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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1998
Commission File No. 0-20947
ON-SITE SOURCING, INC.
(Name of Small Business Issuer in its Charter)
Delaware 54-1648470
(State of Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1111 North 19th Street, Sixth Floor, Arlington, VA 22209
(Address of Principal Executive Offices) (Zip Code)
703-276-1123
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Units comprised of two shares of Common NASDAQ (since 7/11/96)
Stock and one Common Stock Purchase Warrant
Common Stock ($.01 par value) NASDAQ (since 8/19/96)
Common Stock Purchase Warrants NASDAQ (since 8/19/96)
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
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This report contains a total of 33 pages. The Exhibit Index appears on page 31.
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $ 25,965,719.
Aggregate market value of the Registrant's Common Stock held by non-affiliates
of the Registrant as of February 28, 1999 was approximately $4,680,797 based
upon the closing price reported for such date on the Nasdaq SmallCap Market. For
purposes of this disclosure, shares of common stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the Registrant have been excluded because such persons
may be deemed to be affiliates. The determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the issuer's shares of common stock as of
February 28, 1999 was 4,824,669.
Transitional Small Business Disclosure Format Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
On-Site Sourcing, Inc. ("On-Site" or the "Company") provides reprographic,
document management, imaging, facilities management and information technology
services to law firms, corporations, 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 and imaging 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 production of manuals, brochures and other materials for
corporations and non-profit organizations. On-Site also provides on-premises
management of customers' support services including mailroom operations,
facsimile transmission, records and supply room management and copying services.
The information technology group (the "IT Group") provides a full range of
technology services to professional service organizations, including systems
design and integration, training and network management services. The IT Group
was formed in response to the need of law firms for new client/server
applications and connectivity, requiring information technology expertise that
is difficult to acquire due the competitive nature of the industry. The
competitive law firm has the need for E-mail, integrated billing and document
management services and recurring technology upgrades that are being demanded by
their clients.
On-Site Sourcing, Inc. was founded in 1992 and currently serves the greater
Washington, Baltimore, Philadelphia, New York City and Atlanta metropolitan
areas through outsourcing locations in Arlington, Virginia; Baltimore, Maryland;
Philadelphia, Pennsylvania; New York, New York; and Atlanta, Georgia. The
Arlington, Virginia outsourcing location is one of the largest processing
centers 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. Facilities management
operators 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 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
option plans.
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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.
The Company earns a significant portion of its revenue by providing
reprographic, imaging and litigation support services to law firms and
corporations. This accounts for approximately 79 percent of the Company's
revenue. Facilities management accounts for approximately 15 percent of the
revenue. Each service, while independent to the client, shares personnel and
resources in order to minimize costs and provide high quality services.
The Company's goal is to expand business in the markets currently
serviced as well as in additional markets by taking advantage of opportunities
presented by the large number of organizations that still provide their own
facilities management and technology services internally.
OPERATIONS. On-Site provides its services through regional offices in
metropolitan Washington, DC, Philadelphia, PA, New York, NY, Baltimore, MD, and
Atlanta, GA. These facilities maintain staff, equipment, supplies and training
facilities in order to provide reprographic, imaging, and litigation support
services to a variety of customers. The Company places professional management
at each regional office 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's facilities management services provide reprographic, mailroom
and facsimile and other services required 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. At facilities management locations, the Company provides on-site
management of the client's support services such as 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. In the supply room services,
On-Site provides 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, as well as copy volume, and
to prepare profit and loss statements that offer solutions to productivity
problems.
The Company's reprographic and litigation support services to law firms
and corporations include 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 electronic media.
The Company's information technology group provides a full range of
technology services to professional service organizations, including systems
design and integration, training and network management services.
CUSTOMERS. On-Site's customers include law firms, non-profit
organizations, corporations, accounting and consulting firms, financial
institutions and other organizations throughout the East Coast of the United
States. 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.
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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's 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,
1998, the Company had approximately 450 full-time employees, of which 7 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 most significant 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. IKON Corporation and Donnelley Enterprise
Solutions, Inc. 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 SiteTrax platform was
created as a solution to automate the highly complex document and facilities
management industry. Effective document management and reproduction, be it mail
or fax management, litigation copying, on-demand printing or document imaging
requires a tremendous monitoring, tracking and accountability solution. These
functions are mission critical, yet peripheral to the task of "putting paper to
machine". Even in the productive 90's, the document management industry
inefficiently uses expensive labor to dispatch these peripheral functions as
required to actually produce the product.
With the genesis of SiteTrax, On-Site has effectively automated all
peripheral functions. SiteTrax manages every step of the production and
management process, from logging in projects, tracking them throughout the
production and quality control process through shipping and delivery. SiteTrax
tracks mail, fax courier, and box distribution, materials usage, operator
distribution/ workflow, productivity and quality control efficiency. It also
provides integrated cost accounting and invoicing, all at the click of a mouse.
These automated processes make the Company's production and management process
more efficient and productive. The resultant savings are passed on to our
clients in the form of greater investment in quality control, competitive
pricing, and superior tracking, reporting and accountability.
