STOCK OPTION AGREEMENT
AGREEMENT dated as of the 14 day of September, 1998, by and between
Individual Investor Group, Inc., a Delaware corporation ("Company"), and Xxxxxx
Xxxxxx ("Employee").
WHEREAS, the Company and Employee have entered into an Employment Agreement
dated September 11, 1998 pursuant to which Employee will be employed by the
Company ("Employment Agreement");
WHEREAS, on September 14, 1998 ("Grant Date"), the Stock Option Committee
of the Board of Directors of the Company authorized the grant to the Employee of
an option ("Option") to purchase an aggregate of 250,000 shares of the
authorized but unissued Common Stock of the Company, $.01 par value ("Common
Stock"), conditioned upon the Employee's acceptance thereof upon the terms and
conditions set forth in this Agreement and the terms of the Employment
Agreement; and
WHEREAS, the Employee desires to acquire the Option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants the Employee the Option
to purchase all or any part of an aggregate of 250,000 shares of Common Stock
("Option Shares") on the terms and conditions set forth herein and subject to
the provisions of the Employment Agreement.
2. Non-Incentive Stock Option. The Option represented hereby is not
intended to be an Option which qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended.
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3. Exercise Price. The exercise price of the Option is $1.1875 per share,
subject to adjustment as hereinafter provided.
4. Exercisability. This Option is exercisable, subject to the terms and
conditions of this Agreement, as follows: (i) the right to purchase 62,500 of
the Option Shares shall be exercisable on or after September 14, 1999, (ii) the
right to purchase an additional 62,500 of the Option Shares shall be exercisable
on and after September 14, 2000 (iii) the right to purchase an additional 62,500
of the Option Shares shall be exercisable on and after September 14, 2001 and
(iv) the right to purchase an additional 62,500 of the Option Shares shall be
exercisable on or after September 14, 2002. After a portion of the Option
becomes exercisable, it shall remain exercisable, except as otherwise provided
herein, until the close of business on September 14, 2008 ("Exercise Period").
5. Effect of Termination of Employment.
5.1. Termination Due to Death. If Employee's employment by the Company
terminates by reason of death, the portion of the Option, if any, that was
exercisable as of the date of death may thereafter be exercised by the
legal representative of the estate or by the legatee of the Employee under
the will of the Employee, for a period of one year from the date of such
death or until the expiration of the Exercise Period, whichever period is
shorter. The portion of the Option, if any, that was not exercisable as of
the date of death shall immediately terminate upon death.
5.2. Termination Due to Disability. If Employee's employment by the
Company terminates by reason of Disability (as such term is defined in the
Employment Agreement), the portion of the Option, if any, that was
exercisable as of the date of termination of employment may thereafter be
exercised by the Employee for a period of one year from the date of the
termination of employment or until the expiration of the Exercise Period,
whichever period is shorter. The portion of the Option, if any, that was
not exercisable as of the date of the termination of employment shall
immediately terminate upon the termination of employment.
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5.3. Other Termination.
5.3.1. If Employee's employment is terminated by the Company for
cause (as defined in Section 9(a) of the Employment Agreement), this
Option, whether or not exercisable, shall immediately expire.
5.3.2. If Employee's employment is terminated by the Company
without cause (as defined in Section 9(a) of the Employment
Agreement), the portion of the Option, if any, that was exercisable as
of the date of termination of employment may thereafter be exercised
by the Employee for a period of one year from the date of the
termination of employment or until the expiration of the Exercise
Period, whichever period is shorter. The portion of the Option, if
any, that was not exercisable as of the date of the termination of
employment shall immediately terminate upon the termination of
employment.
5.3.3. If Employee terminates her employment with the Company,
this Option, whether or not exercisable, shall immediately expire.
6. Withholding Tax. Not later than the date as of which an amount first
becomes includible in the gross income of the Employee for Federal income tax
purposes with respect to the Option, the Employee shall notify the Company of
the amount and, to the extent required, pay to the Company, or make arrangements
satisfactory to the Board 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. The obligations of the Company pursuant to this Agreement shall be
conditional upon such payment or arrangements with the Company and 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 Employee from the Company.
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7. Adjustments. In the event of any recapitalization, dividend (other than
cash dividend), stock split, reverse stock split, or other change in capital
structure of the Company affecting the number of issued shares of Common Stock,
the Company shall proportionally adjust the number and kind of Option Shares and
the exercise price of the Option in order to prevent the dilution or enlargement
of the Employee's proportionate interest in the Company and Employee's rights
hereunder immediately prior to the reorganization, recapitalization,
consolidation, dividend, stock split, reverse stock split or other change,
provided that the number of Option Shares shall always be a whole number.
