<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
ONLINE INNOVATION, INC.
-------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-------------------------------------------------------
(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)(1) 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:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(1) 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>
ONLINE INNOVATION, INC.
1118 HOMER STREET, #218
VANCOUVER, BRITISH COLUMBIA V6B 6L5, CANADA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 4, 2000
TO THE STOCKHOLDERS OF ONLINE INNOVATION, INC.,
The 2000 Annual Meeting of Stockholders of Online Innovation, Inc. (the
"Company"), will be held at the law offices of Stradling, Yocca, Carlson &
Rauth, located at 660 Newport Center Drive, Suite 1600, Newport Beach,
California 92660-6422 on December 4, 2000, at 10:00 a.m., for the following
purposes as more fully described in the accompanying Proxy Statement:
(1) To elect the following three nominees to serve as directors until the
next annual meeting of stockholders or until their successors are
elected and have qualified:
Chad D. Lee
Marlene C. Schluter
Harvey H. Cohen
(2) To ratify the adoption of the Company's 2000 Stock Incentive Plan
which authorizes the grant of options to purchase up to 1,500,000
shares of the Company's Common stock;
(3) To ratify the appointment of Moen and Company, Chartered Accountants,
as independent auditors of the Company for the fiscal year ending June
30, 2001; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on October 20, 2000
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Chad D. Lee
Chad D. Lee
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
Vancouver, British Columbia
October 23, 2000
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any stockholder
present at the meeting may withdraw his or her proxy and vote personally on each
matter brought before the meeting. Stockholders attending the meeting whose
shares are held in the name of a broker or other nominee who desire to vote
their shares at the meeting should bring with them a proxy or letter from that
firm confirming their ownership of shares.
<PAGE>
ONLINE INNOVATION, INC.
1118 HOMER STREET, #218
VANCOUVER, BRITISH COLUMBIA V6B 6L5, CANADA
---------------
PROXY STATEMENT
---------------
INTRODUCTION
THIS PROXY STATEMENT IS BEING FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF ONLINE INNOVATION, INC.,
a Delaware corporation (the "Company"), for use at its 2000 Annual Meeting of
stockholders (the "Annual Meeting") to be held on December 4, 2000, at 10:00
a.m., at the law offices of Stradling, Yocca, Carlson & Rauth, located at 660
Newport Center Drive, Suite 1600, Newport Beach, California 92660-6422. This
Proxy Statement and the accompanying proxy are being mailed to stockholders
on or about November 2, 2000. It is contemplated that this solicitation of
proxies will be made primarily by mail; however, if it should appear
desirable to do so in order to ensure adequate representation at the meeting,
directors, officers and employees of the Company may communicate with
stockholders, brokerage houses and others by telephone, telegraph or in
person to request that proxies be furnished and may reimburse banks,
brokerage houses, custodians, nominees and fiduciaries for their reasonable
expenses in forwarding proxy materials to the beneficial owners of the shares
held by them. All expenses incurred in connection with this solicitation
shall be borne by the Company.
Holders of shares of common stock of the Company (the "stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary,
Online Innovation, Inc., 1118 Homer Street, #218, Vancouver, British Columbia
V6B 6L5, Canada, in writing prior to or at the meeting or by attending the
meeting and voting in person. A proxy, when executed and not so revoked, will be
voted in accordance with the instructions given in the proxy. If a choice is not
specified in the proxy, the proxy will be voted "FOR" the nominees for election
of directors named in this Proxy Statement and "FOR" the ratification of Moen
and Company Chartered Accountants as the Company's independent auditors.
VOTING SECURITIES
The shares of common stock, $.001 par value, constitute the only
outstanding class of voting securities of the Company. Only the stockholders of
the Company of record as of the close of business on October 20, 2000 (the
"Record Date"), will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 13,305,000 shares of
Common stock outstanding and entitled to vote. A majority of shares entitled to
vote represented in person or by proxy will constitute a quorum at the meeting.
Each stockholder is entitled to one vote for each share of Common stock held as
of the Record Date. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting for the purpose of
determining whether a quorum is present. Abstentions will be treated as shares
present and entitled to vote for purposes of any matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares, an
abstention or broker non-vote will have the same effect as a vote against the
matter being voted upon.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Bylaws, as amended, authorize a total of three directors.
Currently, there are three members of the Board of Directors. Unless otherwise
instructed, the proxy holders named in the enclosed proxy will vote the proxies
received by them for the three nominees named below. Pursuant to the Company's
Bylaws, as amended, all directors serve until such time as their successor has
been elected, until they resign, or until they are removed by a majority vote at
a meeting of the Company's stockholders. A majority vote is required for the
election of each director. All of the nominees are presently directors of the
Company. If any nominee becomes unavailable for any reason before the election,
the enclosed proxy will be voted for the election of such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors. The Board of
Directors has no reason to believe that any of the nominees will be unavailable
to serve.
The names and certain information concerning the three nominees for
election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
DIRECTORS
All members of the Company's Board of Directors hold office until the next
annual meeting of stockholders or until their successors are elected and have
qualified. Officers serve at the discretion of the Board of Directors.
The director nominees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- ------------- -----------------------------------------------
<S> <C> <C>
Chad D. Lee 32 Chief Executive Officer, President and Director
Marlene C. Schluter 37 Secretary, Treasurer and Director
Harvey H. Cohen 76 Vice President and Director
</TABLE>
MR. LEE is the founder of Online Innovation, Inc. He has served as director
and Chief Executive Officer of the Company since October, 1997 and has acted as
President since April, 1998. He is a graduate of the University of British
Columbia where he focused his studies on the field of Urban Land Economics. He
has used his skills in strategic management, financial analysis and planning,
contract negotiation, and business planning to develop new companies and to
assist established companies with operations. Mr. Lee is also the Principal of
CL Communications Group where he has developed and implemented multi-media
marketing strategies for several publicly traded companies. Mr. Lee brings to
the Company strong leadership vision, expertise in strategic management, and an
ability to develop and implement corporate strategy that achieves results.
Utilizing this expertise, Mr. Lee has focused the Company's interests on the
communications and hi-tech Internet sectors through the acquisition and further
development of the Company's technology assets. From March, 1991 to February,
1995 Mr. Lee was employed by Summit Motors, a motor vehicle dealership located
in Vancouver, British Columbia. Mr. Lee was responsible for warranty claims,
invoicing, sales, business development and quality assurance. From February,
1995 to September, 1996, Mr. Lee was employed by Ensign Pacific Lease Ltd., a
motor vehicle leasing company also based in Vancouver, British Columbia. He was
responsible for invoicing, budgets, credit, revenue forecasts, business
development, customer satisfaction and quality assurance. From October, 1996 to
the present, Mr. Lee has been the president and director of C.L. Communications
Group.
