INTRANET SOLUTIONS INC, DEF 14A, 1998-07-28

INTRANET SOLUTIONS INC
DEF 14A, 1998-07-28
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<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 pursuant to Rule 14a-11(c) or Rule 14a-12

INTRANET SOLUTIONS, 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:
- - --------------------------------------------------------------------------------

<PAGE> 2
INTRANET SOLUTIONS, INC.
Lake Corporate Center
8091 Wallace Road
Eden Prairie, Minnesota 55344
------------------------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 16, 1998
------------------------------------------

TO THE SHAREHOLDERS OF INTRANET SOLUTIONS, INC.:

Please take notice that the Annual Meeting of Shareholders of IntraNet
Solutions, Inc. will be held, pursuant to due call by the Board of Directors of
the Company, at the Marriott Southwest Hotel, 5801 Opus Parkway, Minnetonka,
Minnesota, 55343 at 3:30 p.m. on September 16, 1998, or at any adjournment or
adjournments thereof, for the purpose of considering and taking appropriate
action with respect to the following:

1. To elect six directors.

2. To approve an amendment to the Company's 1994-1997 Stock Option and
Compensation Plan to increase the number of shares of common stock
reserved for issuance thereunder from 2,500,000 to 3,100,000 shares.

3. To approve the adoption of the 1997 Director Stock Option Plan.

4. To transact any other business as may properly come before the
meeting or any adjournments thereof.

Pursuant to due action of the Board of Directors, shareholders of record
on July 21, 1998, will be entitled to vote at the meeting or any adjournments
thereof.

A proxy for the meeting is enclosed herewith. You are requested to fill in
and sign the proxy, which is solicited by the Board of Directors, and mail it
promptly in the enclosed envelope.

By Order of the Board of Directors

/s/ Jeffrey J. Sjobeck
Jeffrey J. Sjobeck,
Chief Financial Officer and Secretary

Dated: August 12, 1998

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE PROXY
CARD EXACTLY AS YOUR NAME(S) APPEARS ON THE CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.

<PAGE> 3

PROXY STATEMENT

INTRANET SOLUTIONS, INC.
Lake Corporate Center
8091 Wallace Road
Eden Prairie, Minnesota 55344

------------------------------------------

Annual Meeting of Shareholders to be Held
September 16, 1998

------------------------------------------

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IntraNet Solutions, Inc. (the "Company")
for use at the annual meeting of shareholders to be held at the Marriott
Southwest Hotel, 5801 Opus Parkway, Minnetonka, Minnesota 55343 on September 16,
1998 at 3:30 p.m. and at any adjournment thereof.

All shares represented by properly executed proxies received in time will
be voted at the meeting and, where the manner of voting is specified on the
proxy, will be voted in accordance with such specifications. Shares represented
by properly executed proxies on which no specification has been made will be
voted FOR the election of the nominees for director named herein, FOR the
amendment to the Company's 1994-1997 Stock Option and Compensation Plan and FOR
the adoption of the 1997 Director Stock Option Plan, and will be deemed to grant
discretionary authority to vote upon any other matters properly coming before
the meeting.

Any shareholder who executes and returns a proxy may revoke it at any time
prior to the voting of the proxies by giving written notice to the Secretary of
the Company, by executing a later-dated proxy, or by attending the meeting and
giving oral notice to the Secretary of the Company.

The Board of Directors of the Company has fixed the close of business on
July 21, 1998 as the record date for determining the holders of outstanding
shares of common stock entitled to notice of, and to vote at, the annual
meeting. On that date, there were 8,681,983 shares of common stock issued and
outstanding. Each such share of common stock is entitled to one vote at the
meeting. The Notice of Annual Meeting, this Proxy Statement and the form of
proxy are first being mailed to shareholders of the Company on or about August
12, 1998.

2
<PAGE> 4

PROPOSAL NO. 1
ELECTION OF DIRECTORS

Six directors are to be elected at the meeting, each director to hold
office until the next Annual Meeting of Shareholders, or until his successor is
elected and qualified. All of the persons listed below are now serving as
directors of the Company. David D. Koentopf has resigned from the Board as of
August 1, 1998 and is not standing for reelection. All of the persons listed
below have consented to serve as a director, if elected. If all six nominees are
elected, there will be one vacancy on the Board which will be filled at a later
date. The Board of Directors proposes for election the nominees listed below:

Robert F. Olson, age 42, serves as the Company's President and Chief
Executive Officer. Prior to the Merger (as such term is defined in "Certain
Transactions" below), Mr. Olson founded IntraNet Integration Group, Inc. and
served as its President, Chief Executive Officer and Chairman of its Board of
Directors since its inception in April 1990. From 1987 to 1990, Mr. Olson served
as the general manager of the Greatway Communications Division of Anderberg-Lund
Printing Company, an electronic publishing sales and services organization. From
1981 to 1987, Mr. Olson was involved in general management and marketing
capacities in several electronic publishing service and resale start-up
organizations.

Jeffrey J. Sjobeck, age 38, serves as the Company's Chief Financial
Officer, Secretary and as a director. Prior to the Merger, Mr. Sjobeck served as
a director of IntraNet Integration Group, Inc. from June 1995 and chief
financial officer of IntraNet Integration Group, Inc. from December 1994. From
June 1993 to November 1994, Mr. Sjobeck served as chief financial officer of
Innovative Gaming Corporation of America, Reno, Nevada, which company develops,
manufactures and distributes gaming equipment. From June 1990 to May 1993, Mr.
Sjobeck served as controller and chief financial officer of James Phillips
Company. From October 1984 to May 1990, Mr. Sjobeck was employed in the Audit
and Accounting division of Coopers & Lybrand LLP.

Paul R. Anderson, age 39, became a member of the Board in November 1997.
Mr. Anderson began his career as a corporate lawyer specializing in
high-technology companies. Since 1988, Mr. Anderson has served in a variety of
managerial positions for Adobe Systems, Inc., San Jose, California, which
develops and supports software products enabling users to use information across
all print and electronic media. He has been Vice President - Type and Content
since 1997, in which he manages development and product marketing for Adobe's
type, clip-art and stock photography product lines. From 1996 to 1997 he was
Vice President and General Manager - Publishing Division and had profit and loss
responsibility for Adobe's Type and FrameMaker product lines. From 1993 to 1996,
he served in the Application Products Division, variously as Director -
International, Senior Director - Pacific Rim and then as Vice President -
Pacific Rim. From 1988 to 1992, he managed the opening of Adobe's Tokyo office
and managed the applications products business in Japan. Mr. Anderson also
serves on the board of Datalogics Inc.

Ronald E. Eibensteiner, age 46, has been an investor in numerous
development stage and technology companies, having served as president and
founder of Wyncrest Capital, Inc. since 1990. Mr. Eibensteiner is also Chairman
of OneLink Communications, Inc., a telecommunications service provider; a
co-founder of Diametrics Medical, Inc., a manufacturer of blood gas systems; and
a director of Reality Interactive, an electronic publisher of information for
Fortune 500 companies. From 1992 to 1996, Mr. Eibensteiner served as chairman of
Prodea Software Corporation, a data warehousing software company, until its sale
to Platinum Technology, Inc. in January 1996.

Kenneth H. Holec, age 43, has been a director of the Company since
February 1998. Mr. Holec is President and Chief Executive Officer of ShowCase
Corporation, a data warehousing solutions supplier. Prior to that he spent over
13 years at Minneapolis-based Lawson Software, a provider of high-end financial
and human resource management software solutions, where he served as President
and CEO from 1985 to 1993. Mr. Holec serves on the Minnesota Software
Association Board of Directors and Executive Committee.

Steven C. Waldron, age 50, joined the Board in February 1998. He has been
President and Chief Executive Officer of St. Paul Software, an electronic data
interchange software provider that markets its high-end software products to
Fortune 1000 companies worldwide, since 1995. From 1992 to 1995 he was president
of Innovex, a corporation with three divisions providing disk drive components,
software and medical services with $70 million in annual revenues. Prior to that
he was President and CEO of Norstan Communications, a supplier of
telecommunications hardware and software, a company that he helped start and was
associated with for 12 years.

<PAGE> 5

PROXIES AND VOTING

The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of common stock of the Company present and entitled to
vote on the election of directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting is required for election to the Board of
each of the six nominees named above. A shareholder who abstains with respect to
the election of directors is considered to be present and entitled to vote on
the election of directors at the meeting, and is in effect casting a negative
vote, but a shareholder (including a broker) who does not give authority to a
proxy to vote, or withholds authority to vote, on the election of directors,
shall not be considered present and entitled to vote on the election of
directors.

All shares represented by proxies will be voted FOR the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.

THE BOARD AND ITS COMMITTEES

The Board of Directors met six times and took action by written action in
lieu of a meeting 15 times during the year ended March 31, 1998.

The Company maintains an Audit Committee to review the scope and results
of the annual audit and other accounting related services. The Audit Committee
consists of Messrs. Anderson and Eibensteiner. Henry Fong and David D. Koentopf,
former outside directors of the Company, served on the Audit Committee until
their respective resignations from the Board on October 31, 1997 and August 1,
1998, respectively. Mr. Anderson was appointed to the Committee on November 4,
1997. The Audit Committee took action once by unanimous written action during
fiscal 1998.

The Company also maintains a Compensation and Stock Option Committee to
provide recommendations concerning salaries, stock options and incentive
compensation for officers and employees of the Company. The members of the
Compensation and Stock Option Committee are Messrs. Eibensteiner, Holec and
Waldron. Mr. Fong served on that Committee until his resignation from the Board
on October 31, 1997. On May 12, 1998, Mr. Koentopf resigned from the Committee
and Messrs. Holec and Waldron were appointed to the Committee. The Compensation
and Stock Option Committee took action five times by unanimous written action
during fiscal 1998.