The Company has also developed a proprietary automated cost recovery
system for copy machines. 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 has filed applications for patents on portions of this
system.
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.
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ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices and reprographic operations which
service the metropolitan Washington, DC area are located in approximately 31,000
square feet of leased space in Arlington, Virginia. The lease is on a
month-to-month basis. Rent for the premises is $60,000 per month.
The Company leases approximately 8,000 square feet of office space in
Philadelphia, PA. The lease provides for a base annual rent of $110,500 and an
expiration date in October 2000.
The Company also has offices located in approximately 2,500 square feet
of leased space in Frederick, MD. The lease provides for a base annual rent of
$15,000 with additional operating costs of $2,000 per year and an expiration
date in May 1999.
The Company has offices located in approximately 12,000 square feet of
leased space in Atlanta, GA. The lease provides for a base annual rent of
$114,528. The lease expiration date is February 28, 2002.
The Company has offices located in approximately 12,000 square feet of
leased space in New York, NY. The lease provides for a base annual rent of
$93,350 with an annual 3 % increase on November 1 of each subsequent year
through November 2005. The lease expiration date is October 31, 2006.
The Company has offices located in approximately 8,000 square feet
of leased space in Baltimore for a base rent of $127,756 with a 3% annual
increase each subsequent year. The lease expires on February 14, 2007.
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.
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Company's management, there are no legal
proceedings pending to which the Company is a party or to which any of its
properties is subject, other than ordinary, routine litigation incidental to the
business which is not expected to have a material adverse effect on the results
of operations, financial condition or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1998, covered by this report, no matters
were submitted to a vote of the Company's security holders.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDERS' MATTERS
PRICE RANGE OF COMMON STOCK
The following table shows the high and low closing bid prices for the
Common Stock in the over-the-counter market. 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 in
1997 and 1998.(1)
The quotations represent prices between dealers in securities, do not
include retail markup, markdowns or commissions and may not necessarily
represent the actual transactions.
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COMMON STOCK WARRANTS UNITS
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Quarter Ended: HIGH LOW HIGH LOW HIGH LOW
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March 31, 1997 2.625 2.000 0.563 0.313 5.875 4.250
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June 30, 1997 2.484 1.750 0.375 0.250 5.500 3.500
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September 30, 1997 3.750 2.125 0.563 0.281 8.125 4.500
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December 31, 1997 3.750 2.750 0.688 0.313 8.000 5.500
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March 31, 1998 3.630 2.810 .813 .344 7.875 5.625
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June 30, 1998 3.130 2.130 .594 .344 6.625 4.50
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September 30, 1998 2.310 1.060 .438 .156 5.250 2.50
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December 31, 1998 1.840 1.030 .406 .125 3.750 2.125
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(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 the Nasdaq SmallCap Market on July 11, 1996 and the
Common Stock and Warrants began trading separately on August 19, 1996 with the
Units also continuing to trade.
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
As of December 31, 1998, there were 60 holders of record and
approximately 1,477 beneficial owners of the Common Stock.
DIVIDENDS
The Company has never paid cash dividends on its common stock. Payment
of dividends will be within the discretion of the Company's Board of Directors
and will depend on, among other factors, earnings, capital requirements, and the
operating and financial condition of the Company. At the present time, the
Company anticipates retaining future earnings, if any, in order to finance the
development of its business activities.
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RECENT ISSUANCES OF COMMON STOCK
On January 15, 1998 the Company issued 5,000 shares of its Common Stock
pursuant to the exercise of employee stock options. On April 1, 1998 the
Company issued 17,448 shares of its common stock to four employees 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, and the certificates for the
securities bear a legend accordingly
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information in this section should be read in conjunction with
the information contained in the financial statements and related notes in
"Item 7. Financial Statements."
This Annual Report on Form 10-K, including the documents
Incorporated by reference, contains forward-looking statements within the
meaning of Section 21B of the Securities Exchange Act of 1934, as amended.
Such statement appear in a number of places in this Annual Report,
including, without limitation, under "Item 6. Management's Discussion and
Analysis" and information related to the impact of the year 2000. When the
Company refers to forward-looking statements or information, sometimes the
Company uses words such as "may," "will," "could," "should," "plans,"
"intends," "expects," "believes" or similar expressions. All subsequent
written and oral forward-looking statements attributable to the Company and
persons acting on its behalf are qualified by their entirety by the
cautionary statements contained in this Annual Report. Actual events or
results may differ materially from those discussed in forward-looking
statements. The Company undertakes no duty to update any forward-looking
statements, or to publicly release the results if it revises any of them.
