EXHIBIT 99.1
SETTLEMENT AGREEMENT
This agreement (this "Agreement"), effective as of June 21, 2002, is
between (1) OnLine Power Supply, Inc. (the "Company"), a Nevada corporation with
offices at 8100 South Akron St., Suite 308, Centennial, Colorado 80112, acting
through its board of directors (Glenn M. Grunewald, Gary Fairhead, Ronald
Mathewson and Thomas Glaza); (2) each such board member individually; (3) Kris
Budinger, shareholder and former director and CEO; and (4) James F. Glaza and
Jeannette Glaza, husband and wife (together referred as "Glaza"), and Falcon
Financial Services, Inc. ("Falcon"), a Colorado corporation controlled by Glaza,
all with the business address of 15435 Gleneagle Drive, Suite 210, Colorado
Springs, Colorado 80921. Glaza, Glenn M. Grunewald, Gary Fairhead, Ronald
Mathewson, Thomas Glaza, and Kris M. Budinger are the "Individual Parties."
Glaza has filed a proxy statement with the Securities and Exchange
Commission to solicit shareholders of the company to vote in favor of four Glaza
nominees (the "Glaza Slate") to the board of directors. The Company has filed a
motion for preliminary injunction, and permanent injunction, in the United
States District Court for the District of Colorado, case number 02 D 0904 (CBS),
referred to herein as the "Injunction Proceedings". The Company has filed a
proxy statement with the SEC to solicit shareholders to vote in favor of four
persons nominated by the board of directors (the "Company Slate").
The parties realize that it is in their best interest and the best interest
of the Company to resolve their differences as reflected in the proxy statement
filed by Glaza, the Injunction Proceedings and the Company's proxy statement.
Therefore, the parties agree as follows:
1. Glaza and Falcon agree to immediately cease all of their efforts to
elect the Glaza Slate to the board of directors of the Company. This
shall include, but not be limited to (1) ceasing to use the Glaza
Proxy Statement to solicit shareholder votes for the Glaza Slate; and
(2) Glaza sending a `stop look and listen' letter to the Company
shareholders (the "Letter"), including to those shareholders who have
already appointed Glaza as proxy to vote their shares for the Glaza
Slate. The Letter includes a form for shareholders who have already
appointed Glaza as their proxy to sign and return to Glaza revoking
that appointment.
2. The Individual Parties further agree to vote all of the shares they
own in favor of Glenn M. Grunewald, Gary Fairhead, Edward Sidor,
Kenneth A. Cassady, and Gary A. Young (the "New Company Slate") for
elections at the 2002, 2003, and 2004 Annual Meetings of shareholders.
The numbers of shares owned by Glaza are 680,611 shares owned of
record by James F. Glaza and 719,388 shares held of record by
Jeannette Glaza. The Individual Parties will not directly or
indirectly encourage anyone to vote against the New Company Slate, or
for the election of anyone else to the board of directors of the
Company at any meeting not called by the board of directors, or
encourage anyone to call for any meeting of shareholders, through the
2004 annual meeting of shareholders, so long as the Company nominates
the New Company Slate. Each Individual Party agrees not to transfer
ownership of any of such Individual Party's shares of Company stock
without first obtaining such transferee's agreement to comply with
Paragraph 2 of this Agreement and providing the original copy of such
agreement to the Company; provided, however, that sales to the public
through Rule 144 promulgated under the Securities Act of 1933 shall be
exempt from such restriction. The Individual Parties agree that any
transfer that does not comply with the preceding sentence will be void
and of no effect. The preceding two sentences shall remain in effect
only through the 2004 Annual Meeting of shareholders of the Company.
Settlement Agreement--Page 1 of 5
3. The Company, Glaza, Thomas L. Glaza, and Falcon shall submit a joint
motion to dismiss the Injunctive Proceedings with prejudice upon
Glaza's sending a letter of notification to the SEC that Glaza intends
to abide by this Agreement and attaching a copy of this Agreement to
the letter. Commencing with the signature of this Agreement, the
Company will cease all of its efforts to conduct discovery or
otherwise collect evidence in support of the Injunction Proceedings.
