<PAGE>
SB-2
Form SB-2
As filed with the Securities and Exchange Commission on February 14, 1997
Registration No. 333-3544
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ON-SITE SOURCING, INC.
(Name of small business issuer in its charter)
Delaware 8744 54-1648470
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
On-Site Sourcing, Inc. On-Site Sourcing, Inc.
1111 North 19th Street 1111 North 19th Street
6th Floor 6th Floor
Arlington, VA 22209 Arlington, VA 22209
703-276-1123
(Address and Telephone Number of (Address of Principal Place of Business or
Principal Executive Offices) Intended Principal Place of Business)
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Mr. Christopher J. Weiler, President
On-Site Sourcing, Inc.
1111 19th Street, 6th Floor
Arlington, VA 22209
703-276-1123
(Name, address and telephone number of agent for service)
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With copies of communication to:
John S. Stoppelman, Esq.
The Stoppelman Law Firm, P.C.
1749 Old Meadow Road, Suite 610
McLean, Virginia 22102
703-827-7450
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Approximate date of the proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective
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If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: |X|
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CALCULATION OF REGISTRATION FEE
(For calculation of the $6,352.23 registration fee, see table on following page)
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of each class of Amount to offering price per aggregate offering Amount of
securities to be registered be registered Unit or Share (1) price registration fee
<S> <C> <C> <C> <C>
Units, each consisting of two shares of Common
Stock, $0.01 par value per share, and one
Redeemable Common Stock Purchase
Warrant ................................... 1,104,000(2) $6.25 $ 6,900,000 $ 2,379.31
Common Stock included in the Units ........... 2,208,000 -- -- --
Warrants included in the Units ............... 1,104,000 -- -- --
Common Stock issuable upon exercise of the
Warrants .................................. 1,104,000 $6.00 $ 6,624,000 $ 2,284.14
Underwriter's Option to Purchase Units ....... 96,000 $ .00 $ 96.00 (3)
Underwriter's Units issuable upon exercise of
the Underwriter's Option .................. 96,000 $0.001 $ 960,000 $ 331.03
Common Stock included in Underwriter's Units . 192,000 -- -- --
Warrants included in the Underwriter's Units . 96,000 -- -- --
Common Stock issuable upon exercise of the
Underwriter's Warrants .................... 96,000 $9.60 $ 921,600 $ 317.79
Units offered by Selling Securityholders, each
consisting of two shares of Common Stock,
$0.01 par value per share, and one
Redeemable Common Stock Purchase
Warrant (4) ............................... 109,123 $6.25 $ 682,018.75 $ 235.18
Common Stock included in the Units (5) ....... 218,246 -- -- --
Warrants included in the Units (6) ........... 109,123 -- -- --
Common Stock issuable upon exercise of the
Warrants .................................. 109,123 $6.00 $ 654,738.00 $ 225.77
Common Stock issued in Bridge Financing (7) .. 559,709 $3.00 $ 1,679,127.00 $ 579.01
Total ........................................ $18,421,579.75
TOTAL REGISTRATION FEE ....................... $ 6,352.23
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 144,000 Units which the Underwriter has the option to purchase from
the Company to cover over-allotments, if any.
(3) None pursuant to Rule 457(g).
(4) Shares registered by certain selling securityholders for sale in the initial
public offering as Units when combined with Warrants offered by the Company. See
"Selling Securityholders"
(5) To be sold by Selling Securityholders.
(6) To be sold by the Company.
(7) Registered by certain selling securityholders. See "Selling Securityholders"
and "Shares Eligible for Future Sale".
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On-Site Sourcing, Inc. (the "Registrant") hereby amends this Post
Effective Amendment No. 1 on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Post Effective Amendment No. 1 shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until the Post Effective Amendment No. 1 shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
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On July 9, 1996, Registrant's Registration Statement on Form SB-2 was
declared effective by the Securities and Exchange Commission. Pursuant to such
Registration Statement, 960,000 Units (each Unit comprised of two shares of
Common Stock and one Warrant) were publicly offered and sold by Registrant. In
addition, the Selling Securityholders referred to in this Registration Statement
sold 109,123 Units and retain 559,709 shares of Common Stock which were included
in the original filing to be sold by certain Selling Securityholders. In August
1996 M.H. Meyerson & Co., Inc. exercised the Overallotment Option to the extent
of 140,200 Units.
4
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ON-SITE SOURCING, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
Form SB-2 Registration
Statement Item and Heading Location in Prospectus
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1. Front of Registration Statement and
Outside Front Cover of Prospectus.......... Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus........................ Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk Factors....... Prospectus Summary; Risk
Factors
4. Use of Proceeds............................ *
5. Determination of Offering Price............ *
6. Dilution................................... *
7. Selling Security Holders................... Selling Securityholders and
Plan of Distribution
8. Plan of Distribution....................... Cover; Selling Securityholders
and Plan of Distribution
9. Legal Proceedings.......................... *
10. Directors, Executive Officers,
Promoters and Control Persons.............. Management; Principal
Stockholders; Certain
Transactions
11. Security Ownership of Certain
Beneficial Owners and Management........... Management; Principal
Stockholders
12. Description of Securities.................. Description of Securities
13. Interests of Named Experts and
Counsel.................................... Interest of Counsel
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Management
15. Organization Within Last Five Years........ Prospectus Summary
16. Description of
Business................................... Prospectus Summary; Risk
Factors; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Business;
Management; Certain
Transactions; Principal
Securityholders; Consolidated
Financial Statements
17. Management's Discussion and Analysis
or Plan of Operations...................... Management's Discussion and
Analysis of Financial Condition
and Results of Operations
18. Description of Property.................... Business
19. Certain Relationships and Related
Transactions............................... Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters........................ Front Cover Page; Description
of Securities
21. Executive Compensation..................... Management
22. Financial Statements....................... Financial Statements
23. Change in and Disagreements with
Accountants on Accounting and
Financial Disclosure....................... Experts
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* Not Applicable
5
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Subject to completion dated February 14, 1997
PROSPECTUS
ON-SITE SOURCING, INC.
559,709 Shares of Common Stock
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This Prospectus relates to the offer and sale by certain persons (the
"Selling Securityholders") of up to 559,709 shares of Common Stock ("Common
Stock") of On-Site Sourcing, Inc. (the "Company"). The Company will not receive
any of the proceeds from the sale of such shares. It is anticipated that the
Common Stock will be offered and sold from time to time in the over-the-counter
market, on the NASDAQ Small-Cap Market System, or otherwise, at prices and terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. See "Selling Securityholders and Plan of Distribution."
The Selling Securityholders may be considered "Underwriters" pursuant to the
Securities Act of 1933, as amended (the "Securities Act").
The Common Stock is quoted on the NASDAQ Small-Cap Market system
("NASDAQ") under the symbol "ONSS". On February 12, 1997 the reported closing
sale price of the Common Stock on NASDAQ was $2.625.
The Company has agreed to pay all of the expenses in connection with the
registration and sale of the shares being offered by the Selling Securityholders
(other than brokerage commissions and fees and expenses of counsel to the
Selling Securityholders). The Company has also agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act.
See "Risk Factors" at page 4 for certain considerations relevant
to an investment in these Securities.
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THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is February 14, 1997
6
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AVAILABLE INFORMATION
On-Site Sourcing, Inc. ("On-Site" or the "Company"), which is currently a
reporting company, has filed a registration statement on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended ("1933
Act") with the Securities and Exchange Commission ("SEC"), with respect to the
securities being offered by this prospectus ("Prospectus"). This Prospectus,
which constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to On-Site and the securities offered
hereby, reference is made to the Registration Statement and the exhibits
thereto. All of these documents may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; and at the SEC's Regional Offices at
7 World Trade Center, 13th Floor, New York, New York 10007 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies may be obtained at the prescribed rates from the Public Reference Section
of the SEC at its principal office in Washington, D.C. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
On-Site intends to distribute to its stockholders annual reports
containing financial statements audited by its independent certified public
accountants and to make available quarterly reports containing unaudited summary
financial information for the first three quarters of each fiscal year.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, by
any person in any jurisdiction in which it is unlawful for such person to make
such an offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information herein is correct as of any date subsequent to the date hereof.
7
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated all per share data and
information in this Prospectus relating to the number of shares of Common Stock
outstanding assumes no exercise of outstanding options to purchase an aggregate
of 833,009 shares of Common Stock or 96,000 Units (each Unit comprised of two
shares of Common Stock and one Common Stock purchase warrant).
The Company
On-Site Sourcing, Inc. (the "Company" or "On-Site") provides reprographic
and facilities management services to law firms, non-profit organizations,
accounting firms, financial institutions and other organizations throughout the
East Coast of the United States. In order to meet the highly specialized
requirements of each client, On-Site offers a variety of customized reprographic
and facilities management services. The Company provides reprographic services
24 hours per day, seven days per week including copying, binding, labeling,
collating and indexing in support of complex, document-intensive litigation as
well as higher volume productions of manuals, brochures and other materials for
corporations and non-profit organizations. In addition, On-Site provides a
variety of imaging and scanning services which allow the transfer of information
from paper documents into an electronic media. On-Site also provides on-premises
management of the customer's support services including mailroom operations,
facsimile transmission, records and supply room management and copying services.
The Company services, refurbishes, leases and sells mid and high volume copy
machines through its copier service division, thereby minimizing critical down
time and increasing productivity at both the Company's reprographic centers and
its facilities management sites. On-Site assumes complete responsibility for
these operations through the provision of management personnel, highly-trained
staff, specialized proprietary software, equipment, supplies, copier repair and
consulting services.
The Company targets the premium service segment of the reprographics and
facilities management markets in which speed, accuracy and quality are critical.
Management believes that On-Site's extensive employee training and innovative
management techniques create efficiencies which allow the Company to provide
high quality service at economical prices. Additionally, the Company's use of
technology, including the proprietary SiteTrax and OATS software, dramatically
enhance labor productivity. On-Site's meticulous quality control process ensures
that each client's accuracy demands are met. Because the large majority of
potential customers still handle their own reprographic and related facilities
management internally, the Company believes that the Company's efficiency
provides opportunities for growth in the premium service market.
On-Site Sourcing, Inc. was founded in 1992 and currently serves the
greater Washington, DC, Philadelphia, New York City, and Atlanta metropolitan
areas through outsourcing locations in Arlington, Virginia; Philadelphia,
Pennsylvania, New York, New York and Atlanta, Georgia, as well as facilities
management locations in Washington, DC; Philadelphia, PA and Mt. Laurel, New
Jersey. The Arlington, Virginia outsourcing location is the largest legal
processing center in the metropolitan Washington area. The Company expanded
service to the New York City metropolitan area in November 1996. Customers
include a number of the large law firms, corporations and non-profit entities
operating in these cities.
The Company was originally incorporated in Virginia in December, 1992 and
changed its state of incorporation to Delaware in January, 1996. The Company's
principal executive offices are located at 1111 N. 19th Street, 6th Floor,
Arlington, Virginia 22209, and its telephone number is (703) 276-1123.
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The Offering
Securities Offered by Selling
Securityholders....................... 559,709 shares of Common Stock. See
"Selling Securityholders" and
"Description of Securities."
Common Stock Outstanding as of
the date of this Prospectus (1)....... 4,794,021 shares
Use of Proceeds.......................... None of the proceeds from the 559,709
Shares of Common Stock being sold by
the Selling Securityholders will be
received by the Company.
Risk Factors............................. The securities offered hereby are
speculative and involve a high degree
of risk. See "Risk Factors."
Nasdaq Symbols........................... Common Stock - ONSS
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(1) Includes 280,400 shares of Common Stock issued upon the partial exercise of
the Overallotment Option. Does not include (i) 1,209,323 shares of Common Stock
reserved for issuance upon exercise of Warrants; (ii) 192,000 shares of Common
Stock and 96,000 Warrants reserved for issuance upon exercise of the
Underwriter's Options; and (iii) 833,009 shares of Common Stock reserved for
issuance upon exercise of outstanding options.
RISK FACTORS
The Securities offered hereby are speculative and involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. Each prospective investor should carefully consider the
following risk factors inherent in and affecting the business of the Company and
this offering before making an investment decision.
RISKS RELATED TO THE COMPANY
Limited Operating History.
The Company began operations in June of 1993 and therefore has had only a
limited operating history upon which prospective investors may base an
evaluation of its performance. The Company is subject to the normal risks of any
start up business including unanticipated problems and unforeseen forms of
competition. See "Prospectus Summary - The Company" and "Business".
Possible Need for Additional Financing.
Prior to the initial public offering, the Company had relied upon private
placements of its equity securities as well as bank loans to finance its working
capital requirements. The Company anticipates, based on current proposed plans
and assumptions relating to its operations, that the proceeds of the initial
public offering and cash flow from operations will be sufficient to satisfy its
contemplated capital requirements for at least 12 months from the date hereof.
In the event that the Company's plans change or prove to be inaccurate the
Company may be required to seek additional financing sooner than currently
anticipated or may be required to curtail its planned expansion. There can be no
assurances that any additional financing will be available to the Company on
acceptable terms, or at all. Additional equity financing may involve substantial
dilution of the stock ownership percentage of the Company's then existing
stockholders. Moreover, financial and other covenants imposed by future lenders
might adversely affect the Company's ability to pay dividends and management's
ability to control the Company. See "Managements' Discussion and Analysis of
Financial Condition and Results of Operations."
9
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Competition.
The reprographics and facilities management businesses are highly
competitive. On-Site competes with numerous national and regional companies,
some of which are substantially larger and have greater financial resources than
the Company. There can be no assurances that future competition will not have a
material adverse effect on the Company's business, financial condition, or
results of operations. See "Business - Competition"
Sensitivity to Service Economy.
The Company's business and results of operations are sensitive to the
state of the U.S. service economy, particularly the legal sector. In
recessionary periods, copy volumes may decline at individual sites due to fewer
matters being handled by the clients. Reduced copy volumes negatively affect the
Company's revenues and gross margins per site. In addition, customers may impose
pricing pressures on the Company due to their own reduced levels of
profitability, thereby adversely affecting the Company's gross margins and
results of operations. See "Management Discussion and Analysis of Financial
Condition and Results of Operations."
Dependence on Key Customers.
Two of the Company's customers, a large national law firm and a non-profit
organization, accounted for 10% and 18% of the Company's gross sales in 1995.
There can be no assurance that these customers will maintain their volume of
business with the Company. A loss of the Company's sales to these customers
could have a material adverse effect on the Company's results of operations
unless other customers were found to provide the Company with similar revenues.
See "Management Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Key Personnel.
The success of the Company will be largely dependent on the personal
efforts of Christopher J. Weiler, President and Chief Executive Officer, Allen
C. Outlaw, Executive Vice President of Sales and Marketing, Larry F. Morris,
Vice President of Sales, Joseph Sciacca, Chief Financial Officer, and Anthony A.
Kopsidas, Vice President of Operations. These employees all have employment
agreements and Christopher Weiler is covered by a key-man life insurance policy
for $1,000,000. The Company's growth and future success will depend in large
part on its ability to continue to attract, motivate and retain highly qualified
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will continue to be successful in hiring, motivating
or retaining such qualified personnel. The loss of key personnel or the
inability to hire or retain qualified personnel could have a material adverse
effect on the Company's business and financial conditions. See "Business -
Employees" and "Management - Directors, Executive Officers and Key Employees"
and "Management - Employment Agreements".
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation and By-Laws provisions to eliminate
the personal liability of its directors for monetary damages for breach or
alleged breach of their fiduciary duties as directors, subject to certain
exceptions. See "Limitation of Liability and Indemnification Matters."
RISKS RELATED TO THE OFFERING
Dividend Policy.
The Company has not paid any cash dividends on its Common Stock and does
not expect to declare or pay any cash dividends in the foreseeable future. See
"Description of Securities - Dividends."
Authorization and Discretionary Issuance of Preferred Stock.
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The Company is currently authorized to issue 1,000,000 shares of Preferred
Stock, par value $.01 per share. The preferred stock is issuable in one or more
series with such rights, preferences, maturity dates and similar matters as the
Board of Directors of the Company may from time to time determine without any
further vote or action by the Company's stockholders. No Preferred stock is
currently outstanding. See "Description of Securities - Preferred Stock."
Substantial Control by Current Officers and Directors.
The current executive officers and directors of the Company and persons
who may be deemed affiliates, as a group, beneficially own approximately 30% of
the Company's outstanding Common Stock, assuming the exercise of any outstanding
warrants and options held by such individuals and their affiliates. As a result,
officers and directors and their affiliates voting together may be able to
effectively control the decision on matters, such as the election of directors,
if they were to agree. See "Management".
Possible Conflicts of Interest between the Company and the Company's Counsel.
On-Site's corporate attorney, John S. Stoppelman, is a stockholder of the
Company holding 641,100 shares of common stock, assuming the exercise of 3,700
Warrants to purchase Common Stock at $6.00 per share, or 13.4% of the shares
outstanding. Mr. Stoppelman serves as the Chairman of the Board of Directors and
Secretary. Accordingly, there may be a conflict of interest in Mr. Stoppelman's
role as Chairman of the Board of Directors and as the Company's counsel. The
fees collected by the Stoppelman Law Firm from the Company did not constitute
five percent or more of his law firm's gross revenue in any year of the
Company's existence. The Company believes that the fees charged were at least as
favorable as those obtainable from an uninterested third party. See "Interest of
Management and Others in Certain Transactions."
NASDAQ Maintenance Requirements; Possible Delisting of Securities from NASDAQ
System; Risks of Low-Priced Stocks
The Company's securities are listed on the NASDAQ SmallCap Market. If the
Company is unable to satisfy NASDAQ's maintenance criteria in the future, its
securities will be subject to being delisted, and trading, if any, would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. ("NASD"). As a consequence of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The SEC has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on NASDAQ and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000 if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
In addition, if the Company's securities are not quoted on NASDAQ, or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9 promulgated under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") for non-NASDAQ and non-exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.
The Company's Common Stock will, as of the date of this Amendment,
technically be within the definitional scope of a penny stock, but will be
exempt from the definition of penny stock by operational law, because it is
listed on
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NASDAQ. In the event that the Common Stock were subsequently to become
characterized as a penny stock, the market liquidity for the Company's
securities could be severely affected. In such an event, the regulations on
penny stocks could limit the ability of broker/dealers to sell the Company's
securities and thus the ability of purchasers of the Company's securities to
sell their securities in the secondary market.
Significant Outstanding Options and Warrants.
As of the date of this offering, there are outstanding stock options to
purchase an aggregate of approximately 833,009 shares of Common Stock at
exercise prices ranging from $1.11 to $3.25 per share as well as 1,209,323
Common Stock Purchase Warrants (the "Warrants") issued in connection with the
initial public offering and the M.H. Meyerson & Co. Inc.'s subsequent partial
exercise of the overallotment option. To the extent that outstanding options are
exercised, dilution to the Company's stockholders may occur. Moreover, the terms
upon which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of outstanding options and warrants can be
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company than
the exercise terms provided by such outstanding securities. In the event of the
exercise of a substantial number of Warrants offered as part of the Units within
a reasonably short period of time after the right to exercise commences, the
resulting increase in the amount of Common Stock of the Company in the trading
market could substantially affect the market price of the Common Stock. See
"Description of Securities - Warrants" and "Management - Stock Option Plan".
12
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CAPITALIZATION
The following sets forth (i) the capitalization of the Company as of
September 30, 1996. The information set forth below should be read in
conjunction with the Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
September 30,
1996
Long-Term Debt, net of current portion .... $ 353,118
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Common Stock, $.01 par value, 20,000,000
shares authorized, 4,787,355 issued and
outstanding ........................... $ 47,874
Preferred Stock, $.01 par value, 1,000,000
shares authorized zero shares issued .. $ --
Additional Paid-in Capital ................ $ 6,354,501
Accounts and Notes Receivable ............. $ (50,400)
Retained Earnings ......................... $ 97,717
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Total Stockholders' Equity .......... $ 6,449,692
-----------
Total Capitalization ........... $ 6,802,810
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SELECTED FINANCIAL DATA
The following selected financial data as of December 31, 1995 and December
31, 1994 and for the periods then ended are derived from the Company's audited
financial statements. The financial data as of September 30, 1996 and 1995 and
for the nine month periods then ended are derived from unaudited financial
statements. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which the Company considers necessary
for a fair presentation of the financial position and the results of operations
for these periods. Operating results for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the entire
year. The following data should be read in conjunction with the financial
statements of the Company, including the notes thereto. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Financial Statements.