Factors which may cause the actual results of operations in future periods to
differ materially from intended or expected results include, but are not
limited to:
[the following are intended as examples only]
* the loss of any key employees could adversely impact its ability
to secure and complete engagements because the Company's business
involves the delivery of professional services and is labor-
intensive;
* the availability and terms of additional capital or debt
financing to fund future acquisitions and for working capital
purposes;
* significant competition for business opportunities because of the
fragmented nature of companies offering similar services and the
low barrier on entry;
* fluctuations of revenue and operating income between quarters
GENERAL
The Company began to provide reprographic and facilities management
services to the premium service segment of the Philadelphia, PA market in June
1993. The Company has subsequently expanded its geographic market to include
Washington, DC, Baltimore, MD, New York, NY and Atlanta, GA. In November 1996,
the Company expanded the scope of its reprographic services to include imaging
and scanning. In 1998 the Company also formed its information Technology
Division to provide a full range of technology services to law firms and other
professional service organizations. Revenues from reprographic, imaging services
and litigation support account for approximately 79% of total revenues while
facilities management accounts for 15% of total revenue as of December 31, 1998.
The revenue provided by the reprographic and imaging services vary
depending on the volume of work orders received, with the months of August and
December historically being slow periods. Revenues are collected on a monthly
basis for facilities management contracts with payment due on the first of the
following month, while reprographic and service revenues are collected on a per
job basis.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
The Company's revenues are primarily derived from reprographics,
imaging services, litigation support, facilities management and information
technology services. Overall revenues increased from $21,138,948 to $25,965,719,
an increase of $4,826,771 or 23% from 1997 to 1998. The increase is primarily
due to increased volume of work orders fulfilled at the Arlington, VA,
Philadelphia, PA, Atlanta, GA, New York, NY and Baltimore MD facilities and
revenues from the new information technology group.
COSTS AND EXPENSES
COST OF SALES. Cost of sales increased by $6,419,830, or 42%, to
$21,713,447 in 1998 as compared to $15,293,617 for 1998. As a percentage of
revenue, cost of sales increased from 72% in 1997 to 84% in 1998. Operating
margins decreased to $4,252,272, a $1,593,059 decrease from 1997. As a percent
of revenue, operating margins declined from 28% in 1997 to 16 % in 1998. The
decreased operating margins were due primarily to high staffing levels and the
start up of the information technology group.
SELLING AND SHIPPING. Costs of selling and shipping increased $244,085
or 10% in 1998. As a percentage of revenue, selling and shipping decreased from
11% in 1997 to 10% in 1998. Selling expenses are primarily commissions based on
sales.
ADMINISTRATIVE. Administrative costs in 1998 increased $799,724 or 36%
over the 1997 period. As a percentage of revenues these costs increased from 11%
in 1997 to 12% in 1998. The increase in administrative costs can be attributed
to professional fees, increases in staffing and personnel costs, and travel
associated with the expansion into new markets during 1998.
EARNINGS (LOSS) FROM OPERATIONS. The Company incurred a loss from operations of
$1,419,331 in 1998 as compared to earnings of $1,217,537 in 1997. The loss
resulted from lower operating margins and higher expense levels due to high
staffing, start up of the information technology group, and costs associated
with expansion.
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OTHER INCOME (EXPENSES), PRIMARILY INTEREST. Other expenses increased
from $141,938 to $236,574, an increase of $94,636 or 67% due mainly to an
increase in the amount of debt carried by the Company in order to meet the
Company's working capital and equipment needs. Other income, including interest
on short-term treasury obligations and sale of excess supplies increased by
$32,596 from $196,656 in 1997 to $229,292 in 1998.
NET (LOSS) EARNINGS. The Company incurred a net loss of $997,613 in
1998 as compared to net earnings of $721,073 in 1997, and, as a result, the
Company has provided for an income tax benefit of $429,000 in 1998 as compared
to income tax expense of $551,182 in 1997.
LIQUIDITY AND CAPITAL RESOURCES AT DECEMBER 31, 1998
The Company has funded its expansion and growth by utilizing internally
generated cash flow, long term financing, and a commercial line of credit. The
Company anticipates that the cash flow from operations and credit facilities
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.
In order to assure additional working capital is available to the
Company to fund its growth and expansion, on February 3, 1997, the Company
entered into an agreement with a financial institution for a $2,500,000 working
capital line of credit. The working capital line of credit is collateralized by
the accounts receivable and certain other assets as described in the agreement.
The working capital line of credit is subject to certain financial covenants and
bears interest at the bank's prime rate of interest or the 30 day LIBOR rate
plus 2.25%. The underlying loan has a maturity date of April 30, 1999. At
December 31, 1998 net advances totaling $141,345 were made under this agreement.
On February 27, 1997, the Company signed an agreement with a financial
institution to provide $1,100,000 to refinance certain capitalized lease
obligations under a 48 month term loan at rates deemed favorable to the Company.
The loan was funded in April 1997 and matures in March 2000. Under the terms of
the agreement, the loan is collateralized by specific equipment and certain
other assets. The term loan is subject to certain financial covenants and bears
interest at rates ranging from 8.75% to 9.02%.
The Company believes its market risk exposure with regard to its
financial instruments is limited to changes in interest rates. Based upon the
composition of the Company's variable rate debt outstanding at December 31,
1998 which is primarily borrowings under the working capital line of credit,
the Company does not believe that a hypothetical increase in the bank's prime
rate of interest or the 30 day LIBOR rate would be material to net income.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year.
