<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.
iNTELEFILM CORPORATION
- --------------------------------------------------------------------------------
(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
iNTELEFILM CORPORATION
5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MN 55416
(612) 925-8840
May 5, 2000
Dear Shareholder:
I am pleased to invite you to attend the 2000 Annual Meeting of Shareholders of
iNTELEFILM Corporation, to be held at the Lutheran Brotherhood, 625 Fourth
Avenue South, Minneapolis, Minnesota, on June 22, 2000, at 3:30 p.m. local time.
At the Annual Meeting you will be asked to vote for the election of directors,
to approve our 2000 Stock Option Plan and to ratify the appointment of BDO
Seidman, LLP as our independent public accountants for the fiscal year ending
December 31, 2000. The accompanying material contains the Notice of Annual
Meeting, the Proxy Statement, which includes information about the matters to be
acted upon at the Annual Meeting, and the related proxy card.
I sincerely hope you will be able to attend the Annual Meeting. Whether or not
you are able to attend in person, I urge you to sign and date the enclosed proxy
and return it promptly in the enclosed envelope. If you do attend in person, you
may withdraw your proxy and vote personally on any matters brought properly
before the Annual Meeting.
iNTELEFILM CORPORATION
/s/ Christopher T. Dahl
Christopher T. Dahl
Chairman, President and Chief Executive Officer
<PAGE> 3
iNTELEFILM CORPORATION
5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MN 55416
(612) 925-8840
--------------------
NOTICE
OF
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 22, 2000
--------------------
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
iNTELEFILM Corporation, a Minnesota corporation, will be held at the Lutheran
Brotherhood, 625 Fourth Avenue South, Minneapolis, Minnesota, on June 22, 2000,
at 3:30 p.m. local time, for the following purposes, as more fully described in
the accompanying Proxy Statement:
1. To elect four directors for the ensuing year and until their
successors shall be elected and duly qualified;
2. To consider and vote upon adoption of iNTELEFILM's 2000 Stock
Option Plan;
3. To ratify the appointment of BDO Seidman, LLP as iNTELEFILM's
independent public accountants for the fiscal year ending
December 31, 2000; and
4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on May 1, 2000, are
entitled to notice of and to vote at the Annual Meeting. Whether or not you
expect to attend the Annual Meeting in person, please mark, date and sign the
enclosed proxy exactly as your name appears thereon and promptly return it in
the envelope provided, which requires no postage if mailed in the United States.
Proxies may be revoked at any time before they are exercised and, if you attend
the Annual Meeting in person, you may withdraw your proxy and vote personally on
any matter brought properly before the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jill J. Theis
Jill J. Theis
Secretary and General Counsel
Minneapolis, Minnesota
May 5, 2000
<PAGE> 4
iNTELEFILM CORPORATION
5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MN 55416
(612) 925-8840
--------------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 22, 2000
--------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of iNTELEFILM Corporation for use at the 2000 Annual
Meeting of Shareholders to be held at the Lutheran Brotherhood, 625 Fourth
Avenue South, Minneapolis, Minnesota, on June 22, 2000, at 3:30 p.m. local time,
or at any adjournment or postponement thereof. All shares of Common Stock
represented by properly executed and returned proxies, unless such proxies have
previously been revoked, will be voted at the Annual 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 and returned
proxies on which no specification has been made will be voted for the election
of the nominees for director named herein, for adoption of iNTELEFILM's 2000
Stock Option Plan and for ratification of the appointment of the independent
public accountants for the fiscal year ending December 31, 2000. If any other
matters are properly presented at the Annual Meeting for action, including a
question of adjourning or postponing the Annual Meeting from time to time, the
persons named in the proxies and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
The Notice of Annual Meeting, this Proxy Statement and the related proxy card
are first being mailed to shareholders of iNTELEFILM on or about May 5, 2000.
RECORD DATE AND OUTSTANDING COMMON STOCK
The Board has fixed the close of business on May 1, 2000, as the Record Date for
determining the holders of iNTELEFILM's outstanding voting shares entitled to
notice of, and to vote at, the Annual Meeting. On that date, there were
6,418,866 shares of Common Stock issued, outstanding and entitled to vote.
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any time
before it is voted. Any shareholder who wishes to revoke a proxy can do so by
(a) executing a later-dated proxy relating to the same shares and delivering it
to the Secretary of iNTELEFILM prior to the vote at the Annual Meeting, (b)
filing a written notice of revocation bearing a later date than the proxy with
the Secretary of iNTELEFILM prior to the vote at the Annual Meeting, or (c)
appearing in person at the Annual Meeting, filing a written notice of revocation
and voting in person the shares to which the proxy relates. Any written notice
or subsequent proxy should be delivered to iNTELEFILM Corporation, 5501
Excelsior Boulevard, Minneapolis, Minnesota 55416, Attention: Jill J. Theis,
Esq., or hand-delivered to Ms. Theis prior to the vote at the Annual Meeting.
<PAGE> 5
VOTING AND SOLICITATION
Each shareholder is entitled to one vote, exercisable in person or by proxy, for
each share of Common Stock held of record as of the Record Date. Shareholders do
not have the right to cumulate votes in the election of directors.
Expenses incurred in connection with the solicitation of proxies will be paid by
iNTELEFILM. The proxies are being solicited principally by mail. In addition,
directors, officers and regular employees of iNTELEFILM may solicit proxies
personally or by telephone, for which they will receive no consideration other
than their regular compensation. iNTELEFILM will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting material to the
beneficial owners of shares of Common Stock held as of the Record Date and will
reimburse such persons for their reasonable expenses so incurred.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of at least a majority of
the shares of Common Stock outstanding and entitled to vote is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. All
votes will be tabulated by the inspector of election for the Annual Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
If a properly executed proxy is returned and the shareholder has abstained from
voting on any matter, the shares represented by such proxy will be considered
present at the Annual Meeting for purposes of determining a quorum and for
purposes of calculating the vote, but will not be considered to have been voted
in favor of such matter.
If an executed proxy is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority as to certain
shares to vote on one or more matters, such shares will be considered present at
the Annual Meeting for purposes of determining a quorum, but will not be
considered to be represented at the Annual Meeting for purposes of calculating
the vote with respect to such matter.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information as of April 1, 2000, regarding
the beneficial ownership of iNTELEFILM's Common Stock by (a) each person known
by iNTELEFILM to own beneficially more than five percent of the Common Stock,
(b) each director and nominee for election as a director, (c) each Named
Executive Officer (as defined herein), and (d) the current directors and
executive officers as a group. Any shares which are subject to an option or a
warrant exercisable within 60 days are reflected in the following table and are
deemed to be outstanding for the purpose of computing the percentage of Common
Stock owned by the option or warrant holder but are not deemed to be outstanding
for the purpose of computing the percentage of Common Stock owned by any other
person. Unless otherwise noted, each person identified below possesses sole
voting and investment power with respect to such shares. Unless otherwise noted,
the address for each person identified below is c/o iNTELEFILM Corporation, 5501
Excelsior Boulevard, Minneapolis, Minnesota 55416.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF
OWNED (1) CLASS
-------------------------- -----------------
<S> <C> <C>
Christopher T. Dahl............................ 1,111,220(2) 14.8%
Perkins Capital Management, Inc................ 680,186(3) 9.6
730 East Lake Street
Wayzata, Minnesota 55391
William Bednarczyk............................. 628,500 8.9
Foothill Capital Corporation................... 600,000(4) 8.6
11111 Santa Monica Boulevard
Los Angeles, California 90025
Richard W. Perkins............................. 503,717(5) 7.3
730 East Lake Street
Wayzata, Minnesota 55391
James G. Gilbertson............................ 206,076(6) 3.1
Michael R. Wigley.............................. 81,250(7) 1.3
Michael N. Delgado............................. 73,006(8) 1.1
Steven C. Smith................................ 50,000(8) *
William E. Cameron............................. 33,750(8) *
All directors and executive officers
as a group (8 persons).................... 2,077,451(9) 24.5%
</TABLE>
- ---------------
* Less than 1%.
(1) Securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the SEC and, accordingly, may include securities
owned by or for, among others, the spouse, children or certain other
relatives of such person as well as other securities as to which the
person has or shares voting or investment power or has the option or
right to acquire Common Stock within 60 days of April 1, 2000.
(2) Includes 418,234 shares purchasable upon the exercise of options and
warrants.
(3) Based upon statements filed with the SEC, PCM is a registered
investment adviser of which Richard W. Perkins, a director of
iNTELEFILM, is President. As set forth in Schedule 13D filed with the
SEC on February 2, 2000, PCM has the sole right to sell such shares and
has sole voting power over 149,051 of such shares. Mr. Perkins and PCM
disclaim any beneficial interest in such shares. Excludes shares
beneficially owned by Mr. Perkins.
(4) Represents shares purchasable upon the exercise of warrants.
(5) Represents shares held by Mr. Perkins as trustee for various trusts of
which he is sole trustee. Mr. Perkins has the sole right to sell such
shares and has sole voting power over 336,460 of such shares. Includes
167,257 shares purchasable upon the exercise of options and warrants.
Mr. Perkins' beneficial ownership excludes shares held for the accounts
of clients of PCM.
(6) Includes 201,576 shares purchasable upon the exercise of options.
(7) Includes 33,750 shares purchasable upon the exercise of options.
(8) Includes shares purchasable upon the exercise of options.
(9) Includes 996,005 shares purchasable upon the exercise of options and
warrants.
3
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
Four persons have been nominated for election as directors at the Annual
Meeting, all of whom currently serve as directors of iNTELEFILM. Directors of
iNTELEFILM are elected annually, by a majority of the voting power of the shares
present and entitled to vote, to serve until the next Annual Meeting and until
their successors are elected and duly qualified. There are no family
relationships between any director or officer.
It is intended that votes will be cast pursuant to the enclosed proxy for the
election of the nominees listed in the table below, except for those proxies
which withhold such authority. Shareholders do not have cumulative voting rights
with respect to the election of directors, and proxies cannot be voted for a
greater number of directors than the number of nominees. In the event that any
of the nominees shall be unable or unwilling to serve as a director, it is
intended that the proxy will be voted for the election of such other person or
persons as the management may recommend in the place of such nominee. iNTELEFILM
has no reason to believe that any of the nominees will not be candidates or will
be unable to serve.
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
shares present and entitled to vote at the Annual Meeting shall be elected to
the Board of Directors. An abstention will have the same effect as a vote
withheld for the election of directors and a broker non-vote will not be treated
as voting in person or by proxy on the proposal. Set forth below is certain
information concerning the nominees for the Board of Directors. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------- ------- ------------------------------------------------------------ -------------------
<S> <C> <C> <C>
Christopher T. Dahl 56 Chairman of the Board, President and Chief Executive 1990
Officer of iNTELEFILM Corporation
Richard W. Perkins(1)(2) 69 President, Chief Executive Officer and Director of 1990
Perkins Capital Management, Inc.
Michael R. Wigley(1)(2)(3) 46 President and Chief Executive Officer of Great Plains 1998
Companies, Inc.
William E. Cameron(1)(2)(3) 55 Television Distribution Executive 1998
</TABLE>
- --------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Related Party Transaction Committee.
BUSINESS EXPERIENCE
CHRISTOPHER T. DAHL has been President, Chief Executive Officer and Chairman of
iNTELEFILM since its inception in February 1990. Mr. Dahl also serves as
President, Chief Executive Officer and Chairman of Harmony Holdings, Inc.
