<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
Intervisual Books, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
INTERVISUAL BOOKS, INC.
2716 OCEAN PARK BOULEVARD, SUITE 2020
SANTA MONICA, CALIFORNIA 90405
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 6, 2000
To the Shareholders of INTERVISUAL BOOKS, INC.:
The Annual Meeting of Shareholders of Intervisual Books, Inc. (the
"Company") will be held on Wednesday, September 6, 2000, at 10:00 a.m., local
time, at the Company's corporate headquarters located at 2716 Ocean Park
Boulevard, Suite 2020, Santa Monica, California 90405, for the following
purposes:
1. To elect eight directors to serve until the next annual meeting of
shareholders and until their successors are chosen;
2. To consider and act upon a proposal to ratify the selection of BDO
Seidman, LLP as independent auditors of the Company for 2000; and
3. To transact such other business as may properly come before the
meeting and any postponements or adjournments thereof.
Only shareholders of record at the close of business on August 4, 2000
shall be entitled to notice of and to vote at the meeting and any postponements
and adjournment(s) thereof.
A proxy solicited by the Company's Board of Directors, together with a
proxy statement and a copy of the Company's 1999 annual report to security
holders are enclosed herewith. Please sign, date and return the proxy promptly
in the enclosed reply envelope. If you attend the meeting and wish to vote in
person, you may do so by withdrawing your proxy prior to the meeting.
By Order of the Board of Directors
Gail A. Thornhill
Secretary
Santa Monica, California
August 18, 2000
WHETHER YOU OWN A FEW OR MANY SHARES OF STOCK AND WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, YOU ARE URGED TO DATE, SIGN AND RETURN YOUR PROXY
PROMPTLY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED.
<PAGE> 3
INTERVISUAL BOOKS, INC.
2716 OCEAN PARK BOULEVARD, SUITE 2020
SANTA MONICA, CALIFORNIA 90405
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, SEPTEMBER 6, 2000
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Intervisual Books, Inc. (the "Company")
for use at the Annual Meeting of Shareholders of the Company and any
postponements or adjournments thereof (the "Annual Meeting"). The Annual Meeting
will be held on Wednesday, September 6, 2000 at 10:00 a.m., local time, at the
Company's corporate headquarters located at 2716 Ocean Park Boulevard, Suite
2020, Santa Monica, California 90405. The approximate date on which this proxy
statement and the enclosed form of proxy are first being sent or given to
shareholder is August 18, 2000.
At the Annual Meeting, the Company's shareholders will consider and act
upon proposals to (i) elect eight directors to serve until the next annual
meeting of shareholders and until their successors are chosen; (ii) ratify the
selection of BDO Seidman, LLP as independent auditors of the Company for 1999;
and (iii) transact such other business as may properly come before the meeting
and any postponements or adjournments thereof.
The close of business on August 4, 2000 has been fixed as the record date
(the "Record Date") for determining the holders of the Company's common stock,
no par value (the "Common Stock") who are entitled to notice of and to vote at
the Annual Meeting. As of the Record Date, there were 5,950,383 shares of Common
Stock outstanding and entitled to vote.
Copies of solicitation materials will be furnished to brokerage houses and
other fiduciaries for forwarding to beneficial owners of shares of the Company's
Common Stock. The costs of soliciting proxies related to the Annual Meeting,
including the cost of preparing and mailing this proxy statement, will be paid
by the Company. In addition to solicitations by mail, directors and regular
employees of the Company may solicit proxies in person or by telephone or
telegraph without receiving any compensation in addition to their regular
compensation as directors or employees.
Any proxy which is returned by a shareholder properly completed and which
is not revoked will be voted at the meeting in the manner specified therein.
Unless contrary instructions are given, the persons designated as proxyholders
in the accompanying proxy card(s) (or their substitutes) will vote FOR the
election of the Board of Directors' nominees, FOR Proposal 2, and in the
proxyholders' discretion with respect to such other business or matters which
might otherwise properly come before the meeting. Any proxy given pursuant to
this solicitation may be revoked prior to the meeting at any time by delivering
an instrument revoking it, or a duly executed proxy bearing a later date, to the
Secretary of the Company. Any proxy given pursuant to this solicitation may also
be revoked by any shareholder who attends the meeting and gives oral notice of
his or her election to vote in person, without compliance with any other
formalities.