Software, hardware or firmware may recognize a date using "00" as the year 1900,
rather than the year 2000. Such an inability of computer programs to recognize a
year that begins with "20" could result in system failures, miscalculations or
errors causing disruptions of operations or other business problems, including,
among others, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company has established a Year 2000 Program (the "Y2K Program") to address
the Year 2000 issue with respect to the following: (i) the Company's information
technology and operating systems; (ii) the Company's non-information technology
systems (such as buildings, plan, equipment and other infrastructure systems
that may contain embedded microcontroller technology); (iii) certain systems of
the Company's major vendors and material service providers (insofar as they
relate to the Company's business activities with such parties); and (iv) the
Company's material clients (insofar as the Year 2000issue relates to the
Company's ability to provide services to such clients). The Y2K Program is
divided into five major phases: a) Awareness, b) Inventory and Risk Assessment,
c) Repair and Renovation, d) Verification and Validation, and e) Implementation
and Monitoring.
The Awareness Phase is intended to ensure the establishment of the program and
the awareness of potential risks and Year 2000 issues. The phase, which involves
communicating the status and progress of the program within the Company and to
third parties, is an on-going activity and will continue as the Company proceeds
through the other phases.
The Inventory and Risk Assessment Phase involves the performance of an initial
inventory of all hardware, software and infrastructure, as well as material
vendors, to identify potential Year 2000 issues and to determine the action
required, if any, to mitigate the risk to the Company. The Company is the
process of contacting its third party service providers to determine the Year
2000 status of their systems, as well as their plans to bring them into
compliance. Material items are those believed by the Company to have significant
impact on the business from a customer service, financial or legal perspective.
The Company's internal Y2K team is performing this
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phase. The Company anticipates that this phase will be substantially complete by
the end of the second quarter in 1999.
The Repair, Replacement and Replacement and Renovation Phase is intended to
ensure that the appropriate items as identified in the final inventory and risk
assessment are upgraded to meet Year 2000 compliance criteria. This may include
software updates, hardware upgrades, development of new processes, new business
practices, training programs, etc. While completion of the various elements of
this phase is tied to corresponding elements within the assessment phase, the
Company anticipates that material repairs, replacements and renovations will be
substantially complete by mid-1999 for systems under the direct control of the
Company. No current assessment of the completion dates for material repairs,
replacements and renovations not under the Company's direct control, and for
which third parties such service providers are responsible, will be available
until completion of that portion of the Inventory and Risk Assessment phase.
The Verification and Validation Phase ensures that critical business processes,
systems and infrastructure are verified and tested to ensure Year 2000 issues
will not cause major disruption in the ongoing operation of the Company
business. Verification and testing of those systems under the Company's direct
control will be performed by the Company's internal Y2K team with the support of
its technicians and certain of the principal suppliers of those systems under
its direct control to be substantially complete in the third quarter of 1999.
Finally, during the Implementation and Monitoring Phase, the Year 2000 upgrades
will be installed into the Company's operating systems, as necessary. In
addition, the monitoring activity will be employed in an effort to ensure that
unforseen Year 2000 critical items are appropriately prioritized for correction.
While the implementation component of this phase is scheduled to be completed by
the end of the third quarter in 1999, the Company's monitoring activities will
be on going.
STATE OF READINESS
The Company's progress towards completing risk assessment within the Company is
on schedule to be completed in the first quarter 1999, however there is general
uncertainty involved in the attempt to evaluate the Year 2000 problem because of
the uncertainty of the readiness of this third party suppliers and vendors.
Although the remediation, testing and implementation phases have not yet
commenced, the Company anticipates that these phases will proceed along the
schedule as contemplated by its Y2K Program.
COSTS
The Company will utilize both internal and external resources to reprogram, or
replace, and test software for Year 2000 modifications. Total costs associated
with required modifications to become Year 2000 compliant is not expected to be
material to the Company's consolidated results of operations and financial
position in any given year.
RISKS
In a reasonably likely worst case scenario, the failure to correct a material
Year 2000 problem could result in an interruption in, or a failure of, certain
normal business activities or operations, including operations that are
essential to the provision of the Company's services. Such failures could
materially and adversely affect the Company's results of operations, liquidity
and financial condition. Due to the general uncertainty inherent in the Year
2000 problem, resulting in major part from the present state of the Company's
knowledge concerning the Year 2000 readiness of third-parties such as its
service providers, the Company is unable to determine at this time whether the
consequences of Year 2000 of failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The Y2K
Program is expected to significantly reduce the Company's level of uncertainty
about the Year 2000 problem and, in particular, about the Year 2000 compliance
and readiness of its material partners. The Company believes that, with the
completion of the Y2K Program as schedules, the potential of significant
interruptions of normal operations should be reduced.
