U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-10932
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INDIVIDUAL INVESTOR GROUP, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3487784
------------------------------ --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 Broad Street, 14th Floor, New York, New York 10004
------------------------------------------------------
(Address of principal executive offices)
(212) 742-2277
--------------
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No____
---
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date: As of November 13, 2000
registrant had outstanding 10,754,019 shares of Common Stock, $.01 par value per
share.
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
ASSETS 2000 1999
------------ ------------
Current assets:
Cash and cash equivalents $ 7,074,079 $ 6,437,542
Accounts receivable(net of allowances of
$496,661 in 2000 and $419,048 in 1999) 3,034,448 3,019,710
Investment in discontinued operations 49,302 49,302
Prepaid expenses and other current assets 884,610 864,851
------------ ------------
Total current assets 11,042,439 10,371,405
------------ ------------
Investments 5,316,902 2,638,356
Deferred subscription expense 403,639 383,624
Property and equipment - net 1,442,849 1,653,659
Security deposits 377,607 374,527
Other assets 433,184 836,396
------------ ------------
Total assets $19,016,620 $16,257,967
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,432,341 $ 3,024,395
Accrued expenses 576,168 716,670
Deferred advertising revenue 1,543,853 1,467,210
------------ ------------
Total current liabilities 5,552,362 5,208,275
------------ ------------
Deferred advertising revenue 1,281,203 938,164
Deferred subscription revenue 2,601,393 2,448,591
------------ -----------
Total liabilities 9,437,958 8,595,030
------------ ------------
Stockholders' Equity:
Preferred stock, $.01 par value, authorized
2,000,000 shares,7,880 issued and outstanding
in 2000 and 10,000 issued and outstanding in
1999 79 100
Common stock, $.01 par value; authorized
18,000,000 shares; 10,760,019 issued and
outstanding in 2000 and 10,353,901 issued
and outstanding in 1999 107,600 103,539
Additional paid-in capital 33,729,278 33,421,542
Warrants 999,120 742,079
Deferred compensation (257,482) (272,038)
Accumulated deficit (24,996,933) (26,332,285)
------------ ------------
Total stockholders' equity 9,581,662 7,662,937
------------ ------------
stockholders' equity $19,016,620 $16,257,967
============ ============
See Notes to Consolidated Condensed Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- -- -------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Revenues:
Online Services $ 588,160 $ 657,274 $ 2,842,813 $ 1,229,630
Print Publications 4,635,253 3,838,057 13,825,541 11,044,820
---------- ---------- ---------- ----------
Total revenues 5,223,413 4,495,331 16,668,354 12,274,450
---------- ---------- ---------- ----------
Operating expenses:
Editorial, production and distribution 3,203,827 2,937,584 10,075,042 8,377,406
Promotion and selling 2,177,863 2,102,355 7,378,014 5,852,023
General and administrative 1,470,192 1,487,351 4,158,629 4,019,827
Depreciation and amortization 142,152 143,212 425,341 391,617
---------- ---------- ---------- ----------
Total operating expenses 6,994,034 6,670,502 22,037,026 18,640,873
---------- ---------- ---------- ----------
Gain on sale of assets 6,702,219 - 6,702,219 -
Operating income (loss) 4,931,598 (2,175,171) 1,333,547 (6,366,423)
Investment and other income 24,640 798,352 151,457 1,394,746
---------- ---------- ---------- ----------
Net Income (loss) $4,956,238 ($1,376,819) $ 1,485,004 ($4,971,677)
========== ============ =========== ===========
Basic income (loss) per common share $0.47 ($0.15) $0.13 ($0.55)
========== ============ ========== ===========
Average number of common shares used in computing
basic and dilutive loss per common share 10,413,519 9,188,724 10,399,225 8,998,833
Dilutive income (loss) per common share $0.44 ($0.15) $0.13 ($0.55)
========== ============ ========== ===========
Average number of common shares used in computing
basic and dilutive loss per common share 11,182,167 9,188,724 11,167,873 8,998,833
See Notes to Consolidated Condensed Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30,
------------------------
2000 1999
------------------------
Cash flows from operating activities:
Net Income (loss) $1,485,004 $4,971,677)
Reconciliation of net income (loss) to net
cash used in operating activities:
Gain on sale of assets (6,702,219) -
Depreciation and amortization 425,341 391,617
Stock option and warrant transactions 202,904 301,304
Non - cash revenue/ expense - (312,545)
Gain on sale of investments - (1,277,512)
Changes in operating assets and liabilities: - -
Decrease (increase) in:
Accounts receivable 985,262 (647,650)
Prepaid expenses and other current assets (133,576) (216,872)
Deferred subscription expense (20,015) 214,829
Security deposits (3,080) 95,100
Other assets 246,400 (50,002)
Increase (decrease) in:
Accounts payable and accrued expenses 467,980 711,008
Deferred advertising revenue (1,770,067) 559,500
Deferred subscription revenue 120,990 (55,966)
----------- -----------
Net cash used in operating activities (4,695,076) (5,258,866)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (216,170) (1,513,740)
Net proceeds from sale of assets 5,585,819 -
Net proceeds from sale of investments - 2,721,236
Increase in investments - (753,076)
Net cash provided by discontinued operations - 139,849
----------- -----------
Net cash provided by investing activities 5,369,649 594,269
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 111,616 2,263,515
Proceeds from issuance of common stock - 3,000,000
Preferred stock dividends paid (149,652) -
----------- -----------
Net cash provided (used) in financing activities (38,036) 5,263,515
----------- -----------
Net increase in cash and cash equivalents 636,537 598,918
Cash and cash equivalents, beginning of period 6,437,542 4,752,587
----------- -----------
Cash and cash equivalents, end of period $7,074,079 $5,351,505
=========== ===========
See Notes to Consolidated Condensed Financial Statements
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements include the
accounts of Individual Investor Group, Inc. and its subsidiaries
(collectively, the "Company"). Such financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial reporting and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
as required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the nine
months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report for the year
ended December 31, 1999 on Form 10-K.
The Company, during the third quarter ended September 30,
2000, adopted the accounting treatment of EITF 99-19, Reporting Revenue
Gross as a Principal versus Net as an Agent with respect to revenues
recognized from list rentals.
This change required a restatement of Online Services revenues
for the three and nine months ended September 30, 1999 of $560 and
$1,400, respectively, with an equal increase to promotion and selling
expenses. This change also required a restatement of Print Publications
revenues for the three and nine months ended September 30, 1999 of
$39,719 and $112,545, respectively, with an equal increase to promotion
and selling expenses. This change had no impact on reported net loss
for the applicable periods. Online Services and Print Publications
revenues increased $7,318 and $86,274, respectively for the six months
ended June 30, 2000 with an equal increase to promotion and selling
expenses. This change had no impact on the reported net loss for the
six months ended June 30, 2000.
2. INVESTMENTS
On June 2, 1999, the Company, Kirlin Holding Corp. ("Kirlin")
and VentureHighway.com Inc. ("VentureHighway") (at the time a
wholly-owned subsidiary of Kirlin), entered into an agreement pursuant
to which the Company acquired 1,654,344 newly- issued shares (adjusted
to reflect a subsequent stock split) of common stock of VentureHighway,
representing 19.9% of the then-outstanding shares of common stock (the
other 80.1% of which immediately after the transaction were held by
Kirlin). The purchase price was paid in the form of a credit for
VentureHighway to use to purchase advertising in the Company's
magazines and web sites during the 30 months ending December 31, 2001.
The investment and the deferred advertising revenues were recorded at
the fair market value at the date of the transaction of $2,638,356 (or
$1.595 per share of VentureHighway owned by the Company). In December
1999, VentureHighway raised $7.65 million cash, selling 2,142,000
shares at a price of $3.57 per share.
VentureHighway owns and operates VentureHighway.com, a branded
web site designed to serve as an interactive portal for the matching of
companies seeking funding with qualified investors seeking to fund such
companies, and the facilitation of private placements and public
offerings of securities of companies. There currently is no public
market for VentureHighway securities, and there is no assurance that
the Company will realize any value (and the Company in fact may realize
a loss) with respect to its investment in VentureHighway.
On February 23, 2000, the Company and ReverseAuction.com, Inc.
(now named Pricing Dynamics, Inc. ("Pricing Dynamics")) entered into an
agreement pursuant to which the Company acquired 1,166,667 newly-issued
shares of common stock of Pricing Dynamics, representing a 3.3% stake
(on a fully-diluted basis) of Pricing Dynamics (constituting 7.4% of
the then-outstanding shares). The purchase price was paid in the form
of a credit for Pricing Dynamics to use to purchase advertising in the
Company's magazines and web sites during the 21 months ending December
31, 2001. The investment and the deferred advertising revenues were
recorded at the fair market value at the date of the transaction of
$1,544,736.
Pricing Dynamics provides e-commerce tools and dynamic pricing
software, for the business-to-business, business-to-consumer and
consumer-to-consumer markets. There currently is no public market for
Pricing Dynamics securities, and there is no assurance that the Company
will realize any value (and the Company in fact may realize a loss)
with respect to its investment in Pricing Dynamics.
On May 4, 2000, the Company and Tradeworx, Inc. ("Tradeworx")
entered into an agreement pursuant to which the Company acquired
1,045,000 newly-issued shares of common stock of Tradeworx,
representing a 7% stake (with warrants to acquire up to 10.5%), on a
fully-diluted basis, of Tradeworx. The purchase price was paid for in
the form of a credit for Tradeworx to use to purchase advertising in
the Company's magazines and websites during the 24 months ending August
1, 2002. The investment and the deferred advertising revenue were
recorded at the fair market value at the date of the transaction of
$1,133,810.
Tradeworx is in the business of developing proprietary
software and other financial analytical tools that provide online
investment analysis and investment decision support platforms for
retail and institutional investors and brokerage firms. There currently
is no public market for Tradeworx securities, and there is no assurance
that the Company will realize any value (and the Company in fact may
realize a loss) with respect to its investment in Tradeworx.
3. SALE OF ASSETS
In August 2000, the Company agreed to sell two Internet domain
names for cash consideration of $1 million payable in two $500,000
installments. In connection with the sale, the Company also issued a
warrant to purchase 250,000 shares of the Company's Common Stock at an
exercise price of $2.00 per share. The fair market value of the issued
warrant was approximately $257,000. The Company received the first
installment of $500,000 in August 2000 and the second installment of
$500,000 in October 2000 (see Note 10).
In September 2000, the Company sold certain assets related to
the business of InsiderTrader.com for cash consideration of $500,000
and the assumption of certain liabilities.
In September 2000, the Company sold certain assets related to
Ticker magazine. for cash consideration of $6 million, less an
adjustment for certain current assets and liabilities, and the
assumption of certain liabilities (see Note 10).
Realized gain on the sale of assets for the three months ended
September 30, 2000, represented by these three separate transactions
was approximately $6.7 million.
4. DISCONTINUED OPERATIONS
On April 30, 1998 the Company's Board of Directors decided to
discontinue the Company's investment management services business.
The investment management services business was principally
conducted by a wholly owned subsidiary of the Company, WisdomTree
Capital Management, Inc. ("WTCM"). WTCM serves as general partner of
(and is an investor in) a domestic private investment fund. The Company
is also a limited partner in the fund. As a result of the Board's
decision to discontinue the investment management services business,
WTCM is continuing to dissolve the domestic investment fund,
liquidating its investments and distributing the net assets to all
investors as promptly as possible.
In 1998, the Company recorded provisions to accrue for its
share of any net operating losses of the domestic fund and related
costs that are expected to occur until the fund liquidates its
investments. The Company believes that any remaining net operating
losses and related costs associated with these discontinued operations
have been adequately provided for by the provisions established in
1998.
At September 30, 2000, the domestic investment fund had
remaining net assets of approximately $665,000. The Company's net
investment in discontinued operations of $49,302 at September 30, 2000
represents its share of the net assets of the domestic investment fund,
less any costs associated with discontinuing the investment management
services.
5. STOCK OPTIONS
During the three and nine months ended September 30, 2000, the
Company granted 2,000 and 662,909 options, respectively, to purchase
the Company's Common Stock; 41,417 and 87,118 options, respectively,
were exercised (providing proceeds of $51,771 and $111,616
respectively); and 451,699 and 635,698 options, respectively, were
cancelled. Of the total options granted, all were granted under the
Company's stock option plans, and expire at various dates through
September 2010.
On July 19, 2000, the Stock Option Committee, pursuant to the
Company's 2000 Performance Equity Plan, awarded 150,000 shares of
authorized but unissued Common Stock in the aggregate to certain
employees subject to the terms of a restricted stock agreement. 25,500
of such shares have been issued and earned by various employees and
earnings for the period ended September 30, 2000 have been charged
approximately $42,000 with respect to these shares. An additional
93,500 of such shares have been granted and issued to employees at a
compensation value of approximately $157,000, which amount is being
amortized ratably over the employment period required to earn such
shares. The remaining 31,000 of such shares were forfeited and are
available for reissuance.
6. INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share for the three and nine
months ended September 30, 2000 and 1999, respectively, is computed by
dividing the net income (loss), after deducting dividends on cumulative
convertible preferred stock, by the weighted average number of shares
of Common Stock outstanding during the applicable period. Diluted
income (loss) per common share for the three and nine months ended
September 30, 2000 and 1999, respectively, is computed by dividing net
income (loss) by the weighted average number of shares of Common Stock
and common equivalent shares during the applicable period. Common
equivalent shares consist of the incremental shares of Common Stock
issuable upon the exercise of stock options, warrants and other
securities convertible into shares of Common Stock.
The exercise of stock options, warrants and other securities
convertible into shares of Common Stock were not assumed in the
computation of diluted loss per common share, as the effect would have
been antidilutive. The exercise of stock options and warrants were not
assumed in the computation of diluted income per common share because
the respective exercise prices of such securities were in excess of the
value of the Common Stock during the applicable period.
The computation of net income (loss) applicable to common
shareholders is as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) $4,956,238 $(1,376,819) $1,485,004 $(4,971,677)
Preferred stock dividends (49,652) - (149,652) -
----------- ------------- ----------- ------------
Net income (loss) applicable to
common shareholders $4,906,586 $(1,376,819) $1,335,352 $(4,971,677)
=========== ============ =========== ============
7. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," requires the disclosure of
comprehensive income (loss), defined as the change in equity of a
business enterprise during a period from transactions and other events
and circumstances from non-owner sources. Comprehensive income (loss)
is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not
been recognized in the calculation of net income (loss).
Comprehensive income (loss) for the three and nine months
ended September 30, 2000 and 1999, respectively, is presented in the
following table:
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) $4,956,238 $(1,376,819) $1,485,004 $(4,971,677)
Other comprehensive income (loss)
Net unrealized gain (loss) on investments - (3,333,814) - 3,029,769
---------- ------------ ---------- ------------
Total comprehensive income (loss) $4,956,238 $(4,710,633) $1,485,004 $(1,941,908)
========== ============ ========== ============
8. SALE OF COMMON STOCK
On September 21, 2000, 2,120 shares of Series A Preferred
Stock were converted at the conversion price of $2.12 per share into
200,000 shares of Common Stock.
On September 29, 1999, the Company entered into a Stock
Purchase Agreement with Telescan, Inc. ("Telescan") providing for the
sale of 779,130 shares of Common Stock for an aggregate purchase price
of $3,000,000, which was based upon one hundred and twenty-five percent
(125%) of the average of the closing prices of the Common Stock, as
reported by NASDAQ, for the seven business days prior to the date of
the closing. Additionally, the Company and Telescan entered into an
agreement pursuant to which the Company obtained a three-year license
to use several of Telescan's propriety technology and investment tools
on the Company's web sites. The Company paid the $1,134,500 license fee
by issuing 368,301 shares of Common Stock to Telescan, which was based
upon the average of the closing prices of the Company's Common Stock,
as reported by NASDAQ, for the seven business days prior to the date of
the closing.
9. SEGMENT INFORMATION
The Company's business segments are focused on providing
research and analysis of investment information to individuals and
investment professionals through two operating segments: Online
Services and Print Publications. The Company's Online Services
operations include individualinvestor.com (www.individualinvestor.com)
and InsiderTrader.com (www.insidertrader.com). The Company sold assets
related to and the operations of InsiderTrader.com in September 2000.
The Company's Print Publications operations publishes and
markets Individual Investor magazine, a personal finance and investment
magazine, Ticker, a magazine for financial advisors, planners and
brokers, and Individual Investor's Special Situations Report, a
financial investment newsletter. Substantially all of the Company's
operations are within the United States. The Company sold assets
related to and the operations of Ticker magazine in September 2000.
The table below presents summarized operating data for the
Company's two business segments, consistent with the way such data is
utilized by Company management in evaluating operating results. During
the period ended September 30, 2000, the Company evaluated the
methodology used to allocate marketing and promotion expenses,
specifically as they relate to expenses incurred for the Individual
Investor of the Year(TM) and Magic 25(TM) online trading contests
offered by the Company, and modified the allocation methodology. These
expenses benefit both the Print Publications and Online Services
segments. Whereas the previous methodology allocated substantially all
costs associated with such contests to the Online Services segment, the
revised allocation process allocates contest expenses primarily based
on the estimated incremental revenues generated by the Print
Publications and Online Services segments, respectively, in connection
with such contests.
Any inter-segment revenues included in segment data are not
material. The accounting policies utilized in the table below are the
same as those described in Note 1 of the Notes to Condensed
Consolidated Financial Statements, as well as the consolidated
financial statements and footnotes thereto in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. Operating
contribution represents the difference between operating revenues less
operating expenses (before general and administrative ("G&A") and
depreciation and amortization expenses).
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Online Services $ 588,160 $ 657,274 $ 2,842,813 $ 1,229,630
Print Publications 4,635,253 3,838,057 13,825,541 11,044,820
----------- ------- ---- ------------ ------------
5,223,413 4,495,331 16,668,354 12,274,450
----------- ------- ---- ------------ ------------
Operating contribution (before G&A and
depreciation and amortization expenses and
gain on sale of assets):
Online Services (666,429) (290,481) (1,261,632) (1,484,948)
Print Publications 508,152 (254,127) 476,930 (470,031)
----------- ------- ---- ------------ ------------
(158,277) (544,608) (784,702) (1,954,979)
Gain on sale of assets 6,702,219 - 6,702,219 -
G&A and depreciation and amortization
expewnses (1,612,344) (1,630,563) (4,583,970) (4,411,444)
Investment and other income 24,640 798,352 151,457 1,394,746
----------- ------- ---- ------------ ------------
Net income (loss) $4,956,238 $(1,376,819) $ 1,485,004 $(4,971,677)
========== ============ ============ ============
Investments as of September 30, 2000 increased approximately
$2.7 million as compared to December 31, 1999. This was primarily due
to investments in Tradeworx, Inc. and Pricing Dynamics, Inc. (see Note
2). Deferred advertising revenue as of September 30, 2000 increased
approximately $0.4 million as compared to December 31, 1999 primarily
due to investments in Tradeworx and Pricing Dynamics (see Note 2),
offset by revenue earned during the period and the assumption by the
purchaser of the deferred advertising revenue liability attributable to
Ticker magazine. Deferred subscription revenue as of September 30, 2000
increased approximately $0.2 million due to the timing of direct mail
and subscription renewal campaigns. There were no other material
changes from year-end 1999 in total assets, in the basis of
segmentation, or in the basis of measurement of segment profit or loss.
