EXHIBIT 10.36
iNTELEFILM CORPORATION
STOCK OPTION AGREEMENT
No. of shares subject to option: 1,000,000
Date of Grant: September 5, 2001
AGREEMENT dated the 5th day of September, 2001, by and between
iNTELEFILM Corporation a Minnesota corporation (the "Company") and MARK A. COHN
(the "Optionee").
W I T N E S S E T H:
1. Grant of Option. Pursuant to action duly taken by the Company's
board of directors (the "Board"), the Company grants to the Optionee effective
September 5, 2001, subject to the terms and conditions herein set forth, the
right and option to purchase (the "Option") from the Company all or a part of an
aggregate of 1,000,000, shares of Stock (the "Shares") at the purchase price of
$.85 per share (the "Option Price"), such option to be exercised as hereinafter
provided. The term "Stock" means the Company's common stock, $.02 par value. The
Option is intended to be a non-qualified stock option and is not intended to
satisfy the requirements applicable to an "incentive stock option" described in
Section 422(b) of the Code.
2. Terms and Conditions. It is understood and agreed that the option
evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. This Option shall expire ten years after the date
of grant unless terminated earlier as specified in Sections 3 or 4 below.
(b) Exercise of Option. This Option shall be exercisable cumulatively,
to the extent it is vested, as set forth in Exhibit A. Any exercise shall be
accompanied by a written notice to the Company specifying the number of shares
of Stock as to which the Option is being exercised and the purchase price, to
the extent the Option is being exercised for cash. Notation of any partial
exercise shall be made by the Company on Schedule I hereto. This Option may not
be exercised for a fraction of a Share, and must be exercised for no fewer than
one hundred (100) shares of Stock, or such lesser number of shares as may be
vested.
(c) Payment of Purchase Price Upon Exercise. At the time of any
exercise, the purchase price of the Shares as to which this option is exercised
shall be paid in any of the following methods or combination of methods as the
Optionee may elect: (i) cash to the Company, (ii) tendering of shares of the
Stock already owned by the Optionee for at least six months (so-called
"cashless" or "immaculate" exercise methods) having a "fair market value" equal
to the Option Price for the Shares exercised, (iii) 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 the Option Price for the Shares
exercised and any tax withholding resulting from such exercise, or (iv)
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surrender for cancellation shares subject to this Option having a "spread" equal
to the entire the Option Price for the Shares exercised and any tax withholding
resulting from such exercise. The term "fair market value" shall mean the
closing price of a share of Stock as reported on the New York Stock Exchange,
the American Stock Exchange, the Nasdaq Stock Market or any other stock market
or exchange on which the Stock is traded on the trading date immediately
preceding the date that the Option is exercised. If the Stock is not listed or
traded on any such exchange or in any such market, the "fair market value" shall
be determined in good faith by the Board or a committee thereof appointed for
such purpose. The term "spread" shall mean the fair market value of the Stock in
excess of the Option Price multiplied by the number of shares of Stock subject
to the portion of the Option tendered for cancellation.
(d) Nontransferability. This Option shall not be transferable other
than by will or by the laws of descent and distribution. During the lifetime of
the Optionee, this Option shall be exercisable only by the Optionee or by the
Optionee's guardian or legal representative. No transfer of this Option by the
Optionee by will or by the laws of descent and distribution shall be effective
to bind the Company unless the Company is furnished with written notice thereof
and a copy of the will and/or such other evidence as the Board may determine
necessary to establish the validity of the transfer.
(e) Subject to Lock Up. The Optionee understands that the Company at a
future date may file a registration or offering statement (the "Registration
Statement") with the Securities and Exchange Commission to facilitate an
underwritten public offering of its securities. The Optionee agrees, for the
benefit of the Company, that should such an offering be made and should the
managing underwriter of such offering require, the undersigned will not, without
the prior written consent of the Company and such underwriter, during the Lock
Up Period as defined herein:
(i) Sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of this Option or any of the Shares acquired upon
exercise of this Option during the Lock Up Period;
(ii) Sell or grant, or agree to sell or grant, options, rights or
warrants with respect to any of the Shares acquired upon exercise of this
Option. The foregoing does not prohibit gifts to donees or transfers by will or
the laws of descent to heirs or beneficiaries provided that such donees, heirs
and beneficiaries shall be bound by the restrictions set forth herein.
