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EXHIBIT 99.1
Execution Copy
INTERVISUAL BOOKS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") between INTERVISUAL BOOKS, INC., a
California corporation (the "Company"), and XXXXXX XXXX ("Employee") is entered
into as of the 11TH day of May, 1999.
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:
X. XXXXX. The Company hereby grants to Employee the right to
purchase up to 140,000 shares of common stock of the Company at a price of $1.25
per share (which price equals the fair market value of the Company's common
stock as of the date of the grant), 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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II. 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
46,667 shares on each of May 11, 2000, and May 11, 2001 and
46,666 shares on May 11, 2002. 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:
(1) 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) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or
(3) 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.
III. 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.
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IV. 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.
V. TRANSFERABILITY. This option except transfer to the "Ades Family
Trust" 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.
VI. 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.
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VII. 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.
VIII. 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 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.
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IX. 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.
X. 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.
XI. RIGHT OF FIRST REFUSAL. If Employee desires to transfer (except for
a transfer to the "Ades Family Trust") 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 fifteen (15) days following delivery of the
Notice, the Company shall have the option to purchase all (but not less than
all) of the Shares
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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 but not less than Fair
Market Value of the Shares on the first applicable day after receipt of writen
notice of the Employee's intention to transfer such Shares. The "applicable day"
is defined as the first day after dilvery of notice to the Company that the
Employee could have sold the Shares on the open market.Such option shall be
exercisable by delivery of written notice to Employee within such fifthteen (15)
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.
XII. 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 a different address for notice which shall be substituted for
that specified above.
XIII. CHOICE OF LAW; COUNTERPARTS. This Agreement, and all rights and
obligations hereunder, shall be governed by the laws of the State of California
without the regard to conflict of law principles. 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.
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XIV. 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.
XV. 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/ XXXXXX XXXX
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Xxxxxx Xxxx
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