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 Section 240.14a-11(c) or Section 240.14a-12
Online System Services, Inc.
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed: April 21, 1997
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[Online System Services, Inc. Letterhead]
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders,
which will be held on Tuesday, May 20, 1997, at 2:30 p.m., Mountain Standard
Time, at the offices of the Company, 1800 Glenarm Place, Suite 800, Denver,
Colorado 80202.
At the meeting, the shareholders will elect directors of the Company and
transact such other items of business as are listed in the Notice of Annual
Meeting and more fully described in the Proxy Statement.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. Accordingly, please mark, sign and date the
enclosed proxy and return it promptly in the enclosed envelope to ensure that
your shares will be represented. If you do attend the meeting, you may, of
course, withdraw your proxy should you wish to vote in person.
Sincerely yours,
R. Steven Adams
President and Chief Executive Officer
April 18, 1997
ONLINE SYSTEM SERVICES, INC.
1800 Glenarm Place
Suite 800
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Online
System Services, Inc., a Colorado corporation (the "Company") will be held on
Tuesday, May 20, 1997, at 2:30 p.m. Mountain Standard Time at the offices of the
Company, 1800 Glenarm Place, Suite 800, Denver, Colorado 80202 for the
following purposes:
1. To elect seven nominees to the Board of Directors to serve for a term
of one year.
2. To approve an amendment to the Online System Services, Inc. 1995 Stock
Option Plan.
3. To ratify the appointment of Arthur Andersen LLP as the independent
accountants for the current fiscal year.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Only holders of record of common stock of the Company at the close of
business on April 10, 1997 will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY IN THE
REPLY ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
BY ORDER OF THE BOARD OF
DIRECTORS
Robert M. Geller
Secretary
April 18, 1997
PROXY STATEMENT
ONLINE SYSTEM SERVICES, INC.
1800 Glenarm Place
Suite 800
Denver, Colorado 80202
Annual Meeting of Stockholders - May 20, 1997
GENERAL
The enclosed Proxy is solicited by the Board of Directors of Online System
Services, Inc. (the "Company") for use at the annual meeting of the Company to
be held Tuesday, May 20, 1997 at 2:30 p.m. at the Company's offices, 1800
Glenarm Place, Suite 800, Denver, Colorado 80202, or any adjournment thereof.
Such solicitation is being made by mail and may also be made by directors,
officers and employees of the Company. Any Proxy given pursuant to such
solicitation may be revoked by the stockholder at any time prior to the voting
thereof by so notifying the Company in writing at the above address, attention:
Robert M. Geller, Secretary, or by appearing and voting in person at the
meeting. Shares represented by Proxies will be voted as specified in such
Proxies. In the absence of specific instructions, Proxies received by the Board
of Directors will be voted (to the extent they are entitled to be voted on such
matters): (1) in favor of the nominees for directors named in this Proxy
Statement; (2) for the amendment of the Online System Services, Inc. Stock
Option Plan of 1995 to increase the number of shares authorized under such plan
from 700,000 to 1,100,000; (3) for the ratification of the appointment of Arthur
Andersen LLP as the independent accountants of the Company and (4) in the
Proxies' discretion upon such other business as may properly come before the
meeting.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the material enclosed herewith will be paid by the Company.
The Company may reimburse banks, brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
material to beneficial owners of stock. This Proxy Statement and the Company's
Annual Report for the year ended December 31, 1996 are being mailed to
stockholders on or about April 18, 1997.
OUTSTANDING STOCK
Common Stock, no par value ("Common Stock"), of which there was 3,179,761
shares outstanding on the Record Date constitutes the only class of outstanding
voting securities issued by the Company. Each holder of Common Stock will be
entitled to cast one vote in person or by proxy for each share of Common Stock
held for the election of directors and for all other matters voted on at the
annual meeting. Only stockholders of record at the close of business on April
10, 1997 will be entitled to vote at the meeting (the "Record Date").
Information as to the name, address and stock holdings of each person known
by the Company to be a beneficial owner of more than 5% of its Common Stock and
as to the name, address and stock holdings of each director and nominee for
election to the Board of Directors and by all officers, directors, and nominees,
as a group, as of the Record Date is set forth below. Except as indicated
below, the Company believes that each such person has the sole (or joint with
spouse) voting and investment powers with respect to such shares.
Common Stock
-------------------------------
Name/Address Amount Percent
of Beneficially of
Stockholder/Director Owned Class(1)
- - ---------------------------------------- --------------- -------------
R. Steven Adams 500,000 15.7%
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Creative Business Strategies, Inc. 219,000(2) 6.7
5353 Manhattan Circle, Suite 201
Boulder, Colorado 80303
Robert M. Geller 183,333(3) 5.7
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Paul H. Spieker 178,333(4) 5.6
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Robert J. Lewis 54,370(5) *
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
H. Robert Gill 0(6) *
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Richard C. Jennewine 0(7) *
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
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Charles P. Spickert 60,000(8) *
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Directors and Officers as a Group 1,117,702(9) 33.5
(11 persons)
* Less than one percent of shares outstanding.
(1) In calculating percentage ownership, all shares of Common Stock which a
named stockholder has the right to acquire within 60 days from the date of
this Proxy Statement upon exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
owned by that stockholder, but are not deemed to be outstanding for the
purpose of computing the percentage of Common Stock owned by any other
stockholders.
(2) Includes options and warrants for the purchase of 100,000 and 5,000 shares
of Common Stock, respectively.
(3) Includes options for the purchase of 28,333 shares of Common Stock, but
excludes options for the purchase of 16,667 shares of Common Stock that are
not exercisable during the next 60 days.
(4) Includes options for the purchase of 28,333 shares of Common Stock, but
excludes options for the purchase of 16,667 shares of Common Stock that are
not exercisable during the next 60 days.
(5) Includes options and warrants for the purchase of 25,000 and 2,700 shares
of Common Stock, respectively.
(6) Excludes options for the purchase of 30,000 shares of Common Stock that are
not exercisable during the next 60 days.
(7) Excludes options for the purchase of 30,000 shares of Common Stock that are
not exercisable during the next 60 days.
(8) Includes options for the purchase of 50,000 shares of Common Stock, but
excludes options for the purchase of 15,000 shares of Common Stock that are
not exercisable during the next 60 days.
(9) Includes options and warrants for the purchase of 158,332 and 2,700 shares
of Common Stock, respectively, but excludes options for the purchase of
226,668 shares of Common Stock that are not exercisable during the next 60
days.