("Harmony"), a company which produces television commercials, music videos and
related media, of which iNTELEFILM is the largest shareholder. Mr. Dahl is also
Chairman of webADTV, a subsidiary of iNTELEFILM. Mr. Dahl also owns CTD
Properties, a company that owns and operates real estate in the upper Midwest.
Mr. Dahl is also a member of the Association for Publicly Traded Companies and
serves on the Advisory Board for the College of Liberal Arts of the University
of Minnesota. Messrs. Dahl and Perkins own and control Media Management, LLC
("MMLLC"). Employees of MMLLC provide certain administrative, legal and
accounting services to iNTELEFILM and Harmony. From 1985 to 1999, Mr. Dahl
served as Chairman and Chief Executive Officer of Community Airwaves Corporation
("CAC"), a company which formerly
4
<PAGE> 8
owned and operated radio stations. Prior to founding CAC, Mr. Dahl managed his
private investments. From 1969 to 1979, Mr. Dahl was the founder and President
of a group of companies involved in photo finishing, retail photo sales, home
sewing notions, toy distribution and retail craft stores. He was employed by
Campbell-Mithun and Knox Reeves Advertising from 1965 through 1969.
RICHARD W. PERKINS has been a director of iNTELEFILM since its inception. For
more than five years, Mr. Perkins has been President and Chief Executive Officer
of PCM, a registered investment advisor. As noted above, Messrs. Perkins and
Dahl own MMLLC. Mr. Perkins is also a director of Community Airwaves Corporation
("CAC") as well as the following publicly held companies: Bio-Vascular, Inc., a
medical products manufacturer; CNS, Inc., a consumer products manufacturer;
Eagle Pacific Industries, Inc., a manufacturer of plastic pipe; Harmony;
LifeCore Biomedical, Inc., a medical device manufacturer; Nortech Systems, Inc.,
an electronic sub-systems manufacturer; Quantech LTD., a developer of
immunological tests; and Vital Images, Inc., a medical visualization software
company.
MICHAEL R. WIGLEY has been a director of iNTELEFILM since February 1998. Mr.
Wigley is President and Chief Executive Officer of Great Plains Companies, Inc.
("Great Plains"), a building material and supply company based in Roseville,
Minnesota. He has served as its President since 1989. Mr. Wigley is Chairman and
Chief Executive Officer of four subsidiaries of Great Plains, as well as
Chairman and Chief Executive Officer of Great Plains Properties, Inc. and
TerraDek Lighting, Inc., two independent privately-held companies. Mr. Wigley is
also a director of Choicetel Communications, Inc., an Internet kiosk provider.
He co-founded the Minnesota branch of McKinsey & Company, where he managed
various teams of consultants from 1986 to 1989. Mr. Wigley holds a M.B.A. from
Harvard University and a M.S. in Civil Engineering from Stanford University.
WILLIAM E. CAMERON has been a director of iNTELEFILM since April 1998. Formerly
a Vice President with J. Walter Thompson, Omnicom and the NBC Television
Network, Mr. Cameron brings over 30 years experience in the fields of
advertising and broadcast television. Since 1993, Mr. Cameron has been the head
of International Business Development for Universal Health Communications,
London, England, the largest medical-health-wellness video library in the world.
A broadcast journalism graduate of Drake University, Mr. Cameron also serves as
a director of Harmony and RME Entertainment.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during the fiscal year ended December
31, 1999. Each of the incumbent directors attended all of the meetings of the
Board held while he was a member during the last fiscal year. The Board of
Directors also took action pursuant to written consent 11 times during the last
fiscal year. The Board of Directors has established Audit, Compensation and
Related Party Transaction Committees. The Board of Directors has not established
a Nominating Committee.
The Audit Committee, which consisted of Messrs. Perkins, Wigley and Cameron
during 1999, is responsible for recommending independent public accountants,
reviewing with the independent public accountants the scope and results of the
audit engagement, establishing and monitoring iNTELEFILM's financial policies
and control procedures, and reviewing and monitoring the provision of non-audit
services by iNTELEFILM's independent public accountants. The Audit Committee did
not meet during the last fiscal year. In April 2000, the Audit Committee adopted
a charter that specifies its composition, responsibilities and meeting
requirements. A copy of the Audit Committee charter appears at Appendix A to
this document.
The Compensation Committee, which consisted of Messrs. Perkins, Wigley and
Cameron during 1999, determines and establishes the salaries, bonuses and other
compensation of the executive officers of iNTELEFILM. The Compensation Committee
held two meetings during the last fiscal year. Such meetings were attended by
all members of the committee.
The Related Party Transaction Committee, which consisted of Messrs. Cameron and
Wigley during 1999, reviews all potential conflict of interest situations. The
Related Party Transaction Committee held three meetings during the last
5
<PAGE> 9
fiscal year. Such meetings were attended by all members of the committee. The
committee also took action pursuant to written consent four times during the
last fiscal year.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid to or
accrued by each of iNTELEFILM's executive officers receiving in excess of
$100,000 (the "Named Executive Officers") for services rendered to iNTELEFILM
and its subsidiaries during the fiscal years ended December 31, 1999, 1998 and
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
AWARDS
ANNUAL COMPENSATION ---------------------
----------------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS(S) OPTIONS
- --------------------------- ------ ------------- ----------- ---------------------
<S> <C> <C> <C> <C>
Christopher T. Dahl................. 1999 291,000(1) 250,000 250,000(3)
Chairman, President and 1998 291,000(1) 500,000 330,396(4)
Chief Executive Officer 1997 241,250(1) 15,000(2) 37,500(5)
James G. Gilbertson................. 1999 175,000(6) 183,334 100,000(7)
Chief Operating Officer 1998 137,439(6) 366,667 146,428(8)
1997 123,500(6) 7,500(2) 25,000(9)
Steven C. Smith..................... 1999 177,917(1) 5,000 30,000(10)
Chief Financial Officer 1998 43,750(1) - 50,000(11)
1997 - - -
Michael N. Delgado.................. 1999 115,625 8,333 110,000(12)
Vice President of 1998 87,622 6,667 -
Marketing 1997 82,664 - -
</TABLE>
- ---------------
(1) Includes compensation paid by MMLLC and Harmony for services rendered.
(2) Represents compensation paid by Harmony.
(3) Option grant at $1.63 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan.
(4) Option grants at $3.19 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan. As part of iNTELEFILM's repricing plan, Mr. Dahl forfeited
278,750 options at a weighted average price per share of $5.56 each in
return for a grant of 180,398 options at $3.19 each. by reducing the
number of shares granted as part of this repricing, it was iNTELEFILM's
intent to make an even value exchange.
(5) Option grants at $3.50 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan. In April 1998, these options were forfeited in return for
a grant of 34,178 options at $3.19 per share.
(6) Represents compensation paid by MMLLC.
(7) Option grant at $1.63 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan.
(8) Option grants at $3.19 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan. As part of iNTELEFILM's repricing plan, Mr. Gilbertson
forfeited 187,500 options at a weighted average price per share of
$5.53 each in return for a grant of 121,428 options at $3.19 each. By
Reducing the number of shares granted as part of this repricing, it was
iNTELEFILM's intent to make an even value exchange.
(9) Option grants at $3.50 per share pursuant to iNTELEFILM's 1994 Stock
Option Plan. In April 1998, these options were forfeited in return for
a grant of 22,785 options at $3.19 per share.
(10) Non-qualified grant of options at $2.03 per share.
(11) Non-qualified grant of options at $3.00 per share.
(12) Non-qualified grant of 50,000 options at $3.93 per share, non-qualified
grant of 4,190 options at $1.69 per share, option grants at $1.69 per
share for 32,184 shares pursuant to iNTELEFILM's 1994 Stock Option Plan
and 23,626 shares pursuant to 1991 Stock Option Plan.
6
<PAGE> 10
The following table sets forth the number of securities underlying options
granted in 1999, the percent the grant represents of the total options granted
to employees during such fiscal year, the per share exercise price of the
options granted, and the expiration date of the options for the Named Executive
Officers. No stock appreciation rights were granted during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE
- --------------------------- ---------------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Christopher T. Dahl.......... 250,000 24.9 1.63 04/16/04
James G. Gilbertson.......... 100,000 10.0 1.63 04/16/04
Steven C. Smith.............. 30,000 3.0 2.03 10/16/04
Michael N. Delgado........... 60,000 6.0 1.69 04/30/04
50,000 5.0 3.93 12/21/04
</TABLE>
The following table sets forth certain information concerning options to
purchase Common Stock exercised by the Named Executive Officers during 1999 and
the number and value of unexercised options held by the Named Executive Officers
at December 31, 1999. No stock appreciation rights were exercised by the Named
Executive Officers in 1999 or were outstanding at the end of that year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS AT
AT FY-END FY-END($)(1)
-------------------------- -----------------------
VALUE EXERCISABLE/ EXERCISABLE/
NAME SHARES ACQUIRED REALIZED ($) (1) UNEXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- ---------------- -------------------------- -----------------------
<S> <C> <C> <C> <C>
Christopher T. Dahl...... 125,000 398,500 309,682/125,000 502,614/397,875
James G. Gilbertson...... - - 181,476/50,000 372,786/159,400
Steven C. Smith.......... - - 50,000/30,000 100,350/73,790
Michael N. Delgado....... - - 46,756/83,750 101,310/163,651
</TABLE>
- ---------------
(1) Market value of underlying securities at fiscal year-end minus the exercise
price.
COMPENSATION OF DIRECTORS
Commencing January 1, 2000, each non-employee director receives $1,000 cash per
month as compensation for services provided as a non-employee director.
iNTELEFILM reimburses certain expenses of its directors in connection with
attendance at Board and committee meetings. Non-employee directors also receive
periodic option grants under iNTELEFILM's 1994 Director Stock Option Plan.
During 1999, iNTELEFILM granted an option, under such plan, for the purchase of
45,000 shares of Common Stock at fair market value on the date of grant to each
non-employee director. Each such option vests as follows: (a) 15,000 shares on
the date of grant, (b) 15,000 shares on the first anniversary of the date of
grant provided that the optionee remains a director on such date, and (c) 15,000
shares on the second anniversary of the date of grant provided that the optionee
remains a director on such date. The 1994 Director
7
<PAGE> 11
Stock Option Plan also provides that each non-employee director will
automatically be awarded an option to purchase 45,000 shares of iNTELEFILM's
Common Stock on December 31, 2000, and December 31, 2003. Such options will vest
ratably over three-year periods provided that the optionee remains a director.
In August 1998, MMLLC entered into a consulting arrangement with Richard W.
Perkins, a non-employee member of iNTELEFILM's Board of Directors, pursuant to
which Mr. Perkins was paid $170,000 during 1999 for consulting services. MMLLC
terminated the foregoing consulting arrangement effective December 31, 1999. See
"Certain Relationships and Related Transactions - Management Services from an
Affiliate" for further information on such arrangement.
MMLLC also has a consulting arrangement with William E. Cameron, a non-employee
member of iNTELEFILM's Board of Directors, pursuant to which Mr. Cameron was
paid $45,061 during 1999 for consulting services. See "Certain Relationships and
Related Transactions - Management Services from an Affiliate" for further
information on such arrangement.
In April 1999, iNTELEFILM adopted a severance plan which covers Richard W.