CONTINGENCY PLANS
<PAGE>
After reviewing information gathered in the Inventory and Risk Assessment Phase,
and to prepare for the possibility that certain information systems or third
party partners and vendors will not be Year 2000 compliant, the Company intends
to develop contingency plans, as appropriate. These plans may include the
establishment of teams to monitor and correct disruptions, utilization of
back-up processes including data back up and storage, and the development of
manual "work-around" solutions.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
BALANCE SHEETS F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF STOCKHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
On-Site Sourcing, Inc.
We have audited the accompanying balance sheets of On-Site Sourcing,
Inc., as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. 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 reasonable 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, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/S/ REZNICK FEDDER & SILVERMAN, P.C.
- - ------------------------------------
Bethesda, Maryland
February 12, 1999
<PAGE>
ON-SITE SOURCING, INC.
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS
1998 1997
------------------------- ----------------------
<S> <C> <C>
CURRENT ASSETS $ - $ 1,490,702
Cash and cash equivalents 5,922,027 5,921,063
Accounts receivable, net 449,366 417,693
Prepaid supplies 136,758 216,747
------------------------- ----------------------
Prepaid expenses
Total current assets 6,508,151 8,046,205
Property and equipment, net 4,367,996 4,069,097
Note receivable - officer - 25,000
Other assets 75,062 98,781
$ 10,951,209 $ 12,239,083
------------------------- ----------------------
------------------------- ----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 2,018,248 $ 1,992,580
Accrued and other liabilities 694,334 924,487
Line of credit 141,345 -
Current portion of long-term debt 472,824 411,894
Provision for income taxes, current - 139,798
------------------------- ----------------------
3,326,751 3,468,759
Long-term debt, net of current portion 1,169,454 1,094,444
Deferred rent 121,911 96,509
Provision for income taxes, net of current portion - 419,395
Deferred taxes 197,182 66,989
------------------------- ----------------------
4,815,298 5,146,096
------------------------- ----------------------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares
authorized; 4,824,669 and 4,802,221 shares issued and outstanding 48,247 48,022
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding - -
Subscription receivable (50,400) (50,400)
Additional paid-in capital 6,432,691 6,367,379
Treasury stock (5,000 shares of common stock at cost) (25,000) -
Accumulated earnings (deficit) (269,627) 727,986
------------------------- ----------------------
6,135,911 7,092,987
------------------------- ----------------------
$ 10,951,209 $ 12,239,083
------------------------- ----------------------
------------------------- ----------------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF OPERATIONS
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
<S> <C> <C>
Revenue $ 25,965,719 $ 21,138,948
Costs and expenses
Cost of sales 21,713,447 15,293,617
-------------------- --------------------
4,252,272 5,845,331
-------------------- --------------------
Selling and shipping 2,645,776 2,401,691
Administrative 3,025,827 2,226,103
-------------------- --------------------
5,671,603 4,627,794
-------------------- --------------------
Earnings (loss) from operations (1,419,331) 1,217,537
-------------------- --------------------
Other income (expense)
Other income 229,292 196,656
Other expense, primarily interest (236,574) (141,938)
-------------------- --------------------
(7,282) 54,718
-------------------- --------------------
Earnings (loss) before income taxes (1,426,613) 1,272,255
Income tax expense (benefit) (429,000) 551,182
-------------------- --------------------
Net Earnings (loss) $ (997,613) $ 721,073
-------------------- --------------------
-------------------- --------------------
Basic earnings (loss) per common share $ (0.21) $ 0.15
Diluted earnings (loss) per share $ (0.21) $ 0.15
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Additional Subscriptions
Common shares stock paid-in capital Receivable
---------------- --------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Balance at
December 31, 1996 $ 4,794,021 $ 47,940 $ 6,351,911 $ (50,400)
Sale of common stock 8,200 82 15,468 -
Net earnings - - - -
---------------- --------------- ------------------ --------------------
Balance at
December 31, 1997 4,802,721 48,022 6,367,379 (50,400)
Sale of common stock 22,448 225 65,312 -
Common stock reacquired - - - -
Net loss - - - -
---------------- --------------- ------------------ --------------------
Balance at
December 31, 1998 $ 4,824,669 $ 48,247 $ 6,432,691 $ (50,400)
---------------- --------------- ------------------ --------------------
---------------- --------------- ------------------ --------------------
</TABLE>
<TABLE>
<CAPTION>
Treasury Retained
Stock (deficit)
(Common) earning Total
------------------ ----------------- ------------------
<S> <C> <C> <C>
Balance at
December 31, 1996 $ - $ 6,913 $ 6,356,364
Sale of common stock - - 15,550
Net earnings - 721,073 721,073
------------------ ----------------- ------------------
Balance at
December 31, 1997 - 727,986 7,092,987
Sale of common stock - - 65,537
Common stock reacquired (25,000) - (25,000)
Net loss - (997,613) (997,613)
------------------ ----------------- ------------------
Balance at
December 31, 1998 $ (25,000) $ (269,627) $ 6,135,911
------------------ ----------------- ------------------
------------------ ----------------- ------------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (997,613) $ 721,073