ELECTION OF DIRECTORS
Nomination and Election of Directors
The Company's by-laws provide that the size of the Board of Directors shall
be fixed from time to time by resolution of the stockholders, subject to
increase by resolution of the Board of Directors. In the event the stockholders
do not fix by resolution the number of directors, the by-laws provide that the
number of directors shall be three (3), subject to increase by resolution of the
Board of Directors. The Proxies granted by the stock holders will be voted at
the annual meeting for the election of the persons listed below as directors of
the Company.
Nominees for Director
---------------------
R. Steven Adams
Robert M. Geller
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Paul H. Spieker
Robert J. Lewis
H. Robert Gill
Richard C. Jennewine
Charles P. Spickert
In the event that one of more of the above named persons shall become
unavailable for election, votes will be cast pursuant to authority granted by
the enclosed proxy for such person or persons as may be designated by the Board
of Directors, unless the Board of Directors determines to reduce its size
appropriately.
Directors and Officers
The directors and executive officers of the Company are as follows:
Name Age Director Position
- - ---- --- -------- --------
Since
-----
R. Steven Adams............ 44 1994 President, Chief Executive
Officer and a Director
Thomas S. Plunkett......... 44 ---- Chief Financial Officer
Robert M. Geller........... 44 1995 Secretary and a Director
Paul H. Spieker............ 53 1995 Vice President-Technical
Operations and a Director
D. Kent McBride............ 44 ---- Vice President-Learning and
Performance
William Eager.............. 39 ---- Vice President-Web Services
Vincent D. Bradshaw....... 56 ---- Vice President-Sales
Robert J. Lewis............ 66 1995 Director
H. Robert Gill............. 60 1996 Director
Richard C. Jennewine....... 58 1996 Director
Charles P. Spickert........ 43 1997 Director
R. Steven Adams, founder of the Company, has served as President, Chief
Executive Officer and a director since the Company's incorporation in March
1994. From 1985 to 1994, Mr. Adams was President-Sheridan Hotel Management, a
full service hotel management company. Mr. Adams was the creator and founder of
HotelNet, which was an online information system for the hospitality industry.
Mr. Adams' experience includes software development, personal computer
manufacturing and management of online information systems.
Thomas S. Plunkett, has served as Vice President-Chief Financial Officer of
the Company since October 1996. From 1995 to 1996 Mr. Plunkett was the Vice
President of Business Management at Maxtor Corporation, a manufacturer of disk
drives. From 1994 to 1995 Mr. Plunkett was the Vice President of Operations for
Hi-Tech Manufacturing, an electronic manufacturing services company. From 1992
to 1994 he was a Controller at Conner Peripherals, a manufacturer of disk
drives. From 1989 to 1992, Mr. Plunkett served as Vice President and C.F.O. of
Discovery Technologies, a manufacturer of high resolution medical image
transmission equipment. Prior to joining Discovery Technologies, Mr. Plunkett
held various senior operations and financial management positions with
Miniscribe Corporation from 1982 to 1989.
Robert M. Geller, has been a director and corporate secretary of the
Company since May 1995. He also served as Vice President-Chief Financial Officer
of the Company on a one-half time basis from May 1995 to October 1996. Mr.
Geller currently provides consulting services to the Company on a one-
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half time basis. From 1986 to the present, Mr. Geller has been President of The
Growth Strategies Group, a consulting company specializing in board and
executive services for emerging growth companies. Mr. Geller is a director of
Integral Peripherals, Inc., a privately held manufacturer of computer disk
drives; Renaissance Entertainment Corporation, a publicly held owner and
operator of renaissance fairs; and Armanino Foods of Distinction, Inc., a
publicly held producer of Italian foods.
Paul H. Spieker, has been Vice President-Technical Operations and a
director of the Company since February 1995. From 1992 to 1994 Mr. Spieker was
President of Business Regulatory Coalition-Colorado, a public affairs company
responsible for policy formulation and activities primarily dealing with
regulatory matters representing companies before the Colorado Public Utilities
Commission. From 1991 to 1994, he was a private consultant primarily for
businesses in voice and data communications. From 1990 to 1991, Mr. Spieker was
President of Developers Cable Construction, a startup company providing contract
construction services for residential developers and local telephone and cable
companies. From 1987 to 1990, Mr. Spieker was employed by Volt Information
Sciences, Inc., a New York based telecommunications company. Mr. Spieker was
employed by U S WEST Communications, Inc. and its predecessor from 1966 to 1987
and served in several senior management capacities, including the head of the
strategic business unit which served large telephone customers in a seven state
territory.
D. Kent McBride, has been Vice President-Learning and Performance of the
Company since December 1995 and served as Vice President of Business Development
from May 1995 to December 1995. From May 1994 to May 1995, Mr. McBride was an
independent consultant and developed and delivered accelerated learning classes
for clients ranging from nuclear power plants to the U.S. Air Force and the
Colorado Department of Revenue. From January 1993 to May 1994, he was employed
by The Boulder Center of Accelerated Learning, a training firm based in Boulder,
Colorado. From October 1992 to January 1993, he was a software and training
consultant. Mr. McBride served as customer service manager for the Association
of Brewers, a publisher for the home and micro brewing industries, from May 1992
to October 1992. From March 1991 to May 1992, he was a consultant to industry
for team building and personal leadership.
William Eager, has been Vice President-Web Services of the Company since
March 1995. From 1990 to 1995, Mr. Eager was an author publishing for Prentice
Hall Publishing and Que Corporation. During that time Mr. Eager wrote seven
books on the Internet and electronic communications. Mr. Eager is the author of
the book "Using the World Wide Web," published in 1994 by Que Corporation. From
1987 to 1990, he was Director-Corporate Communications for BASF Corporation, an
electronic media company. Mr. Eager provides his full time services to the
Company and without restriction from any publisher. If Mr. Eager elects to
author additional books, he would do so on his own time. The Company believes
it benefits from Mr. Eager's reputation as an author in the Internet and
technology application fields.
Vincent D. Bradshaw, joined the Company as Director-Sales in June 1996 and
was promoted to Vice President-Sales and made an officer of the Company in
September 1996. From May 1993 to May 1996, he was Director of Business
Development for Source One Management, Inc., a privately held Denver based
company in the business of providing technical operations, management and
engineering services. From 1987 to 1996, Mr. Bradshaw was an independent,
Denver based marketing and business consultant, doing business as Foresight
Business Services. As a consultant, he provided marketing and business
operations advice to a number of private and public companies. From May 1981 to
December 1986, Mr. Bradshaw was employed by Mountain Bell and its parent company
in different sales positions leading to his being named Vice President-Federal
Services from 1985 to 1986. From August 1960 to
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April 1981, he held progressive technical operations, engineering and
sales/marketing positions with AT&T Company in several eastern states. Mr.
