-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FzzZpfiYASjqRBv01vTcvLMMRx6yWrCJxtGKH87vaA3QRdxmv+rXO6H4qc89HAs5 pywNCf7WGWQhxhpkuNrbmA== 0000950137-02-000414.txt : 20020414 0000950137-02-000414.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950137-02-000414 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020115 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELEFILM CORP CENTRAL INDEX KEY: 0000882160 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 411663712 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21534 FILM NUMBER: 02521615 BUSINESS ADDRESS: STREET 1: 5501 EXCELSIOR BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55416 BUSINESS PHONE: 6129258840 MAIL ADDRESS: STREET 1: 5501 EXCELSIOR BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55416 FORMER COMPANY: FORMER CONFORMED NAME: CHILDRENS BROADCASTING CORP DATE OF NAME CHANGE: 19951102 8-K 1 c67219e8-k.txt CURRENT REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 January 15, 2002 Date of Report (Date of earliest event reported) INTELEFILM CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 0-21534 41-1663712 (State or other jurisdiction (Commission File No.) (IRS Employer ID No.) of incorporation) 6385 Old Shady Oak Road, Suite 290, Eden Prairie, Minnesota 55344 (Address of principal executive offices) (952) 925-8840 (Registrant's telephone number, including area code) ================================================================================ ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS The Registrant announced on January 16, 2002 that it had completed the sale of the stock of its commercial production subsidiary, Chelsea Pictures, Inc. to the Chelsea Pictures management group comprised of Steve Wax, Lisa Mehling and Alison Amon (collectively the "Chelsea Management Group"). The Chelsea Management Group paid $785,000 in proceeds to the Registrant, consisting of cash at closing of $250,000 and a promissory note for $585,000. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired Not applicable. (b) Pro Forma Financial Information The following unaudited pro forma condensed financial statements are filed with this report: Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2001 Pro Forma Condensed Consolidated Statements of Income: Year Ended December 31, 2000 Nine Months Ended September 30, 2001 This unaudited pro forma financial information sets forth the impact of the sale of the stock of the Registrant's commercial production subsidiary, Chelsea Pictures, Inc., to the Chelsea Management Group. The Chelsea Management Group paid $785,000 in proceeds to the Registrant, consisting of cash at closing of $250,000 and a promissory note of $585,000. The note is payable in variable installments over a three year term and bears interest at a variable rate. The note is secured by the acquired Chelsea Pictures, Inc. stock, and 200,000 shares of iNTELEFILM common stock held by the Chelsea Management Group. The note limits personal recourse against the Chelsea Management Group to $150,000. The Company will use the sale proceeds for working capital. The sale transaction was consummated on January 15, 2002 and will be effective January 1, 2002. The pro forma adjustments are based upon information currently available and on certain assumptions, described within the footnotes to the pro forma financial statements, that management of the Company believes are necessary and reasonable for a fair presentation of the pro forma financial information. The pro forma financial information and accompanying notes should be read in conjunction with the historical consolidated financial statements of the Company for the fiscal year ended December 31, 2000 and for the interim period ended September 30, 2001. The objective of the unaudited pro forma financial information is to show what the significant effects on the historical financial statements might have been had the sale of Chelsea Pictures, Inc. occurred, for balance sheet purposes, on September 30, 2001, and, for statement of operations purposes, on January 1, 2000. However, the pro forma balance sheets are not necessarily indicative of the effects of the Company's financial position that would have been attained had the transaction occurred earlier. The unaudited pro forma statements of operations and balance sheets do not purport to present the Company's consolidated results of operations and financial position as they might have been, or as they may be in the future, had the transaction occurred on the assumed date. STATEMENTS OF OPERATIONS:
Pro forma adjustments for Pro forma after sale of the sale of the stock of stock of iNTELEFILM Chelsea Chelsea Corporation Pictures, Inc. Pictures, Inc. ------------------------------------------------------------------------ ----------------- Nine months ended September 30, 2001: Revenues $31,695,953 $ (17,129,165)(1) $ 14,566,788 Operating expenses 39,783,004 (17,682,540)(1) 22,100,464 ------------------------------------------------------------------- ----------------- Income (loss) from operations (8,087,051) 553,375 (7,533,676) Other income (expense) 50,358 -- 50,358 Minority interest 160,000 -- 160,000 Interest income (expense) - net (468,559) 127,846 (2) (340,713) ------------------------------------------------------------------- ----------------- Net income (loss) $(8,345,252) $ 681,221 $ (7,664,031) =================================================================== ================= Basic and diluted net loss per share $ (1.24) $ (1.14) =========== ============= Weighted average number of shares outstanding 6,712,000 6,712,000 =========== =============
(1) To eliminate the revenue and operating expenses of Chelsea Pictures, Inc. (2) To eliminate interest expense totaling $105,210 associated with a line of credit utilized in the operations of Chelsea Pictures, Inc. and to add interest income of $22,636 associated with the acquisition note receivable.
Pro forma adjustments for Pro forma after sale of the sale of the stock of stock of iNTELEFILM Chelsea Chelsea Corporation Pictures, Inc. Pictures, Inc. ------------------------------------------------------------------------- ----------------- Year Ended December 31, 2000 Revenues $ 66,997,559 $ (22,960,137)(1) $ 44,037,422 Operating expenses 77,831,077 (22,636,981)(1) 55,194,096 -------------------------------------------------------------------- ---------------- Income (loss) from operations (10,833,518) (323,156) (11,156,674) Other income (expense) (259,724) 8,744 (250,980) Interest income (expense) - net 148,751 74,108 (2) 222,859 -------------------------------------------------------------------- ---------------- Net income (loss) $(10,944,491) $ (240,304) $(11,184,795) ==================================================================== ================ Basic and diluted net loss per share $ (1.70) $ (1.74) ============ ============ Weighted average number of shares outstanding 6,437,000 6,437,000 ============ ============
