ONLINE SYSTEM SERVICES INC, PRE 14A, 1998-06-24

ONLINE SYSTEM SERVICES INC
PRE 14A, 1998-06-24
COMPUTER INTEGRATED SYSTEMS DESIGN

Previous: NORWEST ASSET SECURITIES CORP, 424B5, 1998-06-24

Next: PHOENIX INTERNATIONAL LTD INC, S-8, 1998-06-24

<PAGE>

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Online System Services, Inc.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

- - -------------------------------------------------------------------------------

(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:

- - -------------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

- - -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- - -------------------------------------------------------------------------------
(3) Filing Party:

- - -------------------------------------------------------------------------------
(4) Date Filed:

<PAGE>

[LOGO TO COME]

ONLINE SYSTEM SERVICES, INC.
1800 Glenarm Place
Suite 700
Denver, Colorado 80202

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 30, 1998

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Online
System Services, Inc., a Colorado corporation ("OSS" or the "Company"), will
be held on July, 30, 1998, at : .m., Mountain Time, at the Company's
offices, 1800 Glenarm Place, Suite 700, Denver, Colorado for the following
purposes:

1. To elect seven nominees to the Board of Directors to serve for a term of
one year.

2. To approve an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of capital stock from 15,000,000 to
25,000,000 shares and to increase the number of authorized shares of common
stock, no par value, from 10,000,000 to 20,000,000 shares.

3. To approve issuances of the Company's securities pursuant to two separate
financing proposals.

4. To approve an amendment to the Online System Services, Inc. Stock Option
Plan of 1995 to increase the number of shares authorized under such plan from
1,100,000 to 2,500,000.

5. To ratify the appointment of Arthur Andersen LLP as the independent
accountants of the Company for the current fiscal year.

6. To transact such other business as may properly come before the meeting
and any adjournments thereof.

Only holders of record of common stock of the Company at the close of
business on July 2, 1998 will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournment thereof.

YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED REPLY ENVELOPE AS PROMPTLY AS POSSIBLE.

BY ORDER OF THE BOARD OF DIRECTORS

Robert M. Geller
Secretary

July , 1998

<PAGE>

[LOGO TO COME]

PROXY STATEMENT

ONLINE SYSTEM SERVICES, INC.

1800 GLENARM PLACE
SUITE 700
DENVER, COLORADO 80202

ANNUAL MEETING OF SHAREHOLDERS--JULY 30, 1998

GENERAL

The enclosed Proxy is solicited by the Board of Directors of Online System
Services, Inc., a Colorado corporation ("OSS" or the "Company"), for use at
the annual meeting of the Company to be held on July, 30, 1998, at :
.m., Mountain Time, at the Company's offices, or any adjournment thereof.
Such solicitation is being made by mail and may also be made by directors,
officers and employees of the Company. Any Proxy given pursuant to such
solicitation may be revoked by the shareholder at any time prior to the voting
thereof by so notifying the Company in writing at the above address,
attention: Robert M. Geller, Secretary, or by appearing and voting in person
at the meeting. Shares represented by Proxies will be voted as specified in
such Proxies. In the absence of specific instructions, Proxies will be voted
(to the extent they are entitled to be voted on such matters): (1) FOR the
election to the Board of Directors of the nominees named in this Proxy
Statement; (2) FOR the amendment to the Articles of Incorporation to increase
the number of authorized shares of capital stock from 15,000,000 to 25,000,000
and to increase the number of authorized shares of common stock, no par value,
from 10,000,000 to 20,000,000; (3) FOR issuances of the Company's securities
pursuant to a Securities Purchase Agreement dated May 22, 1998 between OSS and
Arrow Investors LLC and in connection with a proposed placement of $15 million
worth of the Company's common stock; (4) FOR the amendment to the Online
System Services, Inc. Stock Option Plan of 1995 to increase the number of
shares authorized under such plan from 1,100,000 to 2,500,000; (5) FOR the
ratification of the appointment of Arthur Andersen LLP as the independent
accountants of the Company for the current year; and (6) in the Proxies'
discretion upon such other business as may properly come before the meeting.
So far as the management of the Company is aware, no matters other than those
described in this Proxy Statement will be acted upon at the Annual Meeting.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether
or not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval
of any matter submitted to the shareholders for a vote. If a broker indicates
on the proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will be considered as
shares that are present for the purposes of determining the presence of a
quorum, but will not be considered as present and entitled to vote with
respect to that matter.

All of the expenses involved in preparing, assembling and mailing this Proxy
Statement and the material enclosed herewith will be paid by the Company. The
Company may reimburse banks, brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
material to beneficial owners of stock. This Proxy Statement and the Company's
Annual Report for the year ended December 31, 1997 are being mailed to
shareholders on or about July 7, 1998.
<PAGE>

OUTSTANDING STOCK

Common Stock, no par value ("Common Stock"), of which there were
shares outstanding on the Record Date, 10% Preferred Stock,
$10.00 stated value ("10% Preferred Stock"), of which there were 267,500
shares outstanding on the Record Date, and 5% Preferred Stock, $1,000 stated
value ("5% Preferred Stock"), of which there were 3,000 shares outstanding on
the Record Date, constitute the only classes of outstanding voting securities
issued by the Company. Each holder of Common Stock and each holder of 10%
Preferred Stock will be entitled to cast one vote in person or by proxy for
each share of Common Stock or 10% Preferred Stock held for the election of
directors and for all other matters voted on at the Annual Meeting. Each
holder of 5% Preferred stock will be entitled to cast votes in person or
by proxy for each share of 5% Preferred Stock held for the election of
directors and for all other matters voted on at the Annual Meeting. The
holders of Common Stock, the holders of 10% Preferred Stock, and the holders
of 5% Preferred Stock shall vote as a single class on all matters voted on at
the Annual Meeting. Only shareholders of record of the Common Stock, the 10%
Preferred Stock, and the 5% Preferred Stock at the close of business on July
2, 1998 will be entitled to vote at the meeting (the "Record Date").

Information as to the name, address and stock holdings of each person known
by the Company to be a beneficial owner of more than 5% of its Common Stock,
its 10% Preferred Stock, or its 5% Preferred Stock and as to the name, address
and stock holdings of each director and nominee for election to the Board of
Directors and by all officers, directors, and nominees, as a group, as of the
Record Date is set forth below. Except as indicated below, the Company
believes that each such person has the sole (or joint with spouse) voting and
investment powers with respect to such shares.

<TABLE>
<CAPTION>
COMMON STOCK 10% PREFERRED STOCK 5% PREFERRED STOCK
------------------------- ----------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
NAME/ADDRESS OF BENEFICIALLY OF BENEFICIALLY OF BENEFICIALLY OF
SHAREHOLDER/DIRECTOR OWNED CLASS (1) OWNED CLASS (1) OWNED CLASS (1)
- - -------------------- -------------- --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
R. Steven Adams 497,000(2) 14.8% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Robert M. Geller 184,667(3) 5.5% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Paul H. Spieker 179,667(4) 5.3% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Lee E. Schlessman 57,000(5) 1.7% 120,000(6) 44.9% None
1301 Pennsylvania
Street, Suite 800
Denver, Colorado 80203
Susan M. Duncan 13,500(7) * 30,000(8) 11.3% None
2651 South Wadsworth
Circle
Lakewood, Colorado
80227
Arrow Investors LLC (9) None 3,000 100%
c/o One World Trade
Center
Suite 4563
New York, New York
10048
Robert J. Lewis 64,370(10) 1.9% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202

</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK 10% PREFERRED STOCK 5% PREFERRED STOCK
------------------------ ---------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
NAME/ADDRESS OF BENEFICIALLY OF BENEFICIALLY OF BENEFICIALLY OF
SHAREHOLDER/DIRECTOR OWNED CLASS (1) OWNED CLASS (1) OWNED CLASS (1)
- - -------------------- -------------- --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas S. Plunkett 37,000(11) 1.1% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
H. Robert Gill 20,000(12) * None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Richard C. Jennewine 20,000(13) * None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Charles P. Spickert 56,000(14) 1.6% None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
William R. Cullen None(15) None None
1800 Glenarm Place,
Suite 700
Denver, Colorado 80202
Directors and Executive
Officers as a Group (12
persons) 1,058,704(16) 29.1% None None
</TABLE>
- - --------
* Less than one percent of shares outstanding.

(1) In calculating percentage ownership, all shares of Common Stock which a
named shareholder has the right to acquire within 60 days from the date of
this Proxy Statement upon exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
owned by that shareholder, but are not deemed to be outstanding for the
purpose of computing the percentage of Common Stock owned by any other
shareholders. No options or warrants to acquire either the 10% Preferred
Stock or 5% Preferred Stock are outstanding.

(2) Excludes options for the purchase of 100,000 shares of Common Stock that
are not exercisable during the next 60 days.

(3) Includes options for the purchase of 36,667 shares of Common Stock, but
excludes options for the purchase of 38,333 shares of Common Stock that
are not exercisable during the next 60 days.

(4) Includes options for the purchase of 36,667 shares of Common Stock, but
excludes options for the purchase of 23,333 shares of Common Stock that
are not exercisable during the next 60 days.

(5) Includes warrants for the purchase of 16,000 shares of Common Stock. Also
includes (i) 2,500 shares of Common Stock owned by The Schlessman Family
Foundation, (ii) warrants for the purchase of 2,000 shares of Common
Stock owned by The Schlessman Family Foundation, (iii) 7,500 shares of
Common Stock owned by persons who have granted Mr. Schlessman a power of
attorney with respect to such shares, and (iv) warrants for the purchase
of 6,000 shares of Common Stock owned by persons who have granted Mr.
Schlessman a power of attorney with respect to such warrants.

(6) Includes 10,000 shares of 10% Preferred Stock owned by The Schlessman
Family Foundation. Also includes 30,000 shares of 10% Preferred Stock
owned by persons who have granted Mr. Schlessman a power of attorney with
respect to such shares.

(7) Includes warrants for the purchase of 2,000 shares of Common Stock. Also
includes 5,000 shares of Common Stock owned by the Susan M. Duncan
Irrevocable Gift Trust and warrants for the purchase of 4,000 shares of
Common Stock owned by the Susan M. Duncan Irrevocable Gift Trust.

(8) Includes 20,000 shares of 10% Preferred Stock owned by the Susan M.
Duncan Irrevocable Gift Trust.

3
<PAGE>

(9) Includes warrants for the purchase of 50,000 shares of Common Stock and
shares of Common Stock issuable as of the Record Date
upon the conversion of the 5% Preferred Stock.

(10) Includes options and warrants for the purchase of 35,000 and 2,700
shares of Common Stock, respectively.

(11) Includes options for the purchase of 35,000 shares of Common Stock, but
excludes options for the purchase of 80,000 shares of Common Stock that are
not exercisable during the next 60 days.

(12) Includes options for the purchase of 20,000 shares of Common Stock, but
excludes options for the purchase of 20,000 shares of Common Stock that are
not exercisable during the next 60 days.

(13) Includes options for the purchase of 20,000 shares of Common Stock, but
excludes options for the purchase of 20,000 shares of Common Stock that are
not exercisable during the next 60 days.

(14) Includes options for the purchase of 50,000 shares of Common Stock, but
excludes options for the purchase of 15,000 shares of Common Stock that are
not exercisable during the next 60 days.

(15) Excludes options for the purchase of 130,000 shares of Common Stock that
are not exercisable during the next 60 days.

(16) Includes options for the purchase of 236,034 shares of Common Stock, but
excludes options for the purchase of 516,666 shares of Common Stock that
are not exercisable during the next 60 days.

PROPOSAL 1:
ELECTION OF DIRECTORS

NOMINATION AND ELECTION OF DIRECTORS

The Company's by-laws provide that the size of the Board of Directors shall
be fixed from time to time by resolution of the shareholders, subject to
increase by resolution of the Board of Directors. In the event the
shareholders do not fix by resolution the number of directors, the by-laws
provide that the number of directors shall be three, subject to increase by
resolution of the Board of Directors. The Board of Directors has set the size
of the Board at seven. The Proxies granted by the stock holders will be voted
at the annual meeting for the election of the seven persons listed below as
directors of the Company.

NOMINEES FOR DIRECTOR

R. Steven Adams
William R. Cullen
Robert M. Geller
Robert J. Lewis
Richard C. Jennewine
Charles P. Spickert
H. Robert Gill

In the event that one of more of the above named persons shall become
unavailable for election, votes will be cast pursuant to authority granted by
the enclosed proxy for such person or persons as may be designated by the
Board of Directors, unless the Board of Directors determines to reduce its
size appropriately.

POTENTIAL RESIGNATION OF DIRECTORS

On March 19, 1998 the Company executed an Agreement and Plan of Merger (the
"DCI Merger Agreement") pursuant to which the Company agreed to acquire Durand
Communications, Inc., a California corporation ("DCI"), via a merger of the
Company's wholly owned subsidiary, Durand Acquisition Corporation, with DCI
(the "DCI Merger"). As consideration for the DCI Merger, the Company will
issue up to 971,250 shares of its Common Stock and will acquire 100% of the
outstanding shares of common stock, no par value, of DCI. Approval by the
Company's shareholders is a condition precedent to the Company's obligation to
consummate the DCI Merger. If the issuance of shares of Common Stock is not
approved by the shareholders, it is unlikely that the Company will consummate
the DCI Merger. The Company anticipates that it will call a special meeting of
the shareholders to take place in September 1998 at which the shareholders
will consider the issuance of such Common Stock and other matters related to
the DCI Merger (the "Special Meeting").

4
<PAGE>

At the Special Meeting and in connection with the approval of the issuance
of such Common Stock to consummate the DCI Merger, the shareholders will be
asked to elect to the Board of Directors two persons selected by DCI. Under
the terms of the DCI Merger Agreement, the Company agreed to use its best
efforts to cause two persons selected by DCI to be elected to the Company's
Board of Directors in connection with the consummation of the DCI Merger. The
Company anticipates that these two persons will be Andre Durand, founder,
President and Chief Executive Officer of DCI and Donald J. Esters, Chairman of
the Board of Directors of DCI. If the DCI Merger is approved by the
shareholders and DCI's nominees are elected by the shareholders, Mr. Gill and
Mr. Spickert have indicated that they will resign from the Board of Directors
in order to keep the Board of Directors at its current size of seven persons.