MS. SCHLUTER has served as director, corporate secretary and treasurer of
the Company since October, 1997. She is a graduate of Simon Fraser University
with a Bachelor of Education (B Ed.) and was employed by the public school
system at the elementary and secondary school levels, specializing in Business
and Math. Ms. Schluter was also an active member in the school counseling
programs. Ms. Schluter furthered her professional career by attending courses in
the Master of Business Administration Program at the University of British
Columbia
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concentrating in the areas of International Trade and Finance. She went on to
work in the Financial Industry with Yorkton Securities Inc. where she completed
the Canadian Securities Course (CSC) and Series 63 and 67 for qualification in
the United States. Ms. Schluter acted as a Broker's Assistant and as a Broker
with Yorkton Securities Inc. She was employed by Yorkton Securities Inc. from
April, 1991 to December, 1996. From February, 1997 to July, 1997, Ms. Schluter
acted as executive assistant and performed investor relations services for CKD
Ventures Ltd., a Vancouver, British Columbia based mineral exploration company.
MR. COHEN has been involved with the Company since its inception providing
advice on matters related to its mineral properties. He has served as Vice
President since April 1998. Mr. Cohen graduated from the University of British
Columbia with a Bachelor's degree in Physical Sciences/Mining Engineering. He
has been a registered member of the Association of Professional Engineers and
Geoscientists of British Columbia since 1954 and is also a lifetime member of
the Canadian Institute of Mining, Metallurgy and Petroleum. During the course of
his career he has acted for numerous publicly traded companies in the mining
sector. Mr. Cohen has been semi-retired for approximately ten years.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held four meetings during the fiscal
year ended June 30, 2000. Mr. Lee and Ms. Schluter each attended one-hundred
percent (100%) of these meetings. Mr. Cohen was unable to attend any of the
meetings of the Board of Directors. There are no family relationships among any
of the directors or executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an audit committee (the "Audit Committee") composed of Mr.
Cohen and Ms. Schluter. The Audit Committee aids management in the establishment
and supervision of the Company's financial controls, evaluates the scope of the
annual audit, reviews audit results, consults with management and the Company's
independent accountants prior to the presentation of financial statements to the
stockholders and, if appropriate, initiates inquiries into aspects of the
Company's financial affairs. The Audit Committee did not hold any meetings
during the fiscal year ended June 30, 2000. The Audit Committee Charter is
included herewith as Exhibit A. The Company does not have a compensation
committee or a nominating committee.
OTHER EXECUTIVE OFFICERS
The Company has no other executive officers.
COMPENSATION OF EXECUTIVE OFFICERS
The Company has no officers who received aggregate compensation (including
bonus and other benefits) in excess of $100,000 during the fiscal years ended
June 30, 1998, 1999, and 2000.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company does not have any employment or severance agreements.
DIRECTORS' FEES
The Company's directors do not receive any compensation for their services
on the Company's Board of Directors. All directors may be reimbursed for certain
expenses incurred for meetings of the Board of Directors which they attended.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the
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Company's equity securities, to file reports of ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission. Such directors, executive officers and 10% stockholders are also
required to furnish the Company with copies of all Section 16(a) forms they
file.
The directors listed below have not filed a Form 3 pursuant to the
filing requirements under Section 16(a) of the Exchange Act applicable to the
Company's directors, officers and any persons holding ten percent or more of
the Company's common stock. All persons to whom this Section 16(a) applies
will file the appropriate Form 5, including information that should have been
included on Form 3, with respect to the Company's fiscal year ended June 30,
2001.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the ownership
of the Company's issued and outstanding common stock as of October 20, 2000 by
(i) each person who is known to the Company to be the beneficial owner of more
than 5 percent of the Company's common stock; (ii) named directors and executive
officers; and (iii) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK PERCENT
--------------------------- ---------------------- OF
AMOUNT AND AMOUNT AND COMMON
NATURE OF PERCENT NATURE OF PERCENT STOCK AND
BENEFICIAL OF BENEFICIAL OF PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP(2) CLASS(1) OWNERSHIP CLASS STOCK
------------------------------------------------- ------------- ---------- ---------- ------- ---------
<S> <C> <C> <C>
Chad D. Lee 5,500,000 41.3% 41.3%
(President, Chief Executive Officer and Director)
61-12411 Jack Bell Drive
Richmond, British Columbia
Canada
Marlene C. Schluter 2,500,000 18.8% 18.8%
(Secretary, Treasurer and Director)
2233 Lillooet Street
Vancouver, British Columbia
Canada
Harvey H. Cohen 0 0.0% 0.0%
(Vice President and Director)
8278 Tugboat Place
Vancouver, British Columbia
Canada
Directors and Officers as a Group (3 persons) 8,000,000 60.1% 60.1%
</TABLE>
------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a Management Agreement made effective as of November 1, 1997,
the Company pays $2,500 per month to MCS Management Ltd., a company wholly owned
by Ms. Marlene C. Schluter, Director, Secretary and Treasurer of the Company,
for management services provided to the Company by MCS Management Ltd.
Pursuant to a Management Agreement made effective as of July 1, 2000, the
Company pays $2,500 per month to Netgain Management Solutions Inc., a company
wholly owned by Mr. Chad D. Lee, President, Chief Executive Officer, and
Director of the Company, for management services provided to the Company by
Netgain Management Solutions Inc.
The Company has not been a party to any other transactions during the past
two years, and is not currently a party to any other transaction, in which any
directors, officers or holders of greater than five percent of the Company's
securities, or any immediate family members of any of the foregoing, have any
direct or indirect material interest.
The Company believes all of the transactions set forth above were made on
terms no less favorable to the Company than could otherwise be obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board, including a majority of
the independent and disinterested outside directors on the Board.
PROPOSAL TWO
APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
The Board of Directors of the Company has adopted, subject to stockholder
approval, the 2000 Employee Stock Incentive Plan (the "2000 Plan"). The purposes
of the 2000 Plan are to enhance the Company's ability to attract, motivate and
retain the services of qualified employees, officers and directors (including
non-employee officers and directors), consultants and other service providers
upon whose judgment, initiative and efforts the successful conduct and
development of the Company's business largely depends, by providing them with an
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company.
The principal features of the 2000 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 2000 Plan itself which
is attached hereto as Exhibit B.
DESCRIPTION OF THE 2000 PLAN
The 2000 Plan authorizes the Company to grant options to purchase up to
1,500,000 shares of common stock to employees, officers, directors, consultants
and other service providers of the Company. This authorization is subject to
adjustment in the number and kind of shares allowed under the 2000 Plan in the
event of stock splits, stock dividends or certain other similar changes in the
capital structure of the Company.