Except as described in this paragraph, the Company has not compensated its
directors in their capacities as directors. On April 23, 1997, the Company
granted to each of Messrs. Eibensteiner, Fong, and Koentopf, the then
non-employee directors, options to purchase 30,000 shares of the Company's
common stock at an exercise price of $4.00 per share. Each of the options vests
in three annual 10,000-share increments beginning on July 31, 1997. On January
12, 1998, the Company granted to Messrs. Anderson, Holec and Waldron,
non-employee directors of the Company, options to purchase 30,000 shares of
common stock at an exercise price of $6.00 per share. Each of the options
granted to Messrs. Holec and Waldron vests in three annual 10,000-share
increments beginning on January 12, 1999. The options granted to Mr. Anderson
vest in three annual 10,000-share increments beginning on December 1, 1998.

All of the option grants described in the preceding paragraph, except for
the option grant to Mr. Fong, are subject to approval by the shareholders of the
proposal to adopt the 1997 Director Stock Option Plan. See "Proposal No. 3
- - - Proposal to Approve the Adoption of the 1997 Director Stock Option Plan
- - - New Plan Benefits." The options granted to Mr. Fong were granted under
the Company's 1994-1997 Stock Option and Compensation Plan.

PRINCIPAL SHAREHOLDERS

The Company has outstanding one class of voting securities, common stock,
$0.01 par value, of which 8,681,983 shares were outstanding as of the close of
business on the Record Date. Each share of common stock is entitled to one vote
on all matters put to a vote of shareholders.

<PAGE> 6

The following table sets forth as of the Record Date certain information
regarding the beneficial ownership of shares of common stock by each director of
the Company, each nominee for director, each of the executive officers listed in
the Summary Compensation Table, each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares and all directors and
executive officers as a group. Except as otherwise indicated, each shareholder
has sole voting and investment power with respect to the shares beneficially
owned.

NUMBER OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER OWNED SHARES
---------------------------------------- ---------------- --------------
Robert F. Olson (1)..................... 4,116,632 46.7

Jeffrey J. Sjobeck (2) ................. 50,169 *

James G. Sippl (3)...................... 96,250 1.1

Paul R. Anderson........................ -- --

Ronald E. Eibensteiner (4).............. 298,571 3.4

Kenneth H. Holec........................ -- --

David D. Koentopf (5)................... 37,229 *

Steven C. Waldron....................... -- --

Equitex, Inc. (6)....................... 473,250 5.5

Perkins Capital Management I (7)........ 513,200 5.9

All directors and executive
officers
as a group (8 persons) (8)............. 4,598,851 50.5

- - ---------------
* Less than 1%.

(1) Includes 35,714 shares held by Mr. Olson's wife, 84,619 shares issuable
upon exercise of currently exercisable warrants held in trust for the
benefit of Mr. Olson's children, and 50,000 shares issuable upon exercise
of currently exercisable warrants owned by Mr. Olson's spouse. Mr. Olson
disclaims beneficial ownership of these securities.

(2) Reflects 50,169 shares of common stock subject to stock options which are
exercisable currently or within 60 days.

(3) Reflects 55,000 shares issuable upon exercise of currently exercisable
options and 41,250 shares issuable upon exercise of currently exercisable
warrants. Mr. Sippl resigned as Chief Executive Officer on April 30, 1998.

(4) Includes 20,000 shares of common stock issuable upon exercise of options
exercisable currently or within 60 days held by Mr. Eibensteiner. Also
includes 171,499 shares owned and 107,072 shares issuable upon exercise of
currently exercisable warrants owned by Wyncrest Capital, Inc., an
investment fund controlled by Mr. Eibensteiner.

(5) Includes 20,000 shares of common stock issuable upon exercise of options
exercisable currently or within 60 days and 1,034 shares issuable upon
exercise of currently exercisable warrants. Mr. Koentopf has resigned from
the Board effective August 1, 1998.

(6) Information taken from such person's most recent Schedule 13G filing with
the Securities and Exchange Commission ("SEC"). Such person's address is
7315 E. Peakview Avenue, Englewood, CO 80111.

(7) Information taken from such person's most recent Schedule 13G filing with
the SEC. Includes 513,200 shares as to which such person has sole
dispositive power and 275,000 shares as to which such person has sole
voting power. Such person's address is 730 East Lake Street, Wayzata, MN
55391.

(8) Includes 283,975 shares of common stock subject to currently exercisable
warrants and 145,169 shares of common stock subject to options exercisable
currently or within 60 days. Also includes shares that may be deemed to be
owned by Mr. Robert Olson through his spouse or a trust for the benefit of
his children, as to which he disclaims beneficial ownership (see note (1)
above).

<PAGE> 7

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years (or such shorter applicable period) awarded to or
earned by the Chief Executive Officer, the Chief Financial Officer and the Chief
Operating Officer of the Company. No other executive officer of the Company
earned an annual salary and bonus from the Company in excess of $100,000 during
any of the three preceding fiscal years.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION AWARDS
------------------------ --------------
COMMON STOCK ALL OTHER
NAME AND PRINCIPAL FISCAL UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($) (1)
- - ------------------- ------- ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Robert F. Olson 1998 155,000 -- -- 10,492
President and Chief 1997 141,793 -- -- 10,492
Executive Officer 1996 110,883 200 -- 11,164

Jeffrey J. Sjobeck 1998 100,000 -- 10,000 --
Chief Financial Officer 1997 82,291 2,100 12,500 --
and Secretary 1996 66,146 200 26,907 --

James G. Sippl (2) 1998 150,000 21,000 -- --
Chief Operating Officer 1997 26,154 -- 100,000 --
</TABLE>

(1) Represents term life insurance premiums.
(2) Mr. Sippl resigned on April 30, 1998.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth the number of individual grants of stock
options made during fiscal year 1998 to the executive officers named in the
Summary Compensation Table.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF MARKET
SHARES TOTAL OPTIONS PRICE
UNDERLYING GRANTED TO EXERCISE OR ON DATE
OPTIONS EMPLOYEES IN BASE PRICE OF GRANT EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) ($/SHARE) DATE
- - ------------------------ ----------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Robert F. Olson......... -- -- -- -- --
Jeffrey J. Sjobeck...... 10,000 (1) 1.1% 5.50 5.50 3/10/2008
James G. Sippl.......... -- -- -- -- --
</TABLE>

(1) Vesting of options is based on Mr. Sjobeck's performance.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

The following table summarized information with respect to options held by
the executive officers named in the Summary Compensation Table and the value of
the options held by such persons at the end of fiscal 1998. No options were
exercised by the executive officers named in the Summary Compensation Table
during fiscal 1998.

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END ($) (1)
-------------------------------- ------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Robert F. Olson........... -- -- -- --
Jeffrey J. Sjobeck........ 44,788 47,670 170,162 188,266
James G. Sippl............ 40,000 60,000 46,000 69,000
</TABLE>

(1) Based upon the difference between the option exercise price in each case
and the last sale price of the common stock on March 31, 1998 (the last day
of the Company's 1998 fiscal year), which was $6.25.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Stock Option and Compensation Committee (the "Compensation
Committee") consists of Messrs. Eibensteiner, Holec and Waldron. There were no
"interlocks" within the meaning of the rules and regulations of the SEC.

EMPLOYMENT AGREEMENTS

In July 1996, the Company entered into three-year employment agreements
with each of Robert F. Olson, the Company's President and Chief Executive
Officer, and Jeffrey J. Sjobeck, the Company's Chief Financial Officer and
Secretary. Mr. Olson and Mr. Sjobeck received annual base salaries of $155,000
and $100,000, respectively, in fiscal 1998 and each has the opportunity to earn
performance-related bonuses, including stock options issued pursuant to the
Company's 1994-1997 Stock Option and Compensation Plan. Pursuant to their
respective agreements, neither Mr. Olson nor Mr. Sjobeck may disclose
confidential information about the Company and each has agreed not to compete
with the Company for a two-year period after any termination of employment. The
Company may terminate either of Mr. Olson's or Mr. Sjobeck's employment without
cause upon 120 days written notice to the Board of Directors. In the event of
any such termination, Mr. Olson will be entitled to receive severance
compensation equal to the greater of six months of his base salary or the
balance of the compensation due and owing to him under his employment agreement,
and Mr. Sjobeck will be entitled to 120 days severance pay.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Decisions on compensation of the Company's executives generally have been
made by the Compensation and Stock Option Committee of the Board (the
"Committee"). Each member of the Committee is a non-employee director. All
decisions by the Compensation Committee relating to the compensation of the
Company's executive officers are reviewed by the full Board. Pursuant to rules
designed to enhance disclosure of the Company's policies toward executive
compensation, set forth below is a report prepared by the Committee addressing
the compensation policies for the Company for the year ended March 31, 1998 as
they affected the Company's executive officers.

The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
objectives and long-term goals, reward above-average corporate performance,
recognize individual achievements, and assist the Company in attracting and
retaining qualified executives. Executive compensation is set at levels that the
Committee believes to be consistent with others in the Company's industry.

There are three elements in the Company's executive compensation program,
all determined by individual and corporate performance:

- Base salary compensation
- Annual incentive compensation
- Stock options

Total compensation opportunities are competitive with those offered by
employers of comparable size, growth and profitability in the Company's
industry.