10. ACCOUNTS RECEIVABLE
In August 2000, the Company arranged a line of credit whereby
the Company may borrow principal amounts up to $2.0 million secured by
certain of its assets. Availability under the facility is based on a
formula of a percentage of eligible accounts receivable and provides
for interest on direct borrowings at an annual rate equal to prime plus
1.5% plus fees based on the amount of the invoices financed. The term
of the line of credit is for a period of two years, subject to certain
termination provisions. Total funding at September 30, 2000 was
approximately $1.1 million.
The Company has accounted for this transaction in accordance
with SFAS 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". Accordingly, accounts
receivable have been reduced by the proceeds received from the facility
and related fees have been recognized as expenses.
One million dollars of the September 30, 2000 receivable
balance reflects amounts from the sale of Ticker magazine and the two
Internet domain names, which were collected during the first week of
October 2000 (see Note 3).
11. SUBSEQUENT EVENTS
In October 2000, the Company announced the resignation of its
President and Chief Operating Officer, Brette Popper and of its Chief
Financial Officer, David Allen, as part of a streamlining of its
management team. The Company also announced that Jonathan Steinberg,
who has led the company since its inception as Chief Executive Officer,
would assume additional responsibilities as President, and that Gregory
Barton, Vice President of Business Development and Legal Affairs, has
assumed the additional responsibilities of Chief Financial Officer. The
Company does not expect the streamlining of its management team to
cause any material adverse effects to operations.
In October 2000, 698,601 options to purchase the Company's
Common Stock were cancelled and no options were granted. During the
four months ended October 31, 2000, 1,150,300 options were cancelled,
2,000 options were granted and the Company issued a warrant to purchase
250,000 shares of the Company's Common Stock at an exercise price of
$2.00 per share. The net options and warrants outstanding decreased
during the four months ended October 31, 2000 by 939,717 shares.
The Company, effective October 4, 2000, began trading on the
NASDAQ National Market under the ticker symbol "IIGP." The Company
relinquished its right to its prior symbol "INDI" in connection with
the agreement to sell the two Internet domain names (see Note 3).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Important Notice Concerning "Forward-looking Statements" in this Report
1. "Forward-looking Statements." Certain parts of this Report describe
historical information (such as operating results for the three and nine months
ended September 30, 2000 and September 30, 1999, respectively), and the Company
believes the descriptions to be accurate. In contrast to describing the past,
various sentences of this Report indicate that the Company believes certain
results are likely to occur after September 30, 2000. These sentences typically
use words or phrases like "believes," "expects," "anticipates," "estimates,"
"will continue" and similar expressions. Statements using those words or similar
expressions are intended to identify "forward-looking statements" as that term
is used in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include, but are not limited to, projections of operating results for
periods after September 30, 2000, concerning either a specific segment of the
Company's business or the Company as a whole. For example, projections
concerning the following are forward-looking statements: net revenues, operating
expenses, net income or loss, contribution to overhead, number of subscribers,
subscription revenues, revenues per advertising page, number of advertising
pages, production expense per copy, page views, revenues per page view,
marketing expenses, sales expenses, and general and administrative expenses.
Except to the extent that a statement in this Report is describing a historical
fact, each statement in this Report is deemed to be a forward-looking statement.
2. Actual Results May Be Different than Projections. Due to a variety
of risks and uncertainties, actual results may be materially different from the
results projected in the forward-looking statements. These risks and
uncertainties include those set forth in Item 2 (entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations") of
Part I hereof, in Exhibit 99 hereof and elsewhere in this Report, and in Item 1
(entitled "Business") of Part I and in Item 7 (entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations") of Part II of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed with the Securities and Exchange Commission.
3. The Company Has No Duty to Update Projections. The forward-looking
statements in this Report are current only on the date this Report is filed.
After the filing of this Report, the Company's expectations of likely results
may change, and the Company might come to believe that certain forward-looking
statements in this Report are no longer accurate. The Company shall not have any
obligation, however, to release publicly any corrections or revisions to any
forward-looking statements contained in this Report, even if the Company
believes the forward-looking statements are no longer accurate.
Three and Nine Months Ended September 30, 2000 as Compared to the Three and Nine
Months Ended September 30, 1999
Operating Income (Loss)
The operating income for the three months and nine months ended
September 30, 2000 increased to approximately $4.9 million and $1.3 million,
respectively, as compared to an operating loss of approximately $2.2 million and
$6.4 million, respectively, in the same periods of 1999. The decrease in the
operating loss from the prior year is primarily due to the gain of sale of
assets of approximately $6.7 million and increased advertising revenues,
partially offset by increased promotion and selling and editorial, production
and distribution expenses. Operating losses excluding the gain on the sale of
assets decreased to approximately $1.8 million and $5.4 million, respectively,
for the three and nine months ended September 30, 2000 - an improvement of
approximately 19% and 16%, respectively, as compared to the loss of
approximately $2.2 million and $6.4 million, respectively, in the same periods
of 1999.
Online Services operations provided a negative operating contribution
(before deducting G&A and depreciation and amortization expenses and gain on
sale of assets) of approximately $0.7 million and $1.3 million for the three and
nine months ended September 30, 2000, respectively, as compared to a negative
operating contribution of approximately $0.3 million and $1.5 million,
respectively, in the same periods of 1999. The change in the three-month
operating contribution from the prior year is primarily due to decreased
advertising revenues, and increased editorial and production expenses required
to maintain and support the web site. The change in the nine-month operating
contribution from the prior year is primarily due to increased advertising
revenues, partially offset by increased editorial and production expenses
required to maintain and support the web site. The Company has recently
reorganized its Online Services operations, significantly reducing ongoing
personnel and technology development expenses. The Company expects that
editorial and production expenses associated with its Online Services in the
near term will be lower than the level of such expenses in the third quarter of
2000.
Print Publications operations provided a positive operating
contribution (before deducting G&A and depreciation and amortization expenses
and gain on sale of assets) of approximately $0.5 million and $0.5 million for
the three and nine months ended September 30, 2000, respectively, as compared to
negative operating contribution of approximately $0.3 million and $0.5 million,
respectively, in the same periods of 1999. The improvement in operating
contribution is primarily due to increased advertising revenues, partially
offset by increased promotion and selling, and production and distribution
expenses.
Revenues
Total revenues for the three and nine months ended September 30, 2000
increased approximately 16% and 36%, respectively, to approximately $5.2 million
and $16.7 million, respectively, as compared to approximately $4.5 million and
$12.3 million, respectively, in the same periods of 1999. Online Services
revenues for the three and nine months ended September 30, 2000 decreased
approximately 11% and increased approximately 131%, respectively, to
approximately $0.6 million and $2.8 million, respectively, as compared to
approximately $0.7 million and $1.2 million, respectively, in the same periods
of 1999. Print Publications revenues for the three and nine months ended
September 30, 2000 increased approximately 21% and 25%, respectively, to
approximately $4.6 million and $13.8 million, respectively, as compared to
approximately $3.8 million and $11.0 million, respectively, in the same periods
of 1999.
Online Services advertising revenues for the three and nine
months ended September 30, 2000 decreased approximately 17% and increased
approximately 140 %, respectively, to approximately $0.5 million and $2.5
million, respectively, as compared to approximately $0.6 million and $1.1
million, respectively, in the same periods of 1999. The increase in advertising
revenues from the prior year nine-month period is attributable to several
factors, including a growth in page views and advertising impressions; for the
three-month period, these factors were more than offset by a decline in online
advertising by VentureHighway.com, Inc. Excluding the effect of Venture
Highway's online advertising, the Company's Online Services would have reported
revenues in the three and nine months ended September 30, 2000 that were higher
advertising by approximately 54% and 154%, respectively, than in the same
periods of 1999. Traffic to the Company's web sites (excluding the sites of the
Individual Investor of the Year (TM) and Magic 25 (TM) online trading contests
offered by the Company)for the three and nine months ended September 30, 2000
increased approximately 79% and 77%, respectively, to approximately 22 million
and 71 million page views, respectively, as compared to approximately 12 million
and 40 million page views, respectively, in the same periods of 1999. For the
nine months ended September 30, 2000, the Company's Online Services had 42
advertisers, none of which accounted for over 10% of total online advertising
revenues.
Print Publications advertising revenues for the three and nine months
ended September 30, 2000 increased approximately 28% and 32%, respectively, to
approximately $3.4 million and $9.9 million, respectively, as compared to
approximately $2.7 million and $7.5 million, respectively, in the same periods
of 1999. Individual Investor magazine's advertising revenues for the three and
nine months ended September 30, 2000 increased approximately 16% and 26%,
respectively, to approximately $2.3 million and $6.7 million, respectively, as
compared to approximately $2.0 million and $5.3 million, respectively, in the
same periods of 1999. This change relates primarily to a 2% and 11% respective
increase in advertising pages sold, combined with a 13% and 13% respective
increase in the net advertising rate per page, when compared to 1999. Ticker
magazine's advertising revenues for the three and nine months ended September
30, 2000 increased approximately 59% and 47%, respectively, to approximately
$1.1 million and $3.3 million, respectively, as compared to approximately $0.7
million and $2.2 million, respectively, in the same periods of 1999. This change
relates primarily to a 44% and 39% respective increase in advertising pages
sold, combined with a 31% and 4% respective increase in the net advertising rate
per page, when compared to 1999.
Print Publications circulation revenues for the three and nine months
ended September 30, 2000 increased approximately 12% and 12%, respectively, to
approximately $0.9 million and $2.8 million, respectively, as compared to
approximately $0.8 million and $2.5 million, respectively, in the same periods
of 1999. Subscription revenues for the three and nine months ended September 30,
2000 increased 13% and 11%, respectively, to approximately $0.7 million and $2.1
million, respectively, as compared to approximately $0.6 million and $1.9
million, respectively, in the same periods of 1999. The increase in subscription
revenues from the prior year is primarily attributable to a change in the
subscriber mix for Individual Investor magazine, with more of the subscriber
base being obtained from more profitable direct-to-publisher sources. This
increase was partially offset by a reduction in the number of subscribers to
Individual Investor's Special Situations Report. Newsstand revenues for the
three and nine months ended September 30, 2000 increased approximately 9% and
14%, respectively, to approximately $202,000 and $690,000, respectively, as
compared to $185,000 and $605,000, respectively, in the same periods of 1999.
Print Publications list rental and other revenues for the three and
nine months ended September 30, 2000 decreased approximately 11% and increased
approximately 4%, respectively, to approximately $327,000 and $1.1 million,
respectively, as compared to approximately $368,000 and $1.0 million,
respectively, in the same periods of 1999. The increase in the nine-month figure
relates primarily to higher list rental revenues attributable to the Individual
Investor magazine subscriber lists.
Operating Expenses
Total operating expenses for the three and nine months ended September
30, 2000 increased approximately 5% and 18%, respectively, to approximately $7.0
million and $22.0 million, respectively, as compared to approximately $6.7
million and $18.6 million, respectively, in the same periods of 1999. The rate
of increase in operating expenses was significantly lower than the rate of
increase of revenues - which increased approximately 16% and 36%, respectively,
for the three and nine months ended September 30, 2000, as compared to the same
periods of 1999.
Editorial, production and distribution expenses for the three and nine
months ended September 30, 2000 increased approximately 9% and 20%,
respectively, to approximately $3.2 million and $10.1 million, respectively, as
compared to approximately $2.9 million and $8.4 million, respectively, in the
same periods of 1999. Online Services production, development and editorial
expenses for the three and nine months ended September 30, 2000 increased
approximately 17% and 52%, respectively, to approximately $0.9 million and $2.8
million, respectively, as compared to approximately $0.7 million and $1.9
million, respectively, in the same periods of 1999. The increase in these Online
Services expenses from the prior year is primarily related to higher editorial
salaries and consulting fees, increased research costs, and costs associated
with enhanced analytical and research tools now available on
www.individualinvestor.com. As noted above, the Company has recently reorganized
its Online Services operations, significantly reducing ongoing personnel and
technology development expenses. The Company expects that editorial and
production expenses associated with its Online Services in the near term will be
lower than the level of such expenses in the third quarter of 2000. Print
Publications editorial, production and distribution expenses for the three and
nine months ended September 30, 2000 increased approximately 6% and 11%,
respectively, to approximately $2.3 million and $7.2 million, respectively, as
compared to approximately $2.2 million and $6.5 million, respectively, in the
same periods of 1999. The increase from the prior year relates primarily to an
increase in the average number of pages per issue, as well as higher editorial
salaries and related costs.
Promotion and selling expenses for the three and nine months ended
September 30, 2000 increased approximately 4% and 26%, respectively, to
approximately $2.2 million and $7.4 million, respectively, as compared to
approximately $2.1 million and $5.9 million, respectively, in the same periods
of 1999. Online Services promotion and selling expenses for the three and nine
months ended September 30, 2000 increased approximately 86% and 50%,
respectively, to approximately $0.4 million and $1.3 million, respectively, as
compared to approximately $0.2 million and $0.9 million, respectively, in the
same periods of 1999. The increase from the prior year is primarily attributable
to higher marketing and promotion expenses associated with the Individual
Investor of the Year(TM) and Magic 25(TM) online trading contests offered by the
Company. Print Publications promotion and selling expenses for the three and
nine months ended September 30, 2000 decreased approximately 6% and increased
approximately 22%, respectively, to approximately $1.8 million and $6.1 million,
respectively, as compared to approximately $1.9 million and $5.0 million,
respectively, in the same periods of 1999. The increase from the prior year
nine-month period is primarily due to increased marketing and promotion expenses
associated with the Individual Investor of the Year(TM) and Magic 25(TM) online
trading contests offered by the Company, direct mail campaign and customer
activation expenses, increased sales commissions relating to higher sales, and
higher recruiting fees as a result of hiring additional in-house sales
personnel. The decrease from the prior year three-month period is primarily due
to decreased salaries for advertising and marketing personnel due to a decrease
in the number of employees within these departments.
General and Administrative expenses for the three and nine months ended
September 30, 2000 were approximately $1.5 million, and $4.2 million,
respectively, as compared to approximately $1.5 million and $4.0 million,
respectively, in the same periods of 1999. The increase in the nine-month figure
as compared to the same period in 1999 was primarily due to increased salaries
and rent expense, partially offset by lower professional and recruiting fees.
The Company has recently implemented a significant reduction in its general and
administrative expenses through reduction in general and administrative
personnel and expects these expenses in the near term to be substantially lower
than the level of such expenses in the third quarter of 2000. Moreover, the
Company intends to sublet a portion of its headquarters office space and
believes it may see a significant reduction in ongoing rent expense beginning in
the first quarter of 2001.
Depreciation and amortization expense for the three and nine months
ended September 30, 2000 were approximately $0.1 million and $0.4 million,
respectively, as compared to approximately $0.1 million and $0.4 million,
respectively, in the same periods of 1999.
Gain on Sale of Assets
Gain on sale of assets for the three and nine months ended September
30, 2000 of approximately $6.7 million represents the gain on the sale of two
Internet domain names and certain assets related to Ticker magazine and
InsiderTrader.com and the assumption by the respective purchasers of certain
liabilities related thereto. No similar transactions were realized in 1999.
Investment and Other Income
Investment and other income for the three and nine months ended
September 30, 2000 were approximately $0.0 million and $0.2 million,
respectively, as compared to approximately $0.8 million and $1.4 million,
respectively, in the same periods of 1999. The decreases for both periods are
primarily attributable to realized gains from sale of investments of
approximately $0.8 million and $1.3 million, respectively, during the three
months and nine months ended September 30, 1999.
Discontinued Operations
There was no net loss from discontinued operations for the three and
nine months ended September 30, 2000 or September 30, 1999. No additional loss
amounts were recorded by the Company for discontinued operations because the
Company believes that any remaining net operating losses and related costs
associated with these discontinued operations have been adequately provided for
by provisions established in 1998.
The Company's net investment in discontinued operations of $49,302 at
September 30, 2000 represents its share of the net assets of the domestic
investment fund, less any costs associated with discontinuing the investment
management services business.
Net Income (Loss)
The Company's net income for the three and nine months ended September
30, 2000 increased to approximately $5.0 million and $1.5 million, respectively,
as compared to a net loss of approximately $1.4 million and $5.0 million,
respectively, in the same periods of 1999.
The basic income per weighted average common share for the three and
nine months ended September 30, 2000 was $0.47 and $0.13, respectively, as
compared to a loss of $0.15 and $0.55, respectively, in the same periods of
1999. The dilutive income per weighted average common share for the three and
nine months ended September 30, 2000 was $0.44 and $0.13, respectively, as
compared to a loss of $0.15 and $0.55, respectively, in the same periods of
1999.
Liquidity and Capital Resources
As of September 30, 2000, the Company had working capital of
approximately $5.5 million, which included cash and cash equivalents totaling
approximately $7.1 million.
The Company's current levels of revenues are not sufficient to cover
its expenses. It is the Company's intention to control its operating expenses
while continuing to invest in its existing products - and, as noted above, the
Company recently has implemented changes intended to substantially reduce
certain operating and general and administrative expenses. The Company
anticipates quarterly losses to continue through the remainder of 2000 and into
2001. Profitability may be achieved in future periods only if the Company can
substantially increase its revenues and/or realize capital gains on investments
or the sale of certain assets while controlling increases in expenses. There can
be no assurance that revenues will be substantially increased, that additional
capital gains will be realized on investments (instead capital losses in fact
may be realized) or that certain assets will be sold, or that expenses can be
adequately decreased to enable the Company to attain profitability.
Based on the Company's current outlook, the Company believes that its
working capital will be sufficient to fund its operations and capital
requirements at least through the end of 2001. During the second quarter of
2000, the Company retained The Jordan, Edmiston Group, Inc., the media
investment bank, to explore a range of strategic alternatives to enhance
shareholder value, including the possible sale of the Company. The Company
during the quarter ended September 30, 2000 entered into three separate
agreements with unrelated third parties which resulted in net gains on the sale
of assets of approximately $6.7 million and which generated net cash proceeds of
approximately $6.6 million (which amount includes $1.0 million collected with
respect to these sales during the first week of October 2000). In connection
with one of these agreements, the Company also issued a warrant to purchase
250,000 shares of the Company's Common Stock at an exercise price of $2.00 per
share.
The Company is continuing its exploration of strategic alternatives,
including exploring sources of additional financing and/or sale of assets. There
can be no assurance, however, that this process will result in the Company
entering into any additional transactions or enhancing shareholder value. In the
event that the Company is unable to attain profitability prior to exhausting its
existing resources, the Company would need to obtain additional financing or
sell certain of its assets in order to sustain operations. No assurance can be
given that the Company will be able to obtain additional financing or sell
additional assets, or as to the terms upon which the Company could do so. Any
additional financing could result in dilution of an investor's equity investment
in the Company.
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. 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 the 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. In April 1999, the court denied plaintiffs' motion with
respect to Messrs. Schmidt and Steinberg, but granted the motion with respect to
WTA and plaintiffs were permitted to and did file and serve a complaint solely
against this defendant. WTA moved to dismiss the complaint as to all causes of
action other than the breach of contract claim, which motion was denied. WTA
subsequently answered the complaint and discovery was commenced. In February
2000, plaintiffs moved to amend their complaint to add Messrs. Schmidt and
Steinberg as defendants, and defendants moved for summary judgment. Both motions
were denied. Plaintiffs alleged that WTA did not timely process plaintiffs'
request for redemption of their interest in WTA and the complaint sought
approximately $470,000 in alleged compensatory damages, plus pre-judgment
interest, as well as punitive damages. In August 2000 the parties agreed to
settle the litigation on undisclosed terms. The impact of the settlement is not
material to the Company's financial position or results of operations.
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.