<TABLE>
<CAPTION>
1995 1994 1996 1995
---- ---- ---- ----
Year Ended December 31, Nine Months Ended Sept. 30,
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ....................................... 4,919,270 1,959,455 6,368,487 3,534,424
--------- ---------- --------- ---------
Costs and Expenses:
Cost of sales ............................... 3,887,709 1,425,443 4,616,899 2,749,899
Selling and shipping ........................ 343,012 54,910 663,143 263,742
Administrative .............................. 532,027 480,428 653,757 388,580
--------- ---------- --------- ---------
Total Operating Expenses ............... 4,762,748 1,960,781 5,933,799 3,402,221
========= ========== ========= =========
Earnings (Loss) from Operations ................ 156,522 (1,326) 434,688 132,203
Net Earnings (Loss) ............................ 75,628 (22,266) 336,044 51,399
Earnings (Loss) per Common Share ............... 0.03 (0.01) 0.10 0.02
Average Number of Common Shares and Common Share
Equivalents Outstanding During the Period ... 2,648,377 2,558,377 3,402,181 2,648,377
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ------------------
Balance Sheet Data:
Cash and cash equivalents .................. $ 38,116 $ 3,784,883
Working Capital (Deficit) .................. $ (94,892) $ 5,136,935
Total Assets ............................... $ 1,478,035 $ 7,899,568
Long Term Debt, Net of Current Portion ..... $ 125,384 $ 353,118
Shareholders Equity:
Common Stock ............................ $ 21,870 $ 47,874
Additional Paid in capital .............. $ 488,140 $ 6,354,501
Accounts and Notes Receivable - Shareholders -- $ (50,400)
Retained Earnings (Deficit) ............. $ (238,327) $ 97,717
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company began to provide reprographic and facilities management
services to the premium service segment of the Philadelphia, Pennsylvania market
in June 1993. The company has subsequently expanded its geographic market to
include Washington, DC New York, NY and Atlanta, Georgia. In July 1995 the
Company expanded the scope of its business through the purchase of the assets of
a copy machine repair service and in November, 1996 the Company expanded the
scope of its reprographic services to include imaging and scanning. Revenues
from reprographic and litigation support account for approximately 77% of total
revenues while facilities management accounts for 20% and copy machine
refurbishment, repairs, sale and leases account for 3% as of September 30, 1996.
The Company's reprographic and litigation support services to law firms
and corporations includes copying, binding, drilling, "Bates" stamping,
labeling, collating, indexing, assembling, imaging, scanning and quality review.
The Company currently has technology which allows customers to "telecommute" by
sending documents instantaneously via the Internet to computers at On-Site. The
documents are then transferred into the memory of a digital copy machine and
reproduced.
The Company also contracts to provide its services on the premises of its
customers through facilities management agreements. The Company conducts a
comprehensive analysis of each client's needs and tailors the services provided
to these needs based on volume, time, and quality requirements. On-Site's
facilities management services include providing on-site management of the
client's support services including copy, mail, supply and records rooms.
Mailroom services include distributing all mail and interoffice correspondence,
processing, logging and billing outgoing mail, parcels and special courier
items, logging, billing, and tracking transmission of outgoing facsimiles and
distributing incoming facsimiles. Supply room services include providing all
required materials through a "Just in Time" system designed to minimize the
costs of logging and tracking materials provided. Records room services include
utilization of bar code applications and state-of-the-art imaging and scanning
equipment to store documents and data base information for quick retrieval and
copying. Copy room management involves tracking, logging and billing all copies,
and providing repair services to copy machines. In addition, specialized
proprietary software generates operating data that allows the Company to analyze
vendor, copy and overtime costs, copy volume and prepare profit and loss
statements that offer solutions to productivity problems.
In July 1995, On-Site purchased the assets of SWR Associates, Inc.
("SWR"), doing business as CRC or Copier Rebuild Center, in Frederick, MD, that
services, refurbishes, leases and sells mid and high volume copiers. On-Site now
provides service technicians to all of the Company's locations. The acquisition
of an in house repair service was a natural vertical integration and has allowed
On-Site to minimize critical down time and increases productivity at the
Company's reprographic centers and facilities management sites.
The revenue provided by the reprographic services vary depending on the
volume of work orders received with December historically being a slow period.
Revenues are collected on a monthly basis for facilities management contracts
with payment due on the first of the month while reprographic and service
revenues are collected on a per job basis. The Company's collection history of
accounts receivables has been 45 to 90 days with facilities management accounts
being collected within 10 to 15 days.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues
The Company's revenues are derived from reprographics and litigation
support, facilities management, and copier repairs. Overall sales revenue
increased by $2,959,815 or 151% from 1994 to 1995. Of this increase $2,035,712,
a 58% increase, can be attributed to the increased capacity of existing
facilities and $762,306, a 62% increase, resulted from the increased number of
facilities management sites from three as of December 31, 1994 to eight as of
December 31, 1995.
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The purchase of the Copy Rebuild Center in Frederick, MD in July 1995, which
services, refurbishes, leases and sells mid and high volume copiers, also
provided approximately three percent (3%) of the Company's total revenues in
1995. The Company expects that copy machine sales and servicing will continue to
account for approximately three percent (3%) of the total revenues during 1996.
The company has also achieved name recognition and a reputation for quality in
the markets it served in 1995 which has resulted in repeat customers.
Costs and Expenses
Cost of Sales. Cost of sales increased by $2,462,266 or 173% from 1994.
This increase was nearly proportional to the increase in revenues. As a
percentage of revenue, cost of sales increased from 73% in 1994 to 79% in 1995.
This increase can be attributed to an increase in wages paid to three sales and
marketing employees hired in 1995 and a rise in the cost of paper during 1995.
Selling and shipping. Costs of selling and shipping increased $288,102 or
525% in 1995 due to increased marketing efforts and increased commissions paid
to a larger marketing staff and the purchase of new delivery trucks in 1995.
Administrative. Although administrative costs in 1995 increased $51,599 or
10.7% over the 1994 period, these costs declined as a percentage of revenues
from 24% to 11%. The increase can be attributed to the Company's growth both in
existing and new markets in 1995.
Earnings from Operations. Earnings from operations increased $157,848 in
1995 due to increased marketing efforts by the Company. The increased number of
facility management sites from three in 1994 to eight in 1995 also accounts for
the increased earnings from operations.
Other Expenses, Primarily Interest. Other expenses increased by $52,032 or
180% due mainly to an increase in the amount of debt carried by the Company in
order to meet the Company's working capital needs and costs of expansion.
Income Tax Expense. In December 1994, the Company had available unused
operating loss carryforwards that were applied to taxable income in 1995. As of
December 31, 1995 the Company still had unused operating loss carryforwards that
may be applied against future taxable income. See "Notes to Financial Statements
- - Note J"
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Revenues
Revenue for the nine months ended September 30, 1996 increased 80% or
$2,834,063 to $6,368,487 as compared to $3,534,424, recorded for the nine months
ended September 30, 1995. The principal reason for the increase is due to
increased volume of work orders fulfilled through increased capacity at the
Rosslyn, VA reprographic facility, increased sales volume at the Philadelphia
facility and the Atlanta facility becoming fully operational.
Costs and Expenses
For the nine months ended September 30, 1996 cost of sales increased
$1,867,000 or 68% over the same period in 1995. Operating margins increased 123%
to $1,751,588, a $967,063 increase over the same period last year. As a percent
of sales, operating margins improved from 22% for the nine months ended
September 30, 1995 to 27.5 % in this period. In relation to sales, costs of
sales and related operating margins improved due to the acquisition of equipment
previously leased , volume purchasing discounts and increased production per
labor hour. Every dollar in increased sales volume over last year contributed
$.34 to the 1996 operating margins.
Selling and shipping increased by $399,401 to $663,143 over the same period last
year. As a percent of sales, this represents an increase from 7.4% for the nine
months ended September 30, 1995 to 10.4% in the same period in 1996, primarily
due to the addition of personnel, higher commissions associated with increased
revenue, and expansion into new markets.
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Administration expenses for the nine months ended September 30, 1996 increased
$265,177 to $653,757 over the same period last year due primarily to
professional fees, increases in staffing and personnel costs, and travel
associated with the expansion into new markets. Administration decreased from
10.9% to 10.2% of sales over the same period last year.
Earnings from Operations
Earnings from operations increased 228 % or $302,485 from $132,203 to
$434,688 over the nine months ended September 30, 1995. The increase is due to
increased marketing efforts, higher margins and continued expansion into new
markets.
Other income and expenses
Other income (expenses) decreased $79,060 compared to the first nine
months of 1995 due to the purchase by the Company of equipment previously under
capital leases obligations resulting in lower interest expense. Other income,
primarily interest on short term treasury obligations was $62,394.
Net earnings
For the nine months ended September 30, 1996 the Company generated net
earnings of $336,044 as compared to $51,399 for the same period last year. This
represents an increase of $284,645 or 554%. Earnings per share for the nine
months ended September 30, 1996 were $.10 compared to $. 02 for the nine months
ended September 30, 1995. Increases in earnings in 1996 as compared to the 1995
periods primarily result from the continuing growth of the litigation support
operations due to focused marketing efforts and expansion of our client base.
Liquidity and Capital Resources at September 30, 1996 and Subsequent Activity
On July 9, 1996 the Company's registration statement was declared
effective. Approximately $1,500,000 of the net proceeds totaling $5,431,913 were
used to curtail its line of credit and other borrowings, bridge financing and
accounts payable. The Company has funded its expansion and growth by utilizing
the proceeds of its initial public offering and long term financing, where
appropriate, for significant capital outlays.
The Company anticipates that the net proceeds from the initial public
offering, proceeds from the overallotment options, and cash flow from operations
will be sufficient to meet the Company's expected cash requirements for the next
twelve months. There can be no assurances that unforeseen events may not require
more working capital than the Company has at its disposal.
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<PAGE>
In order to finance working capital needs the Company raised $310,700
through a private placement of 147,955 shares of Common stock in March 1996.
On March 29, 1996, Allen C. Outlaw, Vice President of Sales and Marketing
and a director of the Company, exercised options to purchase 162,000 shares of
common stock for $90,000. The options had been granted pursuant to an employment
agreement and fully vested during 1994. In connection with the exercise of the
options, the Company loaned $89,900 to the officer/director. The loan bears
interest at 6% per year with a payment of $40,000 due on May 1, 1996 and the
remaining principal and interest due April 1, 1998.
On September 26, 1996, the Company loaned Joseph Sciacca, Chief Financial
Officer $25,000 to purchase Common Stock of the Company pursuant to an
employment agreement. The loan is due September 26, 1998 with interest accruing
at the prime rate at the time of the loan.
Acquisition of SWR Associates, Inc.
On-Site recently expanded the scope of its business to include the
servicing and sales of refurbished copy machines by purchasing the net assets of
SWR Associates, Inc. ("SWR") of Frederick, Maryland, doing business as CRC, for
the nominal consideration of $10,000 on July 27, 1995. SWR's location in
Frederick, MD, is comprised of a copier rebuild center that services,
refurbishes, leases and sells mid and high volume copiers. The acquisition of an
in-house repair service was a vertical integration designed to allow On-Site to
minimize critical down time of equipment and increase productivity at On-Site's
reprographic centers and facilities management sites. As a result of the
acquisition, On-Site now provides copier service technicians with dispatch to
all of On-Site's locations, thereby enhancing productivity.
SWR has become the maintenance division of On-Site after the acquisition,
with On-Site providing the majority of SWR's work. For the seven months before
the acquisition, SWR had revenues of approximately $286,000 and incurred a loss
of $76,300 due mainly to excess capacity. Subsequent to its acquisition, SWR's
facility and personnel began operating at full capacity due to On-Site's demands
for copy machine maintenance. SWR's external revenue during the post-acquisition
period in 1995 was approximately $162,000. This factor, in addition to the
elimination of redundant general and administrative expenses, resulted in SWR
earning a profit of approximately $9,400 for the last five months of 1995.
While On-Site's acquisition of SWR has had a significant effect on SWR's
performance, SWR has not had a similar effect on On-Site. SWR only accounted for
3% of On-Site Sourcing's external revenue for 1995. Management believes the time
period after the acquisition is more indicative of how SWR will perform in the
future and that providing audited financial statements for the time prior to the
acquisition would therefore not provide meaningful information. For the first
two months of 1996, SWR only accounted for 2.8% of On-Site's total revenue.
Furthermore, SWR's operations, prior to the acquisition, reflect discretionary
salary and bonuses to the owner as a result of appropriate income tax planning
which have not continued after the acquisition.
BUSINESS
The Company, ("On-Site") provides reprographic and facilities management
services to law firms, non-profit organizations, accounting firms, financial
institutions and other organizations throughout the East Coast. In order to meet
the highly specialized requirements of each client, On-Site offers a variety of
customized reprographic and facilities management services. The Company's
reprographic services include copying, binding, labeling, collating and indexing
in support of complex, document-intensive litigation as well as higher volume
productions of manuals, brochures and other materials for corporations and
non-profit organizations. In addition, On-Site provides a variety of imaging and
scanning services which allow the transfer of information from paper documents
into an electronic media. On-Site also provides
18
<PAGE>
on-premises management of the customer's support services including mailroom
operations, facsimile transmission, records and supply room management and
copying services. The Company also services, refurbishes, leases and sells mid
and high volume copy machines thereby minimizing critical down time and
increasing productivity at the Company's reprographic centers and facilities
management sites. On-Site assumes complete responsibility for these operations
through the provision of management, highly-trained staff, specialized
proprietary software, equipment, supplies, as well as copier repair and
consulting services.
The Company targets the premium service segment of the market in which
speed, accuracy and quality are critical by providing high quality service at
economical prices. On-Site Sourcing, Inc. was founded in 1992 and currently
serves the greater Washington, Philadelphia, and Atlanta metropolitan areas
through outsourcing locations in Arlington, Virginia; Philadelphia,
Pennsylvania, New York, New York and Atlanta, Georgia, as well as facilities
management locations in Washington, DC; Philadelphia, PA and Mt. Laurel, New
Jersey. The Arlington, Virginia outsourcing location is the largest legal
processing center in the metropolitan Washington area. Customers include a
number of the large law firms, corporations and non-profit entities operating in
these cities. The Company was originally incorporated in Virginia in December,
1992 and changed its state of incorporation to Delaware in January, 1996.
Outsourcing Market. Traditionally, most organizations have provided all of
the services required to support their own operations. Increasingly, however,
organizations are contracting out certain functions to specialized independent
business service companies. These services include reprographic, security,
secretarial, cafeteria, computer and communications facilities management.
Outsourcing allows organizations to focus their management and resources
on their own business, while often improving support systems and more
effectively controlling costs. Users of facilities management services are
relieved of the responsibilities of selecting and maintaining equipment and
hiring, training, managing and motivating employees. These vendors generally
achieve economies of scale in administration and the purchasing of equipment and
supplies.
Strategy. The Company's strategy for continued growth in the premium
service sector of the reprographic and facilities management business is to
attract new customers, retain existing clients and to expand the range of
services while maintaining high quality and efficient operations. The Company
has developed several management strategies in order to continue to compete
successfully with larger companies including:
o Training programs On-Site has developed intensive training programs
for all employees through the use of proprietary
computer programs. Training is based on
qualification requirements for each position and
continues throughout the course of employment.
o Quality control Strict quality control standards are also
maintained through the use of a Quality Assurance
Team, Quality Assurance Diary, intensive training
programs and client surveys. Because of the
sensitivity of the materials produced, each
document is hand checked in a separate room by a
quality control team. Less than 1% of all documents
are rejected by clients due to poor quality.
o Employee Relations On-Site places a strong emphasis on employee
relations through the use of employee empowerment
practices, team building, close relations between
employees and management and an employee incentive
program that includes stock ownership.
o Economies of Scale On-Site is able to provide efficient services to
its clients because it achieves economies of scale
in administration, training, acquisition of
equipment and supplies, improved equipment
utilization, servicing copiers and higher employee
productivity.
o Broad Range of Services On-Site offers a broad range of services in order
to tailor its operations to the highly specialized
requirements of each client. In addition to
customized reprographic services, On-Site offers
litigation support such as binding, labeling,
collating and indexing. Facilities management
services include copy and mailroom operations,
facsimile transmission, records and supply room
management, as well as copier repair and consulting
services.
19
<PAGE>
The Company receives the main part of its business by providing
reprographic and litigation support services to law firms and corporations. This
accounts for approximately 77 percent of the Company's business. Facilities
management accounts for approximately 20 percent of the business while the final
sector of On-Site's business, the servicing and sales of copy machines, now
provides 3 percent of the Company's business. Each division and business
function, while independent in services to the client, share personnel and
resources in order to minimize costs and provide high quality services.
The Company's goal is to expand its reprographics and facilities
management business by taking advantage of opportunities presented by the large
number of organizations that still provide their own facilities management
services internally.
Operations. On-Site provides its services through regional offices in
metropolitan Washington, DC, Philadelphia, PA, New York, NY and Atlanta, GA.
These facilities maintain staff, equipment, supplies and training facilities in
order to provide reprographic and litigation support services to a variety of
customers. The Company also places professional management at each site and
provides employees with ongoing training in equipment operation and maintenance,
customer satisfaction, interpersonal skills, and quality control. Equipment and
supplies are provided by numerous regional and national vendors.
On-Site contracts to provide its services on the premises of its
customers. The Company conducts a comprehensive analysis of each client's needs
and tailors the services provided to these needs based on volume, time, and
quality requirements.
The Company's reprographic and litigation support services to law firms
and corporations includes copying, binding, drilling, "Bates" stamping,
labeling, collating, indexing, assembling and quality review. The Company
currently has technology which allows customers to "telecommute" by sending
documents instantaneously via the Internet to computers at On-Site. The
documents are then transferred into the memory of a copy machine and reproduced.
On-Site also provides a variety of imaging and scanning services which allow the
transfer of information from paper documents into an electronic media.
On-Site's facilities management services include providing on-site
management of the client's support services including copy, mail, supply and
records rooms. Mailroom services include distributing all mail and interoffice
correspondence, processing, logging and billing outgoing mail, parcels and
special courier items, logging, billing, and tracking transmission of outgoing
facsimiles and distributing incoming facsimiles. Supply room services include
providing all required materials through a "Just in Time" system designed to
minimize the costs of logging and tracking materials provided. Records room
services include utilization of bar code applications and state-of-the-art
imaging and scanning equipment to store documents and data base information for
quick retrieval and copying. Copy room management involves tracking, logging and
billing all copies, and providing repair services to copy machines. In addition,
specialized proprietary software generates operating data that allows the
Company to analyze vendor, copy and overtime costs, copy volume and prepare
profit and loss statements that offer solutions to productivity problems.
In July 1995, On-Site purchased the assets of SWR Associates, Inc.
("SWR"), doing business as CRC, a copy rebuild center in Frederick, MD, that
services, refurbishes, leases and sells mid and high volume copiers. On-Site now
provides service technicians to all of the Company's locations. The acquisition
of an in house repair service was a natural vertical integration and has allowed
On-Site to minimize critical down time and increases productivity at the
Company's reprographic centers and facilities management sites.
The Company operates in two segments, one of which includes facilities
management, litigation copying, and related services at customer and company
locations, and a second, which includes the purchase, refurbishment, lease, sale
and servicing of copy machines. For the year ended December 31, 1995, the
purchase, refurbishment, lease, sale and servicing of copy machines was not
material to the financial statements. The Company's operations are conducted
entirely in the United States.
20
<PAGE>
Customers. On-Site's customers include law firms, non-profit
organizations, accounting firms, financial institutions and other organizations
throughout the East Coast. On-Site's customer base is the premium service
segment of the market in which speed, accuracy and quality are critical. The
Company's clients include many of the largest law firms and business entities in
the markets served.
Employees. The Company continuously recruits, trains and offers benefits
and other incentives to personnel in order to develop and retain a qualified and
reliable staff. Under the Company' training program, all personnel receive
training covering the use and maintenance of equipment, interpersonal skills and
operating procedures. The Company places a strong emphasis on employee relations
and engages in team building, and employee empowerment practices as well as
providing incentives, including a stock option plan, that are specifically
designed to encourage and reward employee performance. Additionally, all
employees are bonded, sign confidentiality agreements and agree to undergo drug
tests. The Company believes these programs result in higher employee
productivity and professionalism. As of December 31, 1996 the Company had
approximately 180 full time employees, of which 6 are in executive positions.
None of the Company's employees are represented by a labor union and the Company
considers its employee relations to be satisfactory.
Competition. The reprographics and facilities management businesses are
highly competitive. The largest competition is from prospective clients
themselves, which provide these services internally. The national competitors
providing facilities management services include Pitney Bowes Management
Services and Xerox Business Systems, while Merrill Corporation is a competitor
for reprographic services. Alco Standard Corporation and R.R. Donnelley Business
Systems are national competitors providing both reprographic and facilities
management services while Copy America, Balmar and Reliable are regional
competitors providing both of these services in the markets served by On-Site.
Technology and Proprietary Information. The Company's proprietary
software, On-Site Sourcing, Inc. Automated Tracking System ("OATS") was
conceptualized by the Company's President, Christopher Weiler, in early 1993 for
use in facilities management contracts. It has undergone continuous development
to the present. The program tracks and produces reports for a variety of back
office operations which enables On-Site to operate in the most efficient manner,
thereby increasing productivity. When combined with specially configured bar
code technology, the program tracks the delivery of all internal mail and
packages, organizes file rooms, assists the client with cost accounting by
automating client billing information and purchase orders, tracks office
employee productivity, automates inventories and tracks incoming and outgoing
facsimiles. The program also employs icons which allow direct access to other
applications such as the UPS and Federal Express Tracking Systems. The report
function produces in-depth charts on all facets of the back office which allows
On-Site employees to easily monitor activities and eliminate inefficiencies.
Finally, OATS automates On-Site's billing of clients. OATS is installed via
computer disk and is compatible with a variety of operating systems.
The Company is also developing a proprietary automated cost recovery
system for copy machines, SiteTrax, which has become operational. The system
networks copy machines and tracks the number of copies made, the client to be
billed, the specific matter involved and the employee making the copies. This
system is designed to increase On-Site's appeal to potential facilities
management clients based on price and performance.
The Company relies on confidentiality and non-competition agreements with
its employees in order to protect its proprietary know-how and employs various
methods to protect the software, concepts, ideas and documentation of its
proprietary technology. However, such methods may not afford complete
protection, and there can be no assurance that others will not independently
develop similar know-how or obtain access to the Company's know-how or software,
concepts, ideas and documentation. Furthermore, although the Company has and
expects to have confidentiality and non-competition agreements with its
employees, consultants, and appropriate vendors, there can be no assurance that
such arrangements will adequately protect the Company's trade secrets.