The presence at the meeting, in person or by proxy, of a majority of the
shares of Common Stock outstanding on the Record Date will constitute a quorum
at the meeting. Votes cast by proxy or in person at the Annual Meeting will be
counted by the persons appointed by the Company to act as the inspectors of
election for the meeting. Inspectors of election will treat shares represented
by proxies that reflect abstentions or include "broker non-votes" as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions or "broker non-votes" do not constitute a vote "for" or
"against" any matter and thus will be disregarded in any calculation of "votes
cast". Any unmarked proxies, including those submitted by brokers or nominees,
will be voted in favor of the nominees for the Board of Directors and the
proposals, as indicated in the accompanying proxy card.
<PAGE> 4
Each share of Common Stock is entitled to one vote on all matters voted on
at the meeting and, in the election of directors, each shareholder has the right
to cumulate his or her votes and give one nominee a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which his
or her shares are entitled, or to distribute his or her votes on the same
principle among as many nominees as he or she desires, and the nominees
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected. This right to cumulate votes will exist only if the
candidate's name has been placed in nomination prior to the voting and any
shareholder gives notice of that shareholder's intention to cumulate his or her
votes at the meeting prior to the voting.
2
<PAGE> 5
CERTAIN BENEFICIAL OWNERSHIP
The following table sets forth certain information concerning beneficial
ownership of the Common Stock of the Company by any person who is known by the
Company to be the beneficial owner of more than five (5%) percent of the Common
Stock, by each director of the Company, each nominee for election as a director,
each executive officer named in the Summary Compensation Table, and by all
current directors and officers as a group. Except as otherwise noted, the
following shareholders have sole voting and investment power with respect to the
shares except to the extent that authority is shared by spouses under applicable
law.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OWNERSHIP(1)(2) OF CLASS
---- ----------------- --------
<S> <C> <C>
Waldo H. Hunt/the Hunt Family Trust(3)(4)................... 3,043,917(4) 49.9%
2716 Ocean Park Blvd. #2020
Santa Monica, CA 90405
Steven D. Ades/the Steven Ades and Laurie Levit Revocable
Family Trust(5)........................................... 661,607 11%
2716 Ocean Park Blvd. #2020
Santa Monica, CA 90405
Nathan N. Sheinman.......................................... 300,000 4.8%
Dan P. Reavis............................................... 140,000 2.3%
Dr. Neil G. Berkman......................................... 10,000 *
Gordon Hearne............................................... 35,499 *
Leonard W. Jaffe............................................ 27,833 *
Wong Weng Foo............................................... 0 *
All directors and officers as a group (11 persons).......... 4,351,009 64.8%
</TABLE>
---------------
* Less than 1%
(1) Unless otherwise indicated in the following footnotes, all such information
is as of August 4, 2000. Information relating to beneficial ownership of
shares of Common Stock is based upon the rules set forth under the
Securities Exchange Act of 1934 (the "Exchange Act"). Under such rules, more
than one person may be deemed to be a beneficial owner of the same
securities.
(2) Includes the following number of shares of Common Stock that may be
purchased upon the exercise of options granted by the Company which are
exercisable on August 4, 2000 or within 60 days thereafter: Mr. Hunt,
150,000; Mr. Ades, 46,667; Mr. Sheinman, 300,000; Mr. Reavis, 135,000; Mr.
Hearne, 34,999; Mr. Jaffe, 20,833; Mr. Berkman, 10,000; and all directors
and executive officers as a group, 763,916.
(3) Such shares are owned of record by Waldo H. Hunt individually and by Waldo
H. Hunt and Patricia E. Hunt, Trustees of The Hunt Family Trust UTA May 30,
1980 (the "Hunt Trust"), of which both Trustees have shared voting and
investment power.