Perkins, a non-employee member of iNTELEFILM's Board of Directors. See "-
Employment Contracts, Termination of Employment and Change-in- Control
Arrangements" for further information on such plan.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
After consultation with an outside consulting firm, the Board of Directors
adopted a severance plan which covers two of iNTELEFILM's executive officers,
Christopher T. Dahl and James G. Gilbertson, and one of iNTELEFILM's
non-employee directors, Richard W. Perkins. As to the officers, the plan provide
for severance benefits in the event of termination of employment under certain
circumstances following a change in control of iNTELEFILM (as defined). The
applicable circumstances are (a) termination by iNTELEFILM without cause (as
defined) other than because of death, retirement or disability, (b) termination
by the officer for good reason (as defined), or (c) termination by the officer
without good reason if the date of termination is within 180 days after a change
in control. Following any such termination, in addition to compensation and
benefits already earned, the officer will be entitled to receive a lump sum
severance payment equal to a multiple of the officer's annual gross base salary
from MMLLC, Harmony and iNTELEFILM as then in effect, including amounts accrued
but not paid. The applicable multiples for Messrs. Dahl and Gilbertson are five
and two, respectively. Based upon 1999 annual gross base salaries, Messrs. Dahl
and Gilbertson would be eligible to receive lump sum severance payments of
$1,455,000 and $350,000, respectively. As to the non-employee director, the plan
provides for severance benefits following a change in control of iNTELEFILM.
Following any such change in control, the non-employee director will be entitled
to receive a lump sum severance payment of $250,000. Mr. Perkins is
participating in the plan in consideration of his status as a founding director
of iNTELEFILM and his ongoing consulting with management. The plan also provides
for the accelerated vesting of outstanding stock options and certain other
benefits following a change in control of iNTELEFILM.
In general, a change in control is defined to include (a) the incumbent
directors failing to constitute a majority of the Board, (b) any person becoming
the beneficial owner of securities representing 20% or more of the voting power
of iNTELEFILM's then outstanding securities eligible to vote for the election of
the Board, (c) iNTELEFILM consummating a merger, amalgamation, consolidation,
statutory share exchange or similar form of corporate transaction involving
iNTELEFILM and any of its affiliates that requires the approval of iNTELEFILM's
shareholders, (d) iNTELEFILM consummating a plan of complete liquidation or
dissolution or a sale of substantially all of its assets, or (e) iNTELEFILM
making a distribution or a series of distributions within 24 months whereby
iNTELEFILM distributes to shareholders cash or other property equal to at least
50% of the value of iNTELEFILM.
Cause for termination by iNTELEFILM includes (a) the officer committing a felony
or entering a plea of no contest to a felonious crime in a court of law which
results in material damage to iNTELEFILM or any of its affiliates or materially
impairs the value of the officer's services to iNTELEFILM or its affiliates, or
(b) the officer willfully engaging in one or more acts, or willfully omitting to
act, except for sickness, a disability, vacation or authorized leave of absence,
which is demonstrably willful and materially damaging to iNTELEFILM or any of
its affiliates committed in bad faith or with reasonable belief that such act or
omission to act was damaging to iNTELEFILM or an affiliate, including acts and
omissions that constitute gross negligence in the performance of the officer's
duties as in effect immediately prior to the commencement of the applicable term
of the plan.
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<PAGE> 12
Good reason for termination by the officer includes (a) the assignment of duties
inconsistent with the individual's status as an officer or a substantial
alteration in responsibilities, (b) the relocation of the officer's principal
place of business, (c) a reduction in base salary, (d) the failure of iNTELEFILM
to maintain compensation plans in which the officer participates or to continue
providing certain other existing employment benefits, (e) the failure of
iNTELEFILM to obtain from a successor a satisfactory assumption in writing of
iNTELEFILM's obligations under the severance plan, or (f) any failure to
maintain reasonable and adequate indemnification in respect of the officer's
services as an officer.
The plan is in effect through March 31, 2002. Thereafter, the plan automatically
renews annually unless iNTELEFILM gives notice that it does not wish to extend
it. In addition, the plan will continue in effect for three years after a change
in control of iNTELEFILM.
Payments made pursuant to the severance plan and, under certain circumstances,
accelerated vesting or exercise of options in connection with a change in
control of iNTELEFILM might be deemed "excess parachute payments" for purposes
of the golden parachute payment provisions of Section 280G of the Internal
Revenue Code. To the extent such benefits are so considered, the plan
participant would be subject to an excise tax equal to 20% of the amount of the
excess parachute payment, and iNTELEFILM would be denied a tax deduction for the
excess parachute payment. In that event, iNTELEFILM has agreed to pay each plan
participant an additional amount so that the net amount retained by each of
them, after payment of such excise tax and other applicable taxes on the
additional amount, will equal the full amount to which each would be entitled in
the absence of such excise tax.
iNTELEFILM's income tax deduction for executive compensation is limited by
Internal Revenue Code Section 162(m) to $1,000,000 per executive per year (less
the amount of any excess parachute payments), unless compensation above that
amount is "performance-based." This limit applies to iNTELEFILM's Chief
Executive Officer and the other most highly compensated executive officers
identified in the Summary Compensation Table. iNTELEFILM has not had any
deductions limited by Section 162(m) to date. iNTELEFILM will make every
reasonable effort to ensure that all compensation paid to its executives is
fully deductible, provided it determines that application of this limit is
consistent with iNTELEFILM's needs and its compensation philosophy.
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<PAGE> 13
PROPOSAL NO. 2
ADOPTION OF 2000 STOCK OPTION PLAN
GENERAL
To provide iNTELEFILM with the flexibility to issue stock options in the coming
years, the Board of Directors has adopted, subject to shareholder approval,
iNTELEFILM's 2000 Stock Option Plan (the "Plan"). The Board of Directors has
reserved 500,000 shares of Common Stock for issuance under the Plan and a
maximum of an additional 300,000 shares of Common Stock that will become
available for issuance under the Plan each year. A general description of the
Plan is set forth below, but such description is qualified in its entirety by
reference to the full text of the Plan, a copy of which appears at Appendix B to
this document.
DESCRIPTION OF THE PLAN
Purpose. The purpose of the Plan is to promote the long-term financial interest
of iNTELEFILM and any related company by (a) attracting and retaining employees
and other individuals providing services to iNTELEFILM, (b) motivating such
individuals, by means of appropriate incentives, to achieve long-range goals,
(c) providing incentive compensation opportunities that are competitive with
those of other similar companies, and (d) conforming participants' interests
with those of iNTELEFILM's shareholders through compensation based on
iNTELEFILM's Common Stock.
Term. The term of the Plan shall be limited in duration to ten years from the
earlier of (a) the effective date of the Plan or (b) the date the Plan is
approved by iNTELEFILM's shareholders. Further, the Plan may be terminated at
any time, provided that such termination will not adversely affect options then
outstanding.
Administration. The Plan is administered by the Compensation Committee of
iNTELEFILM's Board of Directors (the "Committee"). The Committee has authority
and discretion (a) to determine whether and to what extent any award or
combination of awards will be granted, (b) to select from among eligible
individuals those persons who will receive awards, (c) to determine the number
of shares of iNTELEFILM's Common Stock to be covered by each award, (d) to
establish the terms, conditions, performance criteria, restrictions and other
provisions of such awards, (e) to determine the treatment of awards upon the
eligible individual's retirement, disability, death, or other termination of
employment or service; (f) to cancel or amend the terms of any award, (g) to
interpret the Plan and (h) to delegate any of its powers to any member of the
Committee or to any other person. The Committee may establish, amend and rescind
any rules and regulations relating to the Plan and make all other determinations
that may be necessary or advisable for the administration of the Plan. The
Committee may also grant awards as alternatives to or replacements of awards
outstanding under the Plan or any other plan or arrangement.
Eligibility. All employees of iNTELEFILM or any subsidiary are eligible to
receive incentive stock options ("ISOs") pursuant to the Plan. All (a) common
law employees, prospective employees or officers of iNTELEFILM or any
subsidiary, (b) members of iNTELEFILM's Board, (c) consultants and advisors to
iNTELEFILM, and (d) employees of any related company or business partner of
iNTELEFILM are eligible to receive non-qualified stock options ("NSOs").
Options. When an option is granted under the Plan, the Committee, in its
discretion, specifies the exercise price, the type of option (ISO or NSO) to be
granted, and the number of shares which may be purchased upon exercise of the
option. The exercise price of an option may not be less than 100% of the fair
market value of iNTELEFILM's Common Stock on the date of grant. However, with
respect to any ISO granted to a holder of more than 10% of iNTELEFILM's Common
Stock, the exercise price may not be less than 110% of the fair market value of
iNTELEFILM's Common Stock on the date of grant. Generally, the fair market value
of iNTELEFILM's Common Stock is the closing price of the Stock as reported on
the Nasdaq Stock Market on the date the option is granted. On April 7, 2000, the
closing price of iNTELEFILM Common Stock as reported by the Nasdaq SmallCap
Market was
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<PAGE> 14
$3.00 per share. No individual may receive an option grant under the Plan to
purchase more than 150,000 shares in any fiscal year.
The term during which an option may be exercised and whether an option will be
exercisable immediately, in stages or otherwise are set by the Committee, but
the term of any ISO may not exceed ten years from the date of grant. Optionees
may pay for shares upon exercise of options with cash, cashier's check,
iNTELEFILM Common Stock valued at the stock's then fair market value and
acceptable to the Committee, or a combination of these methods. Except as
otherwise provided by the Committee, awards granted under the Plan are
nontransferable during the life of the optionee.
The Committee will determine the form of stock option agreements which will be
used for options granted under the Plan. Such agreements will govern the right
of an optionee to exercise an option upon termination of employment or
affiliation with iNTELEFILM during the life of an optionee and following an
optionee's death. The Board or the Committee may impose additional or
alternative conditions and restrictions on ISOs or NSOs granted under the Plan;
however, each ISO must contain such limitations and restrictions upon its
exercise as are necessary to ensure that the option will be an ISO as defined
under Section 422 of the Internal Revenue Code of 1986, as amended.
Restricted Stock. Grants of restricted stock may be made by the Committee,
subject to the terms and provisions of the Plan, at any time and in such amounts
as the Committee shall determine. Each grant of restricted stock and/or the
vesting thereof may be conditioned upon the completion of a specified period of
service with iNTELEFILM or a related company, upon the attainment of specified
performance objectives or upon such other criteria as the Committee may
determine. Voting rights and rights to receive dividends shall be determined by
the Committee.
Tax Offset Payments. Grants of tax offset payments may be made by the Committee
in its discretion subject to the terms and provisions of the Plan. Tax offset
payments shall not exceed the amount necessary to pay applicable federal, state,
local and other taxes payable with respect to an award. Tax offset payments
shall be paid solely in cash.
Change in Control. Upon a change in control (as defined in the Plan), all or a
portion of an award (as determined by the Committee) will become fully
exercisable and vested as to all shares subject to such award if (a) such award
is not assumed by the surviving corporation or its parent or (b) the surviving
corporation or its parent does not substitute such award with another award of
substantially the same terms.
Amendment. The Committee may amend or terminate the Plan, or any part thereof,
at any time, provided, however, that no amendment or termination may impair the
terms and conditions of any outstanding option to the material detriment of the
optionee without the consent of the optionee. An amendment shall be subject to
the approval of iNTELEFILM's shareholders only to the extent required by
applicable law, rule, or regulation.
