards, deferred stock, stock related options and other
stock based awards. The Management Incentive Plan will terminate at such time no
further awards may be granted and awards granted are no longer outstanding,
provided that incentive options may only be granted until November 4, 2006. The
Management Incentive Plan is administered by the Board of Directors. Pursuant to
the Management Incentive Plan, the Board of Directors has authority to determine
the selection of participants, allotment of shares, price and other conditions
of purchase of awards and administration of the Management Incentive Plan.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Board of Directors does not have a standing compensation committee. The
only member of the Board who is an officer of the Company is the Chairman,
Jonathan L. Steinberg. Peter M. Ziemba is a partner of Graubard Mollen & Miller,
which firm is the Company's outside general counsel.
Director Compensation
Directors receive no cash compensation for their services to the Company as
directors, but are reimbursed for all reasonable costs incurred in attending
meetings of the Board of Directors. Pursuant to the 1996 Plan, directors who are
not employees of the Company receive automatic grants of stock options upon
their election or appointment as a director and upon each re-election as a
director. Each stock option is for 30,000 shares of Common Stock and vests at
the rate of 10,000 shares of Common Stock per year after an equal period of
service, and once vested, remain exercisable until the tenth anniversary of the
date of grant unless the director ceases to be a director for reason other than
death, in which case a shorter exercise period may apply. Each option is
exercisable per share at the fair market value per share on the date of grant.
Notwithstanding the foregoing, if the director eligible for an award of a stock
option is re-elected as a director and has not yet served as a director of the
Company for a term of three full years, the award of the stock option will be
modified as follows: (A) the number of shares of Common Stock that may be
acquired under the stock option will be reduced to (1) 20,000 shares of Common
Stock if the director has served as a director more than two years, but less
than three years, (2) 10,000 shares of Common Stock if the director has served
as a director more than one year, but less than two years, and (3) if the
director has served less than one year as a director, no stock option will be
awarded; and (B) the stock option will be exercisable by the director as to
10,000 shares of Common Stock on each of the second and third anniversaries of
his re-election or re-appointment as a director if the stock option represents
8
<PAGE>
the right to acquire 20,000 shares of Common Stock and the stock option will be
exercisable by the director as to 10,000 shares of Common Stock on the third
anniversary of his re-election or re-appointment as a director if the stock
option represents the right to acquire 10,000 shares of Common Stock.
Upon his election as a director on June 17, 1998, S. Christopher Meigher
III was granted ten-year options to purchase up to 30,000 shares at $4.375 per
share, which vest at the rate of 10,000 shares of Common Stock on June 17 in
each of 1999, 2000 and 2001. On June 21, 1995, prior to adoption of the 1996
Plan, Bruce L. Sokoloff was granted ten-year options to purchase 30,000 shares
of Common Stock at $5.75 per share, which vest at the rate of 10,000 shares of
Common Stock on June 21 in each of 1996, 1997 and 1998. Upon his re-election on
June 17, 1998, Mr. Sokoloff was granted ten-year options to purchase up to
30,000 shares of Common Stock at $4.375 per share, which vest at the rate of
10,000 shares of Common Stock on June 17 in each of 1999, 2000 and 2001. Upon
his election as a director on June 19, 1996, Peter M. Ziemba was granted
ten-year options to purchase 30,000 shares of Common Stock at $10.50 per share,
which vest at the rate of 10,000 shares of Common Stock on June 19 in each of
1997, 1998 and 1999. Upon his re-election on June 17, 1998, Mr. Ziemba was
granted ten-year options to purchase up to 20,000 shares of Common Stock at
$4.375 per share, which vest at the rate of 10,000 shares of Common Stock on
June 17 in each of 2000 and 2001.
On December 23, 1998, the Board of Directors determined to grant
replacement options to the non-employee directors, subject to cancellation of
their existing options. The replacement options entitle the holders to purchase
the same number of shares of Common Stock as the old options, at an exercise
price of $2.00 per share (the fair market value of the Common Stock on the date
of grant), and are subject to an identical vesting schedule, except that the new
options are not exercisable prior to June 23, 1999. The new options expire on
the same dates as the old options, except that once exercisable, the new options
remain exercisable for the balance of their term, notwithstanding that the
holder may no longer serve as a director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 23, 1999,
with respect to the Common Stock ownership of (i) those persons or groups known
to beneficially own more than 5% of the Company's voting securities, (ii) each
director and director-nominee of the Company, (iii) each current executive
officer whose compensation exceeded $100,000 in the 1998 fiscal year, and (iv)
all current directors and executive officers of the Company as a group.
Name of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Ownership(1) of Voting Securities
- ------------------------------ ----------------------- --------------------
Jonathan L. Steinberg 3,331,809(2) 34.8%
Wise Partners, L.P. 1,781,133(3) 19.9%
Saul P. Steinberg 1,288,090(4) 17.8%
Reliance Financial Services
Corporation 666,666(5) 7.5%
Henry G. Clark 31,249(6) *
S. Christopher Meigher III 10,000(7) *
Bruce L. Sokoloff 56,000(8) *
Peter M. Ziemba 30,000(9) *
All directors and executive 3,459,058(10) 35.7%
officers as a group (7 persons)
- ---------------------------
* Less than 1%.