<PAGE> 9

Base salary compensation is determined by the potential impact the
individual has on the Company, the skills and experiences required by the job,
and the performance and potential of the incumbent in the job. Annual incentive
compensation for executives of the Company is based primarily on corporate
operating earnings and revenue growth and the Company's positioning for future
results, but also includes an overall assessment by the Committee of executive
management's performance, as well as market conditions.

Awards of stock grants under the 1994-1997 Stock Option and Compensation
Plan (the "Plan") are designed to promote the identity of long-term interests
between the Company's executives and its shareholders and assist in the
retention of executives and other key employees. The Plan also permits the
Committee to grant stock options to key personnel.

The Committee surveys employee stock option programs of companies with
similar capitalization to the Company prior to recommending the grant of options
to executives. While the value realizable from exercisable options is dependent
upon the extent to which the Company's performance is reflected in the market
price of the Company's common stock at any particular point in time, the
decision as to whether such value will be realized in any particular year is
determined by each individual executive and not by the Compensation Committee.
Accordingly, when the Committee recommends that an option be granted to an
executive, that recommendation does not take into account any gains realized
that year by that executive as a result of his or her individual decision to
exercise an option granted in a previous year.

Ronald E. Eibensteiner
Kenneth H. Holec
Steven C. Waldron

CERTAIN TRANSACTIONS

Prior to the July 31, 1996 merger of IntraNet Integration Group, Inc. into
the Company (the "Merger"), the Company's assets consisted solely of its
ownership of all of the rights in and to the "MacGregor" trademark pursuant to
certain license agreements and certain related assets (the "MacGregor Rights").
Pursuant to and as a condition of the closing of the Merger, the Company was
required to dispose of all of its existing assets such that, prior to closing,
its balance sheet would show a tangible net worth, less non-current assets, of
at least $3,000,000, cash of at least $1,000,000 and no liabilities. To satisfy
such condition, and to produce a pre-closing balance sheet evidencing such
tangible net worth, cash and the absence of liabilities, the Company completed a
series of transactions that were approved by the Company's shareholders on July
30, 1996. Such transactions included the sale of the MacGregor Rights to Hutch
Sports USA, Inc. ("Hutch"), a subsidiary of Roadmaster Industries, Inc.
("Roadmaster"). The Company and Roadmaster were both under the indirect common
control of Henry Fong, then a director of the Company. As a result of his
interest in such transaction, Mr. Fong (and his affiliates) abstained from
voting in connection with the sale and transfer of the MacGregor Rights from the
Company to Hutch.

Hutch acquired the MacGregor Rights for a purchase price of $2,910,000,
paid as follows: (i) $1,000,000 in cash; and (ii) the delivery of a one-year
unsecured installment promissory note in the amount of $1,910,000, payable in
twelve equal monthly installments bearing interest at the prime rate publicly
announced by Bank America, N.A. The Company closed on the disposition of such
assets immediately prior to closing on the Merger, but made such transaction
effective February 1, 1996, and reduced the carrying amount of its intangible
assets at January 31, 1996 by $1,200,000.

In December 1996, the Company borrowed an aggregate of $250,000 from the
wife of Robert Olson, and entered into binding commitments from each of James
Sippl, the Company's then Chief Operating Officer, and Ronald Eibensteiner, a
member of the Company's Board of Directors, pursuant to which each of Messrs.
Sippl and Eibensteiner committed to lend the Company $150,000 and $125,000,
respectively. In January 1997, the Company borrowed an aggregate of $50,000 from
Mr. Sippl and, in February 1997, borrowed an additional $100,000 from Mr. Sippl.
In March 1997, the Company borrowed an aggregate of $125,000 from Mr.
Eibensteiner. In each such instance, the Company issued an unsecured promissory
note bearing interest at the rate of 9% per annum for the aggregate principal
amount of the indebtedness. As additional consideration for the loans, the
Company issued each lender a five-year warrant to acquire a number of shares of
the Company's common stock is equal to 20% of the principal amount of the
indebtedness. The warrants have an exercise price of $4.00 per share.

<PAGE> 10

In June 1997, the Company converted an aggregate of $125,000 of the
indebtedness to Mr. Olson's wife into 35,714 shares of its common stock. One
hundred twenty-five thousand dollars of the indebtedness owing to Mr.
Eibensteiner and $25,000 of the indebtedness owing to Mr. Sippl was converted
into an aggregate of 30,000 shares of the Company's Series A Convertible
Preferred Stock in July 1997. The remaining $250,000 of such indebtedness was
repaid in April and May 1998.

The Company contracts with an entity that provides programming services to
certain of its customers. This entity is beneficially controlled by Robert
Olson. Total fees under this contract arrangement for the years ended March 31,
1996, 1997 and 1998 were $51,000, $19,000 and $36,000, respectively.

The Company has a revolving credit agreement with a bank that provides for
borrowings of up to $3.85 million based on available collateral. Advances of
$1,809,086 and $2,246,122 were outstanding as of March 31, 1997 and 1998,
respectively. Advances are due on demand and accrue interest at the bank's base
lending rate plus 2.5% (the effective rate of interest was 11.0% on March 31,
1997 and 1998). As of March 31, 1998 the Company had borrowing availability,
based on available collateral, of approximately $500,000. The agreement is
secured by substantially all Company assets and requires the Company to meet
various covenants including maintenance of minimum levels of net worth. Up to
$300,000 of borrowings are personally guaranteed by Mr. Olson. Total debt
underlying this agreement, including long-term debt, was $2.7 million as of
March 31, 1998.

<PAGE> 11

PROPOSAL NO. 2
PROPOSAL TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE
COMPANY'S 1994-1997 STOCK OPTION AND COMPENSATION PLAN

On July 31, 1996, the Board of Directors of the Company (the "Board")
unanimously approved the 1994-1997 Stock Option and Compensation Plan (the
"Plan") and 2,500,000 shares of common stock were reserved for issuance under
the Plan. On July 21, 1998, the Board approved an amendment to the Plan to
increase the number of shares reserved for issuance under the Plan by 600,000,
to 3,100,000 shares. A complete text of the Plan is set forth as Exhibit A to
this Proxy Statement. The brief summary of the Plan which follows is qualified
in its entirety by reference to the complete text.

GENERAL

The purpose of the Plan is to increase shareholder value and to advance
the interests of the Company by furnishing a variety of economic incentives
("Incentives") designed to attract, retain and motivate employees of and
consultants to the Company.

The Plan provides that a committee (the "Committee") composed of at least
two disinterested members of the Board or the entire Board if no Committee has
been constituted may grant Incentives in the following forms: (a) stock options;
(b) stock appreciation rights; (c) stock awards; (d) restricted stock; (e)
performance shares; and (f) cash awards. Incentives may be granted to
participants who are employees of or consultants to the Company (including
officers and directors of the Company who are also employees of or consultants
to the Company) selected from time to time by the Committee.

The number of shares of common stock which may be issued under the Plan if
this amendment is approved may not exceed 3,100,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This represents approximately 35.7% of the outstanding shares of
common stock on July 21, 1998. On July 21, 1998, the closing sale price of the
common stock as reported by NASDAQ was $5.25 per share.

STOCK OPTIONS

Under the Plan, the Committee may grant non-qualified and incentive stock
options to eligible employees to purchase shares of common stock from the
Company. The Plan confers on the Committee discretion, with respect to any such
stock option, to determine the number and purchase price of the shares subject
to the option, the term of each option and the time or times during its term
when the option becomes exercisable. The purchase price for incentive stock
options may not be less than the fair market value of the shares subject to the
option on the date of grant. The number of shares subject to an option will be
reduced proportionately to the extent that the optionee exercises a related SAR.
The term of a non-qualified option may not exceed 10 years and one day from the
date of grant and the term of an incentive stock option may not exceed 10 years
from the date of grant. Any option shall become immediately exercisable in the
event of specified changes in corporate ownership or control. The Committee may
accelerate the exercisability of any option or may determine to cancel stock
options in order to make a participant eligible for the grant of an option at a
lower price. The Committee may approve the purchase by the Company of an
unexercised stock option for the difference between the exercise price and the
fair market value of the shares covered by such option.

The option price may be paid in cash, check, bank draft or by delivery of
shares of common stock valued at their fair market value at the time of purchase
or by withholding from the shares issuable upon exercise of the option shares of
common stock valued at their fair market value or as otherwise authorized by the
Committee.

In the event that an optionee ceases to be an employee of or consultant to
the Company for any reason, including death, any stock option or unexercised
portion thereof which was otherwise exercisable on the date of termination of
employment shall expire at the time or times established by the Committee.

<PAGE> 12

STOCK APPRECIATION RIGHTS

A stock appreciation right or a "SAR" is a right to receive, without
payment to the Company, a number of shares, cash or any combination thereof, the
amount of which is determined pursuant to the formula described below. A SAR may
be granted with respect to any stock option granted under the Plan, or alone,
without reference to any stock option. A SAR granted with respect to any stock
option may be granted concurrently with the grant of such option or at such
later time as determined by the Committee and as to all or any portion of the
shares subject to the option.

The Plan confers on the Committee discretion to determine the number of
shares as to which a SAR will relate as well as the duration and exercisability
of a SAR. In the case of a SAR granted with respect to a stock option, the
number of shares of common stock to which the SAR pertains will be reduced in
the same proportion that the holder exercises the related option. The term of a
SAR may not exceed ten years and one day from the date of grant. Unless
otherwise provided by the Committee, a SAR will be exercisable for the same time
period as the stock option to which it relates is exercisable. Any SAR shall
become immediately exercisable in the event of specified changes in corporate
ownership or control. The Committee may accelerate the exercisability of any
SAR.