INCENTIVE OPTIONS. Officers and other key employees of the Company or of
any parent or subsidiary corporation of the Company, whether now existing or
hereafter created or acquired (an "Affiliated Company") (including directors if
they are also employees of the Company or an Affiliated Company), as may be
determined by the Board, who qualify for incentive stock options under the
applicable provisions of the Internal Revenue Code, will be eligible for
selection to receive incentive options under the 2000 Plan. An employee who has
been granted an incentive option may, if otherwise eligible, be granted an
additional incentive options and receive nonqualified options or restricted
shares if the Administrator so determines. No incentive stock options may be
granted to an optionee under the 2000 Plan if the aggregate fair market value
(determined on the date of grant) of the stock with respect to which incentive
stock options are exercisable by such optionee in any calendar year under the
2000 Plan of the Company and its Affiliated Company exceeds $100,000.
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NONQUALIFIED OPTIONS OR RESTRICTED SHARES. Officers and other key employees
of the Company or of an Affiliated Company, any member of the Board, whether or
not he or she is employed by the Company, or consultants, business associates or
others with important business relationships with the Company will be eligible
to receive nonqualified options or restricted shares under the 2000 Plan. An
individual who has been granted a nonqualified option or restricted shares may,
if otherwise eligible, be granted an incentive option or an additional
nonqualified option or options or restricted shares if the Board so determines.
In no event may any individual be granted options under the 2000 Plan
pursuant to which the aggregate number of shares that may be acquired thereunder
during any calendar year exceeds 1,500,000 shares.
The 2000 Plan may be administered by either the Board or a committee
appointed by the Board, either of which has full authority to implement,
administer and make all determinations necessary under the 2000 Plan.
The exercise price of incentive stock options must at least be equal to the
fair market value of a share of common stock on the date the option is granted.
The exercise price of all options granted under the 2000 Plan to non-employee
directors shall be 100% of the fair market value of the common stock on the date
of grant, and all such options shall have a term of 10 years. Payment of the
exercise price may be made in cash, by delivery of shares of the Company's
common stock or, potentially, through the delivery of a promissory note. The
Board has the authority to determine the time or times at which options granted
under the 2000 Plan become exercisable, provided that options must expire no
later than ten years from the date of grant. Options are nontransferable, other
than upon death by will and the laws of descent and distribution, and generally
may be exercised only by an employee while employed by the Company or within
three months after termination of employment (one year for termination resulting
from death or disability).
The Board may from time to time alter, amend, suspend or terminate the 2000
Plan in such respects as the Board may deem advisable; provided, however, that
no such alteration, amendment, suspension or termination shall be made that
would substantially affect or impair the rights of any person under any
incentive option, nonqualified option or restricted share theretofore granted to
such person without his or her consent. Unless previously terminated by the
Board, the 2000 Plan will terminate on October 20, 2010. All options granted
under the 2000 Plan will vest upon a change in control.
NEW PLAN BENEFITS
Currently, no options of shares of common stock have been issued under the
2000 Plan; however, the Company expects to grant options to the Company's
executive officers in the near future.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF 2000 PLAN
The following is a summary of certain federal income tax consequences of
participation in the 2000 Plan. The summary should not be relied upon as being a
complete statement of all possible federal income tax consequences. Federal tax
laws are complex and subject to change. Participation in the 2000 Plan may also
have consequences under state and local tax laws which vary from the federal tax
consequences described below. For such reasons, the Company recommends that each
participant consult his or her personal tax advisor to determine the specific
tax consequences applicable to him or her.
INCENTIVE OPTIONS. No taxable income will be recognized by an optionee
under the 2000 Plan upon either the grant or the exercise of an incentive
option. Instead, a taxable event will occur upon the sale or other disposition
of the shares acquired upon exercise of an incentive option, and the tax
treatment of the gain or loss realized will depend upon how long the shares were
held before their sale or disposition. If a sale or other disposition of the
shares received upon the exercise of an incentive option occurs more than (i)
one year after the date of exercise of the option and (ii) two years after the
date of grant of the option, the holder will recognize long-term capital gain or
loss at the time of sale equal to the full amount of the difference between the
proceeds realized and the exercise price paid. However, a sale, exchange, gift
or other transfer of legal title of such stock (other than certain transfers
upon the optionee's death) before the expiration of either of the one-year or
two-year periods described above will constitute a "disqualifying disposition."
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A disqualifying disposition involving a sale or exchange will result in
ordinary income to the optionee in an amount equal to the lesser of (i) the fair
market value of the stock on the date of exercise minus the exercise price or
(ii) the amount realized on disposition minus the exercise price. If the amount
realized in a disqualifying disposition exceeds the fair market value of the
stock on the date of exercise, the gain realized in excess of the amount taxed
as ordinary income as indicated above will be taxed as capital gain. A
disqualifying disposition as a result of a gift will result in ordinary income
to the optionee in an amount equal to the difference between the exercise price
and the fair market value of the stock on the date of exercise. Any loss
realized upon a disqualifying disposition will be treated as a capital loss.
Capital gains and losses resulting from disqualifying dispositions will be
treated as long-term or short-term depending upon whether the shares were held
for more or less than the applicable statutory holding period (which currently
is more than one year for long-term capital gains). The Company will be entitled
to a tax deduction in an amount equal to the ordinary income recognized by the
optionee as a result of a disposition of the shares received upon exercise of an
incentive option.
The exercise of an incentive option may result in items of "tax preference"
for purposes of the "alternative minimum tax." Alternative minimum tax is
imposed on an individual's income only if the amount of the alternative minimum
tax exceeds the individual's regular tax for the year. For purposes of computing
alternative minimum tax, the excess of the fair market value on the date of
exercise of the shares received on exercise of an incentive option over the
exercise price paid is included in alternative minimum taxable income in the
year the option is exercised. An optionee who is subject to alternative minimum
tax in the year of exercise of an incentive option may claim as a credit against
the optionee's regular tax liability in future years the amount of alternative
minimum tax paid which is attributable to the exercise of the incentive option.
This credit is available in the first year following the year of exercise in
which the optionee has regular tax liability.