On June 5, 1998 the Company executed an Agreement and Plan of Merger (the
"Skyconnect Merger Agreement") pursuant to which the Company agreed to acquire
Skyconnect, Inc., a Colorado corporation ("Skyconnect"), via a merger of the
Company's wholly owned subsidiary, Skyconnect Acquisition Corporation, with
Skyconnect (the "Skyconnect Merger"). As consideration for the Skyconnect
Merger, the Company will issue up to 1,100,000 shares of its Common Stock and
will acquire 100% of the outstanding shares of common stock, no par value, of
Skyconnect. Approval by the Company's shareholders is a condition precedent to
the Company's obligation to consummate the Skyconnect Merger. If the issuance
of shares of Common Stock is not approved by the shareholders, it is unlikely
that the Company will consummate the Skyconnect Merger. The Company
anticipates that it will ask the shareholders to consider the issuance of such
Common Stock and other matters related to the Skyconnect Merger at the Special
Meeting.

At the Special Meeting and in connection with the approval of the issuance
of such Common Stock to consummate the Skyconnect Merger, the shareholders
will be asked to elect to the Board of Directors William R. Becker, the
Chairman of the Board of Directors of Skyconnect. Under the terms of the
Skyconnect Merger Agreement, the Company agreed to use its best efforts to
cause Mr. Becker to be elected to the Company's Board of Directors in
connection with the consummation of the Skyconnect Merger. If the Skyconnect
Merger is approved by the shareholders and Mr. Becker is elected by the
shareholders, Mr. Geller has indicated that he will resign from the Board of
Directors in order to keep the Board of Directors at its current size of seven
persons.

DIRECTORS, NOMINEES FOR DIRECTOR AND OFFICERS

The directors, nominees for director, and executive officers of the Company
are as follows:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
- - ---- --- -------- ----------------------------------------------------
<S> <C> <C> <C>
Chairman of the Board, President and Chief Executive
R. Steven Adams......... 45 1994 Officer
and a Director
William R. Cullen....... 56 1998 Chief Operating Officer and a Director
Thomas S. Plunkett...... 45 -- Chief Financial Officer
Robert M. Geller........ 45 1995 Secretary and a Director
Keith M. Bennett........ 49 -- Senior Vice President--Sales and Tactical Marketing
Gwenael S. Hagan........ 37 -- Vice President--Strategic Development
Paul H. Spieker......... 54 1995 Vice President--Technical Operations and a Director
Robert J. Lewis......... 67 1995 Director
H. Robert Gill.......... 61 1996 Director
Richard C. Jennewine.... 59 1996 Director
Charles P. Spickert..... 44 1997 Director
</TABLE>

R. STEVEN ADAMS, founder of the Company, has served as President, Chief
Executive Officer and a director since the Company's incorporation in March
1994. From 1985 to 1994, Mr. Adams was President-Sheridan Hotel Management, a
full service hotel management company. Mr. Adams was the creator and founder
of HotelNet, which was an online information system for the hospitality
industry. Mr. Adams' experience includes software development, personal
computer manufacturing and management of online information systems.

5
<PAGE>

WILLIAM R. CULLEN, has served as Chief Operating Officer and a director
since March 1998. From May 1997 to March 1998, Mr. Cullen worked as a
consultant to the businesses in the cable industry. From April 1994 to May
1997, Mr. Cullen was Chairman and CEO of Access Television Network, Inc., a
privately held company specializing in providing paid programming to local
cable systems. From January 1992 to March 1994, Mr. Cullen was President and
CEO of California News Channel, a programming project of Cox Cable
Communications. From July 1984 to December 1991, Mr. Cullen was employed by
United Artist Cable Corporation (and its predecessor United Cable Television
Corp.) as Vice President of Operations and President of its subsidiary United
Cable of Los Angeles, Inc., and as its Senior Vice President of the Southwest
Division. Prior to joining United Artist Cable Corporation, Mr. Cullen was
President of Tribune Company Cable of California, Inc. and CEO of its United-
Tribune Cable of Sacramento joint venture, served as a top financial officer
of three companies, and worked in banking.

THOMAS S. PLUNKETT, has served as Vice President-Chief Financial Officer of
the Company since October 1996. From 1995 to 1996 Mr. Plunkett was the Vice
President of Business Management at Maxtor Corporation, a manufacturer of disk
drives. From 1994 to 1995 Mr. Plunkett was the Vice President of Operations
for Hi-Tech Manufacturing, an electronic manufacturing services company. From
1992 to 1994 he was a Controller at Conner Peripherals, a manufacturer of disk
drives. From 1989 to 1992, Mr. Plunkett served as Vice President and C.F.O. of
Discovery Technologies, a manufacturer of high resolution medical image
transmission equipment. Prior to joining Discovery Technologies, Mr. Plunkett
held various senior operations and financial management positions with
Miniscribe Corporation from 1982 to 1989.

ROBERT M. GELLER, has been a director and corporate secretary of the Company
since May 1995. He also served as Vice President-Chief Financial Officer of
the Company on a one-half time basis from May 1995 to October 1996. Mr. Geller
currently provides consulting services to the Company on a one-half time
basis. From 1986 to the present, Mr. Geller has been President of The Growth
Strategies Group, a consulting company specializing in board and executive
services for emerging growth companies. Mr. Geller is a director of
Renaissance Entertainment Corporation, a publicly held owner and operator of
renaissance fairs; and Armanino Foods of Distinction, Inc., a publicly held
producer of Italian foods.

KEITH M. BENNETT, joined the Company in April 1998 as Senior Vice President-
Sales and Tactical Marketing. From December 1997 to April 1998 and from April
1996 to February 1997, Mr. Bennett worked as a consultant to new and emerging
companies in the telecommunications industry to assist them in establishing
their products and services in the marketplace. From February 1997 to December
1997, Mr. Bennett was Vice President of North American Sales for Intergram
International, a global provider of digital messaging products and services,
responsible for developing and implementing all sales and marketing
strategies. From May 1993 to April 1996, Mr. Bennett was Director of Sales and
Customer Service with U S WEST, MRG and was responsible for new product market
launches with an emphasis on sales, customer service, and marketing.

GWENAEL S. HAGAN, joined the Company in January 1998 as Vice President of
Strategic Development. From June 1996 to January 1998. Mr. Hagan served as
Vice President of New Business Development with International Channel, a cable
television network, where he was responsible for new revenue opportunities,
both domestically and internationally, and developing and implementing
strategies to increase revenue and position International Channel for growth
via evolving digital cable and satellite platforms. From December 1994 to June
1996, Mr. Hagan served as the Internet Marketing Manager for Microsoft's
western region. His work with Microsoft encompassed competitive strategy
development, sales resource allocation, presentations and public relations.
From March 1994 to December 1994, Mr. Hagan worked with Missing Link
Communications, Inc. , a developer of television programs to assist computers
in buying personal computers. At Missing Link, Mr. Hagan was responsible for
programming concepts and establishing alliances. Prior to that time, Mr. Hagan
spent 11 years with Jones International, Ltd., a cable television operator and
television network development company.

PAUL H. SPIEKER, has been Vice President-Technical Operations and a director
of the Company since February 1995. From 1992 to 1994 Mr. Spieker was
President of Business Regulatory Coalition-Colorado, a public affairs company
responsible for policy formulation and activities primarily dealing with
regulatory matters

6
<PAGE>

representing companies before the Colorado Public Utilities Commission. From
1991 to 1994, he was a private consultant primarily for businesses in voice
and data communications. From 1990 to 1991, Mr. Spieker was President of
Developers Cable Construction, a startup company providing contract
construction services for residential developers and local telephone and cable
companies. From 1987 to 1990, Mr. Spieker was employed by Volt Information
Sciences, Inc., a New York based telecommunications company. Mr. Spieker was
employed by U S WEST Communications, Inc. and its predecessor from 1966 to
1987 and served in several senior management capacities, including the head of
the strategic business unit which served large telephone customers in a seven
state territory.

ROBERT J. LEWIS, has been a director of the Company since February 1995. Mr.
Lewis retired in October 1995 after having spent 37 years in the cable
television industry as an owner and developer of cable systems and senior
executive with several cable television companies. From 1987 until his
retirement, Mr. Lewis was employed by TCI Telecommunications, Inc. ("TCI"),
one of the largest cable television companies in the United States. Mr. Lewis
served as a Senior Vice President of TCI from 1991 to 1993 and as a Senior
Advisor to TCI from 1993 until his retirement.

H. ROBERT GILL, has been a director of the Company since August 1996. From
April 1996 to the present, Mr. Gill has been the President of The Topaz Group,
a consulting company offering board of director services to high technology,
emerging growth, public and private corporations. From March 1995 to March
1996, Mr. Gill was the Senior Vice President and President, Enhanced Products
Group for Frontier Corporation, a telecommunications company. From January
1989 to March 1995 he was President, Chief Executive Officer and a director or
Confer-Tech International, Inc. Mr. Gill is a director of TOPRO, Inc., a
systems integration company offering equipment and services to a variety of
growth manufacturing industries; QualMark Corporation, a provider of
accelerated life testing equipment and services; MOSAIX, Inc., a marketer of
inbound and outbound call center systems and services; and Spatial
Technologies, Inc., a developer and marketer of three dimensional modeling
software for CAD applications.

RICHARD C. JENNEWINE, has been a director of the Company since November
1996. From September 1995 to the present, Mr. Jennewine has been President-
International Operations and Regional Manager-Western Operations for Computer
Aid, Inc. a leader in strategic outsourcing and information services
consulting. From December 1991 to February 1995, Mr. Jennewine served as the
Senior Vice President of the CONCORD Group, a privately held entrepreneurial
group of 40 international enterprises. From January 1994 to February 1995, he
served as the President of the Concord Trading Corporation, a company focusing
on trading and business ventures in Asia, Russia, the Middle East and South
America. Prior to these positions, Mr. Jennewine spent 26 years with IBM
Corporation, including startup operations in mainland China. Mr. Jennewine is
a director of Easter Seals of Colorado and is a member of the Corporate
Management Committee of Computer Aid, Inc.

CHARLES P. SPICKERT, has been a director since April 1997. Mr. Spickert
founded Medical Education Collaborative ("MEC"), a non-profit medical
education organization, in March 1988 and currently serves as MEC's President
and Chief Executive Officer. From June 1990 to July 1992 Mr. Spickert also
served as the President and Chief Operating Officer of HealthWatch, Inc., a
developer and manufacturer of medical supplies and devices. Prior to these
positions, Mr. Spickert held marketing and sales management positions with
Allertech, a provider of allergy products and services; International Medical
Corporation, a manufacturer of cardiovascular devices and supplies; and Becton
Dickinson, a provider of microbiology equipment and supplies.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

Messrs. Gill and Jennewine are the current members of the Audit Committee of
the Board of Directors. The Audit Committee represents the Board in
discharging its responsibilities relating to the accounting, reporting, and
financial control practices of the Company. The Committee has general
responsibility for review with management of the financial controls,
accounting, and audit and reporting activities of the Company. The Committee
annually reviews the qualifications and engagement of the Company's
independent accountants,

7
<PAGE>

makes recommendations to the Board as to their selection, reviews the scope,
fees, and results of their audit, and reviews their management comment
letters.

Messrs. Geller, Lewis and Adams are the current members of the Compensation
Committee, which oversees compensation for directors, officers and key
employees of the Company.

During fiscal 1997, the Board of Directors met nine times. Each director
attended, in person or by telephone, 75% or more of the aggregate total of
meetings of the Board of Directors and meetings of committees of the Board of
Directors on which such director serves. During fiscal 1997, the Audit
Committee and the Compensation Committee each met once. The Board of Directors
does not have a standing nominating committee.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTOR.

EXECUTIVE COMPENSATION

The following table summarizes the annual compensation paid by the Company
during fiscal years ended December 31, 1995, 1996, and 1997 to R. Steven
Adams, the Chief Executive Officer of the Company as of December 31, 1997 and
the executive officers of the Company, other than Mr. Adams, whose total
annual salary and bonus exceeded $100,000 for the year ended December 31,
1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPOSITION
-------------------- ------------------
SALARY BONUS OTHER SECURITIES
NAME AND PRINCIPAL POSITION YEAR $ $ $ UNDERLYING OPTIONS
- - --------------------------- ---- -------- ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
R. Steven Adams................... 1997 $120,217 -- -- --
President, Chief Executive 1996 $110,217 -- -- --
Officer and Director 1995 $ 69,000 -- (1) --
Thomas S. Plunkett (2)............ 1997 $103,642 -- -- 85,000(3)
Chief Financial Officer 1996 $ 17,641 -- -- 60,000
1995 -- -- -- --
</TABLE>
- - --------
(1) On January 1, 1995, the Company issued 480,000 shares of Common Stock
issued to Mr. Adams, as the founder and promoter of the Company, for a
nominal value ($100). Mr. Adams has also purchased other Common Stock from
the Company at fair market value as determined by the Board of Directors.

(2) Mr. Plunkett was hired as Chief Financial Officer in October 1996.

(3) Includes options for the purchase of 60,000 shares of Common Stock
initially granted to Mr. Plunkett on October 4, 1996 but repriced by the
Company's Board of Directors on May 20, 1997.

STOCK OPTIONS

The following tables summarize the stock option grants and exercises during
fiscal 1997 to or by the named executive officers and the value of all options
held by the named executive officers as of December 31, 1997.