----------------- -----------------
Adjustments to reconcile net earnings
to net cash used in operating activities
Depreciation 1,037,175 769,918
(Gain) loss on disposition of equipment (29,524) 8,460
Changes in assets and liabilities
Decrease (increase) in accounts receivable, net 64,036 (3,240,315)
Increase in prepaid supplies (31,673) (228,923)
Decrease (increase) in prepaid expenses 79,989 (130,780)
Decrease (increase) in other assets 23,719 (62,874)
Increase in accounts payable - trade 25,668 1,468,812
(Decrease) increase in accrued and other liabilities (230,153) 635,288
Increase (decrease) in deferred rent 25,402 20,380
(Decrease) increase in provision for income taxes (559,193) 559,193
Increase (decrease) in deferred taxes 130,193 (8,011)
----------------- -----------------
Total adjustments 535,639 (208,852)
----------------- -----------------
Net cash provided by (used in) operating activities (461,974) 512,221
----------------- -----------------
Cash flows from investing activities
Capital expenditures (1,090,034) (1,265,293)
Proceeds from disposition of equipment 9,501 -
----------------- -----------------
Net cash used in investing activities (1,080,533) (1,265,293)
----------------- -----------------
Cash flows from financing activities
Proceeds from sale of common stock and exercise of warrants 65,537 15,550
Proceeds of long-term debt agreements 316,000 361,643
Net borrowings short term debt agreement 141,345 -
Payments under long-term debt agreements (471,077) (28,141)
----------------- -----------------
Net cash provided by financing activities 51,805 349,052
----------------- -----------------
NET DECREASE IN CASH (1,490,702) (404,020)
AND CASH EQUIVALENTS
Cash and cash equivalents, beginning 1,490,702 1,894,722
----------------- -----------------
Cash and cash equivalents, end $ - $ 1,490,702
----------------- -----------------
----------------- -----------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31,
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
<S> <C> <C>
Supplemental disclosure of cash flow activities
Interest paid $ 194,585 $ 133,470
---------------- -----------------
---------------- -----------------
Income taxes paid $ - $ -
---------------- -----------------
---------------- -----------------
Non cash investing and financing activities:
Fixed assets acquired under capital lease obligations $ 269,508 $ -
---------------- -----------------
---------------- -----------------
Refinancing of capital lease obligations under an equipment note $ - $ 1,100,000
---------------- -----------------
---------------- -----------------
Fixed assets acquired through long-term debt $ 21,509 $ -
---------------- -----------------
---------------- -----------------
Purchase of treasury stock offset against note receivable $ 25,000 $ -
---------------- -----------------
---------------- -----------------
Proceeds from sale of equipment included in accounts receivable $ 65,000 $ -
---------------- -----------------
---------------- -----------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. ORGANIZATION
NATURE OF BUSINESS
On-Site Sourcing, Inc. (the "Company") was incorporated in the
Commonwealth of Virginia on December 1992 and changed its state
incorporation to Delaware in January 1996. The Company performs various
services, including facilities management, litigation copying, and
related services at customer and company locations, and the purchase,
and the purchase, refurbishment, lease, sale and servicing of copy
machines. The facilities management and litigation copying services are
performed in the metropolitan areas of Philadelphia, Pennsylvania;
Washington, D.C.; Atlanta, Georgia; and New York, New York.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Management estimates include the allowance
for doubtful accounts on accounts receivable. Actual results could
differ from those estimates. Significant estimates are made when
accounting for the allowance for uncollectible accounts in connection
with accounts receivable.
RECLASSIFICATIONS
Certain accounts in 1997 financial statements have been reclassified to
conform with the December 31, 1998 presentation.
REVENUE RECOGNITION
Revenue from reprographic services is recognized on a per copy basis
upon completion of the services. Facilities management revenue is
recognized based on monthly fixed fees and, in certain cases, on a
variable per copy fee basis, as defined in facilities management
agreements.
SEGMENT DISCLOSURES
Effective for the year ended December 31, 1998, the Company adopted
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 establishes standards for reporting
information about operating segments and related disclosures about
products and services, geographic areas and major customers.
INCOME TAXES
Deferred taxes are recognized based on the estimated future tax effects
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amount used for
income tax purposes. Income tax expense (benefit) represents the
current tax provision for the period and the change during the period
in deferred and current tax assets and liabilities. Deferred taxes for
temporary differences relate to depreciation, deferred rent and net
operating loss carryforwards.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation on property and
equipment is computed on a straight-line basis over the estimated
useful lives of the assets ranging from two to ten years for financial
reporting purposes. Accelerated methods are used for tax purposes.
EARNINGS PER (LOSS) COMMON SHARE
Basic earnings (loss) per share excludes dilution and is calculated
using the average number of shares outstanding. Diluted earnings (loss)
per share is computed on the basis of the average number of shares
outstanding plus the effect of outstanding stock options using the
"treasury stock" method.
