Document:

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                                                                  Exhibit 10.39

                          AMENDMENT TO LEASE AGREEMENT

     THIS AMENDMENT TO LEASE dated, for references purposes only, this 21st day
of June 1999, between Watt Headquarters Limited Partnership, a California
limited partnership, (hereinafter referred to as "LESSOR"), and Intervisual
Books, Inc.,  a California corporation (hereinafter referred to as "LESSEE"),
with reference to the following facts and objectives:

     WHEREAS, Lessor and Lessee have heretofore entered into that certain Lease
dated August 8, 1996 (the "LEASE") for premises commonly known as 2716 Ocean
Park Blvd., Suite 2020, Santa Monica, CA 90405 (the "PREMISES").

     WHEREAS, Lessor and Lessee desire to expand Lessee's Premises and have
agreed to amend said Lease as hereinafter set forth.

     NOW, THEREFORE, in consideration of the terms, covenants and conditions as
set forth in the Lease and in this Agreement, the Lease agreement shall be
amended as follows:

     1.   Paragraph 1.2  - Premises -  Effective August 1, 1999, Lessee's
          Premises shall increase to include Suite 1050 (the "Additional
          Premises") as shown on attached Exhibit "A-2" (which shall form a part
          of Exhibit "A-1"), and the Premises square footage shall be increased
          from 11,551 rentable square feet and 10,313 usable square feet to
          13,862 rentable square feet and 12,376 usable square feet.

     2.   Paragraphs 1.6, 1.7 and 4.3  - Base Rent -  Effective August 1,
          1999, Lessee's minimum base rent shall be increased from $17, 551.25
          to $22,180.00.

     3.   Paragraphs 1.10 and 4.2 - Lessee's Share of operating Expense
          Increase - Lessee's share of operating expense increase is hereby
          amended to 13.958% as defined in Paragraph 4.2.

     4.   Paragraph 2.2 - Vehicle Parking - Effective August 1, 1999,  Lessee
          shall be entitled to rent and use 61 unreserved parking spaces in the
          Office Building Project, subject to the terms provided in Paragraph 2.

     5.   LESSOR'S WORK -   Upon full execution of this Amendment to Lease
          Agreement, Lessor, at Lessor's sole cost and expense, shall perform
          the following improvements:

          1. Install carpet within the Additional Premises where carpeting needs
             to be replaced to reasonably match existing carpeting.

          2. Paint interior of Additional Premises with building standard paint.

          3. Construct one (1) partition wall and one (1) door in doorway, as
             shown in Exhibit "C" attached hereto.

        THIS AMENDMENT TO LEASE AGREEMENT shall be under the same terms and
conditions as set forth in the Lease, except as specifically mentioned herein,
and shall remain in full force and effect.

        IN WITNESS WHEREOF, the parties hereto have executed the Amendment to
Lease Agreement on the date referenced below.

"LESSOR"                                           "LESSEE"

WATT HEADQUARTERS LIMITED PARTNERSHIP,             INTERVISUAL BOOKS, INC.,
a California limited partnership                   A California corporation

By:  WATT FAMILY PROPERTIES, INC.,
     a California corporation
     its general partner

By:   /s/ Gale J. Zander                         By:  /s/ Dan P. Reavis
      ------------------                              -----------------
          Gale J. Zander, Vice President

Date:     July 12, 1999                Printed name:  Dan P. Reavis
          -------------                               -------------
                                                Its:  Executive Vice President
                                                      ------------------------
                                               Date:  July 6, 1999
                                                      ------------<PAGE>   1
                             INTERVISUAL BOOKS, INC.
                             1999 STOCK OPTION PLAN

        1. PURPOSE. The Plan is intended to provide incentive to employees,
directors, advisors and consultants of the Corporation to encourage proprietary
interest in the Corporation, to encourage such employees to remain in the employ
of the Corporation or such directors, advisors and consultants to remain in the
service of the Corporation, and to attract new employees, directors, advisors
and consultants with outstanding qualifications.

