SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted
|_| Definitive Proxy Statement by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
INDIVIDUAL INVESTOR GROUP, INC.
----------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________
(5) Total fee paid:
________________________________________________________________
|_| Fee paid previously with preliminary materials:
________________________________________________________________
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________
(3) Filing Party:
________________________________________________________________
(4) Date Filed:
________________________________________________________________
- -----------------------
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
PRELIMINARY COPIES
INDIVIDUAL INVESTOR GROUP, INC.
125 Broad Street
14th Floor
New York, New York 10004
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 22, 1999
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Individual Investor Group, Inc. ("Company") will be held at the offices of
counsel to the Company, Graubard Mollen & Miller, 600 Third Avenue, 32nd Floor,
New York, New York, on Tuesday, June 22, 1999, at 10:00 a.m. local time, for the
following purposes:
1. To elect one director of the Company for a term of three years and
until his successor is elected and qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock; and
3. To transact such other business as may properly come before the
meeting, or any or all postponement(s) or adjournment(s) thereof.
Only stockholders of record at the close of business on April 29, 1999,
will be entitled to notice of, and to vote at, the meeting and any
postponement(s) or adjournment(s) thereof.
You are urged to read the attached Proxy Statement, which contains
information relevant to the actions to be taken at the meeting. In order to
assure the presence of a quorum, whether or not you expect to attend the meeting
in person, please sign and date the accompanying Proxy Card and mail it promptly
in the enclosed addressed, postage prepaid envelope. You may revoke your proxy
if you so desire at any time before it is voted.
By Order of the Board of Directors
Henry G. Clark
Secretary
New York, New York
May __, 1999
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1999
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors of Individual
Investor Group, Inc. ("Company") to be used at the Annual Meeting of
Stockholders of the Company to be held on June 22, 1999, and any postponements
or adjournments thereof ("Annual Meeting"). The matters to be considered at the
Annual Meeting are set forth in the attached Notice of Annual Meeting.
The proxy will be voted (or withheld from voting) in accordance with
any specifications made. Where no specifications are indicated, the proxies will
vote "FOR" the nominee for director as described below under Proposal 1, "FOR"
the proposal to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock as described below under Proposal 2,
and, in the discretion of the proxy holders, on any other business properly
coming before the meeting and any postponement(s) or adjournment(s) thereof. A
proxy may be revoked by giving notice to the Secretary of the Company in person,
or by written notification actually received by the Secretary, at any time prior
to its being exercised.
The Company's executive offices are located at 125 Broad Street, 14th
Floor, New York, New York 10004. This Proxy Statement and the enclosed form of
proxy are first being sent to stockholders on or about May __, 1999.
VOTING SECURITIES
The Board of Directors has fixed the close of business on April 29,
1999, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Only stockholders of record at
the close of business on that date will be entitled to vote at the Annual
Meeting or any and all postponement(s) or adjournment(s) thereof. As of April
29, 1999, the Company had issued and outstanding [8,942,297] shares of Common
Stock, the Company's only class of voting securities outstanding. Each
stockholder of the Company will be entitled to one vote for each share of Common
Stock registered in his, her or its name on the record date. The presence, in
person or by proxy, of a majority of all of the outstanding shares of Common
Stock constitutes a quorum at the Annual Meeting. Proxies that are marked
"abstain" and proxies relating to "street name" shares that are returned to the
Company but marked by brokers as "not voted" will be treated as shares present
for purposes of determining the presence of a quorum on all matters but will not
be treated as shares entitled to vote on the matter as to which authority to
vote is withheld by the broker ("broker non-votes").
The election of the director requires a plurality vote of those shares
of Common Stock voted at the Annual Meeting with respect to the election of the
director. "Plurality" means that the individual who receives the largest number
of votes cast "FOR" is elected as a director. Consequently, any shares of Common
Stock not voted "FOR" a particular nominee (whether as a result of a direction
to withhold authority or a broker non-vote) will not be counted in such
nominee's favor.