ITEM 2. Changes in Securities
Sales of Unregistered Securities
- ----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
Consideration received and Exemption from If option, warrant or
Date of sale Title of security Number description of underwriting or registration convertible security, terms
Sold/ other discounts to market claimed of exercise or conversion
Granted price afforded to purchasers
- ----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
- ----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
7/1/00 - Options to purchase 2,000 Exercise price would be Section 4(2) Vesting over a period of
9/30/00 common stock received upon exercise four years from date of
granted to employees grant, subject to certain
conditions of continued
service; exercisable for a
period lasting ten years
from date of grant at an
exercise price of $1.8125
per share.
- ----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
8/10/00 Warrant to purchase 250,000 Company received $1 million in Section 4(2) Exercisable until 8/10/03 at
common stock connection with issuance of an exercise price of $2.00
warrant and sale of two per share.
Internet domain names; in
addition, Company would
receive exercise price upon
exercise
- ----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3.1 Amended and Restated Certificate of Incorporation of Incoporated by reference to Exhibit 3.2 to the Form
Registrant, as amended through June 22, 1999 10-Q for the quarter ended June 30, 1999
3.2 By-laws of Registrant amended through April 27, 1999 Incorporated by reference to Exhibit 3.3 to the Form
10-Q for the quarter ended June 30, 1999
4.1 Specimen Certificate for Common Stock of Registrant Incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-18
(File No. 33-43551-NY)
10.1 Factoring Agreement, dated August 1, 2000, between Systran Filed herewith
Financial Services Corporation and Registrant, as amended
10.2 Asset Purchase Agreement, dated September 28, 2000, between Filed herewith
123Jump.con and Registrant
27 Financial Data Schedule September 30, 2000 Filed only with the electronic submission of Form
10-Q in accordance with the EDGAR requirement
99 Certain Risk Factors Filed herewith
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the Quarter Ended
September 30, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: November 13, 2000
INDIVIDUAL INVESTOR GROUP, INC. (Registrant)
By: /s/ Jonathan L. Steinberg
Jonathan L. Steinberg, Chief Executive Officer and Director
By: /s/ Gregory Barton
Gregory Barton, Chief Financial Officer
(Principal Financial Officer)
Exhibit 10.1
SYSTRAN Financial Services Corporation
FACTORING AGREEMENT
This Factoring Agreement (the "Agreement") is between SYSTRAN Financial Services
Corporation and its affiliates, including but not limited to Textron Financial
Corporation ("SYSTRAN") and Individual Investor Group, Inc. (the "Seller"),
whose address is set forth on the last page hereof. In consideration of mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS: A "Debtor" means a person or entity obligated to pay a
Bill. A "Bill" means any right to payment for services rendered or goods sold by
Seller to a Debtor evidenced by a writing which complies with the general
requirements of SYSTRAN as those may be set forth in the Seller Information
Manual, as described in Paragraph 2.8. A "Chargeback" means a return of a Bill
to Seller and a debit of Seller's account. "Recourse" means the right to
Chargeback a Bill to Seller.
2. PURCHASE OF BILLS.
2.1. Seller agrees to present for purchase such Bills as it desires
SYSTRAN to purchase arising from the services of Seller and goods sold by
Seller. SYSTRAN, at its sole discretion, may purchase such Bills as SYSTRAN
determines meet the standards set by SYSTRAN from time to time. Seller shall
submit to SYSTRAN an original and two (2) copies of each Bill which shall be
attached to a schedule form provided by SYSTRAN. Should the Debtor require any
additional documentation as a prerequisite to payment, Seller will also provide
such documentation with each Bill.
2.2 SYSTRAN will settle with the Seller by mailing or sending via
facsimile to the Seller a settlement statement setting forth the Bills
purchased, the amount paid, and any deductions made for fees, charges or
security deposit and depositing funds as follows:
[ ] Mail funds due Seller. [ ] U.P.S. funds due Seller. [X] Wire
funds due Seller into bank account specified by Seller on wire authorization
form. [ ] Deposit funds due Seller.
2.3. Any payment to Seller may be reduced by SYSTRAN by any amount
due from Seller to SYSTRAN, including but not limited to the security deposit,
Chargebacks, fees and costs.
2.4. SYSTRAN will give notice to the Debtors of the assignment of any
Bills purchased by placing a legend on the Bills stating the Bills have been
sold and assigned to SYSTRAN and are payable to SYSTRAN at an address designated
by SYSTRAN. Seller agrees that all Debtors can be notified of an address
specified by SYSTRAN, and Seller will not attempt to direct payment other than
to that address. Seller agrees to pay all costs and expenses incurred by SYSTRAN
in giving such notice or notices as SYSTRAN deems necessary by whatever means
SYSTRAN deems necessary. All remittances received by Seller for payment of Bills
previously sold to SYSTRAN are the property of SYSTRAN and shall be held in
trust by Seller for SYSTRAN and shall be delivered immediately to SYSTRAN in the
identical form of payment received by Seller. Should Seller receive a check
comprising payment both to Seller and SYSTRAN, Seller will turn over the check
to SYSTRAN, and SYSTRAN will refund Seller's portion to Seller, less any amounts
outstanding and due from Seller to SYSTRAN. In the event that Seller collects
directly from the Debtor a Bill which has been sold to SYSTRAN and Seller does
not deliver immediately to SYSTRAN the identical form of payment received by
Seller, Seller will be charged an administrative fee. The amount of the fee
shall be determined by SYSTRAN at its sole discretion, but shall not exceed
three times the normal fee, pursuant to paragraph three below. Seller agrees
that any collection by or directly from the Debtor by Seller of a Bill which has
been sold to SYSTRAN is a default under the terms of this Agreement.
2.5. Any Bills in a special purchase shall be subject to all
provisions of this Agreement. A special purchase is the purchase at the
beginning of the factoring relationship of Seller's Bills that are either billed
by Seller, previously financed by a lender, or previously sold and assigned to
another factor.
2.6. SYSTRAN has provided to Seller a Seller Information Manual,
which is a guide to policy and procedures concerning daily submission of Bills,
collection efforts, and other matters. The Seller Information Manual is not part
of this Agreement. Seller hereby acknowledges receipt of the Seller Information
Manual. These procedures are only guidelines to ensure the efficient operation
of the factoring process. SYSTRAN may change any procedure at any time, and may
choose not to follow procedures at its discretion.
3. SERVICE FEES. SYSTRAN shall charge and Seller shall pay a fee of one
point two five (See Exhibit "A") percent ( %) of the face amount of all Bills
purchased and an additional service fee as follows: $1.15 per bill . The service
fee shall be payable upon the purchase of any Bill by SYSTRAN, and SYSTRAN may
choose to collect service fees either from payments due Seller or may bill the
Seller periodically. SYSTRAN may, upon prior notice to Seller, change any fee
and such change shall be effective upon receipt of the notice; provided, that
SYSTRAN may change the amount of any fee caused by a change in SYSTRAN's cost of
funds without prior notice to Seller, but must notify Seller of such change on
the next settlement statement sent to the Seller. A fee change due to a change
in cost of funds will be effective upon the date of the change which will be
indicated on the settlement statement.
3.1. MINIMUM VOLUME AND FEE. Seller agrees to sell to SYSTRAN a
minimum of $15,000.00 in Bills per month. In the event that Seller fails to sell
$15,000.00 in Bills per month for each of two consecutive months, Seller's fee
will automatically be increased at the beginning of the third month. The minimum
fee after the increase will be 4.5% or the current fee, whichever is higher.
SYSTRAN may increase the fee beyond these levels at its discretion. The fee will
be automatically lowered to the last fee in effect should Seller's monthly
purchase volume exceed $15,000.000 per month for each of two consecutive months.
4. DEPOSIT. In order (a) to secure Seller's performance of its obligations
arising hereunder, (b) to provide security for payment of Seller's liabilities
or deficiencies arising hereunder, and (c) to provide security to SYSTRAN's
borrowing sources, Seller shall deliver to SYSTRAN the deposit described below.
Seller acknowledges that SYSTRAN has given its lender a security interest in all
of its customer deposits to secure payment of certain credit lines to finance
SYSTRAN's Sellers' accounts receivable. Seller hereby transfers and assigns to
SYSTRAN all of Seller's rights in and to such deposit on the conditions set
forth below and subordinates all of its right, title and interest in and to such
deposit to the right, title and interest of SYSTRAN's lender to such deposit.
The foregoing transfer and subordination are absolute and unconditional. Subject
to the subordination, the terms of the deposit are as follows.
4.1. AMOUNT OF DEPOSIT. Seller's deposit shall be equal to twenty
------
percent (20%) of Seller's Bills that are ninety (90) days old or less computed
--
from date of purchase.
4.2. ADJUSTMENT OF DEPOSIT. The amount of Seller's deposit will be
reviewed and, if necessary, adjusted each day. Increases in the amount of
Seller's deposit will be withheld by SYSTRAN from payments to Seller to the
extent necessary pursuant to this Agreement. If sufficient bills are not
purchased to fund the increase, Seller will pay the amount of the increase upon
demand. Decreases will be repaid to Seller from Seller's deposit amount.
4.3. REPAYMENT OF DEPOSIT. Effective upon termination of this
Agreement, no Deposit will be released to Seller except at SYSTRAN's sole
discretion, unless all amounts owing to SYSTRAN have been paid in full by
Seller. Effective upon termination, all other sums that may become due to Seller
by SYSTRAN will be included in the Deposit. The effective Deposit percentage may
be greater than the Deposit percentage set forth in paragraph 4.1 The balance of
the Deposit will be repaid to Seller at such time as all Bills are paid in full.
In the event that Chargebacks to Seller exceed the amount of Seller's Deposit,
none of Seller's Deposit will be repaid and Seller will pay SYSTRAN an amount
equal to such excess. Such excess amount shall bear interest at four percent
(4%) over prime as announced by SYSTRAN's lender from the date notice of the
excess liability is rendered to Seller until payment is received.
5. SECURITY INTEREST. The purchase of the Bills of Seller by SYSTRAN is
absolute subject to the right to Chargeback. In addition to the outright
ownership of those Bills purchased by SYSTRAN, to secure the payment and
performance of indebtedness and obligations of Seller to SYSTRAN now existing
and hereafter arising, SYSTRAN shall have and is hereby granted a present
continuing security interest in all Bills, accounts and accounts receivable of
Seller, whether now existing or hereafter created, together with all guaranties,
securities, books and records, accounts, correspondence, and documents with
respect to such Bills, and, in addition, Seller hereby grants SYSTRAN a security
interest in the deposit provided for in Section 4 above, all of Seller's
inventory, contract rights, general intangibles, money, instruments, documents,
chattel paper, securities, credits, claims and demands against SYSTRAN or
others, and all other goods and personal property of all kinds belonging to the
Seller, whether presently existing or hereafter acquired, together with any
proceeds, products.
5.1. FINANCING STATEMENTS. Seller shall not execute or file any
financing statement, supplements or amendments thereto, or any other instruments
or security agreement covering the collateral described above in favor of anyone
other than SYSTRAN. Seller shall execute and deliver to SYSTRAN any financing
statements, title documents, supplements or amendments thereto and any other
instruments which SYSTRAN from time to time may reasonably require to perfect,
preserve, protect or enforce the security interest of SYSTRAN hereunder or the
priority of such security interest. Seller shall pay all costs of filing such
statements or instruments with appropriate governmental authorities together
with the costs of all lien searches. Seller agrees that either a carbon,
photocopy, or other reproduction of this Agreement is sufficient as a financing
statement under this Agreement.
5.2. SYSTRAN may, in its sole discretion, elect to discharge any
security interest, lien or other encumbrance upon any bill for service or bill
for goods sold purchased by SYSTRAN. Any such payments and all expenses incurred
in connection therewith shall be treated as a Chargeback. SYSTRAN shall have no
obligation to discharge any such security interest, lien or encumbrance.
6. RECOURSE, DISPUTES AND CHARGEBACKS.
6.1. All Bills are purchased by SYSTRAN from Seller with full
recourse. All Bills may be Chargedback to Seller at any time after ninety (90)
days after the purchase date if not collected from Debtor within such period or
at any time, if SYSTRAN determines, in its sole discretion, that the Bill is not
collectible. SYSTRAN shall not deem a disputed Bill uncollectible without
allowing Seller a reasonable time to settle the dispute not to exceed twenty-one
(21) days from notice of dispute. It is within SYSTRAN's discretion as to when a
Bill over such time periods may be Chargedback to Seller. Regardless of Bill
type: 1) All Bills in a special purchase by SYSTRAN, as defined in paragraph
2.5, are subject to Chargeback ninety (90) days from the date of special
purchase by SYSTRAN; 2) All Bills owing by Canadian Debtors and logistics
companies are subject to Chargeback ninety (90) days from the date of purchase
by SYSTRAN.
6.2. In addition, SYSTRAN reserves the right, however, from time to
time and at its absolute discretion, to Chargeback to Seller any Bill which does
not conform to the representations and warranties set forth in the Agreement or
is discovered not to conform with the reasonable standards which SYSTRAN may set
for Bills. SYSTRAN shall have a continuing security interest in any Bill which
is Chargedback to the Seller, but Seller shall immediately upon receiving notice
of a Chargeback pay to SYSTRAN the Chargeback amount and does hereby authorize
SYSTRAN to deduct any Chargeback from the daily settlements described in Section
2. Interest on any unsatisfied Chargeback shall bear interest at the rate of
four percent (4%) over prime as announced by SYSTRAN's lender. Chargeback of any
Bill does not authorize Seller to collect any outstanding sum owing on that Bill
from a Debtor. All amounts owing on from the Debtor on a Chargeback Bill remain
payable to SYSTRAN.
6.3. COLLECTION OF BILLS. SYSTRAN may, but is not required to,
commence any action, including legal action, to collect a Bill. All costs of
collection, including attorney fees, court fees, and costs of investigation,
will be the responsibility of the Seller. Prior to any act of default, SYSTRAN
will commence litigation only with Seller's authorization. Subsequent to an act
of default and failure to cure in accordance with paragraph 20, SYSTRAN may file
suit as it decides necessary without Seller's authorization. In the event of
default, Seller hereby grants authorization to SYSTRAN to settle or compromise
any bill dispute, including litigation, with any uncollected amount being
subject to Chargeback, together with all other amounts for which Seller is
obligated to SYSTRAN.
7. WARRANTIES AND REPRESENTATIONS.
7.1. Seller warrants and represents with respect to all Bills sold to
SYSTRAN that (a) the Bill is genuine and in all respects what it purports to be;
(b) Seller has good title to the Bill and the Bill is free and clear of all
encumbrances, liens and prior claims, and that the Seller has the legal right to
sell the Bill; (c) Seller has no knowledge of any fact which may impair the
validity of the Bill or make it uncollectible in accordance with its terms and
face amount; (d) the Bill made according to lawful and valid contracts which
Seller has executed; (e) Seller has no knowledge of any counterclaims or setoffs
or defenses existing in favor of the Debtor, whether arising from the services
or products which are the subject of the Bill or otherwise and there has been no
agreement as to the issuance or granting of any discount on the Bill; (f) the
Bill is not a duplicate of and does not cover the same services or charges or
purchase price as a Bill previously purchased by SYSTRAN from the Seller or
billed directly by the Seller to the Debtor; (g) Seller does not own, control,
or exercise dominion over the business of any Debtor whose Bills are factored by
Seller to SYSTRAN. Seller is not a subsidiary of any Debtor and no Debtors
control or exercise dominion over the business of Seller; (h) Seller will not
under any circumstances or in any manner whatsoever interfere with any of
SYSTRAN's rights under the Factoring Agreement in connection with SYSTRAN's
factoring of Seller's Bills; (i) immediately upon sale of Bills to SYSTRAN,
Seller will make proper entries on its books and records, disclosing the
absolute sale of such Bills to SYSTRAN; (j) Seller has not and will not pledge
the credit of SYSTRAN to any person or business for any purpose whatsoever.
7.2. If the Seller is a corporation, it is duly organized, existing,
and in good standing under the laws of Delaware. If Seller represents him or
herself to be a sole proprietorship or a partnership, such representation shall
be deemed conclusive and binding upon Seller. Seller is duly qualified to do
business and is in good standing in every other state in which such
qualification is required. If Seller is a corporation, execution, delivery and
performance hereof are within its corporate powers, have been duly authorized,
and are not in contradiction of law or the terms of its charter, by-laws or
other incorporation papers, or any indenture, agreement or undertaking to which
it is a party or by which it is bound. In addition, the Seller has all material
licenses and certificates necessary for the operation of its business and the
issuance of Bills.
8. POWER OF ATTORNEY. In order to carry out the Factoring Agreement, and
to avoid unnecessary notification of Debtors, Seller irrevocably appoints
SYSTRAN or any person designated by SYSTRAN, its special attorney-in-fact or
agent with power to: Bill, receive and collect all amounts which may be due or
become due to Seller from Debtors and to use Seller's name for purposes of
billing and collection of amounts due; Delete Seller's address on all Bills
mailed to Debtor and substitute SYSTRAN's address with regard to all Bills of
Seller; Receive, open and dispose of all mail addressed to Seller or Seller's
trade name at SYSTRAN's address; Negotiate checks received in payment whether
payable to Seller or to SYSTRAN; endorse the name of Seller or Seller's trade
name on any checks or other evidences of payment that may come into the
possession of SYSTRAN on Bills purchased by SYSTRAN and on any invoices or other
document relating to any of the Bills; In Seller's name, or otherwise, demand,
sue for, collect and get or give releases for any and all monies due or to
become due on Bills; Compromise, prosecute, or defend any action, claim or
proceeding as to Bills purchased by SYSTRAN. Nothing herein shall require
SYSTRAN to instigate or become a party to any litigation as more fully set forth
in Paragraph 6.3; Notify Debtors of assignment of accounts to SYSTRAN; and
notify, direct, and instruct Debtors in Seller's name or Seller's trade name of
the remit-to address and procedures for making payment on any Bills that are
sold to SYSTRAN; Take all steps necessary to ensure payment of such amounts due;
and do any and all things in Seller's name necessary and proper to carry out the
purpose intended by the Factoring Agreement.
9. ADDITIONAL DOCUMENTS. The Seller shall at all times, do, make, execute
and deliver all such additional and further instruments as may be reasonably
requested by SYSTRAN in order to more completely vest in and assure to SYSTRAN
and make available to it, the property and rights herewith or hereafter granted
or assigned and transferred to SYSTRAN as collateral and to evidence the sale of
the Bills to SYSTRAN and to carry into effect the provisions and intent of this
Agreement.
10. LOCATION OF BOOKS AND RECORDS, PLACE OF BUSINESS. It is understood
that Seller's place of business is the one set forth in this Agreement and that
all of its books, accounts, correspondence, papers and records pertaining to the
services or sales of products are located there, and all such books, accounts,
correspondence, papers and records will be opened for SYSTRAN's inspection at
all reasonable times.
11. INDEMNIFICATION OF SYSTRAN; SALES AND EXCISE TAXES. Seller will
indemnify and hold SYSTRAN harmless against any and all liability, loss or
expense, including attorney's fees, caused by or arising out of any alleged
claims, defenses, setoffs or counterclaims asserted by any party and relating in
any manner to the Bills purchased by SYSTRAN hereunder. In the event any sales
or excise taxes are imposed by any state, federal or local authorities with
respect to any of the Bills sold and assigned hereunder, where such taxes are
required to be withheld or paid by SYSTRAN, Seller shall also indemnify SYSTRAN
and hold it harmless with respect to all such taxes and hereby authorizes
SYSTRAN to charge to Seller's account any such tax that is paid or withheld by
SYSTRAN. SYSTRAN may charge the deposit for any amount due under this paragraph.