(4) In connection with the merger of Fast Forward Marketing, Inc. ("Fast
Forward") into a subsidiary of the Company (the "Merger"), the Hunt Trust
entered into a voting agreement (the "Voting Agreement") with Steven Ades
and Trustees of the Steven Ades and Laurie Levit Revocable Family Trust UTA
April 18, 1991 (the "Ades Trust"). Under this agreement, the Hunt Trust
agreed to vote a sufficient number of shares of Common Stock owned by the
Hunt Trust in such a manner as to elect Steven Ades and a second outside
independent director mutually acceptable to Mr. Ades and the Company's Board
of Directors to the Company's Board. Dr. Berkman is the second designated
nominee under the Voting Agreement. Under the Voting Agreement, Mr. Ades and
the Ades Trust agreed to vote all shares of Common Stock owned by them in
favor of those director nominees recommended by the Company's Board of
Directors. The Voting Agreement terminates upon the occurrence of certain
events, including Steven Ades' cessation of employment with the Company.
(5) Such shares are owned of record by Mr. Ades individually or by the trustees
of the Ades Trust, both of which have shared voting and investment power.
3
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of eight directors is to be elected at the meeting. Directors are
elected by a plurality of the votes cast at the Annual Meeting in person or by
proxy by the holders of shares entitled to vote in the election. The Board of
Directors is informed that all of the nominees are willing to serve as
directors, but if any of them should decline or be unable to act as a director,
the persons designated as proxyholders in the accompanying proxy card(s) (or
their substitutes) will vote for such substitute nominee or nominee(s) as may be
designated by the Board of Directors unless the Board reduces the number of
directors accordingly.
NOMINEES
The following information has been furnished by the respective nominees for
election as directors:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Waldo H. Hunt........................ 79 Chairman of the Board, Chief Executive 1975
Officer
Nathan N. Sheinman................... 51 President, Chief Operating Officer 1997
Dan P. Reavis........................ 50 Executive Vice President, Chief Financial 1998
Officer
Steven D. Ades....................... 51 President of the Video and New Media Division 1999
Dr. Neil G. Berkman.................. 51 President, Neil G. Berkman Associates 1999
Gordon Hearne........................ 76 Director 1996
Leonard W. Jaffe..................... 82 Director 1998
Wong Weng Foo........................ 57 Director 2000
</TABLE>
Waldo H. Hunt has been a director and the Chairman of the Board of the
Company since its organization in 1975. In November 1996, he assumed the
additional role of Chief Executive Officer. From 1994 through December 1996, Mr.
Hunt also served as Chairman of The Hunt Group, a company founded by Mr. Hunt
(the "Hunt Group"). Mr. Hunt is the founder of the Company and is considered by
many to be the father of the modern-day pop-up industry.
Nathan N. Sheinman become President and Chief Operating Officer of the
Company in January 1997. Mr. Sheinman joined the Board in March 1997. Prior to
joining the Company, Mr. Sheinman was employed by Penguin USA serving as Senior
Vice President of Special Sales, Publisher of Looney Tunes books and
co-publisher of Penguin USA's Packaging Division from March 1990 to December
1996. From 1986 to February 1990, Mr. Sheinman was Vice President Sales/Special
Markets and Vice President Marketing and Director of Sales, Special Markets for
Penguin Books Canada.
Dan P. Reavis became Executive Vice President and Chief Financial Officer
in January 1998. Mr. Reavis joined the Board of as a director in February 1998.
Prior to joining the Company, Mr. Reavis was the Executive Vice President of
Operations and Chief Financial Officer of Price Stern Sloan Publishers for ten
years before his resignation from that Company in December 1995. From January
1996 to January 1998, Mr. Reavis' principal occupation was that of a consultant
and investor.
Steven D. Ades was the President and a director of Fast Forward since its
organization in 1987. From 1984 to 1987, Mr. Ades was the national accounts
manager for Prism Entertainment, a publisher and distributor of video
programming. In connection with the Merger, Mr. Ades joined the Company as
President of the Company's Video and New Media Division in May 1999. Mr. Ades,
who has been a director since 1999, is being nominated to the Company's Board of
Directors in accordance with the terms of the Voting Agreement.
Dr. Neil G. Berkman is President of Neil G. Berkman Associates, a firm he
founded in 1988 that provides investor relations, financial consulting and
crisis management services to public company clients. From 1981 until 1988 Dr.