4. The board of directors of the Company shall immediately notify the SEC
that the Company will not use the Company's preliminary proxy
statement, now on file with the SEC, to solicit shareholder votes for
the Company Slate, and the Company will not use such preliminary proxy
statement. The board of Directors immediately will nominate the New
Company Slate (Glenn M. Grunewald, Gary Fairhead, Edward Sidor,
Kenneth A. Cassady, and Gary A. Young) for the election to the board
of directors at the 2002 annual meeting of shareholders, and the
Company will file revised proxy statement materials with the SEC for
the board of directors to solicit shareholder votes for the New
Company Slate. The Company also will nominate and solicit votes for
the New Company Slate for election at the 2003 and 2004 Annual
Meetings of Shareholders. The board of directors will recommend to
shareholders a vote in favor of all nominees on the New Company Slate.
The Company will use its best efforts to file the revised proxy
statement materials with the SEC as soon as possible.
5. Each of the parties agrees that if either Kenneth A. Cassady or Gary
A. Young resigns, the other may appoint a successor to be part of the
New Company Slate that the board of directors will nominate for
election at the 2003 and 2004 Annual Meetings of Shareholders (if so
modified, the "New Company Slate"); provided, that such a proposed
successor must be acceptable to the majority of the remaining
directors in their good faith determination of the qualification of
such proposed successor to the Company's board of directors. Each of
the parties agrees not to encourage or vote for the removal of any of
the directors of the New Company Slate.
6. Concurrently with the execution of this Agreement, the Company and the
present directors of the Company agree that they will pass the
resolution attached as Exhibit A to amend the bylaws of the Company to
increase the size of the board to five and to nominate the New Company
Slate. The present directors agree not to vote to change this
resolution prior to the 2002 Annual Meeting of Shareholders.
7. The parties to this Agreement will prepare a joint press release
announcing this Agreement. After the press release is published, the
parties agree to make no statement inconsistent with the content of
the press release.
8. The Company will provide Glaza the opportunity to review and suggest
changes in the revised proxy statement materials prior to filings
thereof. The parties acknowledge that the Company is ultimately
responsible for all filings with the Securities and Exchange
Commission and that the Company will have the final determination
regarding the content of the proxy statement. Good faith difference of
opinion about disclosures in the new proxy statement will not be
deemed to be a violation of this Agreement. The Company also agrees,
however, that no derogatory comments regarding Falcon and Glaza will
be included in the new proxy materials. Glaza agrees to cooperate
fully in furnishing information under his control as may be necessary
for the Company to respond to questions from the SEC regarding the
revised proxy statement materials.
Settlement Agreement--Page 2 of 5
9. The Company shall reimburse Falcon and Glaza, within 20 days of
receipt, for their receipted third-party expenses (which shall include
Falcon's postage costs, for which a third-party receipt may not be
available), not to exceed $80,000, incurred to the date of this
Agreement with respect to the proxy statement and their legal expenses
incurred in connection with the Injunction Proceedings to the date of
this Agreement, and also their future costs. The parties agree to
cooperate to keep future costs down, if possible; the parties agree
that `future costs' shall be limited to the legal, mailing, and other
costs required to prepare, file, and mail the Letter.
10. In consideration of the promises outlined above, and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Glaza and Falcon, and Thomas L. Glaza, on behalf
of themselves, their heirs, personal representatives, executors,
administrators, attorneys, predecessors, successors, assigns,
insurers, servants, agents, employers, employees, officers, directors,
affiliated and associated persons, representatives and firms in any
and every capacity do hereby mutually release, discharge, waive,
forever abandon and agree to release the Company and all of its heirs,
personal representatives, executors, administrators, attorneys,
predecessors, successors, assigns, insurers, servants, agents,
employers, employees, officers, directors (including but not limited
to Glenn M. Grunewald, Gary Fairhead, Ronald Mathewson, Thomas Glaza,
and former officer and director Kris M. Budinger), affiliated and
associated persons, representatives and firms, in any and very
capacity, from any and all liability, demands, damages, losses,
expenses, loans, reimbursements, actions, rights and all causes of
action of whatsoever kind and nature, including without limitation,
claims and rights of contribution, by reason of any and all known and
unknown, foreseen and unforeseen, damages, expenses, costs, losses,
liabilities and claims, of any and all variety and the consequences
thereof, which Glaza or Falcon may now or hereafter have against the
Company relating to Falcon's proxy materials or the Injunctive
Proceedings. The obligations of the parties set forth in this
Agreement will not be effected by the terms of this release.