Facilities. The Company's executive offices and reprographic operations
which service the metropolitan Washington area are located in approximately
31,000 square feet of leased space in Arlington, Virginia. The lease expires in
December of 2002. Rent for the premises is $37,500 per month.
The Company's Philadelphia offices are located in approximately 4900
square feet of leased space in center city Philadelphia, PA. The lease provides
for a base annual rent of $61,300 and an expiration date in October 2000. The
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Company also has offices located in approximately 3935 square feet of leased
space in Frederick, MD. The lease provides for a base annual rent of $30,000
with additional operating costs of $2,000 per year and an expiration date in
January, 1997.
The Company also has offices located in approximately 5,512 square feet of
leased space in Atlanta, GA. The lease provides for a base annual rent of
$64,800. The lease expiration date is February 28, 2002.
The Company also has offices located in approximately 8,000 square feet of
leased space in New York, NY. The lease provides for a base annual rent of
$122,250 with annual increases on November 1 of each subsequent year as follows:
$125,350 in 1997, $129,058 in 1998, $132,878 in 1999, $136,811 in 2000, $140,863
in 2001, $145,036 in 2002, $149,335 in 2003, $153,763 in 2004, $158,323 in 2005.
The lease expiration date is October 31, 2006.
The Company believes that its current facilities are adequate for its
current and reasonably foreseeable future needs for the markets that each
facility serves and that additional physical capacity at its current facilities
is available to accommodate expansion, if required.
Seasonal and Cyclical Nature of Business; Backlog. The revenue provided by
the reprographic services vary depending on the volume of work orders received,
with December historically being a slow period. Facilities management contracts
are not significantly seasonal or cyclical in nature. The nature of the business
does not lend itself to backlogs and references to backlogs are not meaningful.
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MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Christopher J. Weiler 33 President, Chief Executive Officer and Director
John S. Stoppelman 52 Chairman of the Board and Director
Allen C. Outlaw 30 Vice President - Sales and Marketing and Director
Anthony A. Kopsidas 26 Vice President - Operations and Director
Joseph Sciacca 43 Chief Financial Officer
Larry F. Morris 30 Vice President - Sales and Marketing
Charles B. Millar 36 Director
Jorge R. Forgues 41 Director
Arnold J. Wasserman 59 Director
Christopher J. Weiler founded the Company with Mr. Stoppelman in December,
1992 and has been President, Chief Executive Officer and a director of the
Company since that time. Mr. Weiler graduated from the United States Naval
Academy in 1985 and served in the United States Navy as a surface warfare
officer and as a Navy Senate Liaison Officer on Capitol Hill, Washington, D.C.
Joining Pitney Bowes Management Services (PBMS) in 1991, Mr. Weiler took the
reigns of PBMS Washington's most volatile account and refined it into one of the
largest and most profitable national accounts.
John S. Stoppelman founded the Company with Mr. Weiler in December, 1992
and has been Chairman of the Board of Directors since inception. Mr. Stoppelman
has also served as Secretary and Treasurer. Mr. Stoppelman has been a practicing
attorney for twenty five years. After working as an attorney at a government
agency for four years, Mr. Stoppelman entered private practice in 1976,
specializing in securities, corporate, and other investment related law and
litigation. Mr. Stoppelman has also been the Chairman of Justin Asset
Management, Inc., a registered investment advisory firm (1985-1994). He has
served on the American Bar Association Committee on Federal Regulation of
Securities (1976-present) and as Vice-Chairman of the Subcommittee on SEC
Practice and Enforcement Matters of the ABA Federal Regulation of Securities
Committee (1979-1991). Mr. Stoppelman has published several articles relating to
the areas of his practice and has appeared at various times on national
television to comment on various securities related issues.
Allen C. Outlaw has been Vice President of Sales and Marketing since
joining the Company in March 1994. Mr. Outlaw has also served on the Board of
Directors since March, 1994. Prior to joining the Company, he held various
positions in the investment industry including owner and Director of Marketing
of Justin Asset Management a successful investment management firm from January
1991 until joining the Company.
Anthony A. Kopsidas has been the Vice President of Operations since
December, 1994. Prior thereto Mr. Kopsidas served as a supervisor since joining
the Company in March 1994. Mr. Kopsidas served as president of Corporate Lawn
and Landscaping, a Maryland corporation, for three years before joining the
Company. Mr. Kopsidas has also served on the Board of Directors since December,
1994.
Joseph Sciacca has served as Chief Financial Officer since October 1996.
From 1991 to 1994 Mr. Sciacca served as Vice President - Finance of Q-Star
Technology Inc. and from 1994 until joining the Company in October 1996, Mr.
Sciacca was self-employed with a private practice that specialized in business
planning, business combinations and taxation. He has been a practicing
accountant for twenty-one years. He is a graduate from Georgetown University and
earned his Masters of Science in Taxation from The American University.
Larry F. Morris has served as Vice President of Sales and Marketing in the
Atlanta office since joining the Company in November 1995. Prior thereto Mr.
Morris spent seven years as a legal recruiter and consultant to law firms
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and corporations, most recently as President of Morris & Company from October
1994 until joining the Company and prior thereto as Executive Vice President and
Managing Recruiter of the Atlanta placement firm Bellon & Associates from
January 1993 until October 1994. From January 1990 until January 1993 Mr. Morris
was Vice President of the Houston attorney recruitment firm, Lyn-Jay
International, which merged with Richard, Wayne & Roberts in 1992.
Charles B. Millar has served as a Senior Vice President of the Washington
D.C. investment banking firm of Johnston, Lemon & Co., Inc. since 1991. Mr.
Millar joined the Board of Directors, Compensation and Audit Committees in
August 1996.
Jorge R. Forgues has held the positions of Vice President of Finance and
Administration, Chief Financial Officer and Treasurer of Network Imaging
Corporation since April 1996. From October 1993 until assuming his current
position, Mr. Forgues was Vice President of Finance and Administration, Chief
Financial Officer and Treasurer of Globalink, a Fairfax-based, publicly-traded,
machine translation software company. From 1992 to 1993 Mr. Forgues was the
Director of Accounting for Spirit Cruises, a $50 million harbor cruise line with
operations in nine states. Prior thereto, from 1987 to 1992, Mr. Forgues was
Vice President of Finance at Best Programs, Inc., a $25 million computer
software developer. Mr. Forgues joined the Board of Directors, Compensation and
Audit Committees in August 1996.
Arnold J. Wasserman has in excess of 35 years of business experience as an
Engineer, Sales/Marketing Executive, Leasing Executive and Business Consultant.
During the past five years Mr. Wasserman has been self-employed as a business
consultant. Mr. Wasserman is also a director and Chairman of the Audit Committee
of Stratusus, Inc., a reporting company. Mr. Wasserman joined the On-Site's
Board of Directors in September 1996.
All directors hold office until the next annual meeting of the
stockholders and the election and qualification of their successors. Executive
officers are elected by the Board of Directors annually and serve at the
discretion of the Board.
Messrs. John Stoppelman, Charles Millar and Jorge Forgues are the members
of the Audit Committee of the Board of Directors. Messrs. Christopher Weiler,
Charles Millar and Jorge Forgues are the members of the Compensation Committee
of the Board of Directors.
Director Compensation
Directors currently receive no cash compensation for serving on the Board
of Directors other than reimbursement of reasonable expenses incurred in
attending meetings. The outside directors, Charles B. Millar, Jorge R. Forgues
and Arnold J. Wasserman have each received options to purchase 20,000 shares of
Common Stock vesting over a period of one year in equal portions at the end of
each quarter. The options were granted at the market price at the time of grant.
Executive Compensation
The following table sets forth the cash compensation paid or accrued by
the Company to the Company's Chief Executive Officer and the Company's other
executive officers whose compensation exceeded $100,000 for the fiscal years
ended December 31, 1995 and December 31, 1994.
Summary Compensation Table
<TABLE>
<CAPTION>
Options
Name and Principal Position Fiscal Year Salary (in shares)
- --------------------------- ----------- ------ -----------
Long Term
Annual Compensation(1) Compensation
---------------------- ------------
<S> <C> <C> <C>
Christopher Weiler ................... 1995 $85,000 0
President and Chief Executive Officer 1994 $65,000 0
1993 $50,000 0
</TABLE>
- ----------
24
<PAGE>
(1) As of June 1, 1996, Mr. Weiler will be compensated at a rate of $100,000 per
annum. See "Management - Employment Agreements."
No other officer received cash compensation in excess of $100,000 in 1993, 1994
or 1995.
Stock Option Plans
1995, 1996 and 1997 Stock Option Plans. Effective March 3, 1995, August 2, 1996,
and January 13, 1997 the Board of Directors of the Company adopted the 1995 1996
and 1997 Stock Option Plans (the "Plans"). The 1995 Plan was approved by the
stockholders of the Company at the Stockholder's Annual Meeting held on March
15, 1995.
The Plans are designed to attract and retain qualified personnel in key
positions, provide officers, directors and key employees with a proprietary
interest in the Company as an incentive to contribute to the success of the
Company and to reward key employees for outstanding performance and the
attainment of targeted goals. The Plans provide for the grant of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code as well
as nonqualified stock options. The total number of options to purchase the
Company's common stock granted under the 1995, 1996 and 1997 Plans are not to
exceed 510,000 shares 242,000, and 500,000 shares respectively. The number of
shares which may be issued under the Plan may be adjusted to reflect any changes
in the number of shares of the Company's Common Stock due to the declaration of
stock dividends, recapitalization resulting in stock splits or combinations or
exchanges of shares.
The 1995 1996, and 1997 Stock Option Plans authorize the Board of
Directors to administer the Plans. The Board's authority includes the authority
to grant Options to purchase Common Stock, determine which Options shall
constitute Incentive Stock Options and which shall constitute Nonqualified Stock
Options and to determine the exercise price of the options granted. Options may
be granted to employees, officers and directors as well as employees of present
or future divisions and subsidiary corporations. Options granted as Incentive
Stock Options are subject to two limitations. The first is that the aggregate
Fair Market Value of the shares of Common Stock underlying the Options becoming
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000. The Second limitation is that the Option Price for Shareholders
holding 10% or more of the outstanding shares shall not be less than 110% of the
Fair Market Value of the Common Stock. All Options granted under the Plans may
only be exercised while the Optionee is then in the employ of the Company and
has remained continuously so employed since the date of the grant of the Option.
If the employment of the Optionee terminates, other than by reason of death,
disability or retirement, all Options may be exercised within three months after
such termination, with the exception that all options shall terminate upon
dismissal for cause. Options granted under the Plans are not transferable other
than by will, the laws of descent and distribution or to a revocable inter vivos
trust for the primary benefit of the Optionee and his or her spouse.
Employment Agreements
The Company has entered into a three-year employment agreement with
Christopher J. Weiler effective December 1995 which provides for his employment
as President and Chief Executive Officer. The employment agreement provides for
an annual base compensation of $85,000 until June 1, 1996 and $100,000
thereafter subject to increases upon review by the Board of Directors, and
annual bonuses at the discretion of the Board of Directors. The amount of any
increases to base salary and bonuses granted by the Board of Directors is based
upon a review of the employee's overall performance and the achievement of
employment goals set by the Board.
The Company has entered into a one year employment agreement, to be
renewed automatically for succeeding one year periods, with Allen Outlaw
effective June 1, 1994 which provides for his employment as Vice President of
Sales and Marketing. The employment agreement provides for an annual base
compensation of $50,000 subject to increases upon review by the Board of
Directors, and incentives and annual bonuses at the discretion of the Board of
Directors. The amount of any increases to base salary and bonuses granted by the
Board of Directors is based upon a review of the employee's overall performance
and the achievement of employment goals set by the Board. The agreement also
provides for options to purchase 162,000 shares of the Company's Common Stock.
The options are subject to a vesting schedule which ties vesting to the
achievement of certain employment goals. These goals were met and exceeded
during 1994.
25
<PAGE>
Begining in October, 1996 Mr. Outlaw began to receive a flat salary of $95,000
per year which replaced his prior compensation arrangement.
The Company has entered into a three year employment agreement, to be
renewed automatically for succeeding one year periods, with Larry F. Morris
effective November 1996, which provides for his employment as Vice President of
Sales and Marketing. The employment agreement provides for a base non-refundable
salary draw of $52,000 per year payable monthly against commission compensation.
Mr. Morris receives a commission of .25% on each percentage point of margin on
reprographic and printing revenues that are realized by the Company through
sales managed or closed by Mr. Morris with a cap at 10% on all full margin (40%
or greater gross) reprographic revenues. Mr. Morris also receives a commission
of .125% on each percentage point of margin on facilities management revenues
that are realized by the Company through sales managed or closed by Mr. Morris
with a cap of 5% on a full margin (40% or greater gross) facilities management
revenues. The agreement also provides for options to purchase 108,000 shares of
the Company's Common Stock. The options are subject to a vesting schedule
whereby 36,000 shares vest on the first, second and third anniversary of the
employment agreement. 27,000 options from a previous employment agreement are
currently vested.
The Company has entered into a three year employment agreement, to be
renewed automatically for succeeding one year periods, with Anthony Kopsidas
effective December 1995, which provides for his employment as Vice President of
Operations. The employment agreement provides for an annual base compensation of
$55,000 subject to increases upon review by the Board of Directors, and
incentives and annual bonuses at the discretion of the Board of Directors. The
amount of any increases to base salary and bonuses granted by the Board of
Directors is based upon a review of the employee's overall performance and the
achievement of employment goals set by the Board. The agreement also provides
for options to purchase 126,000 shares of the Company's common stock. The
options are subject to a vesting schedule whereby the options vest on the first,
second and third anniversaries of the commencement of employment with the
Company. All of the options are currently vested.
The Company has entered into a three year employment agreement, to be
renewed automatically for succeeding one year periods, with Joseph Sciacca
effective September 26, 1996, which provides for his employment as Chief
Financial Officer. The employment agreement provides for an annual base
compensation of $90,000 subject to increased upon review by the Board of
Directors, and incentives and annual bonuses at the discretion of the Board of
Directors. The amount of any increases to base salary and bonuses granted by the
Board of Directors is based upon a review of the employee's overall performance
and the achievement of employment goals set by the Board. The agreement also
provides for options to purchase 75,000 shares of the Company's Common Stock.
The options are subject to a vesting schedule whereby the options vest in equal
quarterly installments over a four year period. In addition, the Agreement
provides for a $25,000 loan. 4,688 shares are currently vested.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the bylaws of the Company provide that the Company is required to
indemnify its officers and directors, employees and agents under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. The bylaws provide that the Company,
among other things, will indemnify such officers and directors, employees and
agents against certain liabilities that may arise by reason of their status or
service as directors, officers, or employees (other than liabilities arising
from willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
PRINCIPAL STOCKHOLDERS
26
<PAGE>
The following table sets forth information as of the date of this
Prospectus based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
or a group known by the Company to be the owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director, (iii) each executive
officer named in the Summary Compensation Table under the caption "Management",
and (iv) all officers and directors as a group.
<TABLE>
<CAPTION>
Name # of Shares Beneficially Owned Approximate % of Beneficial
- ---- ------------------------------ ---------------------------
Ownership (1)
-------------
<S> <C> <C>
John S. Stoppelman (2)................ 641,100 13.4%
The Stoppelman Law Firm
1749 Old Meadow Road
Suite 610
McLean, VA 22102
Christopher J. Weiler................. 360,000 7.5%
c/o the Company
Allen C. Outlaw (3)................... 207,000 4.3%
c/o the Company
Anthony A. Kopsidas (4)............... 126,000 2.6%
c/o the Company
Larry F. Morris....................... 27,000 *
c/o the Company *
Joseph Sciacca (5).................... 32,065 *
c/o the Company
Jorge R. Forgues (6) 10,000 *
Network Imaging Corporation
500 Huntmar Park Drive
Herndon, VA 20170
Charles B. Millar (6) 10,000 *
Johnston Lemon & Co., Inc.
1101 Vermont Ave, NW
Washington DC 20005
Arnold J. Wasserman (6) 10,000 *
Arnold J. Wasserman Companies
1 Brookwood Drive
West Caldwell, NJ 07006
All Officers and Directors as a 1,423,165 30%
group..............................
</TABLE>
- ----------
* Less than 1%
(1) Based on 4,794,021 shares of Common Stock outstanding as of the date of this
prospectus.
(2) Assumes exercise of 3,700 Warrants to purchase Common Stock at $6.00 per
share.
(3) 162,000 Shares are held by escrow agent pursuant to the Promissory Note and
Escrow Agreement. See "Interest of Management and others in Certain Transactions
- - Loans and Guarantees".
(4) Assumes exercise of vested stock option to purchase 126,000 shares of common
stock at $1.11 per share.
(5) Assumes exercise of stock options that are currently vested or will vest
within 60 days hereof to purchase 9,375 Shares of Common Stock at $2.125 per
share.
(6) Assumes Exercise of stock option that are currently vested or will vest
within 60 days hereof to purchase 10,000 shares of Common Stock at $2.50 per
share.
27
<PAGE>
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In March 1994, the Company granted Options to purchase 162,000 shares of
Common Stock at an adjusted price of $0.56 per share to Allen Outlaw pursuant to
his original employment agreement as an incentive to join the Company. Mr.
Outlaw is the Vice President of Sales and Marketing and a director. The Options
were subject to a vesting schedule based on sales goals that were met and
exceeded during 1994. At the date of grant, these options were granted on terms
no less favorable to the Company than those available to unaffiliated parties
purchasing shares of the Company's Common Stock.
In December 1995 the Company granted Options to purchase 126,000 shares of
Common Stock at $1.11 per share to Anthony Kopsidas, the Vice President of
Operations and a director. The Options are subject to a vesting schedule whereby
the options vest on the first, second and third anniversaries of his employment.
All of the Options are currently vested. At the date of grant, these options
were granted on terms no less favorable to the Company than those available to
unaffiliated parties purchasing shares of the Company's Common Stock.
In December 1995 the Company granted Options to purchase 162,000 shares of
Common Stock at $1.39 per share to Larry Morris, Vice President of Sales and
Marketing. Twenty seven thousand (27,000) of the Options were vested upon the
grant, Mr. Morris entered into a revised Employment Agreement with the Company
in October 1996 which granted Mr. Morris options to purchase 108,000 shares of
Common Stock at $2.12 per share. The options vest in equal portions on the
first, second and third anniversaries of the date of the Employment Agreement
with the Company if the Agreement is still in effect. Options to purchase 27,000
shares of Common Stock are vested from the prior Employment Agreement. At the
date of grant, these options were granted on terms no less favorable to the
Company than those available to unaffiliated parties purchasing shares of the
Company's Common Stock.
In July 1996 the Company entered into agreements with certain Selling
Securityholders named below whereby the Selling Securityholders exchanged shares
of the Company's common stock acquired in private placements for Units issued by
the Company. Manhattan Group Funding exchanged 90,000 shares for 45,000 Units;
Paul Sozansky exchanged 30,000 shares for 15,000 Units, Ronnee Medow exchanged
45,000 shares for 22,500 Units, Sagax Fund II Ltd. exchanged 23,810 shares for
11,905 Units, Sabine Devilloutreys exchanged 23,810 shares for 11,905 Units and
Leonard and Roslyn Parker exchanged 5,626 shares for 2,813 Units.
In September 1996 the Company granted Options to purchase 75,000 shares of
the Company's Common Stock at $2.125 per share to Joseph Sciacca, Chief
Financial Officer. The Options vest in equal quarterly installments over a four
year period. At the date of grant, these options were granted on terms no less
favorable to the Company than those available to unaffiliated parties purchasing
Shares of the Company's Common Stock.
In September 1996 the Company granted options to purchase 20,000 shares of
the Company's Common Stock at $2.50 per share to each of the Company's outside
directors, Jorge R. Forgues, Charles B. Millar and Arnold J. Wasserman. The
options vest in equal quarterly installments over a period of one year. At the
date of the grant, these options were granted on terms no less favorable to the
Company than those available to unaffiliated parties purchasing Shares of the
Company's Common Stock.
Loans and Guarantees
In March 1996, the Company loaned $89,900 to Allen C. Outlaw, Vice
President of Sales and Marketing. The loan bears interest at 6% per year with a
balance of $50,400 principal and interest due April 1, 1998.
During 1994, the company received a $15,000 non-interest bearing working
capital advance from the Company's Chairman of the Board of Directors, John S.
Stoppelman. The advance was repaid during 1995.
In September 1996 the Company loaned $25,000 to Joseph Sciacca, Chief
Financial Officer, pursuant to an employment agreement. The loan bears interest
at the prime rate at the date of the loan and is due September 26, 1998.
Revenues and Expenses
28
<PAGE>
During 1995, the Company billed the Chairman of the Board of Directors,
John S. Stoppelman approximately $19,000 for reprographic services and the sale
of a photocopier. These transactions occurred at the same prices available to
non-related third parties.
During 1995 and 1994, the company incurred approximately $20,000 and
$4,000 respectively, for legal services rendered by the Stoppelman Law Firm,
P.C., of which the Chairman of the Board of Directors, John S. Stoppelman is a
principal. During the nine months ended September 30, 1996, the Company incurred
approximately $190,671 for legal services rendered by the Stoppelman Law Firm,
P.C. The Company believes that the fees charged were at least as favorable as
those obtainable from an uninterested third party. In October 1996, the Company
entered into an arrangement with The Stoppelman Law Firm whereby the Company
pays a flat rate of $5,000 per month for legal services.
