SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement o Confidential, For Use of the Commission
o Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
o Definitive Additional Materials
o Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
INDIVIDUAL INVESTOR GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
1
Preliminary Proxy Material: Confidential, for use of the Commission Only
INDIVIDUAL INVESTOR GROUP, INC.
1633 Broadway
38th Floor
New York, New York 10019
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 18, 1997
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
INDIVIDUAL INVESTOR GROUP, INC. ("Company") will be held at the offices of
counsel to the Company, Graubard Mollen & Miller, 600 Third Avenue, 32nd Floor,
New York, New York, on Wednesday, June 18, 1997, at 10:00 a.m. local time, for
the following purposes:
(1) To elect two directors of the Company for a term of three
years and until their successors are elected and qualified;
(2) To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock and Preferred Stock.
(3) To consider and vote upon a proposal to approve and adopt the
1996 Management Incentive Plan.
(4) To transact such other business as may properly come before
the meeting, or any or all postponement(s) or adjournment(s) thereof.
Only stockholders of record at the close of business on April 23, 1997,
will be entitled to notice of, and to vote at, the meeting and any
postponement(s) or adjournment(s) thereof.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTIONS TO BE TAKEN AT THE MEETING. IN ORDER TO
ASSURE THE PRESENCE OF A QUORUM, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED ADDRESSED, POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY
IF YOU SO DESIRE AT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
Scot A. Rosenblum
Secretary
New York, New York
May 7, 1997
INDIVIDUAL INVESTOR GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors of Individual
Investor Group, Inc. ("Company") to be used at the Annual Meeting of
Stockholders of the Company to be held on June 18, 1997, and any postponement(s)
or adjournment(s) thereof ("Annual Meeting"). The matters to be considered at
the meeting are set forth in the attached Notice of Annual Meeting.
The proxy will be voted (or withheld from voting) in accordance with
any specifications made. Where no specifications are indicated, the proxies will
vote "FOR" the nominees for director, "FOR" the proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock and Preferred Stock as described below under Proposal 2, "FOR" the
proposal to approve and adopt the 1996 Management Incentive Plan as described
below under Proposal 3 and, in the discretion of the proxyholders, on any other
business properly coming before the meeting and any postponement(s) or
adjournment(s) thereof. A proxy may be revoked by giving notice to the Secretary
of the Company in person, or by written notification actually received by the
Secretary, at any time prior to its being exercised.
The Company's executive offices are located at 1633 Broadway, 38th
Floor, New York, New York 10019. This Proxy Statement and the enclosed form of
proxy are first being sent to stockholders on or about May 7, 1997.
VOTING SECURITIES
The Board of Directors has fixed the close of business on April 23,
1997, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Only stockholders of record at
the close of business on that date will be entitled to vote at the Annual
Meeting or any and all postponement(s) or adjournment(s) thereof. As of April
23, 1997, the Company had issued and outstanding 6,161,869 shares of Common
Stock, the Company's only class of voting securities outstanding. Each
stockholder of the Company will be entitled to one vote for each share of Common
Stock registered in his name on the record date. The presence, in person or by
proxy, of a majority of all of the outstanding shares of Common Stock
constitutes a quorum at the Annual Meeting. Proxies relating to "street name"
shares that are returned to the Company but marked by brokers as "not voted"
will be treated as shares present for purposes of determining the presence of a
quorum on all matters but will not be treated as shares entitled to vote on the
matter as to which authority to vote is withheld by the broker ("broker
non-votes").
The election of directors requires a plurality vote of those shares of
Common Stock voted at the Annual Meeting with respect to the election of
directors. "Plurality" means that the individuals who receive the largest number
of votes cast "FOR" are elected as directors. Consequently, any shares of Common
Stock not voted "FOR" a particular nominee (whether as a result of a direction
to withhold authority or a broker non-vote) will not be counted in such
nominee's favor.
The approval of the amendment to the Certificate of Incorporation must
be approved by the affirmative vote of a majority of the shares of Common Stock
outstanding and entitled to vote. Abstentions as to this matter are considered
present and entitled to vote on the matter and, therefore, have the same effect
as a vote against the proposal. Shares of Common Stock deemed present at the
Annual Meeting, but not entitled to vote on the amendment to the Certificate of
Incorporation (because of either shareholder withholding or broker non-vote)
will have the effect of a negative vote because this proposal requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
All other matters to be voted on, including the approval of the 1997
Management Incentive Plan, will be decided by the affirmative vote of a majority
of the shares of Common Stock present or represented at the Annual Meeting and
entitled to vote. On any such matter, an abstention will have the same effect as
a negative vote, but because shares of Common Stock held by brokers will not be
considered entitled to vote on matters as to which the brokers withhold
authority, a broker non-vote will have no effect on the vote.
The following table sets forth certain information as of April 23,
1997, with respect to the Common Stock ownership of (i) those persons or groups
known to beneficially own more than 5% of the Company's voting securities, (ii)
each director and director-nominee of the Company, (iii) each executive officer
whose compensation exceeded $100,000 in the 1996 fiscal year, and (iv) all
directors and executive officers of the Company as a group.
Amount and Nature of Percent of Class
Name of Beneficial Owner Beneficial Ownership(1) of Voting Securities
- ------------------------ -------------------- --------------------
Saul P. Steinberg 1,288,090(2) 20.9%
Jonathan L. Steinberg 1,176,677(3) 18.3%
Reliance Financial Services Corporation 666,666(4) 10.8%
Robert H. Schmidt 332,334(5) 5.2%
Scot A. Rosenblum 272,079(6) 4.2%
Bruce L. Sokoloff 36,000(7) *
Peter M. Ziemba 10,000(8) *
All directors and executive
officers as a group (6 persons) 1,827,090(9) 25.8%
* Less than 1%.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. The information concerning the
stockholders is based upon information furnished to the Company by such
stockholders. Except as otherwise indicated, all of the shares of
Common Stock are owned of record and beneficially and the persons
identified have sole voting and investment power with respect thereto.
(2) Includes 666,666 shares of Common Stock owned by Reliance Insurance
Company, an indirect wholly owned subsidiary of Reliance Group
Holdings, Inc. ("Reliance Group"). See Note (4). Approximately 45% of
the common stock of Reliance Group is beneficially owned by Mr. Saul P.
Steinberg, members of his family and affiliated trusts. As a result of
his stockholdings in Reliance Group, Mr. Saul P. Steinberg may be
deemed to control Reliance Insurance Company and to beneficially own
the shares of Common Stock owned by Reliance Insurance Company. Mr.
Saul P. Steinberg is the father of Mr. Jonathan Steinberg and
brother-in-law of Mr. Bruce L. Sokoloff.
(3) Includes 276,667 shares of Common Stock issuable upon currently
exercisable options and options exercisable within next 60 days. Does
not include 403,333 shares of Common Stock issuable upon exercise of
options which are not currently exercisable and which will not become
exercisable within the next 60 days.
(4) Includes 666,666 shares of Common Stock owned by Reliance Insurance
Company. Reliance Financial Services Corporation is the direct parent
company of Reliance Insurance Company. Reliance Insurance Company has
sole voting power and sole investment power of the shares of Common
Stock listed. (See Note 2 above.)
(5) Includes 318,334 shares of Common Stock issuable upon the exercise of
currently exercisable options and options exercisable within the next
60 days. Does not include 241,666 shares of Common Stock issuable upon
exercise of options which are not currently exercisable and which will
not become exercisable within the next 60 days.
(6) Includes 271,079 shares of Common Stock issuable upon the exercise of
currently exercisable options and options exercisable within the next
60 days. Does not include 124,584 shares of Common Stock issuable upon
exercise of options which are not currently exercisable, and which will
not become exercisable within the next 60 days.
(7) Includes 20,000 shares of Common Stock issuable upon the exercise of
presently exercisable options and options exercisable within the next
60 days. Does not include 10,000 shares of Common Stock issuable upon
exercise of options which are not currently exercisable and which will
not become exercisable within the next 60 days.
(8) Includes 10,000 shares of Common Stock issuable upon the exercise of
presently exercisable options within the next 60 days. Does not include
20,000 shares of Common Stock issuable upon exercise of options which
are not currently exercisable and which will not become exercisable
within the next 60 days.