8
<PAGE>

OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
PERCENT OF TOTAL OPTIONS
NUMBER O SECURITIES GRANTED TO EMPLOYEES EXERCISE
UNDERLYING OPTIONS DURING FISCAL YEAR ENDED PRICE EXPIRATION
NAME GRANTED DECEMBER 31, 1997 ($/SHARE) DATE
- - ---- ------------------- ------------------------ -------- ----------
<S> <C> <C> <C> <C>
R. Steven Adams......... 0 $ 0 -- --
Thomas S. Plunkett...... 75,000(1) $1.63 5/20/04
15,000(2) $1.63 5/20/02
------
90,000 9.7%(3)
</TABLE>
- - --------
(1) Includes options for the purchase of 60,000 shares and 15,000 shares,
respectively, that were originally granted on October 4, 1996 and January
9, 1997, respectively, at exercise prices of $3.88 and $3.38,
respectively. These options were repriced by the Board of Directors of the
Company on May 20, 1997. Each of these options was initially exercisable
in one-third increments on the 12th, 24th, and 36th month after the date
of grant. In connection with the repricing of these options, the vesting
of the options was delayed for six months such that each of these options
is now exercisable on the 18th, 30th, and 42nd months after the date of
the original grant.

(2) This option was exercisable in full immediately upon grant.

(3) All options repriced by the Board of Directors during the fiscal year
ended December 31, 1997 (but which were originally granted during a prior
fiscal year) are deemed to have been granted during the fiscal year ended
December 31, 1997 for the purpose of calculating such percentage.

AGGREGATED OPTION EXERCISES DURING FISCAL YEAR ENDED DECEMBER 31, 1997 AND
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
------------------------- -------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
R. Steven Adams......... -- -- -- --
Thomas S. Plunkett...... 0 $ 0 15,000/75,000 $73,050/$365,250(1)
</TABLE>
- - --------
(1) The value of unexercised in-the-money options was determined by
multiplying the number of shares subject to such options by the favorable
difference between the exercise price per share and $6.50, the closing bid
price per share on December 31, 1997.

REPRICING OF STOCK OPTIONS

On May 20, 1997 the Board of Directors of the Company approved the repricing
of stock options that had been previously granted to certain employees,
directors and consultants of the Company including Thomas S. Plunkett, Chief
Financial Officer. The Board of Directors decision to reprice such options was
based on its view that such options are an integral part of the Company's
compensation to such individuals. All of such options were repriced either at
$1.63, the market price of the stock on May 20, 1997, or at a price greater
than $1.63.

BOARD OF DIRECTOR COMPENSATION

The Board of Directors of the Company do not receive cash compensation for
their services as directors of the Company, but they are reimbursed for their
reasonable expenses in attending meetings of the Board of Directors. During
fiscal 1997, the Company compensated Robert M. Geller, Robert J. Lewis, H.
Robert Gill, Richard C. Jennewine and Charles P. Spickert for their services
as consultants.

9
<PAGE>

CERTAIN TRANSACTIONS

During 1995, the Company leased $50,000 of equipment (the "Equipment Lease")
from a partnership whose partners include Robert M. Geller, an officer and
director of the Company. The three year capital lease has an effective annual
interest rate of 14.9%. The Company granted Mr. Geller a five-year warrant to
purchase 5,000 shares of Common Stock at an exercise price of $0.50 per share
in connection with the Equipment Lease.

During November 1997, the Company licensed its MD Gateway Web site and
related equipment and software to Medical Education Collaborative, a nonprofit
company formed by Charles P. Spickert, a director of the Company. The Company
licensed MD Gateway to MEC in connection with the Company's strategic decision
to focus its activities on non-healthcare related activities. The license
agreement provides that MEC will pay OSS a license fee of 35% of revenues in
excess of certain MEC expenses related to MD Gateway services.

The Company's principal offices are located in a building managed by
Sheridan Management Company and owned by one of its affiliates. R. Steven
Adams' spouse is a vice president of Sheridan Management Company. The current
base monthly rental is $13,657.

The Company believes that the transactions summarized above are on terms no
less favorable than could be obtained from unaffiliated third parties. The
Board of Directors has determined that any transactions with officers,
directors or principal shareholders will be approved by the disinterested
directors and will be on terms no less favorable than could be obtained from
an unaffiliated third party. The Board of Directors will obtain independent
counsel or other independent advice to assist in that determination.

PROPOSAL 2:
AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF STOCK

Under the Company's current Articles of Incorporation, the Company has
authority to issue 15,000,000 shares of capital stock of which 10,000,000
shares are authorized shares of Common Stock, no par value, and 5,000,000
shares are authorized shares of Preferred Stock, in such series and classes
and with such par value, rights, preferences, and limitations as the Board of
Directors may designate. As of July 2, 1998 shares of Common Stock
were issued and outstanding, 267,500 shares of 10% Preferred Stock were issued
and outstanding, and 3,000 shares of 5% Preferred Stock were issued and
outstanding. Proposal 2 recommends to the shareholders an amendment to the
Company's Articles of Incorporation that would increase the number of
authorized shares of Common Stock from 10,000,000 shares to 20,000,000 shares
and thereby increase the number of authorized shares of capital stock of the
Company from 15,000,000 shares to 25,000,000 shares. The Board of Directors
has unanimously approved the amendment contained in Proposal 2. Attached
hereto as Appendix A is copy of the proposed amendment to the Articles of
Incorporation.

The Board of Directors considers Proposal 2 to be in the best interests of
the Company and its shareholders. Although the Company's currently authorized
shares may be adequate to cover anticipated needs for such shares of the date
of this Proxy Statement and the Company currently has no specific plans to use
the additional authorized shares of Common Stock, the proposed increase will
ensure that a sufficient number of shares will be available, if needed, for
issuance in connection with any possible future transactions approved by the
Board of Directors, including, among others, stock splits, stock dividends,
acquisitions, financings and other corporate purposes. The Board of Directors
believes that the availability of the additional shares of Common Stock for
such purposes without delay or the necessity for a special shareholders'
meeting (except as may be required by applicable law or regulatory authorities
or by the rules of any stock exchange on which the Company's securities may
then be listed) will be beneficial to the Company by providing it with the
flexibility required to consider and respond to future business opportunities
and needs as they arise. Currently, the rules of the Nasdaq SmallCap Market,
on which the Company's Common Stock is listed, prohibit the Company from
issuing shares of its Common Stock without shareholder approval for such
issuance, if the issuance, among other things, (i) would

10
<PAGE>

result in a change of control of the Company, (ii) in connection with an
acquisition of the stock or assets of another company, would result in the
newly issued stock having voting power equal to or in excess of 20% of the
voting power outstanding before the issuance or (iii) in connection with a
transaction other than a public offering, is at a price less than the greater
of book or market value and equals 20% or more of the voting power outstanding
before the issuance. It is possible that shares of Common Stock may be issued
at a time and under circumstances that may increase or decrease earnings per
share and increase or decrease the book value per share of shares presently
held. Furthermore, shares of Common Stock could be issued to deter or prevent
a hostile takeover of the Company even though such a transaction was favored
by the holders of the requisite number of the then outstanding Common Stock,
10% Preferred Stock, 5% Preferred Stock, and any other Preferred Stock which
the Company may issue in the future. The Board of Directors has no present
intention to issue shares of Common Stock to deter or prevent such a
transaction and is not currently aware of any attempt to takeover the Company.

The additional Common Stock to be authorized by the adoption of Proposal 2
would have rights identical to the currently outstanding Common Stock of the
Company. The adoption of Proposal 2 and the issuance of Common Stock
authorized thereby would not affect the rights of the holders of currently
outstanding Common Stock of the Company, except for effects incidental to
increasing the number of outstanding shares of the Company's Common Stock. Any
future issuance of Common Stock will be subject to the rights of holders of
any outstanding shares of the 10% Preferred Stock, the 5% Preferred Stock, and
any other Preferred Stock which the Company may issue in the future.

RESOLUTION AND VOTE REQUIRED FOR PROPOSAL 2

The following resolution will be submitted for approval at the Annual
Meeting:

"RESOLVED, That ARTICLE III of the Articles of Incorporation of
Online System Services, Inc., as heretofore amended, be further
amended by deleting the first two sentences thereof in their
entirety and substituting therefore the language set forth on
Appendix A attached hereto."

The affirmative vote of the holders of a majority of the voting power of the
shares of Common Stock, the 10% Preferred Stock, and the 5% Preferred Stock
voting together as a single class, present or represented at the meeting and
entitled to vote on Proposal 3, is required to approve Proposal 2.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2 TO
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF STOCK.

PROPOSAL 3:
SALES OF THE COMPANY'S SECURITIES

BACKGROUND

OSS' business development strategy requires substantial capital to fund
capital expenditures and operating expenses required to rapidly expand the
Company's i2u products and services to support additional broadband operators
in future markets and to market and provide the Company's products and
services to a growing number of potential subscribers of the broadband
operators who partner with the Company. As a result, the Company expects to
incur additional substantial operating and net losses in fiscal 1998 and
possibly for one or more fiscal years thereafter. The Company believes it
currently has sufficient working capital to fund operations to September 1998.

The market for high-speed Internet access is in the formative stage. OSS
believes it is important that the Company continue its high-level of business
development expenditures in order to establish OSS as a leading provider of
Internet products and services to broadband operators during this early stage
in the market's

11
<PAGE>

development. OSS believes that the first companies to gain significant market
presence will have a competitive advantage as the market for these products
and services grows and matures. Since revenues from operations during this
early state of OSS' business development will not be adequate to support
anticipated expenditures, OSS belives it is important for the Company to be
able to raise additional capital through the sale of its Common Stock and
securities convertible into shares of Common Stock.

On February 24, 1998, the Company entered into a Letter of Intent ("LOI")
for a proposed public offering of from $15-20,000,000 worth of the Company's
Common Stock (the "Public Offering"). When the LOI was executed, OSS expected
to complete the Public Offering during late July or early August 1998. Prior
to the preparation of the offering documents for the Public Offering, OSS and
Skyconnect, Inc. ("Skyconnect") entered into discussions regarding the
acquisition of Skyconnect by OSS. On June 5, 1998, OSS and Skyconnect entered
into an Agreement and Plan of Merger pursuant to which Skyconnect would be
merged into a wholly-owned subsidiary of OSS. The proposed acquisition of
Skyconnect, as well as the proposed acquisition by OSS of Durand
Communications, Inc. ("DCI"), are subject to, among other things, approval by
the shareholders of OSS. Management currently expects that a special meeting
(the "Special Meeting") of the Company's shareholders will be held during
September 1998 to consider both the Skyconnect and DCI acquisitions.

In view of the proposed acquisitions, management determined that it was not
feasible to pursue the Public Offering until late in the fall of 1998 or early
1999. For this reason, management believes the Company needs to obtain
additional working capital now from other sources in order to fund operations.
On May 22, 1998, the Company entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") pursuant to which it sold 3,000 shares of the
Company's 5% Convertible Preferred Stock ("5% Preferred Stock") for
$3 million. The Securities Purchase Agreement also provided for additional
purchases of up to $6 million worth of the Company's Common Stock. The
proceeds from the sale of the 5% Preferred Stock are being used to fund the
Company's operations. The 5% Preferred Stock was issued in accordance with
Colorado law and pursuant to authority conferred upon the Board of Directors
of the Company (the "Board") by the Company's stockholders in Article III of
the Company's Articles of Incorporation. The Board approved the issuance of
the 5% Preferred Stock because the Board believes such issuance was required
to fund the Company's operations during the summer of 1998. The Bylaws of The
Nasdaq Stock Market ("Nasdaq") which lists the Company's outstanding Common
Stock, requires stockholder approval of the issuance, other than in a public
offering, of common stock or securities convertible into common stock if such
common stock has or would have upon issuance voting power in excess of 20% of
the voting power outstanding before such issuance. Since it is possible that
the total number of shares of the Company's Common Stock issuable upon
conversion of the 5% Preferred Stock and sold pursuant to the $6 million
purchase commitment could exceed 20% of the Company's currently outstanding
shares of Common Stock, it is necessary for the Company to obtain stockholder
approval of at least the $6 million purchase commitment portion of this
financing arrangement in order for the Company's Common Stock to continue to
be listed on the Nasdaq SmallCap Market.

While the $6 million purchase commitment may be sufficient to fund
operations until the Public Offering, such funds do not provide the capital
required to enable the Company to vigorously pursue its business development
strategy and they are not sufficient to give the Company any flexibility in
determining the appropriate timing for the Public Offering. In addition, the
availability of such funds is subject to a number of factors which are outside
of the Company's control. For these reasons, the Board has determined that it
is important for the Company to raise up to $18 million of additional capital
through a private placement of its securities to one or a small group of
investors (the "Private Placement").

The Private Placement, if successful, is expected to involve the issuance of
shares of the Company's Common Stock or securities convertible into shares of
the Company's Common Stock which will exceed 20% of the Company's currently
outstanding shares of Common Stock. Therefore, it is necessary for the Private
Placement to also be approved by the Company's shareholders in order for the
Company's Common Stock to continue to be listed on the Nasdaq SmallCap Market.

12
<PAGE>

The stockholders of the Company are being asked to approve the issuance of
the Company's Common Stock pursuant to the Securities Purchase Agreement
(Proposal 3A) and the Private Placement (Proposal 3B), in response to the
Nasdaq rules. Approval by a majority of the votes cast with respect to each
proposal is required to approve such proposal, provided that there is a quorum
for the conduct of business at the Annual Meeting. If the required affirmative
vote is not obtained, the Board will need to determine whether it should seek
any additional funds from the sale of its securities, notwithstanding that to
do so might seriously jeopardize the continued listing of the Company's Common
Stock on the Nasdaq SmallCap Market. Because of the importance of maintaining
a market for the Company's Common Stock on the Nasdaq SmallCap Market, the
Board recommends that the stockholders vote FOR both Proposal 3A and Proposal
3B.