9
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(1) Beneficial ownership is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. The information concerning the
stockholders is based upon information furnished to the Company by such
stockholders. Except as otherwise indicated, all of the shares of Common
Stock are owned of record and beneficially and the persons identified have
sole voting and investment power with respect thereto.
(2) Includes 1,781,133 shares of Common Stock owned by Wise Partners, L.P., of
which Mr. Jonathan L. Steinberg is the general partner. (See Note 3.)
Includes 646,666 shares of Common Stock issuable upon options exercisable
within the next 60 days. Does not include 33,334 shares of Common Stock
issuable upon exercise of options which are not currently exercisable and
which will not become exercisable within the next 60 days. The business
address of Jonathan L. Steinberg is 125 Broad Street, New York, New York
10004.
(3) Wise Partners, L.P., a New York limited partnership, of which Jonathan L.
Steinberg is the general partner and Saul P. Steinberg is the limited
partner. The business address of Wise Partners, L.P. is c/o Jonathan L.
Steinberg, 125 Broad Street, 14th Floor, New York, New York 10004.
(4) Includes 666,666 shares of Common Stock owned by Reliance Insurance
Company, an indirect wholly owned subsidiary of Reliance Group Holdings,
Inc. ("Reliance Group"). (See Note 5.) Approximately 43.7% of the common
stock of Reliance Group is beneficially owned by Saul P. Steinberg, members
of his family and affiliated trusts. As a result of his stockholdings in
Reliance Group, Saul P. Steinberg may be deemed to control Reliance Group
and to beneficially own the shares of Common Stock owned by Reliance
Insurance Company. Saul P. Steinberg is the father of Jonathan Steinberg
and brother-in-law of Bruce L. Sokoloff. Excludes shares of Common Stock
owned by Wise Partners, L.P., of which Saul P. Steinberg is the limited
partner. (See Note 2.) The business address of Saul P. Steinberg is Park
Avenue Plaza, 55 East 52nd Street, New York, New York 10055.
(5) Includes 666,666 shares of Common Stock owned by Reliance Insurance
Company. Reliance Financial Services Corporation is the direct parent
company of Reliance Insurance Company. Reliance Insurance Company has sole
voting power and sole investment power over the shares of Common Stock
listed. (See Note 4.) The business address of Reliance Financial Services
Corporation is Park Avenue Plaza, 55 East 52nd Street, New York, New York
10055.
(6) Includes 1,000 shares of Common Stock held by Mr. Clark's spouse and 28,249
shares of Common Stock issuable upon the exercise of options exercisable
within the next 60 days. Does not include 86,751 shares of Common Stock
issuable upon exercise of options which are not currently exercisable and
which will not become exercisable within the next 60 days.
(7) Includes 10,000 shares of Common Stock issuable upon the exercise of
options exercisable within the next 60 days. Does not include 20,000 shares
of Common Stock issuable upon exercise of options which are not currently
exercisable, and which will not become exercisable within the next 60 days.
(8) Includes 40,000 shares of Common Stock issuable upon the exercise of
options exercisable within the next 60 days. Does not include 20,000 shares
of Common Stock issuable upon exercise of options which are not currently
exercisable and which will not become exercisable within the next 60 days.
(9) Includes 30,000 shares of Common Stock issuable upon the exercise of
options exercisable within the next 60 days. Does not include 20,000 shares
of Common Stock issuable upon exercise of options which are not currently
exercisable and which will not become exercisable within 60 days.
(10) Includes 754,915 shares of Common Stock issuable upon the exercise of
options exercisable within the next 60 days. Does not include 580,085
shares of Common Stock issuable upon exercise of options which are not
currently exercisable and which will not become exercisable within the next
60 days. Also includes 1,781,133 shares of Common Stock owned by Wise
Partners, L.P. of which Jonathan L. Steinberg is the general partner.
10
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 26, 1998, the Company sold 1,259,842 shares of Common
Stock at a price per share equal to $3.97 (the closing ask price of the Common
Stock on the trading day immediately preceding the closing of the sale) to Wise
Partners, L.P., a limited partnership of which Jonathan L. Steinberg, the
Company's Chairman of the Board and Chief Executive Officer, is the general
partner. Saul P. Steinberg, Jonathan Steinberg's father and beneficial owner of
more than 5% of the outstanding shares of Common Stock, is the limited partner
of Wise Partners, L.P. The Company believes the terms of this sale were more
favorable to the Company than it would have received in an arms-length
transaction with an unaffiliated third party.
11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registration caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: April 28, 1999
INDIVIDUAL INVESTOR GROUP, INC.
/s/ Johathan L. Steinberg
By:_______________________________
Jonathan L. Steinberg
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
- ----------------------------- ----------------------- ----------------
/s/ Jonathan L. Steinberg
- ---------------------------- Chief Executive Officer April 28, 1999
Jonathan L. Steinberg and Director
/s/ Henry G. Clark
- ---------------------------- Vice President - Finance April 28, 1999
Henry G. Clark (Principal Financial and
Accounting Officer)
/s/ S. Christopher Meigher III
- ------------------------------ Director April 28, 1999
S. Christopher Meigher III
/s/ Bruce L. Sokoloff
- ------------------------------ Director April 28, 1999
Bruce L. Sokoloff
/s/ Peter M. Ziemba
- ------------------------------ Director April 28, 1999
Peter M. Ziemba