8. Acceleration of Vesting on Change of Control. Notwithstanding the
provisions of Sections 4, in the event of a "change of control" (as defined
below) while the Employee is employed by the Company, the vesting of this Option
shall accelerate and all the Option Shares shall be purchasable by Employee
simultaneous with such change of control. For the purposes of this Agreement, a
change of control shall mean (i) the acquisition by any "person" (as defined in
Section 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")), other than a stockholder of the Company that, as of the date
of this Agreement, is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of 10% or more of the outstanding voting securities of
the Company, of more than 50% of the combined voting power of the then
outstanding voting securities of the Company or (ii) the sale by the Company of
all, or substantially all, of the assets of the Company to one or more
purchasers, in one or a series of related transactions, where the transaction or
transactions require approval pursuant to Delaware law by the stockholders of
the Company.
9. Method of Exercise.
9.1. Notice to the Company. The Option shall be exercised in whole or
in part by written notice in substantially the form attached hereto as
Exhibit A directed to the Company at its principal place of business
accompanied by full payment as hereinafter provided of the exercise price
for the number of Option Shares specified in the notice.
9.2. Delivery of Option Shares. The Company shall deliver a
certificate for the Option Shares to the Employee as soon as practicable
after payment therefor.
9.3. Payment of Purchase Price. The Employee shall make payments by
wire transfer, certified or bank check, in each case payable to the order
of the Company. Alternatively, the Employee may make arrangements
satisfactory to the Company with a bank or a broker who is a member of the
National Association of Securities Dealers, Inc. to sell on the exercise
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date a sufficient number of the Option Shares being purchased so that the
net proceeds of the sale transaction will at least equal the Exercise Price
multiplied by the number of Option Shares being purchased pursuant to such
exercise, plus the amount of any applicable withholding taxes and pursuant
to which the bank or broker undertakes to deliver the full Exercise Price
multiplied by the number of Option Shares being purchased pursuant to such
exercise, plus the amount of any applicable withholding taxes to the
Company on a date satisfactory to the Company, but no later than the date
on which the sale transaction would settle in the ordinary course of
business.
10. Nonassignability. The Option shall not be assignable or transferable
except by will or by the laws of descent and distribution in the event of the
death of the Employee. No transfer of the Option by the Employee by will or by
the laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice thereof and a
copy of the will and such other evidence as the Company may deem necessary to
establish the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of the Option.
11. Company Representations. The Company hereby represents and warrants to
the Employee that:
(a) the Company, by appropriate and all required action, is duly
authorized to enter into this Agreement and consummate all of the
transactions contemplated hereunder; and
(b) the Option Shares, when issued and delivered by the Company to the
Employee in accordance with the terms and conditions hereof, will be duly
and validly issued and fully paid and non-assessable.
12. Employee Representations. The Employee hereby represents and warrants
to the Company that:
(a) she is acquiring the Option and shall acquire the Option Shares
for her own account and not with a view towards the distribution thereof;
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(b) she has received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders;
(c) she understands that she must bear the economic risk of the
investment in the Option Shares, which cannot be sold by her unless they
are registered under the Securities Act of 1933 ("1933 Act") or an
exemption therefrom is available thereunder;
(d) she has had both the opportunity to ask questions and receive
answers from the officers and directors of the Company and all persons
acting on its behalf concerning the terms and conditions of the offer made
hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (b) above;
(e) she is aware that the Company shall place stop transfer orders
with its transfer agent against the transfer of the Option Shares in the
absence of registration under the 1933 Act or an exemption therefrom as
provided herein; and
(i) The certificates evidencing the Option Shares may bear the
following legends:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933. The shares may not be sold or transferred in the absence of such
registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14, 1998,
a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
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13. Restriction on Transfer of Option and Option Shares. Anything in this
Agreement to the contrary notwithstanding and in addition to the provisions of
Section 10 of this Agreement, the Employee hereby agrees that she shall not
sell, transfer by any means or otherwise dispose of the Option Shares acquired
by her without registration under the 1933 Act, or in the event that they are
not so registered, unless (i) an exemption from the 1933 Act registration
requirements is available thereunder, and (ii) the Employee has furnished the
Company with notice of such proposed transfer and the Company's legal counsel,
in its reasonable opinion, shall deem such proposed transfer to be so exempt.