PROPOSAL 3A: ISSUANCE OF COMMON STOCK PURSUANT TO SECURITIES PURCHASE
AGREEMENT

GENERAL. On May 22, 1998, the Company entered into the Securities Purchase
Agreement pursuant to which (i) the Company sold 3,000 shares of 5% Preferred
Stock to Arrow Investors LLC ("Arrow") for $3 million; (ii) Arrow agreed,
subject to certain conditions, to purchase up to $6 million worth of shares of
the Company's Common Stock; and (iii) the Company issued warrants to purchase
100,000 shares of its Common Stock at a warrant exercise price of $16.33 per
share. In addition, the Company agreed to file by July 6, 1998, a registration
statement with the Securities & Exchange Commission to register the shares of
Common Stock issuable upon conversion of the 5% Preferred Stock, the Common
Stock issuable pursuant to the $6 million purchase commitment and upon
exercise of the Warrants. In the event that such registration statement is not
effective, the holders of the securities issued pursuant to the Securities
Purchase Agreement are entitled to include shares of Common Stock issued or
issuable in connection therewith with other registrations of securities by the
Company. EBI Securities, Inc. is entitled to a fee of 8% of the gross proceeds
raised in connection with the sale of the Company's securities pursuant to the
Securities Purchase Agreement. The description of the terms of the Securities
Purchase Agreement contained herein are summaries and do not purport to be
complete. A copy of the Securities Purchase Agreement is available from the
Company upon written request to: Robert M. Geller, Secretary, Online System
Services, Inc., 1800 Glenarm Place, Suite 700, Denver, Colorado 80202.

The terms of the 5% Preferred Stock provide that if upon conversion of the
5% Preferred Stock and the payment of dividends thereon, the Company has
issued 574,281 shares of its Common Stock, then the Company must redeem all of
the 5% Preferred Stock which have not previously been converted, unless the
shareholders of the Company approve the issuance of shares of Common Stock
upon conversion of the 5% Preferred Stock in excess of 574,281 shares. This
limitation was included in order to assure that the issuance of the 5%
Preferred Stock, plus any shares sold upon exercise of the Warrants, could not
result in the issuance of a number of shares which was more than 20% of the
Company's outstanding shares of Common Stock at the time of the issuance of
the 5% Preferred Stock, without first obtaining shareholder approval. This
limitation will not come into effect unless the market price for the Company's
Common Stock is less than approximately $6.08 per share at the time that the
5% Preferred Stock is converted. The Board of Directors has proposed that
shareholders approve the elimination of the maximum number of shares issuable
upon conversion of the 5% Preferred Stock in order to remove any possibility
that the Company could incur a cash obligation to redeem a portion of the 5%
Preferred Stock should there be a substantial decrease in the market value for
the Company's Common Stock.

Under the terms of the Securities Purchase Agreement, the Company has
certain rights to require Arrow to invest up to an additional $6 million in
increments ranging from $400,000 (if the average minimum closing bid price for
the Company's Common Stock equals or exceeds $8.00 and the average trading
volume equals or exceeds $300,000 for the ten trading days prior to the
Company's exercise of such right) up to $1 million (if the average minimum
closing bid price for the Company's Common Stock equals or exceeds $11.00 and
the average trading volume equals or exceeds $600,000 for the ten trading days
prior to the Company's exercise of such right) in exchange for the issuance of
additional shares of the Company's Common Stock to Arrow. The purchase price
for such stock will be 86% of the lowest closing bid price of the Company's
Common Stock during the ten trading days prior to the date of each such
purchase. The Company may exercise this option only if the issuance of such
Common Stock has been approved by the Company's shareholders. The Board of
Directors recommends

13
<PAGE>

approval of this portion of the Securities Purchase Agreement so that the
Company will have the ability to raise additional working capital with minimal
time constraints if required to fund operations.

SUMMARY OF TERMS OF 5% PREFERRED STOCK. The following is a summary of the
rights, privileges and preferences of the 5% Preferred Stock. This summary is
qualified in its entirety be reference to the terms of the 5% Preferred Stock
attached hereto as Appendix B.

Voting. Each share of 5% Preferred Stock entitles the holder thereof to cast
the number of votes equal to the number of whole shares of Common Stock into
which the 5% Preferred Stock held by such holder are convertible immediately
after the close of business on the record date fixed for meeting at which the
vote is to be taken.

Dividends. The cumulative noncompounded dividend on the 5% Preferred Stock
is 5% per annum based on the stated value of $1,000 per share, payable as
permitted by law, at the option of the Company, in cash or Common Stock upon
the earlier of (i) the redemption or conversion of the 5% Preferred Stock or
(ii) the liquidation of the Company. No dividends may be paid on the Common
Stock unless all unpaid dividends on the 5% Preferred Stock are first declared
and paid. Dividends on the 5% Preferred Stock are equal in preference to any
dividends declared on the 10% Preferred Stock.

Redemption and Conversion. The 5% Preferred Stock may be redeemed, in whole
or in part, by the Company at any time prior to September 19, 1998 for a price
per share equal to (i) $1,000 plus all accrued but unpaid dividends divided by
the Conversion Price (defined below) as of the date on which the notice of
redemption of the 5% Preferred Stock is given by the Company multiplied by
(ii) the average per share closing bid price of the Common Stock for the five
trading days immediately preceding such date. Each share of the outstanding 5%
Preferred Stock is convertible, at any time at the election of the holder
thereof, into the number of shares of Common Stock equal to $1,000 divided by
the lesser of (i) $16.33 or (ii) 86% of the average per share closing bid
price of the Common Stock for the five trading days immediately preceding the
date on which the holder thereof elects to convert such 5% Preferred Stock. If
the Company elects to redeem the 5% Preferred Stock, the Company shall give at
least ten days notice to the holders of the 5% Preferred Stock of the
Company's intent to redeem such 5% Preferred Stock. Upon the giving of such
notice by the Company, the holders of the 5% Preferred Stock shall not
thereafter be entitled to convert the 5% Preferred Stock into shares of Common
Stock unless a notice of conversion relating to such 5% Preferred Stock has
previously been submitted. Upon any conversion of the 5% Preferred Stock the
Company will have the option to pay the accrued but unpaid cumulative dividend
on the 5% Preferred Stock either (i) in cash or (ii) by issuing additional
shares of Common Stock calculated by adding the amount of the accrued but
unpaid dividend into the $1,000 stated value set forth in the formula above.

Preemptive Rights. A holder of the 5% Preferred Stock has no preemptive
rights to subscribe for any additional shares of any class of stock of the
Company or for any issue of bonds, notes or other securities convertible into
any class of stock of the Company.

Liquidation Preference. In the event of a liquidation, dissolution or
winding-up of the Company, whether voluntary or otherwise, after payment of
the debts and other liabilities of the Company, the holders of the 5%
Preferred Stock will be entitled to receive from the remaining net assets of
the Company, before any distribution to the holders of the Common Stock, the
amount of $1,000.00 per share of 5% Preferred Stock in cash plus payment of
all accrued but unpaid dividends. The liquidation preference on the 5 %
Preferred Stock is equal in preference to the liquidation preference on the
10% Preferred Stock. Thereafter, holders of the 5% Preferred Stock shall be
entitled to share in any distributions made to the holders of the Common Stock
as if each share of 5% Preferred Stock was converted (pursuant to the formula
set forth above) into the number of shares of Common Stock into which it is
convertible immediately prior to the close of business on the business day
fixed for such distribution.

14
<PAGE>

RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS. The Board considers
Proposal 3A to be in the best interests of the Company and its shareholders.
The issuance of the 5% Preferred Stock was based on the Board's belief that
the funds obtained in connection with the issuance of such 5% Preferred Stock
were necessary to provide the Company with working capital to sustain its
operations through the summer of 1998. The Board believes that the Company's
ability to require Arrow to invest up to an additional $6,000,000 into the
Company is necessary to provide the Company with flexibility to finance its
operations beyond September 1998, even if the proposed funding described in
Proposal 3B below is successful. Any proceeds received by the Company upon the
exercise of its right to require Arrow to make an additional investment in the
Company will be used for general working capital purposes. Further, the Board
believes it is important to remove the limitation on the number of shares of
Common Stock which may be issued upon conversion of the 5% Preferred Stock in
order to eliminate the contingent liability which exists for the potential
redemption of the 5% Preferred Stock which could be required in the event of a
significant decrease in the market value for the Company's Common Stock.

The additional Common Stock which could be issued pursuant to Proposal 3A
would have rights identical to the currently outstanding Common Stock of the
Company. The adoption of Proposal 3A and the issuance of Common Stock
authorized thereby would not affect the rights of the holders of currently
outstanding Common Stock of the Company, except for effects incidental to
increasing the number of outstanding shares of the Company's Common Stock. Any
future issuance of Common Stock will be subject to the rights of holders of
any outstanding shares of the 10% Preferred Stock and the 5% Preferred Stock
and any other Preferred Stock which the Company may issue in the future.

RESOLUTION AND VOTE REQUIRED FOR PROPOSAL 3A. The following resolution will
be submitted for approval at the Annual Meeting:

"RESOLVED, That for purpose of satisfying Rule 4310(c)(25)(H) of
The Nasdaq Stock Market, Inc., which requires that certain sales
of the Company's securities be approved by shareholders for the
Company's Common Stock to continue to be listed on the Nasdaq
SmallCap Market, the shareholders of the Company hereby approve
the issuance of the Company's Common Stock in connection with
the terms of the Securities Purchase Agreement dated May 22,
1998, between OSS and Arrow Investors LLC, including the
elimination of the limit of 574,281 shares as the maximum number
of shares of Common Stock issuable upon conversion of the 5%
Preferred Stock and in connection with the payment of dividends
thereon.

The affirmative vote of the holders of a majority of the voting power of the
shares of Common Stock, 10% Preferred Stock and the 5% Preferred Stock voting
together as a single class, present or represented at the meeting and voting
on Proposal 3A, is required to approve Proposal 3A.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3A.

PROPOSAL 3B: ISSUANCE OF COMMON STOCK IN CONNECTION WITH PROPOSED PRIVATE
PLACEMENT.

GENERAL. As indicated above, the Board believes that OSS should raise up to
$18 million of additional capital to fund operations prior to the Public
Offering. The Company has discussed with a number of investment banking firms
the terms upon which they would be willing to raise additional capital for
OSS. However, as of the date of this Proxy Statement, the Company has not
entered into any agreement or understanding with any such firm for an offering
of the Company's securities. Since each of the proposals would result in the
issuance of a number of shares of the Company's Common Stock equal to more
than 20% of the Company's currently outstanding shares of Common Stock, it
will be necessary for such funding to be approved by the Company's
shareholders in order for the Company's Common Stock to continue to qualify
for listing on the Nasdaq SmallCap Market. OSS anticipates that prior to the
Annual Meeting of Shareholders, it will enter into an agreement with one of
the firms and will have commenced the offering. In order to expedite the
ability to close any such financing and to avoid

15
<PAGE>

the expense and need to have the funding approved at a subsequent meeting of
the Company's shareholders, the Board has decided to request that shareholders
approve the funding in advance of the Company's selection of a particular firm
and investment terms. For this approval, if given, to be effective, the terms
of the financing must be on terms at least as favorable to the Company as the
following:

TERMS OF PROPOSED FINANCING

<TABLE>
<S> <C>
Securities Offered OSS Common Stock, no par value. Shares to be offered
and sold
pursuant to an exemption from the registration
requirements of the Securities Act of 1933

Maximum number of shares
to be sold 2,500,000

Transfer Restrictions Transfer of shares must be in accordance with Rule 144
promulgated by the Securities and Exchange Commission.
Rule 144 limits transfer for at least one year after
purchase unless the transfer is registered pursuant to
the Securities Act of 1933 or pursuant to an exemption
from registration under the act.

Registration Rights Shares will be subject to "piggyback" registration
rights during
first year whereby holders will have the ability to
include shares in any registration statement filed by
the Company. If no registration statement is filed
within the first year, the holders would have right to
demand the filing of one registration statement
pursuant to the Securities Act of 1933 for the sale of
their shares.

Price 75% or more of the bid price for the Company's Common
Stock at
either the commencement or closing of the offering,
whichever is less.

Expenses of Offering:

Selling Commissions 10% or less of gross proceeds.
Fees and Other Expenses 3% or less of gross proceeds.
Agent's Warrants 10% or less of total number of shares sold; exercise
price equal to 120% or more of price at which shares
are sold.
</TABLE>

RESOLUTION AND VOTE REQUIRED FOR PROPOSAL 3B. The following resolution will
be submitted for approval at the Annual Meeting:

"RESOLVED, That for purpose of satisfying Rule 4310(c)(25)(H) of
The Nasdaq Stock Market, Inc., which requires that certain sales
of the Company's securities be approved by shareholders for the
Company's Common Stock to continue to be listed on the Nasdaq
SmallCap Market, the shareholders of the Company hereby approve
the Company's issuance of its Common Stock in connection with
the Company's anticipated private offering of Common Stock on
terms equal to or better than the terms set forth in the Proxy
Statement for the 1998 Annual Meeting of Shareholders

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3B.

16
<PAGE>

PROPOSAL 4:
AMENDMENT OF ONLINE SYSTEM SERVICES, INC. 1995 STOCK OPTION PLAN

PROPOSED AMENDMENT

The Board of Directors proposes that the shareholders of the Company approve
the amendment to the Online System Services, Inc. 1995 Stock Option Plan to
increase the number of shares of Common Stock that may be issued pursuant to
the 1995 Plan from 1,100,000 to 2,500,000. The 1995 Plan was originally
adopted by the Board of Directors and the shareholders on March 17, 1995. The
features of the 1995 Plan, a copy of which is attached hereto as Appendix C,
are summarized below. The affirmative vote of the holders of a majority of the
voting power of the shares of Commons Stock, 10% Preferred Stock and 5%
Preferred Stock voting together as a single class, present or represented at
the meeting and voting on Proposal 4, is required to approve Proposal 4.

SUMMARY OF PLAN

The 1995 Plan terminates March 17, 2005, unless sooner terminated by action
of the Board. The 1995 Plan provides for the grant of options to purchase
shares of the Company's Common Stock to officers, directors, employees and
consultants. As of July 2, 1998, there were 9 officers, 4 directors, 43
employees and 4 consultants eligible to receive such options. Options granted
under the 1995 Plan may have a term of up to ten years. Options which expire,
are canceled or are terminated without having been exercised, may be regranted
to participants under the 1995 Plan. Options granted under the 1995 Plan may
be either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or options that do not qualify for
special tax treatment. No incentive stock options may be granted with a per
share exercise price less than the fair market value per share at the date of
grant (or 110% of fair market value in the case of optionees who hold 10% or
more of the Company's outstanding Common Stock). Under the 1995 Plan, the
exercise price of nonqualified stock options may not be less than 85% of the
fair market value of the Common Stock on the date of grant. The Board of
Directors has adopted a policy of not granting nonqualified stock options with
an exercise price less than the fair market value of the Common Stock on the
date of grant. Not more than $100,000 in value of incentive stock options
under all plans of the Company may vest in any calendar year for any option
holder and no incentive stock option may be exercised more than ten years
after the date of grant. The 1995 Plan is administered by the Board of
Directors and options may be granted at such time and in such amounts as the
Board of Directors, in its discretion, determines.