Antidilution Provisions. In the event of a corporate transaction involving
iNTELEFILM, including without limitation any stock dividend, combination or
reverse stock split, sale of substantially all assets, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, distribution of
assets or other change in corporate structure, the Committee may adjust or
substitute awards to preserve the benefits or potential benefits of the awards.
Actions by the Committee may include (a) adjustment of the number and kind of
shares which may be delivered under the Plan, (b) adjustment of the number and
kind of shares subject to outstanding awards, (c) adjustment of the exercise
price of outstanding options, and (d) any other adjustments that the Committee
determines to be appropriate.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Under present law, an optionee who is granted an ISO
does not recognize taxable income at the time the option is granted or upon its
exercise, although the exercise is an adjustment item for alternative minimum
tax purposes and may subject the optionee to the alternative minimum tax. Upon a
disposition of the shares more than two years after grant of the option and one
year after exercise of the option, any gain or loss is treated as long-term
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<PAGE> 15
capital gain or loss. Net capital gains on shares held more than 12 months are
generally taxed at a maximum federal rate of 20%. Capital losses are generally
allowed in full against capital gains and up to $3,000 against other income. If
the above holding periods are not satisfied, the optionee recognizes ordinary
income at the time of disposition equal to the difference between the exercise
price and the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. Unless limited by Section 162(m) of the Internal Revenue
Code, iNTELEFILM is entitled to a deduction in the same amount as and at the
time the optionee recognizes ordinary income.
Non-statutory Stock Options. An optionee does not recognize any taxable income
at the time he or she is granted an NSO. Upon exercise, the optionee recognizes
taxable income generally measured by the excess of the then fair market value of
the shares over the exercise price. Any taxable income recognized in connection
with an option exercise by an employee of iNTELEFILM is subject to tax
withholding by iNTELEFILM. Unless limited by Section 162(m) of the Internal
Revenue Code, iNTELEFILM is entitled to a deduction in the same amount as and at
the time the optionee recognizes ordinary income. Upon a disposition of such
shares by the optionee, any difference between the sale price and the optionee's
exercise price, to the extent not recognized as taxable income as provided
above, is treated as long-term or short-term capital gain or loss, depending on
the holding period. Net capital gains on shares held more than 12 months may be
taxed at a maximum federal rate of 20% (lower rates may apply depending upon
when the stock is acquired and the applicable income tax bracket of the
taxpayer). Capital losses are generally allowed in full against capital gains
and up to $3,000 against other income.
Restricted Stock. Restricted stock awards are generally taxed on the later of
grant or the expiration of a substantial risk of forfeiture. A restricted stock
award is subject to a "substantial risk of forfeiture" within the meaning of
Section 83 of the Internal Revenue Code to the extent the award will be
forfeited in the event that the recipient ceases to provide services to
iNTELEFILM. Because the restricted stock grants are subject to a substantial
risk of forfeiture, the recipient will not recognize ordinary income at the time
the award is granted. Instead the recipient will recognize ordinary income on
the earlier of (a) the date the restricted stock is no longer subject to a
substantial risk of forfeiture or (b) when the restricted stock becomes
transferable. The amount of ordinary income to be recognized is equal to the
difference between the amount paid for the restricted stock and the fair market
value of the restricted stock on the date the restricted stock is no longer
subject to a substantial risk of forfeiture. The ordinary income recognized by
the recipient who is an employee will be subject to tax withholding by
iNTELEFILM. Unless limited by Section 162(m) of the Internal Revenue Code,
iNTELEFILM is entitled to a tax deduction in the same amount and at the same
time as the recipient recognizes ordinary income.
Tax Offset Payments. In the year of receipt of a tax offset payment, the
recipient will have taxable ordinary income, equal to the amount of the tax
offset payment. In the case of a recipient who is also an employee, any tax
offset payment will be subject to tax withholding by iNTELEFILM. Unless limited
by Section 162(m) of the Internal Revenue Code, iNTELEFILM will be entitled to a
tax deduction in the same amount and at the same time as the recipient
recognizes ordinary income.
The foregoing is only a summary of the general effect of federal income taxation
upon the optionee or recipient and iNTELEFILM with respect to the grant and
exercise of options and awards under the Plan. This summary does not purport to
be complete and does not discuss the tax consequences arising in the context of
the optionee's or recipient's death or the income tax laws of any municipality,
state or foreign country in which the optionee's or recipient's income or gain
may be taxable.
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<PAGE> 16
NEW PLAN BENEFITS
The following table indicates the options to be issued under the Plan to the
persons and groups listed in the table as of April 7, 2000.
<TABLE>
<CAPTION>
DOLLAR NUMBER OF SHARES
NAME AND POSITION VALUE UNDERLYING OPTIONS
- ----------------- ----- ------------------
<S> <C> <C>
Christopher T. Dahl, Chairman, President and
Chief Executive Officer.................................................. N/A 0
James G. Gilbertson, Chief Operating Officer.................................. N/A 0
Steven C. Smith, Chief Financial Officer...................................... * 30,000
Michael N. Delgado, Vice President of Marketing............................... * 50,000
Executive Group............................................................... * 130,000
Non-Executive Director Group.................................................. N/A 0
Non-Executive Officer Employee Group.......................................... N/A 0
</TABLE>
- --------------------
* Indeterminable.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
approve the Plan. Abstentions will be considered shares entitled to vote in the
tabulation of votes cast on the proposal and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS CONSIDERS THE PLAN TO BE IN THE BEST INTERESTS OF
INTELEFILM AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
PLAN.
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<PAGE> 17
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed BDO Seidman, LLP as independent public
accountants for iNTELEFILM for the fiscal year ending December 31, 2000. A
proposal to ratify such appointment will be presented to the shareholders at the
Annual Meeting. Representatives of BDO Seidman, LLP are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions from
shareholders in attendance.
THE BOARD OF DIRECTORS OF iNTELEFILM UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
Until October 1998, the studios and tower site of WWTC(AM) and KYCR(AM) were
located in St. Louis Park, Minnesota. The studio facility consisted of
approximately 12,000 square feet. The tower site included four 200-foot towers,
a transmitter building and a storage garage on approximately 16 acres. The tower
site was leased from Christopher T. Dahl, President, Chief Executive Officer and
Chairman of iNTELEFILM, at a total annual rent of approximately $114,000, and
the studio site was leased from 5501 Building Partnership, a partnership
consisting of Messrs. Dahl and Perkins, a director of iNTELEFILM, at an annual
rent of approximately $132,000. In connection with the sale of radio station
KYCR(AM) to Salem Communications Corporation ("Salem") in October 1998, Salem
entered into a ten-year lease agreement with Mr. Dahl and became the lessee for
the KYCR(AM) tower site lease. Under the Salem tower lease, Salem pays a lower
monthly rental rate then what Mr. Dahl had received under the tower lease
agreement with iNTELEFILM. The Related Party Transaction Committee ratified and
approved iNTELEFILM's payment to Mr. Dahl of the $294,000 difference between the
monthly rental he would have received from iNTELEFILM, had iNTELEFILM renewed
such lease through October 2008, and the monthly rental paid by Salem from
November 1998 through October 2008. In addition, after the first year of its
lease, Salem has the ability to terminate its lease with one year's notice. In
the event the lease is terminated by Salem and Mr. Dahl is unable to lease the
tower site to another party, iNTELEFILM has agreed to pay Mr. Dahl $4,500 per
month, the full amount he would have otherwise received from Salem, through
October 2008.
From January 1996 through February 1999, iNTELEFILM leased 6,000 square feet of
office space at 724 First Street North, Minneapolis, Minnesota, the former
location of its executive offices, from 724 Associates, a partnership consisting
of Messrs. Dahl, President, Chief Executive Officer and Chairman of iNTELEFILM,
Perkins, a director of iNTELEFILM, and Stephen L. Wallack, a shareholder of
iNTELEFILM. These facilities were leased at annual rental of $54,000. The
executive offices were adjacent to the offices of CAC, MMLLC and Radio
Management Corporation ("RMC"). CAC is owned and controlled by Messrs. Dahl,
Perkins and Russell Cowles II, either directly or through trusts. MMLLC is owned
and controlled by Messrs. Dahl and Perkins. RMC is owned and controlled by
Messrs. Dahl, Perkins and Cowles. Mr. Cowles, a former director-elect of
iNTELEFILM, is a beneficiary and trustee of the John Cowles Family Trust, a
shareholder of iNTELEFILM. Under the terms of the lease, iNTELEFILM was
obligated to pay its proportionate share of repairs and maintenance. These
arrangements were approved by the Related Party Transaction Committee of
iNTELEFILM's Board of Directors, which is comprised of disinterested directors,
and iNTELEFILM believes such arrangements were on terms at least as favorable as
could have been obtained from unaffiliated third parties. In March 1999,
iNTELEFILM assigned all of its rights and obligations under the lease to 5501
Building Partnership, an entity owned by Messrs. Dahl and Perkins.
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<PAGE> 18
MANAGEMENT SERVICES FROM AN AFFILIATE
From July 1993 through July 1998, iNTELEFILM received administrative, legal and
accounting services from employees of RMC, an entity owned by Messrs. Dahl,
President, Chief Executive Officer and Chairman of iNTELEFILM, Perkins, a
director of iNTELEFILM, and Cowles, a former director-elect. Since August 1998,
iNTELEFILM has received such services from employees of MMLLC, an entity owned
by Messrs. Dahl and Perkins. Employees of MMLLC also provide similar services to
Harmony. iNTELEFILM pays a set monthly fee of $125,000 for the services listed
above. All outside services directly attributable to iNTELEFILM are billed
directly to iNTELEFILM. iNTELEFILM paid RMC an aggregate of $525,000 for
services during 1998. iNTELEFILM paid MMLLC an aggregate of $745,000 for
services during 1998, $370,000 of which was paid in conjunction with expenses
incurred in the sale of iNTELEFILM's radio stations, and an aggregate of
$1,095,000 for services during 1999, $550,000 of which was paid in conjunction
with expenses incurred in the sale of iNTELEFILM's radio stations. Harmony pays
a set monthly fee of $55,000 for services provided to it. Harmony paid MMLLC an
aggregate of $463,720 for such services during its fiscal year ended June 30,
1999. The salaries of three officers of iNTELEFILM, Messrs. Gilbertson, Smith
and Ms. Theis, are paid by MMLLC. The services of Chief Operating Officer, Chief
Financial Officer and General Counsel are rendered by Messrs. Gilbertson, Smith
and Ms. Theis, respectively, on a shared basis with Harmony. In August 1998,
MMLLC entered into a consulting arrangement with Richard W. Perkins, a
non-employee member of iNTELEFILM's Board of Directors, pursuant to which Mr.
Perkins provided consulting services to iNTELEFILM in connection with the
restructuring of iNTELEFILM following its sale of radio stations. Mr. Perkins
was not paid for such services during 1998. Through MMLLC, iNTELEFILM paid Mr.
Perkins $170,000 for such services during 1999. MMLLC terminated the foregoing
consulting arrangement effective December 31, 1999. MMLLC also has a consulting
arrangement with William E. Cameron, a non-employee member of iNTELEFILM's Board
of Directors, pursuant to which Mr. Cameron provides consulting services to
iNTELEFILM and Harmony in connection with the ongoing business strategies of
such entities. Through MMLLC, Harmony paid Mr. Cameron $36,000 and $45,061 for
such services during 1998 and 1999, respectively.
