UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 14A (Revised)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant X Filed by a party other than the Registrant
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Check the appropriate box:
X Preliminary Proxy Statement
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
- ----- 14A-6(E)(2)
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to ss.240.14a-12
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ONLINE POWER SUPPLY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
PRELIMINARY PROXY MATERIAL
ONLINE POWER SUPPLY, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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JULY 31, 2002
June ____, 2002
We are pleased to give you notice of our Annual Meeting of Shareholders:
Date: Wednesday, July 31, 2002
Time: 10:00 AM MDT
Place: The Terrace Gardens at
Dove Valley Event and Conference Center
13065 East Briarwood
Englewood, Colorado
Purpose: - Elect five directors;
- Ratify the appointment of the independent auditors; and
- Transact any other business that may properly come before
the meeting.
Record Date: June 28, 2002
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. We appreciate your cooperation.
By Order of the Board of Directors
Glenn M. Grunewald, Chief Executive Officer
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Only shareholders of record on June 28, 2002 may vote at the meeting. Only
shareholders of record, and beneficial owners, on the record date, may attend
the meeting. The proxy contest between the company and James F. Glaza has been
settled. See "Settlement of the Proxy Contest" in the proxy statement
accompanying this notice. If you previously have appointed Glaza as your proxy
to vote your shares in favor of the Glaza slate of directors, that earlier proxy
has been revoked because Glaza has sent you a letter to that effect. Therefore,
you now may vote only using the company's form of proxy included with the proxy
statement accompanying this notice, or attending the meeting and voting in
person. You may attend the meeting even if you send in your proxy. See "Granting
Your Proxy" in the proxy statement accompanying this notice.
If you plan to attend the meeting, please bring personal identification and
proof of ownership if your shares are held in "street name" (i.e., your shares
are held of record by brokers, banks or other institutions). Proof of ownership
means a letter or statement from your broker showing your ownership of OnLine
shares on the record date.
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ONLINE POWER SUPPLY, INC.
8100 S. AKRON STREET, SUITE 308
ENGLEWOOD, COLORADO 80112
TEL. 303.741.5641 FAX 303.741.5679
PROXY STATEMENT FOR ANNUAL MEETING ON JULY 31, 2002
The 2002 Annual Report on Form 10-KSB/A, including audited financial
statements for the fiscal year ended December 31, 2001, is mailed to
shareholders together with these proxy materials on or about July 1, 2002. The
proxy materials consist of this proxy statement and notice of annual meeting,
the Annual Report on Form 10-KSB/A, the Audit Committee Certification and the
Audit Committee Charter and the chief executive officer's letter to
shareholders.
This proxy statement is provided in connection with a solicitation of
proxies by the Board of Directors of OnLine Power Supply, Inc. for use at our
annual meeting of shareholders (the "Meeting") to be held on July 31, 2002 and
at any adjournments of the Meeting. Our annual meetings usually are held in
June, but the issues and time needed to deal with the proxy contest with James
F. and Jeannette Glaza (now settled) has resulted in this later meeting on July
31, 2002.
WHO CAN VOTE
If you hold any shares of common stock on the record date (June 28, 2002),
then you will be entitled to vote at the Meeting. If you hold stock in your own
name, you may vote directly. If you own stock beneficially but in the record
name (street name) of an institution, you may instruct the record holder how to
vote when the record holder contacts you about voting and gives you the proxy
materials. There are 2,800 shares of non-voting preferred stock issued and
outstanding.
COMMON STOCK OUTSTANDING ON THE RECORD DATE: 21,243,155 SHARES
QUORUM AND VOTING RIGHTS
You are entitled to one vote for each share of OnLine common stock you
hold. A quorum for the Meeting will exist if a majority of the voting power of
the shareholders is present at the Meeting, in person or represented by properly
executed proxy delivered to us prior to the Meeting. Shares of common stock
present at the Meeting that abstain from voting, or that are the subject of
broker non-votes, will be counted as present for determining a quorum. A broker
non-vote occurs when a nominee holding stock in street name or otherwise for a
beneficial owner does not vote on a particular matter because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
We will be voting on two matters: First, on the election of directors; and
second, on the ratification of the appointment of independent auditors. For the
election of directors, a nominee will be elected if he receives a "plurality" of
the votes cast. Under Nevada law, "plurality" of votes cast means that each
shareholder may cast as many votes for or against the election of each director
nominee, as he or she holds. For example, if you hold 10,000 shares of common
stock, you may cast 10,000 votes for or against each of the nominees, or you may
abstain from voting. Abstention from voting your shares is not counted as a
negative vote or a positive vote. A nominee will be elected if he receives more
votes "for" than "against."
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Cumulative voting for directors is not allowed under the company's articles
of incorporation (cumulative voting allows shareholders to multiply their shares
times the number of candidates for election, and cast that number of votes all
for or against one candidate, or distribute that number of votes in any other
manner desired).
Second, the selection of our independent audit firm by the audit committee
will be ratified if the number of votes cast in favor exceeds the number of
votes cast in opposition.
Any other matter which properly comes before the Meeting would be approved
if the number of votes cast in favor exceeds the number of votes cast in
opposition, unless Nevada law requires a different approval ratio. OnLine's
Corporate Secretary, Richard Millspaugh, will serve as the inspector of
election.
Abstentions and broker non-votes will have no effect on the election of
directors. Abstentions as to all other matters which properly may come before
the Meeting will be counted as votes against those matters. Broker non-votes as
to all other matters will not be counted as votes for or against, and will not
be included in calculating the number of votes necessary for approval of these
matters.
HOW YOUR PROXY WILL BE VOTED; RECOMMENDATION OF THE BOARD
The board of directors is soliciting a proxy in the enclosed form to
provide you with the opportunity to vote on all matters scheduled to come before
the Meeting, whether or not you attend in person.
The board of directors recommends you vote in favor of the director
nominees, and in favor of the selection of audit firm for the current fiscal
year. In order for your vote to be counted at the meeting, you must complete and
return the form of proxy included with this proxy statement, or attend the
meeting and vote in person. A vote by you on the form of proxy provided by James
F. Glaza cannot be counted at the meeting as a valid proxy for or against the
nominees, because these proxies have been revoked. You still have the right to
vote at the company's annual meeting on July 31, 2002 - i.e. , for, against, or
abstain as to each of the nominees named in this proxy statement; and for,
against, or abstain as to ratification of selection of the audit firm for the
current year. HOWEVER, TO VOTE AT OUR MEETING YOU MUST ATTEND IN PERSON, OR
COMPLETE, SIGN AND DATE THE FORM OF PROXY INCLUDED WITH THIS PROXY STATEMENT.