(9) Includes 896,080 shares of Common Stock issuable upon the exercise of
currently exercisable options and options exercisable within the next
60 days. Does not include 799,583 shares of Common Stock issuable upon
exercise of options which are not currently exercisable and which will
not become exercisable within the next 60 days.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each of which serves
for a term of three years, with only one class of directors being elected in
each year. The term of the first class of directors, consisting of Mr. Jonathan
L. Steinberg and Mr. Scot A. Rosenblum will expire on the date of this year's
Annual Meeting, the term of office of the second class of directors, consisting
of Mr. Bruce L. Sokoloff and Mr. Peter M. Ziemba, will expire in 1998, and the
2
term of office of the third class of directors, consisting of Mr. Robert
Schmidt, will expire in 1999. In each case, each director serves from the date
of his election until the end of his term and until his successor is elected and
qualified.
Two persons will be elected at the Annual Meeting to serve as directors
for a term of three years. The Company has nominated Mr. Jonathan L. Steinberg
and Mr. Scot A. Rosenblum as the candidates for election. Unless authority is
withheld, the proxies solicited by management will be voted "FOR" the election
of these nominees. In case either of the nominees becomes unavailable for
election to the Board of Directors, an event which is not anticipated, the
persons named as proxies, or their substitutes, shall have full discretion and
authority to vote or refrain from voting for any other candidate in accordance
with their judgment.
Information about Nominees
Jonathan L. Steinberg founded the Company and has served as Chairman of
the Board of Directors of the Company since October 1988. Mr. Steinberg also
served as President from October 1988 to July 1994 and Treasurer of the Company
from October 1988 to June 1996. In addition, Mr. Steinberg is the
Editor-in-Chief of each of the Company's publications. From August 1986 to
August 1988, Mr. Steinberg was employed as an analyst in the Mergers and
Acquisitions Department of Bear, Stearns & Co. Inc., an investment banking firm.
Mr. Steinberg is a nephew by marriage of Bruce L. Sokoloff, a director of the
Company. Mr. Steinberg is 32 years of age.
Scot A. Rosenblum has served as a director, Vice President, Chief
Financial Officer and Secretary of the Company since October 1988 and Treasurer
of the Company since June 1996. In addition, Mr. Rosenblum served as the
Publisher of each of the Company's publications until March 1996. From August
1986 to August 1988, Mr. Rosenblum was employed as an analyst in the Corporate
Finance Department of Bear, Stearns & Co. Inc.
Mr. Rosenblum is 32 years of age.
Information About Other Directors
Each of the directors named in the following table will continue in
office after the Annual Meeting and until his term expires in the year indicated
and his successor is elected and qualified:
Term Served as
Name Age Expires In Director Since Principal Occupation
Bruce L. Sokoloff 47 1998 1989 Director
Peter M. Ziemba 39 1998 1996 Director
Robert H. Schmidt 60 1999 1994 President and Chief Operating Officer
Bruce L. Sokoloff has served as a director since 1989. Mr. Sokoloff has
served as Senior Vice President - Administration of Reliance Group Holdings,
Inc., the holding company for several insurance and financial services
corporations, for more than five years and has been employed at Reliance Group
since 1973. Mr. Sokoloff is an uncle by marriage of Mr. Jonathan L. Steinberg.
Peter M. Ziemba has served as a director since 1996. Mr. Ziemba is an
attorney and has been a partner of the law of firm Graubard Mollen & Miller for
more than five years. Graubard Mollen & Miller is outside general counsel to the
Company.
Robert Schmidt has served as a director, President and Chief Operating
Officer of the Company since July 1994. From January 1991 to June 1994, Mr.
Schmidt was President and Chief Executive Officer of Dreyfus Service
Corporation, a marketing and mutual fund distribution subsidiary of Dreyfus
Corporation. From 1966 to December 1990, Mr. Schmidt served in various executive
capacities with Levine, Huntley, Schmidt & Beaver, an advertising agency which
he co-founded, including Chairman and Chief Executive Officer from 1985 to
December 1990.
3
Executive Officers, Board of Directors' Meetings and Committees
Mr. Henry G. Clark (age 52) has been Controller and Principal
Accounting Officer since November 1995. Prior to that, he was Chief Financial
Officer/Controller of Seventh Generation, Inc. from July 1990 to March 1992 and
then again from May 1993 to December 1994. Mr. Clark is a Certified Public
Accountant.
During 1996, the Board of Directors met four times and acted by
unanimous consent on six occasions. The Company has standing audit and stock
option committees of the Board of Directors.
The audit committee was established in June 1996 and is currently
comprised of Mr. Bruce L. Sokoloff and Mr. Peter M. Ziemba. The function of the
audit committee is to recommend annually to the Board of Directors the
appointment of the independent auditors of the Company; review with the
independent auditors the scope of the annual audit and review their final report
relating thereto; review with the independent auditors the accounting practices
and policies of the Company; review with the internal and independent auditors
the overall accounting and financial controls of the Company; be available to
independent auditors during the year for consultation; and review related party
transactions by the Company on an ongoing basis and review potential conflicts
of interest situations where appropriate.
The Audit Committee had one meeting in 1996.
The stock option committee of the Board of Directors is responsible for
administering the Company's 1991 Stock Option Plan ("1991 Plan"), the 1993 Stock
Option Plan ("1993 Plan") and 1996 Performance Equity Plan ("1996 Plan"), each
of which is discussed below. The Stock Option Committee currently consists of
Mr. Jonathan L. Steinberg and Mr. Bruce L. Sokoloff. During 1996, the Stock
Option Committee did not meet, but acted by unanimous written consent on
numerous occasions.
Executive Compensation
The following table sets forth the compensation for the past three
fiscal years ended December 31, 1996, of the Company's Chief Executive Officer
and each other executive officer whose compensation exceeded $100,000 the fiscal
year ended December 31, 1996.
===================================================================================================================
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
Number of All Other
Name and Principal Position Year Salary Bonus Options Compensation
- -------------------------------------------------------------------------------------------------------------------
Jonathan L. Steinberg, 1996 $160,000 -- 100,000 --
Chief Executive Officer 1995 $110,000 $200,000 80,000 --
1994 $110,000 -- 500,000 --
- -------------------------------------------------------------------------------------------------------------------
Robert H. Schmidt, 1996 $210,427 -- 80,000 --
President and Chief Operating Officer (1) 1995 $150,000 $150,000 80,000 --
1994 $75,000 -- 400,000 --
- -------------------------------------------------------------------------------------------------------------------
Scot A. Rosenblum, 1996 $150,000 -- 60,000 --
Vice President, Treasurer and Secretary 1995 $99,990 $100,000 50,000 --
1994 $91,247 -- 100,000 --
===================================================================================================================
(1) Mr. Schmidt commenced employment with the Company in July 1994.
The Company employs Mr. Robert H. Schmidt pursuant to an employment
agreement expiring July 27, 1997, renewable for successive one-year periods
automatically, unless terminated under the notice provisions set forth in the
agreement. Mr. Schmidt's current annual base compensation is a total of
$212,500. The Company is obligated to pay for life insurance benefits for Mr.
Schmidt up to an annual premium amount of $10,000. The agreement requires Mr.
Schmidt to devote his full business time to the Company and contains a
non-competition provision for a period of one year following termination of
employment.
4
Mr. Jonathan L. Steinberg and Mr. Scot A. Rosenblum do not have written
employment agreements; for fiscal year 1997 they are compensated with an annual
base salary of $230,000 and $162,500, respectively.
On November 4, 1996, the Board of Directors adopted a compensation plan
for key executives and employees of the Company. Under this plan, the Board of
Directors determined Messrs. Steinberg, Schmidt and Rosenblum are eligible to
receive a cash bonus equal to 20% of their base salary if the information
services operations of the Company (i.e., publishing and on-line services)
achieves target profitability of $500,000 in the fiscal year ended December 31,
1997.
Option Grants
The following table sets forth the stock options granted in the last
fiscal year to the Company's executive officers identified in the Summary
Compensation table above.
===========================================================================================================================
OPTIONS GRANTED IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------------
% of Total
Number of Options Granted Exercise Price Expiration
Name of Executive Options Granted to All Employees Per Share Date
- ---------------------------------------------------------------------------------------------------------------------------
Jonathan L. Steinberg(1) 100,000 12.95% $7.50 11/4/06
- ---------------------------------------------------------------------------------------------------------------------------
Robert H. Schmidt(2) 80,000 10.36% $7.50 11/4/06
- ---------------------------------------------------------------------------------------------------------------------------
Scot A. Rosenblum(3) 60,000 7.77% $7.50 11/4/06
===========================================================================================================================
(1) The options become exercisable as to 33,334 shares of Common Stock on
November 4, 1997 and 33,333 shares of Common Stock on November 4 in
each of 1998 and 1999.
(2) The options become exercisable as to 26,667 shares of Common Stock on
November 4, 1997 and 26,666 shares of Common Stock on November 4 in
each of 1998 and 1999.