HARMONY-RELATED TRANSACTIONS
In connection with the July 1997 acquisition by iNTELEFILM of shares of common
stock of Harmony, iNTELEFILM borrowed an aggregate of $1.25 million from three
parties: Rodney P. Burwell, a former director of iNTELEFILM, Pyramid Partners,
L.P., an entity of which PCM is the managing partner, and William M. Toles, a
shareholder of iNTELEFILM. Mr. Perkins, a director of iNTELEFILM, is President
and Chief Executive Officer of PCM. Messrs. Perkins and Toles are members of the
Board of Directors of Harmony. Their loans were evidenced by notes bearing
interest at 10% per annum, initially payable in July 1998, and amended in June
1998 to be payable in October 1998. Warrants to purchase an aggregate of 125,000
shares of Common Stock at $4.00 per share were issued to those lenders in July
1997. In connection with the June 1998 amendment to such notes, (a) the interest
rate on the note issued to Mr. Burwell was increased to 20% per annum effective
July 1998, (b) an additional warrant to purchase 25,000 shares of Common Stock
at $3.0625 per share was issued to Pyramid Partners, L.P. and (c) an additional
warrant to purchase 12,500 shares of Common Stock at $3.0625 per share was
issued to Mr. Toles. In November 1998, iNTELEFILM repaid Messrs. Perkins, Toles
and Burwell in full.
Messrs. Dahl, Perkins and William E. Cameron, directors of iNTELEFILM, are
directors of Harmony, an entity of which iNTELEFILM is the largest shareholder.
In January 1998, iNTELEFILM borrowed $611,000 from Harmony, and paid debt
issuance costs of $39,000, evidenced by a note payable to Harmony in the amount
of $650,000. The note payable bore interest at 15% per annum, was unsecured and
was due upon demand. In May 1998, iNTELEFILM repaid $322,863 of principal on the
note and $36,062 of interest which had accrued through May 1998. In June 1998,
iNTELEFILM repaid the note in full.
In April 1998, iNTELEFILM assigned to Pyramid Partners, L.P.; Perkins &
Partners, Inc., Profit Sharing Plan & Trust; and Christopher T. Dahl & State
Bank of New Prague Joint Account all of its right to purchase 225,000 shares of
common stock of Harmony at $2.50 per share from Glenn B. Laken, a shareholder of
Harmony. Pyramid Partners, L.P. is an entity of which PCM is the managing
partner. Mr. Perkins, a director of iNTELEFILM, is President and Chief Executive
Officer of PCM. Mr. Perkins is also President of Perkins & Partners, Inc. Mr.
Dahl is President, Chief Executive Officer and Chairman of iNTELEFILM. In
October 1998, iNTELEFILM repurchased the 225,000 shares of common stock of
Harmony at $2.75 from Pyramid Partners, L.P.; Perkins & Partners, Inc., Profit
Sharing Plan & Trust; and Christopher T. Dahl and State of New Prague Joint
Account.
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<PAGE> 19
From November 1998 to March 2000, iNTELEFILM advanced Harmony an aggregate sum
of approximately $3.7 million under notes receivable bearing interest at 14% per
annum. Until such time as Harmony obtains a new working line of credit,
iNTELEFILM has agreed to fund Harmony's operations as necessary. At this time,
iNTELEFILM receives no additional compensation for providing such services to
Harmony.
NON-COMPETITION AGREEMENTS
In connection with the sale of radio station assets to Catholic Radio Network,
LLC ("CRN"), Christopher T. Dahl, President, Chief Executive Officer and
Chairman of iNTELEFILM, entered into a three-year Consulting and Non-
Circumvention Agreement with CRN, pursuant to which Mr. Dahl received $750,000.
In connection with sale of radio station assets to Radio Unica Corp. ("Radio
Unica"), Mr. Dahl entered into a two-year Non-Competition Agreement with Radio
Unica, pursuant to which Mr. Dahl received $750,000.
REPURCHASE OF SHARES
In August 1998, the Board of Directors of iNTELEFILM authorized the repurchase
of up to 400,000 shares of iNTELEFILM's Common Stock pursuant to Exchange Act
Rule 10b-18. The repurchase was to be made through a broker which was to have
made purchases of Common Stock in the open market in iNTELEFILM's name and on
its behalf. iNTELEFILM subsequently determined that the broker did not follow
iNTELEFILM's instructions with respect to the purchase of such shares and
canceled its authorization for the repurchase of shares. The broker then advised
iNTELEFILM that it had accumulated 385,000 shares of iNTELEFILM's Common Stock
for its own account and presented iNTELEFILM with the opportunity to purchase
such shares, but iNTELEFILM was unable to effect such purchase because of delays
in connection with the closing of the sale of assets to CRN and restrictions
placed upon iNTELEFILM by its primary lender. Christopher T. Dahl, President,
Chief Executive Officer and Chairman of iNTELEFILM, and Richard W. Perkins, a
director of iNTELEFILM, with the consent of the Board, initiated negotiations
with the broker to acquire the broker's shares and financed the acquisition of
171,000 shares of iNTELEFILM's Common Stock from the broker for their own
account and assumed all market and other risks associated therewith. Upon the
closing of the sale of the assets to CRN, iNTELEFILM purchased the 171,000
shares of Common Stock from Messrs. Dahl and Perkins at their actual cost,
including financing expenses associated therewith and assumed the financing
obligations of Messrs. Dahl and Perkins at Key Community Bank. In January 1999,
iNTELEFILM repaid in full its indebtedness to Key Community Bank.
SEVERANCE PLAN
In April 1999, iNTELEFILM adopted a severance plan which covers Christopher T.
Dahl, Chairman of the Board, President and Chief Executive Officer; James G.
Gilbertson, Chief Operating Officer and Chief Financial Officer; and Richard W.
Perkins, a non-employee member of the Board of Directors. See "Executive
Compensation - Employment Contracts, Termination of Employment and
Change-in-Control Arrangements" for further information on such plan.
OPTION EXERCISE
In November 1999, Christopher T. Dahl, Chairman of the Board, President and
Chief Executive Officer, exercised his right to purchase 125,000 shares of
iNTELEFILM's Common Stock at a price equal to $1.625 per share by executing a
note receivable to iNTELEFILM for the principal amount of $203,125 at an
interest rate equal to 6% per annum. iNTELEFILM's Board of Directors approved
the loan and the exercise of the option.
OTHER
Lance W. Riley, former Secretary and General Counsel of iNTELEFILM, had an of
counsel relationship with Hessian & McKasy, P.A. ("HMPA"). HMPA is one of the
law firms which represented iNTELEFILM in connection with the ABC/Disney
litigation. During 1998, iNTELEFILM paid HMPA legal fees of $419,299 and
disbursements of $50,735.
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On information and belief, Mr. Riley received payments from HMPA in connection
with the ABC/Disney litigation. iNTELEFILM has not been able to confirm the
amount of such payments. Such payments could involve more or less than $60,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires iNTELEFILM's officers, directors and
persons who own more than 10% of a registered class of iNTELEFILM's equity
securities to file reports of ownership and changes in ownership with the SEC.
Such officers, directors and shareholders are required by the SEC to furnish
iNTELEFILM with copies of all such reports. To iNTELEFILM's knowledge, based
solely on a review of copies of reports filed with the SEC during 1999, all
applicable Section 16(a) filing requirements were satisfied, except that one
report on Form 5 setting forth the November 5, 1999, exercise by Christopher T.
Dahl, Chairman of the Board, President and Chief Executive Officer, of a stock
option to purchase 125,000 shares of iNTELEFILM's Common Stock was not filed on
a timely basis.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
If a shareholder of iNTELEFILM wishes to present a proposal for consideration
for inclusion in the proxy statement for the 2001 Annual Meeting of
Shareholders, the proposal must be sent by certified mail, return receipt
requested, and must be received at the executive offices of iNTELEFILM
Corporation, 5501 Excelsior Boulevard, Minneapolis, Minnesota 55416, Attn:
Secretary, no later than January 6, 2001. All proposals must conform to the
rules and regulations of the SEC. Under SEC rules, if a shareholder notifies
iNTELEFILM after March 20, 2001, of his or her intent to present a proposal for
consideration at the 2001 Annual Meeting of Shareholders, iNTELEFILM, acting
through the persons named as proxies in the proxy materials for such meeting,
may exercise discretionary authority with respect to such proposal without
including information regarding such proposal in its proxy materials.
ANNUAL REPORT ON FORM 10-KSB
A copy of iNTELEFILM's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, as filed with the SEC, including the financial statements and
financial statement schedules thereto, accompanies this Notice of Annual
Meeting, Proxy Statement and related proxy card. iNTELEFILM will furnish to any
person whose proxy is being solicited any exhibit described in the exhibit index
accompanying the Form 10-KSB, upon the payment, in advance, of fees based on
iNTELEFILM's reasonable expenses in furnishing such exhibit(s). Requests for
copies of such exhibit(s) should be directed to Jill J. Theis, Secretary and
General Counsel, at iNTELEFILM's principal address.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christopher T. Dahl
Christopher T. Dahl
Chairman, President and Chief Executive Officer
Minneapolis, Minnesota
May 5, 2000
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APPENDIX A
iNTELEFILM CORPORATION
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
ADOPTED APRIL 24, 2000
INTRODUCTION AND PURPOSE
iNTELEFILM Corporation (the "Company") is a publicly-held company and
operates in a dynamic and highly competitive market. In order to ensure informed
decision-making beneficial to the Company, the Board of Directors has
established an Audit Committee. The primary function of the Audit Committee is
to assist the Board of Directors in fulfilling its oversight responsibilities by
reviewing (a) the Company's financial reporting and public disclosure
activities, (b) the Company's internal controls regarding finance and
accounting, (c) the Company's auditing, accounting and financial reporting
processes generally, and (d) monitoring management's identification and control
of key business and financial risks.
COMPOSITION
The Audit Committee shall be comprised of two or more directors as
determined by the Board, a majority of whom shall be independent directors, and
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the
Committee. In particular, a majority of the Audit Committee:
- Shall not have been employed by the Company or any of its
affiliates for any of the past three years;
- Shall not have received compensation from the Company or any
of its affiliates in excess of $60,000 during the previous
fiscal year other than compensation for board service or
benefits under a tax-qualified retirement plan;
- Shall not be a member of the immediate family of an individual
who is, or has been in any of the past three years, employed
by the Company or any of its affiliates as an executive
officer;
- Shall not be a partner in, or a controlling shareholder or
executive officer of, any business or professional services
organization to which the Company made, or from which the
Company received, payments that are or have been significant
to the Company or the business or professional services
organization in any of the past three years;
- Shall not be employed as an executive of another company for
which any of the Company's executives serves on that other
company's compensation committee.
The members of the Committee shall be elected by the Board at the
annual organizational meeting of the Board and shall serve until their
successors shall be duly elected and qualified. Unless a Chair is elected by the
full Board, the members of the Committee may designate a Chair by majority vote
of the full Committee membership.
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RESPONSIBILITIES AND DUTIES
The primary responsibilities of the Audit Committee of the Board of Directors
are to:
- Monitor the Company's financial reporting process and internal
control system.
- Monitor the audit processes of the Company's independent
accountants and internal audit department.
- Provide an open avenue of communication among the Company's
independent accountants, financial and senior management, the
internal auditing department, and the Board of Directors.
In fulfilling its responsibilities, the Committee shall:
1. Review this Charter on an annual basis and update it as
conditions dictate.