12. FINANCIAL INFORMATION. So long as Seller factors or has any absolute
or contingent obligation of any kind owing to SYSTRAN, the Seller will provide
information regarding the business, affairs and financial condition of the
Seller and its subsidiaries as SYSTRAN may reasonably request, including
financial statements.
13. REORGANIZATION, ACQUISITIONS, CHANGE OF NAME OR LOCATION. Seller shall
notify SYSTRAN in writing not less than thirty (30) days prior to (a) any change
of its name or use of any trade names or (b) any change in the address of the
chief executive office and/or chief place of business of Seller or the location
of any records pertaining to the Bills, and/or (c) any change in company form or
status through merger or consolidation with or into any corporation or any sale,
lease, transfer or disposal of all or any substantial parts of its assets
whether now owned or hereafter acquired.
14. BANKRUPTCY. Seller agrees to notify SYSTRAN of any voluntary or
involuntary bankruptcy petition filed by or against it or any guarantor within
twenty-four (24) hours of such filing.
15. LITIGATION. Except as disclosed in writing, Seller represents and
warrants to SYSTRAN as follows: There are no suits or proceedings pending or to
the knowledge of Seller, threatened against or affecting Seller or any of its
subsidiaries which, if adversely determined, would have a material adverse
effect on the financial condition or business of Seller and its subsidiaries and
there are no proceedings by or before any governmental commission, board,
bureau, or other administrative agency pending or, to the knowledge of Seller,
threatened, against Seller or any of its subsidiaries. Further, Seller
represents and warrants there is no claim, loss contingency, or proceeding,
whether or not pending, threatened or imminent, against or otherwise affecting
Seller that involves the possibility of any judgment or liability not fully
covered by insurance or that may result in a material adverse change in the
business, properties, or condition, financial or otherwise, of Seller.
16. TRADE NAMES. Seller represents and warrants to SYSTRAN that it
utilizes no trade names in the conduct of its business except Individual
----------
Investor Group, Inc. and Ticker Magazine.
- ----------------------------------------------
17. TAXES. Seller represents and warrants to SYSTRAN that: Seller has
filed all federal, state, and local tax returns and other reports it is required
to file and has paid or made adequate provision for payment of all such taxes,
assessments, and other governmental charges.
18. NO CONSENT OR APPROVAL NEEDED. Seller represents and warrants to
SYSTRAN as follows: No consent or approval of any person, no waiver of any lien
or other similar right, and no consent, license, approval, authorization, or
declaration of any governmental authority, bureau, or agency is or will be
required in connection with the execution, delivery, performance, or
enforcement, validity or priority of this Agreement or any other agreement,
instrument, or document to be executed or delivered in connection herewith.
19. Term and Termination
This Agreement is for a term of two(2) year from the date that a duly authorized
representative of SYSTRAN executes this Agreement. The term of this Agreement
shall renew automatically for additional one (1) year terms unless sooner
terminated in accordance with the terms hereof. Seller may terminate this
Agreement effective at the end of any term by giving thirty(30) days prior
written notice to SYSTRAN at the address set forth in this Agreement. Seller may
continue to offer any of its Bills to SYSTRAN during such thirty(30) day period.
SYSTRAN may terminate this Agreement at any time and for any reason by notifying
Seller in writing of such termination.
All of Seller's representations, warranties, and other provisions of this
Agreement shall survive such termination until SYSTRAN has been paid in full and
Seller has fully performed all of its obligations. In addition, should any
transfer of money or property to SYSTRAN hereunder be avoided in a bankruptcy
proceeding involving Seller, any Account Debtor of Seller, or otherwise, then
Seller's obligations hereunder shall be reinstated and/or supplemented to the
extent of the avoided transfer, whether or not this Agreement has otherwise been
terminated.
Notwithstanding the foregoing, Seller has the option to terminate this Agreement
prior to the end of any term by giving SYSTRAN thirty (30) days prior written
notice. Seller may continue to offer any of its Bills to SYSTRAN during such
thirty (30) day period. Seller shall be deemed to have terminated this Agreement
prior to the end of any term on the date that Seller shall have ceased
presenting Bills to SYSTRAN in the normal course for an uninterrupted period of
thirty (30) days ("Deemed Termination"). Upon notice of early termination, or
the date of a Deemed Termination by Seller, prior to the end of any term,
whether or not Seller continues to offer its Bills to SYSTRAN during the thirty
(30) day notice period applicable to Seller, Seller shall be obligated to pay to
SYSTRAN, and Seller's deposit may be charged, an early termination premium
("Early Termination Premium") in an amount equal to two point one seven percent
( 2.17%) times the dollar volume of Bills purchased by SYSTRAN during the month
in which Seller's dollar volume of Bills purchased by SYSTRAN was the greatest
multiplied by the number of months remaining in the then current term, or eleven
(11) months, whichever is lower. Any partial month remaining in the current term
shall constitute a full month for the purpose of calculating the Early
Termination Premium. In addition, if SYSTRAN buys Bills from Seller as part of a
special purchase, and should Seller terminate this Agreement within the first
four (4) months of the term of this Agreement, Seller's Deposit shall be charged
an Early Termination Premium in the amount of the balance of the Deposit on the
termination date. The termination date shall be thirty (30) days after SYSTRAN'S
receipt of the termination notice or on the Deemed Termination date, unless a
termination notice specifies a date that is more than thirty (30) days but less
than sixty (60) days after SYSTRAN's receipt of the termination notice. If
SYSTRAN terminates this Agreement prior to the end of any term upon any default
in the performance of Seller under this Agreement, in view of the impracticality
and extreme difficulty in ascertaining actual damages and by mutual agreement of
the parties as to the reasonable calculation of SYSTRAN's lost profits as a
result thereof, Seller shall be obligated to pay SYSTRAN upon the effective date
of such termination, and Seller's deposit may be charged, a premium in an amount
equal to the Early Termination Premium as set forth above.
20. EVENTS OF DEFAULT. The following shall be events of default under the
terms of this Agreement: (a) default by Seller in the performance or payment,
when due or payable, of any obligation under this Agreement or any other
obligation of the Seller to SYSTRAN or any other financial institution or bank;
(b) Seller agrees to the appointment of a receiver for its assets, makes general
assignment for the benefit of creditors or declares that it is unable to pay its
debts as they mature; (c) Seller files a proceeding under any law for the relief
of Debtors, including but not limited to, Title 11 of the United States Code,
the so-called Bankruptcy Code or any other similar law which may exist; (d) any
involuntary petition under the Bankruptcy Code or similar statute has been filed
against the Seller and not dismissed within sixty (60) days after filing without
the entry of an order for relief; (e) the issuance of an attachment, execution,
tax assessment or similar process against the Seller or its property which is
not released within ten (10) days of its attachment; (f) any of the
representations and warranties in Section 7.1 of this Agreement were not true
with respect to any Bill at the time the Bill was sold to SYSTRAN or any other
representation or warranty in this Agreement was not true when made.
20.1. In addition to all other remedies provided by law, upon the
occurrence of an event of default and failure to cure same within ten (10)
business days of Seller's receipt of written notice thereof, SYSTRAN may upon
notice to the Seller immediately increase the amount of the deposit required
under Section 4 of this Agreement to one-hundred percent (100%) of the
outstanding amount of Bills purchased from the Seller, and the Seller shall
immediately deliver to SYSTRAN funds sufficient to create this one-hundred
percent (100%) deposit. If Seller shall fail to make any such payment, SYSTRAN
may immediately Chargeback to the Seller any or all of the Bills which SYSTRAN
has purchased from Seller, and Seller shall immediately pay to SYSTRAN the
amount of such Chargeback. Should Seller fail to make such payment, SYSTRAN may
seek payment of the deficiency from Seller and simultaneously collect all
Chargedback Bills until the deficiency is satisfied. The deficiency will bear
interest at the rate of prime plus four percent (4%) from the date it is
incurred. Prime shall be that rate announced by SYSTRAN's lender on the date of
the deficiency and may be adjusted with any change in the prime rate.
20.2 In addition to all other remedies provided by law, upon the
occurrence of an Event of Default and failure to cure same within ten (10)
business days of Seller's receipt of written notice thereof, SYSTRAN, upon
application to a court of competent jurisdiction and without the necessity of
posting a bond or undertaking, shall be entitled as a matter of strict right,
without notice and without regard to the value of any Bills or the solvency of
any party bound for payment of the Bills, to injunctive relief to enforce the
terms of this Agreement and to the appointment of a Receiver to (a) take
possession of, collect and apply the proceeds of Bills, and take any and all
actions deemed appropriate by such Receiver to enforce such Bills, and/or (b)
enter upon the business premises of, take possession of and operate the Seller
and all of its assets including, without limitation, taking any and all actions
deemed appropriate, for the protection, possession, control, management and
operation of the Seller's business, its assets and the Bills. Seller hereby
acknowledges and agrees that if an Event of Default occurs and continues for a
period of more than ten (10) business days after the Seller's receipt of written
notice of such default, (a) the Bills and the proceeds of the same are then in
danger of being lost, removed or materially injured; and (b) the Seller is
insolvent, or in imminent danger of insolvency. Seller unconditionally consents
to the appointment of a receiver as provided herein. The receiver shall have all
of the rights and powers permitted under the laws of any state wherein any asset
of the Seller is situated. Seller will pay SYSTRAN upon demand all expenses,
including receiver's fees, attorney's fees, costs and agent's compensation,
incurred pursuant to this paragraph, and any such amounts paid by SYSTRAN shall
be secured by the security interest granted herein. Further, Seller expressly
consents that the receiver appointed under this paragraph may be SYSTRAN or one
of SYSTRAN's employees, representatives or attorneys. Nothing herein requires
SYSTRAN to seek the appointment of a receiver or injunctive relief, nor does
this paragraph in any way diminish SYSTRAN's right under paragraph 8 or any
other provision of this Agreement or under applicable law.
21. EXPENSES OF ENFORCEMENT. With respect to any default under this
Agreement, Seller shall reimburse SYSTRAN for all costs and expenses, including
reasonable attorneys', paralegals', accountants', and other experts and
professional fees and all other fees and costs reasonably and actually incurred
in connection with the default, or in the event that a suit, action,
arbitration, or other proceeding of any nature, including, without limitation,
any proceeding under the united States Bankruptcy Code, any action seeking a
declaration of rights or an action for rescission is instituted to interpret or
enforce this Agreement, including, but not limited to such fees and cost
associated with trial and appeals.
22. JURISDICTION AND VENUE. This Agreement shall be deemed to be a
contract under the laws of the State of Oregon and for all purposes shall be
governed by and construed in accordance with the laws of that state. Seller
irrevocably agrees that any legal action or proceeding brought by or against
Seller with respect to the Agreement will be brought in the courts of the State
of Oregon or in the U.S. District Court for the District of Oregon. Seller
consents to the jurisdiction of such courts. This provision shall not limit the
right of SYSTRAN to bring such actions or proceedings against Seller in the
court of such other states or jurisdictions where Seller may be subject to
jurisdiction. Seller expressly authorizes service of process in any such suit or
action on its behalf upon Registered Agent: , at (address) or upon such other
agent as SYSTRAN may approve in writing, as its agent for such purposes.
23. WAIVER, NOTICE. The waiver by SYSTRAN of the breach of any term of
this Agreement or of the compliance therewith shall not be construed as a waiver
of any other breach or compliance. Notices from either party to the other shall
be given in writing and mailed postage prepaid, registered or certified mail, or
placed in the hands of a national overnight delivery service, addressed to the
addresses set forth opposite each party's name below, or at such other address
as either party may hereafter advise the other in writing.
24. ASSIGNMENT. Seller may not assign any of its rights or obligations
hereunder. SYSTRAN may assign or grant a security interest in this Agreement or
in any Bills purchased by SYSTRAN without Seller's consent. SYSTRAN may assign
any of its rights and remedies with respect to such Bills including the right to
notify Debtors to make payment to SYSTRAN's assignee.
25. SEVERABILITY. The provisions of this Agreement are severable and if
any of these provisions shall be held by any court of competent jurisdiction to
be unenforceable such holding shall not affect or impair any other provisions
hereof.
26. COMPLETE UNDERSTANDING. This Agreement comprises the complete
understanding among the parties and may only be varied by a writing executed by
the parties hereto. Paragraph headings are for convenience only.
27. NO OFFER/COMMITMENT. The presentation of this Agreement to Seller
does not constitute either an offer or commitment to purchase Bills or to extend
to Seller credit of any kind.
Executed this 1st day of August, 2000.
Individual Investor Group, Inc.
By: /s/ Jonathan Steinberg
-----------------------
(Signature)
Title:
Address: 125 Broad Street, 14th Floor
New York, NY 10004
================================================================================
(To be filled in by Notary Public)
State of New York
County of New York
On this 1st day of August, 2000, before me personally appeared Jonathan
Steinberg, whose identity is personally known to me (or proved to me on the
basis of satisfactory evidence) and who by me duly sworn, (or affirmed), did say
that he (she) is the CEO (title or office) of the Individual Investor Group,
Inc. , and that said document was signed by him (her) in behalf of said
corporation by authority of its bylaws or of a Resolution of its Board of
Directors, and acknowledged to me that said corporation executed the same.
My Commission Expires: /s/ Oliver Demassis
-----------------------------
(Signature of Notary Public)
10/14/2000
Accepted:
SYSTRAN Financial Services Corporation Address: 4949 SW Meadows Rd. Suite 500
Lake Oswego, Oregon 97035
By: /s/ Post Office Box 3289
------------------------------------------- Portland, Oregon 97208-3289
(Signature)
EXHIBIT "A"
In addition to the fee charged in Paragraph 3, SYSTRAN shall charge and Customer
shall pay a fee at an annual rate equal to prime plus one point five (1.5%) of
all funds employed to purchase Bills. Prime is defined as the prime rate as
announced by Wells Fargo Bank, N.A. Funds employed shall be calculated by
SYSTRAN on a daily basis based upon bills unpaid and outstanding, less the
deposit. Customer shall pay the factoring fee from payments due Customer or may
bill Customer. A change in the factoring fee due to a prime rate change will be
effective upon the date of the change, which will be indicated on the settlement
statement.
Individual Investor Group, Inc.
By:
Title: /s/ Jonathan Steinberg, CEO
Date: 8-1-00
----------
ADDENDUM TO FACTORING AGREEMENT
This is an Addendum to the Factoring Agreement (the "Agreement"), dated 8-1,
2000 between SYSTRAN Financial Services Corporation ("SYSTRAN") and Individual
Investor Group Inc. (the "Customer").
Paragraph 19 Entitled "Term and Termination" is hereby amended in the following
particulars only:
In the event of a sale of all or substantially all of a Customer's assets or
merger or consolidation with or into any corporation or sales of securities
requiring stockholder's approval in accordance with rules and regulations of the
NASDAQ stock market at anytime during the initial twenty-four (24) month term of
the Factoring Agreement and the Factoring Agreement is terminated as a result,
Systran Financial Services Corporation agrees to accept the lesser of (1) Twenty
Thousand Dollars ($20,000.00) or, (2) the actual Early Termination Fee
contemplated by the calculation method set forth in Paragraph 19 to the
Agreement. This Addendum shall only apply in the event of a sale of the
Customer's business for the reasons set forth above and resulting termination of
the Factoring Agreement. If termination should occur for any other reason the
full Early Termination Fee shall apply.
The parties Acknowledge and Agree to the terms of this Addendum and
incorporate the terms of this Addendum into the Factoring Agreement.
COMPANY NAME
By: /s/ Jonathan Steinberg
Title: CEO
Dated: August 1, 2000
SYSTRAN FINANCIAL SERVICES CORPORATION
By: /s/
Title: President
Dated: August 1, 2000
ADDENDUM - MINIMUM PURCHASE
This Addendum modifies the Factoring Agreement dated Aug 1, 2000
-----------
between SYSTRAN Financial Services Corporation ("SYSTRAN") and
Individual Investor Group Inc. ("Seller")(the "Factoring Agreement").
- -------------------------------
Paragraph 19 Entitled "Term and Termination" is hereby amended in the
following particulars only:
In the event of a sale of all or substantially all of a Customer's assets or
merger or consolidation with or into any corporation or sales of securities
requiring stockholder's approval in accordance with rules and regulations of the
NASDAQ stock market at anytime during the initial twenty-four (24) month term of
the Factoring Agreement and the Factoring Agreement is terminated as a result,
Systran Financial Services Corporation agrees to accept the lesser of the (1)
Seventy-Five Thousand Dollars ($75,000.00) or, (2) the actual Early Termination
Fee contemplated by the calculation method set forth in Paragraph 19 to the
Agreement. This Addendum shall only apply in the event of a sale of the
Customer's business for the reasons set forth above and resulting termination of
the Factoring Agreement. If termination should occur for any other reason the
full Early Termination Fee shall apply.
The parties Acknowledge and Agree to the terms of this Addendum and
incorporate the terms of this Addendum into the Factoring Agreement.
Individual Investor Group, Inc.
By: /s/ David H. Allen
Title: VP/CFO
Dated: 8-02, 2000
SYSTRAN FINANCIAL SERVICES CORPORATION
By:
Title:
Dated:
29223.2
ADDENDUM - MINIMUM PURCHASE
This Addendum modifies the Factoring Agreement dated August 1, 2000,
--------------
between SYSTRAN Financial Services Corporation ("SYSTRAN") and Individual
----------
Investor Group, Inc. ("Seller")(the "Factoring Agreement").
- ---------------------------
Paragraph 3.1 of the Factoring Agreement is deleted and replaced by the
following:
3.1. MINIMUM VOLUME AND FEE. Seller agrees to sell to SYSTRAN a minimum of
$750,000.00 in Bills per month. In the event that Seller fails to sell to
SYSTRAN a minimum of $750,000.00 in Bills in any month, Seller shall pay to
SYSTRAN a minimum fee equal to the difference between $16,275.00 ($750,000.00 X
2.17%) and the actual fee paid for the Bills purchased by SYSTRAN during the
month. Any fee owing by Seller pursuant to this paragraph may be deducted from
Seller's funding. In the event that Seller fails to sell $750,000.00 in Bills
per month for each of two consecutive months, Seller's fee will automatically be
increased at the beginning of the third month. The minimum fee after the
increase will be 2% over the current service fee. The fee will be automatically
lowered to the last fee in effect should Seller's monthly purchase volume exceed
$750,000.00 per month for each of two consecutive months.
The parties Acknowledge and Agree to the terms of this
Addendum and incorporate the terms of this Addendum into the Factoring
Agreement.
Individual Investor Group, Inc.
By: /s/ Jonathan Steinberg
Title: CEO
Dated: August 1, 2000
SYSTRAN FINANCIAL SERVICES CORPORATION
By: /s/
-------
Title: President
Dated: August 1, 2000
AMENDMENT
TO
FACTORING AGREEMENT
This Amendment to the Factoring Agreement dated as of August 1, 2000 ("Factoring
Agreement") between SYSTRAN Financial Services Corporation ("SYSTRAN") and
Individual Investor Group, Inc. ("Seller") is executed as of October 6, 2000.
Terms not otherwise defined herein shall have the meanings provided in the
Factoring Agreement.