As of July 2, 1998 options for the purchase of an aggregate of 1,313,600
shares of Common Stock were outstanding under the 1995 Plan, held by 65
persons, with per share exercise prices from $.50 to $8.50 per share and a
weighted average exercise price of approximately $4.37 per share. All of the
outstanding options currently held by employees under the 1995 Plan are
incentive stock options. The remaining options granted under the 1995 Plan and
held by non-employee directors and consultants are nonqualified and have an
exercise price equal to the fair market value of the Common Stock on the date
of grant. The following persons have been granted options under the 1995 Plan,
each of which has a term ranging from five to ten years unless earlier
terminated as provided in the 1995 Plan.

17
<PAGE>

STOCK OPTION AWARDS UNDER THE ONLINE SYSTEM SERVICES, INC. 1995 STOCK OPTION
PLAN

<TABLE>
<CAPTION>
NAME AND POSITION DATE OF GRANT NUMBER OF OPTIONS EXERCISE PRICE
- - ----------------- ------------------------ ----------------- --------------
<S> <C> <C> <C>
R. Steven Adams, Presi-
dent, Chief Executive Feb. 18, 1998 100,000 $8.50
Officer and a nominee
for director
Thomas S. Plunkett,
Chief Financial Officer October 4, 1996 60,000 $1.63*
January 9, 1997 15,000 $1.63*
May 20, 1997 15,000 $1.63
Feb. 18, 1998 30,000 $8.50
Robert M. Geller, nomi-
nee for director June 13, 1995 25,000 $0.50
Dec. 8, 1995 15,000 $0.50
Feb. 21, 1996 5,000 $1.63*
Feb. 18, 1998 30,000 $8.50
William R. Cullen, nomi-
nee for director Jan. 12, 1998 30,000 $6.31
Mar. 10, 1998 100,000 $8.25
Robert J. Lewis, nominee
for director Jan. 24, 1996 25,000 $1.25
Jul. 29, 1997 10,000 $3.75
Feb. 18, 1998 10,000 $8.50
Richard C. Jennewine,
nominee for director Nov. 8, 1996 30,000 $1.63*
Jul. 29, 1997 10,000 $3.75
Andre Durand, nominee
for director -- -- --
Donald J. Esters, nomi-
nee for director -- -- --
Current Executive Offi-
cers, as a group
(5 persons) June 13, 1995 to present 440,000 $1.63 to $8.50
Current Directors, who
are not also executive
officers, as a group (5
persons) June 13, 1995 to present 265,000 $0.50 to $8.50
Employees, excluding ex-
ecutive officers,
as a group (53 persons) June 13, 1995 to present 600,343 $0.50 to $8.50
Michael S. Murphy,
holder of 5% of
outstanding options May 20, 1997 75,000 $1.63
</TABLE>
- - --------
* Exercise price of $1.63 reflects repricing of the option that occurred on
May 20, 1997.

The last reported sale price for the Common Stock on the Nasdaq SmallCap
Market on , 1998 was $ .

FEDERAL INCOME TAX CONSEQUENCES

The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under
the 1995 Plan. This summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.

In general, an optionee will be subject to tax at the time a nonqualified
stock option is exercised (but not at the time of grant), and he or she will
include in ordinary income in the taxable year in which he or she exercises a
nonqualified stock option an amount equal to the difference between the
exercise price and the fair market value of the shares acquired on the date of
exercise, and the Company will generally be entitled to deduct such

18
<PAGE>

amount for federal income tax purposes except as such deductions may be
limited by the Revenue Reconciliation Act of 1993 ("1993 Tax Act"), described
below. Upon disposition of shares, the appreciation (or depreciation) after
the date of exercise will be treated by the optionee as either short-term or
long-term capital gain or loss depending on whether the shares have been held
for the then-required holding period.

In general, an optionee will not be subject to tax at the time an incentive
stock option is granted or exercised. Upon disposition of the shares acquired
upon exercise of an incentive stock option, long-term capital gain or loss
will be recognized in an amount equal to the difference between the
disposition price and the exercise price, provided that the optionee has not
disposed of the shares within two years of the date of grant or within one
year from the date of exercise. If the optionee disposes of the shares without
satisfying both holding period requirements (a "Disqualifying Disposition"),
the optionee will recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the difference between the exercise price and the
lesser of the fair market value of the share on the date the incentive stock
option was exercised or the date of sale. Any remaining gain or loss is
treated as short-term or long-term capital gain or loss depending upon how
long the shares have been held. The Company is not entitled to a tax deduction
upon either the exercise of an incentive stock option or upon disposition of
the shares acquired pursuant to such exercise, except to the extent that the
optionee recognizes ordinary income in a Disqualifying Disposition and then
only to the extent that such deduction is not limited by the 1993 Tax Act.

If the optionee pays the exercise price, in full or in part, with previously
acquired shares, the exchange will not affect the tax treatment of the
exercise. However, if such exercise is effected using shares previously
acquired through the exercise of an incentive stock option, the exchange of
the previously acquired shares will be considered a disposition of such shares
for the purpose of determining whether a Disqualifying Disposition has
occurred.

Commencing with the Company's 1995 fiscal year, the federal income tax
deduction that the Company may take for otherwise deductible compensation
payable to executive officers who, on the last day of the fiscal year, are
treated as "named executive officers" in the Company's Proxy Statement for
such year will be limited by the 1993 Tax Act to $1,000,000. Under the
provisions of the 1993 Tax Act, the deduction limit on compensation will apply
to all compensation, except compensation deemed under the 1993 Tax Act to be
"performance-based" and certain compensation related to retirement and other
employee benefit plans. The determination of whether compensation related to
the 1995 Plan is performance-based for purposes of the 1993 Tax Act will be
dependent upon a number of factors, including shareholder approval of the 1995
Plan, and the exercise price at which options are granted. The 1993 Tax Act
also prescribes certain limitations and procedural requirements in order for
compensation to qualify as performance-based, including rules which require
that in the case of compensation paid in the form of stock options, the option
price be not less than the fair market value of the stock at date of grant and
that the plan under which the options are granted states the maximum number of
shares with respect to which options may be granted during a specified period
to any employee. Although the Company has structured the 1995 Plan to satisfy
the requirements of the 1993 Tax Act with regard to its "performance-based"
criteria, there is no assurance that awards thereunder will so satisfy such
requirements, and accordingly, the Company may be limited in the deductions it
may take with respect to awards under the 1995 Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
AMENDMENT TO THE ONLINE SYSTEM SERVICES, INC. STOCK OPTION PLAN OF 1995.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent shareholders are
also required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.

19
<PAGE>

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were timely complied with except
for the following:

<TABLE>
<CAPTION>
NUMBER OF TRANSACTIONS NOT
NAME OF INDIVIDUAL FORM LATE REPORTS TIMELY REPORTED
------------------ ---- ------------ ----------------
<S> <C> <C> <C>
Charles P. Spickert..................... 3 1 1
Greg Bicket............................. 3 1 1
Michael S. Murphy....................... 3 1 1
Vincent D. Bradshaw..................... 3 1 1
R. Steven Adams......................... 4 1 1
Richard C. Jennewine.................... 4 1 1
</TABLE>

PROPOSAL 5:
SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has appointed Arthur Andersen LLP as independent
accountants of the Company for the fiscal year ending December 31, 1998.
Arthur Andersen LLP served as the independent accountants of the Company for
the year ended December 31, 1997. Representatives of Arthur Andersen LLP who
are expected to be present at the meeting, will have an opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.

From the Company's inception on March 22, 1994 through December 31, 1995
Jones, Jensen & Company served as the independent accountants for the Company.
On October 7, 1996, the Company dismissed Jones, Jensen & Company effective
October 7, 1996. The reports of Jones, Jensen and Company, regarding the
Company's consolidated financial statements since the Company's inception on
March 22, 1994 through December 31, 1995, contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except for a qualification in Jones,
Jensen and Company's report dated February 9, 1996 concerning the Company's
ability to continue as a going concern. The Company's board of directors
approved the decision to change independent accountants.

In connection with the Company's audits since its inception on March 22,
1994 through December 31, 1995 and through October 7, 1996, there have been no
disagreements with Jones, Jensen and Company on any matter of accounting
principles or practice, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of Jones,
Jensen and Company would have caused them to make reference thereto in their
reports on the financial statements for such years. On October 7, 1996, the
Company engaged Arthur Andersen LLP as its new independent accountants for the
fiscal year ended December 31, 1996. Since its inception on March 22, 1994 and
through October 7, 1996 the Company did not engage or consult with Arthur
Andersen LLP regarding the matters described in Regulation S-B, Item
304(a)(2).

In the event the holders of the Common Stock do not ratify the appointment
of Arthur Andersen LLP, the selection of other independent accountants will be
considered by the Board of Directors. The Board of Directors recommends that
the holders of the Common Stock vote for ratification of the appointment of
Arthur Andersen LLP.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 5 TO
RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT ACCOUNTANTS
OF THE COMPANY.

20
<PAGE>

PROPOSALS OF SHAREHOLDERS

Proposals of shareholders intended to be presented at the Company's 1999
Annual Meeting of Shareholders should be received by the President of the
Company at the above address no later than February 6, 1999, in order to be
considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting.

OTHER MATTERS

The Board of Directors does not intend to bring before the meeting any
business other than as set forth in this Proxy Statement, and has not been
informed that any other business is to be presented to the meeting. However,
if any matters other than those referred to above should properly come before
the meeting, it is the intention of the persons named in the enclosed Proxy to
vote such Proxy in accordance with their best judgment.

Please sign and return promptly the enclosed Proxy in the envelope provided
if you are a holder of Common Stock. The signing of a Proxy will not prevent
your attending the meeting and voting in person.

BY ORDER OF THE BOARD OF DIRECTORS

Robert M. Geller
Secretary

July , 1998

21
<PAGE>

APPENDIX A

PROPOSED AMENDMENT TO ARTICLE III OF THE ARTICLES OF INCORPORATION OF ONLINE
SYSTEM SERVICES, INC.

Article IV, Section 1 of the Articles of Incorporation of the Corporation is
amended and replaced in its entirety to read as follows:

1. Authorized Shares. The aggregate number of shares that the
Corporation has authority to issue is 25,000,000. The shares are classified
in two classes, consisting of 20,000,000 shares of Common Stock, no par
value, and 5,000,000 shares of Preferred Stock, with such par value as the
Board of Directors of the Corporation may designate. The Board of Directors
of the Corporation is authorized to establish one or more series of
Preferred Stock, setting forth the designation of each such series, and
fixing the preferences, limitations and relative rights of each such series
of Preferred Stock.

A-1
<PAGE>

APPENDIX B

6. Designation of Preferred Stock. The Corporation shall establish and
reserve for issuance from its 5,000,000 authorized shares of Preferred Stock a
class of convertible preferred stock consisting of 3,000 shares to be
designated as the 5% Preferred Stock (the "5% Preferred Stock"). The 5%
Preferred Stock shall have a stated value of the Liquidation Preference (as
hereinafter defined). Except as otherwise expressly stated in this Section 6,
all shares of the 5% Preferred Stock shall be identical to the shares of 10%
Preferred Stock, and the holders of 5% Preferred Stock shall be entitled to
the same preferences, limitations and relative rights as the holders of 10%
Preferred Stock.

A. Dividends.

(1) Holders of the 5% Preferred Stock shall be entitled to receive, out
of funds legally available therefor, dividends at a rate equal to 5% (the
"Dividend Rate") of the Liquidation Preference per share per annum (subject
to appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), and
no more, payable in accordance with the provisions of this Section 6.
Notwithstanding the foregoing sentence of this Subsection A(1), in the
event the Registration Statement (as hereinafter defined) is not declared
effective by the Securities and Exchange Commission (the "Commission")
within 90 days following the Initial Closing Date (as defined in that
certain Securities Purchase Agreement (the "Securities Purchase
Agreement"), dated as of May 22, 1998, among the Corporation, the
purchasers named therein and West End Capital LLC), then the Dividend Rate
shall increase to 18% until the Registration Statement is declared
effective; provided, however, that if the Commission conducts a review of
the Registration Statement, the Dividend Rate shall not increase unless it
is not declared effective by the Commission within 120 days following the
Initial Closing Date, at which time the Dividend Rate shall increase to 18%
until the Registration Statement is declared effective.

(2) At the election of the Corporation, each dividend on 5% Preferred
Stock shall be paid either in shares of Common Stock or in cash on the
Delivery Date (as defined in Subsection H(2)(a) of this Section 6) with
respect to any shares of 5% Preferred Stock which are the subject of a
Notice of Conversion (as defined in Subsection H(2)(a) of this Section 6).
Dividends paid in shares of Common Stock shall be paid (based on an assumed
value of $1,000 per share) in full shares only, with a cash payment equal
to the value of any fractional shares. Each dividend paid in cash shall be
mailed to the holders of record of the 5% Preferred Stock as their names
and addresses appear on the share register of the Corporation or at the
office of the transfer agent on the corresponding dividend payment date.
Holders of 5% Preferred Stock will receive written notification from the
Corporation or the transfer agent if a dividend is paid in kind, which
notification will specify the number of shares of Common Stock paid as a
dividend and the recipient's aggregate holdings of Common Stock as of that
dividend payment date and after giving effect to the dividend. All holders
of shares of Common Stock issued as dividends shall be entitled to all of
the rights and benefits relating to shares of Common Stock as set forth in
the Corporation's Articles of Incorporation, as amended, and By-laws.