2. Review with management the Company's annual financial
statements, including significant changes in accounting
principles or their application.
3. Review with the independent accountants their audit report on
the annual financial statements, including the application of
the Company's accounting principles.
4. Review the audit plans and activities of the independent
accountants and the internal auditors, and the coordination of
their audit efforts.
5. Recommend to the Board the selection or replacement of the
independent accountants, taking into consideration
independence and effectiveness.
6. Approve the fees paid to the independent accountants with
respect to all services.
7. Annually review the significant risks the Company is exposed
to and evaluate management's plan to manage these
uncertainties.
8. Review and concur in the appointment or replacement of the
director of internal auditing.
9. Review with the independent accountants and internal auditor
the adequacy of the Company's internal controls and
management's responses with respect to recommendations for
internal control improvements.
10. Review the internal audit department's staffing, budget and
responsibilities.
11. Review with the internal auditor and independent accountants
the results of their reviews of (a) officers' expense accounts
and use of corporate assets and (b) employees' compliance with
Company expense policies.
12. Meet with the director of internal auditing and the
independent accountants in separate executive sessions to
discuss any matters which the Committee or these groups
believe should be discussed privately with the Committee.
13. Report Committee actions to the Board of Directors, with such
recommendations as the Committee deems appropriate.
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14. Conduct or authorize investigations into any matters within
the Committee's scope of responsibilities.
15. Consider such other matters with respect to the Company's
financial affairs, internal controls and the internal and
external audits as the Committee may deem advisable.
16. Engage in such other activities and undertake such other
responsibilities as the Board may assign to the Committee.
MEETINGS
The Committee shall meet at least once each fiscal year, or more
frequently as circumstances dictate in order to completely discharge its
responsibilities and duties as outlined in this charter. To the extent
practicable, each of the committee members shall attend each of the regularly
scheduled meetings in person. As part of its job to foster open communication,
time should be set aside at each meeting for the Committee to meet with
management, the Company's internal auditor and the independent outside auditor
in separate sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately. The Committee may ask members of
management or others to attend the meetings and provide pertinent information,
as appropriate.
A majority of the Committee members currently holding office
constitutes a quorum for the transaction of business. The Committee shall take
action by the affirmative vote of a majority of the Committee members present at
a duly held meeting.
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APPENDIX B
iNTELEFILM CORPORATION
2000 STOCK OPTION PLAN
SECTION 1
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
1.1 Award. The term "Award" shall mean any award or benefit granted in
accordance with the terms of the Plan. Awards under the Plan may be in the form
of (i) Stock Options; (ii) Restricted Stock; and/or (iii) Tax Offset Payments.
The terms and conditions of the Award shall be set forth in an "Award
Agreement."
1.2 Board. The term "Board" shall mean the Board of Directors of the
Company.
1.3 Change in Control. The term "Change in Control" shall mean:
(a) the acquisition by any person or group deemed a
person under Sections 3(a)(9) and 13(d)(3) of the
Exchange Act (other than the Company and its
subsidiaries as determined immediately prior to that
date) of beneficial ownership, directly or indirectly
(with beneficial ownership determined as provided in
Rule 13d-3, or any successor rule, under the Exchange
Act), of a majority of the total combined voting
power of all classes of Stock of the Company having
the right under ordinary circumstances to vote at an
election of the Board, if such person or group deemed
a person prior to such acquisition was not a
beneficial owner of at least five percent (5%) of
such total combined voting power of the Company;
(b) the date of approval by the stockholders of the
Company of an agreement providing for the merger or
consolidation of the Company with another corporation
or other entity where (x) stockholders of the Company
immediately prior to such merger or consolidation
would not beneficially own following such merger or
consolidation shares entitling such stockholders to a
majority of all votes (without consolidation of the
rights of any class of stock to elect directors by a
separate class vote) to which all stockholders of the
surviving corporation would be entitled in the
election of directors, or (y) where the members of
the Board, immediately prior to such merger or
consolidation, would not, immediately after such
merger or consolidation, constitute a majority of the
board of directors of the surviving corporation; or
(c) the sale of all or substantially all of the assets of
the Company.
1.4 Code. The term "Code" shall mean the Internal Revenue Code of 1986,
as amended. A reference to any provision of the Code shall include reference to
any successor provision of the Code.
1.5 Committee. The term "Committee" shall mean a committee described in
Section 10.
1.6 Company. The term "Company" shall mean iNTELEFILM Corporation
1.7 Covered Shares. The term "Covered Shares" shall mean the number of
shares of Stock that an Eligible Individual may purchase pursuant to an Option.
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1.8 Director. The term "Director" shall mean a member of the Company's
Board.
1.9 Eligible Individual. The term "Eligible Individual" shall mean (a)
any common law employee, prospective employee, or officer of the Company, (b)
members of the Company's Board, (c) consultants and advisors to the Company, and
(d) employees of any Related Company or business partner of the Company. All
Eligible Individuals must be natural persons who provide bona fide services to
the Company or a Related Company. In addition, the services provided to the
Company or Related Company must not be in connection with an offer or sale of
securities in a capital raising transaction and must not directly or indirectly
promote or maintain a market for the Company's Stock. An Award may be granted to
an Eligible Individual prior to the date the Eligible Individual performs
services for the Company or Related Company, provided that such Award shall not
become vested prior to the date the Eligible Individual first performs such
services.
1.10 Exchange Act. The term "Exchange Act" shall mean the Securities
Act of 1934, as amended.
1.11 Exercise Price. The term "Exercise Price" shall mean the exercise
price of each Option granted under Section 4 established by the Committee and
determined by any reasonable method established by the Committee at the time the
Option is granted. Options granted pursuant to Section 4 of the Plan shall not
have an Exercise Price of less than 100% of the Fair Market Value of the
Company's Stock on the date the Option is granted.
1.12 Fair Market Value. The term "Fair Market Value" of a share of
Stock on a given date shall mean the closing price of the share of Stock as
reported on the Nasdaq Stock Market on such date, if the share of Stock is then
quoted on the Nasdaq Stock Market or, if the market is closed on that date, the
closing price of the share of Stock on the previous trading day. If the Stock is
not listed on the Nasdaq Stock Market, Fair Market Value shall be determined in
good faith by the Board or Committee.
1.13 Incentive Stock Option. The term "Incentive Stock Option" or "ISO"
shall mean an Option that is intended to satisfy the requirements of Section
422(b) of the Code.
1.14 Non-Employee Director. The term "Non-Employee Director" shall mean
a "non-employee director" as defined in Rule 16b-3(b)(3)(i) of the Exchange Act.
1.15 Non-Qualified Stock Option. The term "Non-Qualified Stock Option"
or "NSO" shall mean an Option that is not intended to satisfy the requirements
applicable to an "incentive stock option" described in Section 422(b) of the
Code. NSO grants may be awarded to any Eligible Individual.
1.16 Option. The term "Option" or "Stock Option" shall mean an ISO or
NSO granted pursuant to the Plan. The grant of an Option entitles the Eligible
Individual to purchase shares of Stock at an Exercise Price established by the
Committee.
1.17 Performance Award. The term "Performance Award" shall mean an
award or grant of shares based upon the achievement of performance objectives,
as contemplated by Section 5.
1.18 Plan. The term "Plan" shall mean this 2000 Stock Option Plan.
1.19 Related Company. The term "Related Company" shall mean any
corporation other than the Company and any partnership, joint venture or other
entity in which the Company owns, directly or indirectly, at least a 20%
beneficial ownership interest. A Related Company includes a subsidiary of the
Company and an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain owns
50% or more of the voting stock in one of the other corporations in such chain.
1.20 Stock. The term "stock" shall mean shares of common stock, $.02
par value, of the Company.
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1.21 Stock Option Agreement. The term "Stock Option Agreement" or
"Agreement" shall mean any written agreement evidencing the terms and conditions
of an ISO or NSO granted under the Plan. The Agreement shall be subject to the
terms and conditions of the Plan.
SECTION 2
PURPOSE
The iNTELEFILM Corporation 2000 Stock Option Plan has been established
by iNTELEFILM Corporation to (i) attract and retain individuals eligible to
participate in the Plan; (ii) motivate Eligible Individuals, by means of
appropriate incentives, to achieve long-range goals; (iii) provide incentive
compensation opportunities that are competitive with those of other similar
companies; and (iv) further identify Eligible Individuals' interests with those
of the Company's other shareholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and any Related Company, including the growth in value of the
Company's equity and enhancement of long-term shareholder return.
SECTION 3
PARTICIPATION
Subject to the terms and conditions of the Plan, the Committee may
determine and designate, from time to time, Eligible Individuals who will be
granted one or more Awards under the Plan at the Exercise Price. In its sole
discretion and without shareholder approval, the Committee may grant to an
Eligible Individual any Award or Awards permitted under the provisions of the
Plan. Awards may be granted as alternatives to or replacement of Awards
outstanding under the Plan, or any other plan or arrangement of the Company or
Related Company (including a plan or arrangement of a business or entity, all or
a portion of which is acquired by the Company or a Related Company).
Only employees are eligible to be granted Incentive Stock Options.
SECTION 4
STOCK OPTIONS
4.1 General. The grant of an Option entitles the Eligible Individual to
purchase shares of Stock at an Exercise Price established by the Committee. Any
Option awarded to Eligible Individuals under this Section 4 may be either NSOs
or ISOs, as determined in the discretion of the Committee. To the extent that
any Stock Option does not qualify as an ISO, it shall constitute an NSO.
4.2 Option Awards. Subject to the following provisions, Options awarded
under the Plan shall be in such form and shall have such terms as the Committee
may determine and specify in a Stock Option Agreement entered into between the
Eligible Individual and the Company.
(a) Exercise of an Option. An Option shall be exercisable in
accordance with such terms and conditions and during such
periods as may be established by the Committee. In no event
shall any fraction of a share of Stock be issued upon the
exercise of an Option. An Option shall be deemed exercised
when the Company receives (a) written notice of exercise from
the person entitled to exercise the Option and (b) full
payment of the Exercise Price for the Covered Shares and all
applicable withholding taxes due upon such exercise. An Option
must be exercised for at least 100 shares of Stock, or such
lesser number of shares of Stock if the remaining portion of
an Option is for fewer than 100 shares of Stock.
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(b) Exercise Price. The Exercise Price of an Option granted under
this Section 4 shall be established by the Committee or shall
be determined by a method established by the Committee at the
time the Option is granted, except that the Exercise Price
shall not be less than 100% of the Fair Market Value of the
Company's Stock on the date of grant.
(c) Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 4 shall be
subject to the following:
(1) Subject to the following provisions of this
Subsection 4.2(c), the full Exercise Price for shares
of Stock purchased upon the exercise of any Option
shall be paid at the time of such exercise (except
that, in the case of an exercise arrangement approved
by the Committee and described in Subsection
4.2(c)(3), payment may be made as soon as practicable
after the exercise).
(2) Payment of the Exercise Price shall be made in such
manner as the Committee may provide in the Award,
which may include cash (including cash equivalents),
tendering of shares of Stock acceptable to the
Committee and either already owned by the Eligible
Individual or subject to Awards hereunder (so-called
"cashless" or "immaculate" exercise methods), and any
other manner permitted by law and approved by the
Committee, or any combination of the foregoing. If
the Company determines that a Stock Option may be
exercised using shares of Restricted Stock, then
unless the Committee provides otherwise, the shares
received upon the exercise of a Stock Option which
are paid for using Restricted Stock shall be
restricted in accordance with the original terms of
the Restricted Stock Award.