(3) The options became exercisable as to 20,000 shares of Common Stock on
November 4 in each of 1997, 1998 and 1999.
The following table sets forth the fiscal year end option values of
outstanding options at December 31, 1996 and the dollar value of unexercised,
in-the-money options for the Company's executive officers identified in the
Summary Compensation table above.
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATED FISCAL YEAR END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Dollar Value of Unexercised
Unexercised Options at Fiscal Year End: in-the-Money Options at Year End(1)
----------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------
Jonathan L. Steinberg 151,667 528,333 $329,062 $494,064
- ------------------------------------------------------------------------------------------------------------------------------
Robert H. Schmidt 268,334 291,666 $523,331 $346,667
- ------------------------------------------------------------------------------------------------------------------------------
Scot A. Rosenblum 258,579 137,084 $1,117,614 $106,249
- ------------------------------------------------------------------------------------------------------------------------------
(1) The value of a share of Common Stock on December 31, 1996 as reported by The Nasdaq Stock Market was
$7.25.
Director Compensation
Directors receive no cash compensation for their services to the
Company as directors, but are reimbursed for all reasonable costs incurred in
attending meetings of the Board of Directors. Pursuant to the 1996 Plan,
directors who are not employees of the Company receive automatic grants of stock
options upon their election or appointment as a
5
director and upon each re-election as a director. Each stock option is for
30,000 shares of Common Stock and vests at the rate of 10,000 shares of Common
Stock per year after an equal period of service, and once vested, remain
exercisable until the tenth anniversary of the date of grant. Each option is
exercisable per share at the market price per share on the date of grant.
Notwithstanding the foregoing, if the director eligible for an award of a stock
option is re-elected as a director and has not yet served as a director of the
Company for a term of three full years, the award of the stock option will be
modified as follows: (A) the number of shares of Common Stock that may be
acquired under the stock option will be reduced to (1) 20,000 shares of Common
Stock if the director has served as a director more than two years, but less
than three years, (2) 10,000 shares of Common Stock if the director has served
as a director more than one year, but less than two years, and (3) if the
director has served less than one year as a director, no stock option will be
awarded; and (B) the stock option will be exercisable by the director as to
10,000 shares of Common Stock on each of the second and third anniversaries of
his re-election or re-appointment as a director if the stock option represents
the right to acquire 20,000 shares of Common Stock and the stock option will be
exercisable by the director as to 10,000 shares of Common Stock on the third
anniversary of his re-election or re-appointment as a director if the stock
option represents the right to acquire 10,000 shares of Common Stock.
Mr. Peter M. Ziemba was granted an option during 1996 to acquire 30,000
shares of Common Stock at $10.50 per share, vesting at the rate of 10,000 shares
of Common Stock on June 19, 1997, 1998 and 1999, exercisable until June 19,
2006.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities ("ten-
percent stockholders") to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
stockholders also are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
furnished to it, and written representations that no other reports were
required, the Company believes that during the Company's fiscal year ended
December 31, 1996, all its officers, directors and ten-percent stockholders
complied with the Section 16(a) reporting requirements.
Stock Option Plans
1991 Plan
In September 1991, the Company adopted the 1991 Plan covering 200,000
shares of the Company's Common Stock pursuant to which officers, directors, and
key employees of the Company are eligible to receive incentive or non-qualified
stock options. The 1991 Plan, which expires in October 2001, is administered by
the Stock Option Committee of the Board of Directors pursuant to the powers
delegated to it by the Board of Directors. To the extent permitted under the
express provisions of the 1991 Plan, the Stock Option Committee has authority to
determine the selection of participants, allotment of shares, price, and other
conditions of purchase of options and administration of the 1991 Plan in order
to attract and retain persons instrumental to the success of the Company. There
are options outstanding under the 1991 Plan for 182,000 shares of Common Stock,
and options for 9,000 shares of Common Stock have been exercised.
1993 Plan
In February 1993, the Company adopted the 1993 Plan covering 500,000
shares of the Company's Common Stock pursuant to which officers, directors, key
employees and consultants of the Company are eligible to receive incentive or
non-qualified stock options, stock appreciation rights, restricted stock awards,
deferred stock, stock reload options and other stock based awards. The 1993 Plan
will terminate at such time no further awards may be granted and awards granted
are no longer outstanding, provided that incentive options may only be granted
until February 16, 2003. The 1993 Plan is administered by the Stock Option
Committee pursuant to the powers delegated to it by the Board of Directors. To
the extent permitted under the provisions of the 1993 Plan, the Stock Option
Committee has authority to determine the selection of participants, allotment of
shares, price, and other conditions of purchase of awards and administration of
the 1993 Plan in order to attract and retain persons instrumental to the success
of the Company. There
6
are options outstanding under the 1993 Plan for 427,501 shares of Common Stock,
and options for 40,560 shares have been exercised
1996 Plan
In 1996, the Company adopted the 1996 Plan covering 1,000,000 shares of
the Company's Common Stock pursuant to which officers, directors, key employees
and consultants of the Company are eligible to receive incentive or
non-qualified stock options, stock appreciation rights, restricted stock awards,
deferred stock, stock reload options and other stock based awards. The 1996 Plan
will terminate at such time no further awards may be granted and awards granted
are no longer outstanding, provided that incentive options may only be granted
until March 18, 2006. The 1996 Plan is administered by the Stock Option
Committee pursuant to the powers delegated to it by the Board of Directors. To
the extent permitted under the provisions of the 1996 Plan, the Stock Option
Committee has authority to determine the selection of participants, allotment of
shares, price, and other conditions of purchase of awards and administration of
the 1996 Plan in order to attract and retain persons instrumental to the success
of the Company. There are options outstanding under the 1996 Plan for 285,100
shares of Common Stock.
Management Plan
In November 1996, the Company adopted the 1996 Management Incentive
Plan covering 500,000 shares of the Company's Common Stock, pursuant to which
executives of the Company or its subsidiaries are eligible to receive grants of
various awards. See Proposal 3 for a discussion of the 1996 Management Incentive
Plan and Appendix B for a copy of this plan.
PROPOSAL 2: TO APPROVE THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
General
The Company is currently authorized by its Certificate of Incorporation
to issue 10,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock. As of the record date, 6,161,869 shares of Common Stock were outstanding
and no shares of Preferred Stock were designated and outstanding, and the
Company was obligated to reserve 3,926,603 shares of Common Stock for issuance
under the 1991 Plan, 1993 Plan, 1996 Plan and 1996 Management Incentive Plan and
upon exercise of other outstanding options and warrants. As further discussed
herein, the Board of Directors believes that the current number of authorized
shares of Common Stock is inadequate for the long term growth and development of
the Company. Accordingly, the Board of Directors proposes to amend the
Certificate of Incorporation to increase the authorized number of shares of
Common Stock by an additional 8,000,000 shares of Common Stock to 18,000,000
shares of Common Stock and to increase the authorized number of shares of
Preferred Stock by an additional 1,000,000 shares of Preferred Stock to
2,000,000 shares of Preferred Stock.
The Board of Directors has unanimously approved the proposal to amend
the Certificate of Incorporation. As of the record date, the Company's directors
and executive officers owned of record 933,010 shares of Common Stock,
representing approximately 15% of the shares of Common Stock entitled to vote at
the Annual Meeting. Each of the directors and executive officers own options to
purchase shares of Common Stock as set forth below and are eligible to receive
grants of options and/or equity based awards under the various employee equity
award plans and employment arrangements or otherwise acquire securities of the
Company. See "Voting Securities". The Company's directors and executive officers
have advised the Company that they will vote their shares of Common Stock in
favor of the proposal.
Number of Shares of Common Stock
Name Subject to Outstanding Options
Jonathan L. Steinberg 680,000
Robert H. Schmidt 560,000
Scot A. Rosenblum 395,663
Bruce Sokoloff 30,000
Peter M. Ziemba 30,000
Other officers as a group (1 person) 30,000
7
Reason for the Proposal
The Company currently has issued and outstanding 6,161,869 shares of
Common Stock and is obligated to reserve 3,926,603 shares of Common Stock for
issuance under the 1991 Plan, 1993 Plan, 1996 Plan and 1996 Management Incentive
Plan and upon exercise of other outstanding options. Based on the number of
shares of Common Stock outstanding as of the record date, the need to reserve
shares of Common Stock as set forth above and the current Certificate of
Incorporation limit of 10,000,000 shares of Common Stock, the Board of Directors
does not believe there is an adequate number of authorized shares of Common
Stock under the Certificate of Incorporation for management to be able to plan
for the future growth and development of the Company.