NONQUALIFIED OPTIONS. No taxable income is recognized by an optionee upon
the grant of a nonqualified option. Upon exercise, however, the optionee will
recognize ordinary income in the amount by which the fair market value of the
shares purchased, on the date of exercise, exceeds the exercise price paid for
such shares. The income recognized by the optionee who is an employee will be
subject to income tax withholding by the Company out of the optionee's current
compensation. If such compensation is insufficient to pay the taxes due, the
optionee will be required to make a direct payment to the Company for the
balance of the tax withholding obligation. The Company will be entitled to a tax
deduction equal to the amount of ordinary income recognized by the optionee,
provided that certain reporting requirements are satisfied. If the exercise
price of a nonqualified option is paid by the optionee in cash, the tax basis of
the shares acquired will be equal to the cash paid plus the amount of income
recognized by the optionee as a result of such exercise. If the exercise price
is paid by delivering shares of common stock of the Company already owned by the
optionee or by a combination of cash and already-owned shares, there will be no
current taxable gain or loss recognized by the optionee on the already-owned
shares exchanged (however, the optionee will nevertheless recognize ordinary
income to the extent that the fair market value of the shares purchased on the
date of exercise exceeds the price paid, as described above). The new shares
received by the optionee, up to the number of the old shares exchanged, will
have the same tax basis and holding period as the optionee's basis and holding
period in the old shares. The balance of the new shares received will have a tax
basis equal to any cash paid by the optionee plus the amount of income
recognized by the optionee as a result of such exercise, and will have a holding
period commencing with the date of exercise. Upon the sale or disposition of
shares acquired pursuant to the exercise of a nonqualified option, the
difference between the proceeds realized and the optionee's basis in the shares
will be a capital gain or loss and will be treated as long-term capital gain or
loss if the shares have been held for more than the applicable statutory holding
period (which is currently more than one year for long-term capital gains).
RESTRICTED STOCK. If no Section 83(b) election is made and repurchase
rights are retained by the Company, a taxable event will occur on each date the
participant's ownership rights vest (e.g., when the Company's repurchase rights
expire) as to the number of shares that vest on that date, and the holding
period for capital gain purposes will not commence until the date the shares
vest. The participant will recognize ordinary income on each date shares vest in
an amount equal to the excess of the fair market value of such shares on that
date over the amount paid for such shares. Any income recognized by a
participant who is an employee will be subject to income tax withholding by the
Company out of the optionee's current compensation. If such compensation is
insufficient to cover the amount to be withheld, the participant will be
required to make a direct payment to the Company for the balance of the tax
withholding obligation. The Company is entitled to a tax deduction in an amount
equal to the ordinary
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income recognized by the participant. The participant's basis in the shares will
be equal to the purchase price, if any, increased by the amount of ordinary
income recognized.
If a Section 83(b) election is made within 30 days after the date of
transfer, or if no repurchase rights are retained by the Company, then the
participant will recognize ordinary income on the date of purchase in an amount
equal to the excess of the fair market value of such shares on the date of
purchase over the purchase price paid for such shares.
TAX WITHHOLDING
Under the 2000 Plan, the Company has the power to withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy Federal,
state and local withholding tax requirements with respect to any options
exercised or restricted stock granted under the 2000 Plan. To the extent
permissible under applicable tax, securities, and other laws, the Committee may,
in its sole discretion, permit a participant to satisfy an obligation to pay any
tax to any governmental entity in respect of any option or restricted stock up
to an amount determined on the basis of the highest marginal tax rate applicable
to such participant, in whole or in part, by (i) directing the Company to apply
shares of common stock to which the participant is entitled as a result of the
exercise of an option or as a result of the lapse of restrictions on restricted
stock, or (ii) delivering to the Company shares of common stock owned by the
participant.
VOTE REQUIRED FOR APPROVAL AND RECOMMENDATION OF THE BOARD
Approval of this Proposal Two to adopt the 2000 Plan requires the
affirmative vote of the holders of a majority of the shares of Common stock of
the Company present or represented by proxy and entitled to vote at the Annual
Meeting (voting together as a single class). Proxies solicited by management for
which no specific direction is included will be voted "FOR" the adoption of the
2000 Plan. THE BOARD DEEMS PROPOSAL TWO TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE
ADOPTION OF THE 2000 PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Moen and Company, Chartered
Accountants, to act as independent auditors and to audit the financial
statements of the Company for the fiscal year ending June 30, 2001, and
recommends that stockholders vote for ratification of such appointment. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
Moen and Company, Chartered Accountants, has audited the Company's
financial statements annually since its fiscal year ended June 30, 1998. Its
representatives are expected to be present at the meeting with the opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the Company's
2001 Annual Meeting of Stockholders and presentation in the Company's Proxy
Statement with respect to such meeting should arrange for such proposal to be
delivered to the Company at its principal place of business no later than July
3, 2001 in order to be considered for inclusion in the Company's proxy statement
relating to that meeting. Matters pertaining to such proposals, including the
number and length thereof, eligibility of persons entitled to have such
proposals included and other aspects are regulated by the Securities Exchange
Act of 1934, Rules and Regulations of the Securities and Exchange Commission and
other laws and regulations to which interested persons should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an amendment
to Rule 14a-4, as promulgated under the Securities and Exchange Act of 1934, as
amended. The amendment to Rule 14a-4(c)(1)
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governs the Company's use of its discretionary proxy voting authority with
respect to a stockholder proposal which is not addressed in the Company's proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the current year's anniversary of
the date of mailing of the prior year's proxy statement, then the Company will
be allowed to use its discretionary voting authority when the proposal is raised
at the meeting, without any discussion of the matter in the proxy statement.
OTHER MATTERS
Management is not aware of any other matters to come before the meeting. If
any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
October 23, 2000 /s/ Chad D. Lee
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
The Annual Report to Stockholders of the Company for the fiscal year
ended June 30, 2000 is being mailed concurrently with this Proxy Statement to
all stockholders of record as of October 20, 2000. The Annual Report is not to
be regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
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EXHIBIT A
AUDIT COMMITTEE CHARTER
<PAGE>
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
ONLINE INNOVATION, INC.
I. AUDIT COMMITTEE PURPOSE
The Audit Committee (the "Committee") of Online Innovation, Inc. (the
"Company") is appointed by the Board of Directors to assist the Board in
fulfilling its oversight responsibilities. The Committee's primary duties and
responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance and accounting.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
The Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Committee has the ability to
retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Committee shall be comprised of two (2) or more directors as determined
by the Board. Committee members shall be appointed by the Board. The Committee
members at present are Marlene C. Schluter and Harvey H. Cohen. If a Committee
Chair is not designated or present, the members of the Committee may designate a
Chair by majority vote of the Committee membership.
The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. The Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Committee should meet privately in
executive session at least annually with management, the director of the
internal auditing department, the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe should be
discussed. In addition, the Committee, or at least its Chair, should communicate
with management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors limited
review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
A. REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the document
published as may be required by SEC regulations.
<PAGE>
2. Review the Company's annual audited financial statements prior to
filing or distribution. This review should include a discussion with management
and independent auditors of significant issues regarding accounting principles,
practices, and judgments.
3. In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control, and report such exposures.
Review significant findings prepared by the independent auditors and the
internal auditing department together with management's responses.
4. Review with financial management and the independent auditors, the
Company's quarterly financial results prior to the release of earnings and/or
the Company's quarterly financial statements prior to filing or distribution.
5. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent auditors
in accordance with SAS 61.