(3) An Eligible Individual may elect to pay the Exercise
Price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Stock (or
a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding
resulting from such exercise.
(d) Settlement of Option. Shares of Stock delivered pursuant to
the exercise of an Option shall be subject to such conditions,
restrictions and contingencies as the Committee, in its
discretion, may establish in addition to such conditions,
restrictions, and contingencies set forth in the Agreement.
(e) Reload Options. The Committee may grant "reload" options,
pursuant to the terms and conditions established by the
Committee and any applicable requirements of Rule 16b-3 of the
Exchange Act ("Rule 16b-3") or any other applicable law. The
Eligible Individual would be granted a new Option when the
payment of the Exercise Price of a previously granted Option
is made by the delivery of shares of the Company's Stock owned
by the Eligible Individual pursuant to Section 4.2(c)(2)
hereof and/or when shares of the Company's Stock are tendered
or forfeited as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of
an Option. The new Option would be an Option to purchase the
number of shares not exceeding the sum of (i) the number of
shares of the Company's Stock provided as consideration upon
the exercise of the previously granted Option to which such
"reload" option relates and (ii) the number of shares of the
Company's Stock tendered or forfeited as payment of the amount
to be withheld under applicable income tax laws in connection
with the exercise of the Option to which such "reload" option
relates. "Reload" options may be granted with respect to
Options granted under this Plan. Such
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"reload" options shall have a per share exercise
price equal to the Fair Market Value as of the date
of grant of the new Option.
(f) Vesting. Eligible Individuals shall vest in all Options in
accordance with the terms and conditions of the Agreement
entered into by and between the Eligible Individual and the
Company.
(g) Option Term. The term of each Option shall be fixed by the
Committee. In the event that the Plan is terminated pursuant
to terms and conditions of Section 11, the Plan shall remain
in effect as long as any Awards under it are outstanding.
(h) Termination of Employment. Following the termination of
Eligible Individual's employment with the Company or a Related
Company, the Option shall be exercisable to the extent
determined by the Committee and specified in the Award
Agreement. The Committee may provide different
post-termination exercise provisions with respect to
termination of employment for different reasons.
(i) Incentive Stock Options. ISO grants may only be awarded to
employees of the Company, a "parent corporation," or a
"subsidiary corporation" as those terms are defined in
Sections 424(e) and 424(f) of the Code. In order for an
employee to be eligible to receive an ISO grant, the employee
must be employed by the Company, parent corporation, or
subsidiary corporation during the period beginning on the date
the Option is granted and ending on the day three months prior
to the date such Option is exercised. Notwithstanding the
provisions of Section 4.2, no ISO shall (i) have an Exercise
Price which is less than 100% of the Fair Market Value of the
Stock on the date of the ISO Award, (ii) be exercisable more
than ten (10) years after the ISO is awarded, or (iii) be
awarded more than ten (10) years after the Effective Date of
this Plan. No ISO awarded to an employee who owns more than
10% of the total combined voting power of all classes of Stock
of the Company, its "parent corporation" or any "subsidiary
corporation" shall (i) have an Exercise Price of less than
110% of the Fair Market Value of the Stock on the date of the
ISO Award or (ii) be exercisable more than five (5) years
after the date of the ISO Award. Notwithstanding Section 8.7,
no ISO shall be transferable other than by will and the laws
of descent and distribution. Options granted hereunder shall
be treated as ISOs only to the extent that the aggregate fair
market value (determined at the time of grant) of shares of
Stock exercisable for the first time by the employee during
any calendar year, in combination with shares first
exercisable under all other plans of the Company and any
Related Company, does not exceed $100,000, with any Options or
portions of Options in excess of such limit (according to the
order in which they were granted) being treated as NSOs.
SECTION 5
PERFORMANCE AWARDS
The Committee shall have the right to designate Awards as "Performance
Awards." The grant or vesting of a Performance Award shall be subject to the
achievement of performance objectives established by the Committee based on one
or more of the following criteria, in each case applied to the Company on a
consolidated basis or to a business unit, as specified by the Committee in an
Award Agreement, and which the Committee may use as an absolute measure, as a
measure of improvement relative to prior performance, or as a measure of
comparable performance relative to a peer group of companies: sales, operating
profits, operating profits before interest expenses and taxes, net earnings,
earnings per share, return on equity, return on assets, return on invested
capital, total shareholder return, cash
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flow, debt to equity ratio, market share, stock price, economic value added, and
market value added. The terms and conditions of a Performance Award shall be set
forth in an Award Agreement entered into between the Company and the Eligible
Individual.
SECTION 6
RESTRICTED STOCK
Subject to the following provisions, the Committee may grant Awards of
Restricted Stock to an Eligible Individual in such form and on such terms and
conditions as the Committee may determine and specify in a Restricted Stock
Award Agreement entered into between the Company and the Eligible Individual:
(a) The Restricted Stock Award shall specify the number
of shares of Restricted Stock to be awarded, the
price, if any, to be paid by the Eligible Individual
and the date or dates on which, or the conditions
upon the satisfaction of which, the Restricted Stock
will vest. The grant and/or the vesting of Restricted
Stock may be conditioned upon the completion of a
specified period of service with the Company or a
Related Company, upon the attainment of specified
performance objectives or upon such other criteria as
the Committee may determine.
(b) Stock certificates representing the Restricted Stock
awarded to an Eligible Individual shall be registered
in the Eligible Individual's name, but the Committee
may direct that such certificates be held by the
Company or its designee on behalf of the Eligible
Individual. Except as may be permitted by the
Committee, no share of Restricted Stock may be sold,
transferred, assigned, pledged or otherwise
encumbered by an Eligible Individual until such share
has vested in accordance with the terms of the
Restricted Stock Award. At the time the Restricted
Stock vests, a certificate for such vested shares
shall be delivered to the Eligible Individual (or his
or her designated beneficiary in the event of death),
free of all restrictions.
(c) The Committee may provide that the Eligible
Individual shall have the right to vote or receive
dividends on Restricted Stock. Unless the Committee
provides otherwise, Stock received as a dividend on,
or in connection with a stock split of, Restricted
Stock shall be subject to the same restrictions as
the Restricted Stock.
(d) Except as may be provided by the Committee, in the
event of an Eligible Individual's termination of
employment or relationship with the Company prior to
all of his or her Restricted Stock becoming vested,
or in the event any conditions to the vesting of
Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions as
set forth in the Restricted Stock Award, the shares
of Restricted Stock which have not vested shall be
forfeited, and the Committee may provide that (i) any
purchase price paid by the Eligible Individual be
returned to the Eligible Individual or (ii) a cash
payment equal to the Restricted Stock's fair market
value on the date of forfeiture, if lower, be paid to
the Eligible Individual.
(e) The Committee may waive, in whole or in part, any or
all of the conditions to receipt of, or restrictions
with respect to, any or all of the Eligible
Individual's Restricted Stock.
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SECTION 7
TAX OFFSET PAYMENTS
The Committee may provide for a Tax Offset Payment to be made by the
Company to an Eligible Individual with respect to one or more Awards granted
under the Plan. The Tax Offset Payment shall be in an amount specified by the
Committee, which shall not exceed the amount necessary to pay the federal,
state, local and other taxes payable with respect to the applicable Award,
assuming that the Eligible Individual is taxed at the maximum tax rate
applicable to such income. The Tax Offset Payment shall be paid solely in cash.
No Eligible Individual shall be granted a Tax Offset Payment in any fiscal year
with respect to more than the number of shares of Stock covered by Awards
granted to such Eligible Individual in such fiscal year. The terms and
conditions of a Tax Offset Payment Award shall be set forth in an Award
Agreement entered into between the Company and the Eligible Individual.
SECTION 8
OPERATION AND ADMINISTRATION
8.1 General. The operation and administration of this Plan, including
any Awards granted under this Plan, shall be subject to the provisions of
Section 8.
8.2 Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective as of April 1, 2000 (the "Effective Date")
provided, however, that to the extent that Awards are granted under the Plan
prior to its approval by the shareholders of the Company, the Awards shall be
subject to the approval of the Plan by the shareholders of the Company. The term
of the Plan shall be limited in duration to ten (10) years from the earlier of
(a) the Effective Date or (b) the date the Plan is approved by the Company's
shareholders.
8.3 Shares Subject to Plan. The shares of Stock for which Awards may be
granted under this Plan shall be subject to the following:
(a) Subject to the following provisions of this Section
8.3, the maximum aggregate number of shares of Stock
that may be issued and sold under the Plan shall be
500,000 shares. The number of shares of Stock so
reserved for issuance shall be subject to adjustment
pursuant to Sections 8.3 (b) and 8.3(d). The shares
of Stock may be authorized, but unissued, or
reacquired Stock.
(b) On January 1st of each year, commencing with year
2001, the aggregate number of shares of Stock that
may be awarded under the Plan shall automatically
increase by the lesser of (a) 300,000 shares of
Stock, (b) 3.5% of the outstanding shares of Stock on
such date, or (c) a lesser amount determined by the
Committee.
(c) To the extent an Award terminates without having been
exercised, or shares awarded are forfeited, such
shares shall again be available issue under the Plan.
Shares of Stock surrendered in payment of the
Exercise Price and shares of Stock which are withheld
in order to satisfy federal, state or local tax
liability, shall not count against the maximum
aggregate number of shares authorized to be issued
pursuant to this Plan, and shall again be available
for issuance pursuant to the terms of the Plan.
(d) In the event of any merger, reorganization,
consolidation, sale of substantially all assets,
recapitalization, stock dividend, stock split,
combination or reverse stock split, spin-off,
split-up, split-off, distribution of assets or other
change in corporate structure affecting the Stock, a
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substitution or adjustment, as may be determined to
be appropriate by the Committee or the Board in its
sole discretion, shall be made in the aggregate
number of shares reserved for issuance under the
Plan. However, no such adjustment shall exceed the
aggregate value of any outstanding Award prior to
such substitution or adjustment. The Board or
Committee may make such other adjustments as it deems
appropriate.
(e) No Eligible Individual shall be granted Options,
Restricted Stock, or any combination thereof with
respect to more than 150,000 shares of Stock in any
fiscal year (subject to adjustment as provided in
Section 8.3(d).
8.4 Securities Laws Restrictions. Issuance of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) If at any time the Committee determines that the
issuance of Stock under the Plan is or may be
unlawful under the laws of any applicable
jurisdiction, the right to exercise any Stock Option
or receive any Restricted Stock shall be suspended
until the Committee determines that such issuance is
lawful. The Company shall have no obligation to
effect any registration of qualification of the Stock
under federal or state laws.
(b) Any person exercising a Stock Option or receiving
Restricted Stock shall make such representations
(including representations to the effect that such
person will not dispose of the Stock so acquired in
violation of federal and state securities laws) and
furnish such information as may, in the opinion of
counsel for the Company, be appropriate to permit the
Company to issue the Stock in compliance with
applicable federal and state securities laws. The
Committee may refuse to permit the exercise of a
Stock Option or issuance of Restricted Stock until
such representations and information have been
provided.
(c) The Company may place an appropriate legend
evidencing any transfer restrictions on all shares of
Stock issued under the Plan and may issue stop
transfer instructions in respect thereof.
(d) To the extent that the Plan provides for issuance of
stock certificates to reflect the issuance of shares
of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited
by applicable law or the applicable rules of any
stock exchange.