The Board of Directors believes approval of the amendment to the
Certificate of Incorporation is in the best interest of the Company and its
stockholders. The authorization of additional shares of Common Stock will enable
the Company to meet its obligations under the various employee benefit plans,
employment arrangements and outstanding options and options, awards and warrants
it may issue in the future. In addition, the proposed amendment will give the
Board of Directors flexibility to authorize the issuance of shares of Common
Stock and Preferred Stock in the future for financing the Company's business,
for acquiring other businesses, for forming strategic partnerships and
alliances, for stock dividends and stock splits, and for director and employee
benefit plans.
Approval of the proposal will permit the Board of Directors to issue
additional shares of Common Stock and Preferred Stock without further approval
of the stockholders of the Company; and the Board of Directors does not intend
to seek stockholder approval prior to any issuance of the authorized capital
stock unless stockholder approval is required by applicable law, the Certificate
of Incorporation or stock market or exchange requirements. Although the Company
may from time to time review various transactions that could result in the
issuance of Common Stock or Preferred Stock and management of the Company
currently is exploring the possibility of raising additional equity financing by
issuing securities, such as Common Stock or Preferred Stock, which may occur in
the near future, the Board of Directors is not considering any proposals to
issue additional shares of capital stock, except as may be required in
connection with the exercise of existing outstanding options and other stock
based awards which may be issued under the Company's 1991 Plan, 1993 Plan, 1996
Plan or 1996 Management Incentive Plan or under any other plan or arrangement as
the Board of Directors may hereafter approve.
The additional flexibility described above that would be afforded to
the Board of Directors by the ability to issue shares of Common Stock and
Preferred Stock could be used to discourage an unsolicited takeover proposal
which the Board of Directors believes is not in the best interest of the
stockholders. For example, shares of Common Stock or Preferred Stock could be
privately placed with purchasers who may support the Board of Directors in
opposing a hostile takeover bid. Although the Board of Directors is required to
make any determination to issue securities based on its judgment as to the best
interests of the stockholders of the Company, the Board of Directors could act
in a manner that would discourage an acquisition attempt or other transaction
that some, or a majority, of the stockholders nevertheless might believe to be
in their best interests or in which stockholders might receive a premium for
their stock over the then market price of their stock. In addition, the issuance
of such shares might make it more difficult or discourage attempts to remove
incumbent management. Moreover, the issuance of such shares might have a
dilutive effect on earnings per share and on the voting rights of the existing
stockholders.
Description of Securities
Common Stock
The holders of Common Stock of the Company are entitled to one vote for
each share held of record on all matters to be voted on by the stockholders of
the Company. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares of
Common Stock of the Company voted for election of directors can elect the
directors of the Company. The holders of Common Stock are entitled to receive
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor. The Company never has paid dividends on its shares
of Common Stock. In the event of liquidation, dissolution or winding up of the
Company, the holders of the shares of Common Stock are entitled to share ratably
in all assets remaining available for distribution
8
to them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
Preferred Stock
The Company is authorized to issue Preferred Stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights that could affect adversely the
voting power of other rights of the holders of the Common Stock. The Company
does not have any Preferred Stock outstanding.
If the proposal to amend the Certificate of Incorporation is approved,
the fourth article of the Certificate of Incorporation will be amended as set
forth in Appendix A to this Proxy Statement. The financial statements,
management's discussion and analysis of financial condition and results of
operations and related information is incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
PROPOSAL 3: APPROVAL OF
1996 MANAGEMENT INCENTIVE PLAN
On November 4, 1996, the Board of Directors unanimously adopted the
1996 Management Incentive Plan ("Management Plan"), subject to stockholder
approval. The Management Plan provides for the grant of options to executive
officers of the Company and its subsidiaries to purchase up to 500,000 shares of
Common Stock. The Management Plan is intended to assist the Company and its
subsidiaries in attracting, retaining and motivating executives of particular
merit.
Although the Company believes that all material provisions of the
Management Plan have been set forth in this Proxy Statement, this summary does
not discuss all the elements of the Management Plan and is qualified in its
entirety by reference to the text of the Management Plan, a copy of which is
attached to this Proxy Statement as Appendix B and is incorporated herein by
reference.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THE MANAGEMENT PLAN
Summary of the Management Plan
Administration
The Management Plan will be administered by the Board of Directors or
by a committee ("Committee") appointed by the Board of Directors, whose members
will serve at the pleasure of the Board of Directors. If no Committee is so
designated, then the Management Plan will be administered by the Board of
Directors. The Board of Directors or, if appointed, Committee, has full
authority, subject to the provisions of the Management Plan, to award (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred
Stock, (v) Stock Reload Options and/or (vi) other stock-based awards
(collectively, "Awards").
Subject to the provisions of the Management Plan, the Board of
Directors or the Committee determines, among other things, the executive
officers to whom from time to time Awards may be granted ("Holders"), the
specific type of Awards to be granted (e.g., Stock Option, Restricted Stock,
etc.), the number of shares subject to each Award, share prices, any
restrictions or limitations on such Awards and any vesting, exchange, deferral,
surrender, cancellation,
9
acceleration, termination, exercise or forfeiture provisions related to such
Awards. The interpretation and construction by the Board of Directors or the
Committee of any provisions of, and the determination of any questions arising
under, the Management Plan or any rule or regulation established by the Board of
Directors or the Committee pursuant to the Management Plan will be final,
conclusive and binding on all persons interested in the Management Plan.
Shares Subject to the Plan; General Terms
The Management Plan authorizes the granting of Awards the exercise of
which would allow up to an aggregate of 500,000 of the Company's Common Stock to
be acquired by the Holders of said Awards. In order to prevent the dilution or
enlargement of the rights of Holders under the Management Plan, the number of
the Company's Common Stock authorized by the Management Plan is subject to
adjustment by the Board of Directors in the event of any increase or decrease in
the number of shares of outstanding Common Stock resulting from a stock
dividend, stock split, reverse stock split or change in the par value affecting
the Company's Common Stock. If any Award granted under the Management Plan is
forfeited or terminated, the Company's Common Stock that was available pursuant
to such Award will again be available for distribution in connection with Awards
subsequently granted under the Management Plan.
Any equity security granted pursuant to the Management Plan must be
held for six months from the date of grant or in the case of an option, at least
six months must elapse from the date of acquisition of the option to the date of
disposition of the option (other than upon exercise or conversion) or its
underlying equity security.
Eligibility
Subject to the provisions of the Management Plan, Awards may be granted
to executive officers who are deemed to have rendered or to be able to render
significant services to the Company or its subsidiaries and are deemed to have
contributed or to have the potential to contribute to the success of the
Company. Incentive Options (as hereinafter defined) may be awarded only to
persons who, at the time of such awards, are employees of the Company or its
subsidiaries.
Types of Awards
Options
The Management Plan provides both for "incentive stock options"
("Incentive Options") as defined in Section 422 of the Code, and for options not
qualifying as Incentive Options ("Non-qualified Options"), both of which may be
granted with any other stock-based award under the Management Plan. The Board of
Directors or the Committee will determine the exercise price per share of Common
Stock purchasable under an Incentive or Non-qualified Option (collectively,
"Options"). The exercise price of a Non-qualified Option may be less than 100%
of the fair market value on the last trading day before the date of the grant.
The exercise price of an Incentive Option may not be less than 100% of the fair
market value on the last trading day before the date of grant (or in the case of
an Incentive Option granted to a person possessing at the time of grant more
than 10% of the total combined voting power of all classes of stock of the
Company, not less than 110% of such fair market value).
The Board of Directors or the Committee determines when Options are to
be granted and when they may be exercised. However, an Incentive Option may only
be granted within a ten-year period commencing on November 4, 1996 and may only
be exercised within ten years of the date of the grant (or within five years in
the case of an Incentive Option granted to a person who, at the time of the
grant, owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of its parent or any subsidiary). Subject
to any limitations or conditions of the Management Plan and any the Board of
Directors or the Committee may impose, Options may be exercised, in whole or in
part, during the term of the Option by giving written notice of exercise to the
Company specifying the number of the Company's Common Stock to be purchased.
Such notice must be accompanied by payment in full of the purchase price, either
in cash or in securities of the Company, or in combination thereof. Options
granted under the Management Plan are exercisable only by the Holder during his
or her lifetime. The Options granted under the Management Plan may not be
transferred other than by will or by the laws of descent and distribution.