(3) Holders of the 5% Preferred Stock shall be entitled to payment of any
dividends in preference and priority to any payment of any cash dividend on
Common Stock or any other class or series of capital stock of the
Corporation other than any other class or series of stock ranking senior
("Senior Preferred Stock") to the 5% Preferred Stock in respect of
dividends, when and as declared by the Board of Directors of the
Corporation. The rights of the holders of 5% Preferred Stock and 10%
Preferred Stock to receive any dividends shall be equal in preference and
priority. Dividends on the 5% Preferred Stock shall accrue with respect to
each share of the 5% Preferred Stock from the date on which such share is
issued and outstanding and thereafter shall be deemed to accrue from day to
day whether or not earned or declared and whether or not there exists
profits, surplus or other funds legally available for the payment of
dividends, and shall be cumulative so that if such dividends on the 5%
Preferred Stock shall not have been paid, or declared and set apart for
payment, the deficiency shall be fully paid or declared and set apart for
payment before any dividend shall be paid or declared or set apart for any
Common Stock or other class or series of capital

B-1
<PAGE>

stock ranking junior to the 5% Preferred Stock (such stock being
collectively referred to herein as the "Junior Stock") and before any
purchase or acquisition of any Junior Stock is made by the Corporation,
except the repurchase of Junior Stock from employees of the Corporation
upon termination of employment. At the earlier of: (1) the redemption or
conversion of the 5% Preferred Stock or (2) the liquidation of the
Corporation, any accrued but undeclared dividends shall be paid to the
holders of record of outstanding shares of the 5% Preferred Stock in
accordance with the provisions of this Section 6. No accumulation of
dividends on the 5% Preferred Stock shall bear interest.

B. Liquidation, Dissolution or Winding Up.

(1) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of shares of the 5% Preferred
Stock then outstanding shall be entitled to be paid out of the assets of
the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to
the holders of any Senior Preferred Stock ranking on liquidation prior and
in preference to the Preferred Stock, but before any payment shall be made
to the holders of Junior Stock by reason of their ownership thereof, an
amount equal to $1,000 per share of 5% Preferred Stock (the "Liquidation
Preference") plus any accrued but unpaid dividends (whether or not
declared). The rights of the holders of 5% Preferred Stock and 10%
Preferred Stock to receive any such distributions shall be equal in
preference and priority. If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation
available for distribution to its shareholders shall be insufficient to pay
the holders of shares of the 5% Preferred Stock the full amount to which
they shall be entitled, the holders of shares of the 5% Preferred Stock
shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were
paid in full.

(2) After the payment of all preferential amounts required to be paid to
the holders of the 5% Preferred Stock and the 10% Preferred Stock upon the
dissolution, liquidation, or winding up of the Corporation, all of the
remaining assets and funds of the Corporation available for distribution to
its shareholders shall be distributed ratably among the holders of the 5%
Preferred Stock and the Junior Stock, with each share of 5% Preferred Stock
being deemed, for such purpose, to be equal to the number of shares of
Common Stock, including fractions of a share, into which such share of 5%
Preferred Stock is convertible immediately prior to the close of business
on the business day fixed for such distribution.

C. Voting.

(1) Each holder of outstanding shares of 5% Preferred Stock shall be
entitled, at each meeting of shareholders of the Corporation (and with
respect to written consents of shareholders in lieu of meetings) with
respect to any and all matters presented to the shareholders of the
Corporation for their action or consideration, to the number of votes equal
to the number of whole shares of Common Stock into which the shares of 5%
Preferred Stock held by such holder are convertible (as adjusted from time
to time pursuant to Subsection H hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of
such written consent. Except as provided by law, by the provisions of
Section J below, or by the provisions establishing any other series of
preferred stock, holders of 5% Preferred Stock shall vote together with the
holders Common Stock as a single class.

(2) The holders of the 5% Preferred Stock shall not be entitled to any
rights of cumulative voting with respect to their shares.

D. Preemptive Rights. No holder of Preferred Stock shall have any preemptive
or similar right to acquire any additional unissued or treasury shares of
stock or securities of any class or rights, warrants or options to purchase
stock or scrip or securities in any kind, including shares or securities
convertible into shares or carrying stock purchase warrants or privileges.

B-2
<PAGE>

E. Other Securities. Subject to any limitations contained in these Articles
of Incorporation, the Board of Directors of the Corporation reserves the right
to establish additional classes and/or series of capital stock of the
Corporation and to designate the preferences, limitations and relative rights
of any such classes and/or series; provided, however, that no such class
and/or series may have preferences, limitations and relative rights which are
superior to or senior to the preferences, limitations and relative rights
granted to the holders of the 5% Preferred Stock.

F. Capital Reorganization. If the Corporation shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock, declare a
dividend payable in Common Stock, or in case of any capital reorganization or
reclassification of the shares of Common Stock of the Corporation, the number
of shares of the 5% Preferred Stock and the stated value of the 5% Preferred
Stock shall be adjusted appropriately to allow the holders of the 5% Preferred
Stock, as nearly as reasonably possible, to maintain (i) the aggregate stated
value of the 5% Preferred Stock and (ii) their pro rata interest in the
Corporation and in the Common Stock upon conversion of the 5% Preferred Stock,
that each holder had prior to any such subdivision, combination, stock
dividend, reorganization or reclassification.

G. Optional Redemption

(1) At any time within the 120 days following the Initial Closing Date,
the Corporation may, at its option, redeem all or any portion of the shares
of 5% Preferred Stock then outstanding upon not less than ten (10) days'
notice at a redemption price per share equal to (A) the quotient of (i) the
Liquidation Preference per share of 5% Preferred Stock plus all accrued but
unpaid dividends on such shares of 5% Preferred Stock and (ii) the
Conversion Price as if the 5% Preferred Stock has been converted on the 5%
Preferred Stock Redemption Date (as hereinafter defined) multiplied by (B)
the average Closing Bid Price (as hereinafter defined) of shares of Common
Stock for the five (5) trading days immediately preceding the 5% Preferred
Stock Redemption Date. Notwithstanding the foregoing, a redemption shall
not occur pursuant to this Subsection G(1) with respect to any 5% Preferred
Stock for which a holder has previously submitted a Notice of Conversion
pursuant to Subsection H of this Section 6. For purposes of this Section 6,
the term "Closing Bid Price" means, for any security as of any date, the
closing bid price on the principal securities exchange or trading market
where the Common Stock is listed or traded as reported by Bloomberg, L.P.
("Bloomberg") or, if applicable, the closing bid price of the Common Stock
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no closing bid price is reported
for the Common Stock by Bloomberg, then the average of the bid prices of
any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price of the Common
Stock cannot be calculated on such date on any of the foregoing bases, the
Closing Bid Price of the Common Stock on such date shall be the fair market
value as mutually determined by the Corporation and holders of a majority
of the outstanding shares of 5% Preferred Stock being converted for which
the calculation of the Closing Bid Price is required in order to determine
the Conversion Price of such shares. "Trading day" shall mean any day on
which the Corporation's Common Stock is traded for any period on the
principal securities exchange or other securities market on which the
Common Stock is then being traded.

(2) Upon receipt of a notice given pursuant to Subsection G(1), each
holder of 5% Preferred Stock shall accept its ratable portion (based on its
holdings of 5% Preferred Stock as compared to the aggregate number of
shares of 5% Preferred Stock then outstanding) of such offer by tendering
such holder's shares to the Corporation for redemption, at an address to be
set forth in such notice, at any time prior to 5:00 p.m. New York time on
the 11th day following the mailing of such notice (the "5% Preferred Stock
Redemption Date"). Upon receipt of a notice given pursuant to Subsection
G(1) of this Section 6, the 5% Preferred Stock which is the subject of such
notice may not thereafter be converted in accordance with
Subsection H(1)(a) of this Section 6, unless a Notice of Conversion
relating to such 5% Preferred Stock had previously been submitted. Within
three (3) business days after the 5% Preferred Stock Redemption Date, the
Corporation shall remit the applicable redemption price, calculated
pursuant to Subsection G(1) of this Section 6, by wire transfer to each
holder of the 5% Preferred Stock to the most recent address of each holder
as set forth on the records of the Corporation or its transfer agent.

B-3
<PAGE>

(3) Any shares of 5% Preferred Stock redeemed pursuant to this Subsection
G or otherwise acquired by the Corporation in any manner whatsoever shall
be canceled and shall not under any circumstances be reissued. The
Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce accordingly the number of authorized shares of
the Corporation's capital stock.

H. Conversion.

(1) Subject to Subsection G(2) of this Section 6, the holders of the 5%
Preferred Stock shall have conversion rights as follows (the "5% Preferred
Stock Conversion Rights"):

(a) Each share of 5% Preferred Stock shall be convertible, at the
option of the holder thereof, at any time and from time to time, into
such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing $1,000, plus the amount of any accrued and
unpaid dividends the Corporation elects to pay in Common Stock, by the
Conversion Price in effect at the time of conversion. The Conversion
Price at which shares of Common Stock shall be deliverable upon
conversion of 5% Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall be
the lower of (i) $16.33 or (ii) 86% of the average Closing Bid Price of
the shares of Common Stock for the five (5) trading days immediately
preceding the 5% Preferred Stock Conversion Date (as hereinafter
defined).

(b) At any time that the number of shares of Common Stock issued (A)
upon conversion of the 5% Preferred Stock and (B) in lieu of dividend
payments on the 5% Preferred Stock, shall equal 574,281 (a "Common
Stock Redemption Event"), the Corporation shall (x) redeem, at a price
determined in accordance with Subsection G(1) of this Section 6, all of
the outstanding 5% Preferred Stock in accordance with the provisions of
Subsection G(2) or (y) call a special meeting of its shareholders for
the purpose of approving the transactions contemplated by the
Securities Purchase Agreement, including the issuance of the 5%
Preferred Stock on the terms set forth therein, together with any other
approvals that shall be required so as to cause the transactions
contemplated by the Securities Purchase Agreement to remain in
compliance with the Rules and Regulations of The Nasdaq Stock Market
(including Rule 4320 of Nasdaq's Non-Qualitative Designation Criteria
in connection with conversions of 5% Preferred Stock; such approvals
are referred to herein as the "Required Approvals"). The Corporation
shall determine within five (5) business days following the receipt of
a Notice of Conversion which of such actions it shall take, and shall
promptly furnish notice to each of the holders of 5% Preferred Stock as
to such determination, including, if applicable, a notice of
redemption. In no event shall the Corporation issue shares of Common
Stock upon conversion of, or in lieu of interest payments on, the 5%
Preferred Stock, after the occurrence of a Common Stock Redemption
Event until the Required Approvals, if any, are obtained.

(c) If the Corporation elects to call a special meeting of its
shareholders pursuant to Subsection H(1)(b) of this Section 6 to obtain
the Required Approvals, the Corporation shall use its best efforts to
obtain such Required Approvals within one hundred twenty (120) days of
the Initial Closing Date (such one hundred twenty (120) day period is
referred to herein as an "Approval Period"). If the Corporation does
not obtain the Required Approvals within the Approval Period and the
Corporation receives a Notice of Conversion after the termination of
the Approval Period, the Corporation must redeem, in accordance with
this Subsection H of this Section 6, any shares of 5% Preferred Stock
outstanding after the Corporation has issued in excess of 574,281
shares of Common Stock in connection with conversions of the 5%
Preferred Stock.

(d) If the Corporation elects, pursuant to this Subsection H, to
redeem the 5% Preferred Stock on the occurrence of a Common Stock
Redemption Event, it shall redeem such 5% Preferred Stock at the price
determined in accordance with Subsection G(1) of this Section 6. If the
Corporation shall have elected, pursuant to this Subsection H(1), to
obtain the Required Approvals but shall not have done so by the later
of the occurrence of the Common Stock Redemption Event or the
expiration of the Approval Period, it shall furnish a redemption notice
to the Purchasers within three (3) business days after the expiration
of the Approval Period.

B-4
<PAGE>

(2) The 5% Preferred Stock Conversion Rights shall be exercised as
follows:

(a) The Corporation will permit each holder of 5% Preferred Stock to
exercise its right to convert the 5% Preferred Stock by faxing an
executed and completed notice of conversion (the "Notice of
Conversion") to the Corporation, and delivering within three (3)
business days thereafter, the original Notice of Conversion (and the
certificates representing the related shares of 5% Preferred Stock) to
the Corporation by hand delivery or by express courier, duly endorsed.
Each date on which a Notice of Conversion is faxed to and received in
accordance with the provisions hereof shall be deemed a "5% Preferred
Stock Conversion Date." The Corporation will transmit the certificates
representing the Common Stock issuable upon conversion of the 5%
Preferred Stock (together with certificates representing the related
shares of 5% Preferred Stock not so converted and, if applicable, a
check representing any fraction of a share not converted) to such
holder via express courier as soon as practicable, but in all events no
later than the later to occur of (the "Delivery Date") (i) three (3)
business days after the 5% Preferred Stock Conversion Date, or (ii)
three (3) business days after receipt by the Corporation of the
original Notice of Conversion (and the certificates representing the
related shares of 5% Preferred Stock). For purposes of this Section 6,
such conversion of the 5% Preferred Stock shall be deemed to have been
made immediately prior to the close of business on the 5% Preferred
Stock Conversion Date.

(b) In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the 5% Preferred Stock,
provided that the Corporation's transfer agent is participating in the
Depository Trust Corporation ("DTC") Fast Automated Securities Transfer
program, on the written request of a holder of 5% Preferred Stock who
shall have previously instructed such holder's prime broker to confirm
such request to the Corporation's transfer agent, the Corporation shall
use commercially reasonable efforts to cause its transfer agent to
electronically transmit such Common Stock to such holder by crediting
the account of the holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission system no later than the applicable
Delivery Date.

(c) The Corporation will at all times have authorized and reserved
for the purpose of issuance a sufficient number of shares of Common
Stock to provide for the conversion of the 5% Preferred Stock. The
Corporation will use its best efforts at all times to maintain a number
of shares of Common Stock so reserved for issuance that is no less than
one and one-half (1.5) times the number that is then actually issuable
upon the conversion of the 5% Preferred Stock, the exercise of the
Warrants issued pursuant to the Securities Purchase Agreement and the
maximum number of shares of Additional Common Stock (as defined in the
Securities Purchase Agreement) which may be issued in accordance with
the Securities Purchase Agreement. Before taking any action which would
cause an adjustment reducing the Conversion Price below the established
par value of the shares of Common Stock issuable upon conversion of the
5% Preferred Stock, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in order that
the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.