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
------------------ -------------------
<S> <C> <C>
Net earnings (loss) available for common shareholders (A) $ (997,613) $ 721,073
------------------ -------------------
Average Outstanding:
Common stock (B) 4,818,220 4,794,705
Employee stock options
- 152,498
------------------ -------------------
Common stock and common stock equivalents (C)
4,818,220 4,947,203
------------------ -------------------
Earnings (loss) per share:
Basic (A/B) $ (0.21) $ 0.15
------------------ -------------------
Diluted (A/C) $ (0.21) $ 0.15
------------------ -------------------
</TABLE>
Unexercised employee stock options to purchase 1,675,360 and 814,257
shares of the Company's common stock as of December 31, 1998 and 1997,
respectively, were not included in the computations of diluted earnings
per share because the options' exercise prices were greater than the
average market price of the Company's common stock during the
respective period. In addition, since the Company had a net loss for
the year ended December 31, 1998, no potential common shares to be
issued are included in the computation of the diluted per share amount
as they would be antidilutive. Accordingly, for the year ended December
31, 1998 common stock equivalents totaling 130,285 are not included in
the weighted average shares of common stock outstanding.
DEFERRED RENT
Deferred rent is recorded and amortized to the extent the total minimum
rental payments allocated to the current period on a straight-line
basis exceed or are less than the cash payments required.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be cash
equivalents.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107, "Disclosure about Fair Value of Financial Instruments". The
estimated fair value amounts have been determined using available
market information, assumptions and valuation methodologies.
SUBSCRIPTION RECEIVABLE AND NOTE RECEIVABLE-OFFICER
Management believes that it is not practicable to estimate the fair
value of notes because notes with similar characteristics are not
available from the Company.
LINE OF CREDIT AND LONG-TERM DEBT
The carrying amounts approximate fair value.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company complies with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of 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 of changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. To determine
recoverability of its long-lived assets, the Company evaluates the
probability that future undiscounted net cash flows will be less than
the carrying amounts of net assets. Impairment, if any, is measured at
fair value.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to a
concentration of credit risk, principally consist of trade accounts
receivable and cash. The Company places its cash with credit worthy,
high quality financial institutions. Credit risk with respect to trade
receivables is also limited because the Company deals with a large
number of customers in a wide geographic area. At December 31, 1998,
two such customers accounted for approximately 25% of trade accounts
receivable.
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31,:
<TABLE>
<CAPTION>
1998 1997
------------------------- ------------------------
<S> <C> <C>
Trade receivables $ 6,306,209 $ 6,341,063
Other receivables 220,151 -
Allowance for uncollectible accounts (604,333) (420,000)
------------------------- ------------------------
$ 5,922,027 $ 5,921,063
------------------------- ------------------------
------------------------- ------------------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (CONTINUED)
OTHER ASSETS
Other assets consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
------------------ --------------------------
<S> <C> <C>
Deposits $ 47,389 $ 30,240
Employee advances 27,673 25,208
Acquisition of facilities management contracts,
net of accumulated amortization of $8,667 - 43,333
------------------ --------------------------
$ 75,062 $ 98,781
------------------ --------------------------
------------------ --------------------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31,:
<TABLE>
1998 1997
------------------ -----------------
<S> <C> <C>
Copiers $ 3,560,647 $ 3,391,926
Computers, equipment and other 2,683,792 1,580,340
Vehicles 332,551 282,106
------------------ -----------------
6,576,990 5,254,372
Accumulated depreciation (2,208,995) (1,185,275)
------------------ -----------------
$ 4,367,995 $ 4,069,097
------------------ -----------------
------------------ -----------------
</TABLE>
Depreciation expense charged to operations was $1,037,175 and $761,251
for the years ended 1998 and 1997, respectively.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (CONTINUED)
ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following at December 31,:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Accrued salaries, commissions, taxes and
fringe benefits $ 484,732 $ 831,197
Accrued sales tax payable 109,581 72,496
Other accrued liabilities 100,021 20,794
----------------- -----------------
$ 694,334 $ 924,487
----------------- -----------------
----------------- -----------------
</TABLE>
4. SEGMENT INFORMATION
The Company's reportable segments are strategic business units that
offer different products and services. The Company has two reportable
segments: reprographics and facilities management services. Reprographic
services include copying, binding, labeling, collating and indexing
materials. Facilities management services include on-premises management
of the customer's support services including mailroom operations,
facsimile transmission, records and supply room management and copying
services. Other operating segments include information technology and
imaging services.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies (note 2). The Company
evaluates performance based on profit and loss from operations before
income taxes and does not review information regarding the allocation
of assets to each segment. In addition, corporate administrative costs
are not allocated to each segment. There are no intersegment sales or
transfers.