        2. DEFINITIONS. Unless otherwise defined herein or the context otherwise
requires, the capitalized terms used herein shall have the following meanings:

               (a) "Administrator" shall mean the Board or the Plan Committee of
the Board, whichever shall be administering the Plan from time to time in the
discretion of the Board, as described in Section 4 of the Plan.

               (b) "Board" shall mean the Board of Directors of the
Corporation.

               (c) "Change of Control" shall mean, a change of control of a
nature that would be required to be reported in response to Item 1 of Form 8-K
required to be filed pursuant to the Exchange Act; provided that, without
limitation, such a Change of Control shall be deemed to have occurred if:

                      (i) 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

                      (ii) any "person" (as such term is used in Section 13(d)
        and 14(d) of the Exchange Act), other than the Company or any "person"
        who as of the date this Plan is adopted by the Board, 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 Exchange Act), 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 of Control" of the
        Company:

                             (a) 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);

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                             (b) any acquisition by an employee benefit plan (or
        related trust) sponsored or maintained by the Company or any corporation
        controlled by the Company; or

                             (c) upon the death of any person who as of the date
        of this Agreement is a director or officer of the Company, the transfer
        (x) by testamentary disposition or the laws of intestate succession to
        the estate or the legal beneficiaries or heirs of such person, or (y) by
        the provisions of any living trust to the named current income
        beneficiaries thereof of the securities of the Company beneficially
        owned by such director or officer of the Company; or

                      (iii) during any period of two consecutive years during
        the term of this Plan, individuals who at the beginning of such period
        constitute the Board cease for any reason to constitute at least a
        majority thereof, unless the election of each director who was not a
        director at the beginning of such period has been approved in advance by
        directors representing at least two-thirds of the directors then in
        office who were directors at the beginning of the period; or

                      (iv) the shareholders of the Company approve the
        dissolution 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.

               (d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

               (e) "Commission" shall mean the Securities and Exchange
Commission.

               (f) "Common Stock" shall mean the common stock of the Corporation
and any class of shares into which such common stock hereafter may be converted
or reclassified.

               (g) "Corporation" shall mean Intervisual Books, Inc.,
a California corporation.

               (h) "Disability" shall mean a medically determinable physical or
mental impairment which has made an individual incapable of engaging in any
substantial gainful activity. A condition shall be considered a Disability only
if (i) it can

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be expected to result in death or has lasted or it can be expected to last for a
continuous period of not less than twelve (12) months, and (ii) the
Administrator, based upon medical evidence, has expressly determined that
Disability exists.

               (i) "Employee" shall mean an individual who is employed (within
the meaning of Section 3401 of the Code and the regulations thereunder) by the
Corporation.

               (j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

               (k) "Exercise Price" shall mean the price per Share of Common
Stock, determined by the Administrator, at which an Option may be exercised.

               (l) "Fair Market Value" shall mean the value of one (1) Share of
Common Stock, determined as follows:

                      (i) If the Shares are (A) listed on an exchange, the
        closing price as reported for composite transactions on the date of
        valuation, or, if no sale occurred on that date, then the mean between
        the closing bid and asked prices on such exchange on such date, or (B)
        traded over-the-counter on the National Market System (the "NMS") of The
        Nasdaq Stock Market, Inc. ("NASDAQ"), the last sale price on the
        business day immediately prior to the date of valuation, or, if no sale
        occurred on such date, then the mean between the highest bid and lowest
        asked prices as of the close of business on the business day immediately
        prior to the date of valuation, as reported in NASDAQ;

                      (ii) If the Shares are not traded on an exchange or the
        NMS but are otherwise traded over-the-counter, the mean between the
        highest bid and lowest asked prices quoted in NASDAQ as of the close of
        business on the date of valuation, or, if on such day such Shares are
        not quoted in NASDAQ, the mean between the representative bid and asked
        prices on such date in the domestic over-the-counter market as reported
        by the National Quotation Bureau, Inc., or any similar successor
        organization; or

                      (iii) If neither clause (i) nor (ii) above applies, the
        Fair Market Value shall be determined by the Administrator in good
        faith. Such determination shall be conclusive and binding on all
        persons.