(1) To eliminate the revenue and operating expenses of Chelsea Pictures, Inc. (2) To eliminate interest expense totaling $45,113 associated with a line of credit utilized in the operations of Chelsea Pictures, Inc. and to add interest income of $28,995 associated with the acquisition note receivable. BALANCE SHEET:
Pro forma adjustments for Pro forma after sale of the sale of the stock of stock of iNTELEFILM Chelsea Chelsea Corporation Pictures, Inc. Pictures, Inc. ----------------------------------------------------------------------- ---------------- September 30, 2001 Current assets 7,569,016 (2,350,764)(1)(2) 5,218,252 Property and equipment - net 2,606,902 (136,429)(1) 2,470,473 Intangible assets - net 5,197,508 (1,035,116)(1) 4,162,392 Note receivable -- 585,000 (3) 585,000 ------------------------- ---------------- Total assets 15,373,426 (2,937,309) 12,436,117 ========================= ================ Current liabilities 11,837,294 (2,304,680)(2)(3) 9,532,614 Long-term debt 420,223 -- 420,223 Minority interest 1,322,484 (20,049)(2) 1,302,435 Shareholders' equity 1,793,425 (612,580) 1,180,845 ------------------------- ---------------- Total liabilities and shareholders' equity 15,373,426 (2,937,309) 12,436,117 ========================= ================
(1) To eliminate the assets of Chelsea Pictures, Inc. (2) To eliminate the liabilities of Chelsea Pictures, Inc. which were assumed by virtue of the purchase of the common stock and to eliminate the minority interest associated with stock options earned by the Chelsea Management Group which were cancelled pursuant to the sale transaction. (3) To reflect receipt of the sale proceeds of $250,000 in cash and a note receivable of $585,000 net of an accrual for estimated disposition costs of $127,500. (c) Exhibits 10.1 Stock Purchase Agreement by and between the Company, and Alison Amon, Lisa Mehling and Steve Wax dated January 15, 2002 10.2 Stock Pledge Agreement by and between the Company, and Alison Amon, Lisa Mehling and Steve Wax dated January 15, 2002 10.3 Promissory Note made by Alison Amon, Lisa Mehling and Steve Wax for the benefit of the Company dated January 1, 2002 99.1 Press Release dated January 16, 2002 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: January 30, 2002 iNTELEFILM Corporation /s/ Mark A Cohn ----------------------------------------- Mark A. Cohn ITS: Chief Executive Officer EXHIBIT INDEX 10.1 Stock Purchase Agreement by and between the Company, and Alison Amon, Lisa Mehling and Steve Wax dated January 15, 2002 10.2 Stock Pledge Agreement by and between the , and Alison Amon, Lisa Mehling and Steve Wax dated January 15, 2002 10.3 Promissory Note made by Alison Amon, Lisa Mehling and Steve Wax for the benefit of the Company dated January 1, 2002 99.1 Press Release dated January 16, 2002 EX-10.1 3 c67219ex10-1.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.1 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT ("Agreement") entered into by and among iNTELEFILM, Corp., a Minnesota corporation ("iNTELEFILM") and Allison Amon, Lisa Mehling and Steve Wax (the "Principals"). iNTELEFILM is the sole owner of 9,200 shares (the "Shares") of common stock ("Common Stock") of Chelsea Pictures, Inc., a Massachusetts corporation (the "Company"), which represents all of the issued and outstanding shares of the Company. The Principals now desire to purchase all of the Shares so that the Principals will become the Company's sole stockholders. iNTELEFILM has agreed to sell all of the Shares to the Principals, on the terms and conditions hereinafter provided. ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Principals and iNTELEFILM agree as follows: 1. PURCHASE AND SALE OF SHARES. Upon the terms and subject to the conditions contained in this Agreement, at the Closing (as defined in Section 3 below), iNTELEFILM shall sell, assign, transfer and deliver to the Principals, and the Principals will accept and purchase from iNTELEFILM, all of the Shares, free and clear of all liens and encumbrances. The shares shall be transferred to the Principals so that each Principal owns one third (1/3) of the Shares. 2. PURCHASE PRICE AND PAYMENT. The aggregate price to be paid by the Principals to iNTELEFILM for the Shares shall be $785,000.00, of which (i) $250,000 shall be payable by wire transfer upon the Closing and (ii) the balance shall be in the form of the Principals' Promissory Note, a copy of which is attached hereto as EXHIBIT A (the "Note"). The Principals' obligations under the Note shall be secured by a pledge of the Shares and certain shares of stock in iNTELEFILM, pursuant to a mutually satisfactory Stock Pledge Agreement (the "Stock Pledge Agreement") In the event of a default by the Principals, iNTELEFILM's recourse shall be limited to $150,000.00 against the Principals, jointly and severally, and for the value of the Pledged Shares pursuant to the Stock Pledge Agreement. 3. CLOSING. The closing of the purchase and sale of the Shares (the "Closing") will take place at the offices of the Company, 122 Hudson Street, New York, New York, on or before January 15, 2002, at such time as is mutually acceptable to the parties, and shall be effective as of 12:01 A.M. January 1, 2002 (the "Effective Date"). At the Closing, (i) iNTELEFILM shall deliver to the Principals the certificate(s) representing the Shares duly endorsed for transfer, or accompanied by duly executed stock transfer powers; (ii) the Principals shall wire transfer the cash portion of the purchase price; (iii) the Principals shall deliver to iNTELEFILM the Note; (iv) each party shall deliver to the other party the Stock Pledge Agreement; (v) iNTELEFILM shall deliver the written resignations, effective as of the date of the Closing, of all of the current officers and Directors of the Company (the "Resignations"); (vi) iNTELEFILM shall deliver to the Principals the articles of incorporation of the Company and all amendments thereto, and the by-laws of the Company, duly certified by the Secretary as being in full force and effect on the Closing date; (vii) iNTELEFILM shall deliver to the Principals certificates of good standing for the State of Massachusetts and each other state which the Company is qualified as a foreign corporation; (viii) iNTELEFILM shall deliver to the Principals the complete and correct minute books, stock ledgers, and stock transfer records of the Company; (ix) iNTELEFILM shall deliver to the Principals UCC-3 termination statements terminating all security interests in the Shares or assets of the Company held by Westminster Properties, Broeckner and General Electric Capital Corporation; and (x) iNTELEFILM shall deliver to the Principals a true and complete copy, certified by the Secretary of iNTELEFILM, of resolutions duly and validly adopted by the Board of Directors of iNTELEFILM evidencing their authorization of the execution of this Agreement and the transactions contemplated thereby. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PRINCIPALS. Each of the Principals hereby represents, warrants and covenants to iNTELEFILM, severally and not jointly, which representations, warranties and covenants shall survive the Closing for a period of two years, as follows: (a) Authority. He or she has legal capacity to enter into this Agreement and to purchase the Shares from iNTELEFILM, as contemplated by this Agreement, which he or she is freely and willingly doing, and this Agreement is his or her legal and binding obligation, enforceable against him or her in accordance with its terms. (b) Disclosure. The Principals are familiar with the affairs and financial condition of the Company, and have no knowledge of any material event or condition affecting the business, assets or prospects of the Company, the existence or occurrence of which has not been disclosed to iNTELEFILM, including but not limited to any liability relating to real property, personal property, environmental matters, ERISA Plans and other employee benefit plans, tax matters and intellectual property. In entering into this Agreement and consummating the transactions contemplated hereby, the Principals are not relying on any representation or warranty of iNTELEFILM or any other person, except as otherwise expressly provided in this Agreement. (c) Brokers. Neither the Principals nor anyone acting on their behalf, has engaged, retained, or incurred any liability to any broker, investment banker, finder or agent or has agreed to pay any brokerage fees, commissions, finder's fees or other fees with respect to the sale of the Shares, this Agreement or the transactions contemplated hereby. (d) Securities Laws. He or she is acquiring the Shares for his or her own account for investment and not with a view to or for sale in connection with any distribution thereof. He or she will not offer to sell or otherwise transfer any of the Shares in violation of any federal or state securities law. -2- (e) Post-Closing Compensation. Aggregate base salaries for the Principals shall not exceed $650,000 until the outstanding principal balance of the Note is less than $335,000. If a bonus is paid to any of the Principals prior to iNTELEFILM receiving $250,000 of principal payments on the Note, iNTELEFILM will receive 20% of such bonus. In addition, in no event will a bonus be paid to any of the Principals, while any portion of the Note remains unpaid, if such payment would cause the working capital of the Company to become less than zero. (f) Financial Statements. To their knowledge, the financial statements of the Company prepared by the Principals are substantially correct in all material respects and there has not been any material change in the financial condition of the Company since the latest financial statements. 5. REPRESENTATIONS AND WARRANTIES OF INTELEFILM. iNTELEFILM hereby represents and warrants to the Principals, which representations and warranties shall survive the Closing for a period of two years, that: (a) Title to Shares. It now owns and will, as of the Effective Date, own the Shares, free and clear of all liens, encumbrances, liabilities, security interests and restrictions of any nature whatsoever, except for the security interests referred to in Section 3(ix). The Shares are not subject to any restriction with respect to their transferability (other than restrictions on transfer under applicable federal and state security laws). No third party has a basis for any claims against the Shares, the Company, or the Principals with respect to the transactions contemplated hereby. (b) Authority. It has full power and authority to enter into this Agreement and to sell the Shares to the Principals, as contemplated by this Agreement, which it is freely and willingly doing. This Agreement has been duly authorized, executed and delivered by iNTELEFILM and constitutes its legal and binding obligation, enforceable against it in accordance with its terms. (c) Disclosure. It is familiar with the affairs and financial condition of the Company, and has no knowledge of any material event or condition affecting the business, assets or prospects of the Company, the existence or occurrence of which has not been disclosed to the Principals, including but not limited to any liability relating to real property, personal property, environmental matters, ERISA Plans and other employee benefit plans, tax matters and intellectual property. In entering into this Agreement and consummating the transactions contemplated hereby, it is not relying on any representation or warranty of the Principals or any other person, except as otherwise expressly provided in this Agreement. (d) Intercompany Indebtedness. There is no longer any intercompany indebtedness between iNTELEFILM and the Company, any such indebtedness having been satisfied in full, with the exception of $35,000.00 currently owing by the Company to iNTELEFILM, which shall be paid on or before January 31, 2001. (e) Signing Authority. Except as set forth on EXHIBIT B attached hereto, no person employed by or otherwise affiliated with iNTELEFILM has signing authority on any bank account of the Company or has been granted a power of attorney by the Company. (f) Brokers. iNTELEFILM has engaged, retained and incurred a liability to Mosaic Capital as broker, investment banker, finder or agent and shall pay any brokerage fees, commissions, finder's fees or other fees with respect to the sale of the Shares, this Agreement or the transactions contemplated hereby. With the exception of Mosaic Capital, neither iNTELEFILM nor anyone acting on its behalf has engaged, retained, or incurred any liability to any broker, investment banker, finder or agent or has agreed to pay any brokerage fees, commissions, finder's fees or other fees with respect to the sale of the Shares, this Agreement or the transactions contemplated hereby. -3- (g) Litigation. There is no action, suit, claim, proceeding, inquiry or investigation pending or, to the knowledge of iNTELEFILM, threatened, or facts known to iNTELEFILM that could lead to such an action, suit, claim or proceeding, against the Company, or the assets, properties, business or business prospects of the Company, or that could result in an encumbrance on the assets of the Company or the Shares, at law or in equity, or before or by any arbitrator or any federal, state, local or other governmental department, commission, board or agency. (h) The Shares. The Common Stock being sold represents the entire issued and outstanding capital stock of the Company, is fully paid and non-assessable. There are no options, warrants or other rights relating to the Common Stock, or any contractual obligations of the Company to purchase, redeem or otherwise acquire Common Stock. Upon the Closing, the Principals will own all of the issued and outstanding capital stock of the Company, free and clear of any liens and/or