GLAZA, AND THE COMPANY, URGE YOU TO SIGN AND RETURN THE NEW PROXY TO THE COMPANY
AS SOON AS POSSIBLE, AND VOTE IN FAVOR OF THE FIVE NOMINEES AS RECOMMENDED BY
THE BOARD OF DIRECTORS.
GRANTING YOUR PROXY
If you properly execute and return a proxy in the form attached, your
shares will be voted as you specify. If you return our proxy but don't specify,
your shares will be voted in accordance with the recommendations of the Board of
Directors. If you make no specifications, your proxy using our form of proxy
will be voted in favor of the nominees for Director positions, and for the
ratification of our audit firm.
We expect no matters to be presented for action at the Meeting other than
the items described in this proxy statement. However, the enclosed proxy will
confer discretionary authority with respect to any other matter that may
properly come before the Meeting. The persons named as proxies in the enclosed
proxy form intend to vote in accordance with their judgment on any matters that
may properly come before the Meeting.
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REVOKING YOUR PROXY
If you submit a proxy, you may revoke it later or submit a revised proxy at
any time before it is voted. You also may attend the Meeting in person and vote
by ballot, which would cancel any proxy you previously submitted.
PROXY SOLICITATION
We will pay all expenses of soliciting proxies for the Meeting. In addition
to solicitations by mail, arrangements have been made for brokers and nominees
to send proxy materials to their principals, and we will reimburse them for
their reasonable expenses. We have not hired a solicitation firm for the
Meeting. Our employees and directors will solicit proxies by telephone or e-mail
directly with shareholders, or in person, if necessary; these people will not be
paid for these services.
The only "participants" in this proxy solicitation are (1) the directors of
the company; (2) James Glaza; and Jeannette Glaza (3) Kris M. Budinger (former
officer and director of the company). See "Settlement of the Proxy Contest." All
information about the interests of such persons in the company (as defined in
the Securities and Exchange Commission's rules relating to proxy statements) is
contained elsewhere in this proxy statement.
SETTLEMENT OF THE PROXY CONTEST
On June 21, 2002 we signed a "settlement agreement" with James and
Jeannette Glaza to settle the disputes which have developed between Glaza and
the company. The current board of directors, and James and Jeannette Glaza,
believe the agreement is a fair and equitable resolution of the disputes, and is
in the best interests of the company and all of its shareholders.
In the following discussion, "Glaza" refers to James Glaza and his wife
Jeannette, and Falcon Financial Services, Inc., which is owned by Glaza. Both
James and Jeannette Glaza are shareholders of the company. See "Security
Ownership of Certain Beneficial Owners and Management."
BACKGROUND. The Glaza proxy statement proposed retaining Thomas Glaza
(James Glaza's brother who has been a director of the company since July 1999)
as a director, and electing three new persons to the board of directors (David
Stein, Gary A. Young, and Kenneth Cassady), and therefore sought shareholder
approval of a change in control of the company.
On June 3, 2002, Kris M. Budinger resigned as chief executive officer and
chairman of the Board of Directors, and as a director, and no longer works for
the company.
On May 10, 2002, the company filed a motion for preliminary injunction, and
permanent injunction, in United States District Court, for the District of
Colorado (case number 02 D 0904(CBS)), against James F. Glaza, Jeannette Glaza
and Falcon Financial Services, Inc., Thomas Glaza, and John Does 1-10. The
motion alleged that the defendants violated section 14 of the Securities and
Exchange Act of 1934, and the proxy rules of the SEC. The company's motion
sought a number of remedies, including an order of court enjoining the
defendants from solicitation of proxies in violation of federal securities laws.
Glaza filed an answer to the company's motion, denying all of the company's
allegations. A hearing on the motion, and Glaza's response denying the
allegations of the company, was scheduled for July 8, 2002. This court hearing
date has been canceled. See below.
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TERMS OF SETTLEMENT. The parties to the settlement agreement are Glaza and
the company; and also Glenn M. Grunewald, Gary Fairhead, Ronald Mathewson,
Thomas Glaza (incumbent directors), and Kris M. Budinger (former officer and
director). Glaza, the incumbent directors, and Mr. Budinger are referred to
together as the "individual parties." The settlement agreement provides that:
o The current Board of Directors nominate for election as directors at
the company's annual meeting of shareholders on July 31, 2002 (and at
the annual meetings in June 2003 and 2004) Glenn M. Grunewald, Gary
Fairhead, Edward F. Sidor, Kenneth A. Cassady and Gary A. Young. Mr.
Grunewald and Mr. Fairhead are incumbent directors; Mr. Sidor does not
now serve as a director. Mr. Cassady and Mr. Young do not now serve as
directors, and had been nominees on Glaza's slate under the Glaza
proxy statement. Thomas Glaza and Ronald Mathewson, current directors
will not be standing for re-election as directors at the 2002 meeting
or at subsequent meetings of shareholders through the 2004 meeting.
o The individual parties will vote all shares they hold in favor of the
five current nominees at each shareholders' meeting in 2002, 2003 and
2004. Through and including the 2004 annual meeting, the individual
parties will not directly or indirectly encourage anyone to vote
against these nominees or for the election of anyone else to the Board
of Directors at any meeting not called by the Board of Directors, or
encourage anyone to call for any meeting of shareholders, so long as
the Board of Directors nominates the current slate (Grunewald, Sidor,
Fairhead, Cassady and Young).
o The company and Glaza, and Thomas L. Glaza will submit to the United
States District Court, as soon as possible, a joint motion to dismiss
the injunction proceeding, and the company has ceased all discovery
efforts.
o The company will reimburse Glaza for receipted expenses incurred by
Glaza in connection with the Glaza proxy statement and the injunction
proceeding, not to exceed $80,000.
o The company and Glaza have released each other from all claims
relating to the injunction proceeding and Glaza proxy statement. In
addition, the company has released Thomas Glaza from all claims and
expenses related to the injunction proceedings and the Glaza proxy
statement.
REQUIREMENT AND DEADLINES FOR SHAREHOLDERS TO SUBMIT PROXY PROPOSALS
Generally, we will hold the annual meeting on the third Thursday of each
June (June 19 in 2003). Under the rules of the SEC, if a shareholder wants us to
include a proposal in our proxy statement and form of proxy for presentation at
our 2003 Annual Meeting of Shareholders, the proposal must be received by us in
writing at least 150 calendar days in advance of the meeting date (which would
be 120 days in advance of the mailing date), at OnLine Power Supply, Inc., 8100
South Akron Street, Suite 308, Englewood, Colorado 80112, Attention: Mr.
Millspaugh, Secretary.