Berkman was with The Wall Street Group/California, Inc., where he served as
President from 1984 to 1988. From 1977 to 1981, Dr. Berkman was an economist
with the Federal Reserve Bank of Boston. He earned a Ph.D. in economics from the
University of California, Berkeley, in 1977. Dr. Berkman, who has
4
<PAGE> 7
been a director since 1999, is being nominated to the Company's Board of
Directors in accordance with the Voting Agreement.
Gordon Hearne joined the Board in February 1996. Mr. Hearne was a principal
of Hearne & Spector, an advertising agency formed in March 1995 until October
1999. Mr. Hearne was previously employed by the Company as director of its
commercial division and later marketing director of the division from June 1985
to June 1991 when the commercial division was sold to R.R. Donnelley. After such
sale, he continued as a consultant to an affiliate of R.R. Donnelley until
February 1995.
Leonard W. Jaffe became a director of the Company in February 1998. Prior
to joining the Company, Mr. Jaffe was a director, Vice-Chairman and Chairman of
the Executive Committee of National Education Corporation ("NEC") from 1976
until NEC was acquired by Harcourt General in June 1997. He was a director of
Steck-Vaughn Publishing Company from 1993 until that company was acquired by
Harcourt General in February 1998. He serves as a consultant to various
companies.
Wong Weng Foo became a director of the Company in August 2000. Mr. Wong was
chosen by the directors to fill the vacancy created by the resignation of Mr.
McNaughton. Mr. Wong has been a shareholder of T.Y. Wong Pte Ltd., a private
investment company in Singapore, since its inception in 1968 and a director of
the company since 1980. He was a shareholder and founder of Sirivatana Palace
Press in Thailand, a manufacturer of pop-up and novelty books, from 1992 to 1999
when the company was sold.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met three times during 1999 to consider matters
related to the Company's business. The Board of Directors has an Audit Committee
and a Compensation Committee. The Company does not presently have a Nomination
Committee. Each director attended more than 75% of the aggregate of the total
number of meetings of the Board and the committees on which he is a member
during 1998, except for Mr. Jaffe who attended 67% of the meetings.
The Audit Committee reviews significant financial and accounting issues and
the services performed by and the reports of, the Company's independent auditors
and makes recommendations to the Board with respect to these and related
matters. Members of the Audit Committee, which did not meet in 1999, are Messrs.
Hearne, Jaffe and Berkman.
The Compensation Committee makes decisions as to the compensation and
benefits of the Company's officers and key employees when such decisions are not
made by the Company's Board of Directors. The members of the committee are
Messrs. Jaffe and Hearne. The Compensation Committee did not meet during 1999.
5
<PAGE> 8
COMPENSATION OF OFFICERS AND DIRECTORS
CASH COMPENSATION
The following table sets forth in the prescribed format the compensation
paid to all persons serving as the Company's Chief Executive Officer and the
other executive officers of the Company which received total annual salary and
bonus in excess of $100,000 for services rendered in all capacities during the
Company's last completed fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) ($) ($) ($)(2) (#)(3) ($)(4)
--------------------------- ------- ------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Waldo H. Hunt..................... 1999 215,625 0 66,120 150,000 0
Chairman, CEO 1998 235,416 69,179 0 3,125
1997 243,333 0 68,414 150,000 4,750
Nathan N. Sheinman................ 1999 238,958 0 0 300,000 0
President, COO 1998 258,958 0 0 0 5,115
1997 233,974 0 0 300,000 0
Dan Reavis........................ 1999 165,833 0 0 175,000 0
Executive Vice President 1998 156,939 0 0 0 0
Chief Financial Officer 1997 175,000
Steven Ades....................... 1999 158,125 0 0 140,000 0
President, New Media Division
Steven Selsky(5).................. 1999 105,000 0 0 145,000 0
Sr. Vice President -- Finance
</TABLE>
---------------
(1) Mr. Reavis joined the Company in 1998 and, no salary information is
disclosed with respect to 1997 for Mr. Reavis. Mr. Ades and Mr. Selsky
joined the Company in May 1999 in connection with the Merger and no
information is disclosed with respect to prior years for these individuals.
(2) The amount disclosed in this column includes $60,000 in lieu of paying any
life insurance premiums which benefit Mr. Hunt.