(d) All shares of 5% Preferred Stock, which shall have been
surrendered for conversion as herein provided shall no longer be deemed
to be outstanding, and all rights with respect to such shares,
including the rights, if any, to receive dividends, notices and to
vote, shall immediately cease and terminate on the 5% Preferred Stock
Conversion Date, except only the right of the holders thereof to
receive shares of Common Stock in exchange therefor. Any shares of 5%
Preferred Stock so converted shall be retired and canceled and shall
not be reissued, and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the number of shares
of authorized 5% Preferred Stock accordingly.

(3) In the event of a liquidation of the Corporation, the 5% Preferred
Stock Conversion Rights shall terminate at the close of business on the
first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of the 5% Preferred Stock.

B-5
<PAGE>

(4) If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended,
the conversion may, at the option of any holder tendering 5% Preferred
Stock for conversion, be conditioned upon the closing with the underwriter
of the sale of securities pursuant to such offering, in which event the
person(s) entitled to receive the Common Stock issuable upon such
conversion of the 5% Preferred Stock shall not be deemed to have converted
such 5% Preferred Stock until immediately prior to the closing of the sale
of securities.

(5) At no time shall any holder of the 5% Preferred Stock convert such
amount of 5% Preferred Stock as shall result in such Purchaser's ownership,
after such conversion, exceeding 9.9% of the Corporation's outstanding
Common Stock.

(6) No fractional shares of Common Stock shall be issued upon conversion
of the Preferred Stock. In lieu of fractional shares, the Corporation shall
pay cash equal to such fraction multiplied by the then effective and
applicable Conversion Price.

(7) The Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed under this
Subsection H by the Corporation, but will at all times in good faith assist
in the carrying out of all the provisions of this Subsection H and in the
taking of all such action as may be necessary or appropriate in order to
protect the 5% Preferred Stock Conversion Rights of the holders of the 5%
Preferred Stock against impairment.

(8) In the event (a) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation, (b) that the Corporation subdivides or
combines its outstanding shares of Common Stock, (c) of any
reclassification of the Common Stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock or a
stock dividend or stock distribution thereon), (d) of any consolidation or
merger of the Corporation into or with another corporation, (e) of the sale
of all or substantially all of the assets of the Corporation, or (f) of the
involuntary or voluntary dissolution, liquidation or winding up of the
Corporation, then the Corporation shall cause to be filed at its principal
office or at the office of the transfer agent of the Preferred Stock, and
shall cause to be mailed to each holder of the Preferred Stock at their
last address as shown on the records of the Corporation or such transfer
agent, at least ten (10) days prior to the record date specified in (i)
below or twenty (20) days before the date specified in (ii) below, a notice
stating

(i) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision or combination are to be
determined, or

(ii) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
dissolution or winding up.

I. Sinking Fund. There shall be no sinking fund for the payment of
dividends, or liquidation preferences on the 5% Preferred Stock or the
redemption of any shares thereof.

J. Amendment. This Section 6 constitutes an agreement between the
Corporation and the holders of the 5% Preferred Stock. The Corporation shall
not amend this Section 6 or alter or repeal the preferences, rights, powers or
other terms of the 5% Preferred Stock so as to affect adversely the 5%
Preferred Stock, without the written consent or affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of 5% Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class.

B-6
<PAGE>

APPENDIX C

ONLINE SYSTEM SERVICES, INC.
1995 STOCK OPTION PLAN

Article I. Establishment and Purpose

1.1 Establishment. Online System Services, Inc., a Colorado Corporation
("Company"), hereby establishes a stock option plan for employees and others
providing services to the Company and its Subsidiary Corporations, as
described herein, which shall be known as the "1995 STOCK OPTION PLAN" (the
"Plan"). It is intended that certain of the options issued pursuant to the
Plan to employees may constitute incentive stock options within the meaning of
section 422A of the Internal Revenue Code and that other options issued
pursuant to the Plan shall constitute nonstatutory options. The Board shall
determine which options are to be incentive stock options and which are to be
nonstatutory options and shall enter into option agreements with recipients
accordingly.

1.2 Purpose. The purpose of this Plan is to enhance stockholder investment
by attracting, retaining and motivating key employees and consultants of the
Company and its Subsidiary Corporations, and to encourage stock ownership by
such employees and consultants by providing them with a means to acquire a
proprietary interest in the Company's success.

Article II. Definitions

2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below, unless the context clearly requires
otherwise, and when said meaning is intended, the term shall be capitalized.

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as amended.

(c) "Committee" shall mean the Committee provided for by Article IV hereof,
which may be created at the discretion of the Board.

(d) "Company" means Online System Services, Inc., a Colorado Corporation.

(e) "Consultant" means any person or entity, including an officer or
director of the Company or a Subsidiary Corporation, who provides
services (other than as an Employee) to the Company or a Subsidiary
Corporation, and shall include a Non-Employee Director, as defined
below.

(f) "Date of Exercise" means the date the Company receives notice, by an
Optionee, of the exercise of an Option pursuant to section 8.1 of this
Plan. Such notice shall indicate the number of shares of Stock the
Optionee intends to exercise.

(g) "Employee" means any person, including an officer or director of the
Company or a Subsidiary Corporation, who is employed by the Company or
a Subsidiary Corporation.

(h) "Fair Market Value" means the fair market value of Stock upon which an
option is granted under this Plan.

(i) "Incentive Stock Option" means an Option granted under this Plan which
is intended to qualify as an "incentive stock option" within the
meaning of Section 422A of the Code.

(j) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or of any Subsidiary Corporation at the time an
Option is granted hereunder.

C-1
<PAGE>

(k) "Nonstatutory Option" means an Option granted under this Plan which is
not intended to qualify as an incentive stock option within the meaning
of Section 422A of the Code. Nonstatutory Options may be granted at
such times and subject to such restrictions as the Board shall
determine without conforming to the statutory rules of Section 422A of
the Code applicable to incentive stock options.

(l) "Option" means the right, granted under this Plan, to purchase Stock of
the Company at the option price for a specified period of time. For
purposes of this Plan, an Option may be either an Incentive Stock
Option or a Nonstatutory Option.

(m) "Optionee" means an Employee or Consultant holding an Option under the
Plan.

(n) "Parent Corporation" shall have the meaning set forth in Section 425(e)
of the Code with the Company being treated as the employer corporation
for purposes of this definition.

(o) "Subsidiary Corporation" shall have the meaning set forth in Section
425(f) of the Code with the Company being treated as the employer
corporation for purposes of this definition.

(p) "Significant Shareholder" means an individual who, within the meaning
of Section 422A(b)(6) of the Code, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or Subsidiary Corporation of
the Company. In determining whether an individual is a Significant
Shareholder, an individual shall be treated as owning stock owned by
certain relatives of the individual and certain stock owned by
corporations in which the individual is a stockholder, partnerships in
which the individual is a partner, and estates or trusts of which the
individual is a beneficiary, all as provided in Section 425(d) of the
Code.

(q) "Stock" means the no par value common stock of the Company.

2.2 Gender and Number. Except when otherwise indicated by the context, any
masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall
include the plural.

Article III. Eligibility and Participation

3.1 Eligibility and Participation. All Employees are eligible to participate
in this Plan and receive Incentive Stock Options and/or Nonstatutory Options
hereunder. All Consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be
selected by the Board from among those Employees and Consultants who, in the
opinion of the Board, are in a position to contribute materially to the
Company's continued growth and development and to its long-term financial
success.

Article IV. Administration

4.1 Administration. The Board shall be responsible for administering the
Plan.

The Board is authorized to interpret the Plan; to prescribe, amend, and
rescind rules and regulations relating to the Plan; to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company; and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Determinations, interpretations, or other actions made
or taken by the Board, pursuant to the provisions of this Plan, shall be final
and binding and conclusive for all purposes and upon all persons.

At the discretion of the Board this Plan may be administered by a Committee
which shall be an executive committee of the Board, consisting of not less
than three (3) members of the Board. The members of such Committee may be
directors who are eligible to receive Options under this Plan, but Options may
be granted to such persons only by action of the full Board and not by action
of the Committee. Such Committee shall have full power and authority, subject
to the limitations of the Plan and any limitations imposed by the Board, to

C-2
<PAGE>

construe, interpret and administer this Plan and to make determinations which
shall be final, conclusive and binding upon all persons, including, without
limitation, the Company, the stockholders, the directors and any persons
having any interests in any Options which may be granted under this Plan, and,
by resolution or resolution providing for the creation and issuance of any
such Option, to fix the terms upon which, the time or times at or within
which, and the price or prices at which any such shares may be purchased from
the Company upon the exercise of such Option, which terms, time or times and
price or prices shall, in every case, be set forth or incorporated by
reference in the instrument or instruments evidencing such Option, and shall
be consistent with the provisions of this Plan.

The Board may from time to time remove members from, or add members to, the
Committee. The Board may terminate the Committee at any time. Vacancies on the
Committee, howsoever caused, shall be filled by the Board. The Committee shall
select one of its members as Chairman, and shall hold meetings at such times
and places as the Chairman may determine. A majority of the Committee at which
a quorum is present, or acts reduced to or approved in writing by all of the
members of the Committee, shall be the valid acts of the Committee. A quorum
shall consist of two-thirds (2/3) of the members of the Committee.

Where the Committee has been created by the Board, references herein to
actions to be taken by the Board shall be deemed to refer to the Committee as
well, except where limited by this Plan or by the Board.

The Board shall have all of the enumerated powers of the Committee, but
shall not be limited to such powers. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.

Article V. Stock Subject to the Plan

5.1 Number. The total number of shares of Stock hereby made available and
reserved for issuance under the Plan shall be 1,100,000. The aggregate number
of shares of Stock available under this Plan shall be subject to adjustment as
provided in section 5.3. The total number of shares of Stock may be authorized
but unissued shares of Stock, or shares acquired by purchase as directed by
the Board from time to time in its discretion, to be used for issuance upon
exercise of Options granted hereunder.

5.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for
other Options under the Plan.

5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive;
provided, however, that fractional shares shall be rounded to the nearest
whole share. In any such case, the number and kind of shares that are subject
to any Option (including any Option outstanding after termination of
employment) and the Option price per share shall be proportionately and
appropriately adjusted without any change in the aggregate Option price to be
paid therefor upon exercise of the Option.

Article VI. Duration of the Plan

6.1 Duration of the Plan. Subject to stockholder approval, the Plan shall be
in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period, if all Stock subject to it has been purchased pursuant to the exercise
of Options granted under the Plan.

Article VII. Terms of Stock Options

7.1 Grant of Options. Subject to section 5.1, Options may be granted to
Employees or Consultants at any time and from time to time as determined by
the Board; provided, however, that Consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Board shall have
complete discretion in determining the number of Options granted to each
Optionee. In making such determinations, the Board may take into account the
nature of services rendered by such Employees or Consultants, their present
and potential contributions to the Company and its Subsidiary Corporations,
and such other factors as the Board in its discretion shall deem relevant. The
Board also shall determine whether an Option is to be an Incentive Stock
Option or a Nonstatutory Option.

C-3
<PAGE>

In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to which
incentive stock options granted after December 31, 1986 are exercisable for
the first time by the Optionee during any calendar year under all plans of the
Company under which incentive stock options may be granted (and all such plans
of any Parent Corporations and any Subsidiary Corporations of the Company)
shall not exceed $100,000. (Hereinafter, this requirement is sometimes
referred to as the "$100,000 Limitation".)

Nothing in this Article VII of the Plan shall be deemed to prevent the grant
of Options permitting exercise in excess of the maximums established by the
preceding paragraph where such excess amount is treated as a Nonstatutory
Option.

The Board is expressly given the authority to issue amended or replacement
Options with respect to shares of Stock subject to an Option previously
granted hereunder. An amended Option amends the terms of an Option previously
granted and thereby supersedes the previous Option. A replacement Option is
similar to a new Option granted hereunder except that it provides that it
shall be forfeited to the extent that a previously granted Option is
exercised, or except that its issuance is conditioned upon the termination of
a previously granted Option.

7.2 No Tandem Options. Where an Option granted under this Plan is intended
to be an Incentive Stock Option, the Option shall not contain terms pursuant
to which the exercise of the Option would affect the Optionee's right to
exercise another Option, or vice versa, such that the Option intended to be an
Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under Section 422A of the Code.

7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the Board on the date of grant, each Option shall
be evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by Section 10.2 hereof and specifies:
whether the Option is an Incentive Stock Option or a Nonstatutory Option; the
Option price; the duration of the Option; the number of shares of Stock to
which the Option applies; any vesting or exercisability restrictions which the
Board may impose; in the case of an Incentive Stock Option, a provision
implementing the $100,000 Limitation; and any other terms or conditions which
the Board may impose. All such terms and conditions shall be determined by the
Board at the time of grant of the Option.

If not otherwise specified by the Board, the following terms and conditions
shall apply to Options granted under the Plan:

(a) Term. The duration of the Option shall be seven (7) years from the date
of grant.

(b) Exercise of Option. Unless an Option is terminated as provided
hereunder, an Optionee may exercise his Option for up to, but not in
excess of, the amounts of shares subject to the Option specified below,
based on the Optionee's number of years of continuous service with the
Company or a Subsidiary Corporation of the Company from the date on
which the Option is granted. In the case of an Optionee who is an
Employee, continuous service shall mean continuous employment; in the
case of an Optionee who is a Consultant, continuous service shall mean
the continuous provision of consulting services. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount of
shares the Optionee can purchase at any time. The Optionee may exercise
his Option in the following amounts:

(i) After one year of such continuous services for up to but not in
excess of thirty-three and one-third percent (33 1/3%) of the
shares originally subject to the Option;

(ii) After two years of such continuous services, for up to but not in
excess of sixty-six and two-thirds percent (66 2/3%) of the
shares originally subject to the Option; and

(iii) At the expiration of the third year of such continuous services
the Option may be exercised at any time and from time to time
within its terms in whole or in part, but it shall not be
exercisable after the expiration of seven (7) years (five (5)
years in the case of an Incentive Stock Option granted to a
Significant Shareholder) from the date on which it was granted.