For a special meeting, the proposal must be received a reasonable time
before the company begins to print and mail its proxy materials.
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If we do not receive notice by the appropriate time, or if we meet other
requirements of the SEC rules, which allow the company to exclude the proposal,
a vote on the proposal will not be included in the company's proxy statement,
and will not be considered for a vote at that meeting.
A notice of a proposed item of business must include:
o a brief description of the substance of the proposal, and the reasons
for conducting, such business at the annual meeting;
o the shareholder's name and address;
o the number of shares of common stock held by the shareholder (with
supporting documentation where appropriate); and
o any material interest of the shareholder in such business.
CORPORATE GOVERNANCE AND AUDIT COMMITTEE REPORT
MEETINGS OF THE BOARD. The board of directors, which held five formal
meetings during 2001, has primary responsibility for directing the management of
our business affairs. The board currently consists of four members. All of the
directors who served in 2001 (Kris Budinger, Gary Fairhead, Ronald Mathewson and
Thomas Glaza) attended all meetings in 2001. The board conferred informally on
several other occasions in 2001 and also approved various matters by consent
minutes without conducting formal meetings.
AUDIT COMMITTEE. To provide effective direction and review of fiscal
matters, the board established an audit committee in fiscal 2000. The audit
committee has the responsibility of reviewing our financial statements,
exercising general oversight of the integrity and reliability of our accounting
and financial reporting practices, and monitoring the effectiveness of our
internal control systems. The audit committee also recommends a selection of the
auditing firm and exercises general oversight of the activities of our
independent auditors, principal financial and accounting officers and employees
and related matters. The members of the audit committee are Ronald W. Mathewson
and Gary R. Fairhead. Kris Budinger also served on the audit committee until his
resignation as chief executive officer and director as of June 3, 2002. Mr.
Mathewson and Mr. Fairhead are independent directors under criteria established
by the National Association of Securities Dealers, Inc. and the Nasdaq Stock
Market Inc. Mr. Budinger was not deemed an independent director because he was
an employee (chief executive officer) of the company in 2001. Mr. Thomas Glaza
served on the audit committee from inception to August 11, 2000, but resigned
when Mr. Fairhead was appointed as a third member.
The audit committee (as composed prior to June 3, 2002) has reviewed our
financial statements for fiscal 2001 and discussed them with management. The
committee also discussed with the independent audit firm the various matters
required to be so discussed in SAS 63 (Codification of Statements on Auditing
Standards, AU 380). The committee received the written disclosure and the letter
from the independent audit firm as required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee). The committee is satisfied with the audit
firm's independence. Based on the foregoing, the audit committee recommended to
the board of directors that the audited financial statements be included in our
Annual Report on Form 10-KSB which was filed with the Securities and Exchange
Commission in April 2002.
The audit committee met four times in 2001.
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COMPENSATION COMMITTEE. Also in fiscal 2000, we established the
compensation committee to review salary, options and other arrangements for
compensating our officers and directors. The committee also directs all
compensation policies and decisions for the company at large. The compensation
committee met formally on two occasions in fiscal 2001 and also discussed
compensation matters informally from time to time during the year. Mr. Thomas
Glaza, Mr. Ronald Mathewson, and Mr. Gary Fairhead are the current members of
the compensation committee. Mr. Kris Budinger was a member of the compensation
committee until his resignation on June 3, 2002.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has amended the bylaws to establish the number of
directors at five. Each serves a one year term after election by shareholders,
or until his successor is elected to the board. Directors who are elected by the
incumbent Board of Directors (such as Mr. Grunewald) serve until their
re-election at the next meeting of shareholders or until their successors are
elected. There are no arrangements or agreements among shareholders for the
election of any director, except for the voting agreement put in place with the
settlement agreement (see "Settlement of the Proxy Contest").
INFORMATION ABOUT THE NOMINEES
Information about the director nominees follows:
GLENN M. GRUNEWALD, 53, has been Chief Executive Officer and a director of
OnLine since June 3, 2002, and was appointed by the board of directors to take
on the responsibilities of CEO on May 29, 2002 to replace Kris Budinger, who has
resigned as CEO, president and a director effective June 3, 2002. Mr. Grunewald
is a member of the audit committee, but is not an independent director because
he is an employee of OnLine.
His primary duties are developing plans and strategies for: supervision of
product development, coordination of research-development with prospective
customers' design needs, improving customer relations at the corporate level,
and developing strategic relationships with manufacturers and suppliers, and the
investment community. All activities are directed toward the improvement in the
company's overall performance and subsequent increase in shareholder value.
Mr. Grunewald worked at Hubbell, Inc., Orange, Connecticut, from June of
1974 to August 2001. He was promoted through the ranks to hold executive-level
responsibility for operations of Hubbell, most recently as executive vice
president and chief operating officer. Hubbell has annual sales of $1.4 billion,
11,500 employees, and more than 60 domestic and foreign manufacturing
facilities, and eight international sales offices. Mr. Grunewald directed
operations of Hubbell's five major business units: Power systems, electrical
products, industrial technology, wiring systems, and lighting. Responsibilities
have included strategic planning, downsizing and restructuring of operations
company-wide, and initiating and launching new product lines. Mr. Grunewald
provided some consulting services to private companies from time to time from
August 2001, until he joined OnLine on June 3, 2002. Mr. Grunewald holds a
Bachelors Degree in Business Administration (Adelphi University, Garden City,
New York, 1971), and is a graduate of the Harvard University Strategic Marketing
Program (1990).
Mr. Grunewald has been a member of the CEO Roundtable, the National
Electrical Manufacturers Association ("NEMA"), an associate member of the
National Association of Electrical Distributors ("NAED"), and numerous other
industry associations.
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EDWARD F. SIDOR, 63, is a nominee for election to the board of directors.
Since June of 2001, Mr. Sidor has been president of a private consulting company
(IBCCORP-International Business Consultants) to power supply industry clients in
the United States and Europe. Prior to organizing IBCCORP, Mr. Sidor was
worldwide sales manager for Ascom Energy Systems, Inc. from March of 1993 to May
of 2001. Ascom formerly was ABB Power Supplies, Inc., a division of ABB, a Swiss
company; ABB Power Supplies was sold to Ascom in 1999. Ascom designs and
manufacturers custom power supplies for the computer, telecommunications, and
industrial markets, with sales offices in the United States (Maine, California
and Florida), and Germany and Switzerland. Ascom engineering centers are located
in the United States, Germany and Switzerland; manufacturing facilities are
located in the United States, Asia and Europe. ABB Power Supplies' sales in 1993
were $25 million to one customer (IBM); in 2000, sales were approximately $450
million to numerous customers including IBM, Compaq, Motorola, Nokia and Cisco
Systems.