(3) In November 1999, the stock option agreements for Mr. Hunt, Mr. Sheinman and
Mr. Reavis were amended to reduce the exercise price to $1.25 per share. In
the case of Mr. Hunt, certain options were cancelled and an equal amount of
replacement options with an exercise price of $1.25 were granted.
(4) The amounts disclosed in this column represent contributions to the
Company's 401(k) plan.
(5) Mr. Selsky resigned from the Company effective August 15, 2000.
6
<PAGE> 9
STOCK OPTIONS
The following tables set forth certain information with respect to the
executive officers named in the Summary Compensation Table in the prescribed
formats with respect to options granted and exercised under the Company's
various stock option plans during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS GRANTED PRICE APPRECIATION
OPTIONS TO EMPLOYEES IN EXERCISE FOR OPTION TERM(2)
GRANTED FISCAL YEAR PRICE EXPIRATION ---------------------
NAME (#) (%)(1) ($) DATE 5% 10%
---- ---------- ----------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Waldo H. Hunt............... 100,000 10.3% $1.25 2007 $ 78,612 $199,218
Waldo H. Hunt............... 50,000 5.1% $1.25 2002 $ 17,268 $ 38,157
Nathan Sheinman............. 300,000 30.8% $1.25 2005 $152,663 $355,769
Dan Reavis.................. 175,000 17.9% $1.25 2004 $ 89,053 $207,532
Steven Ades................. 140,000 14.4% $1.25 2006 $ 71,243 $166,025
Steven Selsky............... 110,000 11.3% $1.25 2006 $ 55,976 $130,449
Steven Selsky............... 35,000 3.6% $1.25 2006 $ 17,811 $ 41,506
</TABLE>
---------------
(1) In November 1999, the option agreements for Mr. Hunt, Mr. Sheinman and Mr.
Reavis were amended to reduce the exercise price to $1.25 per share. In the
case of Mr. Hunt, certain options were cancelled and an equal amount of
replacement options with an exercise price of $1.25 were granted.
(2) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. Such amounts are
based on the assumption that the named persons hold the options for their
full term. These numbers are calculated based on the requirements
promulgated by the SEC and do not reflect the Company's estimate of future
stock price growth.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END AT FY-END(1)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Waldo H. Hunt............... None N/A 99,999 50,001 12,500 6,250
Nathan Sheinman............. None N/A 300,000 0 37,500 0
Dan P. Reavis............... None N/A 135,000 40,000 16,875 5,000
Steven Ades................. None N/A 0 140,000 0 17,500
Steven Selsky............... None N/A 27,500 82,500 3,437 10,313
Steven Selsky............... None N/A 8,750 26,250 1,094 3,281
</TABLE>
---------------
(1) The amounts in this column are calculated using the difference between the
closing market price of the Company's common stock at the Company's 1999
fiscal year-end and the option exercise prices.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Hunt, the Company's
Chairman of the Board and Chief Executive Officer. This agreement expires on
September 30, 2000, unless further extended or sooner terminated as provided in
the agreement. The Company shall pay the executive a salary of $250,000 subject
to cost of living increases and annual board evaluation. The agreement also
provides for lifetime additional
7
<PAGE> 10
annual payments of $60,000 in lieu of paying any life insurance premiums which
benefit Mr. Hunt. Additionally, the agreement provides $10,000 toward the cost
of a long-term disability insurance policy. If such policy is not available,
this amount is to be paid to Mr. Hunt at year end. A provision for an auto
allowance as well as other benefits are included in the agreement.
The Company has an employment agreement with Mr. Sheinman employing Mr.
Sheinman as the Company's President and Chief Operating Officer. This Agreement
was renewed in January 2000 and expires in January 2002. Under his agreement,
Mr. Sheinman receives an annual salary of $275,000, an automobile allowance, and
certain other benefits.
The Company employs Mr. Reavis as its Executive Vice President and Chief
Financial Officer pursuant to an employment agreement. The employment agreement
provides for an initial term of three years with compensation of $175,000 in the
first year, $183,750 in the second year and $192,950 in the third year.