The Chair of the Committee may represent the entire Audit Committee for purposes
of this review.
B. INDEPENDENT AUDITORS.
The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. As a result, it shall be the responsibility of the
Committee to:
1. Review the independence and performance of the auditors and
annually recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances warrant.
2. Approve the fees and other significant compensation to be paid to
the independent auditors.
3. On an annual basis, review and discuss with the independent
auditors all significant relationships they have with the Company that could
impair the auditors' independence, as per Independence Standards Board Standard
No.1.
4. Review the independent auditors audit plan and discuss with the
independent auditors such matters as the scope of and general approach to be
taken with respect to the audit, the staffing requirements for the audit, the
locations where the audit will be conducted, and the role of the internal
auditors and the extent to which the auditors will rely on management in
connection with the annual audit.
5. Discuss the results of the audit with the independent auditors,
prior to releasing the year-end earnings.
6. Discuss with the auditors the matters required to be communicated
to audit committees in accordance with AICPA SAS 61.
7. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
<PAGE>
C. INTERNAL AUDIT DEPARTMENT AND LEGAL COMPLIANCE
1. Review the budget, plan, changes in plan, activities,
organizational structure, and qualifications of the internal audit department,
as needed.
2. Review the appointment, performance, and replacement of the senior
internal audit executive.
3. Review significant reports prepared by the internal audit
department together with management's response and follow-up to these reports.
4. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental agencies.
D. OTHER AUDIT COMMITTEE RESPONSIBILITIES
1. If required by the Securities and Exchange Commission, annually
prepare a report to shareholders for inclusion in the Company's annual proxy
statement.
2. Perform any other activities consistent with this Charter, the
Company's Bylaws, and governing law, as the Committee or the Board deems
necessary or appropriate.
3. Maintain minutes of Committee meetings and periodically report to
the Board of Directors on significant results of the foregoing activities.
<PAGE>
EXHIBIT B
2000 STOCK INCENTIVE PLAN
<PAGE>
ONLINE INNOVATION, INC.
2000 STOCK INCENTIVE PLAN
This 2000 STOCK INCENTIVE PLAN (the "2000 Plan") is hereby established
by Online Innovation, Inc., a Delaware Company (the "Company"), and adopted by
its Board of Directors as of October 20, 2000 (the "Effective Date").
ARTICLE 1
PURPOSES OF THE 2000 PLAN
1.1 PURPOSES. The purposes of the 2000 Plan are (a) to enhance the
Company's ability to attract and retain the services of qualified employees,
officers and directors (including non-employee officers and directors), and
consultants and other service providers upon whose judgment, initiative and
efforts the successful conduct and development of the Company's business largely
depends, and (b) to provide additional incentives to such persons or entities to
devote their utmost effort and skill to the advancement and betterment of the
Company, by providing them an opportunity to participate in the ownership of the
Company and thereby have an interest in the success and increased value of the
Company.
ARTICLE 2
DEFINITIONS
For purposes of this 2000 Plan, the following terms shall have the
meanings indicated:
2.1 AFFILIATED COMPANY. "Affiliated Company" means any "parent
Company" or "subsidiary Company" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.
2.2 BOARD. "Board" means the Board of Directors of the Company.
2.3 CAUSE. "Cause" means, with respect to a Participant's
Continuous Service, the termination by the Company of such Continuous Service
for any of the following reasons:
(a) The continued, unreasonable refusal or omission by the
Participant to perform any material duties required of him or her by the Company
if such duties are consistent with duties customary for the position held with
the Company;
(b) Any material act or omission by the Participant involving
malfeasance or gross negligence in the performance of Participant's duties to,
or material deviation from any of the policies or directives of, the Company;
(c) Conduct on the part of Participant which constitutes the
breach of any statutory or common law duty of loyalty to the Company; or
(d) Any illegal act by Participant which materially and
adversely affects the business of the Company or any felony committed by
Participant, as evidenced by conviction thereof, provided that the Company may
suspend Participant with pay while any allegation of such illegal or felonious
act is investigated.
<PAGE>
2.4 CHANGE IN CONTROL. "Change in Control" shall mean (i) the
acquisition, directly or indirectly, after the Effective Date, by any person or
group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended) of the beneficial ownership of securities of the Company
possessing more than fifty percent (50%) of the total combined voting power of
all outstanding securities of the Company; (ii) a merger or consolidation in
which the Company is not the surviving entity, and in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to or acquired by a person
or persons different from the persons holding those securities immediately prior
to such merger; (iii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company; (iv) a complete liquidation or
dissolution of the Company; or (v) any reverse merger in which the Company is
the surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to or acquired by a person or persons different from the persons
holding those securities immediately prior to such merger.
2.5 CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.6 COMMITTEE. "Committee" means a committee of two or more
members of the Board appointed to administer the 2000 Plan, as set forth in
SECTION 7.1 hereof.
2.7 COMMON STOCK. "Common Stock" means the Common Stock, $.001
par value, of the Company, subject to adjustment pursuant to SECTION 4.2 hereof.
2.8 CONTINUOUS SERVICE. "Continuous Service" means (i) employment
by either the Company or any parent or subsidiary Company of the Company, or by
a Company or a parent or subsidiary of a Company issuing or assuming a stock
option in a transaction to which Section 424(a) of the Code applies, which is
uninterrupted except for vacations, illness (except for permanent disability, as
defined in Section 22(e)(3) of the Code), or leaves of absence which are
approved in writing by the Company or any of such other employer Companys, if
applicable, (ii) service as a member of the Board of Directors of the Company
until Participant resigns, is removed from office, or Participant's term of
office expires and he or she is not reelected, or (iii) so long as Participant
is engaged as a consultant or service provider to the Company or other Company
referred to in clause (i) above.
2.9 DISABILITY. "Disability" means permanent and total disability
as defined in Section 22(e)(3) of the Code. The Board's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.10 EFFECTIVE DATE. "Effective Date" means the date on which the
2000 Plan is adopted by the Board, as set forth on the first page hereof.
2.11 EXERCISE PRICE. "Exercise Price" means the purchase price per
share of Common Stock payable upon exercise of an Option.
2.12 FAIR MARKET VALUE. "Fair Market Value" on any given date
means the value of one share of Common Stock, determined as follows:
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<PAGE>
(a) If the Common Stock is then listed or admitted to trading
on a NASDAQ market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the closing sale price on the date of valuation
on such NASDAQ market system or principal stock exchange on which the Common
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted on such day, then the Fair Market Value shall be the closing sale price
of the Common Stock on such NASDAQ market system or such exchange on the next
preceding day for which a closing sale price is reported.
(b) If the Common Stock is not then listed or admitted to
trading on a NASDAQ market system or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market on the date of
valuation.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Board in good
faith using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested parties.