               (m) "Grant Date" shall mean the date on which the granting of an
Option is authorized by the Administrator or such other date as prescribed by
the Administrator.

               (n) "Incentive Stock Option" shall mean an option described in
Section 422 of the Code.

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               (o) "Nonstatutory Stock Option" shall mean an option that does
not meet the requirements of Section 422(b) of the Code or is not intended to be
an Incentive Stock Option.

               (p) "Option" shall mean any stock option granted pursuant to the
Plan. An Option shall be granted as of the Grant Date.

               (q) "Option Agreement" shall mean a written stock option
agreement evidencing the grant of an Option.

               (r) "Option Limit" shall have the meaning assigned to it in
Section 6.

               (s) "Optionee" shall mean a Participant who has received an
Option.

               (t) "Participant" shall have the meaning assigned to it in
Section 5(a) hereof.

               (u) "Plan" shall mean this Intervisual Books, Inc. 1999 Stock
Option Plan, as it may be amended from time to time.

               (v) "Plan Committee" shall mean a committee of two or more
directors appointed by the Board to administer the Plan.

               (w) "Purchase Price" shall mean the Exercise Price multiplied by
the number of Shares with respect to which an Option is exercised.

               (x) "Retirement" shall mean the voluntary termination of
employment by an employee after qualifying for early or normal retirement under
any pension plan or profit sharing or benefit plan of the Corporation or its
Subsidiaries. If an employee is not covered by any such plan, "Retirement" shall
mean voluntary termination of employment after the employee has attained age
sixty-five (65) and after the employee has attained the tenth (10th) anniversary
of his or her last preceding date of hire, or as otherwise determined in the
Administrator's sole discretion.

               (y) "Section 16 Participant" shall mean a Participant who is (or,
in the opinion of the Administrator, may be) generally subject to the Section 16
Requirements with respect to purchases and sales of Common Stock or other equity
securities of the Corporation.

               (z) "Section 16 Requirements" shall mean the those obligations
and requirements imposed on officers and directors by Sections 16(a) and 16(b)
of the Exchange Act and the rules of the Commission promulgated thereunder.

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               (aa) "Securities Act" shall mean the Securities Act of 1933, as
amended.

               (bb) "Subsidiary" shall mean any subsidiary corporation as
defined in Section 425(f) of the Code.

               (cc) "Share" shall mean one share of Common Stock, adjusted in
accordance with Section 10 of the Plan (if applicable).

               (dd) "Transfer Agent" shall mean a third-party organization
retained by the Corporation to maintain the stock transfer records of the
Corporation.

        3. EFFECTIVE DATE. The Plan was adopted by the Board effective June 23,
1999. Options granted prior to obtaining shareholder approval in accordance with
Section 16 of the Plan shall be granted subject to such shareholder approval and
must be rescinded if such approval is not obtained in accordance with such
section.

        4. ADMINISTRATION.

               (a) Administrator. Subject to subsection (c) below, the Plan
shall be administered, in the discretion of the Board from time to time, by the
Board or by a Plan Committee which shall be appointed by the Board as provided
in the Corporation's Bylaws. The Board may from time to time remove members
from, or add members to, the Plan Committee. Vacancies on the Plan Committee,
however caused, shall be filled by the Board. The Board shall appoint one of the
members of the Plan Committee as Chairman. The Administrator shall hold meetings
at such times and places as it may determine. Acts of a majority of the
Administrator at which a quorum is present, or acts reduced to or approved in
writing by the unanimous consent of the members of the Administrator, shall be
the valid acts of the Administrator.