Upon exercise of a SAR, the holder is entitled to receive an amount which
is equal to the aggregate amount of the appreciation in the shares of common
stock as to which the SAR is exercised. For this purpose, the "appreciation" in
the shares consists of the amount by which the fair market value of the shares
of common stock on the exercise date exceeds (a) in the case of a SAR related to
a stock option, the purchase price of the shares under the option or (b) in the
case of a SAR granted alone, without reference to a related stock option, an
amount determined by the Committee at the time of grant. The Committee may pay
the amount of this appreciation to the holder of the SAR by the delivery of
common stock, cash, or any combination of common stock and cash.

RESTRICTED STOCK

Restricted stock consists of the sale or transfer by the Company to an
eligible participant of one or more shares of common stock which are subject to
restrictions on their sale or other transfer by the employee. The price at which
restricted stock will be sold will be determined by the Committee, and it may
vary from time to time and among employees and may be less than the fair market
value of the shares at the date of sale. All shares of restricted stock will be
subject to such restrictions as the Committee may determine. Subject to these
restrictions and the other requirements of the Plan, a participant receiving
restricted stock shall have all of the rights of a shareholder as to those
shares. The restrictions on restricted stock shall lapse immediately in the
event of specified changes in corporate ownership or control.

STOCK AWARDS

Stock awards consist of the transfer by the Company to an eligible
participant of shares of common stock, without payment, as additional
compensation for services to the Company. The number of shares transferred
pursuant to any stock award will be determined by the Committee.

PERFORMANCE SHARES

Performance shares consist of the grant by the Company to an eligible
participant of a contingent right to receive cash or payment of shares of common
stock. The performance shares shall be paid in shares of common stock to the
extent performance objectives set forth in the grant are achieved. The number of
shares granted and the performance criteria will be determined by the Committee.
In the event of specified changes in corporate ownership or control, all
payments of performance shares shall be made immediately.

CASH AWARDS

A cash award consists of a monetary payment made by the Company to an
eligible participant as additional compensation for his or her services to the
Company. Payment may depend on the achievement of specified

<PAGE> 13

performance objectives. The amount of any monetary payment constituting a cash
award shall be determined by the Committee.

NON-TRANSFERABILITY OF MOST INCENTIVES

No stock option, SAR, performance share or restricted stock granted under
the Plan will be transferable by its holder, except in the event of the holder's
death, by will or the laws of descent and distribution. During an employee's
lifetime, an Incentive may be exercised only by him or her or by his or her
guardian or legal representative.

AMENDMENT OF THE PLAN

The Committee or the Board may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance may, subject to adjustment in the
event of a merger, recapitalization, or other corporate restructuring, (a)
change or impair, without the consent of the recipient thereof, an Incentive
previously granted, (b) materially increase the maximum number of shares of
common stock which may be issued to all employees under the Plan, (c) materially
change or expand the types of Incentives that may be granted under the Plan, (d)
materially modify the requirements as to eligibility for participation in the
Plan, or (e) materially increase the benefits accruing to participants. Certain
Plan amendments require shareholder approval, including amendments which would
materially increase benefits accruing to participants, increase the number of
securities issuable under the Plan, or change the requirements for eligibility
under the Plan.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion sets forth certain United States income tax
considerations in connection with the ownership of common stock pursuant to the
Plan. These tax considerations are stated in general terms and are based on the
Internal Revenue Code of 1986, as amended (the "Code"), regulations thereunder
and judicial and administrative interpretations thereof. This discussion does
not address state or local tax considerations with respect to the ownership of
common stock. Moreover, the tax considerations relevant to ownership of the
common stock may vary depending on a holder's particular status.

Under existing Federal income tax provisions, a participant who receives a
stock option, performance shares or a SAR under the Plan or who purchases or
receives shares of restricted stock under the Plan which are subject to
restrictions which create a "substantial risk of forfeiture" (within the meaning
of section 83 of the Code) will not normally realize any income, nor will the
Company normally receive any deduction for federal income tax purposes in the
year such Incentive is granted. A participant who receives a stock award under
the Plan consisting of shares of common stock will realize ordinary income in
the year of the award in an amount equal to the fair market value of the shares
of common stock covered by the award on the date it is made, and the Company
will be entitled to a deduction equal to the amount the participant is required
to treat as ordinary income. A participant who receives a cash award will
realize ordinary income in the year the award is paid equal to the amount
thereof, and the amount of the cash will be deductible by the Company.

When a non-qualified stock option granted pursuant to the Plan is
exercised, the participant will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of common stock as
to which the option is exercised and the aggregate fair market value of shares
of the common stock on the exercise date, and the Company will be entitled to a
deduction in the year the option is exercised equal to the amount the
participant is required to treat as ordinary income.

Options which qualify as incentive stock options are entitled to special
tax treatment. Under existing federal income tax law, if shares purchased
pursuant to the exercise of such an option are not disposed of by the optionee
within two years from the date of granting of the option or within one year
after the transfer of the shares to the optionee, whichever is longer, then (i)
no income will be recognized to the optionee upon the exercise of the option;
(ii) any gain or loss will be recognized to the optionee only upon ultimate
disposition of the shares and, assuming the shares constitute capital assets in
the optionee's hands, will be treated as long-term capital gain or loss;

<PAGE> 14

(iii) the optionee's basis in the shares purchased will be equal to the
amount of cash paid for such shares; and (iv) the Company will not be entitled
to a federal income tax deduction in connection with the exercise of the option.
The Company understands that the difference between the option price and the
fair market value of the shares acquired upon exercise of an incentive stock
option will be treated as an "item of tax preference" for purposes of the
alternative minimum tax. In addition, incentive stock options exercised more
than three months after retirement are treated as non-qualified options.

The Company further understands that if the optionee disposes of the
shares acquired by exercise of an incentive stock option before the expiration
of the holding period described above, the optionee must treat as ordinary
income in the year of that disposition an amount equal to the difference between
the optionee's basis in the shares and the lesser of the fair market value of
the shares on the date of exercise or the selling price. In addition, the
Company will be entitled to a deduction equal to the amount the participant is
required to treat as ordinary income.

If the exercise price of an option is paid by surrender of previously
owned shares, the basis of the shares received in replacement of the previously
owned shares is carried over. If the option is a nonstatutory option, the gain
recognized on exercise is added to the basis. If the option is an incentive
stock option, the optionee will recognize gain if the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the applicable holding period. This gain will be added to the basis of
the shares received in replacement of the previously owned shares.

When a stock appreciation right granted pursuant to the Plan is exercised,
the participant will realize ordinary income in the year the right is exercised
equal to the value of the appreciation which he is entitled to receive pursuant
to the formula described above, and the Company will be entitled to a deduction
in the same year and in the same amount.

A participant who receives restricted stock or performance shares subject
to restrictions which create a "substantial risk of forfeiture" (within the
meaning of section 83 of the Code) will normally realize taxable income on the
date the shares become transferable or no longer subject to substantial risk of
forfeiture or on the date of their earlier disposition. The amount of such
taxable income will be equal to the amount by which the fair market value of the
shares of common stock on the date such restrictions lapse (or any earlier date
on which the shares are disposed of) exceeds their purchase price, if any. A
participant may elect, however, to include in income in the year of purchase or
grant the excess of the fair market value of the shares of common stock (without
regard to any restrictions) on the date of purchase or grant over its purchase
price. The Company will be entitled to a deduction for compensation paid in the
same year and in the same amount as income is realized by the employee.

<PAGE> 15

PROPOSAL NO. 3
PROPOSAL TO APPROVE THE ADOPTION OF THE
1997 DIRECTOR STOCK OPTION PLAN

On December 1, 1997, the Board unanimously approved the 1997 Director
Stock Option Plan (the "Plan"), subject to approval by the shareholders. A
complete text of the Plan is set forth as Exhibit B to this Proxy Statement. The
brief summary of the Plan which follows is qualified in its entirety by
reference to the complete text.

GENERAL

The purpose of the Plan is to advance the interests of the Company and its
shareholders by encouraging share ownership by members of the Board of Directors
who are not employees of the Company or any of its subsidiaries, in order to
promote long-term shareholder value through continuing ownership of the
Company's common stock. The Plan provides that the Board may award nonqualified
stock options to purchase shares of common stock from the Company to members of
the Board who are not employees of the Company or any of its subsidiaries.

The number of shares of common stock which may be issued under the Plan if
this amendment is approved may not exceed 300,000 shares, subject to adjustment
in the event of a merger, recapitalization or other corporate restructuring.
This represents approximately 3.5% of the outstanding shares of common stock on
July 21, 1998.

GRANT OF STOCK OPTIONS

The Plan confers on the Board discretion, with respect to any such stock
option, to determine the number and purchase price of the shares subject to the
option, the term of each option and the time or times during its term when the
option becomes exercisable. The purchase price for incentive stock options may
not be less than the fair market value of the shares subject to the option on
the date of grant. The term of an option may not exceed 10 years from the date
of grant. Any option shall become immediately exercisable upon the removal of
the optionee from the Board without cause or in the event of specified changes
in corporate control.

The option price may be paid in cash, check, by delivery of shares of
common stock valued at their fair market value at the time of purchase, or by a
combination of the above.

