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EXHIBIT 10.51
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is entered into as of
the 6th day of September, 2000 (the "Effective Date") between INTERVISUAL BOOKS,
INC., a California corporation (the "Company"), located at 0000 Xxxxx Xxxx Xxxx,
Xxxxx Xxxxxx, XX, 00000 and Xxx Xxxxxx ("Executive").
Whereas: The Company has decided to actively explore all the financial
options available to the Company and finds that Executive's services would be
valuable to this effort and Executive agrees to play a key role in this process;
Whereas: The Company desires to enter into this Agreement with
Executive so as to motivate Executive to remain dedicated and available to the
Company during the uncertainty created by the circumstances;
Whereas: The Company and Executive are parties to that certain
Employment Agreement, dated as of January 19, 1998, pursuant to which Executive
is employed as the Vice President and Chief Financial Officer of the Company
(the "Employment Agreement"); and
Whereas: The Company granted to Executive an option to purchase
175,000 shares of the Company's common stock pursuant to a Nonstatutory Stock
Option Agreement, dated November 13, 1997, with an amended exercise price of
$1.25 per share (the "Exercise Price")(as amended, the "November Stock Option")
and the Company desires to provide Executive with a success bonus upon the
successful closing of a "Change in Control" of the Company (as defined herein),
on the terms and conditions set forth in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Services.
Executive hereby agrees to continue to serve in Executive's current
position with the Company. Nothing contained in this Agreement shall modify or
change any terms contained in the Employment Agreement.
2. Term.
This Agreement is effective for a period of 12 months from the
Effective Date, subject to earlier termination as provided below.
3. Calculation of Success Bonus.
Provided that Executive is employed by the Company upon the successful
closing of a Change in Control of the Company, Executive shall be entitled to
receive a
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success bonus (the "Success Bonus") as determined in this Agreement. The
potential aggregate amount of the Success Bonus shall be calculated as follows:
First, the "per share bonus amount" shall be determined in accordance
with this paragraph. The per share fair market value of the consideration
received by the Company shareholders as a result of a Change in Control shall be
determined. If the per share fair market value of the consideration is $1.25 per
share or less, then the "per share bonus amount" shall equal $0.75 per share. If
the per share fair market value of the consideration is greater than $1.25 per
share, then the Exercise Price shall be subtracted from this amount. This number
shall be further subtracted from $0.75, and the result shall be the per share
bonus amount. If the result is zero or negative, Executive shall not be entitled
to a Success Bonus. In no event shall the per share bonus amount exceed $0.75
per share regardless of the result of the calculation indicated above.
Second, the per share bonus amount shall then be multiplied by the
number of outstanding options remaining unexercised under the November Option
Agreement at the time of the Change in Control. An example of calculation of the
Success Bonus is attached hereto as Exhibit A.
4. Payment Date.
The Success Bonus (if any) shall be paid to Executive within thirty
(30) days after the effective date of a Change in Control of the Company as
defined below.
5. Events Precluding Payment of Success Bonus
Notwithstanding anything contained in this Agreement to the contrary,
Executive shall not be entitled to receive a Success Bonus if any of the
following occur:
(a) Executive remains employed by, or accepts employment with, the
Company or its successor following a Change in Control of the Company on a
full-time basis. Employment with the Company or any successor entity which is
solely for the purpose of providing assistance to the new management team for a
transitory period of up to six months following a Change in Control, shall not
be deemed "employment" for purposes of this Paragraph 5(a). Nothing in this
Agreement shall be construed as to obligate Executive to accept full-time
employment with either the Company or its successor following a Change in
Control of the Company.
(b) The outstanding options granted under the November Option
Agreement survive a Change in Control and are converted into options to acquire
shares in a successor entity to the Company, or in an entity which acquires the
Company, which options shall be fully vested and remain exercisable for a period
time not less than the remaining term under the November Stock Option. In the
event Executive elects to terminate the November Option Agreement so that the
outstanding options granted thereunder may not be exercised following a Change
in Control, then this Paragraph 5(b) will not prevent Executive from being
entitled to receive the Success Bonus which would
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otherwise be payable to Executive in accordance with the terms of this
Agreement. Nothing in this Agreement shall obligate Executive to refrain from
terminating his options so that such options survive the Change in Control.
6. Definition of a "Change in Control".
For purposes of this Agreement, a "Change in Control" of the Company
shall be deemed to have occurred if:
(a) the Company sells, transfers, or otherwise disposes 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 Xxxxx Xxxx 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 the Company merges or consolidates with or
into another entity and the Company is not the continuing or surviving
corporation or pursuant to which the Company's outstanding common stock is
converted into cash, securities or other property of another entity.