               (b) Powers of Administrator. The Administrator shall from time to
time at its discretion select the Optionees who are to be granted Options,
determine the number of Shares to be subject to Options to be granted to each
Optionee and designate such Options as Incentive Stock Options or Nonstatutory
Stock Options. The Administrator shall have full power and authority to operate,
manage and administer the Plan and interpret and construe the Plan and the terms
of all Option Agreements. The interpretation and construction by the
Administrator of any provision of the Plan or of any Option or Option Agreement
shall be final. No member of the Administrator shall be liable for any action or
determination made in good faith with respect to the Plan or any Option.

               (c) Disinterested Administration.  If the Common Stock is
registered under the Exchange Act and Section 16 Participants are to receive
Options hereunder, this Plan shall be administered by the Board or by a Plan
Committee consisting solely of two

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or more directors each of whom shall be a "non-employee director" within the
meaning of Rule 16b-3(b)(3) of the Exchange Act and an "outside director" within
the meaning of Section 162(m) of the Code.

        5. PARTICIPATION.

               (a) Eligibility. The Optionee shall be such persons
(collectively, "Participants"; individually a "Participant") as the
Administrator may select from among the following classes of persons, subject to
the terms and conditions of Section 5(b) below:

                      (i) Employees (who may be officers, whether or not they
               are directors) of the Corporation or of a Subsidiary and
               non-employees to whom an offer of employment has been extended;
               and

                      (ii) directors, advisors and consultants of the
               Corporation or a Subsidiary.

        Notwithstanding provisions of the first paragraph of this Section 5(a),
the Administrator may at any time or from time to time designate one or more
directors as being ineligible for selection as Participants in the Plan for any
period or periods of time. The Administrator may, in its sole discretion and
upon such terms as it deems appropriate, require as a condition of the grant of
an Option to a Participant that the Participant surrender for cancellation some
or all of the Options which have been previously granted to such person under
this Plan or otherwise. An Option, the grant of which is conditioned upon such
surrender, may have an option price lower (or higher) than the exercise price of
such surrendered Option, may cover the same (or a lesser or greater) number of
shares as such surrendered Option, may contain such other terms as the
Administrator deems appropriate, and shall be exerciseable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option.

               (b) Ten-Percent Shareholders. A Participant who, at the time of
grant, owns more than ten percent (10%) of the total combined voting power of
all classes of outstanding stock of the Corporation or its parent shall not be
eligible to receive an Option unless (i) the Exercise Price of the Shares
subject to such Option is at least one hundred ten percent (110%) of the Fair
Market Value of such Shares on the Grant Date.

               (c) Stock Ownership. For purposes of Section 5(b) above, in
determining stock ownership, a Participant shall be considered as owning the
stock owned, directly or indirectly, by or for his or her brothers and sisters,
spouse, ancestors and lineal descendants. Stock owned, directly or indirectly,
by or for a corporation, partnership, estate or trust shall be considered as
being owned proportionately by or for

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its shareholders, partners or beneficiaries. Stock with respect to which such
Participant holds an Option shall not be counted.

               (d) Outstanding Stock. For purposes of Section 5(b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee. "Outstanding stock"
shall not include Shares authorized for issue under outstanding Options held by
the Optionee or by any other person.

        6. STOCK. The stock subject to Options granted under the Plan shall be
Shares of the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of Options
under the Plan at any time shall not exceed 500,000 Shares (the "Option Limit"),
subject to adjustment as provided for in this Plan. Notwithstanding the
foregoing, upon the full or partial payment of any Purchase Price by the
transfer to the Corporation of Shares or upon satisfaction of tax withholding
provisions in connection with any such exercise or any other payment made or
benefit realized under this Plan by the transfer or relinquish ment of Shares,
there shall be deemed to have been issued or transferred under this Plan only
the net number of Shares actually issued or transferred by the Corporation. In
the event any outstanding Option granted under this Plan for any reason expires
or is canceled or terminated, the Shares allocable to the unexercised portion of
such Option shall again be available to be granted as Options under this Plan.
Notwithstanding the previous sentence, to the extent required by Section 162(m)
of the Code, Shares subject to Options which are canceled continue to be counted
against the Option Limit and if, after an Option grant, the price of Shares
subject to such Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a New Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Option
Limit. The limitations established by this Section 6 shall be subject to
adjustment in the manner provided in Section 10 hereof upon the occurrence of an
event specified in Section 10.