The term "Lock Up Period" shall mean the lesser of (x) 180 days or (y)
the period during which Company officers and directors are restricted by the
managing underwriter from effecting any sales or transfers of the Shares. The
Lock Up Period shall commence on the date of the closing of the underwritten
offering.
(f) No Rights as Shareholder; Dividends and Other Distributions. The
Optionee shall have no rights as a shareholder of the Company with respect to
any shares of Stock subject to this option prior to the date of issuance to him
of a certificate for such shares. However, upon exercise of the Option, the
Company shall pay or distribute to the Optionee and the Optionee shall be
entitled to receive such dividends (other than ordinary or periodic cash
dividends) or
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other distributions that the Optionee would have received had the Optionee
exercised the Shares acquired upon exercise immediately prior to the record date
for such dividends or other distributions, or the Company will pay or make
provision for payment, to Optionee, the fair market value (determined at the
time the Optionee exercises the Option to acquire such Shares) of such dividends
or other distributions that were not in cash and not delivered to the Optionee
in kind upon exercise of the Option.
(g) Compliance with Law and Regulations; Shareholder Approval;
Registration Statement. This Option and the obligation of the Company to sell
and deliver shares hereunder shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. The Company shall not be required to issue
or deliver any certificates for shares of Stock prior to (i) the required
listing of such shares on Nasdaq or any stock exchange on which the Stock may
then be listed if the Stock is then listed on Nasdaq or any such stock exchange,
or (ii) the completion of any registration or qualification of such shares under
any federal or state law, or any rule or regulation of any government body which
the Company shall, in its sole discretion, determine to be necessary or
advisable. Moreover, this option may not be exercised if its exercise or the
receipt of shares of Stock pursuant thereto would be contrary to applicable law.
The Company will use its commercially reasonable efforts to effect such required
listing, registration or qualification, and compliance. If the Company is a
reporting company pursuant to Section 15(d) or 12 of the Securities Exchange Act
of 1934, as amended, the Company will use its best efforts to file and obtain
the effectiveness of a Form S-8 registration statement or other suitable form of
registration statement to register with the Securities and Exchange Commission
the Shares issuable upon exercise of the Option.
(h) Provision for Payment of Withholding Taxes. All deliveries and
distributions under this Option Agreement are subject to withholding of all
applicable taxes.
3. Termination of Employment; Change of Control. Upon the termination
of the employment of Optionee with the Company prior to the expiration of the
Option, the following provisions shall apply:
(a) In the event the Optionee's employment with the Company is
terminated by the Company for "Cause" as defined in the employment agreement
dated effective September 5, 2001 (the "Employment Agreement") among the
Company, the Subsidiary and the Optionee or is voluntary terminated by the
Optionee without "Good Reason" as defined in the Employment Agreement, the
Optionee may exercise the Option to the extent the Optionee was vested in and
entitled to exercise the Option at the date of such employment termination for a
period of three (3) months after the date of such employment termination, or
until the term of the Option has expired, whichever date is earlier. To the
extent the Optionee was not entitled to exercise this Option at the date of such
employment termination, or if Optionee does not exercise this Option within the
time specified herein, this Option shall terminate.
(b) If the employment of an Optionee is terminated by the Company
without Cause or is voluntarily terminated by the Optionee for Good Reason, the
Option shall become immediately vested for all of the Shares subject to the
Option and the Option the Option may be
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exercised at any time prior to the expiration date of the Option notwithstanding
anything to the contrary contained in this Agreement.