From April of 1991 to February of 1993, Mr. Sidor was vice president-sales
and marketing for Power Trends, Inc., a designer/manufacturer of technically
advanced power modules (integrated switching regulators and DC-DC power
converters), sold in the United States through independent manufacturer's
representatives to customers including IBM, Motorola, Data General, Hughes,
Hewlett-Packard (now merged to Compaq), and DEC.
Prior to 1991, Mr. Sidor was an officer of Zenith Electronics (1990-1991,
director of original equipment manufacturer "OEM" sales, responsible for
components group sales). He holds a Master of Science degree from the University
of Wisconsin (1960) and a Bachelor of Science degree, physics, from Wabash
College (1958).
Mr. Sidor is an advisory board member of the Power Sources Manufacturing
Association (chairman of the board 1998-2000); and is an advisory board member
of BIAS Power Technology, Inc., a start-up company introducing a family of
low-power (less than 5 watts) power supplies for the stand-by power market. Mr.
Sidor has patented devices in and published technical articles concerning
magnetic sensors, tunnel-diode audio frequency noise, and magnetic switching
components.
GARY R. FAIRHEAD, 50, was appointed a Director of OnLine on August 11, 2000
to fill the vacancy created when the Board of Directors amended the bylaws to
increase the number of directors from three to four. Mr. Fairhead is not an
employee of OnLine, is an independent Director, and is a member of the audit
committee and the compensation committee.
Since February of 1990, Mr. Fairhead has been the President, Chief
Executive Officer and a Director of SigmaTron International, Inc., a Delaware
corporation listed on the Nasdaq Small Cap Market (symbol "SGMA"). SigmaTron,
based in Elk Grove, Illinois, is an independent provider of electronic
manufacturing services, including printed circuit board assemblies and
completely assembled (boxbuild) electronic products.
Mr. Fairhead received his Bachelor of Science degree in 1974 from Purdue
University, and his Master of Science, Industrial Administration in 1978 from
the Krannert School of Business, Purdue University.
KENNETH A. CASSADY, 48, a nominee for election to the Board of Directors,
has been President and Owner of CLA, LP, in Spring, Texas, since February 2002.
CLA manufactures stainless steel fittings for high- pressure hose applications.
The products are sold through several large distributors/manufacturers of high-
pressure hose to global markets. Industries served include water jet, oil and
gas, and industrial processing. CLA has sales of approximately $2 million, and
employs 20 persons. He was self-employed from February 2001 to February 2002.
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From June 1999 to February 2001, he was the president and chief operating
officer of Telxon, a NYSE listed company with sales of approximately $400
million, which had previously experienced significant financial and operational
performance problems. Telxon produced and distributed wireless computer and
communication products. After significant improvements it was purchased by its
primary competitor.
From April 1999 to June 1999, Mr. Cassady was employed by Monarch Marking
Systems, a privately held company with sales of approximately $300 million,
which had experienced financial and operational problems. He was president from
April 1997 to June 1999, chief operating officer from October 1996 to April
1997, and chief financial officer from March 1996 to October 1996. Monarch
produced bar code printers and supplies. After significant improvements the
company was sold to a NYSE company.
Previously, Mr. Cassady was with Lockheed Martin for 17 years, a NYSE
company with sales of approximately $27 billion, primarily a government
contractor of aerospace products, information systems, electronic products, and
project management. He served as a group controller, vice president of mergers
and acquisitions, vice president of business operations for the information
group, and group CFO for the environmental group. Mr. Cassady holds a BBA degree
(1978, University of North Florida), and is a certified public accountant (CPA
licensed in Florida 1979).
GARY A. YOUNG, 60, a nominee for election to the Board of Directors, has
been a business consultant, and author since April 1998, providing business
management consulting in the area of leadership, employee satisfaction, and
business controls. He authored a business management book on the web, "The
Disruptive Technology Advantage," which explains how companies can use
technology that "upsets" traditional business practices in order to create new
markets and wealth for the shareholders.
From February 1992 to retirement in April 1998, Mr. Young was general
manager of Hewlett- Packard's Technology Center in Colorado Springs, Colorado;
in 1998, this facility was generating $80 million in revenues. Prior thereto,
from May 1986 to February 1992, Mr. Young was manager of Hewlett-Packard's
Integrated Circuits Fabrication Facilities in Loveland and Fort Collins,
Colorado. He managed the conception and development of a breakthrough
"disruptive technology" concept in ink jet printing and its placement into
production in just 180 days. From August 1979 to May 1986, he was in various
positions with Hewlett Packard Co. Previously, from 1976 to 1979, he was vice
president of Engineering Systems Corp. where he managed two successful
international acquisitions that involved complex analysis of the accounting
systems used by foreign companies. Subsequently he became responsible for Data
Magnetics, LTD Hong Kong and Atlas Electronics, LTD. Singapore, and managed them
by using expatriate managers. Mr. Young holds a MBA in Finance (1971, Oregon
State University), and a BS Mechanical Engineering (1964, University of
Colorado, Boulder).
DIRECTOR COMPENSATION
Since inception, the non-executive Directors have received as a group
nonqualified options totaling 73,000 shares of our common stock for their
services as Directors and will be given additional options in future years. See
"Nonqualified Stock Option Plan for Non-Executive Directors" below. The options
were fully vested upon grant; the exercise price per share is from $2.88 to
$8.375, in each case equal to the market price of our stock when the options
were granted. None of these options have been exercised. We pay the travel
expenses of the non-executive Directors to attend Board meetings, but we do not
pay any other cash compensation to them for their service.
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If Mr. Cassady and Mr. Young are elected at the 2002 Meeting, they will be
compensated for service in accordance with the company policy. See "Director
Compensation" and "Management Stock Option Plan for Non-Executive Directors"
below.
STOCK OPTION PLANS
We have established two stock option plans (a qualified plan for employees
that was approved by the shareholders and another plan for non-executive
Directors). We have issued nonqualified options to executive officers and to our
investor public relations firm, through December 31, 2001.