encumbrances. (i) Conflicting Instruments. The execution, delivery and performance of this Agreement does not and will not violate any provision of the Company's charter or by-laws, nor to the knowledge of iNTELEFILM does it conflict with or violate any statute, ordinance, law or regulation. (j) Third-Party Consents. iNTELEFILM is not required to obtain any third party consents in order to enter into this Agreement or to consummate the transactions contemplated thereby. (k) Tax Matters. (i) The Company in a timely manner has filed all returns and other reports required of it under all federal, state, local and foreign tax laws to which it is subject and has paid all taxes shown due on all returns. All such returns and reports are true, correct and complete in all material respects and accurately set forth all items to the extent required to be reflected or included in such returns by applicable federal, state, local or foreign tax laws, regulations or rules. The Company has paid in full or set up an adequate reserve in respect of all material taxes for the periods covered by such returns, as well as all other material taxes, penalties, interest, fines, deficiencies, assessments and governmental charges that have become due or payable. There are no audits pending and iNTELEFILM has not received any notice of a pending audit. (ii) The Company is not a party to a tax sharing agreement or similar arrangement. (iii) As used in this Agreement, the term "taxes" means any federal, state, local and foreign income, alternative, add-on minimum tax, or staff payroll tax, together with any interest, fine or penalty thereon, addition to tax, additional amount, deficiency, assessment or governmental charge imposed by any federal, state, local or foreign taxing authority. 6. CONDITIONS TO OBLIGATIONS OF THE PRINCIPALS. The obligations of the Principals to consummate this Agreement and the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of the following conditions precedent: (a) Representations, Warranties and Covenants. Each of the representations and warranties of iNTELEFILM contained in this Agreement shall remain true and correct at the Effective Date as fully as if made on the Effective Date, and iNTELEFILM shall have performed, on or before the Effective Date, all of its obligations under this Agreement, which by the terms hereof are to be performed on or before the Effective Date, including without limitation the delivery of the UCC-3 termination statements contemplated by Section 3(ix). -4- (b) No Pending Action. No legislation, order, rule, ruling or regulation shall have been proposed, enacted or made by or on behalf of any governmental body, department or agency, and no legislation shall have been introduced in either House of Congress or in the legislature of any state, and no investigation by any governmental authority shall have been commenced or threatened, and no action, suit, investigation or proceeding shall have been commenced before, and no decision shall have been rendered by, any court or other governmental authority or arbitrator, which, in any such case, in the reasonable judgment of the Principals, could adversely affect, restrain, prevent or rescind the transactions contemplated by this Agreement (including, without limitation, the purchase and sale of the Shares) or have a material adverse effect on the Company. (c) Purchase Permitted by Applicable Laws; Legal Investment. Subject to the representations and warranties made by the Principals in Section 4(e) hereof, the Principals' purchase of and payment for the Shares to be purchased by them (i) shall not be prohibited by any applicable law or governmental order, rule, ruling, regulation, release or interpretation, or any opinion of the Board of Governors of the Federal Reserve System or other regulatory agency (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), (ii) shall not subject the Principals to any penalty, tax, liability or, in the Principals' reasonable judgment, any other onerous condition under or pursuant to any applicable law, statute, ordinance, regulation or rule, (iii) shall not constitute a fraudulent or voidable conveyance under any applicable law and (iv) shall be permitted by all applicable laws, statutes, ordinances, regulations and rules of the jurisdictions to which the Principals is subject. (d) Proceedings Satisfactory. All proceedings taken in connection with the consummation of the transactions contemplated hereby shall be in form and substance reasonably satisfactory to the Principals and their counsel. (e) Resignations. The Principals shall have received the Resignations. (f) Confirmation from Counsel to iNTELEFILM. The Principals shall have received from counsel to iNTELEFILM a letter confirming the substance of the representations and warranties contained in Section 5 of this Agreement and such other matters as may reasonably be requested by the principals not less than five (5) days prior to the Closing. 7. CONDITIONS TO OBLIGATIONS OF INTELEFILM. The obligations of iNTELEFILM to consummate this Agreement and the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties of the Principals in this Agreement shall remain true and correct at the Effective Date, and the Principals shall, on or before the Effective Date, have performed all of their obligations under this Agreement, which by the terms hereof are to be performed by them on or before the Effective Date, including without limitation the execution and delivery of the Note and the Stock Pledge Agreement. (b) No Pending Action. No legislation, order, rule, ruling or regulation shall have been proposed, enacted or made by or on behalf of any governmental body, department or agency, and no legislation shall have been introduced in either House of Congress or in the legislature of any state, and no investigation by any governmental authority shall have been commenced or threatened, and no action, suit, investigation or proceeding shall have been commenced before, and no decision shall have been rendered by, any court or other governmental authority or arbitrator, which, in any such case, was not known by iNTELEFILM on the date hereof or which could adversely affect, restrain, prevent or rescind the transactions contemplated by this Agreement (including, without limitation, the purchase and sale of the Shares). -5- 8. INDEMNIFICATION. (a) Each party hereby agrees to indemnify, defend and hold the other and his successors and assigns harmless from and in respect of any and all losses, damages, costs and expenses of any kind and nature whatsoever (including, without limitation, interest and penalties, reasonable expenses of investigation and court costs, reasonable attorneys' fees and disbursements and the reasonable fees and disbursements of other professionals) which may be sustained or suffered by any of them (collectively, "Losses"), arising out of or resulting from any breach or inaccuracy of any representation or