(c) Notwithstanding anything herein to the contrary, the Option shall
be immediately vested and exercisable in full in the event of a "Change of
Control," of the Company. A "Change of Control" shall mean:
(i) 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 Optionee, the
Company and/or WebADTV, Inc., ("Subsidiary") 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 and/or of all classes of capital stock (the "Subsidiary
Stock") of Subsidiary 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 and/or Subsidiary;
(ii) the date of approval by the stockholders of the Company and/or
Subsidiary of an agreement providing for the merger or consolidation of the
Company and/or Subsidiary with another corporation or other entity where (x) the
respective stockholders of the Company and/or Subsidiary immediately prior to
such merger or consolidation would not beneficially own with respect to their
Stock and/or Subsidiary Stock 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; provided that, in the event of a Change of Control under this
clause (ii) occurs with respect to the Subsidiary but not the Company and
Optionee continues in the employment of the Company after such Change of
Control, the vesting of this Option shall not be accelerated; or
(iii) the sale of all or substantially all of the assets of the
Company and/or Subsidiary (excluding the sale of the production companies).
4. Death or Disability of Optionee. Upon the death or Disability, as
defined herein, of Optionee prior to the expiration of the Option, the following
provisions shall apply:
(a) If the Optionee is at the time of his Disability employed by the
Company or a subsidiary of the Company and has been in continuous employment
since the Date of Grant of the Option, then the Option may be exercised by the
Optionee for one (1) year following the date of such Disability or until the
expiration date of the Option, whichever date is earlier, but only to the extent
the Optionee was vested in and entitled to exercise the Option at the time of
his Disability. For purposes of this Section 4, the term "Disability" shall mean
a permanent and total disability as defined in Section 22(e)(3) of the Code,
unless the Optionee is employed by the Company, a Parent, a Subsidiary or an
Affiliate, pursuant to an employment agreement which contains a definition of
"Disability," in which case such definition shall control.
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(b) If the Optionee is at the time of his death employed by the Company
or a subsidiary and has been in continuous employment since the Date of Grant of
the Option, then the Option may be exercised by the Optionee's estate or by a
person who acquired the right to exercise the Option by will or the laws of
descent and distribution, for one (1) year following the date of the Optionee's
death or until the expiration date of the Option, whichever date is earlier, but
only to the extent the Optionee was vested in and entitled to exercise the
Option at the time of death.
(c) If the Optionee dies within three (3) months after a termination of
Optionee's employment under the circumstances described in Section 3(a), the
Option may be exercised for nine (9) months following the date of Optionee's
death or the expiration date of the Option, whichever date is earlier, by the
Optionee's estate or by a person who acquires the right to exercise the Option
by will or the laws of descent or distribution, but only to the extent the
Optionee was vested in and entitled to exercise the Option at the time of
Termination. If the Optionee dies after a termination of Optionee's employment
under the circumstances described in Section 3(b), the Option may be exercised
at any time prior to the expiration date of the Option.
5. Tax Offset Payments. This Section intentionally deleted.
6. Adjustments. In the event of any change (through recapitalization,
merger, consolidation, stock dividend, split-up, or amount of the Company's
Stock or any other transaction described in Section 425(a) of the Code) prior to
the exercise of the Option, the Option, to the extent that it has not been
exercised, shall entitle the Optionee to such number and kind of securities as
the Optionee would have been entitled to had the Optionee actually owned the
shares subject to the Option at the time of the occurrence of such change. In
the event of a stock split, stock dividend or other similar adjustment, the
option price for the shares purchasable upon exercise of this Option shall be
proportionately adjusted.
7. Miscellaneous.
7.1 Notices. Any notice or other communications required or
permitted to be given to the parties hereto shall be deemed to have been given
when received, addressed as follows (or at such other address as the party
addressed may have substituted by notice pursuant to this section 7.1):
(a) If to Company:
iNTELEFILM CORPORATION
Crosstown Corporate Center
6385 Old Shady Oak Road, Suite 290
Eden Prairie, Minnesota 55344
Attention: Chief Financial Officer
Telecopier: (952) 925-8888
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With copy to:
Judite P. Fluger, Esq.
iNTELEFILM Corporation
Crosstown Corporate Center
6385 Old Shady Oak Road
Eden Prairie, Minnesota 55344
Fax: (952) 925-8848
(b) If to Employee
Mark A. Cohn
20400 Lakeview Avenue
Deephaven, MN
With copy to:
Bruce J. Parker
Kaplan, Strangis and Kaplan, P.A.