Bradshaw is currently a business advisor with the Boulder Technology Incubator,
a not-for-profit corporation that assists inventors and firms in marketing their
technologies.
Robert J. Lewis, has been a director of the Company since February 1995.
Mr. Lewis retired in October 1995 after having spent 37 years in the cable
television industry as an owner and developer of cable systems and senior
executive with several cable television companies. From 1987 until his
retirement, Mr. Lewis was employed by TCI Telecommunications, Inc. ("TCI"), one
of the largest cable television companies in the United States. Mr. Lewis
served as a Senior Vice President of TCI from 1991 to 1993 and as a Senior
Advisor to TCI from 1993 until his retirement.
H. Robert Gill, has been a director of the Company since August 1996. From
April 1996 to the present, Mr. Gill has been the President of The Topaz Group, a
consulting company offering board of director services to high technology,
emerging growth, public and private corporations. From March 1995 to March
1996, Mr. Gill was the Senior Vice President and President, Enhanced Products
Group for Frontier Corporation, a telecommunications company. From January 1989
to March 1995 he was President, Chief Executive Officer and a director or
Confer-Tech International, Inc. Mr. Gill is a director of TOPRO, Inc., a
systems integration company offering equipment and services to a variety of
growth manufacturing industries; QualMark Corporation, a provider of accelerated
Life testing equipment and services; MOSAIX, Inc., a marketer of inbound and
outbound call center systems and services; and Spatial Technologies, Inc., a
developer and marketer of three dimensional modeling software for CAD
applications.
Richard C. Jennewine, has been a director of the Company since November
1996. From September 1995 to the present, Mr. Jennewine has been President-
International Operations and Regional Manager-Western Operations for Computer
Aid, Inc. a leader in strategic outsourcing and information services consulting.
From December 1991 to February 1995, Mr. Jennewine served as the Senior Vice
President of the CONCORD Group, a privately held entrepreneurial group of 40
international enterprises. From January 1994 to February 1995, he served as the
President of the Concord Trading Corporation, a company focusing on trading and
business ventures in Asia, Russia, the Middle East and South America. Prior to
these positions, Mr. Jennewine spent 26 years with IBM Corporation, including
startup operations in mainland China. Mr. Jennewine is a director of Easter
Seals of Colorado and is a member of the Corporate Management Committee of
Computer Aid, Inc.
Charles P. Spickert, has been a director since April 1997. Mr. Spickert
founded Medical Education Collaborative ("MEC"), a non-profit medical education
organization, in March 1988 and currently serves as MEC's President and Chief
Executive Officer. From June 1990 to July 1992 Mr. Spickert also served as the
President and Chief Operating Officer of HealthWatch, Inc., a developer and
manufacturer of medical supplies and devices. Prior to these positions, Mr.
Spickert held marketing and sales management positions with Allertech, a
provider of allergy products and services; International Medical Corporation, a
manufacturer of cardiovascular devices and supplies; and Becton Dickinson, a
provider of microbiology equipment and supplies.
Committees And Meetings Of The Board Of Directors
Messrs. Gill and Jennewine are the current members of the Audit Committee of
the Board of Directors. The Audit Committee represents the Board in discharging
its responsibilities relating to the accounting, reporting, and financial
control practices of the Company. The Committee has general
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responsibility for review with management of the financial controls, accounting,
and audit and reporting activities of the Company. The Committee annually
reviews the qualifications and engagement of the Company's independent
accountants, makes recommendations to the Board as to their selection, reviews
the scope, fees, and results of their audit, and reviews their management
comment letters.
Messrs. Geller, Lewis and Adams are the current members of the Compensation
Committee, which oversees compensation for directors, officers and key employees
of the Company.
During fiscal 1996, the Board of Directors met nine times. Each director
attended, in person or by telephone, 75% or more of the meetings of the Board of
Directors. The Audit Committee and the Compensation Committee were formed in
fiscal 1996, but did not meet during fiscal 1996. The Board of Directors does
not have a standing nominating committee.
The Board Of Directors Recommends That The Stockholders Vote "FOR" The
Election Of The Nominees For Director.
EXECUTIVE COMPENSATION
Compensation
The following table summarizes the annual compensation paid by the Company
during fiscal years ended December 31, 1994, 1995 and 1996 to R. Steven Adams,
the Chief Executive Officer of the Company as of December 31, 1996. Mr. Adams
has not received any long-term compensation during those periods. No other
executive officer of the Company received salary and bonus in excess of $100,000
or more during those periods.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------
Salary Bonus Other
Name and Principal Position Year $ $ $
- - --------------------------- ---- -------- ----- -----
R. Steven Adams 1996 $110,217 -- --
President, Chief Executive Officer and 1995 $ 69,000 -- (1)
Director 1994 -- -- --
---------------
(1) On January 1, 1995, the Company issued 480,000 shares of Common Stock
issued to Mr. Adams, as the founder and promoter of the Company, for a
nominal value ($100). Mr. Adams has also purchased other Common Stock from
the Company at fair market value as determined by the Board of Directors.
Mr. Adams has not been granted any options or warrants to purchase Common
Stock.
The Board of Directors of the Company do not receive cash compensation for
their services as directors of the Company, but they are reimbursed for their
reasonable expenses in attending meetings of the Board of Directors. During
fiscal 1996, the Company compensated Robert M. Geller, Robert J. Lewis, H.
Robert Gill, Richard C. Jennewine and Charles P. Spickert for their services as
consultants.
-7-
CERTAIN TRANSACTIONS
During 1995, the Company leased $50,000 of equipment (the "Equipment
Lease") from a partnership whose partners include Robert M. Geller, an officer
and director of the Company and Creative Business Strategies, Inc. ("CBS"), a 5%
stockholder of the Company. The three year capital lease has an effective
annual interest rate of 14.9%. The Company granted a five-year warrant to
purchase 5,000 shares of Common Stock at an exercise price of $0.50 per share in
connection with the Equipment Lease to Mr. Geller and CBS, respectively.
In September 1995, the Company entered into a consulting agreement with
CBS. During 1995, CBS was granted an option to purchase 100,000 shares of the
Company's Common Stock at $0.50 per share and was paid $10,000 for services.
During 1995, CBS also purchased 114,000 shares of the Company's Common Stock for
$0.50 per share. The agreement with CBS was replaced with a new agreement
during the first quarter of 1996, under which CBS is to be paid $2,500 for
services rendered in January 1996 and $4,000 per month for 36 months commencing
February 1, 1996.
The Company's principal offices are located in a building managed by
Sheridan Management Company and owned by one of its affiliates. R. Steven
Adams' spouse is a vice president of Sheridan Management Company. The current
base monthly rental is $13,657.