14. Registration Right. The Company agrees to file a registration statement
("Registration Statement") on Form S-8 (or successor form) to register the
Option Shares for issuance to Employee on or prior to the date the Option or any
portion thereof first becomes exercisable. The Company will bear all expenses
and pay all fees incurred in connection with the filing and modification or
amendment of the Registration Statement, exclusive of underwriting discounts,
and commissions payable in respect of the sale of the Common Stock and any
counsel for the Employee. Moreover, if the Company fails to comply with the
provisions of this Section 14, the Company shall, in addition to any other
equitable or other relief available to the Employee, be liable for any and all
incidental, special and consequential damages and damages due to loss of profits
sustained by the Employee.
15. Miscellaneous.
15.1. Notices. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given upon
delivery if delivered in person or by overnight courier (e.g. Federal
Express), or on the third business day following deposit in the United
States mail, if sent by registered or certified mail, return receipt
requested, addressed to the address of the party to receive notice set
forth herein, or to such this address as a party shall designate by
notice in writing given to the this party in accordance with the terms
hereof, except that notices regarding changes in address shall be
effective only upon receipt.
15.2. Stockholder Rights. The Employee shall not have any of the
rights of a stockholder with respect to the Option Shares until such
shares have been issued after the due exercise of the Option. Nothing
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contained in this Agreement shall be deemed to confer upon Employee
any right to continued employment with the Company or any subsidiary
thereof, nor shall it interfere in any way with the right of the
Company to terminate Employee in accordance with the provisions
regarding such termination set forth in Employee's Employment
Agreement with the Company, or if there exists no such agreement, to
terminate Employee at will.
15.3. Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any other or subsequent breach.
15.4. Entire Agreement. This Agreement and the Employment
Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof. This Agreement may not be
amended except by writing executed by the party to be charged.
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15.5. Binding Effect; Successors. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and, to the
extent not prohibited herein, their respective heirs, successors,
assigns and representatives. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties
hereto and as provided above, their respective heirs, successors,
assigns and representatives any rights, remedies, obligations or
liabilities.
15.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Internal laws of the State of New
York without regard to principles of conflicts of law.
15.7.Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC. Address:
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By:/s/Xxxxxxxx Xxxxxxxxx
Xxxxxxxx X. Xxxxxxxxx
Chairman and Chief Executive Officer
EMPLOYEE: Address:
000 Xxxx Xxx Xxxxxx
Xxxxxxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
/s/Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
DATE
Individual Investor Group, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of September 14, 1998
("Agreement") with Individual Investor Group, Inc. ("Company"), I hereby
irrevocably elect to exercise the right to purchase _________ shares of the
Company's common stock, par value $.01 per share ("Common Stock"), which are
being purchased for investment and not for resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
+--+ a [personal check] [certified check] [bank check] payable to the order
+--+ "Individual Investor Group, Inc." in the sum of $_________; and/or
+--+ confirmation of wire transfer in the amount of $_____________.
+--+
I hereby represent, warrant to, and agree with, the Company that:
(i) I have acquired the Option and shall acquire the Option Shares for
my own account and not with a view towards the distribution thereof;
(ii) I have received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Exchange Act
within the last 24 months and all reports issued by the Company to its
stockholders;
(iii) I understand that I must bear the economic risk of the
investment in the Option Shares, which cannot be sold by me unless they are
registered under the Securities Act of 1933 ("1933 Act") or an exemption
therefrom is available thereunder;
(iv) I have had both the opportunity to ask questions and receive
answers from the officers and directors of the Company and all persons
acting on its behalf concerning the terms and conditions of the offer made
hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;
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(v) I am aware that the Company shall place stop transfer orders with
its transfer agent against the transfer of the Option Shares in the absence
of registration under the 1933 Act or an exemption therefrom as provided
herein;
(vi) my rights with respect to the Option Shares shall, in all
respects, be subject to the terms and conditions of this Agreement and the
Employment Agreement; and
(vii) the certificates evidencing the Option Shares may bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities Act
of 1933. The shares may not be sold or transferred in the absence of
such registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of September 14, 1998,
a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
(Signature) (Address)
(Print Name) (Address)
(Social Security Number)
Xx. Xxxxxxxx X. Xxxxxxxxx
November 4, 1998
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