Generally, if the Holder received an option as an employee of the
Company or a subsidiary, no Option, or any portion thereof, granted under the
Management Plan may be exercised by the Holder unless he or she is employed by
the
10
Company or a subsidiary of the Company at the time of the exercise and has been
so employed continuously from the time the Option was granted. However, in the
event the Holder's employment with the Company is terminated due to disability,
the Option will be fully vested and the Holder may still exercise his or her
Option for a period of one year (or such other lesser period as the Board of
Directors or the Committee may specify at the time of grant) from the date of
such termination or until the expiration of the stated term of the Option,
whichever period if shorter. Similarly, should a Holder die while in the
employment of the Company or a subsidiary, the Option will be fully vested on
the date of death and his or her legal representative or legatee under his or
her will may exercise the decedent Holder's Option for a period of one year from
death (or such other greater or lesser period as the Board of Directors or the
Committee specifies at the time of grant) or until the expiration of the stated
term of the Option, whichever is shorter. Further, if the Holder's employment is
terminated without cause or due to normal retirement (upon attaining the age of
65), then the portion of any Option that has vested by the date of such
retirement or termination may be exercised for the lesser of three months after
retirement or the balance of the Option's term.
Stock Appreciation Rights
The Board of Directors or the Committee may grant Stock Appreciation
Rights ("SARs" or singularly "SAR") in conjunction with all or part of any
Option granted under the Management Plan or may grant SARs on a free-standing
basis. In conjunction with Non-qualified Options, SARs may be granted either at
or after the time of the grant of such Non-qualified Options. In conjunction
with Incentive Options, SARs may be granted only at the time of the grant of
such Incentive Options. An SAR entitles the Holder thereof to receive an amount
(payable in cash and/or the Common Stock, as determined by the Board of
Directors or the Committee) equal to the excess fair market value of one share
of Common Stock over the SAR price or the exercise price of the related Option,
multiplied by the number of shares subject to the SAR.
Restricted Stock Awards
The Board of Directors or the Committee may award shares of Restricted
Stock either alone or in addition to other Awards granted under the Management
Plan. The Board of Directors or the Committee shall determine the restricted
period during which the shares of stock may be forfeited if, for example, the
Holder's employment with the Company is terminated. In order to enforce the
forfeiture provisions, the Management Plan requires that all shares of
Restricted Stock awarded to the Holder remain in the physical custody of the
Company until the restrictions on such shares have terminated.
Deferred Stock
The Board of Directors or the Committee may award shares of Deferred
Stock either alone or in addition to other Awards granted under the Management
Plan. The Board of Directors or the Committee shall determine the deferral
period during which time the receipt of the stock is deferred. The Award may
specify, for example, that the Holder must remain employed by the Company during
the entire deferral period in order to be issued the stock.
Stock Reload Options
A Stock Reload Option permits a Holder who exercises an Option by
delivering already owned stock (i.e., the stock-for-stock method) to receive
back from the Company a new Option (at the current market price) for the same
number of shares delivered to exercise the Option, which new Option may not be
exercised until one year after it was granted and expires on the date the
original Option would have expired (had it not been previously exercised). The
Board of Directors or the Committee may grant Stock Reload Options in
conjunction with any Option granted under the Management Plan. In conjunction
with Incentive Options, Stock Reload Options may be granted only at the time of
the grant of such Incentive Option. In conjunction with Non-qualified Options,
Stock Reload Options may be granted either at or after the time of the grant of
such Non-qualified Options.
Other Stock-Based Awards
The Board of Directors or the Committee may grant performance shares
and shares of stock valued with reference to the performance of the Company,
either alone or in addition to or in tandem with Stock Options, Restricted
11
Stock or Deferred Stock. Subject to the terms of the Management Plan, the Board
of Directors or the Committee has complete discretion to determine the terms and
conditions applicable to any such stock-based awards. Such terms and conditions
may require, among other things, continued employment and/or the attainment of
specified performance objectives.
Withholding Taxes
Upon the exercise of any Award granted under the Management Plan, the
Holder may be required to remit to the Company an amount sufficient to satisfy
all Federal, state and local withholding tax requirements prior to delivery of
any certificate or certificates for the Common Stock. Subject to certain
stringent limitations under the Management Plan and at the discretion of the
Company, the Holder may satisfy these requirements by electing to have the
Company withhold a portion of the shares to be received upon the exercise of the
Award having a value equal to the amount of the withholding tax due under
applicable federal, state and local laws.
Agreements
Options, Restricted Stock, Deferred Stock, and SARs and other
stock-based awards granted under the Management Plan will be evidenced by
agreements consistent with the Management Plan in such form as the Board of
Directors or the Committee may prescribe. Neither the Management Plan nor
agreements thereunder confer any right to continued employment upon any Holder.
Term and Termination of the Management Plan
The Management Plan was effective as of November 4, 1996 ("Effective
Date"), subject to approval by the stockholders of the Company within one year
after the Effective Date. Any Awards granted under the Management Plan prior to
such approval shall be effective when made (unless otherwise specified by the
Committee at the time of grant). If the Management Plan is not approved by
stockholders, all Awards granted thereunder shall be deemed options not granted
under any plan. To the extent any such options were Incentive Options, these
will be treated as Non-qualified Options. Unless terminated by the Board of
Directors, the Management Plan shall continue to remain effective until such
time as no further Awards may be granted and all Awards granted under the
Management Plan are no longer outstanding. Notwithstanding the foregoing, grants
of Incentive Options may only be made during the ten-year period following the
Effective Date.
Amendments to the Plan
The Board of Directors may at any time, and from time to time, amend,
alter, suspend or discontinue any of the provisions of the Management Plan, but
no amendment, alteration, suspension or discontinuance shall be made that would
impair the rights of a Holder of any Award theretofore granted, without his or
her consent.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the Management Plan is only a summary of the general rules
applicable to the grant and exercise of stock options and does not purport to
give specific details on every variable and does not cover, among other things,
state, local and foreign tax treatment of participation in the Management Plan.
The information is based on present law and regulations, which are subject to
being changed prospectively or retroactively.
Incentive Options
The Holder will recognize no taxable income and the Company will not
qualify for any deduction upon the grant or exercise of an Incentive Option.
Upon a disposition of the shares underlying the Incentive Option after the later
of two years from the date of grant or one year after the issuance of the shares
to the Holder, the Holder will recognize the difference, if any, between the
amount realized and the exercise price as long-term capital gain or long-term
capital loss (as the case may be) if the shares are capital assets. The excess,
if any, of the fair market value of the shares on the date of exercise of an
Incentive Option over the exercise price will be treated as an item of
adjustment in computing the
12
alternative minimum tax for a Holder's taxable year in which the exercise occurs
and may result in an alternative minimum tax liability for the Holder. If the
Common Stock acquired upon the exercise of an Incentive Option are disposed of
before expiration of the necessary holding period of two years from the date of
the grant of the Incentive Option and one year after the exercise of the
Incentive Option, (i) the Holder will recognize ordinary compensation income in
the taxable year of disposition in an amount equal to the excess, if any, of the
lesser of the fair market value of the shares on the date of exercise or the
amount realized on the disposition of the shares, over the exercise price paid
for such shares; and (ii) the Company will qualify for a deduction equal to any
such amount recognized, subject to the limitation that the compensation be
reasonable. The Holder will recognize the excess, if any, of the amount realized
over the fair market value of the shares on the date of exercise, if the shares
are capital assets, as short-term or long-term capital gain, depending on the
length of time that the Holder held the shares, and the Company will not qualify
for a deduction with respect to such excess. In the case of a disposition of
shares in the same taxable year as the exercise of the Incentive Option, where
the amount realized on the disposition is less than the fair market value of the
shares on the date of exercise, there will be no adjustment since the amount
treated as an item of adjustment, for alternative minimum tax purposes, is
limited to the excess of the amount realized on such disposition over the
exercise price, which is the same amount included in regular taxable income.
Non-qualified Options
With respect to Non-qualified Options (i) upon grant, the Holder will
recognize no income; (ii) upon exercise(if the Common Stock are not subject to a
substantial risk of forfeiture), the Holder will recognize ordinary compensation
income in an amount equal to the excess, if any, of the fair market value of the
shares on the date of exercise over the exercise price, and the Company will
qualify for a deduction in the same amount, subject to the requirement that the
compensation be reasonable; and (iii) the Company will be required to comply
with applicable Federal income tax withholding requirements with respect to the
amount of ordinary compensation income recognized by the Holder. On a
disposition of the shares, the Holder will recognize gain or loss equal to the
difference between the amount realized and the sum of the exercise price and the
ordinary compensation income recognized. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets and as short-term or
long-term capital gain or loss, depending upon the length of time that the
Holder held the shares.
If the shares acquired upon exercise of a Non-qualified Option are
subject to a substantial risk of forfeiture, the Holder will recognize income at
the time when the substantial risk of forfeiture is removed and the Company will
qualify for a corresponding deduction at such time.