The Company believes that the transactions summarized above are on terms no
less favorable than could be obtained from unaffiliated third parties. The
Board of Directors has determined that any transactions with officers, directors
or principal stockholders will be approved by the disinterested directors and
will be on terms no less favorable than could be obtained from an unaffiliated
third party. The Board of Directors will obtain independent counsel or other
independent advice to assist in that determination.
AMENDMENT OF ONLINE SYSTEM SERVICES, INC. 1995 STOCK OPTION PLAN
Proposed Amendment
The Board of Directors proposes that the stockholders of the Company
approve the amendment to the Online System Services, Inc. 1995 Stock Option Plan
to increase the number of shares of Common Stock that may be issued pursuant to
the 1995 Plan from 700,000 to 1,100,000. The 1995 Plan was originally adopted
by the Board of Directors and the stockholders on March 17, 1995. The features
of the 1995 Plan are summarized below.
Summary of Plan
The 1995 Plan terminates March 17, 2005, unless sooner terminated by action
of the Board. The 1995 Plan provides for the grant of options to purchase shares
of the Company's Common Stock to officers, directors, employees and consultants.
Currently, there are four officers, seven directors, thirty-one employees and
four consultants eligible to receive such options. Options granted under the
1995 Plan may have a term of up to ten years. Options which expire, are canceled
or are terminated without having been exercised, may be regranted to
participants under the 1995 Plan. Options granted under the 1995 Plan may be
either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or options that do not qualify for
special tax treatment. No incentive stock options may be granted with a per
share exercise price less than the fair market value per share at the date of
grant (or 110% of fair market value in the case of optionees who hold 10% or
more of
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the Company's outstanding Common Stock). Under the 1995 Plan, the exercise price
of nonqualified stock options may not be less than 85% of the fair market value
of the Common Stock on the date of grant. The Board of Directors has adopted a
policy of not granting nonqualified stock options with an exercise price less
than the fair market value of the Common Stock on the date of grant. Not more
than $100,000 in value of incentive stock options under all plans of the Company
may vest in any calendar year for any option holder and no incentive stock
option may be exercised more than ten years after the date of grant. The 1995
Plan is administered by the Board of Directors and options may be granted at
such time and in such amounts as the Board of Directors, in its discretion,
determines.
Options for the purchase of an aggregate of 732,042 shares of Common Stock
are currently outstanding under the 1995 Plan, held by 46 persons, with per
share exercise prices from $0.50 to $4.38 per share and a weighted average
exercise price of approximately $1.99 per share. All of the outstanding options
currently held by employees under the 1995 Plan are incentive stock options. The
remaining options granted under the 1995 Plan and held by non-employee directors
and consultants are nonqualified and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. The following persons
have been granted options under the 1995 Plan, each of which has a term ranging
from five to ten years unless earlier terminated as provided in the 1995 Plan.
STOCK OPTION AWARDS UNDER THE
ONLINE SYSTEM SERVICES, INC. 1995 STOCK OPTION PLAN
- - ------------------------------------------------------------------------------------------------------------------------------------
Name and Position Date of Grant Number of Options Exercise Price
----------------- ------------- ----------------- --------------
R. Steven Adams, President, Chief Executive Officer and a director --- 0 ---
Robert M. Geller, Secretary and a director June 13, 1995 25,000 $ 0.50
Dec. 8, 1995 15,000 $ 0.50
Feb. 21, 1996 5,000 $ 2.25
Paul H. Spieker, Vice President and a director June 13, 1995 25,000 $ 0.50
Dec. 8, 1995 20,000 $ 0.50
Robert J. Lewis, director Jan. 24, 1996 25,000 $ 1.25
H. Robert Gill, director Aug. 15, 1996 30,000 $4.375
Richard C. Jennewine, director Nov. 18, 1996 30,000 $ 3.38
Charles P. Spickert, director Dec. 8, 1995 50,000 $ 0.50
Apr. 4, 1997 15,000 $ 3.88
Current Executive Officers, as a group June 13, 1995 235,000 $0.50 to $4.38
(7 persons) to present
Current Directors, who are not also executive Dec. 8, 1995 to 150,000 $0.50 to $4.375
officers, as a group (4 persons) present
Employees, excluding executive officers, as a June 13, 1995 212,042 $0.50 to $4.38
group (31 persons) to present
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Thomas S. Plunkett, Chief Financial Officer and Oct. 4, 1996 60,000 $ 3.88
holder of 5% of currently outstanding options Jan. 9, 1997 15,000 $ 3.38
Creative Business Strategies, Inc., holder Sept. 19, 1995 100,000 $ 0.50
of 5% of currently outstanding options
The last reported sale price for the Common Stock on the Nasdaq SmallCap
Market on April 10, 1997 was $4.25.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under the
1995 Plan. This summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.
In general, an optionee will be subject to tax at the time a nonqualified
stock option is exercised (but not at the time of grant), and he or she will
include in ordinary income in the taxable year in which he or she exercises a
nonqualified stock option an amount equal to the difference between the exercise
price and the fair market value of the shares acquired on the date of exercise,
and the Company will generally be entitled to deduct such amount for federal
income tax purposes except as such deductions may be limited by the Revenue
Reconciliation Act of 1993 ("1993 Tax Act"), described below. Upon disposition
of shares, the appreciation (or depreciation) after the date of exercise will be
treated by the optionee as either short-term or long-term capital gain or loss
depending on whether the shares have been held for the then-required holding
period.
In general, an optionee will not be subject to tax at the time an incentive
stock option is granted or exercised. Upon disposition of the shares acquired
upon exercise of an incentive stock option, long-term capital gain or loss will
be recognized in an amount equal to the difference between the disposition price
and the exercise price, provided that the optionee has not disposed of the
shares within two years of the date of grant or within one year from the date of
exercise. If the optionee disposes of the shares without satisfying both holding
period requirements (a "Disqualifying Disposition"), the optionee will recognize
ordinary income at the time of such Disqualifying Disposition to the extent of
the difference between the exercise price and the lesser of the fair market
value of the share on the date the incentive stock option was exercised or the
date of sale. Any remaining gain or loss is treated as short-term or long-term
capital gain or loss depending upon how long the shares have been held. The
Company is not entitled to a tax deduction upon either the exercise of an
incentive stock option or upon disposition of the shares acquired pursuant to
such exercise, except to the extent that the optionee recognizes ordinary income
in a Disqualifying Disposition and then only to the extent that such deduction
is not limited by the 1993 Tax Act.
If the optionee pays the exercise price, in full or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise. However, if such exercise is effected using shares previously
acquired through the exercise of an incentive stock option, the exchange of the
previously acquired shares will be considered a disposition of such shares for
the purpose of determining whether a Disqualifying Disposition has occurred.