1) ISOP approved by shareholders in December, 1999:
Total number of shares to be issued upon exercise of options: 962,324 shares
Remaining options available in the plan 2,537,676 shares
2) Non Executive Directors Plan (not shareholder approved):
Total number of shares to be issued upon exercise of options: 73,000 shares
Remaining options available in the plan 227,000 shares
3) Non qualified option (not part of any plan) shares: 2,163,000 shares
QUALIFIED INCENTIVE STOCK OPTION PLAN
We have adopted an incentive stock option plan for the issuance of options
to purchase up to 3,500,000 million shares of common stock; the options are
intended to qualify under section 422 of the Internal Revenue Code. As of
December 31, 2001, we had outstanding to our employees (including officers)
qualified options to purchase 362,324 shares of common stock, not including
options on 600,000 shares issued to Mr. Grunewald, exercisable, at $1.40 per
share (closing bid price on May 29, 2002); 120,000 are vested and the balance
vest over four years. At June 3, 2002, there are 962,324 options outstanding to
employees. Most of the options are vested (some vest over time), and are
exercisable at prices from $1.40 to $10.62 per share (equal to or above market
prices when the options were issued). The issuance of shares on exercise of
options under the incentive stock option plan is registered with the Securities
and Exchange Commission on Form S-8. The shareholders approved the incentive
stock option plan in December 1999.
NONQUALIFIED STOCK OPTION PLAN FOR NON-EXECUTIVE DIRECTORS
To compensate our non-executive Directors, we established a plan for the
issuance of options to purchase up to 300,000 shares of common stock; options
under this plan will not qualify under section 422 of the Internal Revenue Code.
To date, we have issued options to purchase a total of 73,000 shares of common
stock to our three non-executive Directors, as a group, cumulatively for their
services through July 31, 2002. This plan provides for issuing options on 10,000
shares each year to each such director (exercisable for ten years, at market
price on grant date), after each annual meeting of shareholders, for the ensuing
year of service. We have registered the issuance of shares on exercise of
options under this plan with the Securities and Exchange Commission on Form S-8.
9
NONQUALIFIED OPTIONS (AND WARRANTS)
From time to time we issue options or warrants that are not covered by any
option plan and are not qualified under section 422 of the Internal Revenue
Code. These include outstanding options granted to officers as directed in their
employment agreements: 500,000 options to Kris M. Budinger (100 % vested);
723,000 options to former officer Garth Woodland ( 100 % vested); 125,000
options to Richard L. Millspaugh (46,250 options fully vested, 78,750 options
vesting over three years); 500,000 options granted to Chris A. Riggio (200,000
vested and 300,000 vesting at 20% per year); and 30,000 warrants (all vested) to
Pfeiffer Public Relations, Inc., exercisable at various prices, see "Certain
Relationships and Related Transactions" below).
COMPENSATION OF DIRECTORS
Each of our present Directors who is also an employee receives no
additional compensation for acting as a Director or attending meetings of
Directors. We pay non-employee Directors all of their costs to attend Board
meetings.
SECTION 16(A) REPORTING
Based upon a review of Forms 3 and 4 furnished to us under rule 16a-3(a)
since we became registered with the Securities and Exchange Commission (February
24, 2000), and written representations referred to in Item 405(b)(2)(i) of
Regulation S-K, no Directors, officers, beneficial owners of more than ten
percent of our common stock, or any other person subject to Section 16 of the
Exchange Act has failed to file on a timely basis, the reports required by
Section 16(a) of the Exchange Act.
EXECUTIVE COMPENSATION
The following table shows selected information about the compensation paid
or accrued by us to or for the account of the Chief Executive Officer and Chief
Financial Officer for services and bonuses rendered in all capacities during
each of the fiscal years ended December 31, 2001, 2000, and 1999. No other
executive officer received total annual salary and bonus in excess of $100,000
this year. Other than stock options, we do not have any long-term compensation
plan.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------------------- Shares Underlying
Name and Position Year Salary Bonus Options Granted
- ----------------- ---------------------------------------------- -------------------
Kris Budinger, (former CEO, 2001 $ 177,083 $ - -0- shares
as of June 3, 2002) 2000 $ 150,000 $ - -0- shares
1999 $ 72,000 $ 36,000 11,650 shares
Larry Arnold (former CEO)* 2001 $ 108,000 $ - -0- shares
2000 $ 172,463 $ - -0- shares
1999 $ 72,000 $ 36,000 11,650 shares
* Retirement provision for 18 months (8 months paid through August 2001.)
Richard Millspaugh, CFO 2001 $ 102,000 $ - 40,900 shares
2000 $ 90,000 $ - 100,000 shares
1999 $ 18,000 $ - 3,203 shares
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OPTION GRANTS IN 2001 (QUALIFIED AND NONQUALIFIED)
PERCENT
NUMBER OF OF ALL OPTIONS
SHARES UNDER- GRANTED TO
LYING OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
EXECUTIVE'S NAME GRANTED IN 2001 PRICE DATE PRES. VALUE(1)
- -----------------------------------------------------------------------------------------------------------------
Richard L. Millspaugh 25,000 4.0 % $ 3.75 2009 $ -0-
Richard L. Millspaugh 15,900 2.5 % $ 2.88 2010 $ -0-
<FN>
(1) The Black-Scholes option-pricing model was used to determine the grant
date present value of the stock options that we granted to the named
officer. The following facts and assumptions were used in making this
calculation: exercise prices, which was equal to or above the fair
market value of our stock on the grant date; a zero dividend yield;
expected volatility of 79.58% (2002) and 97.16% (2001); risk-free
interest rate of 6.623 %, and an expected life of ten years. Please
note that "present value at grant date" assumes full vesting at that
date, however, the options vest gradually over a period of years (see
"Employment Agreements" below).
</FN>
SHARES UNDERLYING OPTIONS AND THEIR VALUE
This table shows all outstanding options, and their value as of December
31, 2001, held by each of the named officers as of that date. None of the
officers exercised any options in 2001.
In each case, "value" is determined by multiplying (x) the number of shares
underlying the options by (y) the difference between the closing stock price of
$2.43 per share on December 31, 2001 (the last trading day of the year) and the
exercise price of the options. "Exercisable" means "vested"; "unexercisable"
means, "not vested at December 31, 2001;" "in the money" means the exercise
price was less than the closing stock price on December 31, 2001.
NUMBER OF SHARES VALUE OF UNEXERCISED
NAME UNDERLYING UNEXERCISED IN-THE-MONEY
OF THE OPTIONS AT 12/31/01 OPTIONS AT 12/31/01
OFFICER EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Kris M. Budinger* 511,650 / -0- $ -0- / $ -0-
Richard Millspaugh 53,428 / 90,675 $ -0- / $ -0-
Chris A. Riggio 236,032 / 300,000 $ -0- / $ -0-
* Resigned as of June 3, 2002.
EMPLOYMENT AGREEMENTS
- WITH GLENN GRUNEWALD. We have a written employment agreement with Mr.
Grunewald through May 29, 2007, subject to automatic renewal for another two
year term unless terminated or extended; the agreement will be automatically
extended for an additional two year term unless we or Mr. Grunewald notify each
other of non-extension at least 180 days before end of the term.