INDEPENDENT ACCOUNTANTS
The Company has selected Deloitte & Touche LLP of New York, New York,
as its independent accountants for the year ending December 31, 1997. A
representative of Deloitte & Touche LLP is expected to be present at the meeting
with an opportunity to make a statement if the representative desires to do so
and is expected to be available to respond to appropriate questions from
stockholders.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the Common
Stock.
1997 STOCKHOLDER PROPOSALS
13
In order for any Stockholder Proposal for the 1998 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's Proxy Statement, it
must be received by the Company at its principal executive offices by January 7,
1998.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
Scot A. Rosenblum
Secretary
New York, New York
May 7, 1997
14
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INDIVIDUAL INVESTOR GROUP, INC.
Pursuant to the General Corporation Law of the State of Delaware ("GCL"),
it is hereby certified that:
1. The present name of the corporation (hereinafter called the
"corporation") is Individual Investor Group, Inc. The name under which the
corporation was incorporated was Financial Data Systems, Inc. The date of filing
the original certificate of incorporation of the corporation with the Secretary
of State of the State of Delaware was September 19, 1985.
2. The certificate of incorporation of the corporation is hereby amended by
deleting the first paragraph of Article Fourth and in its stead substituting the
following:
The total number of shares of all classes of stock
that the Corporation shall have authority to issue is twenty
million (20,000,000) shares, of which eighteen million
(18,000,000) shares will be shares of Common Stock, with a par
value of one cent ($.01) per share, and two million
(2,000,000) shares shall be shares of Preferred Stock, with a
par value of one cent ($.01) per share.
3. Except as otherwise amended hereby, the provisions of the certificate of
incorporation of the corporation are in full force and effect.
4. The amendment to the certificate of incorporation has been duly adopted
in accordance with the provisions of Section 242 of the GCL, by resolution of
the Board of Directors of the corporation and by affirmative vote of the holders
of a majority of the outstanding stock entitled to vote thereon at a meeting of
stockholders.
IN WITNESS WHEREOF, the undersigned have signed this
Certificate of Amendment on this ____ day of June 1997.
-------------------------
Robert Schmidt, President
ATTEST:
- -----------------------------
Scot A. Rosenblum, Secretary
APPENDIX B
Approved by Board of Directors November 4, 1996
Approved by Stockholders on: _____________
INDIVIDUAL INVESTOR GROUP, INC.
1996 Management Incentive Plan
Section
1. Purpose; Definitions.
1.1 Purpose. The purpose of the Individual Investor Group, Inc. (the
"Company") 1996 Management Incentive Plan (the "Plan") is to enable the Company
to offer to the executive officers of the Company and its subsidiaries as
determined by the Committee (as hereinafter defined) an opportunity to acquire a
proprietary interest in the Company. The various types of long-term incentive
awards which may be provided under the Plan will enable the Company to respond
to changes in compensation practices, tax laws, accounting regulations and the
size and diversity of its businesses.
1.2 Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Agreement" means the agreement between the Company and the Holder
setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto and the regulations promulgated thereunder.
(d) "Committee" means any committee of the Board, which the Board may
designate to administer the Plan or any portion thereof. If no Committee is so
designated, then all references in this Plan to "Committee" shall mean the
Board.
(e) "Common Stock" means the Common Stock of the Company, par value $.01
per share.
(f) "Company" means Individual Investor Group, Inc., a corporation
organized under the laws of the State of Delaware.
(g) "Deferred Stock" means Stock to be received, under an award made
pursuant to Section 8, below, at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(i) "Effective Date" means the date set forth in Section 12.1, below.
(j) "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
given date: (i) if the Common Stock is listed on a national securities exchange
or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale
price of the Common Stock in the principal trading market for the Common Stock
on the last trading day preceding the date of grant of an award hereunder, as
reported by the exchange or Nasdaq, as the case may be; (ii) if the Common Stock
is not listed on a national securities exchange or quoted on the Nasdaq National
Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market,
the closing bid price for the Common Stock on the last trading day preceding the
date of grant of an award hereunder for which such quotations are reported by
the OTC
Bulletin Board or the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the fair market value of the Common
Stock cannot be determined pursuant to clause (i) or (ii) above, such price as
the Committee shall determine, in good faith.
(k) "Holder" means a person who has received an award under the Plan.
(l) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(m) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment with the
Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 9, below, that
is valued in whole or in part by reference to, or is otherwise based upon,
Stock.
(p) "Parent" means any present or future parent corporation of the Company,
as such term is defined in Section 424(e) of the Code.
(q) "Plan" means the Individual Investor Group, Inc. 1996 Management
Incentive Plan, as hereinafter amended from time to time.
(r) "Restricted Stock" means Stock, received under an award made pursuant
to Section 7, below, that is subject to restrictions under said Section 7.
(s) "SAR Value" means the excess of the Fair Market Value (on the exercise
date) of the number of shares for which the Stock Appreciation Right is
exercised over the exercise price that the participant would have otherwise had
to pay to exercise the related Stock Option and purchase the relevant shares.
(t) "Stock" means the Common Stock of the Company, par value $.01 per
share.
(u) "Stock Appreciation Right" means the right to receive from the Company,
on surrender of all or part of the related Stock Option, without a cash payment
to the Company, a number of shares of Common Stock equal to the SAR Value
divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option to purchase shares of Stock
which is granted pursuant to the Plan.
(w) "Stock Reload Option" means any option granted under Section 5.3,
below, as a result of the payment of the exercise price of a Stock Option and/or
the withholding tax related thereto in the form of Stock owned by the Holder or
the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future subsidiary corporation of the
Company, as such term is defined in Section 424(f) of the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such term as the Board
may in each case determine, and shall be subject to removal at any time by the
Board.
2
2.2 Powers of Committee. The Committee shall have full authority
to award, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock
Reload Options and/or (vi) Other Stock-Based Awards. For purposes of
illustration and not of limitation, the Committee shall have the authority
(subject to the express provisions of this Plan):
(a) to select the executive officers of the Company or any Subsidiary to
whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Reload Stock Options and/or Other Stock-Based Awards may from time to time be
awarded hereunder.
(b) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to,
number of shares, share price, any restrictions or limitations, and any vesting,
exchange, surrender, cancellation, acceleration, termination, exercise or
forfeiture provisions, as the Committee shall determine);
(c) to determine any specified performance goals or such other factors or
criteria which need to be attained for the vesting of an award granted
hereunder;
(d) to determine the terms and conditions under which awards granted
hereunder are to operate on a tandem basis and/or in conjunction with or apart
from other equity awarded under this Plan and cash awards made by the Company or
any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a payment under the Plan under
such rules and procedures as the Committee may establish, including the
crediting of interest on deferred amounts denominated in cash and of dividend
equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which Stock and other
amounts payable with respect to an award hereunder shall be deferred which may
be either automatic or at the election of the Holder; and
(g) to substitute (i) new Stock Options for previously granted Stock
Options, which previously granted Stock Options have higher option exercise
prices and/or contain other less favorable terms, and (ii) new awards of any
other type for previously granted awards of the same type, which previously
granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 11, below, the Committee shall
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable, to interpret the terms and provisions of the Plan and any award
issued under the Plan (and to determine the form and substance of all Agreements
relating thereto), and to otherwise supervise the administration of the Plan.
Subject to Section 11, below, all decisions made by the Committee pursuant to
the provisions of the Plan shall be made in the Committee's sole discretion and
shall be final and binding upon all persons, including the Company, its
Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term or provision of the Plan relating to Incentive Stock
Options (including but limited to Stock Reload Options or Stock Appreciation
rights granted in conjunction with an Incentive Stock Option) or any Agreement
providing for Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify the Plan under Section 422 of the Code, or, without the consent
of the Holder(s) affected, to disqualify any Incentive Stock Option under such
Section 422.
3
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 500,000 shares.
Shares of Stock under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. If any shares of Stock that have been
granted pursuant to a Stock Option cease to be subject to a Stock Option, or if
any shares of Stock that are subject to any Stock Appreciation Right, Restricted
Stock, Deferred Stock award, Reload Stock Option or Other Stock-Based Award
granted hereunder are forfeited, or any such award otherwise terminates without
a payment being made to the Holder in the form of Stock, such shares shall again
be available for distribution in connection with future grants and awards under
the Plan. Only net shares issued upon a stock-for-stock exercise (including
stock used for withholding taxes) shall be counted against the number of shares
available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event
of any change in the number of outstanding shares of Common Stock of the Company
occurring as the result of a stock split, reverse stock split or stock dividend
on the Common Stock, after the grant of an Award, the Company shall
proportionately adjust the number of shares of Stock subject to the Award and
the price to be paid on exercise of an Award as well as the aggregate number of
shares reserved for issuance under the Plan. Any right to acquire a fractional
share of Stock resulting from any adjustments will be rounded to the nearest
whole share of Stock. If the Company shall be the surviving corporation in any
merger, combination or consolidation, any outstanding Award shall pertain and
apply to the shares of Stock to which the Holder is entitled, without adjustment
for issuance by the Company of any securities in the merger, combination or
consolidation. In the event of a change in the par value of the Common Stock of
the Company which is subject to any outstanding Award, such Award will be deemed
to pertain to the shares of Stock resulting from any such change. To the extent
that the foregoing adjustments relate to the Common Stock of the Company, the
adjustments will be made by the Committee whose determination will be final,
binding and conclusive.