11. In consideration of the promises outlined above, and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company on behalf of themselves, their heirs,
personal representatives, executors, administrators, attorneys,
predecessors, successors, assigns, insurers, servants, agents,
employers, employees, officers, directors, affiliated and associated
persons, representatives and firms in any and every capacity do hereby
mutually release, discharge, waive, forever abandon and agree to
release Glaza, Falcon, and Thomas L. Glaza, and all of its heirs,
personal representatives, executors, administrators, attorneys,
predecessors, successors, assigns, insurers, servants, agents,
employers, employees, officers, directors, affiliated and associated
persons, representatives and firms, in any and very capacity, from any
and all liability, demands, damages, losses, expenses, loans,
reimbursements, actions, rights and all causes of action of whatsoever
kind and nature, including without limitation, claims and rights of
contribution, by reason of any and all known and unknown, foreseen and
unforeseen, damages, expenses, costs, losses, liabilities and claims,
of any and all variety and the consequences thereof, which the Company
may now or hereafter have against Glaza and Falcon relating to their
proxy materials or the Injunctive Proceedings. The obligations of the
parties set forth in this Agreement will not be affected by the terms
of this release.
12. This Agreement may be signed in counterparts.
13. If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party or parties shall be
entitled to recover the costs and fees including without limitation
reasonable attorney fees and other fees and costs incurred by such
party or parties in such suit or action.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
Settlement Agreement--Page 3 of 5
ONLINE POWER SUPPLY, INC.
/s/ Glenn M. Grunewald /s/ Glenn M. Grunewald
- ------------------------------------- ------------------------------------
Glenn M. Grunewald, CEO and Director Glenn M. Grunewald, Individually
/s/ Gary Fairhead /s/ Gary Fairhead
- ------------------------------------- ------------------------------------
Gary Fairhead, Director Gary Fairhead, Individually
/s/ Ronald Mathewson /s/ Ronald Mathewson
- ------------------------------------- ------------------------------------
Ronald Mathewson, Director Ronald Mathewson, Individually
/s/ Thomas L. Glaza /s/ Thomas L. Glaza
- ------------------------------------- ------------------------------------
Thomas L. Glaza, Director Thomas L. Glaza, Individually
/s/ Kris M. Budinger
------------------------------------
Kris M. Budinger, Individually
FALCON FINANCIAL SERVICES, INC.
/s/ James F. Glaza /s/ James F. Glaza
- ------------------------------------- ------------------------------------
James F. Glaza, President James F. Glaza, Individually
/s/ Jeannette Glaza
------------------------------------
Jeannette Glaza, Individually
Settlement Agreement--Page 4 of 5
EXHIBIT A
MEMORANDUM OF ACTION OF THE
BOARD OF DIRECTORS
OF
ONLINE POWER SUPPLY, INC.
EFFECTIVE: JUNE 21, 2002
Pursuant to authority granted by the Nevada Revised Statutes, the
following action is hereby taken in lieu of a meeting by the directors of Online
Power Supply, Inc. (the "Corporation"), effective June 21, 2002, and the
directors have consented to this action as shown by their signatures below.
WHEREAS, the Corporation has agreed to settle the proxy contest between it and
Falcon Financial and James and Jeannette Glaza by executing the agreement
attached hereto ("Agreement");
WHEREAS, the Agreement requires the Corporation to nominate Glenn M. Grunewald,
Gary Fairhead, Edward Sidor, Kenneth A. Cassady, and Gary A. Young (the "New
Company Slate") for election to the board of directors of the Corporation at the
2002, 2003, and 2004 Annual Meetings of Shareholders;
WHEREAS, the present size of the Corporation's board of directors, according to
the bylaws of the Corporation, is four;
NOW THEREFORE, be it RESOLVED, that Article III, Section 1 of the Corporation's
Bylaws shall hereby be amended by replacing the entire section with the
following:
"The number of Directors, which shall constitute the whole Board, shall be
five."
BE IT FURTHER RESOLVED, that the Board hereby (1) nominates the New Company
Slate for election to the Board at the 2002 Annual Meeting of Shareholders, and
that the officers of the Corporation are hereby empowered to take all actions
necessary to solicit proxies for their election, and (2) resets the record and
meeting dates to June 28, 2002 and July 31, 2002.
BE IT FURTHER RESOLVED, that the Agreement is hereby approved and its terms
incorporated herein by this reference.
Dated: June 21, 2002.
DIRECTORS:
/s/ Ronald Mathewson /s Glenn M. Grunewald
- ---------------------------------- ---------------------------------------
Ronald Mathewson, Director Glenn M. Grunewald, CEO and Director
/s/ Thomas L. Glaza /s/ Gary Fairhead
- ---------------------------------- ---------------------------------------
Thomas L. Glaza, Director Gary Fairhead, Director
Settlement Agreement--Page 5 of 5