1. Section 5 is amended as follows: The entire section is deleted and
in its place is inserted:
5. SECURITY INTEREST. The purchase of the Bills of Seller by
SYSTRAN is absolute subject to the right to Chargeback. In addition to the
outright ownership of those Bills purchased by SYSTRAN, to secure the payment
and performance of indebtedness and obligations of Seller to SYSTRAN now
existing and hereafter arising, SYSTRAN shall have and is hereby granted a
present continuing security interest in all Bills, accounts and accounts
receivable of Seller, whether now existing or hereafter created, together with
all guaranties, securities, books and records, accounts, correspondence, and
documents with respect to such Bills, and, in addition, Seller hereby grants
SYSTRAN a security interest in the deposit provided for in Section 4 above, all
of Seller's inventory, contract rights, general intangibles, money, instruments,
documents, chattel paper, securities, credits, claims and demands against
SYSTRAN or others, and all other goods and personal property of all kinds
belonging to the Seller, whether presently existing or hereafter acquired,
together with any proceeds, products, excluding therefrom the specific items set
forth in Schedule A.
2 All other terms of the Factoring Agreement shall remain in ful
force and effect without modification.
SYSTRAN FINANCIAL SERVICES CORPORATION
By: /s/
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Gregory Barton
Gregory Barton
VP
Schedule A
Securities of other companies owned by Individual Investor Group, Inc.
("Seller")
Seller's Internet websites, including without limitation, Individualinvestor.com
and Insidertrader.com
Seller's intellectual property, including without limitation, trademarks,
servicemarks, licenses, copyrights and internet domain names
Seller's publications, including without limitation Individual Investor
magazine, Ticker magazine and Special Situations Report newsletter
Seller's INDI SmallCap 500(TM) Index
Seller's Nasdaq trading symbol, INDI
Seller's office furniture and equipment
All proceeds of the foregoing
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
September 28, 2000 (the "Effective Date") between INDIVIDUAL INVESTOR GROUP,
INC., a Delaware corporation with executive offices at 125 Broad Street, New
York, New York 10004 ("Seller"), and 123JUMP.COM, INC., a Florida corporation
with executive offices at 407 Lincoln Road, Suite 12D, Miami Beach, Florida
33139 ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser
wishes to purchase, substantially all of the assets and business of Ticker
magazine ("Ticker"), subject to the exceptions specified herein, on and subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Transferred Assets. Purchaser hereby agrees to purchase,
and Seller hereby agrees to sell, convey, assign, transfer and deliver to
Purchaser, all of Seller's right, title and interest in and to all of the assets
of Ticker, including without limitation, the following assets (the "Transferred
Assets"), subject to the exclusions set forth in Section 1.2 and Section 1.3:
(a) copies of all past issues of Ticker, in print and, where
available, in electronic format, and all work-in-process related to the next
issue of Ticker to be published (including without limitation electronic files
of text and graphics, and any pages of such issue that may have been printed);
(b) the rights of Seller under all open purchase and sale
orders, subscriptions, contracts, agreements, understandings, leases and
licenses to the extent related specifically to Ticker, including without
limitation those listed or described on Schedule 1.1 (collectively, the
"Assigned Agreements");
(c) Intellectual Property (as such term is defined in Section
3.11) owned by Seller relating specifically to Ticker, including without
limitation the internet domain names listed on Schedule 3.11(a), and any rights
or licenses held thereby with respect to such Intellectual Property owned by
others;
(d) all prepaid expenses and deposits to the extent related
specifically to Ticker;
(e) all existing past and current advertiser, customer,
circulation, subscription, promotional and mailing lists, materials and records,
manuscripts, editorial, art work and photographic material, marketing studies
and reports, media kits, telephone numbers, and copies of all books and records
to the extent specifically related to Ticker, the Transferred Assets and the
obligations and liabilities of Seller assumed by Purchaser hereunder (including
all customer files, supplier records and records relating to accounts payable),
but in any event excluding the tax and accounting books of Seller;
(f) the goodwill associated with Ticker; and
(g) the computer hardware and related equipment specifically
related to Ticker;
all as the same exist on the Closing Date (as defined below).
1.2 Excluded Assets. Notwithstanding anything to the contrary
herein, the Transferred Assets to be sold, conveyed, assigned, transferred and
delivered hereunder shall not include:
(a) any cash, cash equivalents or accounts receivable of
Seller;
(b) any assets or rights of Seller to the extent not
exclusively related to Ticker; and
(c) any other excluded assets listed on Schedule 1.2 attached
------------
hereto.
1.3 Notwithstanding anything to the contrary herein, no
contract or agreement which is by law not assignable without the consent of any
party thereto shall be deemed assigned pursuant to this Agreement unless and
until such consent is given.
1.4 The excluded items referred to in Section 1.2 and Section
1.3 are sometimes collectively referred to herein as the "Excluded Assets."
2. Consideration.
2.1 Purchase Price; Adjustments.
(a) As consideration for the sale, conveyance, assignment,
transfer and delivery of the Transferred Assets, contemplated by Section 1,
Purchaser agrees to pay to Seller SIX MILLION U.S. DOLLARS ($6,000,000) (the
"Purchase Price").
(b) At the Closing (as defined below), Purchaser shall pay to
Seller (i) the Purchase Price plus (or minus) (ii) the Current Asset Adjustment
(as defined below). For purposes of this Agreement, the "Current Asset
Adjustment" shall mean the difference between (x) the prepaid expenses and
deposits to the extent specifically related to Ticker (for avoidance of doubt,
this amount excludes cash, cash equivalents and account receivables), minus (y)
the current liabilities of Ticker (excluding any deferred subscription liability
and deferred advertising revenues and liabilities for taxes), all as determined
in accordance with generally accepted accounting principles consistently applied
("GAAP"). The Current Asset Adjustment shall be reasonably estimated by Seller
and reasonably approved by Purchaser approximately three days prior to the
Closing and set forth on a schedule (the "Closing Current Asset Schedule"). The
estimated Current Asset Adjustment shall be subject to adjustment in accordance
with Section 2.3.3.
2.2 Liabilities Assumed. As additional consideration for the
sale, conveyance, assignment, transfer and delivery of the Transferred Assets,
Purchaser hereby assumes and agrees to pay, perform and discharge the following
liabilities of Seller (the "Assumed Liabilities"), as and when due, and shall
hold Seller harmless therefrom:
(a) current liabilities (other than Excluded Liabilities)
reflected on the Interim Balance Sheet (as defined in Section 3.7(b)) or
incurred by Seller, in the ordinary course of business, following the date
thereof through the Closing Date, to the extent specifically related to Ticker;
(b) payroll liabilities to employees of Seller and consulting
fees for services rendered on or after the Effective Date and prior to the
Closing Date, to the extent specifically related to Ticker; and
(c) Seller's obligations to be performed after the Closing
Date under the Assigned Agreements and Prepaid Advertising Agreements (as
defined on Schedule 1.1) and under all subscriptions for Ticker.
In no event shall Purchaser assume or be deemed to have assumed any other debts,
obligations, liabilities or commitments of Seller ("Excluded Liabilities"),
including, without limitation, any:
(i) liability for any federal, state or local taxes of Seller;
(ii) liability which constitutes a breach of, or is
inconsistent with, the representations, warranties and agreements of Seller set
forth in this Agreement;
(iii) liability of Seller for any expenses incurred in
negotiating, preparing or consummating the transactions contemplated by this
Agreement; or
(iv) other liability of Seller not expressly assumed by
Purchaser pursuant to this Section 2.2.
2.3 Closing; Deliveries. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Graubard Mollen & Miller, counsel for Seller, at 10:00 am New York City time
on September 28, 2000 or such other date as may be mutually agreed upon in
writing by the parties hereto (the "Closing Date"). The following instruments,
agreements and other documents shall be executed and delivered at the Closing
and all such documents shall be deemed delivered simultaneously and all
transactions contemplated thereby shall be deemed to take place simultaneously,
and no such document shall be deemed delivered until all such transactions are
completed and all such documents are delivered except for the execution and
delivery of this Agreement:
2.3.1 The following deliveries will be made by Purchaser to
Seller at the Closing:
(a) by wire transfer of good funds of, the Purchase Price,
together with (or net of, as the case may be) the Current Asset Adjustment, to
the following account: FLEET NATIONAL BANK, ABA ROUTING NO. 011500010, CREDIT
TO: FLEET INVESTMENT MANAGEMENT # 0501 246 729, FURTHER CREDIT: INDIVIDUAL
INVESTOR GROUP, INC., ACCOUNT NO. 0000356755;
(b) an instrument of assignment and assumption dated the
Closing Date substantially in the form of Exhibit A hereto (the "Assumption
Agreement"), duly executed by Purchaser;
(c) the certificate of an officer of Purchaser referred to in
Sections 6.2(a) and 6.2(b).
(d) (i) a recently dated Certificate of the Secretary of State
of the State of Florida attaching and certifying as true and correct a copy of
the Certificate of Incorporation, as amended, of Purchaser; (ii) a recently
dated Certificate of the Secretary of State of the State of Florida evidencing
the good standing of Purchaser under the laws of such jurisdiction; and (iii) a
recently dated Certificate of the Secretary of Purchaser attaching and
certifying as true and correct copies of (A) Purchaser's By-laws, as amended and
(B) resolutions adopted by Purchaser's Board of Directors authorizing the
execution and delivery of, and performance of Purchaser's obligations under,
this Agreement and the other agreements and instruments to be executed and
delivered in accordance with this Agreement (the "Additional Agreements");
(e) an opinion of Kilpatrick Stockton LLP, counsel for
Purchaser, dated the Closing Date substantially to the effect set forth in
Exhibit B hereto; and ---------
(f) such other certificates and documents as may be reasonably
requested by Seller or its counsel.
2.3.2 The following deliveries will be made by Seller to
Purchaser at the Closing:
(a) the estimated Closing Current Asset Schedule;
(b) the Assumption Agreement and a bill of sale and power of
attorney dated the Closing Date substantially in the form of Exhibit C hereto
(the "Bill of Sale"), duly executed by Seller;
(c) the certificate of an officer of Seller referred to in
Sections 6.1(a) and 6.1(b);
(d) (i) a recently dated Certificate of the Secretary of State
of the State of Delaware attaching and certifying as true and correct a copy of
the Restated Certificate of Incorporation, as amended, of Seller; (ii) a
recently dated Certificate of the Secretary of State of the State of Delaware
evidencing the good standing of Seller under the laws of such jurisdiction; and
(iii) a recently dated Certificate of the Secretary of Seller attaching and
certifying as true and correct copies of (A) Seller's By-laws and (B)
resolutions adopted by Seller's Board of Directors authorizing the execution and
delivery of, and performance of Seller's obligations under, this Agreement and
the Additional Agreements; and
(e) an opinion of Graubard Mollen & Miller, counsel for
Seller, dated the Closing Date substantially to the effect set forth in Exhibit
D hereto.
2.3.3 Post-Closing Adjustment to Current Asset Adjustment.
(a) Not more than one hundred and twenty (120) calendar days
after the Closing Date, Purchaser shall furnish to Seller a draft of the final
Current Asset Schedule, with appropriate back-up, prepared in accordance with
GAAP. Seller shall, within thirty (30) calendar days thereafter, give Purchaser
written notice (the "Current Asset Schedule Notice") setting forth any issues
that Seller may have relating to such schedule and the calculation of the
Current Asset Adjustment as reflected thereon, and the parties shall resolve any
outstanding issues not later than fifteen (15) calendar days after Seller gives
the Current Asset Schedule Notice. If Purchaser and Seller fail to reach
agreement as to the final Current Asset Adjustment within such fifteen (15)
calendar day period, either Seller or Purchaser or both of them jointly may
submit the dispute to a partner in the New York office of PriceWaterhouse
Coopers LLP (the "Auditor") for resolution. The Auditor shall provide Purchaser
and Seller with the opportunity to present their respective positions with
respect to the dispute and the Auditor shall notify Purchaser and Seller in
writing of its determination within sixty (60) calendar days after Seller gave
the Current Asset Schedule Notice. The determination of the Auditor shall be
conclusive and binding on Purchaser and Seller, and shall be made on the basis
of GAAP consistently applied. In making such determination, the Auditor shall be
deemed to act as an expert and not as an arbitrator. The charges for the
Auditor's services hereunder - which shall not exceed five thousand dollars
($5,000) - shall be borne by Purchaser and Seller in the proportions determined
by the Auditor on the basis that each party shall bear the cost of the Auditor's
services which relate to the amount of the disputed items that are resolved
against it, which determination by the Auditor shall be binding on all parties
hereto.
(b) Within ten (10) calendar days after the Auditor gives
written notice of its determination, Seller or Purchaser, as applicable, shall
make such payment to the other as may be necessary to adjust the amount
delivered at Closing to equal the amount so determined.
2.3.4 Allocation of Purchase Price. Promptly following the
Closing Date, the parties shall, in consultation with each other, prepare an
Allocation Schedule allocating the consideration paid by Purchaser to Seller for
the Transferred Assets and each party shall timely file Internal Revenue Service
Form 8594 consistent with such Allocation Schedule.
3. Representations and Warranties of Seller.
Seller represents and warrants to Purchaser, as of the date
hereof and as of the Closing Date, as follows:
3.1 Due Incorporation and Qualification of Seller;
Investments.
(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. Seller is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which ownership or leasing of its properties or the character of its operations
requires such qualification, except where the failure to qualify would not have
a material adverse effect on the business, financial condition or results of
operations of Ticker or on the Transferred Assets considered as a whole (such a
material adverse effect with respect to Ticker or the Transferred Assets being
hereinafter referred to as a "Material Adverse Effect"). Seller has full
corporate power and authority to own, lease and operate its properties and to
carry on its business in the places and in the manner currently conducted.
(b) None of the Transferred Assets includes any capital stock
or other equity or ownership or proprietary interest in any corporation,
association, trust, partnership, joint venture or other person.
3.2 Authority; Due Authorization; Valid Obligation.
(a) Seller has all requisite corporate power and authority to
execute and deliver this Agreement and the Additional Agreements and to
consummate the transactions contemplated hereby and thereby. Seller has taken
all corporate action necessary for the execution and delivery by it of this
Agreement and the Additional Agreements and for the consummation of the
transactions contemplated hereby and thereby.
(b) This Agreement and the Additional Agreements constitute
the valid and binding obligations of Seller and are enforceable against Seller
in accordance with their respective terms, except as may be limited by
principles of equity or by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally.
3.3 No Conflicts or Defaults. The execution and delivery by
Seller of this Agreement and the Additional Agreements and the consummation of
the transactions contemplated hereby and thereby do not (a) contravene Seller's
Certificate of Incorporation or By-laws or (b) with or without the giving of
notice or the passage of time, or both, violate or conflict with, or result in a
breach of, or a default or loss of rights under, any material agreement,
mortgage, indenture, lease, instrument, permit or license to which Seller is a
party or by which Seller or any of the Transferred Assets are bound, or any
judgment, order, decree, law, rule or regulation to which Seller or any of the
Transferred Assets are subject, except any such violation, conflict, breach,
default or loss of rights as would not have a Material Adverse Effect.
3.4 Authorizations. Except as set forth in Schedule 3.4, no
authorization, approval, order, license, permit or consent of, or filing or
registration with, any court or governmental authority, or consent of any other
party, is required in connection with the execution, delivery and performance by
Seller of this Agreement or the Additional Agreements.
3.5 Transferred Assets. Seller has, and will deliver to
Purchaser at the Closing, good and marketable title to the Transferred Assets,
free and clear of all encumbrances, liens, charges or other restrictions of any
kind or character (collectively, "Liens"), except for (a) Liens for current
taxes, assessments or governmental charges or levies on property not yet due and
delinquent or if Seller shall currently be contesting the validity thereof in
good faith; (b) Liens consisting of (i) pledges or deposits to secure
obligations of Seller under workmen's compensation or other similar laws; (ii)
pledges or deposits to secure performance in connection with bids, tenders,
contracts or leases entered into in the ordinary course of business to which
Seller is a party; (iii) deposits to secure public or statutory obligations of
Seller; (iv) property acquired in the ordinary course of business subject to
leases or purchase money security interests; or (v) mechanics', carriers',
workmen's, repairmen's or other like Liens arising or incurred in the ordinary
course of business or deposits to obtain the release of such Liens; (c) Liens
arising pursuant to any Assigned Agreements; (d) such Liens, easements and
imperfections of title, if any, as will not materially interfere with the
operation of Ticker by Purchaser; and (e) as of the Closing Date, any liens
incurred by Purchaser. The equipment, furniture, fixtures and leasehold
improvements included in the Transferred Assets are generally in good operating
condition and a good state of maintenance and repair, reasonable wear and tear
excepted, and are suitable for use in the operation of Ticker as currently
conducted.
3.6 Litigation. Except as set forth on Schedule 3.6, there is
no claim, action, suit, proceeding, investigation or criminal proceeding, at law
or in equity, before any national, state or provincial, local or other
governmental authority, court, arbitration tribunal or other forum
(collectively, "Proceedings") relating specifically to Ticker or the Transferred
Assets or to the transactions contemplated by this Agreement or the Additional
Agreements pending against Seller, nor has Seller received notice of any
threatened such Proceedings.
3.7 Financials.
(a) The unaudited pro forma income statements of Ticker as of
and for the years ended December 31, 1996 through 1999, and for the period
January 1 through July 31, 2000 (the "Financial Statements"), previously
delivered to Purchaser were prepared in accordance with GAAP applied on a
consistent basis by Seller, are reconcilable to the books and records of Seller
and present fairly the results of operations of Ticker for the periods then
ended, except for the omission of (i) general and administrative expenses, (ii)
depreciation and amortization expenses, (iii) footnote information and (iv)
year-end audit adjustments which are not, singly or in the aggregate, expected
by Seller to be material.
(b) As of August 31, 2000 (the "Interim Balance Sheet Date"),
with respect to Ticker, Seller had no material liabilities or obligations of a
nature required by GAAP to be reflected on a balance sheet ("Liabilities"),
except as set forth or reflected on the unaudited pro forma balance sheet of
Seller as of the Interim Balance Sheet Date, included in the Financial
Statements (the "Interim Balance Sheet"), or as disclosed in this Agreement or a
Schedule to this Agreement. Since the Interim Balance Sheet Date, with respect
to Ticker, Seller has not incurred any Liabilities other than in the ordinary
course of business, or any Liabilities which, individually or in the aggregate,
have had or are likely to have a Material Adverse Effect. All such Liabilities
incurred since the Interim Balance Sheet Date are fully reflected or reserved on
the books and records of Seller.
(c) Except as reflected on Schedule 3.7(c), Seller has not
billed in advance, nor has it been paid in advance by, any advertiser with
respect to advertising contemplated for inclusion in any issue of Ticker.
3.8 Locations; Leases. Set forth on Schedule 3.8 is an
accurate and complete list of all locations maintained by Seller in connection
with Ticker including, without limitation, office, warehouse and home office
locations (each, a "Location") and the leases for each of the Locations other
than 125 Broad Street, 14th Floor, New York, New York 10004 (the "Location
Leases"). The Transferred Assets do not include any fee interest in any real
property, in whole or in part.
3.9 Agreements.
3.9.1 Schedule 3.9.1 contains an accurate and complete list
(broken down by category) as of the dates set forth thereon of all of the
following types of agreements, contracts or commitments (collectively, the
"Material Agreements") which directly relate to the Transferred Assets or the
operation of Ticker and under which Seller has material unperformed obligations
or rights as of the date hereof, including without limitation, any:
(a) material agreement or contract not made in the ordinary
course of business;
(b) employment agreement, employment contract, consulting
agreement or independent sales representative agreement that is not terminable
at will by Seller;
(c) covenant not to compete;
(d) agreement or contract between Seller and any officer,
director or employee (other than employment agreements covered by clause (b)
above);
(e) (i) lease or similar agreement under which (A) Seller is
lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by a third party or (B) Seller is a lessor or sublessor
of, or makes available for use by any third party, any tangible personal
property owned or leased by Seller, or (ii) continuing contract for the future
purchase of materials, printing or other services, supplies or equipment in any
such case which has an aggregate future liability in excess of ten thousand
dollars ($10,000) and which is not terminable by Seller for a cost of less than
ten thousand dollars ($10,000);
(f) material license or other agreement relating in whole or
in part to trademarks, trade names, service marks or copyrights used in Ticker
(including, without limitation, any license or other agreement under which
Seller has the right to use any of the same owned or held by a third party);
(g) agreement or contract under which Seller has borrowed or
loaned any money or issued any note, bond, indenture or other evidence of
indebtedness or directly or indirectly guaranteed indebtedness, liabilities or
obligations of others for the benefit of Seller (other than endorsements for the
purpose of collection in the ordinary course of business);
(h) mortgage, pledge, security agreement, deed of trust or
other document granting a Lien (including liens upon properties acquired under
conditional sales, capital leases or other title retention or security devices)
on any of the Transferred Assets; and
(i) other agreement, contract, lease, license, commitment or
instrument to which Seller is a party or by or to which it or any of its assets
or business is bound or subject which has an aggregate future liability in
excess of ten thousand dollars ($10,000) and is not terminable by Seller for a
cost of less than ten thousand dollars ($10,000).
3.9.2 Each of the Assigned Agreements is legal, valid, binding
and enforceable against the parties thereto in accordance with its terms in all
material aspects, except as may be limited by principles of equity or by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and is in full force
and effect on the date hereof, and except that enforceability of non-competition
agreements and indemnification are subject to the discretion of a court of
competent jurisdiction and principles of public policy. Seller has performed in
all material respects all obligations required to be performed by it to date
under, and is not in default in any material respect in respect of, the Assigned
Agreements, and no event has occurred which, with due notice or lapse of time or
both, would constitute a default in any material respect of the Assigned
Agreements. Except as set forth on Schedule 3.9.2, to Seller's knowledge, no
other party to any Assigned Agreement is in default in respect thereof in any
material respect, and no event has occurred which, with due notice or lapse of
time or both, would constitute a default in any material respect of the Assigned
Agreements. Seller has made available to Purchaser or its representatives true
and complete originals or copies of all written Assigned Agreements, other than
purchase orders and the like.
3.9.3 Seller is not a party to any union or collective
bargaining contracts with respect to any employees of Seller and there has not
been, nor has Seller received written notice threatening, any representational
or organizational activity, strike, slowdown, picketing or work stoppage by any
union or other group of employees against Seller.
3.10 Permits; Compliance with Law. Set forth on Schedule 3.10
hereto is a list of permits, certificates, licenses, approvals and other
authorizations of governmental and tribal authorities (collectively, "Permits")
obtained by Seller and/or its employees relating to Ticker. To Seller's
knowledge, Seller is in compliance in all material respects with the terms of
each of such Permits. Seller has not received notice of any claim arising out of
the failure to obtain any Permit. To Seller's knowledge, Ticker has not been,
and is not being, conducted in violation of any law, ordinance, rule or
regulation, except for violations that, individually or in the aggregate, do
not, and are not likely to, have a Material Adverse Effect.
3.11 Intellectual Property; Computer Software. (a) Set forth
in Schedule 3.11(a) is a list of all patents, trademark and trade name
registrations and copyright registrations, including any applications therefor
or continuations or reissues thereof, owned or used by Seller exclusively in
Ticker (collectively, "Intellectual Property"). Except as set forth in Schedule
3.11(a), none of the products or services sold or otherwise furnished by Seller
related to Ticker infringes any patent, trademark, trade name, trade secret or
other proprietary right of any third party. Seller owns or has the unrestricted
right to use all Intellectual Property required by or used in Ticker. Seller has
not received notice of any claims that it or its Intellectual Property has
infringed the rights of others, and Seller is not aware of any infringement of
Seller's Intellectual Property by others.
(b) Set forth in Schedule 3.11(b) is a list of the principal
----------------
software packages utilized by Seller in connection with Ticker.
3.12 Insurance. Set forth on Schedule 3.12 hereto is a
complete list of insurance policies which Seller maintains relating to the
Transferred Assets or to Ticker. Such policies are in full force and effect and
Seller has received no notice of cancellation relating to any such policies.
3.13 Environmental. Seller has obtained all Permits it is
required by applicable law relating to pollution or protection of the
environment to obtain in connection with Ticker. Seller is in compliance with
all terms and conditions of such Permits and has complied with all other
provisions of such laws except such failures of compliance as would not, singly
or in the aggregate, have a Material Adverse Effect. To the knowledge of Seller,
there are no conditions, circumstances, activities, practices, incidents,
actions or plans which would be reasonably likely to interfere with or prevent
compliance or continued compliance with any such laws, or which may give rise to
common law or other legal liability on the part of Seller in connection with
Ticker for pollution or abatement thereof, including, without limitation,
liability under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or similar territorial or local laws except such
failures of compliance as would not, singly or in the aggregate, have a Material
Adverse Effect.
3.14 Ordinary Course; No Material Adverse Effect. Since the
Interim Balance Sheet Date, Seller has operated Ticker and maintained the assets
of Ticker substantially in the same manner as previously operated or maintained
and solely in the ordinary course and, since such date, (a) there has not been
any material adverse change in the business, financial condition or results of
operations of Ticker or the Transferred Assets, considered as a whole, and (b)
Seller has not sold, encumbered or committed to sell or encumber any of the
material assets or properties of Ticker, other than the sale of inventory in the
ordinary course of business and the pledge of its accounts receivable. Since the
Interim Balance Sheet Date, Seller has:
(i) carried on Ticker in the regular course and substantially
in the same manner as heretofore carried on by it;
(ii) satisfied in all material respects, obligations under all
material agreements and commitments related to Ticker; and
(iii) maintained its books of account and records for Ticker in the usual,
regular and ordinary manner in accordance with GAAP applied on a consistent
basis.
3.15 Disclosure. This Agreement and the Additional Agreements,
together with any Schedule or certificate required to be delivered under this
Agreement which has been supplied by or on behalf of Seller in connection with
the transactions contemplated hereby and thereby, as of their respective dates,
as supplemented by information more recently furnished by Seller in writing and
taken as a whole, do not contain an untrue statement of a material fact, or omit
any statement of a material fact required to be stated or necessary in order to
make the statements contained herein or therein not misleading. Seller makes no
representation or warranty with respect to any information contained in the
Confidential Memorandum, dated June 2000, prepared by the Jordan Edmiston Group,
Inc. regarding Ticker, except the Seller represents that the financial
projections and estimates included in such document represent estimates prepared
in good faith by management of Seller in consultation with its financial
advisors, based upon and subject to the assumptions and qualifications
accompanying such projections and/or estimates.
3.16 Employee Relations. Seller is not a party to any
collective bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of Seller. To the
knowledge of Seller, there have been no labor organization activities involving
any of the employees of Seller during the last five years. All persons who
perform services exclusively for Ticker are terminable at will. Seller has no
knowledge of any pending or threatened material claims by any of Seller's
employees in connection with any such employee's employment by Seller and Seller
has no reason to believe there will be any material adverse change in its
relations with the Transferred Employees (as that term is defined in Section 5.5
of this Agreement) as a result of any announcement or the consummation of the
transactions contemplated by this Agreement.
3.17 Taxes. The Seller has filed or caused to be filed, within
the times and manners prescribed by law, all federal, state, local and foreign
tax returns, elections and tax reports which are required to be filed by, or
with respect to, the Seller. True and complete copies of all such returns,
including for 1999, have been made available to Purchaser. Such returns and
reports reflect accurately all liability for taxes of the Seller for the periods
covered thereby. All federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and other taxes and assessments
(including interest and penalties) payable by or due from the Seller have been
fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Seller. No examination of any tax return of the
Seller is currently in progress and no basis for any assessment exists. There
are not outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of the Seller.
3.18 Employee Benefit Plans. (a) Set forth in Schedule 3.18 is
an accurate and complete list of all employee benefit plans of any variety
whatsoever (the "Employee Benefit Plans"), including without limitation any
within the meaning of Section 3(3) of ERISA (whether or not any such Employee
Benefit Plans are otherwise exempt from the provisions of ERISA), established,
maintained or contributed to by or with respect to the Seller at any time.
(b) To the knowledge of Seller, each Employee Benefit Plan has
been administered in all material respects in accordance with its terms. All of
the Employee Benefit Plans that are intended to be qualified under Section
401(a) of the Code have received determination letters from the Internal Revenue
Service to the effect that such Employee Benefit Plans are qualified; the
Employee Benefit Plans and the trusts related thereto are exempt from federal
income taxes; no such determination letter has been revoked and revocation has
not been threatened; and no such Employee Benefit Plan has been amended since
the date of its most recent determination letter or application therefore in any
respect that would adversely affect its qualification or increase its cost. No
Employee Benefit Plans have been terminated; there have not been any "reportable
events" (as defined in Section 4043 of ERISA and the regulations thereunder)
with respect thereto; and no Employee Benefit Plan has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code or any unfunded
liability of any kind.
4. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller, as of the date
hereof and as of the Closing Date, as follows:
4.1 Due Organization and Qualification. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Florida, with full corporate power and authority to own,
lease and operate its properties and to carry on its business in the places and
in the manner currently conducted.
4.2 Authority; Due Authorization; Valid Obligation.
(a) Purchaser has all requisite corporate power and authority
to execute and deliver this Agreement and the Additional Agreements and to
consummate the transactions contemplated hereby and thereby. Purchaser has taken
all corporate action necessary for the execution and delivery by it of this
Agreement and the Additional Agreements and for the consummation of the
transactions contemplated hereby and thereby.
(b) This Agreement and the Additional Agreements constitute
the valid and binding obligations of Purchaser and are enforceable against
Purchaser in accordance with their respective terms, except as may be limited by
principles of equity or by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally.
4.3 No Conflicts or Defaults. The execution and delivery by
Purchaser of this Agreement and the Additional Agreements and the consummation
of the transactions contemplated hereby and thereby do not (a) contravene
Purchaser's Certificate of Incorporation or By- Laws or (b) with or without the
giving of notice or the passage of time, or both, violate or conflict with, or
result in a breach of, or a default or loss of rights under, any material
agreement, mortgage, indenture, lease, instrument, permit or license to which
Purchaser is a party or by which it or any material portion of its assets is
bound, or any judgment, order, decree, law, rule or regulation to which it or
any material portion of its assets is subject.
4.4 Authorizations. Except as set forth in Schedule 4.4, no
authorization, approval, order, license, permit or consent of, or filing or
registration with, any court or governmental authority, or consent of any other
party, is required in connection with the execution, delivery and performance by
Purchaser of this Agreement or the Additional Agreements.
4.5 Litigation. There are no Proceedings pending against
Purchaser, and Purchaser has not received notice of any threatened Proceedings,
which, if adversely determined, would, singly or in the aggregate, materially
adversely affect the business, financial condition or results of operations of
Purchaser or the consummation of the transactions contemplated by this Agreement
or the Additional Agreements, or which challenge the validity or propriety of
the transactions contemplated by this Agreement or the Additional Agreements.
4.6 Disclosure. To the knowledge of Purchaser, this Agreement
and the Additional Agreements, together with any Schedule, certificate, document
or statement in writing which has been supplied by or on behalf of Purchaser in
connection with the transactions contemplated hereby and thereby, as of their
respective dates, and taken as a whole, do not contain an untrue statement of a
material fact, or omit any statement of a material fact required to be stated or
necessary in order to make the statements contained herein or therein not
misleading.
5. Other Agreements.
5.1 Operation of Ticker Prior to the Closing.
(a) Following the execution of this Agreement and prior to the
Closing Date, Seller shall operate Ticker according to its ordinary and usual
course of business as presently conducted and will use its reasonable efforts to
preserve Ticker and the goodwill of its employees, suppliers and customers
generally and to retain its relationships with such parties generally. During
such period, unless otherwise consented to in writing by Purchaser, Seller shall
maintain the Transferred Assets in good repair, order and condition, reasonable
wear and use and damage by casualty and force majeure excepted. Seller shall
maintain such casualty, liability, fidelity and business interruption insurance
and such performance and surety bonds as are currently in effect in respect of
the Transferred Assets and Ticker until the Closing Date.
5.2 Further Information. Following the execution of this
Agreement and prior to the Closing Date, Seller shall cause its officers,
employees and representatives to furnish such financial, operating and other
data and information relevant to the transactions contemplated hereby as
Purchaser shall from time to time reasonably request. Any information obtained
in the course of such investigation shall be subject to the confidentiality
agreements entered into or to be entered into between Seller and Purchaser.
5.3 Consents, Waivers and Filings. Upon the terms and subject
to the conditions set forth in this Agreement, Purchaser and Seller shall use
their respective reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things, reasonably necessary or desirable to
consummate in an expeditious manner the transactions contemplated by this
Agreement. Without limiting the foregoing, the parties shall cooperate to obtain
from all relevant third parties and governmental authorities, all consents and
waivers to, and permits, authorizations and licenses for, the transactions
contemplated by this Agreement that may be required under any agreement, lease,
financing arrangement, license, Permit or other instrument or under any
applicable law, rule or regulation, and to attempt to remove or vacate any legal
prohibition or impediment to the consummation of the transactions contemplated
hereby.
5.4 Transition. Purchaser has obtained or will obtain its own
insurance coverage with respect to Ticker and the Transferred Assets, effective
as of the Closing Date, and Seller may terminate its insurance effective as of
the close of business on such date.
5.5 Employees.
(a) Purchaser intends to offer or confirm (as the case may be)
employment or consulting arrangements, as of the Closing Date, to those
employees and consultants of Seller providing services to the Business and
identified on Schedule 5.5(a) hereto (such of the employees of Seller who accept
employment with Purchaser following the Closing Date being referred to as the
"Transferred Employees"). Commencing as of such date, and subject to Section
5.5(b), Purchaser shall offer such Transferred Employees such medical and other
benefits as are offered to similarly situated employees under Purchaser's
benefit plans, with credit given for past service with Seller. Nothing in this
Section 5.5 shall be construed as requiring Purchaser to employ the Transferred
Employees for any specified period of time after the Closing Date. Moreover,
nothing in this Agreement shall establish any of the terms or conditions of any
Transferred Employee's subsequent employment by Purchaser (without limiting the
foregoing, nothing in this Agreement shall be deemed to constitute any
Transferred Employee's subsequent employment by Purchaser as being on any other
basis than "at will").
(b) Seller shall pay the Transferred Employees for accrued
vacation and (if applicable) sick days as of the Closing Date. The Transferred
Employees will be fully vested under Seller's 401(k) plan at the time of the
termination of their employment with Seller. Seller will provide Purchaser with
such reasonable assistance as Purchaser may request in connection with the
transfer of any Transferred Employee's benefits under Seller's 401(k) plan to
any similar plan that may be maintained by Purchaser.
6. Closing Conditions.
6.1 Conditions to the Obligations of Purchaser. All
obligations of Purchaser with respect to the Closing and consummation of the
transactions contemplated hereby are subject to the receipt by it of the items
set forth in Section 2.3.2, and to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any one or more of which may be
waived by Purchaser:
(a) All representations and warranties of Seller set forth
herein shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, with the same effect as if made at and as
of the Closing Date, and Purchaser shall have received a certificate signed by
an authorized officer of Seller to such effect;
(b) Seller shall have complied in all material respects with
its covenants and agreements set forth in this Agreement, except as to those
covenants and agreements to be performed or observed after the Closing Date, and
Purchaser shall have received a certificate signed by an authorized officer of
Seller to such effect;
(c) The third-party consents listed on Schedule 6.1 shall have
------------
been obtained; and
(d) No order, injunction or decree shall have been issued and
be continuing before a court and no action, suit or proceeding by any
governmental authority shall have been instituted or threatened which questions
or attacks the validity or legality of the transactions contemplated hereby in
any material fashion or seeks to restrain or prevent the consummation of the
acquisition of the Transferred Assets pursuant to this Agreement or the other
transactions contemplated hereby.
6.2 Conditions to the Obligations of Seller. All obligations
of Seller with respect to the Closing and consummation of the transactions
contemplated hereby are subject to receipt by it of the items set forth in
Section 2.3.1 and to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any one or more of which may be waived by Seller:
(a) All representations and warranties of Purchaser set forth
herein shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, with the same effect as if made at and as
of the Closing Date, and Seller shall have received a certificate signed by an
authorized officer of Purchaser, to such effect;
(c) Purchaser shall have complied in all material respects with its covenants
and agreements set forth in this Agreement, except as to those covenants and
agreements to be performed or observed after the Closing Date, and Seller shall
have received a certificate signed by an authorized officer of Purchaser to such
effect;
(c) The third-party consents listed on Schedule 6.2 shall have
------------
been obtained;
and
(d) No order, injunction or decree shall have been issued and
be continuing before a court and no action, suit, or proceeding by any
governmental authority shall have been instituted or threatened which questions
or attacks the validity or legality of the transactions contemplated hereby in
any material fashion or seeks to restrain or prevent the consummation of the
acquisition of the Transferred Assets pursuant to this Agreement or the other
transactions contemplated hereby.
7. Confidentiality
7.1 Confidentiality. (a) Seller acknowledges that, as a result
of the past involvement of Seller and its principals, employees and agents
("Related Persons") with Ticker, Seller and its Related Persons have become
informed of, and have had access to, confidential information of Ticker
including, without limitation, subscriber, advertiser, marketing and financial
information (collectively, "Ticker Information"). Seller shall not, and shall
take reasonable measures to cause the Related Persons employed by Seller
following the Closing Date not to, at any time use or reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other entity any of
the Ticker Information, without the prior written consent of Purchaser, except
that following the Closing, Seller and its Related Persons shall be entitled to
use and disclose Ticker Information which legally and legitimately is or becomes
of general public or industry knowledge from authorized sources other than
Seller or any of its Related Persons or which Seller is required to include in
any periodic or other report filed with the Securities and Exchange Commission
(provided that Seller will make reasonable efforts to coordinate with Purchaser
the filing of requests for confidential treatment of portions of any such
report) or which is independently developed by Seller (as evidenced by
contemporaneous written documents) without reference to the Ticker Information.
(b) Purchaser acknowledges that, as a result of the past
involvement of Seller's Related Persons with Seller's businesses other than
Ticker, such Related Persons have become informed of, and have had access to,
confidential information of Seller other than Ticker including, without
limitation, subscriber, advertiser, marketing and financial information
(collectively, "Non-Ticker Information"). Purchaser shall not, and shall take
reasonable measures to cause the Related Persons employed by Purchaser following
the Closing Date not to, at any time use or reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity any of the
Non-Ticker Information, without the prior written consent of Seller, except that
following the Closing, Purchaser and the Related Persons employed by Purchaser
following the Closing Date shall be entitled to use and disclose Non-Ticker
Information which legally and legitimately is or becomes of general public or
industry knowledge from authorized sources other than Purchaser or any of the
Related Persons employed by Purchaser following the Closing Date or which
Purchaser is required to include in any periodic or other report filed with the
Securities and Exchange Commission (provided that Purchaser will make reasonable
efforts to coordinate with Seller the filing of requests for confidential
treatment of portions of any such report)or which is independently developed by
Purchaser (as evidenced by contemporaneous written documents) without reference
to the Non-Ticker Information.