Future transactions with interested parties will continue to be handled on
an arms' length basis, upon terms no less favorable to the Company than those
available from unaffiliated third parties.
No loans shall be made by the Company to officers, directors, or to a 5%
or greater stockholder of the Company, or to their affiliates, except for bona
fide business purposes.
Market for Securities
The Common Stock, Warrants and Units (comprised of two shares of common
stock and one Common Stock Purchase Warrant) of On-Site Sourcing, Inc. are
listed on the Nasdaq SmallCap Market and trade under the symbols "ONSS", "ONSSW"
and "ONSSU" respectively. The table below represents the quarterly high and low
sales prices for each quarter since the Company's initial public offering in
July 1996. (1)
Common Stock Warrants Units
------------- ------------- -------------
High Low High Low High Low
---- --- ---- --- ---- ---
1996
- ----
Third Quarter $3.625 $2.125 $1.000 $0.375 $8.000 $4.500
Fourth Quarter $2.625 $2.125 $0.375 $0.250 $5.000 $4.500
(1) The company issued units comprised of two shares of Common Stock and one
Common Stock Purchase Warrant in connection with the initial public offering.
The Units began trading on July 11, 1996 and the Common Stock and Warrants began
trading separately on August 19, 1996 with the Units continuing to trade as
well.
As of January 31, 1997 there were 47 holders of record and approximately
1,100 beneficial owners of the Common Stock as of December 31, 1996.
The Company has not declared and cash dividends on its Common Stock and
does not expect to declare or pay any cash dividends in the forseeable future.
See "Description of Securities--Dividends" and "Risk Factors--Dividend Policy".
DESCRIPTION OF SECURITIES
Units
The Units offered in the initial public offering consist of two shares of
Common Stock and one Redeemable Common Stock Purchase Warrant. The units are
evidenced by separate certificates for the Common Stock and the Warrants which
comprise the Units.
Common Stock
The holders of Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The current officers and directors of the Company
will continue to beneficially own more than 30% of the shares of Common Stock
after the offering and, accordingly, will be able to elect all of the Company's
directors and control corporate policy. Holders of shares of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
in its discretion, out of funds legally available therefor. In the event of
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in the assets of the Company, if any,
legally available for distribution to them after payment of debts and
liabilities of the Company after provision has been made for each class of
stock, if any, having liquidation preference over the Common Stock. Holders of
shares of Common Stock have no conversion, preemptive or other subscription
rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered will be, when issued upon payment of the consideration
set forth in this Prospectus, fully paid and non-assessable.
Preferred Stock
The Company is currently authorized to issue 1,000,000 shares of Preferred
Stock, par value $.01 per share. The preferred stock is issuable in one or more
series with such rights, preferences, maturity dates and similar matters as the
Board of Directors of the Company may from time to time determine without any
further vote or action by the Company's stockholders. No Preferred stock is
currently outstanding.
Redeemable Warrants
29
<PAGE>
The Company has registered 1,309,123 Warrants to purchase Common Stock,
including Warrants issuable if M.H. Meyerson & Co., Inc. exercises in full its
options to purchase Units for itself and to cover over-allotments. The Company
has reserved an equal number of shares of Common Stock for issuance upon
exercise of the Warrants. The following is a brief summary of all the material
provisions of the Warrants. For a more detailed description see the Warrant
Agreement between the Company and the Continental Stock Transfer and Trust
Company, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. See "Additional Information".
Each warrant entitles its holder to purchase one share of Common Stock at
an exercise price of $6.00 per share. The Warrants expire five years from the
date of the closing of the sale of the Units offered hereby.
The Warrants are redeemable by the Company upon thirty days prior written
notice for $.01 per Warrant if the average closing bid price of the Common Stock
is $7.00 or more per share for a period of ten consecutive trading days. Warrant
holders shall have exercise rights until the close of the trading day preceding
the date fixed for redemption.
No warrant will be exercisable unless, at the time of exercise, the
Company has filed a current registration statement with the United States
Securities and Exchange Commission covering the shares of Common Stock issuable
upon exercise of such Warrants and such shares have been registered or qualified
or deemed to be exempt from registration or qualification under the securities
laws of the state of residence of the holder of such Warrant. The Company will
use its best efforts to have all such shares so registered or qualified on or
before the exercise date and to maintain a current prospectus relating thereto
until the expiration of the Warrants, subject to the terms of the Warrant
Agreement. While it is the Company's intention to do so, there can be no
assurance that the Company will be successful in registering such shares.
The exercise price of the Warrants is subject to adjustment upon the
occurrence of certain events, including the issuance of dividends payable in
Common Stock and subdivision or combinations of the Common Stock.
Dividend Policy
The Company has never paid cash dividends on its Common Stock. The Board
of Directors does not anticipate paying cash dividends in the foreseeable future
as it intends to retain future earnings to finance the growth of the business.
The payment of future cash dividends will depend on such factors as earnings
levels, anticipated capital requirements, the operating and financial condition
of the Company and other factors deemed relevant by the Board of Directors.
Delaware Law with Respect to Business Combinations
The Company is subject to the State of Delaware's "business combination"
statute, Section 203 of the Delaware General Corporation Law. In general, such
statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with a person who is an "interested stockholder" for a
period of three years after the date of the transaction in which that person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates, owns (or, within three years prior to the proposed business
combination, did own) 15% or more of the Delaware corporation's voting stock.
The statute could prohibit or delay mergers or other takeovers or change in
control attempts with respect to the Company and, accordingly, may discourage
attempts to acquire the Company.
Transfer Agent
The transfer agent for the Common Stock is the Continental Stock Transfer
and Trust Company, 2 Broadway, New York, NY 10004.
Reports to Stockholders
30
<PAGE>
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
As of the date of this Prospectus, the Company has registered its Common
Stock and Warrants under the provisions of Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
agreed that it will use its best efforts to continue to maintain such
registration for a minimum of five years from the date of this Prospectus. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act.
Lock-Up Agreements
All officers, directors and five percent or greater shareholder's have
agreed not to offer, pledge, sell, or contract to sell, transfer, give, encumber
or otherwise dispose of any shares of common stock of the Company directly or
indirectly, for a period of one year after the effective date of the
Registration Statement on Form SB-2. The lock-up letter also includes any shares
of common stock which may be acquired upon exercise of stock options or warrants
now or hereafter held by the officers, directors or five percent shareholders.
The officers, directors and five percent shareholders are permitted to transfer
common stock to other persons who have signed a similar letter provided that the
shares shall remain to be so restricted in the hands of such transferee.
All principals of the Company holding the Company's unregistered Common
Stock have agreed in writing not to sell, assign, transfer, or make any other
disposition of any of their shares of Common Stock or any security convertible
into or exchangeable for Common Stock prior to two years after the date of this
prospectus or twelve (12) months after the date of this prospectus with M.H.
Meyerson & Co. Inc.'s prior written consent. Additionally, all Securityholders
who have registered Common Stock in this offering (other than the Common Stock
included in the Units to be sold in this offering) have agreed in writing not to
sell, assign, transfer, or make other disposition of any of their shares of
Common Stock prior to six (6) months after the date of this Prospectus without
the prior written consent of M.H. Meyerson & Co. Inc. See "Selling
Securityholders".
INTEREST OF COUNSEL
John S. Stoppelman, a principal of The Stoppelman Law Firm, P.C., counsel
to the Company, is a founder and the Chairman of the Board of Directors of the
Company, owner of 641,100 shares of Common Stock. The fees collected by the
Stoppelman Law Firm from the Company did not constitute five percent of the law
firm's gross revenue in any year of the Company's existence. See "Risk Factors -
Possible Conflicts of Interest Between the Company and the Company Counsel". The
Company believes that the fees charged were at least as favorable as those
obtainable from an uninterested third party.
31
<PAGE>
SELLING SECURITYHOLDERS
Concurrently with the initial public offering, 777,955 shares of the
Company's Common Stock have been registered under the Securities Act pursuant to
the Registration Statement declared effective on July 9, 1996. Of these shares,
109,123 additional Units (the "Additional Units") consisting of 218,246 shares
of Common Stock, $0.01 par value per share ("Selling Securityholders' shares"),
and 109,123 Redeemable Common Stock Purchase Warrants have been sold
concurrently with the initial public offering. The remaining 559,709 shares of
Common Stock may be offered and sold pursuant to this Selling Shareholder
Prospectus in six months of the effective date of the Registration Statement, or
sooner with the consent of M.H. Meyerson & Co., Inc., by the Selling
Securityholders from time to time as market conditions permit in the Nasdaq
SmallCap Market, or otherwise, at prices and terms then prevailing or at prices
related to the then current market price. The Company will pay all expenses in
connection therewith (other than brokerage commissions and fees). M.H. Meyerson
& Co., Inc. shall have a right of first refusal to act as broker for the owners
of the 559,709 shares which were registered in the initial public offering for
sale in six months or sooner with the consent of M.H. Meyerson. The Company will
not receive any of the proceeds from the sale of the Selling Securityholders'
shares of Common Stock. See "Selling Securityholders" and "Description of
Securities - Lock-up Agreement."
<TABLE>
<CAPTION>
Beneficial Owner Number Percent Number Number Number Percent
- ---------------- ------ ------- ------ ------ ------ -------
Shares Beneficially Shares Shares to be Shares Beneficially Owned
Owned Prior to Offering to be Sold in the After the Offering
Registered Offering (1)
----------------------- ---------- ----------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Manhattan Group Funding 180,000 7.0% 180,000 180,000 0 0%
Ron Heller
30 Montgomery Street
Jersey City, NJ 07302
Leonard and Roslyn Parker 11,250 * 11,250 11,250 0 0
9576 Shady Brook Drive
Building 62-201
Boynton Beach, FL 33437
Edward I. Tishelman 45,000 1.7% 45,000 45,000 0 0
254 East 68th Street
New York, NY 10002
Ronnee Medow 90,000 3.5% 90,000 90,000 0 0
c/o Michael Miller
485 Madison Avenue
Suite 1100
New York, NY 10022
Donald L. Skidmore 11,905 * 11,905 11,905 0 0
10900 Equestrian Court
Reston, VA 22090
Carlton F. Gay 11,905 * 11,905 11,905 0 0
c/o Dean Witter Reynolds
2 Wisconsin Circle
Suite 330
Chevy Chase, MD 20815
Mr. and Mrs. Edward A. Baroody 11,905 * 11,905 11,905 0 0
8811 Sandy Ridge Court
Fairfax, VA 22031
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
John Patterson, Esq. 11,905 * 11,905 11,905 0 0
Livingston, Patterson,
Strickland & Weiner
46 North Washington Boulevard
Suite 1
Sarasota, FL 34236
Sabine Devilloutreys 23,810 * 23,810 23,810 0 0
c/o Denis Seynhaeve
Delmag, Inc.
900 Bestgate Road
Suite 410
Annapolis, MD 21401
Sagax Fund II Ltd. 23,810 * 23,810 23,810 0 0
c/o International Fund
Administration, Ltd.
48 Par-La-Ville Road
Suite 464
Hamilton HM 11, Bermuda
Daniel J. Weiler 11,905 * 11,905 11,905 0 0
7402 Beverly Manor Drive
Annandale, VA 22003
Joseph Sciacca 5,000 * 5,000 5,000 0 0
7224 Beechwood Rd.
Alexandria, VA 22307
Walter S. Luffsey 11,905 * 11,905 11,905 0 0
1805 Crystal Drive
No. 713-S
Arlington, VA 22202
Christopher John Laiti 5,000 * 5,000 5,000 0 0
12525 Knollbrook Drive
Clifton, VA 22024
Brentwood, Inc. 7,000 * 7,000 7,000 0 0
12525 Knollbrook Drive
Clifton, VA 22024
Bill Reynolds 11,905 * 11,905 11,905 0 0
P.O. Box 26389
Richmond, VA
IRA Account of Martin H. 56,250 2.2% 56,250 56,250 0 0
Meyerson
30 Montgomery Street
Jersey City, NJ 07302
Michael Silvestri 11,250 * 11,250 11,250 0 0
M.H. Meyerson & Co., Inc.
30 Montgomery Street
Jersey City, NJ 07302
Jeffrey E. Meyerson 11,250 * 11,250 11,250 0 0
M.H. Meyerson & Co., Inc.
30 Montgomery Street
Jersey City, NJ 07302
M.H. Meyerson & Co., Inc. 45,000 1.7% 45,000 45,000 0 0
30 Montgomery Street
Jersey City, NJ 07302
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Paul Sozansky 90,000 3.5% 90,000 90,000 0 0
8 Coventry Drive
Belle Vista, AR 72714
Kenneth J. Koock 90,000 3.5% 90,000 90,000 0 0
M.H. Meyerson & Co., Inc.
30 Montgomery Street
Jersey City, NJ 07302
------- ------ ------- ------- ---- -----
TOTALS................................ 777,955 30% 777,955 777,955 0 0%
------- ------ ------- ------- ---- -----
</TABLE>
- ----------
* Less than 1%
(1) The offering consists of (A) 109,123 Units offered on the date of the
initial public offering and (B) 559,709 shares being registered for sale in six
months or sooner with the consent of M.H. Meyerson. The 109,123 Units consist of
90,000 shares and 45,000 Warrants offered by Manhattan Group Funding, 5,626
shares and 2,813 Warrants offered by Leonard and Roslyn Parker, 45,000 shares
and 22,500 warrants offered by Ronnee Medow, 23,810 shares and 11,905 warrants
offered by Sabine Devilloutreys, 23,810 shares and 11,905 warrants offered by
Sagax Fund II Ltd. and 30,000 shares and 15,000 warrants offered by Paul
Sozansky.
The Common Stock may be sold by one or more of the following methods: (a)
a block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
and (c) face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Securityholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Securityholders in amounts to be negotiated. Such brokers and dealers and any
other participating brokers and dealers may be deemed to be "Underwriters"
within the meaning of the Securities Act in connection with such sales. M.H.
Meyerson & Co., Inc. has a right of first refusal to sell these shares with a
commission in accordance with applicable NASD rules.
SHARES ELIGIBLE FOR FUTURE SALE AND PLAN OF DISTRIBUTION
Prior to the initial public offering there was no public market for the
Units, the Common Stock or the Warrants. Future sales of substantial amounts of
Units, the Common Stock or the Warrants in the public market could adversely
affect prevailing market prices and the Company's ability to raise capital
through future offerings of its securities.
As of the date hereof, the Company has outstanding a total of 4,794,021
shares of Common Stock. Of the 4,794,021 shares outstanding, 2,978,355 shares of
Common Stock offered in the initial public offering and subsequent exercise of
the overallotment option are freely tradeable without restriction or requirement
for further registration under the Securities Act (the "Registered Shares"). Any
sale by an affiliate would be subject to certain volume limitations and other
restrictions. Of the Registered Shares, 218,246 shares were sold by selling
shareholders as Units in the initial public offering and 559,709 shares are
offered in this Prospectus. The remaining 1,815,666 outstanding shares are
"restricted" shares within the meaning of Rule 144 (the "Restricted Shares").
The Restricted Shares outstanding were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Securities
Act and may be sold only if they are registered under the Securities Act or an
exemption from registration is available. See "Selling Securityholders."
34
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by The Stoppelman Law Firm, P.C., McLean, Virginia.
EXPERTS
The financial statements at December 31, 1995 and for the year ended 1995
included in this Prospectus and elsewhere in the Registration Statement of which
this Prospectus forms a part, to the extent indicated in their reports, have
been audited by Grant Thornton LLP, independent certified public accountants,
and are included herein in reliance upon the authority of said firm as experts
in giving said reports.
CHANGE IN ACCOUNTANTS
The former independent auditor for the Company, Grant Thornton, LLP
("Grant Thornton") was dismissed on November 21, 1996. Grant Thornton's reports
on the financial statements for the past two years did not contain an adverse
opinion or disclaimer of opinion, and were not modified as to uncertainty, audit
scope, or accounting principles. During the Company's two most recent fiscal
years and the subsequent interim period preceding the dismissal there were no
disagreements with Grant Thornton on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Grant Thornton's satisfaction, would have caused Grant
Thornton to make reference to the subject matter of the disagreement in
connection with its report. Grant Thornton communicated certain internal control
matters to the Company which meet the definition of reportable events. For the
fiscal year ended December 31, 1995, such reportable events involved
recommendations that the Company develop and maintain stricter internal control
policies for the following areas: accounts receivable, purchases and
disbursements, cash receipts, fixed asset capitalization, inventory, payroll and
computer processing. The Company has implemented systems of internal control
which the Company feels address the issues raised by Grant Thornton.
The Company has requested that Grant Thornton furnish the Company with a
letter addressed to the SEC stating whether or not Grant Thornton agrees with
the above statements. A copy of such letter, dated December 4, 1996 and received
by the Company on December 6, 1996 was filed as Exhibit 16.1 to the Amended
Current Report on Form 8-K filed with SEC on December 9, 1996.
The Company's Board of Directors and Audit Committee determined that it is
in the Company's best interests to engage a new independent auditor.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
SB-2 (the "Registration Statement") under the Securities Act with respect to the
Common Stock and Warrants offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, the initial
public offering and this offering, reference is made to the Registration
Statement, including the exhibits filed therewith, which may be inspected
without charge at the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549; at the New York Regional Office, 7 World Trade Center,
New York, New York 10048 and at the Midwest Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
the Registration Statement may be obtained from the Commission at its principal
office and regional office upon payment of prescribed fees. Statements contained
in this Prospectus as to the contents of any contract or other document are not
necessarily complete and, where the contract or other document has been filed as
an exhibit to the Registration Statement, each statement is qualified in all
respects by reference to the applicable document filed with the Commission.
35
<PAGE>
ON-SITE SOURCING, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Audited Financial Statements
Report of Independent Certified Public Accountants............... F-2
Balance Sheet.................................................... F-3
Statements of Operations......................................... F-4
Statements of Stockholders' Equity............................... F-5
Statements of Cash Flows......................................... F-6
Notes to Financial Statements.................................... F-7F-14
Unaudited Financial Statements
Balance Sheet.................................................... F-15
Statements of Earnings........................................... F-16
Statements of Stockholders' Equity............................... F-17
Statements of Cash Flows......................................... F-18
Notes to Financial Statements.................................... F-19F-23
F - 1
<PAGE>
(Grant Thornton Letterhead)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of directors
On-Site Sourcing, Inc.
We have audited the accompanying balance sheet of On-Site Sourcing, Inc.,
as of December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a resonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of On-Site Sourcing, Inc., as
of December 31, 1995, and the results of its operations and its cash flows for
the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
/s/ Grant Thornton LLP
Vienna, Virginia
February 28, 1996 (except for Note N, as to
which the date is July 8, 1996)
F - 2
<PAGE>
ON-SITE SOURCING, INC.
BALANCE SHEET
ASSETS
December 31, 1995
Current Assets
Cash ......................................................... $ 38,116
Accounts receivable, net ..................................... 809,927
Prepaid supplies ............................................. 54,407
-----------
Total Current Assets .................................... 902,450
Fixed Assets, net ............................................... 500,056
Other Assets .................................................... 75,529
-----------
$ 1,478,035
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade ..................................... $ 506,695
Accrued and other liabilities ................................ 148,693
Line of credit ............................................... 260,000
Current portion of long-term debt ............................ 81,954
-----------
Total Current Liabilities ............................... 997,342
Long-term Debt, Net of Current Portion .......................... 125,384
Deferred Rent ................................................... 83,626
Commitments and Contingencies ................................... --
Stockholders' Equity
Common stock, $.01 par value, 20,000,000 shares
authorized; 2,187,000 shares issued and
outstanding ............................................... 21,870
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and
outstanding ............................................... --
Additional paid-in capital ................................... 488,140
Retained deficit ............................................. (238,327)
-----------
271,683
-----------
$ 1,478,035
===========
The accompanying notes are an integral part of this statement.
F - 3
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF OPERATIONS
1995 1994
---- ----
Year ended December 31,
Revenue ............................... $ 4,919,270 $ 1,959,455
Costs and Expenses
Cost of sales ...................... 3,887,709 1,425,443
Selling and shipping ............... 343,012 54,910
Administrative ..................... 532,027 480,428
----------- -----------
4,762,748 1,960,781
----------- -----------
Earnings (Loss) from Operations ....... 156,522 (1,326)
Other Income (Expense)
Other income ....................... -- 7,922
Other expense, primarily interest .. (80,894) (28,862)
----------- -----------
Earnings (Loss) Before Income Taxes ... 75,628 (22,266)
Income Tax Expense .................... -- --
----------- -----------
Net Earnings (Loss) ................... $ 75,628 $ (22,266)
=========== ===========
Earnings (Loss) per Common Share ...... $ 0.03 $ (0.01)
----------- -----------
Average Number of Common Shares and
Common Share Equivalents Outstanding
During the Year .................... 2,648,377 2,558,377
=========== ===========
The accompanying notes are an integral part of this statement.
F - 4
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Additional Retained
Shares Stock Paid-in Capital (Deficit) Total
------ ----- --------------- --------- -----
Years ended December 31, 1995 and 1994
--------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 . 1,818,000 $18,180 $281,830 $(291,689) $ 8,321
Sale of Common Stock .... 369,000 3,690 206,310 -- 210,000
Net Loss for the Year ... -- -- -- (22,266) (22,266)
--------- ------- -------- --------- ---------
Balance at December 31, 1994 2,187,000 21,870 488,140 (313,955) 196,055
Net Earnings for the Year -- -- -- 75,628 75,628
--------- ------- -------- --------- ---------
Balance at December 31, 1995 2,187,000 $21,870 $488,140 $(238,327) $ 271,683
========= ======= ======== ========= =========
</TABLE>
The accompanying notes are an integraal partof these statements.