-10-
Commencing with the Company's 1995 fiscal year, the federal income tax
deduction that the Company may take for otherwise deductible compensation
payable to executive officers who, on the last day of the fiscal year, are
treated as "named executive officers" in the Company's Proxy Statement for such
year will be limited by the 1993 Tax Act to $1,000,000. Under the provisions of
the 1993 Tax Act, the deduction limit on compensation will apply to all
compensation, except compensation deemed under the 1993 Tax Act to be
"performance-based" and certain compensation related to retirement and other
employee benefit plans. The determination of whether compensation related to the
1995 Plan is performance-based for purposes of the 1993 Tax Act will be
dependent upon a number of factors, including stockholder approval of the 1995
Plan, and the exercise price at which options are granted. The 1993 Tax Act also
prescribes certain limitations and procedural requirements in order for
compensation to qualify as performance-based, including rules which require that
in the case of compensation paid in the form of stock options, the option price
be not less than the fair market value of the stock at date of grant and that
the plan under which the options are granted states the maximum number of shares
with respect to which options may be granted during a specified period to any
employee. Although the Company has structured the 1995 Plan to satisfy the
requirements of the 1993 Tax Act with regard to its "performance-based"
criteria, there is no assurance that awards thereunder will so satisfy such
requirements, and accordingly, the Company may be limited in the deductions it
may take with respect to awards under the 1995 Plan.
The Board Of Directors Recommends That The Stockholders Vote "FOR" The
Amendment To The Online System Services, Inc. Stock Option Plan Of 1995
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are also required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were timely complied with.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Anderson LLP as independent
accountants of the Company for the fiscal year ending December 31, 1997. Arthur
Anderson LLP served as the independent accountants of the Company for the year
ended December 31, 1996. The Company does not anticipate that representatives of
Arthur Anderson LLP will be present at the meeting.
From the Company's inception on March 22, 1994 through December 31, 1995
Jones, Jensen & Company served as the independent accountants for the Company.
On October 7, 1996, the Company dismissed Jones, Jensen & Company effective
October 7, 1996. The reports of Jones, Jensen and Company, regarding the
Company's consolidated financial statements since the Company's inception on
March 22, 1994 through December 31, 1995, contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except for a
-11-
qualification in Jones, Jensen and Company's report dated February 9, 1996
concerning the Company's ability to continue as a going concern. The Company's
board of directors approved the decision to change independent accountants.
In connection with the Company's audits since its inception on March 22,
1994 through December 31, 1995 and through October 7, 1996, there have been no
disagreements with Jones, Jensen and Company on any matter of accounting
principles or practice, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of Jones,
Jensen and Company would have caused them to make reference thereto in their
reports on the financial statements for such years. On October 7, 1996, the
Company engaged Arthur Anderson LLP as its new independent accountants for the
fiscal year ended December 31, 1996. Since its inception on March 22, 1994 and
through October 7, 1996 the Company did not engage or consult with Arthur
Anderson LLP regarding the matters described in Regulation S-B, Item 304(a)(2).
In the event the holders of the Common Stock do not ratify the appointment
of Arthur Anderson LLP, the selection of other independent accountants will be
considered by the Board of Directors. The Board of Directors recommends that the
holders of the Common Stock vote for ratification of the appointment of Arthur
Anderson LLP.
The Board Of Directors Recommends That The Stockholders Vote "FOR" The
Ratification Of Arthur Anderson LLP As The Independent Accountants Of The
Company.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders should be received by the President of the
Company at the above address no later than January 20, 1998, in order to be
considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors does not intend to bring before the meeting any
business other than as set forth in this Proxy Statement, and has not been
informed that any other business is to be presented to the meeting. However, if
any matters other than those referred to above should properly come before the
meeting, it is the intention of the persons named in the enclosed Proxy to vote
such Proxy in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy in the envelope provided
if you are a holder of Common Stock. The signing of a Proxy will not prevent
your attending the meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Robert M. Geller
Secretary
Dated: April 18, 1997
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APPENDIX A
ONLINE SYSTEM SERVICES, INC.
----------------------------
1995 STOCK OPTION PLAN
----------------------
Article I. Establishment and Purpose
-------------------------------------
1.1 Establishment. Online System Services, Inc., a Colorado Corporation
("Company"), hereby establishes a stock option plan for employees and others
providing services to the Company and its Subsidiary Corporations, as described
herein, which shall be known as the "1995 STOCK OPTION PLAN" (the "Plan"). It
is intended that certain of the options issued pursuant to the Plan to employees
may constitute incentive stock options within the meaning of section 422A of the
Internal Revenue Code and that other options issued pursuant to the Plan shall
constitute nonstatutory options. The Board shall determine which options are to
be incentive stock options and which are to be nonstatutory options and shall
enter into option agreements with recipients accordingly.
1.2 Purpose. The purpose of this Plan is to enhance stockholder
investment by attracting, retaining and motivating key employees and consultants
of the Company and its Subsidiary Corporations, and to encourage stock ownership
by such employees and consultants by providing them with a means to acquire a
proprietary interest in the Company's success.
Article II. Definitions
------------------------
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below, unless the context clearly requires
otherwise, and when said meaning is intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee provided for by Article IV hereof,
which may be created at the discretion of the Board.
(d) "Company" means Online System Services, Inc., a Colorado Corporation.
(e) "Consultant" means any person or entity, including an officer or
director of the Company or a Subsidiary Corporation, who provides
services (other than as an Employee) to the Company or a Subsidiary
Corporation, and shall include a Non-Employee Director, as defined
below.
(f) "Date of Exercise" means the date the Company receives notice, by an
Optionee, of the exercise of an Option pursuant to section 8.1 of this
Plan. Such notice shall indicate the number of shares of Stock the
Optionee intends to exercise.
(g) "Employee" means any person, including an officer or director of the
Company or a Subsidiary Corporation, who is employed by the Company or
a Subsidiary Corporation.
(h) "Fair Market Value" means the fair market value of Stock upon which an
option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under this Plan which
is intended to qualify as an "incentive stock option" within the
meaning of Section 422A of the Code.
(j) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or of any Subsidiary Corporation at the time
an Option is granted hereunder.
(k) "Nonstatutory Option" means an Option granted under this Plan which is
not intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code. Nonstatutory Options may be
granted at such times and subject to such restrictions as the Board
shall determine without conforming to the statutory rules of Section
422A of the Code applicable to incentive stock options.
(l) "Option" means the right, granted under this Plan, to purchase Stock
of the Company at the option price for a specified period of time. For
purposes of this Plan, an Option may be either an Incentive Stock
Option or a Nonstatutory Option.