In the event that an optionee ceases to be a non-employee director for a
reason other than death, any stock option or unexercised portion thereof which
was otherwise exercisable on the date the optionee ceases to be a non-employee
director shall expire six months after such date, but in no event after the
option would otherwise have expired under the Plan. If an optionee dies, any
stock option or unexercised portion thereof which was otherwise exercisable on
the date of death may be executed by his or her executors, administrators, heirs
or distributees within one year after the date of death, but in no event after
the option would otherwise have expired under the Plan.

NON-TRANSFERABILITY

No stock option granted under the Plan will be transferable by its holder
except, in the event of the holder's death, by will or the laws of descent and
distribution.

AMENDMENT OF THE PLAN

The Board may amend or discontinue the Plan at any time. However, no such
amendment or discontinuance shall, subject to adjustment in the event of a
merger, recapitalization, or other corporate restructuring, become effective
without shareholder approval if such approval is required by law, rule or
regulation, and in no event shall the Plan be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code of 1986,
as amended, or the Employee Retirement Income Security Act. In addition, no
amendment to the Plan may materially and adversely affect any right of any
optionee with respect to an outstanding option without such optionee's written
consent.

<PAGE> 16

FEDERAL INCOME TAX CONSEQUENCES

The following discussion sets forth certain United States income tax
considerations in connection with the ownership of common stock under the Plan.
These tax considerations are stated in general terms and are based on the Code,
regulations thereunder and judicial and administrative interpretations thereof.
This discussion does not address state or local tax considerations with respect
to the ownership of common stock. Moreover, the tax considerations relevant to
ownership of the common stock may vary depending on a holder's particular
status.

Under existing Federal income tax provisions, a participant who receives a
stock option under the Plan which are subject to restrictions which create a
"substantial risk of forfeiture" (within the meaning of section 83 of the Code)
will not normally realize any income, nor will the Company normally receive any
deduction for federal income tax purposes in the year such option is granted.

If the exercise price of an option is paid by surrender of previously
owned shares, the basis of the shares received in replacement of the previously
owned shares is carried over. Since the option is a nonstatutory option, the
gain recognized on exercise is added to the basis. This gain will be added to
the basis of the shares received in replacement of the previously owned shares.

PROXIES AND VOTING

The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of common stock of the Company present and entitled to
vote on the proposal to approve the adoption of the Plan (the "Proposal") or (b)
a majority of the voting power of the minimum number of shares entitled to vote
that would constitute a quorum for transaction of business at the meeting, is
required for approval of the Proposal. A shareholder who abstains with respect
to the Proposal is considered to be present and entitled to vote on the Proposal
at the meeting, and is in effect casting a negative vote, but a shareholder
(including a broker) who does not give authority to a Proxy to vote, or
withholds authority to vote, on the Proposal, shall not be considered present
and entitled to vote thereon. All shares represented by proxies will be voted
FOR the Proposal unless a contrary choice is specified.

NEW PLAN BENEFITS

The following table sets forth grants of options that have been made to
the following individuals or groups of individuals listed, which options are
subject to approval by shareholders of the proposal to adopt the Plan:

NAME AND POSITION NUMBER OF SHARES
-------------------------------------- ----------------
Paul R. Anderson...................... 30,000
Ronald E. Eibensteiner................ 30,000
David D. Koentopf (1)................. 30,000
Kenneth H. Holec...................... 30,000
Steven C. Waldron..................... 30,000
Executive Group....................... --
Non-Executive Director Group.......... 150,000
Non-Executive Officer Employee Group.. --

(1) Such options were granted to Mr. Koentopf prior to his resignation from the
Board.

<PAGE> 17

OTHER MATTERS

SHAREHOLDER PROPOSALS

Shareholders wishing to present proposals for action by the shareholders
at the 1999 annual meeting must present such proposals at the principal offices
of the Company not later than April 9, 1999. Due to the complexity of the
respective rights of the shareholders and the Company in this area, any
shareholder desiring to propose such an action is advised to consult with his or
her legal counsel with respect to such rights. It is suggested that any such
proposals be submitted by certified mail, return receipt requested.

INDEPENDENT ACCOUNTANTS

On March 6, 1998, the Company dismissed Ernst & Young, LLP as its
independent public accountants responsible for auditing the Company's financial
statements, and appointed Grant Thornton LLP as its independent public
accountants to audit the Company's financial statements for the fiscal year
ending March 31, 1998. This action was taken by the Board of Directors with the
Audit Committee of the Board unanimously approving the written action. Ernst &
Young, LLP's report for the fiscal year ended March 31, 1997 contained a
qualification concerning the Company's ability to continue as a going concern.
During such fiscal year period and the subsequent interim period preceding the
Company's dismissal of that firm, there have been no disagreements with Ernst &
Young, LLP on any matter concerning accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of Ernst & Young, LLP would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.

For the fiscal year ended March 31, 1996, Lund Koehler Cox & Arkema, LLP
acted as certified public accountants responsible for auditing the Company's
financial statements. Lund Koehler Cox & Arkema, LLP's report for the 1996
fiscal year contained no adverse opinions, disclaimers or qualifications, or
modifications as to uncertainty, audit scope or accounting principles, and
during such fiscal year period and the subsequent interim period preceding the
Company's dismissal of that firm, there were no disagreements with Lund Koehler
Cox & Arkema, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Lund Koehler Cox & Arkema, LLP, would have caused it to make
reference to the subject matter of the disagreement in connection with its
reports.

During the Company's fiscal years ended March 31, 1997 and 1996 and the
subsequent interim period through March 6, 1998, the Company did not consult
with Grant Thornton LLP on any item regarding (1) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements,
or (2) the subject matter of a disagreement or reportable event with the former
independent accountants.

A representative of Grant Thornton LLP is expected to attend this year's
Annual Meeting of Shareholders and will be available to respond to appropriate
questions from shareholders.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and Nasdaq. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.

Based solely on review of the copies of such forms furnished to the
Company, the Company believes that during the year ended March 31, 1998 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that Robert F.
Olson did not timely file a Form 4 which was due on July 10, 1997 to report
conversion of a promissory note held by his wife to common stock. Mr. Olson
filed a Form 4 on March 20, 1998.

16
<PAGE> 18

SOLICITATION

The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement, Annual Report and other material which may be sent to
the shareholders in connection with this solicitation. Brokerage houses and
other custodians, nominees and fiduciaries may be requested to forward
soliciting material to the beneficial owners of stock, in which case they will
be reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail but, in addition, officers and regular employees of
the Company may solicit proxies personally, by telephone, by telegram or by
special letter.

The Board does not intend to present to the meeting any other matter not
referred to above and does not presently know of any matters that may be
presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed proxy to vote the
proxy in accordance with their best judgment.

By Order of the Board of Directors

/s/ Jeffrey J. Sjobeck
Jeffrey J. Sjobeck
Secretary

<PAGE> 19

EXHIBIT A

INTRANET SOLUTIONS, INC.
1994-1997 STOCK OPTION AND COMPENSATION PLAN

1. PURPOSE. The purpose of this 1994-1997 Stock Option and Compensation
Plan (the "Plan") of IntraNet Solutions, Inc. (the "Company") is to increase
stockholder value and to advance the interests of the Company by furnishing a
variety of economic incentives ("Incentives") designed to attract, retain and
motivate employees and certain key consultants. Incentives may consist of
opportunities to purchase or receive shares of Common Stock, $.01 par value, of
the Company ("Common Stock"), monetary payments, or both on terms determined
under this Plan.

2. ADMINISTRATION. The Plan shall be administered by the Stock Option
Committee (the "Committee") of the Board of Directors of the Company, or the
entire Board of Directors, until such time as a stock option committee is
formed. The Committee shall consist of not less than two directors of the
Company and shall be appointed from time to time by the Board of Directors of
the Company. Each member of the Committee shall be a "disinterested person"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, and the
regulations promulgated thereunder (the "1934 Act"). The Board of Directors of
the Company may from time to time appoint members of the Committee in
substitution for, or in addition to, members previously appointed, and may fill
vacancies, however caused, in the Committee. The Committee shall select one of
its members as its chairman and shall hold its meetings at such times and places
as it shall deem advisable. A majority of the Committee's members shall
constitute a quorum. All action of the Committee shall be taken by the majority
of its members. Any action may be taken by a written instrument signed by
majority of the members and any action so taken shall be fully effective as if
it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary, shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable. The Committee shall have complete authority to award Incentives under
the Plan, to interpret the Plan, and to make any other determination which it
believes necessary and advisable for the proper administration of the Plan. The
Committee's decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants.

3. ELIGIBLE PARTICIPANTS. Employees of or consultants to the Company or
its subsidiaries or affiliates (including officers and directors, but excluding
directors who are not also employees of or consultants to the Company or its
subsidiaries or affiliates), shall become eligible to receive Incentives under
the Plan when designated by the Committee. Participants may be designated
individually or by groups or categories (for example, by pay grade) as the
Committee deems appropriate. Participation of officers of the Company or its
subsidiaries or affiliates and any performance objectives relating to such
officers' participation must be approved by the Committee. Participation by
others and any performance objectives relating to others may be approved by
groups or categories (for example, by pay grade) and authority to designate
participants who are not officers and to set or modify such targets may be
delegated.

4. TYPES OF INCENTIVES. Incentives under the Plan may be granted in any
one or a combination of the following forms: (a) incentive stock options and
non-statutory stock options (section 6); (b) stock appreciation rights ("SARs")
(section 7); (c) stock awards (section 8); (d) restricted stock (section 8); (e)
performance shares (section 9); and (f) cash awards (section 10).

5. SHARES SUBJECT TO THE PLAN.

5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
11.6, the number of shares of Common Stock which may be issued under the
Plan shall not exceed 2,500,000 shares of $.01 par value Common Stock.