The approval of the amendment to the Certificate of Incorporation
requires the affirmative vote of a majority of the shares of Common Stock
outstanding and entitled to vote. Because this proposal requires the affirmative
vote of a majority of the outstanding shares of Common Stock, abstentions as to
this matter (which are considered present and entitled to vote on the matter)
and shares of Common Stock considered present, but not entitled to vote on this
matter (because of a broker non-vote), will have the same effect as a vote
against this proposal.
All other matters to be voted on will be decided by the affirmative
vote of a majority of the shares of Common Stock present or represented at the
Annual Meeting and entitled to vote. On any such matter, an abstention will have
the same effect as a negative vote, but because shares of Common Stock held by
brokers will not be considered entitled to vote on matters as to which the
brokers withhold authority, a broker non-vote will have no effect on the vote.
<PAGE>
The following table sets forth certain information as of April 29,
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%
Great American Insurance
Company 471,698(6) 5.0%
Great American Life Insurance
Company 471,698(7) 5.0%
Henry G. Clark 31,249(8) *
S. Christopher Meigher III 10,000(9) *
Bruce L. Sokoloff 56,000(10) *
Peter M. Ziemba 30,000(11) *
All directors and executive 3,459,058(12) 35.7%
officers as a group (7 persons)
----------------------------------------
* Less than 1%.
(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 471,698 shares of Common Stock issuable upon conversion of 5,000
shares of currently convertible Series A Preferred Stock held by Great
American Insurance Company. Its business address is 580 Walnut Street,
Cincinnati, Ohio 45202.
2
<PAGE>
(7) Includes 471,698 shares of Common Stock issuable upon conversion of 5,000
shares of currently convertible Series A Preferred Stock held by Great
American Life Insurance Company. Its business address is 250 East Fifth
Street, Cincinnati, Ohio 45202.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each of which
serves for a term of three years, with only one class of directors being elected
in each year. The term of the third class of directors, consisting of S.
Christopher Meigher III, will expire on the date of this year's Annual Meeting.
The term of the first class of directors, consisting of Jonathan L. Steinberg,
will expire in 2000 and the term of the second class of directors, consisting of
Bruce L. Sokoloff and Peter M. Ziemba, will expire in 2001. In each case, each
director serves from the date of his election until the end of his term and
until his successor is elected and qualified.
One person will be elected at the Annual Meeting to serve as a director
for a term of three years. The Company has nominated S. Christopher Meigher III
as the candidate for election. Unless authority is withheld, the proxies
solicited by management will be voted "FOR" the election of this nominee. In
case the nominee becomes unavailable for election to the Board of Directors, an
event which is not anticipated, the persons named as proxies, or their
substitutes, shall have full discretion and authority to vote or refrain from
voting for any other candidate in accordance with their judgment.
Information About Nominee
S. Christopher Meigher III is 52 years old and 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.
Information About Other Directors
Each of the directors named in the following table will continue in
office after the Annual Meeting and until his term expires in the year indicated
3
<PAGE>
and his successor is elected and qualified:
<TABLE>
<CAPTION>
Name Age Term Served as Director Principal Occupation
Expires In Since
- ----------------------- --- ----------- ------------------ --------------------------------
<S> <C> <C> <C> <C>
Jonathan L. Steinberg 34 2000 1988 Chairman of the Board and Chief
Executive Officer of the Company
Bruce L. Sokoloff 50 2001 1989 Senior Vice President - Administration,
Reliance Group Holdings, Inc.
Peter M. Ziemba 41 2001 1996 Partner, Graubard Mollen & Miller
</TABLE>
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.
Bruce L. 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.
Peter M. 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.
Other Executive Officers
Name Age Position
- --------------------- ---- -----------
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
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.
4
<PAGE>
Board of Directors' Meetings and Committees
During 1998, the Board of Directors met ten times and acted by
unanimous consent on four occasions. The Company has standing audit and stock
option committees of the Board of Directors. The Company does not have a
standing nominating committee.