(m) "Optionee" means an Employee or Consultant holding an Option under the
Plan.
(n) "Parent Corporation" shall have the meaning set forth in Section
425(e) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(o) "Subsidiary Corporation" shall have the meaning set forth in Section
425(f) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(p) "Significant Shareholder" means an individual who, within the meaning
of Section 422A(b)(6) of the Code, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or Subsidiary Corporation of
the Company. In determining whether an individual is a Significant
Shareholder, an individual shall be treated as owning stock owned by
certain relatives of the individual and certain stock owned by
corporations in which the individual is a stockholder, partnerships in
which the individual is a partner, and estates or trusts of which the
individual is a beneficiary, all as provided in Section 425(d) of the
Code.
(q) "Stock" means the no par value common stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, any
masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
-2-
Article III. Eligibility and Participation
-------------------------------------------
3.1 Eligibility and Participation. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All Consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected
by the Board from among those Employees and Consultants who, in the opinion of
the Board, are in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success.
Article IV. Administration
---------------------------
4.1 Administration. The Board shall be responsible for administering the
Plan.
The Board is authorized to interpret the Plan; to prescribe, amend, and rescind
rules and regulations relating to the Plan; to provide for conditions and
assurances deemed necessary or advisable to protect the interests of the
Company; and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Determinations, interpretations, or other actions made
or taken by the Board, pursuant to the provisions of this Plan, shall be final
and binding and conclusive for all purposes and upon all persons.
At the discretion of the Board this Plan may be administered by a Committee
which shall be an executive committee of the Board, consisting of not less than
three (3) members of the Board. The members of such Committee may be directors
who are eligible to receive Options under this Plan, but Options may be granted
to such persons only by action of the full Board and not by action of the
Committee. Such Committee shall have full power and authority, subject to the
limitations of the Plan and any limitations imposed by the Board, to construe,
interpret and administer this Plan and to make determinations which shall be
final, conclusive and binding upon all persons, including, without limitation,
the Company, the stockholders, the directors and any persons having any
interests in any Options which may be granted under this Plan, and, by
resolution or resolution providing for the creation and issuance of any such
Option, to fix the terms upon which, the time or times at or within which, and
the price or prices at which any such shares may be purchased from the Company
upon the exercise of such Option, which terms, time or times and price or prices
shall, in every case, be set forth or incorporated by reference in the
instrument or instruments evidencing such Option, and shall be consistent with
the provisions of this Plan.
The Board may from time to time remove members from, or add members to, the
Committee. The Board may terminate the Committee at any time. Vacancies on the
Committee, howsoever caused, shall be filled by the Board. The Committee shall
select one of its members as Chairman, and shall hold meetings at such times and
places as the Chairman may determine. A majority of the Committee at which a
quorum is present, or acts reduced to or approved in writing by all of the
members of the Committee, shall be the valid acts of the Committee. A quorum
shall consist of two-thirds (2/3) of the members of the Committee.
Where the Committee has been created by the Board, references herein to
actions to be taken by the Board shall be deemed to refer to the Committee as
well, except where limited by this Plan or by the Board.
-3-
The Board shall have all of the enumerated powers of the Committee, but
shall not be limited to such powers. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
Article V. Stock Subject to the Plan
-------------------------------------
5.1 Number. The total number of shares of Stock hereby made available and
reserved for issuance under the Plan shall be 3,500. The aggregate number of
shares of Stock available under this Plan shall be subject to adjustment as
provided in section 5.3. The total number of shares of Stock may be authorized
but unissued shares of Stock, or shares acquired by purchase as directed by the
Board from time to time in its discretion, to be used for issuance upon exercise
of Options granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive;
provided, however, that fractional shares shall be rounded to the nearest whole
share. In any such case, the number and kind of shares that are subject to any
Option (including any Option outstanding after termination of employment) and
the Option price per share shall be proportionately and appropriately adjusted
without any change in the aggregate Option price to be paid therefor upon
exercise of the Option.
Article VI. Duration of the Plan
---------------------------------
6.1 Duration of the Plan. Subject to stockholder approval, the Plan shall
be in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period, if all Stock subject to it has been purchased pursuant to the exercise
of Options granted under the Plan.
Article VII. Terms of Stock Options
------------------------------------
7.1 Grant of Options. Subject to section 5.1, Options may be granted to
Employees or Consultants at any time and from time to time as determined by the
Board; provided, however, that Consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Board shall have
complete discretion in determining the number of Options granted to each
Optionee. In making such determinations, the Board may take into account the
nature of services rendered by such Employees or Consultants, their present and
potential contributions to the Company and its Subsidiary Corporations, and such
other factors as the Board in its discretion shall deem relevant. The Board
also shall determine whether an Option is to be an Incentive Stock Option or a
Nonstatutory Option.
-4-
In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to which
incentive stock options granted after December 31, 1986 are exercisable for the
first time by the Optionee during any calendar year under all plans of the
Company under which incentive stock options may be granted (and all such plans
of any Parent Corporations and any Subsidiary Corporations of the Company) shall
not exceed $100,000. (Hereinafter, this requirement is sometimes referred to as
the "$100,000 Limitation".)
Nothing in this Article VII of the Plan shall be deemed to prevent the
grant of Options permitting exercise in excess of the maximums established by
the preceding paragraph where such excess amount is treated as a Nonstatutory
Option.
The Board is expressly given the authority to issue amended or replacement
Options with respect to shares of Stock subject to an Option previously granted
hereunder. An amended Option amends the terms of an Option previously granted
and thereby supersedes the previous Option. A replacement Option is similar to
a new Option granted hereunder except that it provides that it shall be
forfeited to the extent that a previously granted Option is exercised, or except
that its issuance is conditioned upon the termination of a previously granted
Option.
7.2 No Tandem Options. Where an Option granted under this Plan is
intended to be an Incentive Stock Option, the Option shall not contain terms
pursuant to which the exercise of the Option would affect the Optionee's right
to exercise another Option, or vice versa, such that the Option intended to be
an Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under Section 422A of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the Board on the date of grant, each Option shall
be evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by Section 10.2 hereof and specifies:
whether the Option is an Incentive Stock Option or a Nonstatutory Option; the
Option price; the duration of the Option; the number of shares of Stock to which
the Option applies; any vesting or exercisability restrictions which the Board
may impose; in the case of an Incentive Stock Option, a provision implementing
the $100,000 Limitation; and any other terms or conditions which the Board may
impose. All such terms and conditions shall be determined by the Board at the
time of grant of the Option.