5.2. CANCELLATION. To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of a SAR pursuant to Section
7.4, the Company shall be deemed, for purposes of

A-1

<PAGE> 20

applying the limitation on the number of shares, to have issued the
greater of the number of shares of Common Stock which it was entitled to
issue upon such exercise or on the exercise of any related option. In the
event that a stock option or SAR granted hereunder expires or is
terminated or canceled unexercised as to any shares of Common Stock, such
shares may again be issued under the Plan either pursuant to stock
options, SARs or otherwise. In the event that shares of Common Stock are
issued as restricted stock or pursuant to a stock award and thereafter are
forfeited or reacquired by the Company pursuant to rights reserved upon
issuance thereof. such forfeited and reacquired shares may again be issued
under the Plan, either as restricted stock, pursuant to stock awards or
otherwise. The Committee may also determine to cancel, and agree to the
cancellation of, stock options in order to make a participant eligible for
the grant of a stock option at a lower price than the option to be
canceled.

5.3. TYPE OF COMMON STOCK. Common Stock issued under the Plan in
connection with stock options, SARS, performance shares, restricted stock
or stock awards may be in the form of authorized and unissued shares.

6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from the Company. Each stock option granted by the Committee under this
Plan shall be subject to the following terms and conditions:

6.1. PRICE. The option price per share shall be determined by the
Committee subject to adjustment under Section 11.6.

6.2. NUMBER. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to adjustment as
provided in Section 11.6. The number of shares of Common Stock subject to
a stock option shall be reduced in the same proportion that the holder
thereof exercises a SAR if any SAR is granted in conjunction with or
related to the stock option.

6.3. DURATION AND TIME FOR EXERCISE. Subject to earlier termination
as provided in Section 11.4, the term of each stock option shall be
determined by the Committee but shall not exceed ten years and one day
from the date of grant. Each stock option shall become exercisable at such
time or times during its term as shall be determined by the Committee at
the time of grant. The Committee may accelerate the exercisability of any
stock option. Subject to the foregoing and with the approval of the
Committee, all or any part of the shares of Common Stock with respect to
which the right to purchase has accrued may be purchased by the Company at
the time of such accrual or at any time or times thereafter during the
term of the option.

6.4. MANNER OF EXERCISE. A stock option may be exercised, in whole
or in part, by giving written notice to the Company, specifying the number
of shares of Common Stock to be purchased and accompanied by the full
purchase price for such shares. The option price shall be payable in
United States dollars upon exercise of the option and may be paid by cash;
uncertified or certified check; bank draft; by delivery of shares of
Common Stock in payment of all or any part of the option price, which
shares shall be valued for this purpose at the Fair Market Value on the
date such option is exercised; by instructing the Company to withhold from
the shares of Common Stock issuable upon exercise of the stock option
shares of Common Stock in payment of all or any part of the option price,
which shares shall be valued for this purpose at the Fair Market Value or
in such other manner as may be authorized from time to time by the
Committee. Prior to the issuance of shares of Common Stock upon the
exercise of a stock option, a participant shall have no rights as a
stockholder.

6.5. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan
to the contrary, the following additional provisions shall apply to the
grant of stock options which are intended to qualify as Incentive Stock
Options (as such term is defined in Section 422A of the Internal Revenue
Code of 1986, as amended):

(a) The aggregate Fair Market Value (determined as of the time
the option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options are

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exercisable for the first time by any participant during any
calendar year (under all of the Company's plans) shall not exceed
$100,000;

(b) Any Incentive Stock Option certificate authorized under
the Plan shall contain such other provisions as the Committee shall
deem advisable, but shall in all events be consistent with and
contain all provisions required in order to qualify the options as
Incentive Stock Options.

(c) All Incentive Stock Options must be granted within ten
years from the earlier of the date on which this Plan was adopted by
the Board of Directors or the date this Plan was approved by the
stockholders.

(d) Unless sooner exercised, all Incentive Stock Options shall
expire no later than 10 years after the date of grant.

(e) The option price for Incentive Stock Options shall be not
less than the Fair Market Value of the Common Stock subject to the
option on the date of grant.

(f) No Incentive Stock Options shall be granted to any
participant who, at the time such option is granted, would own
(within the meaning of Section 422A of the Code) stock possessing
more than 10% of the total combined voting power of all classes of
stock of the employer corporation or of its parent or subsidiary
corporation.

7. STOCK APPRECIATION RIGHTS. A SAR is a right to receive, without
payment to the Company, a number of shares of Common Stock, cash or any
combination thereof; the amount of which is determined pursuant to the
formula set forth in Section 7.4. A SAR may be granted (a) with respect to any
stock option granted under this Plan, either concurrently with the grant of
such stock option or at such later time as determined by the Committee (as to
all or any portion of the shares of Common Stock subject to the stock option,
or (b) alone, without reference to any related stock option. Each SAR granted
by the Committee under this Plan shall be subject to the following terms and
conditions:

7.1. NUMBER. Each SAR granted to any participant shall relate to
such number of shares of Common Stock as shall be determined by the
Committee, subject to adjustment as provided in Section 11.6. In the case
of a SAR granted with respect to a stock option, the number of shares of
Common Stock to which the SAR pertains shall be reduced in the same
proportion that the holder of the option exercises the related stock
option.

7.2. DURATION. Subject to earlier termination as provided in Section
11.4, the term of each SAR shall be determined by the Committee but shall
not exceed ten years and one day from the date of grant. Unless otherwise
provided by the Committee, each SAR shall become exercisable at such time
or times, to such extent and upon such conditions as the stock option, if
any, to which it relates is exercisable. The Committee may in its
discretion accelerate the exercisability of any SAR.

7.3. EXERCISE. A SAR may be exercised, in whole or in part, by
giving written notice to the Company, specifying the number of SARs which
the holder wishes to exercise. Upon receipt of such written notice, the
Company shall, within 90 days thereafter, deliver to the exercising holder
certificates for the shares of Common Stock or cash or both, as determined
by the Committee, to which the holder is entitled pursuant to Section 7.4.

7.4. PAYMENT. Subject to the right of the Committee to deliver cash
in lieu of shares of Common Stock (which, as it pertains to officers and
directors of the Company, shall comply with all requirements of the 1934
Act), the number of shares of Common Stock which shall be issuable upon
the exercise of a SAR shall be determined by dividing:

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(a) the number of shares of Common Stock as to which the SAR
is exercised multiplied by the amount of the appreciation in such
shares (for this purpose, the "appreciation" shall be the amount by
which the Fair Market Value of the shares of Common Stock subject to
the SAR on the exercise date exceeds (1) in the case of a SAR
related to a stock option, the purchase price of the shares of
Common Stock under the stock option or (2) in the case of a SAR
granted alone, without reference to a related stock option, an
amount which shall be determined by the Committee at the time of
grant, subject to adjustment under Section 11.6); by

(b) the Fair Market Value of a share of Common Stock on the
exercise date.

In lieu of issuing shares of Common Stock upon the exercise of a
SAR, the Committee may elect to pay the holder of the SAR cash equal to
the Fair Market Value on the exercise date of any or all of the shares
which would otherwise be issuable. No fractional shares of Common Stock
shall be issued upon the exercise of a SAR; instead, the holder of the SAR
shall be entitled to receive a cash adjustment equal to the same fraction
of the Fair Market Value of a share of Common Stock on the exercise date
or to purchase the portion necessary to make a whole share at its Fair
Market Value on the date of exercise.

8. STOCK AWARDS AND RESTRICTED STOCK. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
A share of restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:

8.1. NUMBER OF SHARES. The number of shares to be transferred or
sold by the Company to a participant pursuant to a stock award or as
restricted stock shall be determined by the Committee.

8.2. SALE PRICE. The Committee shall determine the price, if any, at
which shares of restricted stock shall be sold to a participant, which may
vary from time to time and among participants and which may be below the
Fair Market Value of such shares of Common Stock at the date of sale.

8.3. RESTRICTIONS. All shares of restricted stock transferred or
sold hereunder shall be subject to such restrictions as the Committee may
determine, including, without limitation any or all of the following:

(a) a prohibition against the sale, transfer, pledge or other
encumbrance of the shares of restricted stock, such prohibition to
lapse at such time or times as the Committee shall determine
(whether in annual or more frequent installments, at the time of the
death, disability or retirement of the holder of such shares, or
otherwise);

(b) a requirement that the holder of shares of restricted
stock forfeit, or (in the case of shares sold to a participant)
resell back to the Company at his or her cost, all or a part of such
shares in the event of termination of his or her employment or
consulting engagement during any period in which such shares are
subject to restrictions;

8.4. ESCROW. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving restricted
stock shall enter into an agreement with the Company setting forth the
conditions of the grant. Shares of restricted stock shall be registered in
the name of the participant and deposited, together with a stock power
endorsed in blank, with the Company. Each such certificate shall bear a
legend in substantially the following form:

"The transferability of this certificate and the shares of
Common Stock represented by it are subject to the terms and
conditions (including conditions of

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<PAGE> 23

forfeiture) contained in the 1994-1997 Stock Option and
Compensation Plan of IntraNet Solutions, Inc. (the "Company"),
and an agreement entered into between the registered owner and
the Company. A copy of the Plan and the agreement is on file
in the office of the secretary of the Company."

8.5. END OF RESTRICTIONS. Subject to Section 11.5, at the end of any
time period during which the shares of restricted stock are subject to
forfeiture and restrictions on transfer, such shares will be delivered
free of all restrictions to the participant or to the participant's legal
representative, beneficiary or heir.