F - 5
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF CASH FLOWS
1995 1994
---- ----
Year ended December 31,
Increase (Decrease) in Cash
Cash Flows from Operating Activities
Net earnings (loss) ............................. $ 75,628 $ (22,266)
--------- ---------
Adjustments to reconcile net earnings to net cash
used in operating activities
Depreciation ................................. 107,412 56,298
Loss on disposition of equipment and furniture -- 7,921
Changes in assets and liabilities
Increase in accounts receivable ............ (355,978) (396,145)
Increase in prepaid supplies ............... (36,327) (16,231)
Decrease (increase) in other assets ........ 2,086 (2,041)
Increase in accounts payable - trade ....... 400,839 97,454
Increase in accrued liabilities ............ 115,655 23,067
Increase in deferred rent .................. 10,430 60,787
--------- ---------
Total Adjustments .................... 244,117 (168,890)
--------- ---------
Net Cash Provided by (Used in) Operating Activities 319,745 (191,156)
--------- ---------
Cash Flows from Investing Activities
Capital expenditures ............................ (224,287) (77,989)
Proceeds from sale of fixed assets .............. -- 8,079
Purchase of CRC, net ............................ (9,161) --
--------- ---------
Net Cash Used in Investing Activities .............. (233,448) (69,910)
--------- ---------
Cash Flows from Financing Activities
Proceeds from sale of common stock .............. -- 210,000
Proceeds of long-term debt agreements ........... 164,188 62,458
Payments under long-term debt agreements ........ (264,783) (129,580)
Net borrowings under line-of-credit agreement ... 110,034 109,966
Deferred offering costs ......................... (65,585) --
--------- ---------
Net Cash (Used in) Provided by Financing Activities (56,146) 252,844
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 30,151 (8,222)
Cash and Cash Equivalents at Beginning of Year ..... 7,965 16,187
--------- ---------
Cash and Cash Equivalents at End of Year ........... $ 38,116 $ 7,965
========= =========
The accompanying notes are an integral part of these statements.
F - 6
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Note A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
On-Site Sourcing, Inc. (the Company), was incorporated in the Commonwealth
of Virginia on December 15, 1992. During 1996, the Company was merged into a
newly formed Delaware Corporation. The Company operates in two segments, one of
which includes facilities management, litigation copying, and related services
at customer and company locations, and a second, which includes the purchase,
refurbishment, lease, sale and servicing of copy machines. The Company's
facilities management and litigation copying services are performed in
Philadelphia, Pennsylvania; Arlington, Virginia; and Atlanta, Georgia. The
Company's copy machines business is conducted from the Company's Frederick,
Maryland, office. For the year ended December 31, 1995, the purchase,
refurbishment, lease, sale and servicing of copy machines was not material to
the financial statements.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition
Revenue from reprographic services is recognized on a per copy basis upon
completion of the services. Revenue from facilities management is recognized
based on monthly fixed fees and, in certain cases, variable per copy fees, as
contained in facilities management agreements. Revenue from the sale of
refurbished copiers is recognized when the copiers are shipped and transfer of
title occurs.
Research and Development
Research and development costs are expensed as incurred.
Deferred Offering Costs
Specific incremental costs directly attributable to the planned initial
public offering (see Note N) are deferred and will be charged against the gross
proceeds of the offering. In the event the offering is not completed, the costs
will be charged to expense at that time.
Income Taxes
Deferred taxes arise from temporary differences, primarily attributable to
differences between reporting, for tax purposes, on the cash basis, and for
financial statements, on the accrual basis.
Depreciation
Depreciation on fixed assets is computed on a straight-line basis over an
estimated useful life of five years for financial reporting purposes.
Accelerated methods are used for tax purposes.
F - 7
<PAGE>
Earnings per Common Share
The Company's common stock was split 100-for-one and 18-for-one in March
1995 and February 1996, respectively. All earnings per share amounts in the
financial statements have been restated to give effect to the stock splits.
Earnings (loss) per common share is based on the weighted average number
of common shares and, if dilutive, common equivalent shares outstanding during
each year. Such average shares include the weighted average number of common
shares outstanding (2,187,000 in 1995 and 2,097,000 in 1994) plus the shares
issuable upon exercise of stock options and warrants after the assumed
repurchase of common shares with the related proceeds (461,377 in 1995 and
1994). Options and warrants granted, as well as certain shares issued during the
one-year period prior to the planned initial public offering (see Note N), are
treated as outstanding in calculating earnings per share for both periods
presented.
Employee Stock Options
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which is effective for 1996 financial statements.
SFAS No. 123 requires that stock-based compensation be accounted for on the fair
value method as described in SFAS No. 123, or on the intrinsic value-based
method of Accounting Principles Board Opinion No. 25 (APB 25), whereby if
options are priced at fair market value or above on the date of grant, there is
no compensation expense of the options to the Company. If APB 25 is used, pro
forma net income and earnings per share must be disclosed as if the fair value-
based method had been applied. The Company intends to continue accounting for
its incentive stock option plan under APB 25; therefore, the only effect on the
Company's financial statements will be the pro forma disclosure.
Long-lived Assets
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest) is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement of that loss would be based
on the fair value of the asset. SFAS No. 121 also generally requires long-lived
assets and certain identifiable intangibles to be disposed of to be reported at
the lower of the carrying amount or the fair value less cost to sell. SFAS No.
121 is effective for the Company's 1996 fiscal year-end. The Company has made no
assessment of the potential impact of adopting SFAS No. 121 at this time.
Fair Value of Financial Instruments
Effective December 31, 1995, the Company adopted SFAS No. 107, which
requires disclosing fair value to the extent practicable for financial
instruments which are recognized or unrecognized in the balance sheet.
At December 31, 1995, financial instruments held consist of the Company's
line of credit and other current debt instruments for which fair value
approximates carrying value.
Cash and Cash Equivalents
The Company considers all highly liquid securities purchased with a
maturity of three months or less to be cash equivalents. As of December 31,
1995, cash is comprised of amounts held in demand deposit accounts.
Note B - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
F - 8
<PAGE>
Accounts Receivable
Accounts receivable consisted of the following at December 31, 1995:
Trade ....................................................... $ 830,077
Other ....................................................... 9,850
Allowance for uncollectible accounts ........................ (30,000)
---------
$ 809,927
---------
Other Assets
Other assets consisted of the following at December 31, 1995:
Deferred offering costs ..................................... $ 65,585
Deposits .................................................... 9,944
---------
$ 75,529
---------
Fixed Assets
Fixed assets consisted of the following at December 31, 1995:
Copiers ..................................................... $ 467,269
Computers, equipment, and other ............................. 134,692
Vehicles .................................................... 70,525
---------
672,486
Accumulated depreciation .................................... (172,430)
---------
$ 500,056
---------
Accrued and Other Liabilities
Accrued and other liabilities consisted of the following at December 31,
1995:
Accrued salaries, commissions, taxes,
and fringe benefits ....................................... $ 70,750
Accrued sales tax payable ................................... 42,943
Other accrued liabilities ................................... 35,000
---------
$ 148,693
---------
Note C - LINE OF CREDIT
At December 31, 1995, the Company had available a $300,000 working capital
line of credit at the bank's prime rate (8.5%) plus 2%. The credit facility is
collateralized by the assets of the Company and guaranteed by the Company's
Chairman, and the Company's President and his spouse. Borrowings under the
working capital line of credit were $260,000. The credit facility expires on
April 1, 1996; however, management expects to renew the line of credit in the
ordinary course of business. In January 1996, the Company amended the credit
facility to $450,000 with all other terms remaining unchanged.
Note D - LONG-TERM DEBT
Long-term debt is as follows at December 31, 1995:
F - 9
<PAGE>
10.5% variable rate (prime plus 2%) equipment note,
collateralized by all assets of the Company, payable in equal
monthly installments of approximately $3,194, maturing
November 1998 ................................................ $ 111,800
10.5% variable rate (prime plus 2%) equipment note,
collateralized by the equipment, payable in equal monthly
installments of approximately $736, maturing September 1997 .. 16,194
7.2%-9% vehicle notes, collateralized by the vehicles, payable in
various equal monthly installments, including interest and
principal, maturing at various dates through December 1999 ... 54,153
Capital leases .................................................. 25,191
---------
207,338
Less current maturities included in current liabilities ......... (81,954)
---------
$ 125,384
---------
Aggregate maturities for long-term debt are as follows at
December 31, 1995:
Year ending December 31,
1996............................................................. $81,954
1997............................................................. 66,905
1998............................................................. 48,489
1999............................................................. 9,990
---------
$207,338
========
The above notes are subject to certain covenants; at various times
throughout the year the Company was in violation of the covenants. However, at
December 31, 1995, the banks have waived their rights under the default
provisions through December 31, 1996, in connection with the violation of the
covenants.
On January 30, 1996, the Company borrowed $182,000 from a bank. The notes
are payable in equal annual installments plus 10.5% variable interest (prime
plus 2%) maturing at various dates through October, 1998. The notes are subject
to certain covenants and are collateralized by certain assets of the Company.
Note E - LEASES
The Company leases its office facilities, copiers, and office equipment
under various operating and capital leases. Lease terms range from one to
approximately six years.
Minimum annual rental and lease commitments for leases with a remaining
term of one year or more at December 31, 1995, are as follows:
Capital Operating
Year ending December 31, Leases Lease
- ------------------------ ------- ----------
1996 ........................................... $17,441 $ 595,000
1997 ........................................... 9,762 436,000
1998 ........................................... -- 163,000
1999 ........................................... -- 126,000
2000 ........................................... -- 116,000
Thereafter ...................................... -- 75,000
------- ----------
Total minimum lease payments .................... 27,203 $1,511,000
==========
Less: interest................................... 2,012
-------
Present value of net minimum lease payments...... $25,191
=======
F - 10
<PAGE>
Fixed assets recorded under capital leases as of December 31, 1995, total
approximately $28,000. Interest expense on the outstanding obligations under
capital leases was approximately $15,000 and $13,000 for the years ended
December 31, 1995 and 1994, respectively.
Rent expense was $376,000 and $101,000 for the years ended December 31,
1995 and 1994, respectively. The Company received abatements of rent for a
portion of the term of two office space leases. Rent expense is recorded on a
straight-line basis over the life of the lease, thus giving rise to deferred
rent.
Note F - RELATED PARTY TRANSACTIONS
Transactions with an Officer/Shareholder
During the years ended December 31, 1995 and 1994, the Company recorded the
following transactions with an officer/shareholder.
o During 1994, the Company received a $15,000 non-interest bearing working
capital advance which was repaid during 1995.
o During 1995, the Company billed the officer/shareholder approximately
$19,000 for reprographic services and the sale of a copier.
o During 1995 and 1994, the Company incurred approximately $20,000 and
$4,000 respectively, for legal services rendered by the officer/shareholder.
Included in the amounts payable as of December 31, 1995, is approximately
$15,000 in legal fees due to the officer/shareholder.
Transactions with a Shareholder
During 1995 and 1994, the Company recorded revenue of approximately
$340,000 and $324,000, respectively, for services provided to a shareholder
under a facilities management agreement. Included in accounts receivable as of
December 31, 1995, is approximately $86,000 in accounts receivable from the
shareholder.
Note G - COMMITMENTS
Employment Agreements
The Company has entered into employment agreements with 12 officers and
employees. The agreements are for terms ranging from six months to five years
and generally automatically renew for periods ranging from six months to one
year. The agreements further provide for guaranteed base salaries, contingent
incentive compensation based on achievement of certain sales and other goals,
non-compete and non-disclosure restrictions and in certain cases, stock options.
The minimum amounts due under the agreements during the succeeding five-year
period, exclusive of contingent incentive compensation, is as follows:
Year ending December 31,
1996......................................................... $463,000
1997......................................................... 385,000
1998......................................................... 365,800
1999......................................................... 60,000
2000......................................................... 35,000
----------
$1,308,800
F - 11
<PAGE>
Note H - INCENTIVE STOCK OPTION PLAN
In 1995, the Company adopted an incentive stock option plan, under which a
pool of 510,000 shares has been reserved. The plan is administered and terms of
option grants are established by the Board of Directors. Under the terms of the
plan, options may be granted to the Company's employees to purchase shares of
common stock. Options become exercisable ratably over a vesting period as
determined by the Board of Directors, and expire over terms not exceeding ten
years from the date of grant, three months after termination of employment, or
one year after the death or permanent disability of the employee. The Board of
Directors determines the option price (not less than fair market value) at the
date of grant.
At December 31, 1995 and 1994, pursuant to an employment agreement, the
Company had outstanding options to sell 162,000 shares of common stock to an
officer/director of the Company at an exercise price of $.56 per share. These
options vest upon the attainment of certain performance goals. As of December
31, 1994, all options were vested. The options expire in March 1997.
At December 31, 1995, the Company had outstanding options to sell 126,000
shares of common stock to an officer/director at an exercise price of $1.11 per
share. As of December 31, 1995, options for 84,000 shares are vested, and
options for 42,000 shares are scheduled to vest in June 1996. The options expire
in December 2000.
During 1995, the Company granted to employees options for 216,000 shares of
common stock at exercise prices ranging from $1.11 to $1.39 per share. The grant
price of $1.11 per share was determined by the Board of Directors to represent
fair value and the grant price of $1.39 per share was determined to be in excess
of fair value based upon independent sales of stock by a shareholder in December
1995 at $1.11 per share. As of December 31, 1995, options for 60,000 of the
shares are vested with the remainder scheduled to vest through December 1998.
The options expire through December 2000.
The following depicts activity in the plan for the two years ended December
31, 1995:
Per Share
Exercise
Shares Prices
------ ------
Options Outstanding
-------------------
Outstanding, January 1, 1994 ...................... -- $ --
Options granted ................................ 162,000 .56
Options exercised .............................. -- --
Options expired ................................ -- --
------- ----------
Outstanding, December 31, 1994 .................... 162,000 $ .56
Options granted ................................ 342,000 $1.11-1.39
Options exercised .............................. -- --
Options expired ................................ -- --
------- ----------
Outstanding, December 31, 1995 .................... 504,000 $.56-1.39
======= ==========
Note I - STOCK WARRANTS
At December 31, 1995 and 1994, in connection with the issuance of stock,
the Company had outstanding warrants for a total of 90,000 shares of its common
stock exclusively to Ryan Lee and Company exercisable at a price of $.56 per
share (the approximate market price at time of grant). The warrants became
exercisable on July 22, 1993, and expire on July 22, 1998.
Note J - INCOME TAXES
F - 12
<PAGE>
The amounts and sources of the provision for deferred income tax expense
(benefit) were as follows for the year ended December 31:
1995 1994
---- ----
Current ................................... $ -- $ --
Deferred .................................. 30,206 (8,893)
-------- -------
30,206 (8,893)
Change in valuation allowance ............. (30,206) 8,893
-------- -------
$ -- $ --
======== =======
Deferred tax assets (liabilities) consist of the following at December 31,
1995:
Excess of tax over financial accounting depreciation ......... $ (45,293)
Operating accruals ........................................... (24,389)
Loss carryforwards ........................................... 145,340
Other ........................................................ 14,549
---------
Gross deferred tax asset ..................................... 90,207
Deferred tax asset valuation allowance ....................... (90,207)
---------
$ --
=========
The differences between the total income tax expense (benefit) and the
income tax expense (benefit) computed using the federal income tax rate were as
follows:
1995 1994
---- ----
Pretax earnings (loss) ......................... $ 75,628 $(22,266)
======== ========
Computed federal income taxes at 34% ........... $ 25,714 $ (7,570)
Computed state income taxes, net of
federal benefit ................................ 4,492 (1,323)
-------- --------
Deferred tax (benefit) expense ................. 30,206 (8,893)
Expense (benefit) arising from change
in deferred tax asset valuation allowance ...... (30,206) 8,893
-------- --------
Income tax expense ............................. $ -- $ --
======== ========
The Company has available at December 31, 1995, unused operating loss
carryforwards of approximately $364,000 that may be applied against future
taxable income and expire through 2009. The change in ownership as a result of
the planned initial public offering (see Note N) may limit the utilization of
operating loss carryforwards.
Note K - SUPPLEMENTAL CASH FLOWS INFORMATION
Noncash Investing and Financing Activities
The Company had the following noncash investing and financing activities
for the years ended December 31:
1995 1994
---- ----
Fixed assets acquired under
capital lease obligation ...................... $ 46,718 $254,939
Fixed assets acquired in
acquisition of CRC ............................ 33,308 --
Fixed asset basis reduction
related to capital lease termination .......... 33,114 --
Capital lease obligation retired
resulting from early lease termination ........ 150,236 --
F - 13
<PAGE>
During 1995, the Company entered into agreements with lessors to purchase
certain fixed assets held under capital leases for approximately $117,000, which
was less than the remaining lease obligation. These purchases occurred before
the leases had expired. The purchase of these fixed assets resulted in a
reduction in the lease obligations of approximately $150,000, and a reduction in
basis of the corresponding fixed assets of approximately $33,000.
Supplemental Disclosures of Cash Flows Information
The Company paid the following amounts for interest and income taxes during
the year ended December 31:
1995 1994
---- ----
Interest ............................. $41,150 $18,435
------- -------
Income taxes ......................... $ -- $ --
------- -------
Note L - CONCENTRATION OF CREDIT RISK
Because of the nature of the Company's business, sales to a few customers,
primarily law firms, have accounted for a significant percentage of sales.
During 1995, two customers accounted for approximately $877,000 (18%) and
$488,000 (10%) of total gross sales. Accounts receivable at December 31, 1995,
include approximately $82,000 in amounts due from these customers. During 1994,
two customers accounted for approximately $399,000 (20%) and $324,000 (17%) of
total gross sales.
Note M - ACQUISITION OF SWR ASSOCIATES, INC.
On July 27, 1995, the Company acquired SWR Associates, Inc., d/b/a CRC
Copiers, Inc. (CRC), in a business combination accounted for as a purchase. CRC
is primarily engaged in the refurbishment, sales and service of photocopy
machines. The results of operations of CRC are included in the accompanying
financial statements since the date of acquisition. The total cost of the
acquisition was $10,000, which was less than the value of the net assets of CRC
by approximately $23,000. The excess was utilized to reduce fixed assets based
on fair market values. The acquisition is not deemed material to the Company and
pro forma operating results are therefore not presented.
At the time of the acquisition, the Company also entered into an employment
agreement with CRC's former owner to manage the acquired company. The agreement
calls for five years of compensation (see Note G) and stock options (see Note
H).
Note N - PROPOSED PUBLIC OFFERING
On December 18, 1995, the Company executed a letter of intent for a
proposed initial public offering. As of July 8, 1996, the Company and the
Underwriter have agreed to modify the offer such that the Company will offer
960,000 units, each consisting of two shares of common stock, $.01 par value and
one common stock purchase warrant, to the public at a currently anticipated
price of $6.25 per unit. The warrants are redeemable by the Company for $.01 per
warrant, upon 30 days prior written notice, provided the average closing bid
price of the common stock for ten consecutive days prior to the date of the
redemption notice is $7.00 or more per share. The Company has also granted the
underwriters an option to purchase up to 144,000 additional units, exercisable
for a period of 45 days after the offering is commenced, solely to cover
overallotments. Upon the closing of the initial public offering, the
underwriters will be granted warrants to purchase up to an aggregate of 96,000
units at $10 per unit. The warrants will be exercisable during a four-year
period commencing one year from the date of the initial public offering.