        7. TERMS AND CONDITIONS OF OPTIONS.

               (a) Stock Option Agreements. Each Option shall be evidenced by an
Option Agreement in such other form as the Administrator shall from time to time
determine. Such Option Agreements need not be identical but shall comply with
and be subject to the terms and conditions set forth in this Section 7.

               (b) Nature of Option.  Each Option shall state whether it is an
Incentive Stock Option or a Nonstatutory Stock Option.

               (c) Optionee's Undertaking.  Each Optionee shall agree to remain
in the employ or service of the Corporation and to render services for a period
as shall be determined by the Administrator, from the Grant Date of the Option
or such other date

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agreed to by the Optionee and the Corporation, but such agreement shall not
impose upon the Corporation any obligation to retain the Optionee in their
employ or service for any period.

               (d) Number of Shares. Each Option shall state the number of
Shares to which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 10 hereof.

               (e) Exercise Price; Exercise of Options. Each Option shall state
the Exercise Price. The Exercise Price in the case of an Option granted to an
Optionee described in Section 5(b) hereof, shall not be less than one hundred
ten percent (110%) of the Fair Market Value on the Grant Date. The Exercise
Price in the case of any Nonstatutory Stock Option, shall not be less than
Eighty-five percent (85%) of the Fair Market Value on the Grant Date. The
Exercise Price in the case of any Incentive Stock Option granted to persons
other than to an Optionee described in Section 5(b) hereof, shall not be less
than the Fair Market Value on the Grant Date. At the sole discretion of the
Administrator, any Option granted under this Plan to any Participant may be
exercisable in whole or in part immediately upon the grant thereof, or only
after the occurrence of a specified event and/or only in installments, which
installments may be equal or otherwise, and which installments may vary as to
the number thereof as well as to whether any unexercised installments are
cumulative through the life of a particular Option; provided that, in any event,
such Option shall be exercisable at a minimum rate of at least twenty percent
(20%) per year over the period five years from the Grant Date for the Option in
question; however, in the case of an Option granted to a Participant who is a
director, consultant, advisor or officer of the Corporation, the Administrator
may provide that the Option may become fully exercisable, subject to reasonable
conditions such as continued employment or service to the Corporation, at any
time or during any period established by the Administrator.

               (f) Medium and Time of Payment; Notice. The Purchase Price shall
be payable in full in United States dollars upon the exercise of the Option;
provided, however, that if the applicable Option Agreement so provides, or the
Administrator in its sole discretion otherwise approves thereof, the Purchase
Price may (to the extent permitted by applicable law) be paid by the surrender
of Shares in good form for transfer, owned by the person exercising the Option
and having a Fair Market Value on the date of exercise equal to the Purchase
Price.

        In the event the Corporation determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, an Optionee must make arrangements
satisfactory to the Corporation to enable it to satisfy such withholding
requirements before the Optionee shall be permitted to exercise the Option.
Payment of such withholding requirements may be made, in the discretion of the
Administrator, (i) in cash, (ii) by delivery of Shares registered in the name of
the Optionee, or by the Corporation not issuing such number of Shares subject to

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the Option, having a Fair Market Value at the time of exercise equal to the
amount to be withheld or (iii) any combination of (i) and (ii) above.

        The Optionee shall exercise an Option by completing and delivering to
the Corporation, concurrently with the payment of the Purchase Price in the
manner described above, an exercise notice in such form as the Administrator
shall from time to time determine.