2.13 GOOD REASON. "Good Reason" means with respect to a
Participant's voluntary termination of Continuous Service if such termination is
the result of any of the following:
(a) A reduction in the amount of his base compensation
pay in effect at the time of a Change in Control;
(b) The taking of any action by the Company that would
substantially diminish the aggregate value of the benefits provided the
Participant under the Participant's medical, health, accident, disability
insurance, life insurance, thrift and retirement plans in which he was
participating on the date of a Change in Control, other than any such reduction
which is (i) required by law, (ii) implemented in connection with a general
concessionary arrangement affecting all employees or affecting the group of
employees (of which the Participant is a member) or (iii) generally applicable
to all beneficiaries of such 2000 Plans;
(c) A reduction in duties and responsibilities which results
in the Participant no longer having duties customary for the position held with
the Company at the time of a Change in Control; or
(d) The Company materially breaches any provision of the
Participant's Stock Option Agreement or Stock Purchase Agreement.
2.14 INCENTIVE OPTION. "Incentive Option" means any Option
designated and qualified as an "incentive stock option" as defined in Section
422 of the Code.
2.15 INCENTIVE OPTION AGREEMENT. "Incentive Option Agreement" means
an Option Agreement with respect to an Incentive Option.
2.16 NASD DEALER. "NASD Dealer" means a broker-dealer that is a
member of the National Association of Securities Dealers, Inc.
2.17 NONQUALIFIED OPTION. "Nonqualified Option" means any Option
that is not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the
3
<PAGE>
limitations applicable to a 10% Stockholder or because it exceeds the annual
limit provided for in SECTION 5.6 below, it shall to that extent constitute a
Nonqualified Option.
2.18 NONQUALIFIED OPTION AGREEMENT. "Nonqualified Option Agreement"
means an Option Agreement with respect to a Nonqualified Option.
2.19 OFFEREE. "Offeree" means a Participant to whom a Right to
Purchase has been offered or who has acquired Restricted Stock under the 2000
Plan.
2.20 OPTION. "Option" means any option to purchase Common Stock
granted pursuant to the 2000 Plan.
2.21 OPTION AGREEMENT. "Option Agreement" means the written
agreement entered into between the Company and the Optionee with respect to an
Option granted under the 2000 Plan.
2.22 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.23 PARTICIPANT. "Participant" means an individual or entity who
holds an Option, a Right to Purchase or Restricted Stock under the 2000 Plan.
2.24 PURCHASE PRICE. "Purchase Price" means the purchase price per
share of Restricted Stock payable upon acceptance of a Right to Purchase.
2.25 RESTRICTED STOCK. "Restricted Stock" means shares of Common
Stock issued pursuant to ARTICLE 6 hereof, subject to any restrictions and
conditions as are established pursuant to such ARTICLE 6.
2.26 RIGHT TO PURCHASE. "Right to Purchase" means a right to
purchase Restricted Stock granted to an Offeree pursuant to ARTICLE 6 hereof.
2.27 SERVICE PROVIDER. "Service Provider" means a consultant or
other person or entity who provides services to the Company or an Affiliated
Company and who the Board authorizes to become a Participant in the 2000 Plan.
2.28 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with respect
to a Right to Purchase offered under the 2000 Plan.
2.29 10% STOCKHOLDER. "10% Stockholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of an
Affiliated Company.
ARTICLE 3
ELIGIBILITY
3.1 INCENTIVE OPTIONS. Officers and other key employees of the Company
or of an Affiliated Company (including members of the Board if they are
employees of the Company or of an Affiliated Company) are eligible to receive
Incentive Options under the 2000 Plan.
4
<PAGE>
3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE. Officers and other key
employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the Company or an Affiliated Company), and Service
Providers are eligible to receive Nonqualified Options or Rights to Purchase
under the 2000 Plan.
ARTICLE 4
PLAN SHARES
4.1 SHARES SUBJECT TO THE 2000 PLAN. A total of 1,500,000 shares of
Common Stock may be issued under the 2000 Plan, subject to adjustment as to the
number and kind of shares pursuant to SECTION 4.2 hereof. For purposes of this
limitation, in the event that (a) all or any portion of any Option or Right to
Purchase granted or offered under the 2000 Plan can no longer under any
circumstances be exercised, or (b) any shares of Common Stock are reacquired by
the Company pursuant to an Incentive Option Agreement, Nonqualified Option
Agreement or Stock Purchase Agreement, the shares of Common Stock allocable to
the unexercised portion of such Option or such Right to Purchase, or the shares
so reacquired, shall again be available for grant or issuance under the 2000
Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Board to the
aggregate number and kind of shares subject to this 2000 Plan, and the number
and kind of shares and the price per share subject to outstanding Option
Agreements, Rights to Purchase and Stock Purchase Agreements in order to
preserve, as nearly as practical, but not to increase, the benefits to
Participants.
ARTICLE 5
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this 2000 Plan
shall be evidenced by an Option Agreement which shall specify the number of
shares subject thereto, the vesting provisions relating to such Option, the
Exercise Price per share, and whether the Option is an Incentive Option or
Nonqualified Option. As soon as is practical following the grant of an Option,
an Option Agreement shall be duly executed and delivered by or on behalf of the
Company to the Optionee to whom such Option was granted. Each Option Agreement
shall be in such form and contain such additional terms and conditions, not
inconsistent with the provisions of this 2000 Plan, as the Board shall, from
time to time, deem desirable, including, without limitation, the imposition of
any rights of first refusal and resale obligations upon any shares of Common
Stock acquired pursuant to an Option Agreement. Each Option Agreement may be
different from each other Option Agreement.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock
covered by each Option shall be determined by the Board, provided that the
Exercise Price of an Incentive Option shall not be less than 100% of Fair
Market Value on the date the Incentive Option is granted. If at any time the
Company retains employees in California, then the Exercise Price is subject
to the following: (b) the Exercise Price of a Nonqualified Option shall not
be less than 85% of Fair Market Value on the date the Nonqualified Option is
granted, and (c) if the person to whom an Option is
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<PAGE>
granted is a 10% Stockholder on the date of grant, the Exercise Price shall
not be less than 110% of Fair Market Value on the date the Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the Board,
subject to any legal restrictions, by: (a) cash; (b) check; (c) the surrender of
shares of Common Stock owned by the Optionee that have been held by the Optionee
for at least six (6) months, which surrendered shares shall be valued at Fair
Market Value as of the date of such exercise; (d) the Optionee's promissory note
in a form and on terms acceptable to the Board; (e) the cancellation of
indebtedness of the Company to the Optionee; (f) the waiver of compensation due
or accrued to the Optionee for services rendered; (g) provided that a public
market for the Common Stock exists, a "same day sale" commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the shares so purchased to pay for the
Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the Exercise Price directly to the Company; (h) provided
that a public market for the Common Stock exists, a "margin" commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to pledge the shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the Exercise Price directly to the Company; or (i) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS. The term and provisions for
termination of each Option shall be as fixed by the Board, but no Option may be
exercisable more than ten (10) years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and become
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Board. In the
event that the Company shall retain employees in California, then the Option
shall vest at a rate of at least twenty percent (20%) per year over a five (5)
year period.