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Mr. Grunewald is paid a base salary of $250,000, plus annual incentive
bonuses as determined in good faith by the board of directors based on
achievement of targeted annual earnings goals or other relevant factors as
determined by the board. No goals or other factors have been determined yet for
Mr. Grunewald's bonus participation, except that he will receive a minimum of
25% of 2002 earned compensation (payable by February 14, 2003).
Options have been granted to Mr. Grunewald to purchase 600,000 shares of
common stock under the incentive stock option plan, at an exercise price of
$1.40 per share (closing bid price on May 29, 2002). 120,000 shares are vested
now and 120,000 more shares will vest each year on June 1, 2003, 2004, 2005 and
2006. All these options will be exercisable until June 1, 2012, or if his
employment is terminated, then one year after termination. In addition, over the
term of the agreement, the company will grant Mr. Grunewald additional incentive
stock options to purchase at least another 250,000 shares at market value on
grant date, with vesting within one year of grant date. These options have not
been granted to date, nor has a schedule of the amounts of grants been
determined
We will pay Mr. Grunewald an automobile allowance of $1,000 per month, and
pay his itemized relocation expenses from Roanoke, Virginia to the Denver,
Colorado area not in excess of $75,000.
If he dies or is incapacitated, we will pay his estate or custodians six
months of benefits under the agreement, and unvested options (schedule to vest
within 90 days after the event) will vest immediately to be exercisable for one
year after the event.
If we terminate Mr. Grunewald's employment without cause, or if he
terminates the agreement for good reason (see below), we will pay him within 30
days his base salary for 24 months after termination, plus an amount equal to
his bonus compensation earned in the prior two fiscal years, and keep his health
and insurance plans in effect for 24 months. Further, any stock options which
then were granted and scheduled to vest within 90 days of the event of
termination, will vest at termination and be exercisable for one year after the
event. If he is terminated for cause (continual or deliberate neglect of duties
as established by the board of directors, or conviction or indictment or other
matters related to felony acts, or breach of the agreement or violation of
standards of behavior applicable to officers of the company), no further
benefits will be paid to him.
He may terminate the agreement for good reason, if he is assigned duties
inconsistent with his position, or if his status and responsibilities are
reduced, and similar matters. Mr. Grunewald also may terminate the agreement for
good reason if, after a change in control of the company, the company does not
comply substantially with the terms of the agreement. "Change in control"
includes: Acquisition by a person or group of company securities representing
30% or more of the combined voting power (excluding securities originally bought
directly from the company by a person or group); or, where the current incumbent
directors as of June 1, 2002 cease for any reason to constitute at least a
majority of the board of directors (but a new director elected, or nominated for
election by the shareholders, will be considered as though the individual were a
member of the incumbent board, but not if that person becomes a director through
an actual or threatened election contest or other actual or threatened
solicitation of proxies). Other actions (such as a merger or sale of assets) may
constitute a change in control of the company. Neither the slate of directors
being nominated for election at the 2002 meeting, nor the election of such
persons at that meeting (or subsequent meetings in 2003 or 2004), triggers (or
will trigger) a change in control for purposes of the contract with Mr.
Grunewald.
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The foregoing is only a summary of principal terms of the agreement with
Mr. Grunewald. The contract is available for review as an exhibit to the
company's Report on Form 8-K filed with the SEC on June 3, 2002. On May 28,
2002, the Board of Directors (then comprised of Kris Budinger, Gary Fairhead,
Ronald Mathewson and Thomas Glaza) reviewed and approved Mr. Grunewald's
contract. These four individuals also comprise the compensation committee, and
therefore Mr. Grunewald's contract was reviewed by that committee.
-WITH KRIS BUDINGER. We have a written employment agreement with Kris M.
Budinger through March 31, 2003. Mr. Budinger resigned as of June 3, 2002, at
which time his base salary was $200,000 per year. Under the employment
agreement, Mr. Budinger was granted nonqualified stock options to purchase
500,000 shares of common stock at $5.50 per share (all now vested), which was
110% of the fair value of the stock at March 4, 1998. These options will expire
March 4, 2004. None have been exercised to date. Mr. Budinger will be paid his
base salary, and insurance benefits will be continued, through December 31,
2003, pursuant to the terms of his employment agreement.
-WITH CHRIS RIGGIO. Chris Riggio has a five-year written employment
agreement at a starting salary of $84,000 per year (increased to $102,000 per
year effective September 1, 2000), He received nonqualified stock options to
purchase 500,000 shares of common stock at $3.00, to vest 20% per year starting
September 1, 2000. Mr. Riggio has separate qualified options to buy 11,032
shares at $5.62 and 25,000 shares at $2.88 per share. All vested options
(pursuant to the employment agreement) will survive any voluntary termination of
employment and will expire on the third anniversary date of the separation from
the company or 2009 if not exercised. Mr. Riggio's employment contract provides
a cash bonus of 50 % of his annual salary if the company achieves $2,000,000 in
sales for any calendar year. The bonus of $51,000 for the year ended December
31, 2001 was earned and accrued for calendar year 2001 and paid in January 2002.
-WITH RICHARD MILLSPAUGH. Mr. Millspaugh has a five-year written employment
agreement, at a starting salary of $84,000 per year (increased to $102,000 per
year effective September 1, 2000). He received nonqualified stock options to
purchase 100,000 shares of common stock at $4.50 per share, which will vest 20%
per year starting in 2000. In 1999, we granted to Mr. Millspaugh qualified
options to buy 3,203 shares at $5.62 per share. In April, 2001, we granted
25,000 non qualified options at $3.75 per share. In December 2001, we granted
15,900 options at $2.88 per share. All vested options (pursuant to the
employment agreement) will survive any voluntary termination of employment and
will expire on the third anniversary date of the separation from the company or
2009 if not exercised.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND SENIOR MANAGEMENT.
The following table sets forth certain information about beneficial
ownership of our common stock as of May 22, 2002 by each officer and Director,
by any person or group who is known by us to own more than 5% of our common
stock, and by the officers and Directors as a group. The ownership information
is based on the Forms 3 and 4 filed by our officers and Directors with the
Securities and Exchange Commission as required by section 16(a) of the
Securities and Exchange Act of 1934, except James F. and Jeannette Glaza, whose
ownership is based on their proxy statement filed with the SEC on May 31, 2002.
Based on the Forms 3 and 4, the beneficial owners have sole voting and
dispositive power with respect to their shares except as otherwise noted.