               (g) Term and Non-Transferability of Options. Each Option shall
state the time or times when all or part thereof becomes exercisable. No Option
shall be exercisable after the expiration of ten (10) years (or less, in the
discretion of the Administrator) from the Grant Date; except that no Incentive
Stock Option granted to an Optionee described in Section 5(b) hereof shall be
exercisable after the expiration of five (5) years from the Grant Date (or less,
in the discretion of the Administrator). During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative and shall not be assignable or transferable. The Option
shall not be transferable by the Optionee other than by will or the laws of
descent and distribution. Any other attempted alienation, assignment, pledge,
hypothecation, attachment, execution or similar process, whether voluntary or
involuntary, with respect to all or any part of any Option or right thereunder,
shall be null and void and, at the Corporation's option, shall cause all of the
Optionee's rights under the Option to terminate.

               (h) Cessation of Employment (Except by Death, Disability or
Retirement). If an Optionee's employment or service with the Corporation ceases
for any reason or no reason, whether voluntarily or involuntarily, with or
without cause, other than pursuant to death, Disability or Retirement, such
Optionee shall have the right, subject to the restrictions referred to in
Section 7(g) above, to exercise the Option at any time within ninety (90) days
after such cessation, but, except as otherwise provided in the applicable Option
Agreement, only to the extent that, at the date of such cessation, the
Optionee's right to exercise such Option had accrued pursuant to the terms of
the applicable Option Agreement and had not previously been exercised.

        For purposes of this Section 7(h), the employment relationship shall be
treated as continuing intact while the Optionee is on military leave, sick leave
or other bona fide leave of absence (to be determined in the sole discretion of
the Administrator). The foregoing notwithstanding, in the case of an Incentive
Stock Option, employment shall not be deemed to continue beyond the ninetieth
(90th) day after the Optionee ceased active employment, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.

               (i) Death of Optionee. If an Optionee's employment or service
with the Corporation ceases by reason of the Optionee's death, or after ceasing
to be a Participant but during the period in which he or she could have
exercised the Option

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<PAGE>   10

under this Section 7, and has not fully exercised the Option, then the Option
may be exercised in full, subject to the restrictions referred to in Section
7(g) above, at any time within twelve (12) months after the Optionee's death by
the executor or administrator of his or her estate or by any person or persons
who have acquired the Option directly from the Optionee by bequest or
inheritance, but, except as otherwise provided in the applicable Option
Agreement, only to the extent that, at the date of death, the Optionee's right
to exercise such Option had accrued and had not been forfeited pursuant to the
terms of the applicable Option Agreement and had not previously been exercised.

               (j) Disability of Optionee. If an Optionee's employment or
service with the Corporation ceases by reason of the Optionee's Disability, such
Optionee shall have the right, subject to the restrictions referred to in
Section 7(g) above, to exercise the Option at any time within twelve (12) months
after such cessation by reason of Disability, but, except as provided in the
applicable Option Agreement, only to the extent that, at the date of such
cessation, the Optionee's right to exercise such Option had accrued pursuant to
the terms of the applicable Option Agreement and had not previously been
exercised.

               (k) Retirement of Optionee. If an Optionee's employment or
service with the Corporation ceases by reason of the Optionee's Retirement, such
Optionee shall have the right, subject to the restrictions referred to in
Section 7(g) above, to exercise the Option at any time within ninety (90) days
after the date of Retirement, but only to the extent that, at the date of such
cessation, the Optionee's right to exercise such Option had accrued pursuant to
the terms of the applicable Option Agreement and had not previously been
exercised.

               (l) Time of Cessation of Service. For purposes of this Plan, the
Optionee's employment or service shall be deemed to have ceased or be terminated
on the date when the Optionee's employment or service in fact ceased or Optionee
is in fact terminated.

               (m) Rights as a Shareholder. No one shall have rights as a
shareholder with respect to any Shares covered by an 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 expressly provided in
Section 10 hereof.

               (n) Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Administrator may modify an Option, extend or renew
outstanding Options or accept the cancellation of outstanding Options (to the
extent not previously exercised) for the granting of new Options in substitution
therefor. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted. With the consent of the affected Optionee,
the Administrator may cancel any agreement

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<PAGE>   11

evidencing Options. In the event of such cancellation, the Administrator may
authorize the granting of new Options, which may or may not cover the same
number of Shares that have been the subject of the prior award, at such Exercise
Price and subject to such terms, conditions and discretions as would have been
applicable under this Plan had the canceled Options not been granted.