The audit committee was established in June 1996 and is currently
comprised of Bruce L. Sokoloff and Peter M. Ziemba. The function of the audit
committee is to recommend annually to the Board of Directors the appointment of
the independent auditors of the Company; review with the independent auditors
the scope of the annual audit and review their report relating thereto; review
with the independent auditors the accounting practices and policies of the
Company; review with the internal accountants and independent auditors the
overall accounting and financial controls of the Company; be available to
independent auditors during the year for consultation; and review related party
transactions by the Company on an ongoing basis and review potential conflicts
of interest situations where appropriate. The audit committee held two meetings
in 1998.
The stock option committee of the Board of Directors is responsible for
administering the Company's 1991 Stock Option Plan ("1991 Plan"), the 1993 Stock
Option Plan ("1993 Plan") and 1996 Performance Equity Plan ("1996 Plan"), each
of which is discussed below. The stock option committee currently consists of
Jonathan L. Steinberg and Bruce L. Sokoloff. During 1998, the stock option
committee met once and acted by unanimous written consent on numerous occasions.
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
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.
5
<PAGE>
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.
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 $100,000 for the
fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------------------------------
Number of All Other
Name and Principal Position Year Salary ($) Bonus ($) Options(1) (#) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------
<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 November 1998 Repricing discussed elsewhere in this Proxy Statement.
(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
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.
6
<PAGE>
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 $120,000 and permitted
to exercise from August 13, 1998 through August 13, 1999, options to purchase an
aggregate of 50,000 shares of Common Stock that were previously granted and
vested through May 9, 1998.
Option Grants
The following table sets forth the stock options granted in the last
fiscal year to the Company's executive officers identified in the Summary
Compensation Table above, but excludes options granted in exchange for old
7
<PAGE>
options or amended pursuant to the November 1998 Repricing, which options are
described in a subsequent table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTIONS GRANTED IN LAST FISCAL YEAR
- --------------------------- --------------- ------------------- ----------------- --------------- -----------------------
Potential Realizable
Percent of Total Value at Assumed
Number of Options Granted Annual Rates
Securities to of Stock Price
Underlying Employees in Appreciation for
Options Fiscal Year Exercise Price Expiration Option Term(2) ($)
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
$49,804, respectively.
(4) These options become exercisable as to 12,500 shares of Common Stock on
November 19 in each of 1999, 2000, 2001 and 2002.
The following table sets forth the fiscal year end option values of
outstanding options at December 31, 1998 and the dollar value of unexercised,
in-the-money options for the Company's executive officers identified in the
Summary Compensation table above.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATED FISCAL YEAR END OPTION VALUES
- --------------------------- --------------------------------------------- ------------------------------------------
Name Number of Securities Underlying Unexercised Dollar Value of Unexercised in-the-Money
Options at Fiscal Year End: Options at Fiscal Year End(1)
---------------------- ---------------------- -------------------- ---------------------
Exercisable (#) Unexercisable (#) Exercisable ($) 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>
(1) These values are based on the difference between the closing sale price of
the Common Stock on December 31, 1998 ($3.375) and the exercise prices of
the options, multiplied by the number of shares of Common Stock subject to
the options.
8
<PAGE>
Option Repricings
The following table sets forth information concerning the repricing or
amendment of options held by the Company's executive officers identified in the
Summary Compensation Table in 1998 and discussed elsewhere in this Proxy
Statement. There has not been any other repricing of options granted by the
Company since the Company completed its initial public offering in 1991.
<TABLE>
<CAPTION>
- --------------------------- ----------- ---------------- ------------------ --------------- ------------- ---------------
Length of
Original
Number of Option Term
Securities Exercise Remaining at
Underlying Market Price of Price at Time at Date of
Options Stock at Time of of Repricing New Repricing or
Name and Principal Repriced or Repricing or or Amendment Exercise Amendment
Position Date Amended (#) Amendment ($) ($) Price ($) (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 Plan
In 1991, the Company adopted the 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 Plan
In 1993, the Company adopted the 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 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.