In each instance, the number of shares shown as owned by the individual
includes shares issuable on exercise of options which are or would be
exercisable by September 3, 2002 (60 days from July 3, 2002), as required by the
disclosure rules of the Securities and Exchange Commission. Similarly, the
percentage for
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each person has been determined by dividing (x) the shares owned by the
individual plus the shares the person has the right to acquire on exercise of
options by September 3, 2002 by (y) the 21,243,155 shares of common stock
outstanding as of June 28, 2002, plus for each person with options, the number
of shares the person has the right to acquire on exercise of options by
September 3, 2002. For information about the options, see "Executive
Compensation - Employment Agreements" above. The shares shown as owned by
officers and Directors as a group includes shares issuable on exercise of
options which are or would be exercisable by September 3, 2002, and the
percentage of shares shown as owned by that group has been determined as if all
such options had been exercised.
NAME SHARES PERCENTAGE
Glenn M. Grunewald* 120,000 (1) **
6471 Fairway Estates Drive
Roanoke, Virginia 24018
Kris M. Budinger 1,378,125 (2) 6.4 %
4893 Ashbrook Circle
Highlands Ranch, Colorado 80130
Richard L. Millspaugh 53,428 **
Chief Financial Officer
6335 Lemonwood Drive
Colorado Springs, Colorado 80918
Thomas L. Glaza* 82,234 (4) **
370 Fallen Leaf Lane
Roswell, Georgia 30075
Ronald W. Mathewson * 28,250 **
87 Glenmoor Place
Englewood, Colorado 80110
Gary R. Fairhead * 47,500 **
2201 Landmeier Road
Elk Grove Village, Illinois 60007
Chris A. Riggio 1,136,845 4.8%
Vice-President Discovery
8100 South Akron, Suite 308
Englewood, Colorado 80112
James F. Glaza 1,410,584(3) 6.7%
and Jeannette A. Glaza
15435 Gleneagle Drive, Suite 210
Colorado Springs, Colorado 80921
Total 4,247,791 20.0%
14
<FN>
* Director
** Less than 1%
(1) Shares issuable on options which are vested.
(2) Includes 516,691 shares owned by immediate family members of Mr. Budinger
(Kris's wife holds sole voting and dispositive power over 412,291 shares
and Mr. Budinger shares voting and dispositive power over 104,400 shares
owned by his children.).
(3) Includes 680,611 shares held of record by Mr. Glaza; he disclaims
beneficial ownership of the shares held by his spouse. Also includes
719,388 shares held of record by Mrs. Glaza; she disclaims beneficial
ownership of the shares held by her spouse.
(4) Based on statements made in Glaza's proxy statement filed with the
Securities and Exchange Commission on May 31, 2002. The reported number
includes 19,500 shares underlying options held by Thomas Glaza. For
information on shares bought by Thomas Glaza in the last 24 months see
"Certain Relationships and Related Transactions."
</FN>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Based on statements made in Glaza's proxy statement, Thomas Glaza has
bought shares of company stock in the past 24 months: 5,000 shares on May 31,
2000 at $2.00 per share; 1,100 shares on February 8, 2001 at $5.875 per share;
and 1,500 shares at $4.1875 per share on February 26, 2001. No other officer or
director of the company bought (or sold) stock in the company in the past 24
months. The preceding disclosure is required by the regulations of the
Securities and Exchange Commission.
Fred Budinger, Director of Laboratory, is the brother of Kris Budinger,
former Chairman and CEO. Warren "Eli" Reed, Director International Sales and
Marketing, is a son-in-law of Kris Budinger.
Effective December 31, 2001, Mr. Garth Woodland (formerly Vice President -
Research) was no longer an employee of the company and his employment agreement
was terminated by negotiations, except for the confidentiality, trade secret
protection and non competition provisions, which continue in effect. We paid
$100,000 in cash to Mr. Woodland in full and final settlement of all payroll and
related benefits he would have received if he had remained with the company. Mr.
Woodland retained all vested stock options (723,000 shares) and forfeited
unvested stock options totaling 300,000 shares.
From January 1, 2001 through August 31, 2001, we have paid Mr. Arnold
(former CEO and Chairman of the Board of Directors who left OnLine on February
29, 2000) $108,000 in continuing severance compensation under the provisions of
his employment agreement. See below.
Mr. Kris Budinger resigned as CEO effective June 3, 2002. He will be paid
$200,000 annual base salary as severance, for 18 months after resignation, in
accordance with his employment agreement.
Thomas Glaza has been a Director of the company since July, 1999. James
Glaza, his brother, is a broker in Falcon Financial Services Inc. of Colorado
Springs, Colorado. Falcon Financial Services Inc., in association with Northstar
Securities, Inc. of Dallas, Texas, (the registered broker-dealer with which
Falcon then was associated) raised money for us from 1996 to 2000 in private
placements of our securities.
On September 1, 2000, we signed a 12-month contract with Pfeiffer Public
Relations, Inc. ("PPR") to provide investor public relations services to us. PPR
was paid a base compensation of $7,000 per month for 15 months and effective
March 1, 2002 is paid a base compensation of $4,000 per month. They have been
issued warrants to purchase 30,000 shares of restricted common stock at $9.50
for 10,000 shares, 10,000
15
shares at $12.50 and 10,000 shares at $15.50. The warrants are fully vested. The
contract may be terminated without cause on 30 days written notice. The contract
for services was renewed for an additional twelve months on the anniversary date
of the original contract with the same terms and conditions, except for reduced
monthly cash compensation.
INTERNAL INVESTIGATION AND LAWSUIT TO BE FILED. Outside securities counsel
engaged by the company have completed an internal investigation of certain
financial transactions involving a) stock sales by the company, b)
misappropriated proceeds of stock issuances, c) certain stock transactions
conducted by Larry G. Arnold, former CEO and Chairman of the company, utilizing
an entity owned by him, and d) conduct of other persons involved in sales of
stock. The results of the investigation indicate the following:
1. We believe, based on our corporate records, that Larry G. Arnold
misappropriated 47,000 shares of company stock in late February 2000
(that was registered in another person's name and were to be canceled
and returned to the company treasury), by transferring that stock to a
stock brokerage account, apparently for his own personal benefit. He
was asked to and did return an equivalent number of shares to the
company but has not accounted for any profits he may have realized
from transactions involving the original misappropriated shares.
2. We believe, based on our corporate records, that in 1996, Mr. Arnold,
President of Glitchmaster Marketing Inc., caused Glitchmaster (since
merged into OnLine Entertainment Inc. in 1996) to issue stock to
certain of his friends and acquaintances, as his nominees, maintaining
physical possession of their stock certificates. After the merger and
the exchange of Glitchmaster shares for OnLine shares, we believe that
he periodically sold the nominee OnLine stock for his personal
financial benefit from 1997 to mid-1999, all in violation of duties he
owed to the company as the CEO and Chairman.