5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock shall
not, with respect to which Incentive Options granted under this 2000 Plan and
any other plan of the Company or any Affiliated Company become exercisable for
the first time by an Optionee during any calendar year, exceed $100,000.
5.7 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of descent and distribution, and during
the life of the Optionee shall be exercisable only by such Optionee.
5.8 RIGHTS AS STOCKHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a Stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
5.9 COMPANY'S REPURCHASE RIGHT. In the event of termination of a
Participant's Continuous Service, for any reason whatsoever (including death or
disability), the Option Agreement
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<PAGE>
may provide, in the discretion of the Board, that the Company, or its
assignee, shall have the right, exercisable at the discretion of the Board,
to repurchase shares of Common Stock acquired pursuant to the exercise of an
Option at any time prior to the consummation of the Company's initial public
offering of securities in an offering registered under the Securities Act of
1933, as amended, and at the price equal to the Fair Market Value per share
of Common Stock (determined in accordance with SECTION 2.12 hereof) as of the
date of termination of Optionee's employment. The repurchase right provided
in this SECTION 5.9 shall terminate and be of no further force or effect
following the consummation of an underwritten public offering of the
Company's Common Stock.
In any event, the right to repurchase must be exercised within sixty
(60) days of the termination of Participant's Continuous Service and may be paid
by the Company, or its assignee, by cash, check, or cancellation of purchase
money indebtedness within thirty (30) days of the termination of the exercise
window. If at any time the Company retains employees in California, then the
right to repurchase must be exercised within ninety (90) days.
5.10 RESTRICTIONS ON UNDERLYING SHARES OF COMMON STOCK. Shares of
Common Stock issued pursuant to the exercise of an Option may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Option Agreement.
ARTICLE 6
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE. A Right to Purchase granted to an
Offeree entitles the Offeree to purchase, for a Purchase Price determined by the
Board, shares of Common Stock subject to such terms, restrictions and conditions
as the Board may determine at the time of grant ("Restricted Stock"). Such
conditions may include, but are not limited to, continued employment or the
achievement of specified performance goals or objectives.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights
with respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or such
longer or shorter period as the Board may specify) following the grant of the
Right to Purchase by making payment of the full Purchase Price to the Company in
the manner set forth in SECTION 6.3 hereof and by executing and delivering to
the Company a Stock Purchase Agreement. Each Stock Purchase Agreement shall be
in such form, and shall set forth the Purchase Price and such other terms,
conditions and restrictions of the Restricted Stock, not inconsistent with the
provisions of this 2000 Plan, as the Board shall, from time to time, deem
desirable. Each Stock Purchase Agreement may be different from each other Stock
Purchase Agreement.
6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions,
payment of the Purchase Price upon acceptance of a Right to Purchase Restricted
Stock may be made, in the discretion of the Board, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Offeree that have been held
by the Offeree for at least six (6) months, which surrendered shares shall be
valued at Fair Market Value as of the date of such exercise; (d) the Offeree's
promissory note in a form and on terms acceptable to the Board; (e) the
cancellation of indebtedness of the Company to the Offeree; (f) the waiver of
compensation due or accrued to the Offeree for services rendered; or (g) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
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6.4 RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of
SECTION 6.2 hereof, an Offeree shall have the rights of a Stockholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Stock Purchase Agreement. Unless the Board
shall determine otherwise, certificates evidencing shares of Restricted Stock
shall remain in the possession of the Company until such shares have vested in
accordance with the terms of the Stock Purchase Agreement.
6.5 RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Stock Purchase Agreement. In the event of
termination of a Participant's employment, service as a director of the Company
or Service Provider status for any reason whatsoever (including death or
disability), the Stock Purchase Agreement may provide, in the discretion of the
Board, that the Company shall have the right, exercisable at the discretion of
the Board, to repurchase (i) at the original Purchase Price, any shares of
Restricted Stock which have not vested as of the date of termination, and (ii)
at Fair Market Value, any shares of Restricted Stock which have vested as of
such date, on such terms as may be provided in the Stock Purchase Agreement. The
repurchase right provided in this SECTION 6.5 shall terminate and be of no
further force or effect following the consummation of an underwritten public
offering of the Company's Common Stock.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify the date or dates, the performance goals or objectives which must be
achieved, and any other conditions on which the Restricted Stock may vest.
6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Board, to repayment of such note.
6.8 NONASSIGNABILITY OF RIGHTS. No Right to Purchase shall be
assignable or transferable except by will or the laws of descent and
distribution or as otherwise provided by the Board.
6.9 RESTRICTIONS ON SHARES OF COMMON STOCK. Shares of Common Stock
issued pursuant to a Stock Purchase Agreement may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Stock Purchase Agreement.
ARTICLE 7
ADMINISTRATION OF THE 2000 PLAN
7.1 BOARD. Authority to control and manage the operation and
administration of the 2000 Plan shall be vested in the Board, which may delegate
such responsibilities in whole or in part to a committee consisting of two (2)
or more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
7.2 POWERS OF THE BOARD. In addition to any other powers or authority
conferred upon the Board elsewhere in the 2000 Plan or by law, the Board shall
have full power and authority: (a) to determine the persons to whom, and the
time or times at which, Incentive Options or Nonqualified Options shall be
granted and Rights to Purchase shall be offered, the number of shares to be
represented by each Option and Right to Purchase and the consideration to be
received by the Company upon the exercise thereof; (b) to interpret the 2000
Plan; (c) to create, amend or rescind
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rules and regulations relating to the 2000 Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Option Agreements
and Stock Purchase Agreements; (e) to determine the identity or capacity of
any persons who may be entitled to exercise a Participant's rights under any
Option or Right to Purchase under the 2000 Plan; (f) to correct any defect or
supply any omission or reconcile any inconsistency in the 2000 Plan or in any
Option Agreement or Stock Purchase Agreement; (g) to accelerate the vesting
of any Option or release or waive any repurchase rights of the Company with
respect to Restricted Stock; (h) to extend the exercise date of any Option or
acceptance date of any Right to Purchase; (i) to provide for rights of first
refusal and/or repurchase rights; (j) to amend outstanding Option Agreements
and Stock Purchase Agreements to provide for, among other things, any change
or modification which the Board could have provided for upon the grant of an
Option or Right to Purchase or in furtherance of the powers provided for
herein; and (k) to make all other determinations necessary or advisable for
the administration of the 2000 Plan, but only to the extent not contrary to
the express provisions of the 2000 Plan. Any action, decision, interpretation
or determination made in good faith by the Board in the exercise of its
authority conferred upon it under the 2000 Plan shall be final and binding on
the Company and all Participants.