If not otherwise specified by the Board, the following terms and conditions
shall apply to Options granted under the Plan:
(a) Term. The duration of the Option shall be seven (7) years from the
date of grant.
(b) Exercise of Option. Unless an Option is terminated as provided
hereunder, an Optionee may exercise his Option for up to, but not in
excess of, the amounts of shares subject to the Option specified
below, based on the Optionee's number of years of continuous service
with the Company or a Subsidiary Corporation of the Company from the
date on which the Option is granted. In the case of an Optionee who is
an Employee, continuous service shall mean continuous employment; in
the case of an Optionee who is a Consultant, continuous service shall
mean the continuous provision of consulting services. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount
of shares the
-5-
Optionee can purchase at any time. The Optionee may exercise his
Option in the following amounts:
(i) After one year of such continuous services for up to but not in
excess of thirty-three and one-third percent (33 1/3%) of the
shares originally subject to the Option;
(ii) After two years of such continuous services, for up to but not
in excess of sixty-six and two-thirds percent (66 2/3%) of the
shares originally subject to the Option; and
(iii) At the expiration of the third year of such continuous services
the Option may be exercised at any time and from time to time
within its terms in whole or in part, but it shall not be
exercisable after the expiration of seven (7) years (five (5)
years in the case of an Incentive Stock Option granted to a
Significant Shareholder) from the date on which it was granted.
The Board shall be free to specify terms and conditions other than those set
forth above, in its discretion.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Option Price. No Incentive Stock Option granted pursuant to this Plan
shall have an Option price that is less than the Fair Market Value of Stock on
the date the Option is granted. Incentive Stock Options granted to Significant
Shareholders shall have an Option price of not less than 110 percent of the Fair
Market Value of Stock on the date of grant. The Option price for Nonstatutory
Options shall be established by the Board and shall not be less than eighty-five
percent (85%) of the Fair Market Value of Stock on the date this Option is
granted.
7.5 Term of Options. Each Option shall expire at such time as the Board
shall determine when it is granted, provided however that no Option shall be
exercisable later than the tenth anniversary date of its grant. By its terms,
an Incentive Stock Option granted to a Significant Shareholder shall not be
exercisable after five years from the date of grant.
7.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for all
Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in Stock or in some other form; provided,
however, in the case of an Incentive Stock Option, that said other form of
payment does not prevent the Option from qualifying for treatment as an
"incentive stock option" within the meaning of the Code. Payment may also be
made, in the discretion of the Board, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option exercise form
together with
-6-
irrevocable instructions to a broker-dealer to sell or margin a
sufficient portion of the shares and deliver the sale or margin loan proceeds
directly to the Company to pay for the exercise price.
Article VIII. Written Notice, Issuance of
------------------------------------------
Stock Certificates, Stockholder Privileges
------------------------------------------
8.1 Written Notice. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the Board.
Full payment for the shares exercised pursuant to the Option must accompany the
written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
or to a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock.
8.3 Privileges of a Stockholder. An Optionee or any other person entitled
to exercise an Option under this Plan shall not have stockholder privileges with
respect to any Stock covered by the Option until the date of issuance of a stock
certificate for such stock.
Article IX. Termination of Employment or Services
--------------------------------------------------
9.1 Death. Unless provided otherwise for a Nonstatutory Option, if an
Optionee's employment in the case of an Employee, or provision of services as a
Consultant, in the case of a Consultant, terminates by reason of death, the
Option may thereafter be exercised at any time prior to the expiration date of
the Option or within 12 months after the date of such death, whichever period is
the shorter, by the person or persons entitled to do so under the Optionee's
will or, if the Optionee shall fail to make a testamentary disposition of an
Option or shall die intestate, the Optionee's legal representative or
representatives. The Option shall be exercisable only to the extent that such
Option was exercisable as of the date of death.
9.2 Termination Other Than For Cause Or Due to Death. Unless provided
otherwise for a Nonstatutory Option, in the event of an Optionee's termination
of employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, other than by reason of
death, the Optionee may exercise such portion of his Option as was exercisable
by him at the date of such termination (the "Termination Date") at any time
within three (3) months of the Termination Date; provided, however, that where
the Optionee is an Employee, and is terminated due to disability within the
meaning of Code (S) 422A, he may exercise such portion of his Option as was
exercisable by him on his Termination Date within one year of his Termination
Date. In any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period
specified above shall terminate.
In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such a Corporation to the Company,
shall not be considered a termination of employment for purposes of this Plan.
The Option Agreements may contain such provisions as the Board shall approve
with reference to the effect of approved leaves of absence upon termination of
employment.
-7-
9.3 Termination for Cause. Unless provided otherwise for a Nonstatutory
Option, in the event of an Optionee's termination of employment, in the case of
an Employee, or termination of the provision of services as a Consultant, in the
case of a Consultant, which termination is by the Company or a Subsidiary
Corporation for cause, any Option or Options held by him under the Plan, to the
extent not exercised before such termination, shall forthwith terminate.
Article X. Rights of Optionees
-------------------------------
10.1 Service. Nothing in this Plan shall interfere with or limit in any
way the right of the Company or a Subsidiary Corporation to terminate any
Employee's employment, or any Consultant's services, at any time, nor confer
upon any Employee any right to continue in the employ of the Company or a
Subsidiary Corporation, or upon any Consultant any right to continue to provide
services to the Company or a Subsidiary Corporation.
10.2 Nontransferability. All Options granted under this Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
Article XI. Optionee-Employee's
--------------------------------
Transfer or Leave of Absence
----------------------------
11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan purposes--
--------------------------------------------------
(a) A transfer of an Optionee who is an Employee from the Company to a
Subsidiary Corporation or Parent Corporation, or from one such
Corporation to another, or
(b) a leave of absence for such an Optionee (i) which is duly authorized in
writing by the Company or a Subsidiary Corporation, and (ii) if the
Optionee holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case of
incentive stock options,
shall not be deemed a termination of employment. However, under no
circumstances may an Optionee exercise an Option during any leave of absence,
unless authorized by the Board.