3. We believe, based on our corporate records, that from 1997 to
mid-1999, Mr. Arnold sold OnLine stock, held in the names of certain
friends and acquaintances, and caused the company to issue additional
OnLine treasury shares that were also sold to investors by Mr. Arnold.
Our corporate records do not show that any of the proceeds (all cash)
of these stock sales were received by the company; we believe that all
of the sale proceeds were deposited into a separate bank account that
was apparently owned and controlled by Mr. Arnold. Our corporate
records do not show that he disclosed to the company that he received
money or other benefits from the investors who purchased the treasury
stock.
4. We believe, based on our corporate records, that Mr. Arnold may have
engaged in other activities, involving stock of the company, for his
personal financial benefit, which activities may have been in
violation of his duties he owed to the company as CEO and Chairman.
The statements in paragraphs 1 through 4 are based on our corporate
records, and our outside securities counsel's interpretation of the evidence and
applicable law. You should not construe such statements to be assertions of
fact.
Based on the results of the investigation, in 2002 the company will file a
lawsuit against Mr. Arnold alleging breach of fiduciary duties (misappropriation
and conversion of corporate assets), and others alleging aiding and abetting Mr.
Arnold's misdeeds, and request an accounting from him of the fruits of his
misdeeds. The company will also seek the return of salary and other financial
benefits paid to Mr. Arnold while employed by the company and seek recovery of
the retirement benefits paid to him pursuant to his
16
employment agreement for 18 months following his departure from the company in
late February 2000. We estimate that the amount of financial losses to the
company, plus the amount of personal gain enjoyed by Mr. Arnold and others
acting with him, to the detriment of the company, will prove to be substantial.
However, the extent of such losses will not be completely known until discovery
is completed in the lawsuit to be filed.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors seeks shareholder ratification of the board's
appointment of Ehrhardt Keefe Steiner & Hottman, P.C., Certified Public
Accountants, to act as the auditors of our financial statements for the year
2002. The audit committee has recommended that the Board retain this auditing
firm for the current year. EKS&H audited our financial statements for 2001, 2000
and 1999. The board has not determined what action, if any, would be taken
should the appointment of EKS&H not be ratified at the Meeting. It is expected
that a representative of EKS&H will be available at the Meeting to respond to
appropriate questions. The representative will have the opportunity to make a
statement if he or she desires to do so.
ACCOUNTANT'S FEES
EKS&H billed us the following fees in 2001:
Audit and Review Fees: $63,300
Financial Information Systems Design and Implementation Fees: $ -0-
All Other Fees: $6,660 (Tax Planning and Preparation)
The audit committee of the board of directors deems the provision of
services described under "All Other Fees - Tax Preparation Work" to be
insignificant and does not adversely affect auditor independence and function.
COPIES OF OUR FORM 10-KSB/A
Promptly upon receiving a request from any shareholder, without charge we
will send to the requester a copy of our Form 10-KSB/A, with exhibits, as filed
with the Securities and Exchange Commission. Please address your request to Kari
Austin at OnLine Power Supply, Inc., 8100 S. Akron Street, Suite 308, Englewood,
Colorado 80112. You also may call or fax her at T 303.741.5641, F 303.741.5679.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Audit Committee Charter
99.2 Certification by Audit Committee
17
PROXY ONLINE POWER SUPPLY, INC. PROXY
The undersigned hereby appoints Gary Fairhead and Richard Millspaugh, or
either of them, with full power of substitution, as proxies to all of the shares
of stock of the undersigned in OnLine Power Supply, Inc. at the Annual Meeting
of Shareholders to be held on Wednesday, July 31, 2002 at 10:00 a.m., local
time, or at any adjournments thereof, on the matters numbered below:
THE PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THIS CARD; (2) AS THE BOARD OF
DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER LISTED ON
THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER. PLEASE FOLLOW THE
INSTRUCTIONS CAREFULLY.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF ALL DIRECTOR
NOMINEES AND IN FAVOR OF RATIFYING THE SELECTION OF INDEPENDENT AUDITORS.
If you wish to vote on all matters as the Board of Director recommends,
please sign and date this card on the reverse side, and return this card in the
envelope. If you wish to vote on items individually, please also mark the
appropriate boxes below.
1. Election of Directors:
Instruction: If you want the proxies to vote for all the nominees, check
the FOR box. If you want the proxies to vote against all the nominees,
check the AGAINST box. If you want the proxies to abstain from voting for
or against all the nominees, check the ABSTAIN box.
IF YOU WANT TO VOTE FOR SOME OF THE NOMINEES BUT WITHHOLD AUTHORITY FROM
THE PROXIES TO VOTE FOR OTHERS OR AGAINST (ABSTAIN FROM VOTING FOR THE
OTHERS), CHECK THE FOR BOX AS TO THOSE YOU WANT TO VOTE IN FAVOR, AND DRAW
A LINE THROUGH THE NAME OF THE NOMINEE FOR DIRECTOR YOU WANT TO WITHHOLD
AUTHORITY FROM VOTING, BUT DO NOT WRITE ANYTHING UNDER THE LINE YOU DRAW.
If you want the proxies to vote for some nominees, but against some other
nominees, check the FOR box and draw a line through the name of the
nominees you want to vote against and write "against" under each line you
draw.
o FOR the nominees listed below o AGAINST the nominees listed below
o ABSTAIN
Glenn M. Grunewald Edward F. Sidor Gary R. Fairhead
Kenneth A. Cassady Gary A. Young
2. Ratification of appointment of Ehrhardt Keefe Steiner & Hottman as
independent auditors for the current fiscal year.
Instruction: Mark only one box.
o FOR the appointment o AGAINST the appointment o ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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PROXY ONLINE POWER SUPPLY, INC. PROXY
Sign your name exactly as it appears on the mailing label below. It is
important to return this Proxy properly signed in order to exercise your right
to vote, if you do not attend in person. When signing as an attorney, executor,
administrator, trustee, guardian, corporate officer, etc., indicate your full
title as such.
Sign on this line - joint holders may sign here too: ___________________________
_______________________, 2002. ___________________
(Date) (Number of Shares)
NOTE: Please sign, date, and place this Proxy in the enclosed self-addressed,
postage prepaid envelope and deposit it in the mail as soon as possible.
PLEASE CHECK IF YOU ARE PLANNING TO ATTEND THE MEETING. | |
IF THE ADDRESS ON THE MAILING LABEL IS NOT CORRECT, PLEASE GIVE US THE CORRECT
ADDRESS:
- --------------------------------------------------------------------------------
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