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 0000 Xxxxx Xxxxx Xx., Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, acting
through its board of directors (Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx
Xxxxxxxxx and Xxxxxx Xxxxx); (2) each such board member individually; (3) Xxxx
Xxxxxxxx, shareholder and former director and CEO; and (4) Xxxxx X. Xxxxx and
Xxxxxxxxx Xxxxx, husband and wife (together referred as "Xxxxx"), and Falcon
Financial Services, Inc. ("Falcon"), a Colorado corporation controlled by Xxxxx,
all with the business address of 00000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000. Xxxxx, Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxx, and Xxxx X. Xxxxxxxx are the "Individual Parties."
Xxxxx has filed a proxy statement with the Securities and Exchange
Commission to solicit shareholders of the company to vote in favor of four Xxxxx
nominees (the "Xxxxx 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 Xxxxx, the Injunction Proceedings and the Company's proxy statement.
Therefore, the parties agree as follows:
1. Xxxxx and Falcon agree to immediately cease all of their efforts to
elect the Xxxxx Slate to the board of directors of the Company. This
shall include, but not be limited to (1) ceasing to use the Xxxxx
Proxy Statement to solicit shareholder votes for the Xxxxx Slate; and
(2) Xxxxx sending a `stop look and listen' letter to the Company
shareholders (the "Letter"), including to those shareholders who have
already appointed Xxxxx as proxy to vote their shares for the Xxxxx
Slate. The Letter includes a form for shareholders who have already
appointed Xxxxx as their proxy to sign and return to Xxxxx revoking
that appointment.
2. The Individual Parties further agree to vote all of the shares they
own in favor of Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxx,
Xxxxxxx X. Xxxxxxx, and Xxxx X. Xxxxx (the "New Company Slate") for
elections at the 2002, 2003, and 2004 Annual Meetings of shareholders.
The numbers of shares owned by Xxxxx are 680,611 shares owned of
record by Xxxxx X. Xxxxx and 719,388 shares held of record by
Xxxxxxxxx Xxxxx. 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, Xxxxx, Xxxxxx X. Xxxxx, and Falcon shall submit a joint
motion to dismiss the Injunctive Proceedings with prejudice upon
Xxxxx'x sending a letter of notification to the SEC that Xxxxx 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 (Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxx,
Xxxxxxx X. Xxxxxxx, and Xxxx X. Xxxxx) 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 Xxxxxxx X. Xxxxxxx or Xxxx
X. Xxxxx 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 Xxxxx 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 Xxxxx will
be included in the new proxy materials. Xxxxx 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 Xxxxx, 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, Xxxxx and Falcon, and Xxxxxx X. Xxxxx, 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 Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxx Xxxxx,
and former officer and director Xxxx X. Xxxxxxxx), 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 Xxxxx 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 Xxxxxx X. Xxxxx, 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 Xxxxx 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/ Xxxxx X. Xxxxxxxxx /s/ Xxxxx X. Xxxxxxxxx
------------------------------------- ------------------------------------
Xxxxx X. Xxxxxxxxx, CEO and Director Xxxxx X. Xxxxxxxxx, Individually
/s/ Xxxx Xxxxxxxx /s/ Xxxx Xxxxxxxx
------------------------------------- ------------------------------------
Xxxx Xxxxxxxx, Director Xxxx Xxxxxxxx, Individually
/s/ Xxxxxx Xxxxxxxxx /s/ Xxxxxx Xxxxxxxxx
------------------------------------- ------------------------------------
Xxxxxx Xxxxxxxxx, Director Xxxxxx Xxxxxxxxx, Individually
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxx
------------------------------------- ------------------------------------
Xxxxxx X. Xxxxx, Director Xxxxxx X. Xxxxx, Individually
/s/ Xxxx X. Xxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxx, Individually
FALCON FINANCIAL SERVICES, INC.
/s/ Xxxxx X. Xxxxx /s/ Xxxxx X. Xxxxx
------------------------------------- ------------------------------------
Xxxxx X. Xxxxx, President Xxxxx X. Xxxxx, Individually
/s/ Xxxxxxxxx Xxxxx
------------------------------------
Xxxxxxxxx Xxxxx, 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 Xxxxx and Xxxxxxxxx Xxxxx by executing the agreement
attached hereto ("Agreement");
WHEREAS, the Agreement requires the Corporation to nominate Xxxxx X. Xxxxxxxxx,
Xxxx Xxxxxxxx, Xxxxxx Xxxxx, Xxxxxxx X. Xxxxxxx, and Xxxx X. Xxxxx (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/ Xxxxxx Xxxxxxxxx /s Xxxxx X. Xxxxxxxxx
---------------------------------- ---------------------------------------
Xxxxxx Xxxxxxxxx, Director Xxxxx X. Xxxxxxxxx, CEO and Director
/s/ Xxxxxx X. Xxxxx /s/ Xxxx Xxxxxxxx
---------------------------------- ---------------------------------------
Xxxxxx X. Xxxxx, Director Xxxx Xxxxxxxx, Director
Settlement Agreement--Page 5 of 5
