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EXHIBIT 10.20
INTERVISUAL BOOKS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "Agreement")
between INTERVISUAL BOOKS, INC., a California corporation (the "Company"), and
XXXXX X. XXXX ("Employee") is entered into as of the 1st day of October, 1997.
RECITALS
A. Pursuant to an Employment Agreement bearing even date herewith
between the Company and Employee (the "Employment Agreement"), the Company has
agreed to grant to Employee this option to purchase shares of the Company's
common stock.
B. This Agreement is being entered into between the Company and
Employee in partial fulfillment of the Company's obligation contained in Section
4(i) of the Employment Agreement between the Company and Employee dated on or
about the date hereof. Employee acknowledges that this option may not be
exercised by Employee until such time as the option has been approved by the
Company's shareholders.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. The Company hereby grants to Employee the right to
purchase up to 31,000 shares of common stock of the Company at a price of $1.625
per share (which price equals the fair market value of the Company's common
stock as of the date of this Agreement), on the terms and conditions set forth
herein. This option is not intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code, as amended, and is not made
pursuant to any Company stock option plan. Employee agrees that Employee and any
other person who may be entitled hereunder to exercise this option shall be
bound by all terms and conditions of this Agreement.
This Agreement and the grant of the option herein shall not
be effective unless and until Employee commences full time employment with the
Company pursuant to the terms of the Employment Agreement. If Employee does not
commence full time employment with the Company pursuant to the terms of the
Employment Agreement, this Agreement and the option granted herein shall be null
and void, and the parties hereto shall be deemed to have no rights or
obligations under this Agreement whatsoever.
2. Exercisability. Subject to the terms and conditions
contained herein, the option granted herein shall become exercisable at the
following times and in the following amounts:
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The option shall become exercisable in cumulative increments
of 10,333 shares on each of October 1, 1998 and October 1,
1999 and an increment of 10,334 shares on October 1, 2000. The
option granted hereunder shall lapse and expire on the tenth
(10th) anniversary of the date hereof.
If Employee does not purchase the full number of
shares he is entitled to purchase in any one year, the right to purchase such
shares carries over to the subsequent years during the term of this option.
Notwithstanding the foregoing, this option shall
automatically become fully exercisable upon a "Change in Control of the
Company," as such term is defined below.
For purposes of this Agreement, a "Change in Control
of the Company" shall be deemed to have occurred if:
(a) the shareholders of the Company approve a definitive
agreement to sell, transfer, or otherwise dispose of all or
substantially all of the Company's assets and properties; or
(b)any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934), other than the Company or
any "person" who as of the date this Agreement is a director or
officer of the Company (including any trust of such director or
officer), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following shall
not constitute a "Change in Control" of the Company:
(i) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of a
conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities);
(ii) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(iii) upon the death of any person who as of the date
of this Agreement is a director or officer of the Company, the
transfer (A) by testamentary disposition or the laws of intestate
succession to the estate or the legal beneficiaries or heirs of such
person, or (B) by the provisions of any trust to the beneficiaries
thereof of the securities of the Company beneficially owned by such
director or officer of the Company; or
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(c) the shareholders of the Company approve the dissolution or
liquidation of the Company or a definitive agreement to merge or
consolidate the Company with or into another entity in which the
Company is not the continuing or surviving corporation or pursuant to
which any shares of the Company's stock would be converted into cash,
securities or other property of another entity, other than a merger
of the Company in which holders of the Company's common stock
immediately prior to the merger have the same proportionate ownership
of common stock (or equivalent securities) of the surviving entity
immediately after the merger as immediately before.
3. Exercise. This option may be exercised on the terms and
conditions contained herein by giving ten (10) days' prior written notice of
exercise to the Company, specifying the number of shares to be purchased and the
price to be paid therefor and by delivering a check in the amount of the
purchase price payable to the Company. The purchase price may also be paid, in
whole or in part, by delivery to the Company of outstanding shares of the
Company's common stock previously held by the Employee valued at "Fair Market
Value".
For the purposes of this Agreement, "Fair Market Value" as
of a certain date (the "Determination Date") means: (a) the closing price of a
share of the Company's common stock on the principal exchange on which shares of
the Company's common stock are then trading, if any, on the Determination Date,
or, if shares were not traded on the Determination Date, then on the nearest
preceding trading day during which a sale occurred; or (b) if such stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(i) the last sales price (if the stock is then listed as a National Market Issue
under The Nasdaq National Market System) or (ii) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on the
Determination Date as reported by NASDAQ or such successor quotation system; or
(c) if such stock is not publicly traded on an exchange and not quoted on NASDAQ
or a successor quotation system, the mean between the closing bid and asked
prices for the stock, on the Determination Date, as determined in good faith by
the Board; or (d) if the Company's stock is not publicly traded, the fair market
value established in good faith by the Board.
4. Termination of Employment.
(a) Termination by Employee. If Employee's employment is
terminated by Employee, Employee shall have ninety (90) days following the "Date
of Termination" (as defined in Section 7(h) of the Employment Agreement) to
exercise this option, but only to the extent that this option was exercisable on
such Date of Termination.
(b) Termination for Cause. If Employee's employment is
terminated by the Company for "Cause" (as defined in Section 7(c) of the
Employment
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Agreement), neither Employee nor his estate shall be entitled to exercise this
option after the Date of Termination.
(c) Death or Incapacity. If Employee's employment is
terminated for death or "disability" (as determined under Section 7(b) of the
Employment Agreement), Employee or Employee's estate, as the case may be, shall
have the right for six (6) months following the Date of Termination to exercise
this option, but only to the extent that this option was exercisable on such
Date of Termination.
(d) Other. If Employee's employment is terminated for any
reason other than as set forth in Sections 4(a), (b) and (c) above, Employee
shall have ninety (90) days following such Date of Termination to exercise this
option, but only to the extent that this option was exercisable on such Date of
Termination.
5. Transferability. This option shall be transferable only by will
or by the law of descent and distribution to the estate (or other personal
representative) of Employee and shall be exercisable during Employee's lifetime
only by him. Except as otherwise provided herein, any attempt at alienation,
assignment, pledge, hypothecation, transfer, sale, attachment, execution or
similar process, whether voluntary or involuntary, with respect to all or any
part of this option or any right under this Agreement, shall be null and void
and, at the Company's option, shall cause Employee's rights under this Agreement
to terminate.
6. Withholding Requirements. In the event the Company determines
that it is required to withhold state or federal income taxes as a result of the
exercise of this option, Employee shall be required, as a condition to the
exercise hereof, to make arrangements satisfactory to the Company to enable it
to satisfy such withholding requirements.
7. Rights as a Stockholder. Employee, or any permitted transferee of
Employee, shall have no rights as a stockholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 8 of this Agreement. This
Agreement shall not confer upon Employee any right of continued employment by
the Company or interfere in any way in the Company's right to terminate
Employee.
8. Recapitalization. Subject to any required action by stockholders,
the number of shares of Common Stock covered by this option and the exercise
price thereof shall be proportionately adjusted for any increase or decrease in
the number of issued shares of common stock resulting from a subdivision or
consolidation of such shares or the payment of a stock dividend (but only of
common stock) or any other increase or decrease in the number of issued shares
of common stock effected without receipt of consideration by the Company.
Subject to any required action by stockholders,
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if the Company is the surviving corporation in any merger or consolidation, this
option shall pertain and apply to the securities to which a holder of the number
of shares of common stock subject to the option would have been entitled.
The foregoing adjustments shall be made by the Company's Board of
Directors, whose determination shall be conclusive and binding on the Company
and Employee.
Except as expressly provided in this Section 8, Employee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, consolidation or spin-off of assets or stock
of another corporation, and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares subject to this option or the exercise price thereof.
This option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
9. Securities Act and Other Regulatory Requirements. This option is
not exercisable, in whole or in part, and the Company is not obligated to sell
any shares of the Company's common stock subject to this option, if such
exercise or sale, in the opinion of counsel for the Company, would violate the
Securities Act of 1933 (or any other federal or state statutes having similar
requirements) as it may be in effect at that time.
Further, the Board of Directors of the Company may require as a
condition of issuance of any shares under this option that Employee furnish a
written representation that he is acquiring the shares for investment and not
with a view to distribution to the public. The certificate evidencing any shares
issued pursuant to this option shall bear such restrictive legends as required
by federal or state law.
Further, the Board of Directors of the Company may decide, in its
sole discretion, that the listing or qualification of the shares of stock
subject to the option under any securities exchange requirements or under any
applicable law is necessary or desirable. If such a decision is made, this
option shall not be exercisable in whole or in part unless and until such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions that are not acceptable to the Board of Directors of the
Company.
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10. Effect of Exercise. Upon the exercise of all or any part of this
option, the number of shares of common stock subject to the option under this
Agreement shall be reduced by the number of shares with respect to which such
exercise is made.
11. Notices. Any notice or other communication required or permitted
hereunder or by law shall be validly given or made only if in writing and
delivered in person to an officer or duly authorized representative of the other
party, or deposited in the United States mail, duly certified or registered,
return receipt requested, postage prepaid, and addressed to the party to whom
intended. If sent to the Company, it shall be addressed in care of the
President, 0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxxxx
00000, and if sent to Employee, it shall be addressed to Employee's address on
file with the Company on the date of such notice. If sent by mail, notice shall
be deemed given two days after deposit of such notice in the mail and in
accordance with this section. Any party may from time to time, by written notice
to the other, designate a different address for notice which shall be
substituted for that specified above.
12. Choice of Law; Counterparts. This Agreement, and all rights and
obligations hereunder, shall be governed by the laws of the State of California.
This Agreement may be executed in one or more counterparts, each of which when
so executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
13. Successor. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, heirs,
beneficiaries, executors and administrators.
14. Paragraph Headings; Employment. Paragraph headings are for
convenience only and are not part of the context. This Agreement shall not
obligate the Company or any affiliate to employ Employee for any period of time
nor does this Agreement constitute a contract or agreement for employment.
15. Shareholder Approval. Notwithstanding anything contained in this
Agreement to the contrary, the options granted in this Agreement may not be
exercised until such time as this Agreement is approved by the Company's
shareholders and Employee's rights hereunder are subject to such shareholder
approval.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement is executed as of the date
first written above.
INTERVISUAL BOOKS, INC.
By: /s/
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Name: Xxxxxx Xxxxxx Xxxxxxxx
Title: President
EMPLOYEE:
/s/
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Xxxxx X. Xxxx
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