9
<PAGE>
1996 Plan
In 1996, the Company adopted the 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.
-------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that might incorporate future filings, including this Proxy
Statement, in whole or in part, the sections below entitled "Report of the Board
of Directors and Stock Option Committee Concerning Compensation of Executive
Officers," "Report of the Board of Directors and Stock Option Committee
Concerning Repricing of Options" and "Stock Price Performance Graph" shall not
be incorporated by reference into any such filings or into any future filings,
and the sections below entitled "Report of the Board of Directors and Stock
Option Committee Concerning Compensation of Executive Officers" and "Stock Price
Performance Graph" shall not be deemed soliciting material or filed under the
Securities Act or Exchange Act.
-------------------------------------------------------------
REPORT ON EXECUTIVE COMPENSATION
Report of the Board of Directors and Stock Option Committee Concerning
Compensation of Executive Officers
The Board of Directors (the "Board") sets the base salary of the
Company's executive officers and approves individual bonuses, if any, for
executive officers. The Stock Option Committee of the Board (the "Committee")
administers the Company's 1991 Plan, 1993 Plan and 1996 Plan. The Board
administers the Management Incentive Plan. (The 1991 Plan, the 1993 Plan, the
1996 Plan and the Management Incentive Plan shall be referred to collectively as
the "Plans.") The Company may grant, either pursuant to the Plans or outside of
the Plans, various stock and stock-based awards, including stock options. To
date, the Company has not granted stock or stock-based awards other than stock
options. The following is a summary of policies of the Board and the Committee
that affect the compensation paid to executive officers, as reflected in the
tables and text set forth elsewhere in this Proxy Statement.
10
<PAGE>
GENERAL COMPENSATION POLICY. The Board's and the Committee's policy is
to offer competitive compensation opportunities for executive officers based
upon their personal performance, the financial performance of the Company and
their contribution to that performance. Each executive officer's compensation
package is comprised of two primary elements: (i) base salary that reflects
individual performance and is established so as to be competitive with salary
levels in the industry and for companies of comparable size and (ii) stock-based
awards, typically stock options, designed to provide a long-term incentive for
the executive officers that is tied to improved long-term performance of the
Company and stockholder value. In certain instances, the Company has also paid
cash bonuses. In connection with the hiring of the Company's President in 1998,
the Company agreed to pay her a bonus equal to her base salary in respect of the
first fiscal year during the term of her written employment agreement for which
the Company reports a pre-tax income of $1.00 or greater, after deduction of
bonuses payable to employees (other than the Company's Chief Executive Officer,
but including the President's bonus). In connection with the hiring of the
Company's Vice President of Business and Legal Affairs and General Counsel in
1998, the Company paid him a $5,000 starting bonus designed primarily to cover
relocation expenses. In addition, the Company has in the past, and may in the
future, award cash bonuses to some or all of its executive officers, based upon
their individual performance, the performance of the Company and their
contribution to the Company's performance. Other than the bonuses described
above in connection with the hiring of executive officers, the Company did not
award or agree to award any cash bonuses to executive officers during the past
fiscal year.
FACTORS. Several factors considered in establishing the components of
each executive officer's compensation package for the 1998 fiscal year are
summarized below. Additional factors were taken into account to a lesser degree.
The Board and Committee may in their discretion apply entirely different
factors, such as different measures of financial performance, for future fiscal
years. However, it is presently contemplated that all compensation decisions
will be designed to further the overall compensation policy described above.
* Base Salary. The base salary for each executive officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions in similarly situated companies within the media industry, and
internal comparability considerations. No specific weight is attached to
these factors. The Board believes that the Company's most direct
competitors for executive talent are not limited to the companies that the
Company would use in a comparison for stockholder returns. Therefore, the
compensation comparison group is not the same as the industry group index
used in the section entitled "Stock Price Performance Graph" above.