               (o) Substitution of Options. Notwithstanding any inconsistent
provisions or limits under the Plan, in the event the Corporation acquires
(whether by purchase, merger or otherwise) all or substantially all of
outstanding capital stock or assets of another corporation or of any
reorganization or other transaction qualifying under Section 424 of the Code,
the Administrator may, in accordance with the provisions of that Section,
substitute Options under the Plan for options under the plan of the acquired
company; provided, however, that (i) the excess of the aggregate fair market
value of the shares subject to an option immediately after the substitution over
the aggregate option price of such shares is not more than the similar excess
immediately before such substitution and (ii) the new option does not give
persons additional benefits, including any extension of the exercise period.

               (p) Other Provisions. An Option Agreement authorized under the
Plan may contain such terms and provisions not inconsistent with the terms of
the Plan (including, without limitation, restrictions upon the exercise of the
Option) as the Administrator shall deem advisable in its sole and absolute
discretion.

        8. LIMITATION ON ANNUAL AWARDS.

               (a) Limitation on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the Grant Date) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year under the Plan and all other plans
maintained by the Corporation or its parent, exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options. For the purposes of this
Section 8, Incentive Stock Options shall be taken into account in the order in
which they were granted.

               (b) Limitation on Total Options Granted. As long as the Plan is
in effect, at no time will Options granted to any Participant pursuant to the
Plan exceed 400,000 Shares, subject to adjustment as provided for in Section 10.

        9. TERM OF PLAN. Options may be granted pursuant to the Plan until the
expiration of the Plan ten (10) years after the effective date referred to in
Section 3.

        10. EFFECT OF CERTAIN EVENTS.

               (a) Adjustments Upon Changes in Stock. The Administrator shall
make or provide for such adjustments in the Option Limit, the Exercise Price and
in the

                                      -11-
<PAGE>   12

number or kind of shares or other securities (including shares or other
securities of another issuer) covered by this Plan and outstanding Options as
the Administrator in its sole discretion, exercised in good faith, shall
determine is equitably required to prevent dilution or enlargement of rights of
optionees that would otherwise result from (a) any stock dividend, stock split,
combination of shares, issuance of rights or warrants to purchase stock,
spin-off, recapitalization or other changes in the capital structure of the
Corporation, (b) any merger, consolidation, reorganization or partial or
complete liquidations, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. The Administrator also shall make or
provide for such adjustment in the number or kind of shares of the Corporation's
capital stock or other securities (or in shares or other securities of another
issuer) which may be acquired pursuant to Options granted under the Plan and the
number of such securities to be awarded to each Optionee as the Administrator in
its sole discretion, shall determine is appropriate to reflect any transaction
or event described in the preceding sentence. In the event of any such
transaction or event, the Administrator may provide in substitution for any or
all outstanding Options under the Plan such alternative consideration (including
securities of any surviving entity) as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all Options so replaced. In any case, such substitution of
securities shall not require the consent of any person who is granted Options
pursuant to the Plan. The determination of the Administrator as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

               (b) Change of Control. In addition to the rights set forth in
Section 10(a) above, in the event of a Change of Control, the Administrator may
in its sole discretion, without obtaining shareholder approval or the consent of
any person granted Options under the Plan, take one or more of the following
actions:

                        (i) Accelerate the exercise dates of any outstanding
               Option, or make the Option fully vested and exercisable;

                        (ii) Pay cash to any or all owners of Options in
               exchange for the cancellation of their outstanding Options; or

                        (iii) Make any other adjustments or amendments to the
               Plan and outstanding Options and substitute new Options for
               outstanding Options.

               (c) Adjustment Determination. To the extent that the foregoing
adjustments relate to securities of the Corporation, such adjustments shall be
made by the Administrator, whose determination shall be conclusive and binding
on all persons.