In connection with the Merger, the Company entered into an employment
agreement in May 1999 with Mr. Ades whereby Mr. Ades is employed as President of
the Company's Video and New Media Division. The agreement provides for an
initial term of three years with an annual salary of $275,000, an automobile
allowance and certain benefits.
Also in connection with the Merger, the Company entered into an employment
agreement in May 1999 with Mr. Selsky whereby the Company employed Mr. Selsky as
its Senior Vice President -- Finance. Mr. Selsky resigned from the Company
effective August 15, 2000.
DIRECTOR COMPENSATION
Each director who is not an employee receives a $5,000 annual retainer,
$1,000 for each Board meeting attended in person, $500 for each meeting of a
committee of the Board which is separate from a Board meeting attended in
person, and $250 for each Board or Committee meeting attended by telephone.
Under the Company's Non-employee Director Stock Option Plan (the "Director
Option Plan"), non-employee directors receive an initial option grant to
purchase 30,000 shares of Common Stock when they are first elected or appointed
as a director and thereafter, on the date of each annual meeting of the
Company's shareholders, an additional grant to purchase 2,500 shares of Common
Stock (other than to directors who receive an initial grant during the calendar
year in which the annual meeting is held), provided that such non-employee
director continues in office after the annual meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1999, the Company acquired Fast Forward pursuant to the Merger. In
connection with the Merger, the Company issued a total of 670,000 shares of its
common stock, of which 594,940 shares were issued to the Ades Trust and the
remaining 75,060 shares were issued to certain employees of Fast Forward
pursuant to a pre-existing plan. Consideration for Fast Forward also included a
contingent cash payment which would have been due in May 2000 if certain targets
were met and an additional cash payment of $150,000 due May 1, 2001, subject to
reduction for payment by the Company of certain tax withholdings. In connection
with the Merger, the Hunt Trust and Mr. Ades and the Ades Trust entered into the
Voting Agreement.
During 1999, Mr. Wong was a shareholder and a founder of Sirivatana Palace
Press, in Thailand. Sirivatana Palace Press is one of the printers used by the
Company to print its pop-up and novelty books. During 1999, the Company paid
Sirivatana Palace Press $476,000, which amount represents less than 10% of the
Company's total printing expenses for the year.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Although the Company has a Compensation Committee, in 1999 decisions on
executive compensation for the Company were made by the entire Board of
Directors.
8
<PAGE> 11
EXECUTIVE COMPENSATION PHILOSOPHY
In designing its compensation programs, the Board of Directors believes
that compensation should reflect the value created for shareholders while
supporting the business strategies and long-range plans of the Company. The
Board reviews and determines the compensation of the executive officers of the
Company with this philosophy on compensation as its basis, subject to the
Company's obligations arising under various employment agreements. The Board of
Directors also takes into account individual performance, performance of the
operations directed by such individual, and the overall corporate performance of
the Company.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation is based on the following components:
Base Salary. Base salary is intended to be set at a level which is
competitive to amounts paid to executive officers of similar business structure,
size and marketplace orientation.
Annual Incentives and Bonuses. Annual bonuses may be granted based on the
Company's performance and each executive's individual performance. Based upon
the Company's revenues and loss for 1999, no bonuses were awarded to any Company
employee for the Company's 1999 fiscal year.
Stock Options. Executive officers are eligible to receive grants of stock
options. Generally, option awards are intended to motivate employees to improve
long-term stock market performance. Awards are granted at the fair market value
of the underlying common stock at the date of grant. Stock options vest in
installments as determined by the Board of Directors or the Compensation
Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective October 1997, the Company entered into an Employment Agreement
with Mr. Hunt employing Mr. Hunt as the Company's Chairman of the Board and
Chief Executive Officer. Under the agreement, Mr. Hunt is to receive an initial
annual salary of $250,000, subject to cost of living increases and annual Board
evaluation. The agreement also provides for lifetime additional annual payments
of $60,000 in lieu of paying any life insurance premiums which would otherwise
benefit Mr. Hunt, plus other benefits. Pursuant to his Employment Agreement, Mr.
Hunt was granted options to purchase 150,000 shares of the Company's Common
Stock and he receives other benefits, including an automobile allowance.