(c) Nothing contained in this Section 7.1 or otherwise shall
limit or prohibit any party from making disclosure of Ticker Information or
Non-Ticker Information to the extent required by law, rule or regulation,
provided, however that the disclosing party shall provide notice to the other
party as to the nature of the required disclosure such as to provide the other
party the opportunity to challenge the need for such disclosure and shall
cooperate with the other party in connection with such a challenge, as the other
party reasonably may request, at the other party's expense.
7.2 Equitable Relief. Because Purchaser with respect to the
Ticker Information and Seller with respect to the Non-Ticker Information (the
respective party in such capacity the "Disclosing Party") may not have an
adequate remedy at law to protect its businesses from the breach of any of the
restrictions set forth in Section 7.1 or to protect its respective interests in
its trade secrets, privileged, proprietary or confidential information and
similar commercial assets, the Disclosing Party shall be entitled to injunctive
relief, in addition to such other remedies and relief that would, in the event
of a breach of the provisions of Section 7.1 , be available to it, the other
party hereby waives any requirement that the Disclosing Party prove the
inadequacy of any remedy at law, or to post any bond or other form of security,
in connection with any action, suit or proceeding to the extent related to any
breach or alleged breach of the restrictions set forth in Section 7.1.
8. Acts and Instruments of Transfer; Correspondence.
8.1 Acts and Instruments. Whenever reasonably requested to do
so by either party, on or after the Closing Date, the other party and its
officers shall do, execute, acknowledge and deliver all such acts, bills of
sale, assignments, confirmations, consents, other instruments of assignment,
transfer and conveyance, and any and all such further instruments and documents,
in form reasonably satisfactory to the requesting party and its counsel, as
shall be reasonably necessary or advisable to carry out the intent of this
Agreement and to vest in Purchaser all the right, title and interest of Seller
in and to the Transferred Assets and the assumption by Purchaser of the Assumed
Liabilities.
8.2 Correspondence. (a) Seller hereby authorizes Purchaser, on
and after the Closing Date, to receive and open correspondence addressed to
Seller but delivered to Purchaser's address and to deal with the contents
thereof in a responsible manner, to the extent that such correspondence relates
to the Transferred Assets or Ticker, but Purchaser shall promptly deliver to
Seller all correspondence related to Seller's business (measured as of the
Effective Date) other than Ticker which is delivered to and received by
Purchaser (which correspondence shall be deemed Non-Ticker Information).
(b) On and after the Closing Date, Seller shall promptly
deliver to Purchaser all other correspondence addressed to and received by
Seller to the extent it relates to Ticker (which correspondence shall be deemed
Ticker Information).
(c) The addresses specified under Section 12.3 shall be the
addresses to which mail shall be sent under this Section 8.2.
8.3 Records. Seller shall deliver to Purchaser its records
directly relating to the Transferred Assets and Ticker (but may retain copies
thereof), except that with respect to any records the originals of which Seller
is required to keep for tax purposes, Seller may retain such originals and shall
provide Purchaser with copies thereof. Seller shall have the right to examine,
use and make excerpts from any books of account and other records and documents
which are transferred to Purchaser pursuant to this Agreement for any purpose
connected with or relating to any event occurring prior to the Closing Date.
9. Indemnification.
9.1 Seller's Indemnification. Seller hereby agrees to
indemnify, defend and hold harmless Purchaser, its officers, directors,
shareholders and each other person who controls Purchaser (without duplication),
from and after the Closing Date, against and in respect of any loss, cost,
damage, deficiency or expense (including any related loss, cost, damage,
deficiency or expense arising pursuant to Section 9.3) (collectively, "Damages")
arising from or related to: (i) Seller's breach or non-performance of any
agreement, representation, warranty or undertaking contained in this Agreement
or (ii) except to the extent that any such Damages are reflected on the Interim
Balance Sheet and/or the Current Asset Adjustment, any lawsuit or any court,
administrative or other proceeding now pending against Seller or hereafter
initiated against Seller by third parties arising out of or relating to the
operation of Ticker by Seller prior to and through the Closing Date.
9.2 Purchaser's Indemnification. Purchaser hereby agrees to
indemnify, defend and hold harmless Seller, its officers, directors,
shareholders and each other person who controls Seller (without duplication),
from and after the Closing Date, against and in respect of any Damages arising
from or related to: (i) Purchaser's breach or non-performance of any agreement,
representation, warranty or undertaking contained in this Agreement, including,
without limitation, the performance or non-performance of any Assigned
Agreements following the Closing Date, or (ii) any lawsuit or any court,
administrative or other proceeding initiated against Seller by third parties
arising out of or relating to the operation of Ticker following the Closing
Date.
9.3 Related Costs and Expenses. Each indemnifying party hereto
shall, in addition to such indemnifying party's obligations under Section 9.1 or
9.2, as applicable, indemnify and hold harmless the indemnified party hereto
from, against and in respect of any and all actions, suits, proceedings,
demands, assessments, judgments, settlements, costs (including reasonable
attorneys' fees and disbursements) and legal and other expenses of the
indemnified party incident to any matter as to which the indemnified party is
entitled to indemnification under such Sections, or incident to any allegations
or claims which, if true, would give rise to Damages subject to indemnification
thereunder, or incident to the enforcement by the indemnified party of this
Section 9.
9.4 Third Party Claims. If a claim by a third party is made
against an indemnified party, and if the indemnified party intends to seek
indemnity with respect thereto under this Section 9, such indemnified party
shall promptly notify the indemnifying party of such claim in writing. The
indemnifying party shall have thirty (30) calendar days after receipt of such
notice to undertake, conduct and control, through counsel of its own choosing
(subject to the consent of the indemnified party, such consent not to be
unreasonably withheld or delayed) and at its expense, the settlement or defense
therefor, and the indemnified party shall co-operate with the indemnifying party
at the indemnifying party's expense as the indemnifying party reasonably may
request in connection therewith; provided that: (i) the indemnifying party shall
not thereby permit to exist any Lien upon any assets of any indemnified party;
(ii) the indemnifying party shall permit the indemnified party to participate in
such settlement or defense through counsel chosen by the indemnified party,
provided that the fees and expenses of such counsel shall be borne by the
indemnified party unless both the indemnifying party and the indemnified party
are named parties to the action and the defense of both parties by the same
counsel would be inappropriate due to actual or potential conflict of interest,
and provided further that such participation shall not affect the control of the
matter by the indemnifying party; and (iii) the indemnifying party shall
promptly reimburse the indemnified party for the full amount of any loss
resulting from such claim and all related expense incurred by the indemnified
party within the limits of this Section 9. If the indemnifying party does not
notify the indemnified party within thirty (30) calendar days after receipt of
the indemnified party's notice of a claim of indemnity hereunder that it elects
to undertake the defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim in the exercise of its exclusive
discretion at the expense of the indemnifying party. So long as the indemnifying
party is reasonably contesting any such claim in good faith, the indemnified
party shall not pay or settle any such claim. Notwithstanding the foregoing, the
indemnified party shall have the right to pay or settle any such claim if, in
the reasonable judgment of the indemnifying party (consent to such payment or
settlement not to be unreasonably denied or delayed) the payment or settlement
of such claim will not adversely affect the indemnifying party, provided that in
the event of such payment or settlement the indemnified party shall waive any
right to indemnity therefor by the indemnifying party. The indemnified party
shall join in a settlement of a third party claim proposed by the indemnifying
party, provided that such settlement shall be at the expense of the indemnifying
party, that such settlement shall achieve the release and discharge of the
indemnified party by such third party and that such settlement shall not
prejudice in any material respect the indemnified party's rights against such
third party claimant or any other third party with respect to matters unrelated
to the third party claim in issue.
9.5 Survival of Representations and Warranties, Limitations of
Claims.
(a) The representations and warranties and indemnities set
forth in this Agreement shall survive the Closing Date; provided, that the
provisions of this Section 9 shall constitute the sole remedy of any party for
breach of any representations or warranties in connection with the transactions
contemplated by this Agreement.
(b) Any claim between the parties hereto (other than a claim
for indemnification in respect of third party claims for unpaid taxes)
predicated on a breach of warranty or representation contained in this Agreement
shall survive the Closing Date but shall be barred after the second (2nd)
anniversary of the Closing Date.
(c) Claims for indemnification in respect of third party
claims, including third party claims for taxes, shall survive the Closing Date
but shall be barred: (A) after the applicable statute of limitations, with
respect to claims for unpaid taxes of any type and (B) after the second (2nd)
anniversary of the Closing Date, with respect to any other third party claim.
(d) No payment shall be required to be made by Seller pursuant
to Section 9.1 or by Purchaser pursuant to Section 9.2, except to the extent
that the amount of Damages suffered by the indemnified parties under such
respective Section in connection with such claim, together with all claims
asserted therewith or previously asserted under this Section 9 by any of such
indemnified parties, exceeds one hundred thousand dollars ($100,000) in the
aggregate. For avoidance of doubt, to the extent such indemnifiable claims
exceed one hundred thousand dollars ($100,000) in the aggregate, the
indemnifying party's obligations shall apply with respect to the initial one
hundred thousand dollars ($100,000) of such claims as well as to indemnifiable
damages beyond such amount.
(e) THE WARRANTIES EXPRESSLY STATED IN THIS AGREEMENT ARE THE
ONLY WARRANTIES THAT APPLY TO TICKER OR THE TRANSFERRED ASSETS AND THESE
WARRANTIES ARE IN LIEU OF, AND SELLER EXPRESSLY DISCLAIMS, ANY AND ALL OTHER
WARRANTIES EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(f) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, SELLER'S MAXIMUM LIABILITY TO ANY PERSON, CORPORATION OR OTHER ENTITY
ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER SUCH LIABILITY ARISES FROM
A CLAIM BASED IN TORT, CONTRACT (EXPRESS OR IMPLIED), WARRANTY, STATUTE OR
OTHERWISE, SHALL IN NO EVENT EXCEED THE AMOUNTS ACTUALLY RECEIVED BY SELLER
PURSUANT TO SECTION 2.1(b).
(g)EXCEPT AS MAY BE SET FORTH IN SECTION 9, NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, AND REGARDLESS OF WHETHER ANY REMEDY
FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY OR TO ANY OTHER PERSON, CORPORATION OR OTHER ENTITY FOR ANY LOST
PROFITS, LOSS OF USE, COST OF OBTAINING SUBSTITUTE GOODS OR SERVICES, OR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL, INDIRECT OR EXEMPLARY DAMAGES ARISING UNDER
OR IN ANY WAY RELATING TO THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH LOSS OR DAMAGE.
10. Miscellaneous.
10.1 Termination Prior to the Closing. This Agreement may be
terminated prior to the Closing Date only by mutual written consent of Seller
and Purchaser.
10.2 Entire Agreement. This Agreement, together with the
Additional Agreements and the other documents and instruments delivered pursuant
to this Agreement, sets forth the entire understanding of the parties with
respect to its subject matter, and merges and supersedes all prior and
contemporaneous understandings of the parties hereto with respect to its subject
matter, provided, that the parties' rights under Section 7 and under any other
agreement between Seller, Purchaser and/or any of their Related Persons relating
to confidentiality and/or the ownership of or rights in intellectual property
shall be cumulative. This Agreement may not be modified, in whole or in part,
except by a writing signed by each of the parties hereto, and may not be waived,
in whole or in part, except by a writing signed by the party granting such
waiver. No waiver of any provision of this Agreement of this Agreement in any
instance shall be deemed to be a waiver of the same or any other provision of
this Agreement in any other instance. Failure of any party to enforce any
provision of this Agreement shall not be construed as a waiver of its rights
under such provision or any other provision.
10.3 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered by hand or by Federal Express
or a similar overnight courier to, or (b) five (5) calendar days after being
deposited in any United States post office enclosed in a postage prepaid
registered or certified envelope addressed to the party for whom intended, at
the address for such party set forth below, or to such other address and/or
contact person as may be furnished by such party by notice in the manner
provided herein; provided, however, that any notice of change shall be effective
only upon receipt.
If to Purchaser:
123Jump.com, Inc.
407 Lincoln Road, Suite 12D
Miami Beach, Florida 33139
Attention: President
with a copy to:
Kilpatrick Stockton LLP
3737 Glenwood Avenue
Suite 400
Raleigh, North Carolina 27612
Attention: W. Christopher Matton, Esq.
If to Seller:
Individual Investor Group, Inc.
125 Broad Street
14th Floor
New York, NY 10004
Attention: General Counsel
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Attention: Peter M. Ziemba, Esq.
10.4 Successors and Assigns. This Agreement shall be binding
on, enforceable against and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and nothing herein is intended to
confer any right, remedy or benefit upon any other person. Either party hereto
may assign some or all of its rights under this Agreement to any wholly-owned
subsidiary, or to the successor of all or substantially all of that part of such
party's business to which the subject matter of this Agreement relates, provided
in each case that the assignee agrees in writing to be bound by the assignor's
obligations hereunder and, in the case of an assignment to a wholly-owned
subsidiary, the assignor shall remain responsible for its obligations hereunder.
Except as set forth in the previous sentence, no party hereto may assign its
rights or delegate its obligations under this Agreement without the express
written consent of Purchaser or Seller, as applicable, and any attempt to do so
shall be null and void.
10.5 Public Announcements. Promptly following the execution of
this Agreement, either party may make public disclosure of the terms of this
Agreement, except that neither party shall publicly disclose the Purchase Price.
Notwithstanding the foregoing, either party may make public disclosure of any
term of this Agreement to the extent required by applicable securities laws or
otherwise required by law.
10.6 Expenses. Each of the parties hereto shall bear and pay,
without any right of reimbursement from any other party, and indemnify, defend
and hold harmless the other party against, all costs, expenses and fees incurred
by it or on its or his behalf incident to the preparation, execution and
delivery of this Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated by this Agreement are
consummated, including, without limitation, the fees and disbursements of
attorneys, accountants and consultants employed by such party, and all brokers,
investment bankers, finders and financial advisors retained or utilized by it,
or otherwise acting on its behalf, or otherwise making any claim in the nature
of a broker's or finder's fee arising out of or resulting from any action or
agreement of the indemnifying party or its affiliated parties, in connection
with the transactions contemplated by this Agreement, and shall indemnify and
hold harmless the other parties from and against all such fees, costs and
expenses. Seller represents that except for fees, commissions and expenses which
shall be paid to the Jordan, Edmiston Group, Inc. by Seller, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller.
10.7 Knowledge of a Party. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
knowledge of a party, such knowledge shall be deemed to refer only to the actual
knowledge of the officers of Purchaser or Seller, as the case may be.
10.8 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles.
10.9 Savings Clause. If any provision of this Agreement is
held to be invalid or unenforceable by any court or tribunal of competent
jurisdiction, the remainder of this Agreement shall not be affected thereby, and
such provision (and the remainder of this Agreement) shall be carried out as
nearly as possible according to its original terms and intent to eliminate such
invalidity or unenforceability.
10.10 Counterparts/Facsimile Signatures. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
Signatures delivered via facsimile shall be deemed originals for all purposes.
10.11 Construction. Headings contained in this Agreement are
for convenience only and shall not be used in the interpretation of this
Agreement. References herein to the Agreement shall be deemed to include all
Schedules hereto, and references herein to Sections and Schedules are to the
sections, schedules and exhibits of this Agreement. As used herein, the singular
includes the plural, and the masculine, feminine and neuter gender each includes
the others where the context so indicates. The language in all parts of this
Agreement shall be interpreted according to its fair meaning, and specifically
shall not be interpreted strictly for or against any of the parties to this
Agreement on the basis of such party's being (or being deemed to be) the drafter
of this Agreement.
11. Notification Procedures Re: Availability and Utilization
of Prepaid Advertising Credits and Status of Certain Personnel.
11.1 With respect to satisfying Purchaser's obligations under
the Prepaid Advertising Agreements to the counterparty of Seller under each such
agreement (each a "Prepaid Advertiser"):
(a) Seller shall notify Purchaser in writing, within thirty (30)
calendar days hereof, of the remaining advertising credit
available to each Prepaid Advertiser;
(b) Purchaser shall notify Seller in writing, within thirty (30)
calendar days after the end of each calendar quarter, of the
amount of pages of advertising in Ticker that Purchaser has
published for each Prepaid Advertiser during such calendar
quarter (each such notice from Purchaser shall be referred to
as a "Usage Notice");
(c) Seller shall notify Purchaser in writing, within thirty (30)
calendar days after receipt of a Usage Notice, of the
remaining advertising credit available to each Prepaid
Advertiser as of the date of the Usage Notice; and
(d) With respect to each Prepaid Advertiser, at such time as the
remaining advertising credit available to such Prepaid
Advertiser is expected to be fully utilized within three (3)
calendar months, Seller and Purchaser shall work together in
good faith to devise notification procedures that are more
rapid than those set forth above, in order that Purchaser may
be informed without undue delay of the date that the
advertising credit available to such Prepaid Advertiser
becomes fully utilized.
11.2 Purchaser shall notify Seller in writing with respect to
each person listed on Schedule 5.5(a) with respect to whom either Purchaser has
declined to offer employment or who has declined to accept an offer of
employment from Purchaser. With respect to any such person identified in such
notice, Purchaser shall indicate (i) the salary (and commission structure, if
applicable) offered to such person by Purchaser, (ii) whether such person was
requested by Purchaser to relocate to an office more than thirty-five (35) miles
from 125 Broad Street, New York, New York and (iii) the title of the job
position that Purchaser offered such person. Purchaser shall give Seller the
written notice pursuant to this Section 11.2 promptly (and in any event within
five (5) business days) after Purchaser's decision not to offer employment to
such person or such person's rejection of Purchaser's offer of employment, as
the case may be.
11.3 Purchaser shall notify Seller in writing with respect to
each person listed on Schedule 5.5(a) who resigns his or her employment with
Purchaser or whose employment is terminated by Purchaser. Purchaser shall give
Seller the written notice pursuant to this Section 11.3 promptly (and in any
event within five (5) business days) after the date of the resignation or
termination of such person's employment with Purchaser. Purchaser also shall
notify Seller in writing promptly upon learning that grounds exist to terminate
for cause the employment of any person listed on Schedule 5.5(a). Purchaser's
notice to Seller pursuant to this Section 11.3 shall indicate whether (a) in the
case of a person's resignation, whether such resignation was voluntary and (b)
in the case of termination, whether such termination was without cause or for
cause. Purchaser agrees to cooperate with Seller in good faith and provide
material reasonably requested by Seller in the event that Seller seeks to
demonstrate that any such person resigned his or her employment with Purchaser
or that Purchaser terminated or had grounds to terminate his or employment for
cause.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
Seller:
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Jonathan Steinberg
Chief Executive Officer and Director
Purchaser:
123JUMP.COM, INC.
By: /s/ Manish Shah
President & Chief Executiver Officer
[Schedules and Exhibits omitted]
EXHIBIT 99
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CERTAIN RISK FACTORS
Dated: November 13, 2000
You should carefully consider these risks, as well as those described in our
most recent Form 10-K, Form 10-Q and Form 8-K filings, before making an
investment decision. The risks described below are not the only risks we face.
Additional risks may also impair our business operations. If any of the
following risks occur, our business, results of operations or financial
condition could be materially adversely affected. If that happens, the trading
price of our common stock could decline, and you may lose all or part of your
investment. In the risk factors below, the word "web," refers to the portion of
the Internet commonly referred to as the "world wide web."
We will need to raise additional capital in the future.
