1
EXHIBIT 10.16
INTERVISUAL BOOKS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") between INTERVISUAL BOOKS,
INC., a California corporation (the "Company"), and XXXXXX XXXXXX XXXXXXXX
("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 200,000 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.
2
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 66,667 shares on each of December 31, 1997, and December 31, 1998, and
66,666 shares on 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);
-2-
3
(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
(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
-3-
4
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 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, this option shall automatically become fully exercisable on the Date of
Termination, and Employee shall have ninety (90) days following such Date of
Termination to exercise this option.
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,
-4-
5
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, 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
-5-
6
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.
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
-6-
7
reduced by the number of shares with respect to which such exercise is made.
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
-7-
8
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.
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
-------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman of the Board
EMPLOYEE:
/s/ XXXXXX XXXXXX XXXXXXXX
-------------------------------
Xxxxxx Xxxxxx Xxxxxxxx
-8-