OTHER MATTERS
The Omnibus Reconciliation Act of 1993 (OBRA) limited deductible senior
officer annual compensation to $1,000,000, unless the compensation qualifies as
"performance-based" compensation under Internal Revenue Code Section 162(m)
("Code Section 162(m)"). In general, the Company does not believe the
compensation payable to the Company's senior officers will exceed $1,000,000,
however, the Company will continue to evaluate the requirements of the Code
Section 162(m) and seek the deductibility of senior officer compensation.
Waldo H. Hunt
Nathan N. Sheinman
Dan P. Reavis
Steven D. Ades
Dr. Neil Berkman
Gordon Hearne
Leonard W. Jaffe
Wong Weng Foo
9
<PAGE> 12
REPORT OF BOARD OF DIRECTORS ON REPRICING
In November 1999, the Board of Directors decided to amend the outstanding
stock options granted to Mr. Hunt, Mr. Sheinman and Mr. Reavis to reduce the
exercise price of such options to $1.25 per share. Previously, the stock options
had exercise prices of between $1.50 and $1.79 per share. By November 1999, the
Board of Directors determined that the imbalance between the exercise prices for
these option grants compared to the lower market value that prevailed for the
Common Stock in the Fall of 1999 was not an incentive to the individuals who
were granted the options. Accordingly, the outstanding options were amended to
lower their exercise prices to $1.25 per share. On the date of the repricing,
the closing price of the Company's Common Stock was $1.09. Except for the
amendment to the option exercise price, each stock option continued to be
governed by the same terms which applied prior to the option repricing.
Waldo H. Hunt
Nathan N. Sheinman
Dan P. Reavis
Steven A. Ades
Dr. Neil G. Berkman
Gordon Hearne
Leonard W. Jaffe
Wong Weng Foo
The following chart describes all repricings of options held by an
executive officer during the completed fiscal years subsequent to the date on
which the Company became a reporting company.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
MARKET PRICE
NUMBER OF OF STOCK LENGTH OF ORIGINAL
SECURITIES AT TIME OF EXERCISE PRICE OPTION TERM
UNDERLYING REPRICING AT TIME OF REMAINING AT
OPTIONS/SARS EXERCISE OR REPRICING OR NEW DATE
REPRICED OR AMENDMENT AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED (#) ($) ($) PRICE ($) AMENDMENT
---- -------- ------------ ------------ -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1999
Waldo H. Hunt.......... 11/04/99 100,000 1.09 1.625 1.25 95
Chairman, CEO 11/04/99 50,000 1.09 1.79 1.25 35
Nathan N. Sheinman..... 11/04/99 300,000 1.09 1.375 1.25 50
President, COO
Dan P. Reavis.......... 11/04/99 175,000 1.50 1.50 1.25 60
Executive Vice
President, CFO
1998
Dan P. Reavis.......... 07/16/98 175,000 1.50 2.00 1.50 78
Executive Vice
President, CFO
</TABLE>
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph shows a comparison of total return to shareholders for
the Company, the Company's SIC Code (book publishing) and the NASDAQ Market
Index for the Company's last five fiscal years.
<TABLE>
<CAPTION>
INTERVISUAL BOOKS, NASDAQ MARKET
INC. INDUSTRY INDEX INDEX
------------------ -------------- -------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 97.37 151.86 129.71
1996 68.42 157.76 161.18
1997 136.84 206.49 197.16
1998 47.37 344.49 278.08
1999 57.89 440.65 490.46
</TABLE>
The cumulative total return calculation assumes $100 invested on December 31,
1994 and dividend reinvestments. The graph above is calculated through the
fiscal year ended December 31, 1999.
11
<PAGE> 14
PROPOSAL NO. 2
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected BDO Seidman, LLP to be the independent
auditors of the Company for the fiscal year ending December 31, 2000, and
proposes that the shareholders ratify this selection at the Annual Meeting. BDO
Seidman, LLP also acted as independent auditors of the Company for 1999.