8.5 Tax Withholding. Each Eligible Individual shall, no later than the
date as of which the value of an Award first becomes includible in such person's
gross income for applicable tax purposes, pay, pursuant to such arrangements as
the Company may establish from time to time, any federal, state, local or other
taxes of any kind required by law to be withheld with respect to the Award. The
obligations of the Company under the Plan shall be conditional on such payment,
and the Company (and, where applicable, any Related Company), shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Eligible Individual.
8.6 Payments. Awards may be settled in any of the methods described in
Section 4.2(c). Any Award settlement, including payment deferrals, may be
subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred Stock equivalents.
Each Related Company shall be liable for payment of cash due under the Plan with
respect to any Eligible Individual to the extent that such benefits are
attributable to the services rendered for that Related Company by the Eligible
Individual. Any disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.
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8.7 Transferability. Except as otherwise provided by the Committee,
Awards under the Plan may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by beneficiary designation,
will or by the laws of descent and distribution. If the Committee makes an Award
transferrable, the Award Agreement shall set forth such additional terms and
conditions regarding transferability as the Committee deems appropriate.
8.8 Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Eligible Individual or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
8.9 Agreement With Company. Any Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
shall be reflected in an Award Agreement. A copy of the Award Agreement shall be
provided to the Eligible Individual, and the Committee may, but need not
require, the Eligible Individual to sign the Award Agreement.
8.10 Limitation of Implied Rights.
(a) Neither an Eligible Individual nor any other person
shall, by reason of participation in the Plan,
acquire any right in or title to any assets, funds or
property of the Company or any Related Company
whatsoever, including, without limitation, any
specific funds, assets, or other property which the
Company or any Related Company, in its sole
discretion, may set aside in anticipation of a
liability under the Plan. An Eligible Individual
shall have only a contractual right to the Stock or
amounts, if any, payable under the Plan, unsecured by
any assets of the Company or any Related Company, and
nothing contained in the Plan shall constitute a
guarantee that the assets of the Company or any
Related Company shall be sufficient to pay any
benefits to any Eligible Individual.
(b) This Plan does not constitute a contract of
employment, and selection as a Eligible Individual
will not give the Eligible Individual the right to be
retained in the employ of the Company or any Related
Company, nor any right or claim to any future grants
or to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of
the Plan. Except as otherwise provided in the Plan,
no Award under the Plan shall confer upon an Eligible
Individual any rights of a shareholder of the Company
prior to the date on which the Eligible Individual
fulfills all conditions for receipt of such rights.
8.11 Termination for Cause. If the employment of an Eligible Individual
is terminated by the Company or a Related Company for "cause," then the
Committee shall cancel any Options granted to the Eligible Individual under the
Plan, unless otherwise determined by the Committee. The term "cause" shall mean
(1) the Eligible Individual's violation of any provision of any non-competition
agreement, non-solicitation agreement or confidentiality agreement with the
Company; (2) an illegal or negligent action by the Eligible Individual that
materially and adversely affects the Company; (3) the Eligible Individual's
failure or refusal to perform his/her duties (except when prevented by reason of
illness or disability); (4) conviction of the Eligible Individual of a felony
involving moral turpitude; or (5) the termination of the Eligible Individual's
employment with the Company or Related Company for "cause" as defined in the
Eligible Individual's employment agreement with the Company or Related Company.
8.12 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
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SECTION 9
CHANGE IN CONTROL
In the event of a Change in Control, if specifically documented in
either a special form of Award Agreement at the time of grant or amendment to an
existing Award Agreement, in each case on an individual-by-individual basis:
(a) all or a portion (as determined by the Committee) of
outstanding Stock Options awarded to such individual
under the Plan shall become fully exercisable and
vested; and
(b) the restrictions applicable to all or a portion (as
determined by the Committee) of any outstanding
Restricted Stock awards under the Plan held by an
Eligible Individual shall lapse and such shares shall
be deemed fully vested.
Notwithstanding the foregoing, no acceleration of vesting or termination of
restrictions on Restricted Stock shall occur if (a) all Awards are assumed by a
surviving corporation or its parent or (b) the surviving corporation or its
parent substitutes Awards with substantially the same terms for such Awards. The
Committee shall have the right to cancel Awards in the event of a Change in
Control, provided that in exchange for such cancellation, the Eligible
Individual shall receive a cash payment equal to the Change in Control
consideration less the exercise price of the Awards.
SECTION 10
COMMITTEE
10.1 Administration. The Plan shall be administered by the Compensation
Committee of the Board or such other committee of Directors as the Board shall
designate, which shall consist of not less than two Non-Employee Directors. The
members of the Committee shall be Non-Employee Directors and shall serve at the
pleasure of the Board. To the extent that the Board determines it to be
desirable to qualify Awards granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code. To the extent that the Board determines
it to be desirable to qualify Awards as exempt under Rule 16b-3, the Award
transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3. All determinations made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Eligible Individuals. The Board may
administer the Plan or exercise any or all of the administration duties of the
Committee at any time when a Committee meeting the requirements of this Section
has not been appointed, and the Board may exempt Awards pursuant to Rule
16b-3(d)(1) of the Exchange Act.
10.2 Powers of Committee. The Committee shall have the following
authority with respect to Awards under the Plan: to grant Awards; to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall deem advisable; to interpret the terms and provisions of
the Plan and any Award granted under the Plan; and to otherwise supervise the
administration of the Plan. In particular, and without limiting its authority
and powers, the Committee shall have the authority:
(a) to determine whether and to what extent any Award or
combination of Awards will be granted hereunder;
(b) to select the Eligible Individuals to whom Awards
will be granted;
(c) to determine the number of shares of Stock to be
covered by each Award granted hereunder subject to
the limitations contained herein;
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(d) to determine the terms and conditions of any Award
granted hereunder, including, but not limited to, any
vesting or other restrictions based on such
performance objectives and such other factors as the
Committee may establish, and to determine whether the
performance objectives and other terms and conditions
of the Award are satisfied;
(e) to determine the treatment of Awards upon the
Eligible Individual's retirement, disability, death,
termination for cause or other termination of
employment or service;
(f) to determine that amounts equal to the amount of any
dividends declared with respect to the number of
shares covered by an Award (i) will be paid to the
Eligible Individual currently or (ii) will be
deferred and deemed to be reinvested or (iii) will
otherwise be credited to the Eligible Individual or
that the Eligible Individual has no rights with
respect to such dividends;
(g) to amend the terms of any Award, prospectively or
retroactively; provided, however, that no amendment
shall impair the rights of the Eligible Individual
without his or her written consent; and
(h) to substitute new Stock Options for previously
granted Stock Options, or for options granted under
other plans or agreements, in each case including
previously granted options having higher option
prices.
Determinations by the Committee under the Plan relating to the form, amount, and
terms and conditions of Awards need not be uniform, and may be made selectively
among Eligible Individuals who receive Awards under the Plan, whether or not
such Eligible Individuals are similarly situated.
10.3 Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
10.4 Information to be Furnished to Committee. The Company and any
Related Company shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and any Related Company as to an Eligible Individual's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Eligible
Individuals and other persons entitled to benefits under the Plan must furnish
the Committee such evidence, data or information as the Committee considers
desirable to carry out the terms of the Plan.
10.5 Non-Liability of Board and Committee. No member of the Board or
the Committee, nor any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination or interpretation taken or made with respect to the Plan, and all
members of the Board or the Committee and all officers or employees of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
SECTION 11
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that
no amendment or termination may, in the absence of written consent to the change
by the affected Eligible Individual (or, if the Eligible Individual is not then
living, the affected beneficiary), adversely affect the rights of any Eligible
Individual or beneficiary under any Award
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granted under the Plan prior to the date such amendment is adopted by the Board;
provided that adjustments made pursuant to Subsection 8.3(d) shall not be
subject to the foregoing limitations of this Section 11. An amendment shall be
subject to approval by the Company's shareholders only to the extent required by
applicable laws, regulations or rules of a stock exchange or similar entity.
SECTION 12
GENERAL PROVISIONS
12.1 Award Agreements. No Eligible Individual will have rights under an
Award granted to such Eligible Individual unless and until an Award Agreement
has been duly executed on behalf of the Company and the Eligible Individual.
12.2 No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Related Company from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
12.3 Headings. The headings of the sections and subsections of this
Plan are intended for the convenience of the parties only and shall in no way be
held to explain, modify, construe, limit, amplify or aid in the interpretation
of the provisions hereof.
12.4 Beneficiaries. An Eligible Individual may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan may be paid or transferred in case of death.
Each designation will revoke all prior designations, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Eligible Individual in writing with the Committee during his or her lifetime. In
the absence of any such designation, benefits outstanding at the Eligible
Individual's death shall be paid or transferred to his or her estate. There
shall be no third party beneficiaries of or to this Plan. Any beneficiary of the
Eligible Individual shall have only a claim to such benefits as may be
determined to be payable hereunder, if any, and shall not, under any
circumstances other than the right to claim such benefits, be deemed a third
party beneficiary of or to this Plan.
12.5 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Minnesota,
except to the extent preempted by federal law, without regard to the principles
of comity or the conflicts of law provisions of any jurisdiction.
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iNTELEFILM CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
JUNE 22, 2000
3:30 P.M.
LUTHERAN BROTHERHOOD
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402
iNTELEFILM CORPORATION PROXY
5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of iNTELEFILM Corporation, a Minnesota corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated May 5, 2000, and hereby appoints James G. Gilbertson
and Jill J. Theis, or either of them, proxies and attorneys-in-fact, with full
power to each of substitution and revocation, on behalf and in the name of the
undersigned, to represent the undersigned at the 2000 Annual Meeting of
Shareholders of iNTELEFILM to be held at the Lutheran Brotherhood, 625 Fourth
Avenue South, Minneapolis, Minnesota, on June 22, 2000, at 3:30 p.m. local time,
or at any adjournment or postponement thereof, and to vote, as designated below,
all shares of Common Stock of iNTELEFILM which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth below.
See reverse for voting instructions
<PAGE> 37
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FOR all nominees WITHHOLD AUTHORITY
1. To elect four directors for the ensuing year and until their successors listed at left (except to vote for all
shall be elected and duly qualified. as marked to the nominees listed at
[ ] contrary below) [ ] left
01 CHRISTOPHER T. DAHL 02 RICHARD W. PERKINS
03 MICHAEL R. WIGLEY 04 WILLIAM E. CAMERON
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
-------------------------------------------------
2. To consider and vote upon adoption of iNTELEFILM's 2000 Stock Option
Plan. [ ] For [ ] Against [ ] Abstain
3. To ratify the appointment of BDO Seidman, LLP as iNTELEFILM's
independent public accountants for the fiscal year ending December 31,
2000. [ ] For [ ] Against [ ] Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any
adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE PROXY BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 3. ABSTENTIONS WILL BE COUNTED TOWARDS THE
EXISTENCE OF A QUORUM.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED Dated: ----------------------------, 2000
ENVELOPE.
------------------------------------------------
------------------------------------------------
Signature(s) in Box
(If there are co-owners both must sign)
Please sign exactly as name appears on this proxy.
When shares are held by joint tenants, both should
sign. If signing as attorney,
executor,administrator, trustee or guardian,
please give full title as such and, if not
previously furnished, a certificate or other
evidence of appointment should be furnished. If a
corporation, please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
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