               (d) Limitation on Rights.  Except as expressly provided in this
Section 10, the Optionee 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

                                      -12-
<PAGE>   13

other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger or consolidation or spinoff of
assets or stock of another corporation, and any issue by the Corporation 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 or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation 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.

        11. SECURITIES LAW REQUIREMENTS.

               (a) Legality of Issuance. No Shares shall be issued upon the
exercise of any Option unless and until the Corporation has determined that:

                      (i) it and the Optionee have taken all actions required to
               register the offer and sale of the Shares under the Securities
               Act, or to perfect an exemption from the registration
               requirements thereof;

                      (ii) any applicable listing requirement of any stock
               exchange on which the Common Stock is listed has been satisfied;
               and

                      (iii) any other applicable provision of state or Federal
               law has been satisfied.

               (b) Restrictions on Transfer; Representations of Optionee;
Legends. Regardless of whether the offering and sale of Shares under the Plan
has been registered under the Securities Act or has been registered or qualified
under the securities laws of any state, the Corporation may impose restrictions
upon the sale, pledge or other transfer of such Shares (including the placement
of appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Securities Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Securities Act but an
exemption is available which requires an investment representation or other
representation, each Optionee shall be required to represent that such Shares
are being acquired for investment, and not with a view to the sale or
distribution thereof, and to make such other representations as are deemed
necessary or appropriate by the Corporation and its counsel. Stock certificates
evidencing Shares acquired under the Plan pursuant to an unregistered
transaction shall bear the following restrictive legend and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law:

                                      -13-
<PAGE>   14

               "THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE
               "ACT"). ANY TRANSFER OR PLEDGE OF SUCH SECURITIES WILL BE INVALID
               UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
               SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH
               REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER OR PLEDGE
               TO COMPLY WITH THE ACT."

        Any determination by the Corporation and its counsel in connection with
any of the matters set forth in this Section 11 shall be conclusive and binding
on all persons.

               (c) Registration or Qualification of Securities. The Corporation
may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Corporation shall not be
obligated to take any affirmative action in order to cause the sale of Shares
under the Plan to comply with any law.

               (d) Exchange of Certificates. If, in the opinion of the
Corporation and its counsel, any legend placed on a stock certificate
representing Shares sold under the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of Shares but without such legend.

        12. AMENDMENT OF THE PLAN. The Administrator may from time to time, with
respect to any Shares at the time not subject to Options, suspend or discontinue
the Plan or revise or amend it in any respect whatsoever except that, without
the approval of the Corporation's shareholders, no such revision or amendment
shall:

               (a) Be made if shareholder approval is required by applicable
law, regulation or the requirements of The Nasdaq Stock Market or any exchange
or interdealer network where the Shares are trading;

               (b) Increase the number of Shares which may be issued under the
Plan;

               (c) Amend this Section 12 to defeat its purpose.

        Without limiting the generality of the foregoing, the Administrator may
amend this Plan to eliminate provisions which are no longer necessary as a
result of changes in tax or securities laws or regulations, or in the
interpretation thereof.

                                      -14-
<PAGE>   15

        13. FINANCIAL STATEMENTS. Each Optionee shall receive financial
statements of the Corporation not less than annually.

        14. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.

        15. APPROVAL OF SHAREHOLDERS. The Plan must be approved by the
affirmative vote of the holders of a majority of the Corporation's outstanding
shares of capital stock on or before the date twelve (12) months from the date
the Plan was adopted by the Board.

        16. GOVERNING LAW. This Plan, and the Option Agreements, shall be
governed by and enforced and construed in accordance with the internal
substantive laws (and not the laws of conflicts of laws) of the State of
California.

        To record the adoption of the Plan by the Board as of June 23, 1999, the
Board has caused its authorized officers to sign the Plan and affix the
corporate seal hereto.

                                             INTERVISUAL BOOKS, INC.

                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:  President

                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:  Secretary

                                      -15-

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