F - 14
<PAGE>
ON-SITE SOURCING, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1996 1995
---- ----
(Unaudited) (Audited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 3,784,883 $ 38,116
Accounts Receivable, Net 2,136,793 809,927
Prepaid supplies 213,245 54,407
----------- -----------
Total Current Assets 6,134,921 902,450
Fixed Assets, net 1,713,667 500,056
Other Assets 50,980 75,529
----------- -----------
$ 7,899,568 $ 1,478,035
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade $ 563,829 $ 506,695
Accrued and other liabilities 268,514 148,693
Line of credit and other borrowings -- 260,000
Current portion of long-term debt 72,243 81,954
Deferred Taxes 93,400 --
----------- -----------
Total Current Liabilities 997,986 997,342
Long-term Debt, net of current portion 353,118 125,384
Deferred Rent 98,772 83,626
Commitments and Contingencies -- --
Stockholders' Equity
Common stock, $.01 par value, 20,000,000 shares authorized,
4,787,355 and 2,187,000 shares issued and outstanding 47,874 21,870
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued and outstanding -- --
Additional paid-in capital 6,354,501 488,140
Accounts and notes receivable-shareholders (50,400) --
Retained Earnings (Deficit) 97,717 (238,327)
----------- -----------
6,449,692 271,683
----------- -----------
$ 7,899,568 $ 1,478,035
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 15
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 6,368,487 $ 3,534,424 $ 2,641,926 $ 1,282,023
Cost of sales 4,616,899 2,749,899 1,822,890 1,029,878
----------- ----------- ----------- -----------
Operating Margin 1,751,588 784,525 819,036 252,145
Selling and shipping 663,143 263,742 354,273 112,416
Administration 653,757 388,580 267,172 142,167
----------- ----------- ----------- -----------
1,316,900 652,322 621,445 254,583
----------- ----------- ----------- -----------
Earnings from Operations 434,688 132,203 197,591 (2,438)
Other Income (Expense)
Other Income 62,394 -- 40,921 --
Other expense, primarily interest (64,138) (80,804) (14,596) (25,678)
----------- ----------- ----------- -----------
Earnings Before Income Taxes 432,944 51,399 223,916 (28,116)
Income Taxes 96,900 -- 68,400 --
----------- ----------- ----------- -----------
Net Earnings $ 336,044 $ 51,399 $ 155,516 $ (28,116)
=========== =========== =========== ===========
Net earnings per share $ 0.10 $ 0.02 $ 0.03 $ (0.01)
----------- ----------- ----------- -----------
Average number of Common shares and Common Share
Equivalents outstanding during the period 3,402,181 2,648,377 5,150,694 2,648,377
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 16
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30, 1996
-------------------------------------------------------------------------------
Additional Accounts Retained
Common Common Paid-In and Notes Earnings
Shares Stock Capital Receivable (Deficit) Total
--------- ------ ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 2,187,000 21,870 $ 488,140 $ (238,327) 271,683
Sale of Common Stock 2,600,355 26,004 5,866,361 5,892,365
Accounts and Notes
Receivable-shareholders (115,000) (115,000)
Payments received 64,600 64,600
Net Earnings for the Period 336,044 336,044
--------- ------ ---------- --------- -------- ----------
Balance at September 30, 1996 4,787,355 47,874 $6,354,501 $ (50,400) 97,717 6,449,692
========= ====== ========== ========= ======== ==========
<CAPTION>
For the nine months ended September 30, 1996
-------------------------------------------------------------------------------
Additional Accounts Retained
Common Common Paid-In and Notes Earnings
Shares Stock Capital Receivable (Deficit) Total
--------- ------ ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 2,187,000 21,870 $ 488,140 $ (313,955) 196,055
Net Earnings for the Period 51,399 51,399
--------- ------ ---------- --------- -------- ----------
Balance at September 30, 1995. 2,187,000 21,870 $ 488,140 $ (262,556) 247,454
========= ====== ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 17
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
Net Earnings $ 336,044 $ 51,399
----------- ---------
Adjustments to reconcile net earnings to net
Depreciation 158,358 74,754
Disposal of fixed assets (1,413) --
Changes in assets and liabilities
Increase in accounts receivable (1,326,866) (229,036)
Increase in prepaid supplies (158,838) (34,342)
(Increase) decrease in other assets 24,549 (37,220)
Increase in accounts payable 57,134 293,683
Increase in accrued liabilities 119,821 79,854
Increase in deferred taxes 93,400 --
Increase in deferred rent 15,146 7,822
----------- ---------
Total Adjustments (1,018,709) 155,515
----------- ---------
Net Cash (Used in) Provided by Operating Activities (682,665) 206,914
----------- ---------
Cash Flows Used in Investing Activities
Capital expenditures (1,370,556) (129,239)
Purchase of CRC, net -- (9,161)
----------- ---------
Net Cash used in investing activities (1,370,556) (138,400)
----------- ---------
Cash Flows from Financing Activities
Proceeds from sale of common stock 5,841,965 --
Borrowings under long-term debt agreements 751,870 --
Payments under long-term debt agreements (283,847) (57,619)
Payments under short-term debt agreements (250,000) --
Net (payments) borrowings under line of credit (260,000) 70,034
----------- ---------
Net Cash Provided by Financing Activities 5,799,988 12,415
----------- ---------
Net Increase in Cash 3,746,767 80,929
Cash and cash equivalents, Beginning of Period 38,116 7,965
----------- ---------
Cash and cash equivalents, End of Period $ 3,784,883 $ 88,894
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 18
<PAGE>
On-Site Sourcing, Inc.
Notes to Interim Financial Statements
(unaudited)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company believes that
the disclosures made are adequate to make the information presented not
misleading.
In the opinion of management, the accompanying condensed financial
statements reflect all necessary adjustments and reclassifications that are
necessary for fair presentation for the periods presented. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes filed in the SB-2. The results of
operations for the nine month period ended September 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
Revenue Recognition
Revenue from facilities management is recognized based on monthly fixed
fees and, in certain cases, variable per copy fees, as contained in
facilities management agreements. Revenue from reprographic services is
recognized on a per copy basis upon completion of the services. Revenue
from the sale of refurbished copiers is recognized when the copiers are
shipped and transfer of title occurs.
Fixed Assets
Fixed assets consists of copy center equipment, office furniture and
fixtures, and delivery equipment. Depreciation is provided for in
sufficient amounts to relate the cost of depreciable assets to operations
over their estimated service lives, ranging from three to seven years. The
straight line method is followed for financial reporting purposes.
Accelerated methods are used for tax purposes.
Capitalized Software
The Company capitalizes certain initial development costs after
technological feasibility has been demonstrated. Such capitalized amounts
are amortized commencing with product introduction over the lesser of the
expected sales cycle or over the estimated economic life. Capitalized
software costs are included in Other Assets and are reduced to net
realizable value at September 30, 1996.
F - 19
<PAGE>
On-Site Sourcing, Inc.
Notes to Interim Financial Statements--Continued
(unaudited)
================================================================================
Income Taxes
The provision for income taxes presented in the statements of earnings is
based upon the estimated effective tax rate for the year, and is largely
determined by management's estimate as of the interim date of projected
taxable income for the entire fiscal year.
Earnings per Common Share
The Company's common stock was split 100-for-one and 18-for-one in March
1995 and February 1996, respectively. All earnings per share amounts in the
financial statements have been restated to give effect to the stock splits.
Earnings per common share is based on the weighted average number of common
shares and, if dilutive, common equivalent shares outstanding during each
year. Such average shares include the weighted average number of common
shares outstanding (3,402,181 in 1996 and 2,187,000 1995) plus the shares
issuable upon exercise of stock options and warrants after the assumed
repurchase of common shares with the related proceeds (454,584 in 1996 and
1995). Options and warrants granted, as well as certain shares issued
during the one-year period prior to the initial public offering (see Note
H), are treated as outstanding in calculating earnings per share for both
periods presented.
NOTE B--CREDIT FACILITIES
At September 30, 1996, the Company had available a $450,000 working capital
line of credit at the bank's prime rate (8.25%) plus 1%, which is due on
demand. The credit facility is collateralized by the assets of the Company
and guaranteed by the Company's chairman, and the Company's president and
his spouse. At September 30, 1996 there were no borrowings under the
working capital line of credit.
The above note is subject to certain covenants; at various times throughout
the period the Company was in violation of certain covenants. The banks
have waived their rights under the default provisions through December 31,
1996.
F - 20
<PAGE>
On-Site Sourcing, Inc.
Notes to Interim Financial Statements--Continued
(unaudited)
================================================================================
The Company has retired all bank debt and short term borrowings with the
proceeds of the initial public offering.
The Company has financed certain major equipment purchases under
capitalized leases, with terms of sixty months.
NOTE C--RELATED PARTY TRANSACTIONS
Transactions with an Officer/Shareholder
During the nine months ended September 30, 1996 and 1995, the Company
recorded the following transaction with an officer/shareholder:
During the nine months ended September 30, 1996, the Company incurred
approximately $193,900 for legal services rendered by the
officer/shareholder. Included in the accounts payable as of September
30, 1996, is approximately $9,000 in legal fees due to the
officer/shareholder.
Transactions with a Shareholder
During the nine months ended September 30, 1996 and 1995 the Company
recorded the following transactions with a shareholder:
During the nine months ended September 30, 1996 and 1995, the Company
recorded revenue of approximately $343,800 and $267,000, respectively,
for services provided to a shareholder under a facilities management
agreement. Included in accounts receivable as of September 30, 1996,
is approximately $110,000 due from the shareholder.
In March 1996, the Company entered into a two-year consulting
agreement with its underwriters/shareholder for financial and
marketing services totaling $60,000 which was paid from the proceeds
of the initial public offering.
F - 21
<PAGE>
On-Site Sourcing, Inc.
Notes to Interim Financial Statements--Continued
(unaudited)
================================================================================
Nine months ended September 30, 1996 and 1995
Accounts and Notes receivable -- Shareholders
The Company had a note receivable from an officer/director for $89,900
in connection with the exercise of stock options. The balance of the
note at September 30, 1996 was $50,400.
NOTE D--COMMITMENTS
The Company has annual rental and lease commitments with a term of one year
or more. Effective January 1, 1997, the Company will expand its Arlington,
Virginia, production facility to approximately 31,000 square feet, and has
executed a new lease which will supercede its existing lease agreement. The
lease is for a five year period expiring on December 31, 2002, and the
annual minimum lease expense is $450,000 per year.
The Company has entered into a lease agreement to expand its operations to
New York City. The lease is for a period of ten years and expires on
October 31, 2006. The annual lease obligation giving effect for step
increases as called for in the agreement is $139,667.
The Company entered into a new lease obligation for its Frederick, Maryland
location for approximately 2,500 square feet. The lease has a term of five
years and expires on May 31, 1999. The annual minimum lease obligation
under the lease is $15,000.
NOTE E--INCENTIVE STOCK OPTION PLAN
In 1996 and in 1995, the Company adopted an incentive stock option plan,
under which a pool of 200,000 and 510,000, shares respectively have been
reserved. The plans are administered and terms of option grants are
established by the Board of Directors. Under the terms of the plans,
options may be granted to the Company's employees and directors to purchase
shares of common stock. Options become exercisable ratably over a vesting
period as determined by the Board of Directors, and expire over terms not
exceeding ten years from the date of grant, three months after termination
of employment, or one year after the death or permanent disability of the
employee. The Board of Directors determines the option price (not less than
fair market value) at the date of grant.
Pursuant to an employment agreement, the Company had outstanding options to
sell 162,000 shares of common stock to an officer/director of the Company
at an exercise price of $.56 per share. The options, which were fully
vested during 1994, were exercised on March 29, 1996 for $90,000. In
connection with the exercise of the options, the Company loaned $89,900 to
the officer/director. The loan bears interest at 6% per year with the
remaining principal and interest due April 1, 1998. The balance of the note
on September 30,1996 was $50,400.
F - 22
<PAGE>
On-Site Sourcing, Inc.
Notes to Interim Financial Statements--Continued
(unaudited)
================================================================================
At September 30, 1996, the Company had outstanding options to sell 126,000
shares of common stock to an officer/director at an exercise price of $1.11
per share. As of September 30, 1996, the options are fully vested. The
options expire in December 2000.
The Company has outstanding employee stock options for 332,000 shares of
common stock at exercise prices ranging from $1.11 to $3.25 per share. As
of September 30, 1996, 79,500 of the shares are vested with the remainder
scheduled to vest through December 2001. The options expire at various
times through December 2001. The Company granted a total of 60,000 options
to its outside directors which vest quarterly over one year. The fair value
of options granted to outside directors are charged to expense as they
vest.
- --------------------------------------------------------------------------------
NOTE F--PUBLIC OFFERING
On July 9,1996 the Company completed its initial public offering, whereby
the Company offered 960,000 units, each consisting of two shares of common
stock, $.01 par value and one common stock purchase warrant, to the public
at a price of $6.25 per unit. The warrants are redeemable by the Company
for $.01 per warrant, upon 30 days prior written notice, provided the
average closing bid price of the common stock for ten consecutive days
prior to the date of the redemption notice is $7.00 or more per share. The
Company had also granted the underwriters an option to purchase up to
144,000 additional units solely to cover overallotments, of which, 140,200
were exercised on August 15, 1996. Upon the closing of the initial public
offering, the underwriters were granted an option to purchase up to an
aggregate of 96,000 units at $10.00 per unit. The options will be
exercisable during a four-year period commencing one year from the date of
the initial public offering.
The gross proceeds from the offering and the exercise of the underwriters
overallotment were $6,876,250. The net proceeds to the Company after
deducting offering costs were $5,431,913. In connection with the offering,
2,200,400 shares of common stock and 1,100,200 warrants were issued.
F - 23
<PAGE>
--------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company or the Underwriter. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any security other than the securities offered by this Prospectus, or an
soffer to sell or a solicitation of an offer to buy any security by any person
in any jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that the information in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
-----------
TABLE OF CONTENTS
Page
----
Prospectus Summary.......................................................
Risk Factors.............................................................
Capitalization...........................................................
Selected Financial Data..................................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................
Business.................................................................
Management...............................................................
Principal Stockholders...................................................
Interest of Management and Others in Certain Transactions................
Description of Securities................................................
Underwriting.............................................................
Selling Securityholders..................................................
Shares Eligible for Future Sale..........................................
Legal Matters............................................................
Experts..................................................................
Additional Information...................................................
Index to Consolidated Financial Statements............................... F-1
-----------
PROSPECTUS
-----------
February , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Six of the Company's Restated By-Laws contains the following
provision with respect to indemnification of Directors and Officers:
6.1 Right to Indemnification
The corporation shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as presently exists or may hereafter be amended, any
person who was or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that he,
or a person for whom he is the legal representative, is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or non-profit
entity, including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person. The
corporation shall be required to indemnify a person in connection with a
proceeding initiated by such person only if the proceeding was authorized by the
Board of Directors of the corporation.
6.2 Prepayment of Expenses
The corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article or otherwise.
6.3 Claims
If a claim for indemnification or payment of expenses under this Article
is not paid in full within sixty days after a written claim therefor has been
received by the corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
6.4 Non-Exclusivity of Rights
The rights conferred on any person by this Article 6 shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the certificate of incorporation, these by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
6.5 Other Indemnification
The corporation's obligation, if any, to indemnify any person who was or
is serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or non-profit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or
non-profit enterprise.
II - 1
<PAGE>
6.6 Amendment or Repeal
Any repeal or modification of the foregoing provisions of this Article 6
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
Section 145 of the General Corporate Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgements, fines, amounts paid in settlement reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith.
Item 25. Other Expenses of Issuance and Distribution
SEC Registration .......................................... $ 6,150
NASD Listing Fee .......................................... $ 2,250
NASDAQ Listing Fee ........................................ $ 13,750
Pacific Stock Exchange Listing Fee ........................ $ 500
Transfer Agent Fee ........................................ $ 3,500
Printing and Engraving Cost ............................... $ 40,000
Legal Fees and Expenses ................................... $125,000
Accounting Fees and Expenses .............................. $170,000
Blue Sky Fees and Expenses ................................ $ 47,000
Miscellaneous ............................................. $ 17,850
--------
TOTAL ............................................... $426,000
========
Item 26. Recent Sales of Unregistered Securities
1. On April 6, 1993, the Company issued 350 shares (630,000 after stock
splits) of its Common Stock to John Stoppelman for $50,000.
2. On April 6, 1993, the Company issued 200 shares (360,000 after stock
splits) of its Common Stock to Christopher Weiler for $2.00.
3. On April 6, 1993, the Company issued 100 shares (180,000 after stock
splits) of its Common Stock to Paul Sozansky for $1.00.
4. On April 6, 1993, the Company issued 100 shares (180,000 after stock
splits) of its Common Stock to John E. Krutsick for $1.00.
5. On June 8, 1993, the Company issued 25 shares (45,000 after stock
splits) of its Common Stock to Joel Goldman for $25,000.
6. On June 8, 1993 the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to Manhattan Group Funding for $50,000.
II - 2
<PAGE>
7. On July 12, 1993 the Company issued 10 shares (18,000 after stock
splits) of its Common Stock to Joseph Khoury for $0.10.
8. On June 14, 1993, the Company issued 31.25 shares (56,250 after stock
splits) of its Common Stock to the IRA Account of Martin H. Meyerson for
$31,250.
9. On June 14, 1993, the Company issued 6.25 shares (11,250 after stock
splits) of its Common Stock to Leonard and Roslyn Parker for $6,250.
10. On June 14, 1993, the Company issued 6.25 shares (11,250 after stock
splits) of its Common Stock to Michael Silvestri for $6,250.
11. On June 14, 1993, the Company issued 6.25 shares (11,250 after stock
splits) of its Common Stock to Jeffrey Meyerson for $6,250.
12. On July 22, 1993, the Company issued 25 shares (45,000 after stock
splits) of its Common Stock to Edward Tishelman for $25,000.
13. On October 20, 1993, the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to Denis Seynhaeve for $50,000.
14. On July 22, 1993, the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to LaBrum & Doak pursuant to a Service Contract.
15. On January 31, 1994, the Company issued 25 shares (45,000 after stock
splits) of its Common Stock to M.H. Meyerson & Co., Inc. for $25,000.
16. On March 10, 1994 the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to Manhattan Group Funding for $50,000.
17. On March 29, 1994, the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to Ronee Medow for $50,000.
18. On March 29, 1994, the Company issued 50 shares (90,000 after stock
splits) of its Common Stock to Kenneth Koock for $50,000.
19. On April 14, 1994, the Company issued 25 shares (45,000 after stock
splits) of its Common Stock to Allen Outlaw for $25,000.
20. On November 11, 1994, the Company issued 5 shares (9,000 after stock
splits) of its Common Stock to Donald Burris for $10,000.
21. On March 13, 1996, the Company issued 90,000 shares of its Common
Stock to Ryan, Lee & Company, Inc. for $50,000 pursuant to the redemption of
Warrants to purchase Common Stock issued to Ryan, Lee and Company, Inc. which
were granted pursuant to a professional services contract on July 22, 1993.
22. On March 22, 1996, the Company issued 11,905 shares of its Common
Stock to Carlton F. Gay for $25,000.
II - 3
<PAGE>
23. On March 22, 1996, the Company issued 11,905 shares of its Common
Stock to Edward and Gloria Baroody for $25,000.
24. On March 25, 1996, the Company issued 11,905 shares of its Common
Stock to Donald L. Skidmore for $25,000.
25. On March 26, 1996, the Company issued 23,810 shares of its Common
Stock to Sabine Devilloutreys for $50,000.
26. On March 26, 1996, the Company issued 11,905 shares of its Common
Stock to John M. Strickland and John Patterson t'ees uta dtd 7-1-89 for $25,000.
27. On March 26, 1996, the Company issued 23,810 shares of its Common
Stock to Sagax Fund II Ltd. for $50,000.
28. On March 28, 1996, the Company issued 11,905 shares of its Common
Stock to Daniel J. Weiler for $25,000.
29. On March 28, 1996, the Company issued 11,905 shares of its Common
Stock to Walter Luffsey for $25,000.
30. On March 29, 1996, the Company issued 7,000 shares of its Common Stock
to Brentwood, Inc. for $14,700.
31. On March 29, 1996, the Company issued 5,000 shares of its Common Stock
to Christopher Laiti for $10,500.
32. On March 29, 1996, the Company issued 5,000 shares of its Common Stock
to Joseph Sciacca for $10,500.
33. On March 29, 1996, the Company issued 162,000 shares of its Common
Stock to Allen Outlaw for $90,000 pursuant to the exercise of options granted in
his employment contract of June 1, 1994.
34. On April 1, 1996, the Company issued 11,905 shares of its Common Stock
to William Reynolds for $25,000.
35. On October 9, 1996 the Company issued 3,333 shares of its Common Stock
to Todd Gallichio pursuant to an employment agreement.
36. On October 9, 1996 the Company issued 3,333 shares of its Common Stock
to Randy Jacobs pursuant to an employment agreement.
The sales of securities described above were made in reliance upon Section
4(2) of the 1933 Act, which provides exemptions for transactions not involving a
public offering.
With regard to the Company's reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act of the sale of securities described
above, certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the 1933 Act (i) each
investor made representations that he or she was sophisticated and/or an
"accredited investor" within the meaning of
II - 4
<PAGE>
Regulation D of the 1933 Act in relation to such investments and (ii) each
purchaser gave assurance of his or her investment intent, and the certificates
for the securities bear a legend accordingly.
Item 27. List of Exhibits
Exhibit
Page No. Description of Exhibit
3.01(1) Certificate of Incorporation: Delaware
3.02(1) Restated By-Laws: Delaware
4.01(1) Form of Common Stock Certificate
4.02(1) Form of Warrant Certificate
4.03(1) Form of Warrant Agreement between On-Site Sourcing, Inc. and the
Continental Stock Transfer and Trust Company
4.04(1) Registrant's Articles of Incorporation are incorporated by reference
to exhibit 3.01
4.05(1) Registrant's Restated Bylaws pages 1-5 are incorporated by reference
to exhibit 3.02
5.01(1) Opinion of The Stoppelman Law Firm, P.C. on Legality of Securities
Being Registered
10.01(1) Employment Agreement between the Company and Christopher Weiler
10.02(1) Employment Agreement between the Company and Allen Outlaw
10.03(1) Employment Agreement between the Company and Anthony Kopsidas
10.04(1) Employment Agreement between the Company and Jack Krutsick
10.05 Employment Agreement between the Company and Larry F. Morris
10.06(1) Lease with Rubin Strouse Realty for Philadelphia, PA
10.07(1) Amendment 1 to Lease with Rubin Strouse Realty
10.08(1) Amendment 2 to Lease with Rubin Strouse Realty
10.09(1) Amendment 3 to Lease with Rubin Strouse Realty
10.10(1) Lease with JRG/Lynn Associates 9/12/95 for Arlington, VA
10.11(1) First Addendum to Lease with JRG/Lynn Associates 3/30/94
10.12(1) Second Addendum to Lease with JRG/Lynn Associates 7/6/94
10.13(1) Third Addendum to Lease with JRG/Lynn Associates 6/29/95
10.14(1) Fourth Addendum to Lease with JRG/Lynn Associates 1/25/96
10.15(1) Lease Agreement between Oak Crest Ltd. and SWR 1/31/92 for Frederick,
MD assumed by On-Site
10.16(1) Assumption of Lease Agreement between the Company and Oak Crest Ltd.