* Stock-Based Incentive Compensation. The Board and Committee approve
periodic grants of stock options to each of the Company's executive
officers and others, under the Plans and, in the case of the Board, outside
of the Plans as well. These grants are designed to provide a strong
incentive for executive officers and other employees to work for the
long-term success of the Company and to increase the Company's ability to
retain the services of its executive officers and employees. The vesting
schedules of options granted (historically three to five years from the
date of grant) encourage a long-term commitment to the Company by its
executive officers and other optionees. Each grant generally allows the
optionee to acquire shares of the Company's Common Stock at a fixed price
per share (the fair market value on the grant date) over a specified period
of time (historically, ten years from the grant date, or a shorter period
if the optionee ceases to be employed by the Company), thus providing a
return to the optionee only if the market price of the shares appreciates
over the option term. The size of each option grant is set at a level that
the Board or Committee deems appropriate in order to create a meaningful
opportunity for stock ownership based upon the individual's current
position with the Company, but also takes into account the individual's
potential for future responsibility and promotion over the option vesting
period, and the individual's performance in recent periods. The Board and
Committee periodically review the number of shares owned by, or subject to
options held by, each executive officer, and additional awards are
considered based upon such factors and the past performance of the
executive officer.
* Cash Bonuses. Other than in connection with the hiring of the executive
officers described above, the Company did not pay a cash bonus to any
executive officer during the past year. The Company does not currently have
a formal cash bonus program for executive officers, but the Board may
consider the desirability of granting cash bonuses to executive officers
from time to time. The Board would consider the following factors: the
officer's personal performance, the Company's performance, the officer's
contribution to the Company's performance, and whether a bonus would be
useful in retaining the services of the officer in light of competing
employment opportunities for the officer.
11
<PAGE>
CEO COMPENSATION. In setting the compensation payable during 1998 to
the Company's Chief Executive Officer, Jonathan L. Steinberg, the Board used the
same factors described above for the executive officers. Mr. Steinberg received
the same salary in 1998 as he did in 1997, he did not receive a cash bonus, and
except for his participation in the November 1999 Repricing discussed below, he
was not issued any stock-based incentive compensation.
Submitted by the Board and the Committee:
Jonathan L. Steinberg (Chairman, Member of Stock Option Committee)
S. Christopher Meigher, III
Bruce L. Sokoloff (Member of Stock Option Committee)
Peter M. Ziemba
Report of the Board of Directors and Stock Option Committee Concerning Repricing
of Options
On November 19, 1998, the Board and Committee determined that it was in
the best interests of the Company to offer to reprice the stock options held by
current employees ("November 1998 Repricing"). This determination was made in
view of the circumstances that, because of the substantial decline in the fair
market value of the Company's Common Stock over the eight months leading up to
the Board and Committee's determination, in most cases the stock options had
exercise prices greater than (and in many cases, much greater than) the
then-current fair market value of the Company's Common Stock. This condition had
persisted for several months and in some cases, several years.
Stock option grants are an important component of the compensation
package the Company offers in order to attract and retain qualified employees.