5500 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402
or to such other addresses as may be set forth in a written notice given by
either party to the other party in the manner described in this section.
7.2 Heading. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement or as in
any way limiting or amplifying the terms and provisions hereof.
7.3 Severability. In case this Agreement, or any one or more of the
provisions hereof, shall be held to be invalid, illegal or unenforceable within
any governmental jurisdiction or subdivision thereof, this Agreement or any such
provision or provisions shall not as a result thereof be deemed to be invalid,
illegal or unenforceable in any other governmental jurisdiction or subdivision
thereof. In case any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any
other respect, such invalidity, illegality or unenforceable provision shall be
deemed as though it had never been contained herein and there shall be deemed
substituted, such other provision as will most nearly accomplish the intent of
the parties to the extent permitted by applicable law.
7.4 Entire Agreement. This Agreement and the Employment Agreement
contain the entire agreement of the parties hereto with respect to the subject
matter hereof. Any amendment to this Agreement shall not be effective unless it
is in writing and signed by both parties.
7.5 No Waiver. The failure of Company at any time to enforce any
provision hereof shall not affect its right thereafter to enforce the same, nor
shall the waiver by Company
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of any breach of any provision hereof be construed to be a waiver of any
succeeding breach of any such provision, or as a waiver of the provision itself.
7.6 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
7.7 Arbitration. In the event of a dispute between the Company and
the Employee hereunder, it is the intention of the parties that the dispute
shall be resolved as expeditiously as possible, consistent with fairness to both
sides. Accordingly, any claim or dispute relating to the entitlement of the
Employee to benefits hereunder or the amount thereof, shall be resolved by
binding private arbitration before three arbitrators. Either party may request
arbitration by written notice to the other party. Within 30 days of receipt of
such notice by the opposing party, each party shall appoint a disinterested
arbitrator and the two arbitrators selected thereby shall appoint a third
neutral arbitrator. In the event the two arbitrators cannot agree upon the third
arbitrator within 10 days after their appointment, then the neutral arbitrator
shall be appointed by the Chief Judge of Hennepin County (Minnesota) District
Court. Any arbitration proceeding conducted hereunder shall be in the City of
Minneapolis and shall follow the procedures set forth in the Rules of Commercial
Arbitration of the American Arbitration Association, and both sides shall
cooperate in as expeditious a resolution of the proceeding as is reasonable
under the circumstances. The arbitration panel shall have the power to enter any
relief it deems fair and just on any claim, including interim and final
equitable relief, along with any procedural order that is reasonable under the
circumstances. Any award rendered by any arbitration panel, or a majority
thereof, may be filed and a judgment obtained in any court having jurisdiction
over the parties unless the relief granted in the award is delivered within 10
days of the award.
7.8 Successors. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Employee, such obligations have been
assumed by the successor as a matter of law. The Employee's rights under this
Agreement shall inure to the benefit of, and shall be enforceable by, the
Employee's legal representative or other successors in interest, but shall not
otherwise be assignable or transferable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as the day and year first above written.
iNTELEFILM CORPORATION
By: /s/ Judite Fluger
-----------------------------------------------
Its: General Counsel
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OPTIONEE
/s/ Mark A. Cohn
--------------------------------------------------
Mark A. Cohn
20400 Lakeview Avenue
Deephaven, MN
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EXHIBIT A
OPTION VESTING SCHEDULE
CUMULATIVE NO. OF SHARES
DATE EXERCISABLE
---- -----------
Effective Date through
first anniversary -0-
First Anniversary date of
Effective Date, plus one day 500,000
September 6, 2003 750,000
September 6, 2004 1,000,000
The above vesting schedule assumes an ongoing relationship with the
Company. Your rights to exercise the unvested portion of your option may cease
upon certain terminations of your relationship as provided in Section 2 of this
Agreement.
OPTIONEE INTELEFILM CORPORATION
/s/ Mark A. Cohn By: /s/ Judite Fluger
- ----------------------------------- ----------------------------------
Mark A. Cohn Judite Fluger
General Counsel
A-1
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SCHEDULE I - NOTATIONS AS TO PARTIAL EXERCISE
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Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
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