10.17(1) Lease with Kingston Atlanta Partners, L.P. - 12/15/95 for Atlanta, GA
10.18(1) Form of Management Services Contract
10.23 Revised 1996 Stock Option Plan
10.24 1997 Stock Option Plan 10.25 Employment Agreement between the Company
and Joseph Sciacca
16.01(3) Letter on change in certifying accountant
23.01 Consent of The Stoppelman Law Firm, P.C. incorporated by reference as
part of Exhibit
23.02 Consent of Grant Thornton LLP, independent auditors
(1) Incorporated by reference to the Company's Registration Statement on
Form SB-2 file No. 333-3544.
(2) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the period ended September 30, 1996.
(3) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 29, 1996 and amended December 9, 1996.
II - 5
<PAGE>
Item 28. Undertakings
A. Rule 415 Offering
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) Include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) Reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement and; (iii)
Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the Offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
B. Request for Acceleration of Effective Date
The Company may elect to request acceleration of the effective date of the
Registration Statement under Rule 461 of the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the County of
Arlington in the Commonwealth of Virginia on 14th day of February, 1997.
On-Site Sourcing, Inc.
By: /s/ CHRISTOPHER J. WEILER
--------------------------
II - 6
<PAGE>
Christopher J. Weiler
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Christopher J. Weiler, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as full to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or
either of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
--------- ----- ----
/s/ CHRISTOPHER J. WEILER President, Chief Executive February 14, 1997
- ------------------------- Officer and Director
Christopher J. Weiler
/s/ JOSEPH SCIACCA Chief Financial Officer February 14, 1997
- -------------------------
Joseph Sciacca
/s/ JOHN S. STOPPELMAN Chairman of the Board February 14, 1997
- ------------------------- of Directors
John S. Stoppelman
/s/ ANTHONY A. KOPSIDAS Vice President of February 14, 1997
- ------------------------- Operations and Director
Anthony A. Kopsidas
/s/ ALLEN C. OUTLAW Vice President of Sales February 14, 1997
- ------------------------- and Marketing and Director
Allen C. Outlaw
II - 7
<PAGE>
EX-10.05
Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of this 20th
day of October, 1996 by and between On-Site Sourcing, Inc. with address of 1111
N. 19th Street, Suite 404, Arlington, Virginia 22209 ("OSS" or the "Company")
and Larry F. Morris ("Mr. Morris" or the "Executive") with home address at home
address at 168 5th Street, NE, Atlanta, GA 30308.
WHEREAS, OSS desires to employ the services of Mr. Morris utilizing his
knowledge and expertise as a full-time employee without the distraction of
employment related uncertainties and considers such employment in the best
interests of the Company and its shareholders, and Mr. Morris desires to be
employed full time by the Company; and
WHEREAS, OSS and Mr. Morris desire to enter into an Agreement reflecting
the terms under which Mr. Morris will be employed by the Company. Employment
commenced November 15, 1995.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Term. This Agreement will remain in effect for a period of three years
from the date of this agreement and will be renewed automatically for succeeding
periods of one year unless sooner terminated as provided in sections 6 and 7
below.
2. Nature of Employment. Mr. Morris shall be employed as Vice President -
Sales and Marketing of the Company with full power and authority as determined
by the Board of Directors of OSS (the "Board"). Mr. Morris agrees to diligently
and faithfully perform such duties and serve in the above capacity or in such
capacities as the Board of Directors of the Company shall determine from time to
time.
Mr. Morris's duties include but are not limited to the following:
Report to the President, Chief Executive Officer and the Executive Vice
President - Sales & Marketing, of the Company.
(b) Be responsible for the start-up, development and growth of the
Atlanta-Regional office of the Company.
(c) Assist the Company in the development of all phases of the Company's
business.
3. Compensation for Services. As consideration to Mr. Morris for services
rendered under this Agreement, OSS shall compensate Mr. Morris as follows:
(a) Base salary draw. Mr. Morris shall receive a base non-refundable
salary draw of $4,333.33 per month against commission compensation starting
November 1, 1996.
(b) Commission Compensation.
<PAGE>
(i) Reprographic Revenues. Mr. Morris shall receive a commission of
.25% on each percentage point of margin on reprographic revenues that are
realized by the Company through sales managed or closed by Mr. Morris. This
commission shall be capped at 10% on all full margin (40% or greater gross)
reprographic revenues that are realized by the Company through sales managed or
closed by Mr. Morris.
(ii) Facilities Management. Mr. Morris shall receive a commission of
.125% on each percentage point of margin on facilities management revenues that
are realized by the Company through sales managed or closed by Mr. Morris. This
Commission shall be capped at 5% on all full margin (40% or greater gross)
facilities management revenues that are realized by the Company through sales
managed or closed by Mr. Morris.
(iii) Printing. Mr. Morris shall receive a commission of .25% on
each percentage point of margin on printing revenues that are realized by the
Company through sales managed or closed by Mr. Morris. This Commission shall be
capped at 10% on all full margin (40% or greater gross) printing revenues that
are realized by the Company through sales managed or closed by Mr. Morris.
(c) Benefits. Mr. Morris shall be entitled to all other benefits normally
accorded to full time employees of OSS, including such bonuses, prescription,
life insurance, medical insurance for Mr. Morris's entire family, holidays and
expense accounts as are consistent for other key senior management personnel or
as may be decided by the Executive if said items are discretionary with the
Executive.
Mr. Morris shall be entitled to two weeks paid vacation per year for each
of the first 5 years of employment beginning at commencement of employment. The
Executive shall be entitled to three weeks paid vacation each year after the
fifth anniversary which is to be considered November 15, 2000. No more than two
weeks shall be taken consecutively without the prior written approval by the
Company.
Mr. Morris shall be entitled to all health and sick leave as is accorded
to other key senior management personnel.
(d) Reimbursement. Mr. Morris shall be reimbursed within fifteen (15) days
for all properly documented OSS business expenses incurred by the Executive. To
the extent permitted by applicable law, OSS, shall treat these expenses as
senior in the right of payment to any other obligation of OSS.
(e) Stock Options. Stock options to purchase 108,000 shares of the
Company's common stock at $2.12 per share, the fair market value as of the date
of this Agreement, granted as of October 20, 1996. The options shall vest at
thirty-three and one-third percent (33 1/3% or 36,000 shares) per year on the
first, second and third anniversaries of the date of this Agreement with the
Company if the Agreement is still in effect. The options shall be exercisable
for a period of five years from the date of vesting. The options are cancelable
upon Mr. Morris's termination from the Company for cause as defined in 6(a)
below. Furthermore, the options shall inure to the benefit of the Executive's
heirs and designees. Options to purchase 27,000 shares of On-Site Sourcing stock
at an exercise price $1.39 vested under Mr. Morris's prior employment agreement.
4. Responsibility of Executive. The responsibilities of Mr. Morris under
this Agreement are as follows:
(a) Mr. Morris agrees to serve OSS for the term of employment specified in
Section 1 above. Mr. Morris agrees to (i) devote his full business time to the
business and affairs of OSS, (ii) use his
<PAGE>
best efforts to promote the interests of OSS, and (iii) perform faithfully and
efficiently the responsibilities assigned to him by the Board and listed in
Section 2 above.
(b) During the term of this Agreement, Mr. Morris shall not perform
services for any person or entity that competes directly or indirectly with the
Company. Mr. Morris agrees to disclose in writing to the Board any non-Company
activities for which Mr. Morris receives compensation for services rendered. If
the Board deems such activities to be excessive and to conflict with Mr.
Morris's full time commitment, then the Company shall notify Mr. Morris in
writing to limit those activities to periods in which no time conflict occurs.
(c) Mr. Morris agrees to abide by General Company Policies as the same are
duly adopted by the Board from time to time, so long as such Policies do not
conflict with the terms and conditions of this Agreement.
5. Confidentiality and Non-Disclosure Agreement.
(a) Mr. Morris hereby agrees that he will not at any time, without the
express written consent of the Company: (i) disclose, directly or indirectly,
any Confidential Information (as defined below) to anyone outside the employ of
the Company, or (ii) use, directly or indirectly, any Confidential Information
for the benefit of anyone other than the Company.
(b) Confidential Information as used herein means all information of a
business or technical nature disclosed to, learned or developed by Mr. Morris in
the course of his employment by the Company, which information relates to the
business of the Company or the business of any customer of the Company, or the
business of any other person, firm, corporation, or other entity which consults
with the Company in connection with the business which is not generally known in
the reprographic or facilities management industry. Confidential Information
shall include, but is not limited to, information and knowledge pertaining to
manufacturing processes, procedures, developments, improvements, methods of
operation, sales and profit figures, customer and client lists, credit and other
financial information about the Company or their customers, and relationships
between the Company and its customers, clients and others who have business
dealings with the Company.
(c) In the event that Mr. Morris voluntarily leaves the Company, Mr.
Morris agrees not to seek employment with a reprographic or facilities
management company (competitor) located within 100 miles of the Company's
Atlanta office located at 1375 Peachtree Street, Atlanta, GA or within six
months after leaving the Company.
6. Termination by the Company. The Board of Directors may terminate the
employment of Mr. Morris at any time with or without cause, and in such event
the following shall apply. "Cause" for termination shall be defined as gross
neglect by the Executive of his duties hereunder, willful failure by the
Executive to perform his duties hereunder, conviction of the Executive of a
felony committed during the term of this Agreement, or any lesser crime or
offense involving the property of the Company or any of its subsidiaries or
affiliates, gross malfeasance by the Executive in connection with the
performance of his duties hereunder, willful engagement in conduct by the
Executive or willful refusal without proper legal cause by the Executive to
perform his duties and responsibilities which he has reason to know is
materially injurious to the Company.
(a) In the event of termination for cause, as defined above, by OSS, all
salary and other benefits paid or provided to the Executive hereunder shall
cease as of the date of termination, and the Company shall have no further
obligations to the Executive. Upon a finding by the Board of Directors that the
Executive has willfully failed or refused to observe or perform his duties or
grossly neglected his duties as specifically set forth in Section 4 hereof, OSS
may terminate this agreement for cause
<PAGE>
provided that the Board of Directors has first notified the Executive on two
separate occasions of such failure and has given the Executive at least thirty
(30) days after each such occasion to remedy such breach of duty.
(b) In the event of termination by OSS without cause, the Company agrees
to provide the Executive with the following:
(i) Mr. Morris shall receive an amount equal to two weeks base
salary plus the value of his other employment benefits accrued at the time of
termination that Mr. Morris would have received under this Agreement but for
such termination. Such amount shall be payable to Mr. Morris in one installment
two weeks following termination.
(ii) "Termination without cause" shall be defined as: termination
for any reason other than "cause" (as defined previously in Section 6),
continuous disability or incapacity of Mr. Morris which prevents him from
performing his duties for a period of not less than three (3) months as
determined by any independent, licensed medical doctor, or death.
7. Effect on Successors in Interest. This Agreement shall inure to the
benefit of and be binding upon heirs, administrators, executors, successors and
assigns of each of the parties hereto.
8. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, including
by facsimile, or by recognized courier (such as Federal Express), or three (3)
business days after deposit in the United States Mail, by registered or
certified mail, addressed to a party at its address shown below or at such other
address or facsimile number as such party may designate in writing to the other
party pursuant to this section.
9. Assignment. OSS shall have the right to assign this Agreement and to
delegate all of its rights, duties and obligations hereunder, whether in whole
or in part to any parent, affiliate, successor, or subsidiary organization or
company of OSS or corporation with which OSS may merge or consolidate or which
acquires by purchase or otherwise all or substantially all of OSS assets, but
such assignment shall not release OSS from its obligations under this Agreement.
The Executive shall have no right to assign this Agreement.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia. In the event of any dispute
under this Agreement, it shall be resolved through binding arbitration in
accordance with the rules of the American Arbitration Association.
11. Severability. The provisions of this Agreement are severable, and in
the event that any provision of this Agreement shall be determined to be invalid
or unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
12. Entire Agreement. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding all
negotiations, prior discussions and previous agreements. This Agreement may not
be amended except in writing executed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
a duly authorized officer, and Mr. Morris has signed this Agreement as of the
date and year written above.
The Company:
On-Site Sourcing, Inc.
1111 N. 19th Street, Suite 404
Arlington, Virginia 22209
BY: /s/ John S. Stoppelman
----------------------
John S. Stoppelman
Chairman
Executive:
/s/ Larry F. Morris
----------------------
Larry F. Morris
<PAGE>
EX-10.23
Revised 1996 Stock Option Plan
ON-SITE SOURCING, INC.
DELAWARE
REVISED
1996 STOCK OPTION PLAN
1. Purpose.
This 1996 Stock Option Plan (the "Plan") is intended to encourage
stock ownership by employees and directors of On-Site Sourcing, Inc. (the
"Company"), a Delaware corporation, its divisions and Subsidiary Corporations,
so that they may acquire or increase their proprietary interest in the Company,
and to encourage such employees and directors to remain in the employ of the
Company and to put forth maximum efforts for the success of the business. It is
further intended that options granted by the Board of Directors of the Company
(the "Board") pursuant to Section 5 hereof shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code (the "Code"), as thereafter amended, and the Regulations
issued thereunder (the "Code"), and options granted by the Board pursuant to
Section 6 hereof shall constitute "nonqualified stock options" ("Nonqualified
Stock Options") and, together with Incentive Stock Options, ("Options").
2. Administration and Authority.
The Plan shall be administered by the Board. The Board shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine which Options shall
constitute Incentive Stock Options and which Options shall constitute
Nonqualified Stock Options; to determine the purchase price of the shares of
Common Stock covered by each Option (the "Option Price"); to determine the
persons to whom, and the time or times at which, Options shall be granted; to
determine the number of shares of Common Stock to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and Regulations
relating to the Plan; to determine the terms and provisions of the Option
Agreements (which need not be identical) evidencing Options granted under the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan. The Board may delegate some or all of the powers
granted to it pursuant to this Section 2 to a committee (the "Committee")
appointed by the Board and consisting of not less than two (2) members of the
Board, one of whom shall be the President of the Company. The Board may from
time to time remove members from, or add members to, the Committee, and
vacancies on the Committee shall be filled by the Board. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees, unless otherwise
<PAGE>
determined by the Board.
2.2 Liability.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any
Option.
3. Eligibility.
Options may be granted to employees (including, without limitation,
officers and directors who are employees of the Company or its present or future
divisions and Subsidiary Corporations). In determining the persons to whom
Options shall be granted and the number of shares to be covered by each Option,
the Board shall take into account the duties of the respective persons, their
present and potential contributions to the success of the Company and such other
factors as the Board shall deem relevant in connection with accomplishing the
purpose of the Plan. A person to whom an Option has been granted is sometimes
referred to herein as an "Optionee." An Optionee shall be eligible to receive
more than one Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
4. Shares.
The shares subject to Options hereunder shall be shares of the
Company's Common Stock (the "Common Stock"). Such shares may, in whole or in
part, be authorized but unissued shares or shares that shall have been or that
may be reacquired by the Company. The aggregate number of shares of Common Stock
as to which Options may be granted from time to time under the Plan shall not
exceed 242,000. The limitation established by the preceding sentence shall be
subject to adjustment as provided in Section 7.9 hereof. If any outstanding
Option expires or is terminated without having been exercised in full, the
shares of Common Stock allocable to the unexercised portion of such Option shall
(unless the Plan shall have been terminated) become available for subsequent
grants of Options.
5. Incentive - Stock Options.
Options granted pursuant to this Section 5 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 7 hereof.
5.1 Value of Shares.
The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which Options granted under this Plan and all other option plans of the Company
and any Subsidiary Corporation become exercisable for the first time by an
optionee during any calendar year shall not exceed
<PAGE>
$100,000.
5.2 Ten Percent Shareholder.
In the case of an Incentive Stock Option granted to a 10%
Shareholder, (a) the Option Price shall not be less than 110% of the Fair Market
Value of the shares of Common Stock of the Company on the date of grant of such
Incentive Stock Option, and (b) the exercise period shall not exceed five (5)
years from the date of grant of such Incentive Stock Option.
6. Nonqualified Stock Options.
Options granted pursuant to this Section 6 are intended to
constitute Nonqualified Stock Options and shall be subject only to the general
terms and conditions specified in Section 7 hereof.
7. Terms and Conditions of Options.
Each Option shall be evidenced by a written Option Agreement between
the Company and the Optionee, which agreement shall comply with and be subject
to the following terms and conditions:
7.1 Number of Shares.
Each Option Agreement shall state the number of shares of Common
Stock to which the Option relates.
7.2 Type of Option.
Each Option Agreement shall specifically identify the portion, if
any, of the Option which constitutes an Incentive Stock Option and the portion,
if any, which constitutes a Nonqualified Stock Option.
7.3 Option Price.
Each Option Agreement shall state the Option Price which, in the
case of Incentive Stock Options, shall be not less than 100% of the Fair Market
Value of the shares of Common Stock of the Company on the date of grant of the
Option. The Option Price shall be subject to adjustment as provided in Section
7.9 hereof. The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted.
7.4 Medium and Time of Payment.
<PAGE>
The Option Price shall be paid in full, at the time of exercise, in
cash or in shares of Common Stock having a Fair Market Value equal to such
Option Price or in a combination of cash and such shares, and may be effected in
whole or in part (a) with monies received from the Company at the time of
exercise as a compensatory cash payment, or (b) with monies borrowed from the
Company pursuant to repayment terms and conditions as shall be determined from
time to time by the Board, in its discretion, separately with respect to each
exercise of Options and each Optionee; provided, however, that each such method
and time for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable law, and
provided, further, if the Option Price is paid with monies borrowed from the
Company, such fact shall be noted conspicuously on the certificate evidencing
such shares in accordance with applicable law.
7.5 Term and Exercise of Options.
Options shall be exercisable over the exercise period as and at the
times and upon the conditions that the Board may determine, as reflected in the
Option Agreement; provided, however, that the Board shall have the authority to
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Board for all Options; provided,
however that such exercise period shall not exceed ten (10) years from the date
of grant of such Option. The exercise period shall be subject to earlier
termination as provided in Sections 7.6 and 7.7 hereof. An Option may be
exercised, as to any or all full shares of Common Stock as to which the Option
has become exercisable, by giving written notice of such exercise to the Board;
provided, however, that an Option may not be exercised at any one time as to
fewer than 100 shares (or such number of shares as to which the Option is then
exercisable if such number of shares is less than 100).
7.6 Termination.
Except as provided in Section 7.5 and in this Section 7.6 hereof, an
Option may not be exercised unless the Optionee is then in the employ of the
Company or a division or Subsidiary Corporation (or a corporation issuing or
assuming the Option in a transaction to which IRC ss.425(a) applies), and unless
the Optionee has remained continuously so employed since the date of grant of
the Option. If the employment of an Optionee shall terminate (other than by
reason of death, disability or retirement), all Options of such Optionee that
are exercisable at the time of such termination may, unless earlier terminated
in accordance with their terms, be exercised within three months after such
termination; provided, however, that if the employment of an Optionee shall
terminate for cause, all Options theretofore granted to such Optionee shall, to
the extent not theretofore exercised, terminate forthwith. Nothing in the Plan
or in any Option shall confer upon an individual any right to continue in the
employ of the Company or any of its divisions or Subsidiary Corporations or
interfere in any way with the right of the Corporation or any such division or
Subsidiary Corporation to terminate such employment.
<PAGE>
7.7 Death, Disability or Retirement.
If an Optionee shall die while employed by the Company, or a
Subsidiary Corporation thereof, or within three months after the termination of
such Optionee's employment, other than for cause, or if the Optionee's
employment shall terminate by reason of disability or retirement, all Options
theretofore granted to such Optionee (to the extent otherwise exercisable) may,
unless earlier terminated in accordance with their terms, be exercised by the
Optionee or by the Optionee's estate or by a person who acquired the right to
exercise such Option by bequest or inheritance or otherwise by reason of the
death or disability of the Optionee, at any time within one year after the date
of death, disability or retirement of the Optionee.
7.8 Nontransferability of Options.
Options granted under the Plan shall not be transferable otherwise
than (a) by will; (b) by the laws of descent and distribution; or (c) to a
revocable inter vivos trust for the primary benefit of the Optionee and his or
her spouse. Options may be exercised, during the lifetime of the Optionee, only
by the Optionee, his or her guardian, legal representative or the Trustee of an
above described trust.
7.9 Effect of Certain Changes.
(1) If there is any change in the number of shares of Common Stock through
the declaration of stock dividends, or through recapitalization resulting
in stock splits, or combinations or exchanges of such shares, the number
of shares of Common Stock available for Options, the number of such shares
covered by outstanding Options and the price per share of such Options
shall be proportionately adjusted by the Board to reflect any increase or
decrease in the number of issued shares of Common Stock; provided,
however, that any fractional shares resulting from such adjustment shall
be eliminated.