warranty or the breach of or failure to perform any warranty, covenant, undertaking or other agreement contained in this Agreement. (b) iNTELEFILM agrees to indemnify, defend and hold harmless each of the Principals and each of his or her successors and assigns from and in respect of any and all Losses arising out of or resulting from any act or omission that the Principals are not aware, of iNTELEFILM, its officers, directors, or agents acting specifically on behalf of iNTELEFILM and that occurred between March 4, 1999 and the Closing. (c) The Principals agree to indemnify, defend and hold harmless iNTELEFILM and its successors and assigns from and in respect of any and all Losses arising out of or resulting from any act or omission of the Principals that iNTELEFILM is not aware of and that occurred after March 4, 1999. (d) If there occurs an event which a party asserts is an indemnifiable event pursuant to Section 8(a), (b) and (c), the parties seeking indemnification shall promptly notify the other parties obligated to provide indemnification (collectively, the "Indemnifying Party"). If such event involves the commencement of any action, suit or proceeding by a third person, the party seeking indemnification will give such Indemnifying Party prompt written notice of the commencement of such action, suit or proceeding, provided, however, that the failure to provide prompt notice as provided herein will relieve the Indemnifying Party of its obligations hereunder only to the extent that such failure prejudices the Indemnifying Party hereunder. In case any such action, suit or proceeding shall be brought against any party seeking indemnification and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it desires to do so, to assume the defense thereof, with counsel reasonably satisfactory to such party seeking indemnification and, after notice from the Indemnifying Party to such party seeking indemnification of such election so to assume the defense thereof, the Indemnifying Party shall not be liable to the party seeking indemnification hereunder for any attorneys' fees or any other expenses, in each case subsequently incurred by such party, in connection with the defense of such action, suit or proceeding. The party seeking indemnification agrees to cooperate fully with the Indemnifying Party and its counsel in the defense against any such action, suit or proceeding. In any event, the party seeking indemnification shall have the right to participate at its own expense in the defense of such action, suit or proceeding. In no event shall an Indemnifying Party be liable for any settlement or compromise effected without his prior consent. (e) Any and all claims made under this Agreement may be made from Closing until the second anniversary of the Closing. -6- (f) Notwithstanding anything to the contrary herein, express or implied in this Section 8, no Principal shall be required to indemnify another party by virtue of a breach of a representation or warranty of any other Principal. 9. POST-CLOSING MATTERS. (a) Certain Company Obligations. The Principals shall cause the Company to use all commercially reasonable efforts to effect the release of any guaranty by iNTELEFILM of Company obligations, including but not limited to those to American Express, Entertainment Partners and any applicable insurance carriers. In no event, however, shall such efforts require the Principals to undertake personal liability with respect to such obligations. The Company shall indemnify iNTELEFILM and hold iNTELEFILM harmless with respect to all such Company obligations that arise from and after the Effective Date. (b) Post-Closing Cooperation. The Principals and iNTELEFILM shall cooperate with each other as reasonably necessary to complete an audit of the Company's 2001 financial statements and the preparation of the Company's 2001 tax returns and the establishment of an Effective Date balance sheet for the Company. (c) Subordination. iNTELEFILM agrees to subordinate its $150,000.00 limited recourse rights under the Note to a commercial bank for a working capital line for the Company with a maximum amount of $500,000. iNTELEFILM's subordination shall be conditioned to iNTELEFILM's review of the working capital line agreement to verify that such working capital line agreement will not limit iNTELEFILM's ability to receive Note payments or to enforce its rights and remedies in the event of a default on the Note. 10. MISCELLANEOUS. (a) Fees and Expenses. Each of the parties hereto will pay and discharge his, her or its own expenses and fees in connection with the negotiation of and entry into this Agreement and the consummation of the transactions contemplated hereby. (b) Survival of Representations, Warranties and Covenants. The covenants, agreements, representations, and warranties entered into pursuant to this Agreement shall be continuing and shall survive the Closing for a period of two years from the Closing. (c) Notices. All notices, requests, demands, consents and communications necessary or required under this Agreement shall be made in the manner specified, or, if not specified, shall be delivered by hand or sent by certified mail, return receipt requested, or by telecopy (receipt confirmed) to: if to the Principals: c/o Chelsea Pictures, Inc. 122 Hudson Street New York, NY 10013 with a copy by fax to: Frederick H. Grein, Jr., Esq. (Fax) 617-951-1295 and -7- Allegaert Berger & Vogel LLP 111 Broadway, 18th Floor New York, NY 10006 Attention: David Berger (Fax) 212-571-0555 and Frankfurt Garbus Kurnit Klein & Selz, P.C. 488 Madison Ave, 9th Floor New York, NY 10022 Attention: Gary Schonwald (Fax) 212-593-9175 if to iNTELEFILM: Crosstown Corporate Center 6385 Old Shady Oak Road - Suite 290 Eden Prairie, MN 55344-3299 952-925-8840 with a copy by fax to: Judite Fluger, Esq. Crosstown Corporate Center 6385 Old Shady Oak Road - Suite 290 Eden Prairie, MN 55344-3299 952-925-8845 (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, legal representatives, successors and assigns. (e) Descriptive Headings. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. (g) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason in any jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that each of parties' rights and privileges shall be enforceable to the fullest extent permitted by law, and any such invalidity, illegality and unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the fullest extent permitted by law, the parties hereby waive any provision of any law, statute, ordinance, rule, or regulation, which might render any provision hereof invalid, illegal, or unenforceable. -8- (h) Governing Law. This Agreement and the validity hereof and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely in such State, without giving effect to the conflicts of laws provisions thereof. (i) Entire Agreement. This Agreement, including the Exhibits referred to herein, is complete, and all promises, representations, understandings, warranties and agreements with reference to the subject matter hereof, and all inducements to the making of this Agreement relied upon by all the parties hereto, have been expressed herein or in said Exhibits. This Agreement may not be amended except by an instrument in writing signed on behalf of the Principals and iNTELEFILM. This Agreement supersedes and severs all previously executed agreements, including but not limiting to employment contracts and operating agreements and the obligations thereto by and between the Principals, the Company and iNTELEFILM. [The remainder of this page is intentionally left blank.] -9- IN WITNESS WHEREOF, the Principals and iNTELEFILM have executed this Agreement under seal. INTELEFILM, CORP. By: /s/ Richard Wiethorn ------------------------------------- Its: Chief Financial Officer /s/ Allison Amon ----------------------------------------- ALLISON AMON /s/ Lisa Mehling ----------------------------------------- LISA MEHLING /s/ Steve Wax ----------------------------------------- STEVE WAX EX-10.2 4 c67219ex10-2.txt STOCK PLEDGE AGREEMENT EXHIBIT 10.2 STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made and entered into as of January 1, 2002 by and among iNTELEFILM, Corp. a Minnesota corporation ("iNTELEFILM") and Allison Amon, Lisa Mehling and Steve Wax (the "Principals"). A. Concurrently herewith, the Principals are executing and delivering to iNTELEFILM, a Promissory Note dated as of the date hereof in the principal amount of $535,000.00 (the "Note"); and B. iNTELEFILM is willing to accept the Principals' Note so long as the Principals pledge the shares of Common Stock in Chelsea Pictures, Inc. (the "Company") owned by them and 200,000 shares of common stock in iNTELEFILM owned by Mr. Wax (the " iNTELEFILM Stock" and, together with the pledged shares of Company Common Stock, the "Pledged Shares") to iNTELEFILM as security for the payment of the Note. Concurrently herewith, the Principals are executing and delivering to iNTELEFILM, an Assignment dated as of the date hereof for the herein referenced Pledged Shares. ACCORDINGLY, in consideration of the premises and of the covenants herein contained, the parties hereto agree as follows: 1. PLEDGE. As security for the prompt and complete payment when due of the unpaid principal of, and interest on, the Note, the Principals hereby pledge to iNTELEFILM, and grant to iNTELEFILM a security interest in, the Pledged Shares. iNTELEFILM hereby agrees to lift any restrictions on the iNTELEFILM Stock in the event that that Mr. Wax desires to substitute for the iNTELEFILM Stock unencumbered cash or money market accounts having an aggregate value equal to the value as of the date hereof of the iNTELEFILM Stock so long as the Principals are not in default of their payment of principal and interest under the Note when it becomes due. 2. DELIVERY OF THE PLEDGED SHARES. All certificates or instruments representing or evidencing the Pledged Shares shall be promptly delivered by the Company or the Principals to a mutually acceptable designee to be held on behalf of iNTELEFILM pursuant hereto, and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to iNTELEFILM. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement and until such time as there exists a Default under the Note (as such term is defined in the Note), the Principals shall be entitled to all voting rights with respect to the Pledged Shares, and shall be entitled to receive all cash dividends and distributions paid in respect of the Pledged Shares. From and after the occurrence of, and during the continuance of, any Default, iNTELEFILM shall retain all such cash dividends and distributions payable on the Pledged Shares as additional security hereunder. 4. RESTRICTION ON TRANSFER. The Company and each of the Principals agree that for as long as this Agreement remains in effect, it/he/she will not sell, transfer or otherwise dispose of all or any of its/his/her shares of or rights to acquire the Pledged Shares now owned or hereafter acquired except in compliance with this Agreement. 5. STOCK DIVIDENDS, DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, any of the Principals becomes entitled to receive or receives any securities or other property in respect of, in substitution for, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), the Principals shall, upon reasonable request by iNTELEFILM, accept such securities or other property on behalf of, and for the benefit of, iNTELEFILM as additional security for the Principals 's obligations under the Note and shall promptly deliver such additional security to the Clerk of the Company, together with such duly executed forms of assignment as iNTELEFILM may reasonably request, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 6. DEFAULT. Upon the occurrence of a Default, iNTELEFILM may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the Pledged Shares and receive dividends and distributions with respect to the Pledged Shares) and shall have, and may exercise, any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Massachusetts or otherwise available to iNTELEFILM under applicable law. Without limiting the foregoing, iNTELEFILM is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten (10) business days written notice to the Principals c/o the Company at the address provided in the Stock Purchase Agreement, at such price or prices and upon such terms as iNTELEFILM may deem advisable. The Principals shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, iNTELEFILM may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the aggregate indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to the Principals and the Principals shall be entitled to the return of any of the Pledged Shares remaining in the custody of iNTELEFILM. For a period of up to one year following a default, the Principals agree to continue their employment with the Company and at the option of iNTELEFILM at a maximum aggregate annual compensation of $650,000 to facilitate the orderly sale of the Pledged Shares. Nothing herein shall derogate any rights by either party under the laws of the State of New York. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon full payment of all principal and interest evidenced by the Note, iNTELEFILM shall promptly release all Pledged Shares to the Principals, together with all forms of assignment reasonably requested by the Principals and other documentation reasonably requested by the Principals relating to them. 8. FURTHER ASSURANCES. Each Party agrees that at any time, and from time to time, upon the reasonable written request of the other Party, such Party shall promptly execute and deliver such further documents, and promptly do such further acts and things, as are reasonably necessary in order to effect the purposes of this Pledge Agreement. 