The Company's current levels of revenues are not sufficient to cover its
expenses. It is the Company's intention to control its operating expenses while
continuing to invest in its existing products - and, as noted above in the Form
10-Q, the Company recently has implemented changes intended to substantially
reduce certain operating and general and administrative expenses. The Company
anticipates quarterly losses to continue through the remainder of 2000 and into
2001. Profitability may be achieved in future periods only if the Company can
substantially increase its revenues and/or realize capital gains on investments
or the sale of certain assets while controlling increases in expenses. There can
be no assurance that revenues will be substantially increased, that additional
capital gains will be realized on investments (instead capital losses in fact
may be realized) or that certain assets will be sold, or that expenses can be
adequately decreased to enable the Company to attain profitability.
Based on the Company's current outlook, the Company believes that its working
capital will be sufficient to fund its operations and capital requirements at
least through the end of 2001. During the second quarter of 2000, the Company
retained The Jordan, Edmiston Group, Inc., the media investment bank, to explore
a range of strategic alternatives to enhance shareholder value, including the
possible sale of the Company.. The Company is continuing its exploration of
strategic alternatives, including exploring sources of additional financing
and/or sale of assets. There can be no assurance, however, that this process
will result in the Company entering into any additional transactions or
enhancing shareholder value. In the event that the Company is unable to attain
profitability prior to exhausting its existing resources, the Company would need
to obtain additional financing or sell certain of its assets in order to sustain
operations. No assurance can be given that the Company will be able to obtain
additional financing or sell additional assets, or as to the terms upon which
the Company could do so. Any additional financing could result in dilution of an
investor's equity investment in the Company.
We have a history of losses and we anticipate that our losses will continue in
the future. As of September 30, 2000, we had an accumulated deficit of
approximately $25 million. Since inception, the only calendar year during which
we were profitable was 1995. We expect to continue to incur operating losses in
the remainder of 2000 and into 2001. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future.
Our online services business has a limited operating history. Because we
commenced our online services operations in May 1997, we have only a limited
operating history upon which you can evaluate this business segment and its
prospects. An investor in our common stock must consider the risks, expenses and
difficulties frequently encountered by an early stage business in this new and
rapidly evolving market of web-based financial news and information companies.
We face intense competition in both our print publications business and our
online services business. An increasing number of financial news and information
sources compete for consumers' and advertisers' attention and spending. We
expect this competition to continue and to increase. These competitors include:
o online services or web sites focused on business, finance and investing,
such as CBS MarketWatch.com; The Wall Street Journal Interactive Edition;
CNBC.com; CNNfn.com; TheStreet.com; Briefing.com; The Motley Fool; Yahoo!
Finance; Silicon Investor; Microsoft Investor; SmartMoney.com; Money.com;
and Multex.com;
o publishers and distributors of traditional print media, such as The Wall
Street Journal; Barron's; Investors Business Daily; Business Week; Fortune;
Forbes; Money; Kiplinger's; Smart Money; and Worth;
o publishers and distributors of radio and television programs focused on
business, finance and investing, such as Bloomberg Business Radio and CNBC;
o web "portal" companies, such as Yahoo!; Excite; Lycos; Snap!; Go Network;
and America Online; and
o online brokerage firms, many of which provide financial and investment news
and information, such as Charles Schwab and E*TRADE.
Our ability to compete depends on many factors, including the originality,
timeliness, comprehensiveness and trustworthiness of our content and that of our
competitors, the ease of use of services developed either by us or our
competitors and the effectiveness of our sales and marketing efforts and that of
our competitors.
Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. This may allow them to devote
greater resources than we can to the development and promotion of their services
and products, as well as adapting to rapid technological changes with regard to
the Internet. In particular, future changes may evolve (for example, a rapid
move to broadband or wireless technologies) which we may not be able to cope
with in a timely manner. These competitors may also engage in more extensive
research and development, undertake far-reaching marketing campaigns, adopt more
aggressive pricing policies to attract Internet users, print readers and
advertisers and make more attractive offers to existing and potential employees,
outside contributors, strategic partners and advertisers. Our competitors may
develop content that is equal or superior to our content or that achieves
greater market acceptance than our content. It is also possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully for advertisers, Internet users, print readers,
staff, outside contributors or strategic partners. Increased competition could
result in price reductions, reduced margins or loss of our market share. Any of
these could materially adversely affect our business.
We may not be able to attract and retain qualified employees for our online
service business. There is a general perception in the employment market for
personnel interested in online-related jobs that pure Internet companies offer a
more attractive work environment for a youthful workforce. In addition, many
employees in the Internet industry seek and often receive significant portions
of their compensation through stock options. The stock prices of many pure
Internet companies have increased dramatically over the last several years.
Since we are also in the print publication business, people may perceive us as a
less attractive employer than a pure Internet company. If we are unable to
attract and retain qualified employees for our online services business, that
business could suffer materially.
We may not be able to attract and retain qualified employees for our print
publications business. Many of our competitors in the print publications
business are larger than us and have a number of print titles. We publish only
one magazine and one newsletter. There is a general perception in the employment
market that larger publishers are more prestigious or offer more varied career
opportunities. We may be perceived by people as a less attractive employer than
a larger publisher. If we are unable to attract and retain qualified employees
for our print publications business, that business could suffer materially.
We may not be able to grow our online business. We intend to introduce new
and/or enhanced products, content and services to retain the current users of
our online services and to attract new users. If we introduce a new or enhanced
product, content, or service that is not favorably received or fail to introduce
certain new or enhanced products, content, or services, our current users may
choose a competitive service over our service. Our business could be materially
adversely affected if we experience difficulties and/or delays in introducing
new products, content or services or if these new products, content or services
are not favorably received by our users.
Increased traffic to our web sites may strain our systems and impair our online
services business. On occasion, we have experienced significant spikes in
traffic on our web sites. In addition, the number of users of our online
services has increased over time and we are seeking to increase our user base
further. Accordingly, our web sites must accommodate a high volume of traffic,
often at unexpected times. Our web sites have in the past, and may in the
future, experience slower response times than usual or other problems for a
variety of reasons. These occurrences could cause our users to perceive our web
sites as not functioning properly and, therefore, cause them to use other
methods to obtain the financial information they desire. In such a case, our
business, results of operations, and financial condition could be materially
adversely affected.
Our efforts to build positive brand recognition may not be successful. We
believe that maintaining and growing awareness about our brands (including
Individual Investor, individualinvestor.com, Magic 25(TM) and the America's
Fastest Growing Companies(R)) is an important aspect of our efforts to continue
to attract print subscribers, magazine readers and Internet users. The
importance of positive brand recognition will increase in the future because of
the growing number of providers of financial information. We cannot assure you
that our efforts to build positive brand recognition will be successful.
In order to build positive brand recognition, it is very important that we
maintain our reputation as a trustworthy source of investment ideas, research,
analysis and news. The occurrence of certain events, including our misreporting
a news story or the non-disclosure of a financial interest by one or more of our
employees in a security that we write about, could harm our reputation for
trustworthiness. These events could result in a significant reduction in the
number of our Internet users and print readers, which could materially adversely
affect our business, results of operations and financial condition.
For us to enhance our web brand awareness, it is important for us to continue to
establish and maintain content distribution relationships with highly trafficked
web sites operated by other companies. There is intense competition for
relationships with these sites. Although we have not paid any material sum with
respect to our relationships to date, it is possible that, in the future, we may
be required to pay fees in order to establish or maintain relationships with
these sites. Additionally, many of these sites compete with our web sites as
providers of financial information, and these sites may become less willing to
establish or maintain strategic relationships with us in the future. We may be
unable to enter into relationships with these sites on commercially reasonable
terms or at all.
We depend on certain advertisers to generate revenue. In 1998 and 1999, the
majority of our print publications advertising revenue came from financial
services companies, followed by consumer advertisers and others. We were not
dependent upon any particular advertiser for our print publications revenues.
During the first nine months of 2000, approximately 39% of the online services
advertising revenue came from a combination of VentureHighway.com (a company in
which we have acquired an approximately 15.8% equity interest through an
equity-for-advertising barter transaction) and one brokerage firm offering
online trading. We expect that the majority of advertising revenues derived from
our online services operations will come from online brokerage firms and
companies in which we obtain equity stakes in exchange for advertising. In the
event that online brokerage firms choose to scale back on their advertising (on
the Internet in general or on our web sites in particular) or we do not enter
into additional equity-for-advertising transactions, our online services
business could be materially adversely affected.
We need to manage our growth. Our online services, which commenced in May 1997,
have experienced rapid growth and our print publications business recently has
grown at rates above the industry norm. This growth has placed a strain on our
managerial, operational and financial resources. We expect this strain to
increase with anticipated future growth in both print publications and online
services. To manage our growth, we must continue to implement and improve our
managerial controls and procedures and our operational and financial systems. In
addition, our future success will depend on our ability to expand, train and
manage our workforce, in particular our editorial, advertising sales and
business development staff. We cannot assure you that we have made adequate
allowances for the costs and risks associated with this expansion, that our
systems, procedures or controls will be adequate to support our operations, or
that our management will be able to successfully offer and expand our services.
If we are unable to manage our growth effectively, our business, results of
operations and financial condition could be materially adversely affected.
We face a risk of system failure for our online services business. Our ability
to provide timely information and continuous news updates depends on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Similarly, our ability to track, measure and
report the delivery of advertisements on our sites depends largely on the
efficient and uninterrupted operation of a third-party system maintained by
DoubleClick. These systems and operations are vulnerable to damage or
interruption from human error, natural disasters, telecommunication failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We do not have a formal disaster recovery plan for the event of such
damage or interruption. Any system failure that causes an interruption in our
service or a decrease in responsiveness of our web sites could result in reduced
traffic, reduced revenue and harm to our reputation, brand and our relations
with our advertisers. Our insurance policies may not adequately compensate us
for any losses that we may incur because of any failures in our system or
interruptions in our delivery of content. Our business, results of operations
and financial condition could be materially adversely affected by any event,
damage or failure that interrupts or delays our operations.
We depend on the continued growth in use and efficient operation of the web. Our
business will be materially adversely affected if web usage does not continue to
grow or grows slowly. Web usage may be inhibited for a number of reasons, such
as:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o unavailability of cost-effective, high-speed access to the Internet.
The users of our online services depend on Internet service providers, online
service providers and other web site operators for access to our web sites. Many
of these services have experienced significant service outages in the past and
could experience service outages, delays and other difficulties due to system
failures unrelated to our systems. These occurrences could cause our Internet
users to perceive the web in general or our web sites in particular as an
unreliable medium and, therefore, cause them to use other media or other online
content providers to obtain their financial news and information. We also depend
on certain information providers to deliver information and data feeds to us on
a timely basis. Our web sites could experience disruptions or interruptions in
service due to the failure or delay in the transmission or receipt of this
information, which could have a material adverse effect on our business, results
of operations and financial condition.
We may not realize the value of our investments in VentureHighway.com, Inc.,
Pricing Dynamics, Inc. and Tradeworx, Inc. We record on our balance sheet
investments in non-readily marketable securities at their fair market value at
the date of acquisition, unless and until we become aware of any permanent
impairment in such securities or unless and until such securities become readily
marketable. VentureHighway.com, Inc. is recorded at approximately $2.6 million,
Pricing Dynamics, Inc. at approximately $1.5 million and Tradeworx, Inc. at
approximately $1.1 million. There currently is no public market for
VentureHighway.com, Inc., Pricing Dynamics, Inc. or Tradeworx, Inc. securities,
and there is no assurance that we will realize any value with respect to these
investments.
Our quarterly financial results are subject to significant fluctuations. Our
quarterly operating results may fluctuate significantly as a result of a variety
of factors, many of which are outside our control. For example, revenues in our
print publications business tend to reflect seasonal patterns. We believe that
quarter-to-quarter comparisons of our operating results may not be a good
indication of our future performance, nor would our operating results for any
particular quarter be indicative of future operating results. In some quarters,
our operating results may be below the expectations of public market analysts
and investors. If that happens, the price of our common stock may fall, perhaps
dramatically.
Because our editorial content is focused on the financial markets, a prolonged
"bear market" may cause our businesses to suffer. Our editorial content is
highly focused on the financial markets. If the markets suffer a prolonged
downturn or "bear market," it is possible that our businesses might suffer
materially for two reasons. First, during a bear market, people may become less
interested in buying and selling securities, and thus less interested in our
research and analysis of securities. If this occurs, fewer people might be
interested in subscribing to our print publications and using our online
services. Second, advertisers, particularly the financial services advertisers
that are our most important source of advertising revenue, might decide to
reduce their advertising budgets. Either of these developments could materially
adversely affect our business.
Because our editorial content is focused on research and analysis of specific
stocks, our businesses could suffer if our recommendations are poor. Our
editorial content is focused on research and analysis of specific stocks. We
frequently state that a particular company's stock is undervalued or overvalued
at the current prices. If our opinions prove to be wrong, our customers may be
less interested in subscribing to our print publications and in using our online
services and our business could suffer materially.
We depend on our outside contributors. To some extent we depend upon the efforts
of our outside contributors to produce original, timely, comprehensive and
trustworthy content. Our outside contributors are not bound by employment
agreements. Competition for financial journalists is intense, and we may not be
able to retain existing or attract additional qualified contributors in the
future. If we lose the services of our outside contributors or are unable to
attract additional outside contributors with appropriate qualifications, our
business, results of operations and financial condition could be materially
adversely affected.
We depend on key management personnel. Our future success depends upon the
continued service of key management personnel. We currently are relying upon the
services of Jonathan Steinberg, our Chief Executive Officer and President, and
Gregory Barton, our Vice President of Business Development, Finance and Legal
Affairs, Chief Financial Officer and General Counsel, neither of whom is under
any employment contract with us. The loss of either of our key management
personnel could materially adversely affect its business. Moreover, the costs
that may arise in connection with executive departures and replacements can be
significant, as they were during 1998 and 1999.
We rely on several third party sole providers to conduct many of our operations.
Our strategy is to enter into relationships with various third party sole
providers in order to obtain their technological expertise and capabilities as
well as to achieve economies of scale. If the business of these providers is
disrupted for any reason, our operating results could suffer materially. Some of
these providers are listed as follows:
1. We depend on Quebecor to print Individual Investor magazine. We depend upon
an independent party, Quebecor, to print Individual Investor magazine. If
Quebecor's business is disrupted for any reason, such as fire or other
natural disaster, labor strife, supply shortages, or machinery problems, we
might not be able to distribute Individual Investor magazine in a timely
manner and may lose subscribers and newsstand sales.
2. We depend on independent parties to distribute Individual Investor magazine
to newsstands. We depend upon independent parties (the largest of which is
International Circulation Distributors, a subsidiary of The Hearst
Corporation) to direct the distribution of Individual Investor magazine to
newsstands. If the business of our distributors is disrupted for any
reason, such as labor strife or natural disaster, we may not be able to
distribute Individual Investor magazine to newsstands in a timely manner
and may lose newsstand sales.
3. We depend on an independent party to manage our subscriber files. We depend
upon an independent party to manage our subscriber files. This party
receives subscription orders and payments for Individual Investor magazine
and Special Situations Report newsletter, sends renewal and invoice notices
to subscribers and generates subscribers' labels and circulation reports
for us. If the business of this party is disrupted, we may become unable to
process subscription requests, or send out renewal notices or invoices, or
deliver our print publications. If this were to happen, our business could
suffer materially.
4. We depend on independent parties to obtain the majority of the subscribers
to Individual Investor magazine. We depend upon independent parties to
obtain the majority of the subscribers to Individual Investor magazine.
These agencies include NewSub Services, Special Data Processing and EBSCO.
These agencies obtain subscribers primarily through use of subscription
offers in credit card statements and direct mail campaigns. If the positive
response to the promotion of Individual Investor magazine by these agencies
is not great enough, they may stop promoting our magazine. This could cause
our subscriber base to shrink, which would lower our subscription revenue
and reduce our advertising rate base, which would lead to lower advertising
revenues. Also, many publications compete for services of subscription
agencies, and one or more of these subscription agencies may choose not to
continue to market Individual Investor in order to better serve one of our
competitors. Any of those developments could cause our operating results to
suffer materially.
5. We depend on WinStar Interactive Media Sales, Inc. to sell advertising,
sponsorships and e-commerce partnerships on our web sites. We depend on an
independent party, WinStar Interactive Media Sales, Inc.("WinStar"), to
sell advertising, sponsorships and e-commerce partnerships on our web
sites, to complement our internal efforts. If WinStar's business is
disrupted or its sales force is ineffective, the revenues generated from
our web sites could be materially adversely affected.
Control of the Company by Principal Stockholders. At the present time, Jonathan
Steinberg, Wise Partners, L.P. (a partnership controlled by Jonathan Steinberg)
and Saul Steinberg (who is Jonathan Steinberg's father), beneficially own
approximately 34.9% of the outstanding shares of common stock of the Company. As
a result of their ownership of common stock, they will be able to significantly
influence all matters requiring approval by the Company's stockholders,
including the election of its directors. Because it would be very difficult for
another company to acquire us without the approval of the Steinbergs, other
companies might not view us as an attractive takeover candidate. Our
stockholders, therefore, may have less of a chance to benefit from any possible
takeover of the Company, than they would if the Steinbergs did not have as much
influence.
We rely on our intellectual property. To protect our rights to our intellectual
property, we rely on a combination of trademark, copyright and patent law, trade
secret protection, confidentiality agreements and other contractual arrangements
with our employees, affiliates, clients, strategic partners and others. The
protective steps we have taken may be inadequate to deter misappropriation of
our proprietary information. We may be unable to detect the unauthorized use of,
or take appropriate steps to enforce, our intellectual property rights. We have
registered certain of our trademarks in the United States and have pending U.S.
applications for other trademarks. Effective trademark, copyright, trade secret
and patent protection may not be available in every country in which we offer or
intend to offer our services.
We are somewhat dependent upon the use of certain trademarks in our operation,
including the marks Individual Investor, individualinvestor.com, Magic25(TM) and
the America's Fastest Growing Companies(R). We have a perpetual license for use
of the trademark Individual Investor. To perfect our interests in the mark,
however, we filed suit in 1997 against the licensor and a third party whom we
believed was infringing the mark. The litigation was resolved favorably to us,
with an agreement by the third party not to further infringe the mark. We
commenced negotiations with the licensor to obtain assignment of the mark, The
Individual Investor, but did not reach an agreement. Although we will
continuously monitor and may seek enforcement against any perceived infringement
of the mark, we cannot assure you that our efforts will be successful.
Additionally, we are somewhat dependent upon the ability to protect our
proprietary content through the laws of copyright, unfair competition and other
law. We cannot assure you, however, that the laws will give us meaningful
protection.
Claims of our infringement of the intellectual property rights of others could
be costly and disruptive to our business operations. Other parties may assert
claims against us that we have infringed a copyright, trademark or other
proprietary right belonging to them. Defending against any such claim could be
costly and divert the attention of management from the operation of our
business. In addition, the inability to obtain or maintain the use of copyrights
or trademarks could adversely affect our business operations, as could the award
of damages against us. Our insurance may not adequately protect us against such
claims
We may be liable for information published in our print publications or on our
online services. We may be subject to claims for defamation, libel, copyright or
trademark infringement, invasion of privacy or based on other theories relating
to the information we publish in our print publications or through our online
services. We could also be subject to claims based upon the content that is
accessible from our web sites through links to other web sites. Defending
against any such claim could be costly and divert the attention of management
from the operation of our business, and the award of damages against us could
adversely affect our financial condition. Our insurance may not adequately
protect us against such claims.