8.6. STOCKHOLDER. Subject to the terms and conditions of the Plan,
each participant receiving restricted stock shall have all the rights of a
stockholder with respect to shares of stock during any period in which
such shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares. Dividends
paid in cash or property other than Common Stock with respect to shares of
restricted stock shall be paid to the participant currently.

9. PERFORMANCE SHARES. A performance share consists of an award which
shall be paid in shares of Common Stock, as described below. The grant of
performance share shall be subject to such terms and conditions as the Committee
deems appropriate, including the following:

9.1. PERFORMANCE OBJECTIVES. Each performance share will be subject
to performance objectives for the Company or one of its operating units to
be achieved by the end of a specified period. The number of performance
shares granted shall be determined by the Committee and may be subject to
such terms and conditions as the Committee shall determine. If the
performance objectives are achieved, each participant will be paid in
shares of Common Stock or cash. If such objectives are not met, each grant
of performance shares may provide for lesser payments in accordance with
formulae established in the award.

9.2. NOT STOCKHOLDER. The grant of performance shares to a
participant shall not create any rights in such participant as a
stockholder of the Company until the payment of shares of Common Stock
with respect to an award.

9.3. NO ADJUSTMENTS. No adjustment shall be made in performance
shares granted on account of cash dividends which may be paid or other
rights which may be issued to the holders of Common Stock prior to the end
of any period for which performance objectives were established.

9.4. EXPIRATION OF PERFORMANCE SHARE. If any participant's
employment or consulting engagement with the Company is terminated for any
reason other than normal retirement, death or disability prior to the
achievement of the participant's stated performance objectives, all the
participant's rights on the performance shares shall expire and terminate
unless otherwise determined by the Committee. In the event of termination
by reason of death, disability, or normal retirement, the Committee, in
its own discretion, may determine what portions, if any, of the
performance shares should be paid to the participant

10. CASH AWARDS. A cash award consists of a monetary payment made by the
Company to a participant as additional compensation for his or her services to
the Company. Payment of a cash award will normally depend on achievement of
performance objectives by the Company or by individuals. The amount of any
monetary payment constituting a cash award shall be determined by the Committee
in its sole discretion. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among participants, as the
Committee deems appropriate.

11. GENERAL.

11.1. EFFECTIVE DATE. The Plan will become effective upon its
approval by a majority of the outstanding shares of Common Stock of the
Company at a meeting of stockholders duly called and held.

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<PAGE> 24

Unless approved within one year after the date of the Plan's adoption by
the Committee or by the Board of Directors, the Plan shall not be
effective for any purpose.

11.2. DURATION. The Plan shall remain in effect until all Incentives
granted under the Plan have either been satisfied by the issuance of
shares of Common Stock or the payment of cash or been terminated under the
terms of the Plan and all restrictions imposed on shares of Common Stock
in connection with their issuance under the Plan have lapsed. No
Incentives may be granted under the Plan after the tenth anniversary of
the date the Plan is approved by the stockholders of the Company.

11.3. NON-TRANSFERABILITY OF INCENTIVES. No stock option, SAR,
restricted stock or performance award may be transferred, pledged or
assigned by the holder thereof except, in the event of the holder's death,
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986,
as amended, or Title I of the Employee Retirement Income Security Act, or
the rules thereunder, and the Company shall not be required to recognize
any attempted assignment of such rights by any participant. During a
participant's lifetime, an Incentive may be exercised only by him or her
or by his or her guardian or legal representative.

11.4. EFFECT OF TERMINATION OR DEATH. In the event that a
participant ceases to be an employee of or consultant to the Company for
any reason, including death, any Incentives may be exercised or shall
expire at such times as may be determined by the Committee.

11.5. ADDITIONAL CONDITION. Notwithstanding anything in this Plan to
the contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or
to the receipt of shares of Common Stock issued pursuant thereto, to
deliver to the Company a written representation of present intention to
acquire the Incentive or the shares of Common Stock issued pursuant
thereto for his or her own account for investment and not for
distribution; and (b) if at any time the Company further determines, in
its sole discretion, that the listing, registration or qualification (or
any updating of any such document) of any Incentive or the shares of
Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that
the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with the award of any
Incentive, the issuance of shares of Common Stock pursuant thereto, or the
removal of any restrictions imposed on such shares, such Incentive shall
not be awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.

11.6. ADJUSTMENT. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options, or
achievement of performance share objectives, the number and kind of shares
of stock or other securities to which the holders of the shares of Common
Stock will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock
then subject to the Plan, including shares subject to restrictions,
options or achievements of performance shares, shall be adjusted in
proportion to the change in outstanding shares of Common Stock. In the
event of any such adjustments, the purchase price of any option, the
performance objectives of any Incentive, and the shares of Common Stock
issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide participants
with the same relative rights before and after such adjustment.

11.7. INCENTIVE PLANS AND AGREEMENTS. Except in the case of stock
awards or cash awards, the terms of each Incentive shall be stated in a
plan or agreement approved by the Committee. The Committee may also
determine to enter into agreements with holders of options to reclassify
or convert certain

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<PAGE> 25

outstanding options, within the terms of the Plan, as Incentive Stock
Options or as non-statutory stock options and in order to eliminate SARs
with respect to all or part of such options and any other previously
issued options.

11.8. WITHHOLDING.

(a) The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of
payment, any taxes required by law to be withheld. At any time when
a participant is required to pay to the Company an amount required
to be withheld under applicable income tax laws in connection with a
distribution of Common Stock or upon exercise of an option or SAR,
the participant may satisfy this obligation in whole or in part by
electing (the "Election") to have the Company withhold from the
distribution shares of Common Stock having a value up to the amount
required to be withheld. The value of the shares to be withheld
shall be based on the Fair Market Value of the Common Stock on the
date that the amount of tax to be withheld shall be determined ("Tax
Date").

(b) Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or terminate
the right to make Elections, or may provide with respect to any
Incentive that the right to make Elections shall not apply to such
Incentive. An Election is irrevocable.

(c) If a participant is an officer or director of the Company
within the meaning of Section 16 of the 1934 Act, then an Election
must comply with all of the requirements of the 1934 Act.

11.9. NO CONTINUED EMPLOYMENT, ENGAGEMENT OR RIGHT TO CORPORATE
ASSETS. No participant under the Plan shall have any right, because of his
or her participation, to continue in the employ of, or to continue his or
her consulting engagement for, the Company for any period of time or any
right to continue his or her present or any other rate of compensation.
Nothing contained in the Plan shall be construed as giving an employee, a
consultant, such persons' beneficiaries or any other person any equity or
interests of any kind in the assets of the Company or creating a trust of
any kind or a fiduciary relationship of any kind between the Company and
any such person.

11.10. DEFERRAL PERMITTED. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive. Payment may be
deferred at the option of the participant if provided in the Incentive.

11.11. AMENDMENT OF THE PLAN. The Committee or the Board of
Directors may amend or discontinue the Plan at any time. However, no such
amendment or discontinuance shall, subject to adjustment under Section
11.6: (a) change or impair, without the consent of the recipient, an
Incentive previously granted; (b) materially increase the maximum number
of shares of Common Stock which may be issued to all participants under
the Plan; (c) materially increase the benefits which may be granted under
the Plan; (d) materially modify the requirements as to eligibility for
participation in the Plan; or (e) materially increase the benefits
accruing to participants under the Plan.

11.12. IMMEDIATE ACCELERATION OF INCENTIVES. Notwithstanding any
provision in this Plan or in any Incentive to the contrary: (a) the
restrictions on all shares of restricted stock shall lapse immediately;
(b) all outstanding options and SARs will become exercisable immediately;
and (c) all performance shares shall be deemed to be met and payment made
immediately, if subsequent to the date that the Plan is approved by the
Committee or the Board of Directors of the Company, any of the following
events occur unless otherwise determined by the Board of Directors and a
majority of the Continuing Directors (as defined below):

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<PAGE> 26

(1) any person or group of persons becomes the beneficial
owner of 30% or more of any equity security of the Company entitled
to vote for the election of directors;

(2) a majority of the members of the Board of Directors of the
Company is replaced within the period of less than two years by
directors not nominated and approved by the Board of Directors; or

(3) the stockholders of the Company approve an agreement to
merge or consolidate with or into another corporation or an
agreement to sell or otherwise dispose of all or substantially all
of the Company's assets (including a plan of liquidation).

For purposes of this Section 11.12, beneficial ownership by a person
or group of persons shall be determined in accordance with Regulation 13D
(or any similar successor regulation) promulgated by the Securities and
Exchange Commission pursuant to the 1934 Act. Beneficial ownership of more
than 30% of an equity security may be established by any reasonable
method, but shall be presumed conclusively as to any person who files a
Schedule 13D report with the Securities and Exchange Commission reporting
such ownership. If the restrictions and forfeitability periods are
eliminated by reason of the provision in (1) above, the limitations of
this Plan shall not become applicable again should the person cease to own
30% or more of any equity security of the Company.

For purposes of this Section 11.12, "Continuing Directors" are
directors: (a) who were in office prior to the time that any of the
provisions in (1), (2) or (3) above occurred or any person who has
publicly announced an intention to acquire 20% or more of any equity
security of the Company; (b) directors in office for a period of more than
two years; and (c) directors nominated and approved by the existing
Continuing Directors.