9. CERTAIN AGREEMENTS OF THE PRINCIPALS. (a) Continuous Security Interest. The Principals hereby agree that, until performance in full of all the Principals' obligations under the Note and this Pledge Agreement, all rights, powers and remedies granted to iNTELEFILM hereunder shall continue to exist and may be exercised by iNTELEFILM at any time and from time to time, irrespective of the fact that payment of any amount owing on account of the Note or otherwise may have become barred by any statute of limitations, the Principals hereby waiving the right to plead any statute of limitations to the full extent permitted by law. 2 (b) Security Interest Absolute. To the maximum extent permitted by law, all rights of iNTELEFILM, all security interest hereunder, and all obligations of the Company and the Principals hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any of the secured obligations or any other agreement or instrument relating thereto, including the Note; (ii) any change in the time, manner, or place of payment of, or in any other term of, all of any of the secured obligations, or any other amendment or waiver of or any consent to any departure from the Note, or any other agreement or instrument relating thereto; (iii) any exchange, release, or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty for all or any of the secured obligations; or (iv) any other circumstances that might otherwise constitute a defense available to, or a discharge of, the Company or the Principals. (c) Waiver of Notice. The Principals hereby agree that iNTELEFILM shall be under no duty or obligation whatsoever to make or give any presentments, demands for performance, notice of nonperformance, protests, notice of protest or notices of dishonor hereunder or in connection with the Pledged Shares or any obligations, evidences of indebtedness at any time constituting any part of the Pledged Shares, or in connection with the Note or any other obligations secured hereby. (d) Waiver of Marshaling Rights. The Principals hereby waive any right to require iNTELEFILM to proceed against any person, proceed against or exhaust any collateral or pursue any other remedy in iNTELEFILM's power, or to pursue any of such rights, if any, in any particular order or manner, and the Principals waive any defenses arising by reason of any disability or other defense of any other person. (e) Undertaking to Inform iNTELEFILM. The Principals hereby undertake to inform iNTELEFILM promptly of any change in the Company's business that is likely to have a material adverse financial effect on the Company. 10. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto. 11. ENTIRE AGREEMENT. This Pledge Agreement, together with the Note and the Guaranty by the Company in favor of iNTELEFILM of the same date as the date hereof, represents the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral and written and all concurrent oral agreements, understandings, discussions and negotiations. This Pledge Agreement may not be amended, supplemented or otherwise modified except in a writing signed by the parties hereto. 12. HEADINGS. The headings in this Pledge Agreement are for the purpose of reference only and shall not limit or otherwise affect the terms or provisions hereof. 3 13. NO WAIVER. The rights, powers and remedies given to iNTELEFILM by this Pledge Agreement shall be in addition to all rights, powers and remedies given to or now or hereafter existing in iNTELEFILM by virtue of the Note and any applicable statute or rule of law; each and every right, power and remedy, whether herein specifically given or otherwise existing, may be exercised from time to time and so often and in such order as may be deemed expedient by iNTELEFILM, and the exercise, or the beginning of the exercise, of any such right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter any other right, power or remedy. Any forbearance or failure or delay by iNTELEFILM in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy shall not preclude the further exercise thereof. 14 APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of New York. 15. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason in any jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that each of parties' rights and privileges shall be enforceable to the fullest extent permitted by law, and any such invalidity, illegality and unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the fullest extent permitted by law, the parties hereby waive any provision of any law, statute, ordinance, rule or regulation which might render any provision hereof invalid, illegal or unenforceable. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. 4 IN WITNESS WHEREOF, the Parties have entered into this Pledge Agreement as of the date first set forth above. INTELEFILM, CORP. By: /s/ Richard Wiethorn -------------------------------------- Its: Chief Financial Officer /s/ Allison Amon ----------------------------------------- ALLISON AMON /s/ Lisa Mehling ----------------------------------------- LISA MEHLING /s/ Steve Wax ----------------------------------------- STEVE WAX EX-10.3 5 c67219ex10-3.txt PROMISSORY NOTE EXHIBIT 10.3 NON-NEGOTIABLE LIMITED RECOURSE PROMISSORY NOTE $535,000.00 JANUARY 1, 2002 FOR VALUE RECEIVED, the undersigned, Allison Amon, Lisa Mehling and Steve Wax, ("Makers"), jointly and severally, hereby promise to pay to iNTELEFILM, Corp. (the "Holder"), on or before December 31, 2004, , the principal sum of Five Hundred Thirty-Five Thousand and 00/100 Dollars ($535,000.00), together with interest, as follows, (i) the first $250,000 of principal to be repaid will bear interest at the annual rate of 8%, and (ii) the final $285,000 will bear interest at the generally prevailing prime rate, as reported from time to time in The Wall Street Journal, adjusted quarterly. This Note is payable in installments, which shall include principal and interest, as follows: March 31, 2002 $ 40,000.00 June 30, 2002 $ 40,000.00 September 30, 2002 $ 40,000.00 December 31, 2002 $190,000.00 March 31, 2003 $ 20,000.00 June 30, 2003 $ 20,000.00 September 30, 2003 $ 20,000.00 December 31, 2003 $ 70,000.00 March 31, 2004 $ 20,000.00 June 30, 2004 $ 20,000.00 September 30, 2004 $ 20,000.00 December 31, 2004 All then unpaid principal and interest The obligations of the Makers under this Note are secured by a pledge of shares of the issued and outstanding common stock of Chelsea Pictures, Inc. and certain issued and outstanding shares of Holder's common stock (collectively, the "Shares"), pursuant to a Stock Pledge Agreement of even date entered into between the Makers and the Holder (the "Stock Pledge Agreement"). In the event of a default by the Principals, iNTELEFILM's recourse shall be limited to $150,000 against the Makers, jointly and severally, and for the value of the Pledged Shares (as defined in the Stock Pledge Agreement). If the date set for payment of principal or interest hereunder is a Saturday, Sunday or legal holiday, then such payment shall be made on