Section 4. Eligibility.
4.1 General. Awards may be made or granted to executive officers
of the Company and its subsidiaries as selected by the Committee who are deemed
to have rendered or to be able to render significant services to the Company or
its Subsidiaries and who are deemed to have contributed or to have the potential
to contribute to the success of the Company. No Incentive Stock Option shall be
granted to any person who is not an employee of the Company or a Subsidiary at
the time of grant.
Section 5. Required Six Month Holding Period.
A period of not less than six months must elapse from the date of grant of
an award under the Plan, (i) before any disposition by a Holder of a derivative
security (as defined in Rule 16a-1 promulgated under the Securities Exchange Act
of 1934, as amended) issued under this Plan or (ii) before any disposition by a
Holder of any Stock purchased or granted pursuant to an award under this Plan.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock
Options. Any Stock Option granted under the Plan shall contain such terms, not
inconsistent with this Plan, or with respect to Incentive Stock Options, not
inconsistent with the Code, as the Committee may from time to time approve. The
Committee shall have the authority to grant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options and which may be
granted alone or in addition to other awards granted under the Plan. To the
extent that any Stock Option intended to qualify as an Incentive Stock Option
does not so qualify, it shall constitute a separate Nonqualified Stock Option.
An Incentive Stock Option may be granted only within the ten-year period
commencing from the Effective Date and may only be exercised within ten years of
the date of grant (or five years in the case of an Incentive Stock Option
granted to an optionee ("10% Stockholder") who, at the time of grant, owns Stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company.
4
6.2 Terms and Conditions. Stock Options granted under the Plan shall
be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant and may
be less than 100% of the Fair Market Value of the Stock as defined above;
provided, however, that the exercise price of an Incentive Stock Option shall
not be less than 100% of the Fair Market Value of the Stock if granted to a
person other than a 10% Stockholder and, if granted to a 10% Stockholder, the
exercise price shall not be less than 110% of the Fair Market Value of the
Stock.
(b) Option Term. Subject to the limitations in Section 6.1, above, the term
of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at such time or
times, and subject to such terms and conditions as shall be determined by the
Committee. If the Committee provides, in its discretion, that any Stock Option
is exercisable only in installments, i.e., that it vests over time, the
Committee may waive such installment exercise provisions at any time at or after
the time of grant in whole or in part, based upon such factors as the Committee
shall determine.
(d) Method of Exercise. Subject to whatever installment, exercise and
waiting period provisions are applicable in a particular case, Stock Options may
be exercised in whole or in part at any time during the term of the Option, by
giving written notice of exercise to the Company specifying the number of shares
of Stock to be purchased. Such notice shall be accompanied by payment in full of
the purchase price, which shall be in cash or, unless otherwise provided in the
Agreement, in shares of Stock (including Restricted Stock and other contingent
awards under this Plan) or, partly in cash and partly in such Stock, or such
other means which the Committee determines are consistent with the Plan's
purpose and applicable law. Cash payments shall be made by wire transfer,
certified or bank check or personal check, in each case payable to the order of
the Company; provided, however, that the Company shall not be required to
deliver certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of Stock
shall be valued at the Fair Market Value of a share of Stock on the date prior
to the date of exercise. Such payments shall be made by delivery of stock
certificates in negotiable form which are effective to transfer good and valid
title thereto to the Company, free of any liens or encumbrances. Subject to the
terms of the Agreement, the Committee may, in its sole discretion, at the
request of the Holder, deliver upon the exercise of a Nonqualified Stock Option
a combination of shares of Deferred Stock and Common Stock; provided that,
notwithstanding the provisions of Section 9 of the Plan, such Deferred Stock
shall be fully vested and not subject to forfeiture. A Holder shall have none of
the rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of the
Option.
(e) Transferability. Except as may be set forth in the Agreement, no Stock
Option shall be transferable by the Holder other than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during the
Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holder's employment by the Company
or a Subsidiary terminates by reason of death, any Stock Option held by such
Holder, unless otherwise determined by the Committee at the time of grant and
set forth in the Agreement, shall be fully vested and may thereafter be
exercised by the legal representative of the estate or by the legatee of the
Holder under the will of the Holder, for a period of one year (or such other
greater or lesser period as the Committee may specify at grant) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's employment by the
Company or any Subsidiary terminates by reason of Disability, any Stock Option
held by such Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall be fully vested and may thereafter
be exercised by the Holder for a period of one year (or such other greater or
lesser period as the Committee may
5
specify at the time of grant) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter.
(h) Other Termination. Subject to the provisions of Section 13.3, below,
and unless otherwise determined by the Committee at the time of grant and set
forth in the Agreement, if a Holder is an employee of the Company or a
Subsidiary at the time of grant and if such Holder's employment by the Company
or any Subsidiary terminates for any reason other than death or Disability, the
Stock Option shall thereupon automatically terminate, except that if the
Holder's employment is terminated by the Company or a Subsidiary without cause
or due to Normal Retirement, then the portion of such Stock Option which has
vested on the date of termination of employment may be exercised for the lesser
of three months after termination of employment or the balance of such Stock
Option's term.
(i) Additional Incentive Stock Option Limitation. In the case of an
Incentive Stock Option, the aggregate Fair Market Value of Stock (determined at
the time of grant of the Option) with respect to which Incentive Stock Options
become exercisable by a Holder during any calendar year (under all such plans of
the Company and its Parent and Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at any time, in its
sole discretion, offer to buy out a Stock Option previously granted, based upon
such terms and conditions as the Committee shall establish and communicate to
the Holder at the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option shall be confirmed
by, and shall be subject to the terms of, the Agreement executed by the Company
and the Holder.
6.3 Stock Reload Option. The Committee may also grant to the
Holder (concurrently with the grant of an Incentive Stock Option and at or after
the time of grant in the case of a Nonqualified Stock Option) a Stock Reload
Option up to the amount of shares of Stock held by the Holder for at least six
months and used to pay all or part of the exercise price of an Option and, if
any, withheld by the Company as payment for withholding taxes. Such Stock Reload
Option shall have an exercise price equal to the Fair Market Value as of the
date of the Stock Reload Option grant. Unless the Committee determines
otherwise, a Stock Reload Option may be exercised commencing one year after it
is granted and shall expire on the date of expiration of the Option to which the
Reload Option is related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock Appreciation
Rights to participants who have been, or are being granted, Options under the
Plan as a means of allowing such participants to exercise their Options without
the need to pay the exercise price in cash. In the case of a Nonqualified Stock
Option, a Stock Appreciation Right may be granted either at or after the time of
the grant of such Nonqualified Stock Option. In the case of an Incentive Stock
Option, a Stock Appreciation Right may be granted only at the time of the grant
of such Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be
subject to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be exercisable as shall
be determined by the Committee and set forth in the Agreement, subject to the
limitations, if any, imposed by the Code, with respect to related Incentive
Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate and shall no
longer be exercisable upon the termination or exercise of the related Stock
Option.
(c) Method of Exercise. Stock Appreciation Rights shall be exercisable upon
such terms and conditions as shall be determined by the Committee and set forth
in the Agreement and by surrendering the
6
applicable portion of the related Stock Option. Upon such exercise and
surrender, the Holder shall be entitled to receive a number of Option Shares
equal to the SAR Value divided by the Fair Market Value (on the exercise date).
(d) Shares Affected Upon Plan. The granting of a Stock Appreciation Right
shall not affect the number of shares of Stock available for awards under the
Plan. The number of shares available for awards under the Plan will, however, be
reduced by the number of shares of Stock acquirable upon exercise of the Stock
Option to which such Stock Appreciation Right relates.
Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be awarded, the number of shares to be awarded, the
price (if any) to be paid by the Holder, the time or times within which such
awards may be subject to forfeiture (the "Restriction Period"), the vesting
schedule and rights to acceleration thereof, and all other terms and conditions
of the awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be represented by a
stock certificate or certificates registered in the name of the Holder to whom
such Restricted Stock shall have been awarded. During the Restriction Period,
certificates representing the Restricted Stock and any securities constituting
Retained Distributions (as defined below) shall bear a legend to the effect that
ownership of the Restricted Stock (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the Agreement. Such certificates
shall be deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions that shall be forfeited or that
shall not become vested in accordance with the Plan and the Agreement.
(b) Rights of Holder. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Holder will
have the right to vote such Restricted Stock, to receive and retain all regular
cash dividends and other cash equivalent distributions as the Board may in its
sole discretion designate, pay or distribute on such Restricted Stock and to
exercise all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exceptions that (i) the Holder
will not be entitled to delivery of the stock certificate or certificates
representing such Restricted Stock until the Restriction Period shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled; (ii) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock during the
Restriction Period; (iii) other than regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion designate, pay
or distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and such
Retained Distributions will be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock) until such time, if ever,
as the Restricted Stock with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested and with respect to
which the Restriction Period shall have expired; (iv) a breach of any of the
restrictions, terms or conditions contained in this Plan or the Agreement or
otherwise established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with
respect to each award of Restricted Stock and the satisfaction of any other
applicable restrictions, terms and conditions (i) all or part of such Restricted
Stock shall become vested in accordance with the terms of the Agreement, and
(ii) any Retained Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related thereto shall have
become vested. Any such Restricted Stock and Retained Distributions that do not
7
vest shall be forfeited to the Company and the Holder shall not thereafter have
any rights with respect to such Restricted Stock and Retained Distributions that
shall have been so forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Deferred Stock will be awarded, the number of shares of Deferred Stock to be
awarded to any person, the duration of the period (the "Deferral Period") during
which, and the conditions under which, receipt of the shares will be deferred,
and all the other terms and conditions of the awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 9.2 (d) below, where
applicable), share certificates shall be issued and delivered to the Holder, or
his legal representative, representing the number equal to the shares covered by
the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred Stock shall not
have any rights of a stockholder by virtue of such award until the expiration of
the applicable Deferral Period and the issuance and delivery of the certificates
representing such Stock. The shares of Stock issuable upon expiration of the
Deferral Period shall not be deemed outstanding by the Company until the
expiration of such Deferral Period and the issuance and delivery of such Stock
to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of the Deferral Period with
respect to each award of Deferred Stock and the satisfaction of any other
applicable restrictions, terms and conditions all or part of such Deferred Stock
shall become vested in accordance with the terms of the Agreement. Any such
Deferred Stock that does not vest shall be forfeited to the Company and the
Holder shall not thereafter have any rights with respect to such Deferred Stock.
(d) Additional Deferral Period. A Holder may request to, and the Committee
may at any time, defer the receipt of an award (or an installment of an award)
for an additional specified period or until a specified event (the "Additional
Deferral Period"). Subject to any exceptions adopted by the Committee, such
request must generally be made at least one year prior to expiration of the
Deferral Period for such Deferred Stock award (or such installment).
Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, purchase rights, shares of
Common Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into shares
of Common Stock and awards valued by reference to the value of securities of or
the performance of specified Subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any other awards under
this Plan or any other plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which grants of
such other stock-based awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such awards, and all other terms and conditions
of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee.
8
Section 11. Amendment and Termination.
The Board may at any time, and from time to time, amend alter, suspend
or discontinue any of the provisions of the Plan, but no amendment, alteration,
suspension or discontinuance shall be made which would impair the rights of a
Holder under any Agreement theretofore entered into hereunder, without the
Holder's consent.
Section 12. Term of Plan.
12.1 Effective Date. The Plan shall be effective as of November 4,
1996 ("Effective Date"), subject to the approval of the Plan by the Company's
stockholders within one year after the Effective Date. Any awards granted under
the Plan prior to such approval shall be effective when made (unless otherwise
specified by the Committee at the time of grant), but shall be conditioned upon,
and subject to, such approval of the Plan by the Company's stockholders and no
awards shall vest or otherwise become free of restrictions prior to such
approval.
12.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may be
granted and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only be
made during the ten year period following the Effective Date.
Section 13. General Provisions.
13.1 Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed by the
Company and the Holder. The Committee may terminate any award made under the
Plan if the Agreement relating thereto is not executed and returned to the
Company within ten days after the Agreement has been delivered to the Holder for
his or her execution.
13.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a general
creditor of the Company.
13.3 Employees.
(a) Engaging in Competition With the Company. In the event a Holder's
employment with the Company or a Subsidiary is terminated for any reason
whatsoever, and within eighteen months after the date thereof such Holder
accepts employment with any competitor of, or otherwise engages in competition
with, the Company, the Committee, in its sole discretion, may require such
Holder to return to the Company the economic value of any award which was
realized or obtained by such Holder at any time during the period beginning on
that date which is six months prior to the date of such Holder's termination of
employment with the Company.
(b) Termination for Cause. The Committee may, in the event a Holder's
employment with the Company or a Subsidiary is terminated for cause, annul any
award granted under this Plan to such employee and, in such event, the
Committee, in its sole discretion, may require such Holder to return to the
Company the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six months
prior to the date of such Holder's termination of employment with the Company.
(c) No Right of Employment. Nothing contained in the Plan or in any award
hereunder shall be deemed to confer upon any Holder who is an employee of the
Company or any Subsidiary any right to continued employment with the Company or
any Subsidiary, nor shall it interfere in any way with the right of the Company
or any Subsidiary to terminate the employment of any Holder who is an employee
at any time.
9
13.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award under
the Plan to represent to and agree with the Company in writing that the Holder
is acquiring the shares for investment without a view to distribution thereof.
13.5 Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of Stock Options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
13.6 Withholding Taxes. Not later than the date as of which an
amount must first be included in the gross income of the Holder for Federal
income tax purposes with respect to any option or other award under the Plan,
the Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such amount. If
permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the Company under
the Plan shall be conditioned upon such payment or arrangements and the Company
or the Holder's employer (if not the Company) shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Holder from the Company or any Subsidiary.
13.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of New York (without regard to choice of law provisions).
13.8 Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under which
the availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under
this Plan).
13.9 Non-Transferability. Except as otherwise expressly provided in
the Plan or the Agreement, no right or benefit under the Plan may be alienated,
sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
13.10 Applicable Laws. The obligations of the Company with respect
to all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the Securities Act
of 1933, as amended, and (ii) the rules and regulations of any securities
exchange on which the Stock may be listed.
13.11 Conflicts. If any of the terms or provisions of the Plan or an
Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of said
Section 422 of the Code. Additionally, if this Plan or any Agreement does not
contain any provision required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated herein and therein with
the same force and effect as if such provision had been set out at length herein
and therein. If any of the terms or provisions of any Agreement conflict with
any terms or provision of the Plan, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of the
Plan. Additionally, if any Agreement does not contain any provision required to
be included therein under the Plan, such provision shall be deemed to be
incorporated therein with the same force and effect as if such provision had
been set out at length therein.
13.12 Non-Registered Stock. The shares of Stock to be distributed
under this Plan have not been, as of the Effective Date, registered under the
Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to register the
Stock or to assist the Holder in
10
obtaining an exemption from the various registration requirements, or to list
the Stock on a national securities exchange.
11
INDIVIDUAL INVESTOR GROUP, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on June 18, 1997
The undersigned Stockholder(s) of INDIVIDUAL INVESTOR GROUP, INC., a
P Delaware corporation ("Company"), hereby appoints Robert H. Schmidt and
Peter M. Ziemba, or either of them, with full power of substitution and to
act without the other, as the agents, attorneys and proxies of the
undersigned, to vote the shares standing in the name of the undersigned
R at the Annual Meeting of Stockholders of the Company to be held on
June 18, 1997 and at all adjournments thereof. This proxy will be voted
in accordance with the instructions given below. If no instructions are
given, this proxy will be voted FOR all of the following proposals.
O
1. Election of the following Directors:
X FOR all nominees listed below, except WITHHOLD AUTHORITY to vote
as marked to the contrary below |_| for all nominees listed below|_|
Jonathan L. Steinberg and Scot A. Rosenblum
Y
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.
-------------------------------------
2. To amend the Certificate of Incorporation of the Company to increase the
number of authorized shares of Common Stock to 18,000,000 and the number of
authorized shares of Preferred Stock to 2,000,000.
FOR |_| AGAINST |_| ABSTAIN |_|
3. To approve and adopt the 1996 Management Incentive Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, the proxies are authorized to vote upon such other
business as may come before the meeting or any adjournment thereof.
|_| I plan to attend the Annual Meeting.
Date________,1997
-------------------------
Signature
-------------------------
Signature if held jointly
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.