(2) In the event of the proposed dissolution or liquidation of the
Company, in the event of any corporate separation or division, including,
but not limited to, split-up, split-off or spin-off, or in the event of a
merger or consolidation of the Company with another corporation, the Board
may provide that the holder of each Option then exercisable shall have the
right to exercise such Option (at its then Option Price) solely for the
kind and amount of shares of stock and other securities, property, cash or
any combination thereof receivable upon such dissolution, liquidation, or
corporate separation or division, or merger or consolidation by a holder
of the number of shares of Common Stock for which such Option might have
been exercised immediately prior to such dissolution, liquidation, or
corporate separation or division, or merger or consolidation; or the Board
may provide, in the alternative, that each Option granted under the Plan
shall terminate as of a date to be fixed by the Board; provided, however,
that not less than 30-days' written notice of the date so fixed shall be
given
<PAGE>
to each Optionee, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Options as to all or any part
of the shares of Common Stock covered thereby, including shares as to
which such Options would not otherwise be exercisable; provided, further,
that failure to provide such notice shall not invalidate or affect the
action with respect to which such notice was required.
(3) If while unexercised Options remain outstanding under the Plan, the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or adopt a
plan of liquidation (each, a "Disposition Transaction"), then the Board
may (a) make an appropriate adjustment to the number and class of shares
available for options, and to the amount and kind of shares or other
securities or property (including cash) receivable upon exercise of any
outstanding options after the effective date of such transaction, and the
price thereof, or, in lieu of such adjustment, provide for the
cancellation of all options outstanding at or prior to the effective date
of such transaction; (b) provide that exercisability of all Options shall
be accelerated, whether or not otherwise exercisable; or (c) in its
discretion, permit Optionees to surrender outstanding options for
cancellation; provided, however, that if the stockholders approve such
Disposition Transaction within five years of the date of adoption of this
Plan, the Board shall provide for the alternative in (b) above. Upon any
cancellation of an outstanding Option pursuant to this Section, the
Optionee shall be entitled to receive, in exchange therefor, a cash
payment under any such Option in an amount per share determined by the
Board in its sole discretion, but not less than the difference between the
per share exercise price of such Option and the Fair Market Value of a
share of the Company Common Stock on such date as the Board shall
determine.
(4) Paragraphs (2) and (3) of this Section 7.9 shall not apply to a merger
or consolidation in which the Company is the surviving corporation and
shares of Common Stock are not converted into or exchanged for stock,
securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or
merger of another corporation into the Company in which the Company is the
surviving corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from par
value to no par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series of
shares), the Board may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the
kind and amount of shares of stock and other securities (including those
of any new direct or indirect parent of the Company), property, cash or
any combination thereof receivable upon such reclassification, change,
consolidation or merger by the holder of the number of shares of Common
Stock for which such Option might have been exercised.
<PAGE>
(5) In the event of a change in the Common Stock of the Company as
presently constituted which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
(6) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to
this Plan shall not be adjusted in a manner that causes such option to
fail to continue to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Internal Revenue Code.
(7) Except as hereinbefore expressly provided in this Section 7.9, the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock or any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger,
or consolidation or spin-off of assets or stock of another corporation;
and any issue by the Company of shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the Option. The
grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or part of its business or assets.
7.10 Rights as a Shareholder.
An Optionee or a transferee of an Option shall have no rights as a
shareholder with respect to any shares covered by the Option until the date of
the issuance of a certificate evidencing such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 7.9
hereof.
7.11 Other Provisions.
The Option Agreements authorized under the Plan shall contain such
other provisions, including, without limitation, (a) the imposition of
restrictions upon the exercise of an Option; (b) in the case of an Incentive
Stock Option, the inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option; and (c) conditions relating to
compliance with applicable federal and state securities laws, as the Board shall
deem advisable.
<PAGE>
8. Agreement By Optionee Regarding Withholding Taxes.
If the Board shall so require, as a condition of the exercise, each
Optionee shall agree that (a) no later than the date of exercise of any Option,
the Optionee will pay to the Company or make arrangements satisfactory to the
Board regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Options, and (b) the
Company shall, to the extent permitted or required by law, have the right to
deduct federal, state and local taxes of any kind required by law to be withheld
upon the exercise of such Option from any payment of any kind otherwise due to
the Optionee.
9. Term of Plan.
Options may be granted pursuant to the Plan from time to time within
a period of ten (10) years from the date the Plan is adopted by the Board, or
the date the Plan is approved by the stockholders of the Company, whichever is
earlier.
10. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than one year.
(b) "FAIR MARKET VALUE" per share as of a particular date shall mean
(i) the closing sales price per share of Common Stock on a national
securities exchange for the last preceding date on which there was a sale
of such Common Stock on such exchange; or (ii) if the shares of Common
Stock are then traded on an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such over
the-counter market for the last preceding date on which there was a sale
of such Common Stock in such market, or (iii) in case no reported sale
takes place, the average of the closing bid and asked prices on the
National Association of Securities Dealers' Automated Quotations System ("
NASDAQ ") or any comparable system, or if the shares of Common Stock are
not listed on NASDAQ or comparable system, the closing sale price or, in
case no reported sale takes place, the average of the closing bid and
asked prices, as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for
that purpose; or (iv) if the shares of Common Stock are not then listed on
a national securities exchange or traded in an over-the-counter market,
such value as the Board in its discretion may determine.
(c) "PARENT COMPANY" shall mean any corporation (other than the
<PAGE>
Company) in an unbroken chain of corporations ending with the employer
corporation if, at the time of granting an Option, each of the
corporations other than the employer corporation owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
(d) "SUBSIDIARY CORPORATION" shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(e) "TEN PERCENT Shareholder" shall mean an Optionee who, at the
time an Incentive Stock Option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company or of its Parent or Subsidiary Corporations.
11. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock as to which
Options may be granted under the Plan or materially increase the benefits
accruing to participants under the Plan or materially modify the requirements as
to eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock issued and outstanding, except
that any such increase or modification that may result from adjustments
authorized by Section 7.9 hereof shall not require such approval. Except as
provided in Section 7 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option previously granted, unless
the written consent of the Optionee is obtained.
<PAGE>
12. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board of
Directors but shall be subject to the approval of the holders of a majority of
the issued and outstanding shares of Common Stock of the Company, which approval
must occur within twelve (12) months after the date the Plan is adopted by the
Board.
13. Effect of Headings.
The section and subsection headings contained herein are for
convenience only and shall not affect the construction hereof.
On-Site Sourcing, Inc.
By /s/ Christopher Weiler
----------------------
Christopher Weiler
President
<PAGE>
EX-10.24
1997 Stock Option Plan
ON-SITE SOURCING, INC.
1997 STOCK OPTION PLAN
1. Purpose.
This 1997 Stock Option Plan (the "Plan") is intended to encourage
stock ownership by employees and directors of On-Site Sourcing, Inc. (the
"Company"), a Delaware corporation, its divisions and Subsidiary Corporations,
so that they may acquire or increase their proprietary interest in the Company,
and to encourage such employees and directors to remain in the employ of the
Company and to put forth maximum efforts for the success of the business. It is
further intended that options granted by the Board of Directors of the Company
(the "Board") pursuant to Section 5 hereof shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code (the "Code"), as thereafter amended, and the Regulations
issued thereunder (the "Code"), and options granted by the Board pursuant to
Section 6 hereof shall constitute "nonqualified stock options" ("Nonqualified
Stock Options") and, together with Incentive Stock Options, ("Options").
2. Administration and Authority.
The Plan shall be administered by the Board. The Board shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine which Options shall
constitute Incentive Stock Options and which Options shall constitute
Nonqualified Stock Options; to determine the purchase price of the shares of
Common Stock covered by each Option (the "Option Price"); to determine the
persons to whom, and the time or times at which, Options shall be granted; to
determine the number of shares of Common Stock to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and Regulations
relating to the Plan; to determine the terms and provisions of the Option
Agreements (which need not be identical) evidencing Options granted under the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan. The Board may delegate some or all of the powers
granted to it pursuant to this Section 2 to a committee (the "Committee")
appointed by the Board and consisting of not less than two (2) members of the
Board, one of whom shall be the President of the Company. The Board may from
time to time remove members from, or add members to, the Committee, and
vacancies on the Committee shall be filled by the Board. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees, unless otherwise determined by the Board.
<PAGE>
2.2 Liability.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any
Option.
3. Eligibility.
Options may be granted to employees (including, without limitation,
officers and directors who are employees of the Company or its present or future
divisions and Subsidiary Corporations). In determining the persons to whom
Options shall be granted and the number of shares to be covered by each Option,
the Board shall take into account the duties of the respective persons, their
present and potential contributions to the success of the Company and such other
factors as the Board shall deem relevant in connection with accomplishing the
purpose of the Plan. A person to whom an Option has been granted is sometimes
referred to herein as an "Optionee." An Optionee shall be eligible to receive
more than one Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
4. Shares.
The shares subject to Options hereunder shall be shares of the
Company's Common Stock (the "Common Stock"). Such shares may, in whole or in
part, be authorized but unissued shares or shares that shall have been or that
may be reacquired by the Company. The aggregate number of shares of Common Stock
as to which Options may be granted from time to time under the Plan shall not
exceed 500,000. The limitation established by the preceding sentence shall be
subject to adjustment as provided in Section 7.9 hereof. If any outstanding
Option expires or is terminated without having been exercised in full, the
shares of Common Stock allocable to the unexercised portion of such Option shall
(unless the Plan shall have been terminated) become available for subsequent
grants of Options.
5. Incentive - Stock Options.
Options granted pursuant to this Section 5 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 7 hereof.
5.1 Value of Shares.
The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which Options granted under this Plan and all other option plans of the Company
and any Subsidiary Corporation become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000.
<PAGE>
5.2 Ten Percent Shareholder.
In the case of an Incentive Stock Option granted to a 10%
Shareholder, (a) the Option Price shall not be less than 110% of the Fair Market
Value of the shares of Common Stock of the Company on the date of grant of such
Incentive Stock Option, and (b) the exercise period shall not exceed five (5)
years from the date of grant of such Incentive Stock Option.
6. Nonqualified Stock Options.
Options granted pursuant to this Section 6 are intended to
constitute Nonqualified Stock Options and shall be subject only to the general
terms and conditions specified in Section 7 hereof.
7. Terms and Conditions of Options.
Each Option shall be evidenced by a written Option Agreement between
the Company and the Optionee, which agreement shall comply with and be subject
to the following terms and conditions:
7.1 Number of Shares.
Each Option Agreement shall state the number of shares of Common
Stock to which the Option relates.
7.2 Type of Option.
Each Option Agreement shall specifically identify the portion, if
any, of the Option which constitutes an Incentive Stock Option and the portion,
if any, which constitutes a Nonqualified Stock Option.
7.3 Option Price.
Each Option Agreement shall state the Option Price which, in the
case of Incentive Stock Options, shall be not less than 100% of the Fair Market
Value of the shares of Common Stock of the Company on the date of grant of the
Option. The Option Price shall be subject to adjustment as provided in Section
7.9 hereof. The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted.
7.4 Medium and Time of Payment.
The Option Price shall be paid in full, at the time of exercise, in
cash or in shares of Common Stock having a Fair Market Value equal to such
Option Price or in a
<PAGE>
combination of cash and such shares, and may be effected in whole or in part (a)
with monies received from the Company at the time of exercise as a compensatory
cash payment, or (b) with monies borrowed from the Company pursuant to repayment
terms and conditions as shall be determined from time to time by the Board, in
its discretion, separately with respect to each exercise of Options and each
Optionee; provided, however, that each such method and time for payment and each
such borrowing and terms and conditions of repayment shall be permitted by and
be in compliance with applicable law, and provided, further, if the Option Price
is paid with monies borrowed from the Company, such fact shall be noted
conspicuously on the certificate evidencing such shares in accordance with
applicable law.
7.5 Term and Exercise of Options.
Options shall be exercisable over the exercise period as and at the
times and upon the conditions that the Board may determine, as reflected in the
Option Agreement; provided, however, that the Board shall have the authority to
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Board for all Options; provided,
however that such exercise period shall not exceed ten (10) years from the date
of grant of such Option. The exercise period shall be subject to earlier
termination as provided in Sections 7.6 and 7.7 hereof. An Option may be
exercised, as to any or all full shares of Common Stock as to which the Option
has become exercisable, by giving written notice of such exercise to the Board;
provided, however, that an Option may not be exercised at any one time as to
fewer than 100 shares (or such number of shares as to which the Option is then
exercisable if such number of shares is less than 100).
7.6 Termination.
Except as provided in Section 7.5 and in this Section 7.6 hereof, an
Option may not be exercised unless the Optionee is then in the employ of the
Company or a division or Subsidiary Corporation (or a corporation issuing or
assuming the Option in a transaction to which IRC ss.425(a) applies), and unless
the Optionee has remained continuously so employed since the date of grant of
the Option. If the employment of an Optionee shall terminate (other than by
reason of death, disability or retirement), all Options of such Optionee that
are exercisable at the time of such termination may, unless earlier terminated
in accordance with their terms, be exercised within three months after such
termination; provided, however, that if the employment of an Optionee shall
terminate for cause, all Options theretofore granted to such Optionee shall, to
the extent not theretofore exercised, terminate forthwith. Nothing in the Plan
or in any Option shall confer upon an individual any right to continue in the
employ of the Company or any of its divisions or Subsidiary Corporations or
interfere in any way with the right of the Corporation or any such division or
Subsidiary Corporation to terminate such employment.
<PAGE>
7.7 Death, Disability or Retirement.
If an Optionee shall die while employed by the Company, or a
Subsidiary Corporation thereof, or within three months after the termination of
such Optionee's employment, other than for cause, or if the Optionee's
employment shall terminate by reason of disability or retirement, all Options
theretofore granted to such Optionee (to the extent otherwise exercisable) may,
unless earlier terminated in accordance with their terms, be exercised by the
Optionee or by the Optionee's estate or by a person who acquired the right to
exercise such Option by bequest or inheritance or otherwise by reason of the
death or disability of the Optionee, at any time within one year after the date
of death, disability or retirement of the Optionee.
7.8 Nontransferability of Options.
Options granted under the Plan shall not be transferable otherwise
than (a) by will; (b) by the laws of descent and distribution; or (c) to a
revocable inter vivos trust for the primary benefit of the Optionee and his or
her spouse. Options may be exercised, during the lifetime of the Optionee, only
by the Optionee, his or her guardian, legal representative or the Trustee of an
above described trust.
7.9 Effect of Certain Changes.
(1) If there is any change in the number of shares of Common Stock through
the declaration of stock dividends, or through recapitalization resulting
in stock splits, or combinations or exchanges of such shares, the number
of shares of Common Stock available for Options, the number of such shares
covered by outstanding Options and the price per share of such Options
shall be proportionately adjusted by the Board to reflect any increase or
decrease in the number of issued shares of Common Stock; provided,
however, that any fractional shares resulting from such adjustment shall
be eliminated.
(2) In the event of the proposed dissolution or liquidation of the
Company, in the event of any corporate separation or division, including,
but not limited to, split-up, split-off or spin-off, or in the event of a
merger or consolidation of the Company with another corporation, the Board
may provide that the holder of each Option then exercisable shall have the
right to exercise such Option (at its then Option Price) solely for the
kind and amount of shares of stock and other securities, property, cash or
any combination thereof receivable upon such dissolution, liquidation, or
corporate separation or division, or merger or consolidation by a holder
of the number of shares of Common Stock for which such Option might have
been exercised immediately prior to such dissolution, liquidation, or
corporate separation or division, or merger or consolidation; or the Board
may provide, in the alternative, that each Option granted under the Plan
shall terminate as of a date to be fixed by the Board; provided, however,
that not less than 30-days' written notice of the date so fixed shall be
given
<PAGE>
to each Optionee, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Options as to all or any part
of the shares of Common Stock covered thereby, including shares as to
which such Options would not otherwise be exercisable; provided, further,
that failure to provide such notice shall not invalidate or affect the
action with respect to which such notice was required.
(3) If while unexercised Options remain outstanding under the Plan, the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or adopt a
plan of liquidation (each, a "Disposition Transaction"), then the Board
may (a) make an appropriate adjustment to the number and class of shares
available for options, and to the amount and kind of shares or other
securities or property (including cash) receivable upon exercise of any
outstanding options after the effective date of such transaction, and the
price thereof, or, in lieu of such adjustment, provide for the
cancellation of all options outstanding at or prior to the effective date
of such transaction; (b) provide that exercisability of all Options shall
be accelerated, whether or not otherwise exercisable; or (c) in its
discretion, permit Optionees to surrender outstanding options for
cancellation; provided, however, that if the stockholders approve such
Disposition Transaction within five years of the date of adoption of this
Plan, the Board shall provide for the alternative in (b) above. Upon any
cancellation of an outstanding Option pursuant to this Section, the
Optionee shall be entitled to receive, in exchange therefor, a cash
payment under any such Option in an amount per share determined by the
Board in its sole discretion, but not less than the difference between the
per share exercise price of such Option and the Fair Market Value of a
share of the Company Common Stock on such date as the Board shall
determine.
(4) Paragraphs (2) and (3) of this Section 7.9 shall not apply to a merger
or consolidation in which the Company is the surviving corporation and
shares of Common Stock are not converted into or exchanged for stock,
securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or
merger of another corporation into the Company in which the Company is the
surviving corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from par
value to no par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series of
shares), the Board may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the
kind and amount of shares of stock and other securities (including those
of any new direct or indirect parent of the Company), property, cash or
any combination thereof receivable upon such reclassification, change,
consolidation or merger by the holder of the number of shares of Common
Stock for which such Option might have been exercised.
<PAGE>
(5) In the event of a change in the Common Stock of the Company as
presently constituted which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
(6) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to
this Plan shall not be adjusted in a manner that causes such option to
fail to continue to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Internal Revenue Code.
(7) Except as hereinbefore expressly provided in this Section 7.9, the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock or any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger,
or consolidation or spin-off of assets or stock of another corporation;
and any issue by the Company of shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the Option. The
grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or part of its business or assets.
7.10 Rights as a Shareholder.
An Optionee or a transferee of an Option shall have no rights as a
shareholder with respect to any shares covered by the Option until the date of
the issuance of a certificate evidencing such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 7.9
hereof.
7.11 Other Provisions.
The Option Agreements authorized under the Plan shall contain such
other provisions, including, without limitation, (a) the imposition of
restrictions upon the exercise of an Option; (b) in the case of an Incentive
Stock Option, the inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option; and (c) conditions relating to
compliance with applicable federal and state securities laws, as the Board shall
deem advisable.
<PAGE>
8. Agreement By Optionee Regarding Withholding Taxes.
If the Board shall so require, as a condition of the exercise, each
Optionee shall agree that (a) no later than the date of exercise of any Option,
the Optionee will pay to the Company or make arrangements satisfactory to the
Board regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Options, and (b) the
Company shall, to the extent permitted or required by law, have the right to
deduct federal, state and local taxes of any kind required by law to be withheld
upon the exercise of such Option from any payment of any kind otherwise due to
the Optionee.
9. Term of Plan.
Options may be granted pursuant to the Plan from time to time within
a period of ten (10) years from the date the Plan is adopted by the Board, or
the date the Plan is approved by the stockholders of the Company, whichever is
earlier.
10. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than one year.
(b) "FAIR MARKET VALUE" per share as of a particular date shall mean
(i) the closing sales price per share of Common Stock on a national
securities exchange for the last preceding date on which there was a sale
of such Common Stock on such exchange; or (ii) if the shares of Common
Stock are then traded on an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such over
the-counter market for the last preceding date on which there was a sale
of such Common Stock in such market, or (iii) in case no reported sale
takes place, the average of the closing bid and asked prices on the
National Association of Securities Dealers' Automated Quotations System ("
NASDAQ ") or any comparable system, or if the shares of Common Stock are
not listed on NASDAQ or comparable system, the closing sale price or, in
case no reported sale takes place, the average of the closing bid and
asked prices, as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for
that purpose; or (iv) if the shares of Common Stock are not then listed on
a national securities exchange or traded in an over-the-counter market,
such value as the Board in its discretion may determine.
(c) "PARENT COMPANY" shall mean any corporation (other than the
<PAGE>
Company) in an unbroken chain of corporations ending with the employer
corporation if, at the time of granting an Option, each of the
corporations other than the employer corporation owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
(d) "SUBSIDIARY CORPORATION" shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(e) "TEN PERCENT Shareholder" shall mean an Optionee who, at the
time an Incentive Stock Option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company or of its Parent or Subsidiary Corporations.
11. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock as to which
Options may be granted under the Plan or materially increase the benefits
accruing to participants under the Plan or materially modify the requirements as
to eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock issued and outstanding, except
that any such increase or modification that may result from adjustments
authorized by Section 7.9 hereof shall not require such approval. Except as
provided in Section 7 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option previously granted, unless
the written consent of the Optionee is obtained.
12. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board of
Directors but shall be subject to the approval of the holders of a majority of
the issued and outstanding shares of Common Stock of the Company, which approval
must occur within twelve (12) months after the date the Plan is adopted by the
Board.
13. Effect of Headings.
The section and subsection headings contained herein are for
convenience only and shall not affect the construction hereof.
ON-SITE SOURCING, INC.
<PAGE>
By /s/ Christopher Weiler
----------------------
Christopher Weiler
President
<PAGE>
EX-23.02
Consent of Independent Accountants
Consent of Independent Accountants
We have issued our report dated February 28, 1996, (except for Note N, as to
which the date is June 6, 1996) accompanying the financial statements of On-Site
Sourcing, Inc., contained in the Registration Statement and Prospectus. We
consent to the use of the aforementioned report in the Registration Statement
and Prospectus and to the use of our name as it appears under the caption
"Experts."
Grant Thornton, LLP
Vienna, Virginia
February 14, 1997