the next succeeding business day. All payments hereunder shall be made by check, and delivered to the Holder at such address as to which it shall have notified the Makers from time to time in writing. Upon the occurrence of any Default (as defined below), Holder may declare any or all obligations or liabilities of Makers (including the unpaid principal hereunder, interest and late charges due thereon), immediately due and payable without presentment, demand, protest or notice. Following a Default in payment (as specified in paragraph (a), below, the unpaid principal balance of this Note will bear interest at the annual rate of 10%. At the option of the Holder, this Note, including the principal amount at such time remaining unpaid and interest accrued thereon, shall, without notice or demand, be declared to be and thereby become immediately due and payable for any of the following events of default (each a "Default"), if such default has not been cured. Each of the following shall be a Default unless the Holder consents to such action in writing, which consent may be withheld for any reason: (a) The failure to pay when due any payment of principal or interest herein required, if such failure continues for twenty (20) days after written notice of such failure from the Holder to each of the Principals c/o Chelsea Pictures, Inc. at the address provided in the Stock Purchase Agreement; (b) The merger or consolidation of Chelsea Pictures, Inc. with or into another entity unless the shareholders of Chelsea Pictures, Inc. prior to the merger or consolidation own more than fifty percent (50%) of the voting control of the surviving or resulting entity; (c) The sale by Chelsea Pictures, Inc. of all or substantially all of its assets or the liquidation or dissolution of Chelsea Pictures, Inc.; (d) The filing of a voluntary petition for an order of relief under the Bankruptcy Code by Chelsea Pictures, or any filing for relief under any state or federal insolvency statute by Chelsea Pictures; (e) The filing of an involuntary petition for an order of relief under the Bankruptcy Code against Chelsea Pictures, or any filing for relief under any other state or federal insolvency statute against Chelsea Pictures unless discharged or dismissed within ninety (90) days of the filing; or (f) Failure to provide financial information as follows: (i) Company financial statements within 45 days of each quarter's end; and (ii) Updated personal financial summaries of the Principals within 90 days of each calendar year end; If an Event of Default shall occur hereunder, the Makers shall pay the costs of collection, including reasonable attorneys' fees, incurred by the Holder in the enforcement hereof. The Makers may prepay the whole or any part of the principal of this note at any time and from time to time without premium or penalty. The Makers hereby waive demand, presentment, notice of dishonor, protest and notice of protest, and agree that the Holder hereof may extend the time for payment or accept partial payment without discharging or releasing the Makers. This Note shall be governed by and construed in accordance with the laws of the State of New York. -2- The provisions of this Note are severable. If any provision of this Note or the application thereof to any person or circumstance is held invalid, the provision or its application shall be modified to the extent possible to reflect the expressed intent of the parties but in any event, invalidity shall not affect other provisions or applications of this Note which can be given effect without the invalid provision or application. -3- This Note may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Note. IN WITNESS WHEREOF, the Makers have executed this note under seal as of the date first set forth above. /s/ Allison Amon ----------------------------------------- ALLISON AMON /s/ Lisa Mehling ----------------------------------------- LISA MEHLING /s/ Steve Wax ----------------------------------------- STEVE WAX EX-99.1 6 c67219ex99-1.txt PRESS RELEASE DATED 1/16/02 EXHIBIT 99.1 NEWS RELEASE FOR: INTELEFILM CORPORATION FOR: CHELSEA PICTURES Crosstown Corporate Center 111 Hudson Street 6385 Old Shady Oak Rd, #290 6th Floor Eden Prairie, MN 55344 New York, NY 10013 Mark A. Cohn, Chairman and CEO Steve Wax, President 952-925-8840 212-431-3434 INTELEFILM ANNOUNCES SALE OF CHELSEA PICTURES MINNEAPOLIS, MN, JANUARY 16, 2002 - iNTELEFILM Corporation (FILM) announced today that it has closed on the sale of one of its commercial production subsidiaries, Chelsea Pictures, to that company's management team. "We are pleased to have closed on the sale of Chelsea Pictures. This is the beginning of the unwinding of the Company's strategy of being a diversified media holding company. This shift in strategy, when completed, will result in a single business focus on webADTV, our majority-owned digital asset management company. We wish the management team of Chelsea Pictures continued success with their business," said Mark A. Cohn, Chairman and CEO of iNTELEFILM. Chelsea Pictures reports that it expects to continue its steady growth strategy, working with the best directors and advertising agencies. Steve Wax, President of Chelsea Pictures, commented, "Now that the cooks own the kitchen, Lisa, Allison, and I, along with our other executives and producers are moving forward energetically. We wish Mark and the iNTELEFILM family of companies success with their exciting new plans." ABOUT INTELEFILM iNTELEFILM Corporation FILM, based in Minneapolis, is currently a diversified media holding company. Individual companies managed under the iNTELEFILM umbrella include Curious Pictures, an animation company, New York and San Francisco; DCode, an advertising company, New York; and WebADTV, Inc., a technology company, Minneapolis. iNTELEFILM trades on the Over-the-Counter Bulletin Board under the symbol "FILM." Additional information on the Company can be found in the Company's filings with the Securities and Exchange Commission and on the Company's website: www.intelefilm.com. ABOUT CHELSEA PICTURES Beginning as a small regional company in Boston, Chelsea has become a national company with headquarters in New York and production offices in Los Angeles and Sydney, Australia. Working first with a group of feature directors known for the realism of their films, Chelsea built a reputation for creating emotional, honest television ads. In our thirteen years of existence, the company has produced over five hundred television spots for such clients as Mercedes, AT&T, Nike, and Microsoft. In addition to commercials, Chelsea produced the feature Unmade Beds, directed by Nicholas Barker, and released in August l998; and Killing Joe, Directed by Mehdi Norowzian, which was nominated for an Academy Award in 2000. Our staff includes Steve Wax, President, Allison Amon, Executive Producer, Lisa Mehling, Executive Producer/Head of Sales. -----END PRIVACY-ENHANCED MESSAGE-----