7.3 LIMITATION ON LIABILITY. No employee of the Company or member of
the Board or Committee shall be subject to any liability with respect to duties
under the 2000 Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the 2000 Plan, who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the 2000 Plan.
ARTICLE 8
CHANGE IN CONTROL
8.1 CHANGE IN CONTROL. In order to preserve a Participant's rights in
the event of a Change in Control of the Company, (i) the time period relating to
the exercise or realization of all outstanding Options, Rights to Purchase and
Restricted Stock shall automatically accelerate immediately prior to the
consummation of such Change in Control if the Board does not take the action
described in subitem (C) of this SECTION 8.1, and if such action is taken, such
automatic acceleration shall then occur only if within twelve (12) months of the
consummation of a Change in Control a Participant's Continuous Service is
terminated without Cause or pursuant to the Participant's voluntary termination
for Good Reason, and (ii) with respect to Options and Rights to Purchase, in
connection with such Change in Control the Board in its discretion may, at any
time an Option or Right to Purchase is granted, or at any time thereafter, take
one or more of the following actions: (A) provide for the purchase or exchange
of each Option or Right to Purchase for an amount of cash or other property
having a value equal to the difference, or spread, between (x) the value of the
cash or other property that the Participant would have received pursuant to such
Change in Control transaction in exchange for the shares issuable upon exercise
of the Option or Right to Purchase had the Option or Right to Purchase been
exercised immediately prior to such Change in Control transaction and (y) the
Exercise Price of such Option or the Purchase Price under such Right to
Purchase, (B) adjust the terms of the Options and Rights to Purchase in a manner
determined by the Board to reflect the Change in Control, (C) cause the Options
and Rights to Purchase to be assumed, or new rights substituted therefor, by
another entity, through the continuance of the 2000 Plan and the assumption of
outstanding Options and Rights to Purchase, or the substitution for such Options
and Rights to Purchase of new options and new rights to purchase of comparable
value covering shares of a successor Company, with appropriate adjustments as to
the number and kind of
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shares and Exercise Prices, in which event the 2000 Plan and such Options and
Rights to Purchase, or the new options and rights to purchase substituted
therefor, shall continue in the manner and under the terms so provided, or
(D) make such other provision as the Board may consider equitable. If the
Board does not take any of the forgoing actions, all Options and Rights to
Purchase shall terminate upon the consummation of the Change in Control and
the Board shall cause written notice of the proposed transaction to be given
to all Participants not less than fifteen (15) days prior to the anticipated
effective date of the proposed transaction.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE 2000 PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend
or terminate the 2000 Plan in such respects as the Board may deem advisable. No
such alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the 2000 Plan to comply with
requirements under the Code relating to Incentive Options or other types of
options which give Optionees more favorable tax treatment than that applicable
to Options granted under this 2000 Plan as of the date of its adoption. Upon any
such alteration or amendment, any outstanding Option granted hereunder may, if
the Board so determines and if permitted by applicable law, be subject to the
more favorable tax treatment afforded to an Optionee pursuant to such terms and
conditions.
9.2 2000 PLAN TERMINATION. Unless the 2000 Plan shall theretofore have
been terminated, the 2000 Plan shall terminate on the tenth (10th) anniversary
of the Effective Date (or from the date the Company's Stockholders approved the
2000 Plan, if earlier) and no Options or Rights to Purchase may be granted under
the 2000 Plan thereafter, but Option Agreements, Stock Purchase Agreements and
Rights to Purchase then outstanding shall continue in effect in accordance with
their respective terms.
ARTICLE 10
TAX WITHHOLDING
10.1 WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the 2000 Plan.
To the extent permissible under applicable tax, securities and other laws, the
Board may, in its sole discretion and upon such terms and conditions as it may
deem appropriate, permit a Participant to satisfy his or her obligation to pay
any such tax, in whole or in part, up to an amount determined on the basis of
the highest marginal tax rate applicable to such Participant, by (a) directing
the Company to apply shares of Common Stock to which the Participant is entitled
as a result of the exercise of an Option or as a result of the purchase of or
lapse of restrictions on Restricted Stock or (b) delivering to the Company
shares of Common Stock owned by the Participant. The shares of Common Stock so
applied or delivered in satisfaction of the Participant's tax withholding
obligation shall be valued at their Fair Market Value as of the date of
measurement of the amount of income subject to withholding.
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ARTICLE 11
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the 2000 Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other
disposition shall be without effect.
11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This 2000 Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the 2000 Plan shall be deemed to give the
right to any Participant to be retained as an employee of the Company or any
Affiliated Company or to interfere with the right of the Company or any
Affiliated Company to discharge any Participant at any time.
11.3 APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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PROXY ONLINE INNOVATION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS--DECEMBER 4, 2000
The undersigned hereby nominates, constitutes and appoints Chad D. Lee and
Marlene C. Schluter, and each of them individually, the attorney, agent and
proxy of the undersigned, with full power of substitution, to vote all stock of
ONLINE INNOVATION, INC. which the undersigned is entitled to represent and vote
at the 2000 Annual Meeting of Stockholders of the Company to be held at the law
offices of Stradling, Yocca, Carlson & Rauth, located at 660 Newport Center
Drive, Suite 1600, Newport Beach, California 92660-6422 on December 4, 2000, at
10:00 a.m., and at any and all adjournments or postponements thereof, as fully
as if the undersigned were present and voting at the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, AND 3.
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<C> <S> <C> <C> <C>
1. ELECTION OF DIRECTORS
/ / FOR / / WITHHOLD AUTHORITY
all nominees listed below (EXCEPT to vote for all nominees listed below
AS MARKED TO THE CONTRARY BELOW)
Election of the following nominees as directors: Chad D. Lee, Marlene C. Schluter, and
Harvey H. Cohen.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, PRINT THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.)
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</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
2. RATIFICATION OF 2000 INCENTIVE STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF MOEN AND COMPANY CHARTERED ACCOUNTANTS AS INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
</TABLE>
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IMPORTANT--PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY AND "FOR"
RATIFICATION OF MOEN AND COMPANY CHARTERED ACCOUNTANTS AS INDEPENDENT AUDITORS.
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<S> <C>
Date -------------------, 2000
--------------------------------
(Signature of stockholder)
Please sign your name exactly as
it appears hereon. Executors,
administrators, guardians,
officers of corporations and
others signing in a fiduciary
capacity should state their full
titles as such.
</TABLE>
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN
AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