11.13. DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value"
of Common Stock shall be determined for purposes of this Plan, it shall be
determined by reference to the last sale price of a share of Common Stock
on the principal United States Securities Exchange registered under the
1934 Act on which the Common Stock is listed (the "Exchange"), or, on the
National Association of Securities Dealers, Inc. Automatic Quotation
System (including the National Market System) ("NASDAQ") on the applicable
date, or if the Company's Common Stock has not yet been listed on the
Exchange, the Board of Directors may determine an alternate methodology to
determine "Fair Market Value." If the Exchange or NASDAQ is closed for
trading on such date, or if the Common Stock does not trade on such date,
then the last sale price used shall be the one on the date the Common
Stock last traded on the Exchange or NASDAQ.

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EXHIBIT B

INTRANET SOLUTIONS, INC.
1997 DIRECTOR STOCK OPTION PLAN

1. PURPOSE. The purpose of the IntraNet Solutions, Inc. 1997 Director
Stock Option Plan (the "Plan") is to advance the interests of IntraNet
Solutions, Inc. (the "Company") and its shareholders by encouraging share
ownership by members of the Board of Directors of the Company (the "Board") who
are not employees of the Company or any of its subsidiaries, in order to promote
long-term shareholder value through continuing ownership of the Company's common
stock.

2. ADMINISTRATION. The plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of nonqualified stock options made under
the Plan ("Options"). The Board shall, subject to the provisions of the Plan,
grant Options under the Plan and shall have the power to construe the Plan, to
determine all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decisions of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number or any other officer of the Company to execute and deliver
documents on behalf of the Board. No member of the Board shall be liable for
anything done or omitted to be done by him or by any other member of the Board
in connection with the Plan, except for his own willful misconduct or as
expressly provided by statute.

3. PARTICIPATION. Each member of the Board who is not an employee of the
Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible
to receive an Option in accordance with Paragraph 5 below.

4. AWARDS UNDER THE PLAN.

(a) Awards under the Plan shall include only Options, which are rights to
purchase common stock of the Company, having $.01 par value (the "Common
Stock"). Such Options are subject to the terms, conditions and restrictions
specified in Paragraph 5 below.

(b) There may be issued under the Plan pursuant to the exercise of Options
an aggregate of not more than 300,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 6 below. If any Option is canceled,
terminates or expires unexercised, in whole or in part, any shares of Common
Stock that would otherwise have been issuable pursuant thereto will be available
for issuance under new Options.

(c) A Non-Employee Director to whom an Option is granted (and any person
succeeding to such a Non-Employee Director's rights pursuant to the Plan) shall
have no rights as a shareholder with respect to any Common Stock issuable
pursuant to any such Option until the date of the issuance of a stock
certificate to him for such shares. Except as provided in Paragraph 6 below, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is issued.

5. NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:

(a) The Option exercise price shall be the "Fair Market Value" (as herein
defined) of the Common Stock subject to such Option on the date the Option is
granted. Fair Market Value shall be the closing sales price of a share of Common
Stock on the date of grant as reported on the Nasdaq Market or, if the Nasdaq
Market is closed on that date, on the last preceding date on which the Nasdaq
Market was open for trading, but in no event will such Option exercise price be
less than the par value of the Common Stock.

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<PAGE> 28

(b) The Board shall determine the number of shares of Common Stock subject
to each Option granted to Non-Employee Directors and, subject to Section 5(d)
hereof, the vesting schedule of each such Option. Notwithstanding the foregoing,
once such Options become outstanding, a Non-Employee Director will still be
entitled to the anti-dilution adjustments provided for in Section 6 hereof.

(c) The Option shall not be transferable by the optionee otherwise than by
will or the laws of descent and distribution, and shall be exercisable during
his lifetime only by him.

(d) Options shall not be exercisable:

(i) except pursuant to the vesting schedule established by the Board
of Directors and after the expiration of ten years from the date it is granted.
Notwithstanding anything to the contrary herein, an Option shall automatically
become immediately exercisable in full: (i) upon the removal of the Non-Employee
Director from the Board without cause; or (ii) in the event of a "change in
control" of the Company, as defined in any existing agreements between the
Company and its senior officers.

(ii) unless payment in full is made for the shares of Common Stock
being acquired thereunder at the time of exercise, such payment shall be made in
United States dollars by cash or check, or in lieu thereof, by tendering to the
Company Common Stock owned by the person exercising the Option and having a Fair
Market Value equal to the cash exercise price applicable to such Option, or by a
combination of United States dollars and Common Stock as aforesaid; and

(iii) unless the person exercising the Option has been at all times
during the period beginning with the date of grant of the Option and ending on
the date of such exercise, a Non-Employee Director of the Company, except that

(A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option that has not
expired and has not been fully exercised, such person may, at any time within
six months of the date he ceased to be a Non-Employee Director (but in no event
after the Option has expired under the provisions of subparagraph 5(d)(i)
above), exercise the Option with respect to any Common Stock as to which he
could have exercised on the date he ceased to be such a Non-Employee Director;
or

(B) if any person to whom an Option has been granted shall die
holding an Option that has not expired and has not been fully exercised, his
executors, administrators, heirs or distributees, as the case may be, may, at
any time within one year after the date of such death (but in no event after the
Option has expired under the provisions of subparagraph 5(d)(i) above), exercise
the Option with respect to any shares subject to the Option.

6. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of substantially all of its assets, any
distribution to shareholders other than a normal cash dividend, or other
extraordinary or unusual event, the number or kind of shares that may be issued
under the Plan pursuant to subparagraph 4(b) above, and the number or kind of
shares subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options and
with a corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.

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<PAGE> 29

7. MISCELLANEOUS PROVISIONS.

(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.

(b) A participant's rights and interest under the Plan may not be assigned
or transferred, hypothecated or encumbered in whole or in part either directly
or by operation of law or otherwise (except in the event of a participant's
death, by will or the laws of descent and distribution), including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner, and no such right or interest of any participant in the
Plan shall be subject to any obligation or liability of such participant.

(c) Common Stock shall not be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities exchange and
other applicable laws and requirements.

(d) It shall be a condition to the obligation of the Company to issue
Common Stock upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under subparagraph 5(d)(iii)(B) above) pay
to the Company, upon its demand, such amount as may be requested by the Company
for the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the Company
may refuse to issue such Common Stock.

(e) The expenses of the Plan shall be borne by the Company.

(f) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company or the Board.

(g) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Options hereunder or any Common
Stock issued pursuant hereto as may be required by Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or any other applicable statute,
rule or regulation.

8. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable; provided,
however, that no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or regulation, and in no
event shall the Plan be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act or the rules thereunder. No amendment of
the Plan shall materially and adversely affect any right of any participant with
respect to any Option theretofore granted without such participant's written
consent.

9. TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur upon the adoption of a resolution of the
Board terminating the Plan or ten years from the date the Plan is initially
approved and adopted by the shareholders of the Company. No termination of the
Plan shall materially and adversely affect any of the rights or obligations of
any person, without his consent, under any Option theretofore granted under the
Plan.

10. EFFECTIVE DATE OF PLAN. The Plan will become effective on the date
that it is approved by the affirmative vote of the holders of the greater of (a)
a majority of the outstanding shares of Common Stock of the Company present and
entitled to vote or (b) a majority of the voting power of the minimum number of
shares entitled to vote that would constitute a quorum for transaction of
business at the Company's Special Meeting of Shareholders.

B-3

<PAGE> 30

INTRANET SOLUTIONS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- SEPTEMBER 16, 1998

The undersigned, a shareholder of IntraNet Solutions, Inc., hereby
appoints Robert F. Olson and Jeffrey J. Sjobeck, and each of them, as
proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled
to vote, at the Annual Meeting of Shareholders of IntraNet Solutions,
Inc. to be held at the Marriott Southwest Hotel, 5801 Opus Parkway,
Minnetonka, Minnesota, 55343 at 3:30 p.m. on Wednesday, September 16,
1998, and at any and all adjournments thereof, with all the powers which
the undersigned would possess if personally present, upon:

(1) Election of Directors:

[ ] FOR all nominees
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
ROBERT F. OLSON JEFFREY J. SJOBECK PAUL R. ANDERSON
RONALD E. EIBENSTEINER KENNETH H. HOLEC STEVEN C. WALDRON

To withhold authority to vote for any individual nominee, write that
nominee's name on the space provided below:

------------------------------------------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES,
FOR THE AMENDMENT TO THE COMPANY'S 1994-1997 STOCK OPTION AND
COMPENSATION PLAN
AND FOR THE ADOPTION OF THE 1997 DIRECTOR STOCK OPTION PLAN.

(2) To approve an amendment to the Company's 1994-1997 Stock Option and
Compensation Plan to increase the number of shares of common stock
reserved for issuance thereunder from 2,500,000 to 3,100,000 shares.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

(Continued, and to be COMPLETED AND SIGNED, on the reverse side)

(CONTINUED FROM OTHER SIDE)

(3) To approve the adoption of the 1997 Director Stock Option Plan.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

(4) Upon such other business as may properly come before the meeting or
any adjournments thereof.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and acknowledges receipt of the Notice and Proxy
Statement relating to the Annual Meeting of Shareholders.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When
properly executed, this proxy will be voted on the proposals set forth
herein as directed by the shareholder, but if no direction is made in
the space provided, this proxy will be voted FOR the election of all
nominees for director, FOR the amendment to the Company's 1994-1997
Stock Option and Compensation Plan and FOR the proposal to adopt the
1997 Director Stock Option Plan.

Dated: , 1998

X
------------------------------
X
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(Shareholder must sign exactly
as the name appears at left.
When signed as a corporate
officer, executor,
administrator, trustee,
guardian, etc., please give
full title as such. Both joint
tenants must sign.)