Article XII. Amendment,
------------------------
Modification, and Termination of the Plan
-----------------------------------------
12.1 Amendment, Modification, and Termination of the Plan. The Board may at
any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may--
(a) increase the total amount of Stock which may be purchased through
Options granted under the Plan, except as provided in Article V;
(b) change the class of Employees or Consultants eligible to receive
Options;
-8-
No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
Article XIII. Acquisition, Merger, or Liquidation
--------------------------------------------------
13.1 Acquisition. In the event that an Acquisition occurs with respect to
the Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of Acquisition, whether or
not such Options are then exercisable, in return for payment to the Optionees of
an amount equal to a reasonable estimate of an amount (hereinafter the "Spread")
equal to the difference between the net amount per share payable in the
Acquisition, or as a result of the Acquisition, less the exercise price of the
Option. In estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have been
exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding
in determining the net amount per share. For purposes of this section, an
"Acquisition" shall mean any transaction in which substantially all of the
Company's assets are acquired or in which a controlling amount of the Company's
outstanding shares are acquired, in each case by a single person or entity or an
affiliated group of persons and/or entities. For purposes of this Section a
controlling amount shall mean more than 50% of the issued and outstanding shares
of stock of the Company. The Company shall have such an option regardless of
how the Acquisition is effectuated, whether by direct purchase, through a merger
or similar corporate transaction, or otherwise. In cases where the acquisition
consists of the acquisition of assets of the Company, the net amount per share
shall be calculated on the basis of the net amount receivable with respect to
shares upon a distribution and liquidation by the Company after giving effect to
expenses and charges, including but not limited to taxes, payable by the Company
before the liquidation can be completed.
Where the Company does not exercise its option under this Section 13.1 the
remaining provisions of this Article XIII shall apply, to the extent applicable.
13.2 Merger or Consolidation. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled in such merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of the Company or
a merger and consolidation in which the Company is not the surviving corporation
shall cause every Option outstanding hereunder to terminate as of the effective
date of such dissolution, liquidation, merger or consolidation. However, the
Optionee either (i) shall be offered a firm commitment whereby the resulting or
surviving corporation in a merger or consolidation will tender to the Optionee
an option (the "Substitute Option") to purchase its shares on terms and
conditions both as to number of shares and otherwise, which will substantially
preserve to the Optionee the rights and benefits of the Option outstanding
hereunder granted by the Company, or (ii) shall have the right immediately prior
to such dissolution, liquidation, merger, or consolidation to exercise any
unexercised Options whether or not then exercisable, subject to the provisions
of this Plan. The Board shall have absolute and uncontrolled discretion to
determine whether the Optionee has been offered a firm commitment and whether
the tendered Substitute Option will substantially preserve to the Optionee the
rights and benefits of the Option outstanding hereunder. In any event, any
Substitute Option for an Incentive Stock Option shall comply with the
requirements of Code Section 425(a).
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Article XIV. Securities Registration
-------------------------------------
14.1 Securities Registration. In the event that the Company shall deem it
necessary or desirable to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any Stock with respect to which
an Option may be or shall have been granted or exercised, or to qualify any such
Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with the Company and take such action
as is necessary to permit registration or qualification of such Options or
Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for the Company, or other counsel acceptable to the
Company, that such shares may be transferred. The Company may also require that
the certificates representing such shares contain legends reflecting the
foregoing.
Article XV. Tax Withholding
----------------------------
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state, and local withholding tax requirements.
Article XVI. Indemnification
-----------------------------
16.1 Indemnification. To the extent permitted by law, each person who is
or shall have been a member of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of judgment
in any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's articles of incorporation
or bylaws, as a matter of law, or otherwise, or any power that the Company or
any Subsidiary Corporation may have to indemnify them or hold them harmless.
Article XVII. Requirements of Law
----------------------------------
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17.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Colorado.
Article XVIII. Effective Date of Plan
--------------------------------------
18.1 Effective Date. The Plan shall be effective on March 17, 1995, the
--------------
effective date of its adoption by the Board.
Article XIX. Compliance with Code.
-----------------------------------
19.1 Compliance with Code. Incentive Stock Options granted hereunder are
intended to qualify as "incentive stock options" under Code (S) 422A. If any
provision of this Plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.
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Article XX. No Obligation to Exercise Option.
----------------------------------------------
20.1 No Obligation to Exercise. The granting of an Option shall impose no
obligation upon the holder thereof to exercise such Option.
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AMENDMENT TO
ONLINE SYSTEM SERVICES, INC.
----------------------------
1995 STOCK OPTION PLAN
----------------------
Section 5.1 of the Online System Services, Inc. (the "Company") 1995 Stock
Option Plan is hereby deleted in its entirety and superseded and replaced with
the following provision, effective upon the approval of this Amendment by the
shareholders of the Company:
5.1 Number. The total number of shares of Stock hereby made available
and reserved for issuance under the Plan shall be 1,100,000. The aggregate
number of shares of Stock available under this Plan shall be subject to
adjustment as provided in section 5.3. The total number of shares of Stock
may be authorized but unissued shares of Stock, or shares acquired by
purchase as directed by the Board from time to time in its discretion, to be
used for issuance upon exercise of Options granted hereunder.
GP:377219 v1
ONLINE SYSTEM SERVICES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned having duly received the Notice of Annual Meeting and the
Proxy Statement dated April 18, 1997, hereby appoints the President and Chief
Executive Officer, R. Steven Adams, and the Secretary, Robert M. Geller, as
proxies (each with the power to act alone and with the power of substitution and
revocation) to represent the undersigned and to vote, as designated below, all
common shares of Online System Services, Inc. held of record by the undersigned
on April 10, 1997, at the Annual Meeting of Shareholders to be held on Tuesday,
May 20, 1997 at the offices of Online System Services, Inc., 1800 Glenarm Place,
Suite 800, Denver, Colorado 80202, at 2:30 p.m. Mountain Standard Time, and at
any adjournment thereof.
1. PROPOSAL TO ELECT [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
SEVEN DIRECTORS (except as marked to the contrary below) to vote for all nominees listed below
R. Steven Adams Robert M. Geller Paul H. Spieker Robert J. Lewis
H. Robert Gill Richard C. Jennewine Charles P. Spickert
INSTRUCTION: To withhold authority to vote for an individual nominee or
nominees, write the person's name on the line below.
- - ------------------------------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE [_] FOR [_] AGAINST [_] ABSTAIN
THE ONLINE SYSTEM SERVICES, INC. 1995
STOCK OPTION PLAN.
3. PROPOSAL TO RATIFY THE APPOINTMENT OF [_] FOR [_] AGAINST [_] ABSTAIN
ARTHUR ANDERSON LLP AS THE
INDEPENDENT ACCOUNTANTS FOR THE CORPORATION.
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED [_] FOR [_] AGAINST [_] ABSTAIN
TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING
(CONTINUED ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
This Proxy, when properly executed, will be voted in the manner directed on
the Proxy be the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
Please sign exactly as your name appears on this card. When shares are held
by joint tenants, both should sign. If signing as attorney, guardian, executor,
administrator or trustee, please give full title as such. If a corporation,
please sign in the corporate name by the president or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
------------------------------------------
(Signature)
------------------------------------------
(Signature, if held jointly)
Dated: _____________________________, 1997
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE.
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