Moreover, the Board and Committee believe that stock options held by its
employees and executive officers provide a strong incentive to work for the
success of the Company and encourage a long-term commitment to the Company. The
Board and Committee determined that the employee stock options outstanding on
November 19, 1998 with exercise prices substantially above the then-current fair
market value of the Company's Common Stock did not provide sufficient ability to
motivate and retain the Company's employees and that the options had
significantly lost their usefulness as a component of compensation. The Board
and Committee determined that it was important for the Company to retain its
employees and to re-establish the stock options as a significant source of
motivation for employees and that it was in the best interests of the Company to
offer to reduce the exercise price of outstanding options held by current
employees, to the greater of (i) the closing price of the Company's Common Stock
on November 19, 1998 (which was $1.125) and (ii) $1.25. The Board and Committee
also determined that it was in the best interests of the Company to allow
employees to exchange on a share-for-share basis their then-existing unexercised
stock options on the following terms: (i) the new lower-priced options would
have the same term as the original options, but none would be exercisable prior
to May 19, 1999 (after which date the original exercise schedule would resume);
and (ii) certain other terms of the new options would be different from the old
(for example, the new options would have to be exercised, if at all, within a
shorter period of time following an optionee's cessation of employment). The
Board and Committee determined that it would lessen the value of the repricing
program, to the detriment of the Company, were the Board to declare any current
employee, including officers, to be ineligible to participate. The Company's
Chief Executive Officer, Jonathan L. Steinberg, and Vice President-Finance,
Henry G. Clark thus were allowed to and did participate in the November 1998
Repricing program. In the case of Mr. Steinberg, since the terms (other than
exercise prices, which were never previously changed) of his existing options
were negotiated, amended and restated in May 1997 together with the options held
by other members of senior management (who were no longer employed by the
Company on November 19, 1998, and therefore not eligible to participate in the
November 1998 Repricing), he was offered the opportunity to amend his existing
options, rather than exchange his existing options for new options, to reflect
the reduced exercise price, provided that his existing options could not be
exercised until May 19, 1999 except in certain instances resulting from a change
in control of the Company and subsequent termination of his employment.
12
<PAGE>
Submitted by the Board and the Committee:
Jonathan L. Steinberg (Chairman, Member of Stock Option Committee)
S. Christopher Meigher, III
Bruce L. Sokoloff (Member of Stock Option Committee)
Peter M. Ziemba
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Board 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.
Stock Price Performance Graph
The Stock Price Performance Graph below compares cumulative total
return of the Company, the Russell 2000 Index and the Dow Jones Publishing
Index. The graph plots the growth in value of an initial $100 investment over
the indicated time periods, with dividends reinvested. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG INDIVIDUAL INVESTOR GROUP, INC.,
THE RUSSELL 2000 INDEX AND THE DOW JONES PUBLISHING INDEX
<TABLE>
Cumulative Total Return
----------- ------------ ----------- ----------- ----------- -----------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INDIVIDUAL INVESTOR GROUP, INC. 100 79 124 141 122 66
RUSSELL 2000 INDEX 100 98 126 147 180 179
DOW JONES PUBLISHING INDEX 100 96 118 137 201 214
</TABLE>
Certain 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.
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.
13
<PAGE>
PROPOSAL 2: TO APPROVE THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
The Company is currently authorized by its Certificate of Incorporation
to issue 18,000,000 shares of Common Stock and 2,000,000 shares of Preferred
Stock. As of the record date, [8,942,297] shares of Common Stock were
outstanding and 10,000 shares of Preferred Stock were designated as Series A
Preferred Stock and were outstanding In addition, the Company was obligated to
reserve [4,485,882] shares of Common Stock for issuance under the 1991 Plan,
1993 Plan, 1996 Plan and Management Incentive Plan and upon exercise of other
outstanding options and warrants and upon conversion of the outstanding Series A
Preferred Stock. Based on the number of shares of Common Stock outstanding as of
the record date, the need to reserve shares of Common Stock as set forth above
and the current Certificate of Incorporation limit of 18,000,000 shares of
Common Stock, the Board of Directors does not believe there is an adequate
number of authorized shares of Common Stock under the Certificate of
Incorporation for management to be able to meet current obligations of the
Company and to plan for the future growth and development of the Company.
Accordingly, the Board of Directors proposes to amend the Certificate of
Incorporation to increase the authorized number of shares of Common Stock by an
additional 22,000,000 shares of Common Stock to 40,000,000 shares of Common
Stock. The proposed amendment will not change the number of shares of Preferred
Stock authorized for issuance under the Certificate of Incorporation
The Board of Directors believes approval of the amendment to the
Certificate of Incorporation is in the best interest of the Company and its
stockholders. The authorization of additional shares of Common Stock will enable
the Company to meet its obligations under the various employee benefit plans,
employment arrangements and outstanding options and warrants and issue options,
awards and warrants in the future. In addition, the proposed amendment will give
the Board of Directors flexibility to authorize the issuance of shares of Common
Stock in the future for financing the Company's business, for acquiring other
businesses, for forming strategic partnerships and alliances and for stock
dividends and stock splits.