C-4
<PAGE>

The Board shall be free to specify terms and conditions other than those set
forth above, in its discretion.

All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.

7.4 Option Price. No Incentive Stock Option granted pursuant to this Plan
shall have an Option price that is less than the Fair Market Value of Stock on
the date the Option is granted. Incentive Stock Options granted to Significant
Shareholders shall have an Option price of not less than 110 percent of the
Fair Market Value of Stock on the date of grant. The Option price for
Nonstatutory Options shall be established by the Board and shall not be less
than eighty-five percent (85%) of the Fair Market Value of Stock on the date
this Option is granted.

7.5 Term of Options. Each Option shall expire at such time as the Board
shall determine when it is granted, provided however that no Option shall be
exercisable later than the tenth anniversary date of its grant. By its terms,
an Incentive Stock Option granted to a Significant Shareholder shall not be
exercisable after five years from the date of grant.

7.6 Exercise of Options. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the Board
shall in each instance approve, which need not be the same for all Optionees.

7.7 Payment. Payment for all shares of Stock shall be made at the time that
an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash,
or (ii) if acceptable to the Board, in Stock or in some other form; provided,
however, in the case of an Incentive Stock Option, that said other form of
payment does not prevent the Option from qualifying for treatment as an
"incentive stock option" within the meaning of the Code. Payment may also be
made, in the discretion of the Board, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option exercise
form together with irrevocable instructions to a broker-dealer to sell or
margin a sufficient portion of the shares and deliver the sale or margin loan
proceeds directly to the Company to pay for the exercise price.

Article VIII. Written Notice, Issuance of
Stock Certificates, Stockholder Privileges

8.1 Written Notice. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the Board.
Full payment for the shares exercised pursuant to the Option must accompany
the written notice.

8.2 Issuance of Stock Certificates. As soon as practicable after the receipt
of written notice and payment, the Company shall deliver to the Optionee or to
a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock.

8.3 Privileges of a Stockholder. An Optionee or any other person entitled to
exercise an Option under this Plan shall not have stockholder privileges with
respect to any Stock covered by the Option until the date of issuance of a
stock certificate for such stock.

Article IX. Termination of Employment or Services

9.1 Death. Unless provided otherwise for a Nonstatutory Option, if an
Optionee's employment in the case of an Employee, or provision of services as
a Consultant, in the case of a Consultant, terminates by reason of death, the
Option may thereafter be exercised at any time prior to the expiration date of
the Option or within 12 months after the date of such death, whichever period
is the shorter, by the person or persons entitled to do so under the
Optionee's will or, if the Optionee shall fail to make a testamentary
disposition of an Option or shall die intestate, the Optionee's legal
representative or representatives. The Option shall be exercisable only to the
extent that such Option was exercisable as of the date of death.

C-5
<PAGE>

9.2 Termination Other Than For Cause Or Due to Death. Unless provided
otherwise for a Nonstatutory Option, in the event of an Optionee's termination
of employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, other than by reason of
death, the Optionee may exercise such portion of his Option as was exercisable
by him at the date of such termination (the "Termination Date") at any time
within three (3) months of the Termination Date; provided, however, that where
the Optionee is an Employee, and is terminated due to disability within the
meaning of Code (S) 422A, he may exercise such portion of his Option as was
exercisable by him on his Termination Date within one year of his Termination
Date. In any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period
specified above shall terminate.

In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such a Corporation to the Company,
shall not be considered a termination of employment for purposes of this Plan.
The Option Agreements may contain such provisions as the Board shall approve
with reference to the effect of approved leaves of absence upon termination of
employment.

9.3 Termination for Cause. Unless provided otherwise for a Nonstatutory
Option, in the event of an Optionee's termination of employment, in the case
of an Employee, or termination of the provision of services as a Consultant,
in the case of a Consultant, which termination is by the Company or a
Subsidiary Corporation for cause, any Option or Options held by him under the
Plan, to the extent not exercised before such termination, shall forthwith
terminate.

Article X. Rights of Optionees

10.1 Service. Nothing in this Plan shall interfere with or limit in any way
the right of the Company or a Subsidiary Corporation to terminate any
Employee's employment, or any Consultant's services, at any time, nor confer
upon any Employee any right to continue in the employ of the Company or a
Subsidiary Corporation, or upon any Consultant any right to continue to
provide services to the Company or a Subsidiary Corporation.

10.2 Nontransferability. All Options granted under this Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.

Article XI. Optionee-Employee's
Transfer or Leave of Absence

11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan purposes--

(a) A transfer of an Optionee who is an Employee from the Company to a
Subsidiary Corporation or Parent Corporation, or from one such
Corporation to another, or

(b) a leave of absence for such an Optionee (i) which is duly authorized
in writing by the Company or a Subsidiary Corporation, and (ii) if the
Optionee holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case of
incentive stock options,

shall not be deemed a termination of employment. However, under no
circumstances may an Optionee exercise an Option during any leave of absence,
unless authorized by the Board.

Article XII. Amendment,
Modification, and Termination of the Plan

12.1 Amendment, Modification, and Termination of the Plan. The Board may at
any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may--

C-6
<PAGE>

(a) increase the total amount of Stock which may be purchased through
Options granted under the Plan, except as provided in Article V;

(b) change the class of Employees or Consultants eligible to receive
Options;

No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.

Article XIII. Acquisition, Merger, or Liquidation

13.1 Acquisition. In the event that an Acquisition occurs with respect to
the Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of Acquisition, whether or
not such Options are then exercisable, in return for payment to the Optionees
of an amount equal to a reasonable estimate of an amount (hereinafter the
"Spread") equal to the difference between the net amount per share payable in
the Acquisition, or as a result of the Acquisition, less the exercise price of
the Option. In estimating the Spread, appropriate adjustments to give effect
to the existence of the Options shall be made, such as deeming the Options to
have been exercised, with the Company receiving the exercise price payable
thereunder, and treating the shares receivable upon exercise of the Options as
being outstanding in determining the net amount per share. For purposes of
this section, an "Acquisition" shall mean any transaction in which
substantially all of the Company's assets are acquired or in which a
controlling amount of the Company's outstanding shares are acquired, in each
case by a single person or entity or an affiliated group of persons and/or
entities. For purposes of this Section a controlling amount shall mean more
than 50% of the issued and outstanding shares of stock of the Company. The
Company shall have such an option regardless of how the Acquisition is
effectuated, whether by direct purchase, through a merger or similar corporate
transaction, or otherwise. In cases where the acquisition consists of the
acquisition of assets of the Company, the net amount per share shall be
calculated on the basis of the net amount receivable with respect to shares
upon a distribution and liquidation by the Company after giving effect to
expenses and charges, including but not limited to taxes, payable by the
Company before the liquidation can be completed.

Where the Company does not exercise its option under this Section 13.1 the
remaining provisions of this Article XIII shall apply, to the extent
applicable.

13.2 Merger or Consolidation. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger
or consolidation, any Option granted hereunder shall pertain to and apply to
the securities to which a holder of the number of shares of Stock subject to
the Option would have been entitled in such merger or consolidation.

13.3 Other Transactions. A dissolution or a liquidation of the Company or a
merger and consolidation in which the Company is not the surviving corporation
shall cause every Option outstanding hereunder to terminate as of the
effective date of such dissolution, liquidation, merger or consolidation.
However, the Optionee either (i) shall be offered a firm commitment whereby
the resulting or surviving corporation in a merger or consolidation will
tender to the Optionee an option (the "Substitute Option") to purchase its
shares on terms and conditions both as to number of shares and otherwise,
which will substantially preserve to the Optionee the rights and benefits of
the Option outstanding hereunder granted by the Company, or (ii) shall have
the right immediately prior to such dissolution, liquidation, merger, or
consolidation to exercise any unexercised Options whether or not then
exercisable, subject to the provisions of this Plan. The Board shall have
absolute and uncontrolled discretion to determine whether the Optionee has
been offered a firm commitment and whether the tendered Substitute Option will
substantially preserve to the Optionee the rights and benefits of the Option
outstanding hereunder. In any event, any Substitute Option for an Incentive
Stock Option shall comply with the requirements of Code Section 425(a).

Article XIV. Securities Registration

14.1 Securities Registration. In the event that the Company shall deem it
necessary or desirable to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any Stock with
respect to which an Option may be or shall have been granted or exercised, or
to qualify any such Options or Stock under the Securities Act of 1933, as
amended, or any other statute, then the Optionee shall cooperate with the
Company and take such action as is necessary to permit registration or
qualification of such Options or Stock.

C-7
<PAGE>

Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required
by the Company, as a condition to the issuance of the shares pursuant to
exercise of the Option, to make a representation in writing (a) that he is
acquiring such shares for his own account for investment and not with a view
to, or for sale in connection with, the distribution of any part thereof, (b)
that before any transfer in connection with the resale of such shares, he will
obtain the written opinion of counsel for the Company, or other counsel
acceptable to the Company, that such shares may be transferred. The Company
may also require that the certificates representing such shares contain
legends reflecting the foregoing.

Article XV. Tax Withholding

15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state, and local withholding tax requirements.

Article XVI. Indemnification

16.1 Indemnification. To the extent permitted by law, each person who is or
shall have been a member of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of
judgment in any such action, suit, or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the Company's articles of incorporation or bylaws, as a matter of law, or
otherwise, or any power that the Company or any Subsidiary Corporation may
have to indemnify them or hold them harmless.

Article XVII. Requirements of Law

17.1 Requirements of Law. The granting of Options and the issuance of shares
of Stock upon the exercise of an Option shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.

17.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
Colorado.

Article XVIII. Effective Date of Plan

18.1 Effective Date. The Plan shall be effective on March 17, 1995, the
effective date of its adoption by the Board.

Article XIX. Compliance with Code.

19.1 Compliance with Code. Incentive Stock Options granted hereunder are
intended to qualify as "incentive stock options" under Code (S) 422A. If any
provision of this Plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.

Article XX. No Obligation to Exercise Option.

20.1 No Obligation to Exercise. The granting of an Option shall impose no
obligation upon the holder thereof to exercise such Option.

C-8
<PAGE>

AMENDMENT TO ONLINE SYSTEM SERVICES, INC. 1995 STOCK OPTION PLAN

Section 5.1 of the Online System Services, Inc. (the "Company") 1995 Stock
Option Plan is hereby deleted in its entirety and superseded and replaced with
the following provision, effective upon the approval of this Amendment by the
shareholders of the Company:

5.1 Number. The total number of shares of Stock hereby made available
and reserved for issuance under the Plan shall be 2,500,000. The aggregate
number of shares of Stock available under this Plan shall be subject to
adjustment as provided in section 5.3. The total number of shares of Stock
may be authorized but unissued shares of Stock, or shares acquired by
purchase as directed by the Board from time to time in its discretion, to
be used for issuance upon exercise of Options granted hereunder.

C-9
<PAGE>

ONLINE SYSTEM SERVICES, INC.

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned having duly received the Notice of Annual Meeting and the
Proxy Statement dated July ____, 1998, hereby appoints the Chairman and Chief
Executive Officer, R. Steven Adams, and the Secretary, Robert M. Geller, as
proxies (each with the power to act alone and with the power of substitution and
revocation) to represent the undersigned and to vote, as designated below, all
common shares of Online System Services, Inc., all 10% Preferred Stock and all
5% Preferred Stock held of record by the undersigned on July 2, 1998, at the
Annual Meeting of Shareholders to be held on July 30, 1998 at 1800 Glenarm
Place, Suite 700, Denver, Colorado, at __:__ p.m. Mountain Time, and at any
adjournment thereof.

1. PROPOSAL TO ELECT [ ] FOR all nominees listed below
SEVEN DIRECTORS (EXCEPT AS MARKED TO THE CONTRARY BELOW)

[ ] WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES LISTED BELOW

R. STEVEN ADAMS ROBERT M. GELLER WILLIAM R. CULLEN ROBERT J. LEWIS
H. ROBERT GILL RICHARD C. JENNEWINE CHARLES P. SPICKERT

INSTRUCTION: To withhold authority to vote for an individual nominee or
nominees, write the person's name on the line below.

- - --------------------------------------------------------------------------------

2. PROPOSAL TO AMEND THE ARTICLES OF [ ] FOR [ ] AGAINST [ ] ABSTAIN
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK

3. SALES OF SECURITIES:
3A PROPOSAL TO APPROVE ISSUANCE OF [ ] FOR [ ] AGAINST [ ] ABSTAIN
COMMON STOCK PURSUANT TO
SECURITIES PURCHASE AGREEMENT

3B PROPOSAL TO APPROVE ISSUANCE OF UP [ ] FOR [ ] AGAINST [ ] ABSTAIN
TO 2,500,000 SHARES OF COMMON STOCK
PURSUANT TO PROPOSED OFFERING

4. PROPOSAL TO APPROVE THE AMENDMENT TO THE [ ] FOR [ ] AGAINST [ ] ABSTAIN
THE ONLINE SYSTEM SERVICES, INC. 1995
STOCK OPTION PLAN.

5. PROPOSAL TO RATIFY THE APPOINTMENT OF [ ] FOR [ ] AGAINST [ ] ABSTAIN
ARTHUR ANDERSON LLP AS THE AS THE
INDEPENDENT ACCOUNTANTS FOR THE CORPORATION.

6. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER [ ] FOR [ ] AGAINST [ ] ABSTAIN
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING

(CONTINUED ON OTHER SIDE)
<PAGE>

(CONTINUED FROM OTHER SIDE)

This Proxy, when properly executed, will be voted in the manner directed on
the Proxy be the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2, 3A, 3B, 4, 5 AND 6.

Please sign exactly as your name appears on this card. When shares are held
by joint tenants, both should sign. If signing as attorney, guardian, executor,
administrator or trustee, please give full title as such. If a corporation,
please sign in the corporate name by the president or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.

----------------------------------------
(Signature)

----------------------------------------
(Signature, if held jointly)

Dated: ___________________________, 1998

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE.