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EXHIBIT 10.20
INTERVISUAL BOOKS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") between
INTERVISUAL BOOKS, INC., a California corporation (the "Company"), and XXXX
XXXXXX ("Employee") is entered into as of the 13th day of January, 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. As a condition precedent to the effectiveness of this
Agreement, Employee must commence full time employment with the Company pursuant
to the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto agree as
follows:
1. Grant. The Company hereby grants to Employee
the right to purchase up to 50,000 shares of common stock of the Company at a
price of $1.375 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.
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2. Exercisability. The option granted herein
shall become exercisable at the following times and in the
following amounts:
The option shall become exercisable in cumulative
increments of 25,000 shares on each of (a) December 31,
1998, and (b) December 31, 1999. The option granted
hereunder shall lapse and expire on the seventh (7th)
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
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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
(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
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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 6(f) 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 6(a)
of the Employment 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 "Incapacity" (as defined in Section 6(c)
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 the 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
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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, 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
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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.
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.
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11. Right of First Refusal. If Employee desires
to transfer any shares of common stock which he has acquired pursuant to the
exercise of the option granted herein ("Shares"), Employee shall deliver to the
Company written notice of his intention to transfer such Shares (the "Notice")
together with either a copy of a signed and binding offer by the proposed
transferee (a "Negotiated Sale") or a statement that such Shares are to be sold
into the public market at Fair Market Value at the time of sale (a "Market
Sale"). The Notice for a Negotiated Sale shall state the name and address of the
proposed transferee, the number of Shares to be transferred, the price per
Share, and the other terms of such transfer. The Notice for a Market Sale shall
state the expected date of the proposed sale and the number of Shares to be
sold. For thirty (30) days following delivery of the Notice, the Company shall
have the option to purchase all (but not less than all) of the Shares proposed
to be sold by Employee at the price and terms stated in the Notice. In the event
of a Market Sale, such purchase price shall be the Fair Market Value of the
Shares on the day the Company exercises its option, less five (5) percent. Such
option shall be exercisable by delivery of written notice to Employee within
such thirty (30) day period. Any Shares not purchased by the Company may, for a
period of sixty (60) days commencing on the expiration of the Company's option
to purchase such Shares, be sold to the proposed transferee at the price and
upon the terms specified in the Notice. Shares which are not transferred by
Employee within such sixty (60) day period shall again become subject to the
notice and option provisions of this Section 11. The certificate evidencing any
shares issued pursuant to this option shall bear a restrictive legend stating
that such shares are subject to the right of first refusal set forth in this
Section 11.
12. 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 000, 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
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a different address for notice which shall be substituted for that specified
above.
13. 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.
14. 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.
15. 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.
IN WITNESS WHEREOF, this Agreement is executed as
of the date first written above.
INTERVISUAL BOOKS, INC.
By: /s/ XXXXX X. XXXX
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Name: Xxxxx X. Xxxx
Title: Chairman of the Board
EMPLOYEE:
/s/ XXXX XXXXXX
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Xxxx Xxxxxx
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