Approval of the proposal will permit the Board of Directors to issue
additional shares of Common Stock without further approval of the stockholders
of the Company; and the Board of Directors does not intend to seek stockholder
approval prior to any issuance of the authorized capital stock unless
stockholder approval is required by applicable law or stock market or exchange
requirements. Although the Company from time to time reviews various
transactions that could result in the issuance of Common Stock or Preferred
Stock and management of the Company currently is exploring the possibility of
raising additional equity financing by issuing Common Stock or Preferred Stock,
which may occur in the near future, the Board of Directors is not currently
considering any proposals to issue additional shares of capital stock, except as
may be required in connection with the exercise of existing outstanding options
and warrants or upon conversion of the Series A Preferred Stock, or in
connection with options and other stock based awards which may be issued under
the Company's 1991 Plan, 1993 Plan, 1996 Plan or Management Incentive Plan or
under any other plan or arrangement the Board of Directors may hereafter
approve.
The holders of Common Stock of the Company are entitled to one vote for
each share held of record on all matters to be voted on by the stockholders of
the Company. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares of
Common Stock of the Company voted in an election of directors can elect the
directors of the Company. The holders of Common Stock are entitled to receive
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor. The Company never has paid dividends on its shares
of Common Stock. In the event of liquidation, dissolution or winding up of the
Company, the holders of the shares of Common Stock are entitled to share ratably
in all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of Common Stock have
no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock.
14
<PAGE>
If the proposal to amend the Certificate of Incorporation is approved,
the fourth article of the Certificate of Incorporation will be amended to
increase the number of shares of Common Stock the Company is authorized to issue
to 40,000,000 promptly after the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
CERTAIN 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.
INDEPENDENT AUDITORS
The Company anticipates that it will select Deloitte & Touche LLP as
its independent auditors for the year ending December 31, 1999, although no
formal recommendation has been made to the Company's Board of Directors by its
audit committee as of the date of this Proxy Statement. A representative of
Deloitte & Touche LLP, the auditors of the Company for the year ended December
31, 1998, is expected to be present at the meeting with an opportunity to make a
statement if the representative desires to do so and is expected to be available
to respond to appropriate questions from stockholders.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the Common
Stock.
2000 ANNUAL MEETING STOCKHOLDER PROPOSALS
In order for any stockholder proposal to be presented at the Annual
Meeting of Stockholders to be held in 2000 or to be eligible for inclusion in
the Company's Proxy Statement for such meeting, it must be received by the
Company at its principal executive offices in New York, New York, by January
____, 2000.
15
<PAGE>
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
Henry G. Clark
Secretary
New York, New York
May ____, 1999
16
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on June 22, 1999
The undersigned Stockholder(s) of INDIVIDUAL INVESTOR GROUP,
INC., a Delaware corporation ("Company"), hereby appoints Jonathan L.
Steinberg and Henry G. Clark, or either of them, with full power of
P substitution and to act without the other, as the agents, attorneys and
proxies of the undersigned, to vote the shares standing in the name of
the undersigned at the Annual Meeting of Stockholders of the Company to
be held on June 22, 1999 and at all adjournments thereof. This proxy
will be voted in accordance with the instructions given below. If no
instructions are given, this proxy will be voted FOR all of the
following proposals.
R
1. Election of the following Director:
FOR the nominee listed below WITHHOLD AUTHORITY to vote
O |_| for the nominee listed below |_|
S. Christopher Meigher III
X 2. Proposal to amend the Certificate of Incorporation to increase the
authorized Common Stock.
FOR |_| AGAINST |_| ABSTAIN |_|
Y
3. In their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting or any adjournment
thereof.
|_| I plan to attend the Annual Meeting.
Date __________________, 1999
__________________________________
Signature
___________________________________
Signature if held jointly
Please sign exactly as name appears above. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name
by authorized person.