Representatives of BDO Seidman, LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
Ratification of the selection of BDO Seidman, LLP requires the affirmative
vote of a majority of the shares voting on such proposal (i.e., shares voting
for or against the proposal).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on a review of the copies of
such forms furnished to the Company and certain written representations, the
Company believes that during the last fiscal year all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with, except that Mr. Hunt filed in October 1999
after the 10th day of the month a Form 4 disclosing the purchase of common stock
through Mr. Hunt's 401(k) plan which occurred in September 1999 which was not
properly described on the Form and Mr. Hunt, Mr. Reavis and Mr. Sheinman filed
late in February a Form 5 disclosing grants of stock options.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals by shareholders for presentation at the 2001 annual meeting must
be received by the Company not later than April 20, 2001 in order to be included
in the Company's Proxy Statement and form of proxy relating to that meeting. If
such a proposal is in compliance with all of the requires of Rule 14(a)-8 under
the Securities Exchange Act of 1934, the Company will include it in the Proxy
Statement and in the Form of Proxy issued for the 2001 Annual Meeting of
Stockholders. Such proposals should be in writing and addressed to Gail A.
Thornhill, Secretary, Intervisual Books, Inc., 2716 Ocean Park Boulevard, Suite
2020, Santa Monica, California 90405.
With respect to any proposal that a shareholder presents at the annual
meeting of shareholders to be held in the year 2001 that has not been submitted
for inclusion in the Company's proxy materials pursuant to the requirements of
14a-8 under the Securities Exchange Act, the proxy for such annual meeting of
shareholders will confer discretionary voting authority to vote on such
shareholder proposal unless (a) the Company is notified of such proposal no
later than July 5, 2001, and (b) that proponent complies with the other
requirements set forth in Rule 14(a)-4 of the Securities Exchange Act.
12
<PAGE> 15
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which are
to be brought before the meeting. However, if any such other matters should be
presented for consideration and voting, it is the intention of the persons named
in the enclosed form of proxy to vote the proxy in accordance with their best
judgment.
By order of the Board of Directors
Gail A. Thornhill
Secretary
Santa Monica, California
August 18, 2000
13
<PAGE> 16
PROXY
INTERVISUAL BOOKS, INC.
ANNUAL MEETING OF SHAREHOLDERS, SEPTEMBER 6, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Waldo H. Hunt and Nathan N. Sheinman and
each of them, with full power of substitution, as proxies of the undersigned, to
represent the undersigned and to vote the common stock as specified below at the
Annual Meeting of Shareholders of Intervisual Books, Inc. to be held on
September 6, 2000 at 10:00 a.m., (local time) at the Company's headquarters,
located at 2716 Ocean Park Boulevard, Suite 2020, Santa Monica, California
90405, and at any adjournments or postponements thereof, upon the following
matters and in accordance with their best judgment with respect to any other
matters which may properly come before the meeting, all as more fully described
in the proxy statement for said Annual Meeting (receipt of which is hereby
acknowledged).
------------------------------ ------------------------------
Account Number Common
<TABLE>
<S> <C> <C>
1. Election of directors FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ]
(except as marked to the contrary for all nominees listed below
below)
</TABLE>
Nominees: Waldo H. Hunt, Nathan N. Sheinman, Dan P. Reavis, Steven D. Ades,
Dr. Neil G. Berkman, Gordon Hearne, Leonard W. Jaffe, Wong Weng Foo
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
--------------------------------------------------------------------------------
<PAGE> 17
2. Ratification of selection of BDO Seidman, LLP as independent auditors of the
Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, on such other matters as may properly come before the
meeting and any postponements or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS LISTED IN PROPOSAL 1 AND FOR
PROPOSAL 2. IF ANY OF THE NOMINEES FOR DIRECTOR ARE UNABLE TO SERVE OR FOR GOOD
CAUSE WILL NOT SERVE, THE PROXYHOLDER WILL VOTE FOR SUCH OTHER PERSON OR PERSONS
AS THE BOARD OF DIRECTORS MAY RECOMMEND.
NOTE: Please date and sign this
Proxy exactly as name appears.
When signing as attorney,
trustee, administrator, executor
or guardian, please give your
title as such. In the case of
joint tenants, each joint owner
must sign.
Dated ,2000
--------------------------------
Signature
--------------------------------
Signature (if held jointly)
VOTES MUST BE INDICATED (X) IN
INK. [X]
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