7. Termination.
This Agreement shall terminate upon Executive's cessation of
employment with the Company. Notwithstanding the foregoing, in the event a
Change in Control occurs and Executive's employment is terminated by the Company
prior to the Change in Control and such termination (i) was at the request of a
third party who indicated an intention or had taken steps reasonably calculated
to affect the Change in Control and who affects the Change in Control, or (ii)
otherwise occurred in connection with or in anticipation of a Change in Control
which actually occurs, then for purposes of this Agreement Executive shall be
deemed to be employed by the Company as of the date of the Change in Control.
8. Severance.
If as of January 19, 2001, (i) the Employment Agreement terminates and
has not been renewed, replaced or extended, and (ii) a Change in Control has not
occurred, then the provisions of Sections 6 and 7 of the Employment Agreement
will be incorporated into and will become part of this Agreement.
Notwithstanding the previous sentence, Sections 6 and 7 of the Employment
Agreement and the rights and obligations of the parties thereunder shall
terminate on the date of a Change in Control.
9. Arbitration.
The parties hereto acknowledge that it is in their best interests to
facilitate the informal resolution of any disputes arising out of this Agreement
or otherwise by
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mutual cooperation and without resorting to litigation. As a result, if any
party has a dispute arising hereunder, and the parties are unable to reach
agreement among themselves, then a settlement conference must be held within
thirty (30) days upon receipt of a notice by the complaining party describing in
detail the complaint and setting forth a proposed solution to the complaint. The
settlement conference will be held in any Los Angeles office of the Judicial
Arbitration and Mediation Services, Inc. ("JAMS"). The complaining party must
contact JAMS to schedule the conference and the parties must agree on a retired
judge from the JAMS panel. If the parties are unable to agree upon such a
retired judge, JAMS shall provide a list of three available judges and each
party may strike one judge. The remaining judge will serve as the mediator at
the settlement conference. If the dispute is not settled by the above-described
format, the parties agree to submit the dispute to JAMS for binding arbitration.
A three-judge panel will be selected to arbitrate the dispute. JAMS will provide
the names of five potential arbitrators, giving each party the opportunity to
strike one name. The remaining three arbitrators will serve as the arbitration
panel. The parties agree that the arbitration must be initiated within six
months after the claimed breach occurred and that failure to initiate
arbitration within the six-month period constitutes an absolute bar from the
institution of any new proceedings. Arbitration may be initiated by the
aggrieved party by sending written notice of an intent to arbitrate by
registered certified mail to all parties and to JAMS. The notice must contain a
description of the dispute, the amount involved and the remedies sought. If and
when a demand for arbitration is made by either party, the parties agree to
execute a Submission Agreement provided by JAMS,' setting forth the rights of
the parties if the case is arbitrated and rules and procedures to be followed at
the arbitration hearing.
10. Successors.
This Agreement is personal to Executive and is not assignable by
Executive otherwise than by will or the laws of descent and distribution without
the prior written consent of the Company's Board of Directors. This Agreement
shall inure the benefit of and be enforceable by Executive's legal
representatives. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
11. Notice.
For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Executive's address as on file with the Company
If to Company: Intervisual Books, Inc.
0000 Xxxxx Xxxx Xxxx., #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Chairman of the Board
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or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt thereof.
12. Entire Agreement.
This Agreement, together with the documents referenced herein, contain
the entire agreement of the parties hereto with respect to the subject matter
hereof. It supersedes any and all other agreements, arrangement or
understanding, whether oral or in writing, between the parties hereto with
respect to the Success Bonus. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, written, oral or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement shall be valid or binding.
13. Amendment; Waiver; Governing Law.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing signed
by Executive and by such officer of the Company as may be specifically
designated by the Company's Board of Directors. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.
14. Validity.
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. Withholding of Taxes; Tax Reporting.
The Company may withhold from any amounts payable under this Agreement
all such Federal, state, city and other taxes, and may file with appropriate
governmental authorities all such information, returns or other reports with
respect to the tax consequences of any amounts payable under this Agreement, as
may, in its reasonable judgment, be required by law.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTERVISUAL BOOKS, INC.
By: /s/ Xxxxx X. Xxxx
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Name: Xxxxx X. Xxxx
Title: Chairman of the Board
EXECUTIVE
/s/ Xxx Xxxxxx
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Xxx Xxxxxx
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EXHIBIT A
EXAMPLES OF SUCCESS BONUS CALCULATION
Assumption: 175,000 shares under the November stock Option remain unexercised
at the time of a Change in Control of the Company.
Example 1
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Per share fair market value of consideration received by shareholders $1.20
Since this amount is less than $1.25, the per share bonus amount is $0.75.
This amount is then multiplied by the number of options (175,000) and the
resulting Success Bonus is $131,250.
Example 2
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Per share fair market value of consideration received by shareholders $1.50
Subtract Exercise Price -1.25
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.25
Subtract .25 from .75 and the result is the per share bonus amount. $0.50
Multiply times number of options x 175,000
Success Bonus $87,500
Example 3
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Per share fair market value of consideration received by shareholders $2.00
Subtract Exercise Price -1.25
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.75
Subtract .75 from .75 and the result is zero; therefore, no success bonus is
payable.