Revenue and profit by reportable segment for the years ended December
31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Reprographic services Facilities management services
---------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 20,447,165 $ 18,111,040 $ 4,002,208 $ 2,635,202
Segment profit 1,264,860 2,073,828 459,702 635,426
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
4. SEGMENT INFORMATION (CONTINUED)
A reconciliation of segment revenue and profit to total revenue and
earnings (loss) from operations is as follows:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
REVENUE
Total revenue for reportable segments $ 24,449,373 $ 20,746,242
Other revenue 1,516,346 392,706
----------------- -----------------
Total revenue $ 25,965,719 $ 21,138,948
----------------- -----------------
----------------- -----------------
PROFIT OR LOSS
Total profit for reportable segments $ 1,724,562 $ 2,709,254
Other profit (loss) (3,143,893) (1,491,717)
----------------- -----------------
Income (loss) before interest and income taxes $ (1,419,331) $ 1,217,537
----------------- -----------------
----------------- -----------------
</TABLE>
5. LINE OF CREDIT
In February 1997, the Company entered into a working capital line of
credit agreement with a financial institution for $2,500,000, which
expires April 30, 1999. The working capital line of credit is
collateralized by accounts receivable and certain equipment as described
in the agreement. The working capital line of credit is subject to
certain financial covenants, including minimum tangible net worth
requirements. The line of credit bears interest at the bank's prime rate
or the 30-day LIBOR rate plus 2.25% (7.29% at December 31, 1998). As of
December 31, 1998 and 1997 there were $141,345 and $-0- advances made
under this agreement, respectively.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
6. LONG-TERM DEBT
Long term debt is as follows:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Equipment note of $1,100,000 at 9.02% collateralized by certain assets
of the Company payable in equal monthly installments of $22,916 plus
interest, maturing in March 2000. $ 618,750 $ 893,750
Equipment note at 8.75%, collateralized by the equipment, payable in equal
aggregate monthly installments of $5,594 plus interest, maturing in
December 2000. 203,919 268,500
Vehicle notes at 5.0%, collateralized by the vehicles, payable in equal
aggregate monthly installments of principal and interest of approximately
$983, maturing in October 2001. 31,954 41,882
Vehicle notes at 9.7%, collateralized by the vehicles, payable in equal
aggregate monthly installments of principal and interest of approximately
$1,272, maturing in August 2000. 35,752 46,955
Equipment note at 8.75% collateralized by the equipment, payable in equal
aggregate monthly installments of principal and interest of approximately
$7,380, maturing in July 2002. 282,235 -
Vehicle note at 6.88%, collateralized by the vehicle, payable in equal
aggregate monthly installments of principal and interest of approximately
$425, maturing in November 2003. 21,208 -
Capital leases obligations (see note 7) 448,460 255,251
----------------- -----------------
1,642,278 1,506,338
Less current maturities included in current
liabilities (472,824) (411,894)
----------------- -----------------
$ 1,169,454 $ 1,094,444
----------------- -----------------
----------------- -----------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
6. LONG-TERM DEBT (CONTINUED)
Aggregate maturities for long-term debt are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31, 1999 $ 472,824
2000 565,138
2001 365,063
2002 165,805
Thereafter 73,448
-----------------
$ 1,642,278
-----------------
-----------------
</TABLE>
7. 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, 1998, are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Capital leases Operating
lease
-------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
1999 $ 152,609 $ 772,167
2000 152,540 696,480
2001 143,250 504,819
2002 81,996 386,200
2003 23,906 246,364
Thereafter - 832,289
----------------- -----------------
Total minimum lease payments 554,301 $ 3,438,319
-----------------
-----------------
Less: interest 105,841
-----------------
Present value of net minimum lease payments $
448,460
-----------------
-----------------
</TABLE>
Fixed assets recorded under capital leases as of December 31, 1998 and
1997, total approximately $659,000 and $390,000, respectively,
representing reprographic machines, and computer equipment. Interest
expense on the outstanding obligations under capital leases was
approximately $15,400, and $30,000 for the years ended December 31, 1998
and 1997, respectively.
Rent expense was $1,488,294 and $979,000 for the years ended December
31, 1998 and 1997, respectively.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
8. RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH AN OFFICER/SHAREHOLDER
During the years ended December 31, 1998 and 1997, the Company recorded
the following transactions with a shareholder and former officers.
o During 1998 and 1997, the Company billed a shareholder and former
officer approximately $16,500 and $22,000, respectively, for
reprographic services.
o During 1998 and 1997, the Company incurred approximately $40,000
and $74,000, respectively, for legal services rendered by a
shareholder and former officer. Included in the amounts payable as
of December 31, 1997, is approximately $13,000 in legal fees due
to the officer/shareholder.
o During 1996, the Company entered into a note agreement with a
former officer/shareholder in the amount of $25,000. The loan bore
interest at the prime rate of interest at the date of the loan
(8.25%). All unpaid principal and accrued interest was repayable
in September 1998. In November 1998, the Company repurchased
shares of common stock in satisfaction for the note receivable.
o During 1997, the Company recorded revenue of approximately
$275,000 for services provided to a former shareholder under a
facilities management agreement. Included in accounts receivable
as of December 31, 1997 is approximately $65,000 from the former
shareholder.
9. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with its officers and
certain employees. The agreements provide for base salaries, contingent
incentive compensation based on achievement of certain sales and other
goals, noncompete and nondisclosure restrictions and, in certain cases,
stock options which vest over a period of time.
The agreements are terminable at the discretion of the Company.
LETTER OF CREDIT
The Company has an undrawn bank letter of credit, in the approximate
amount of $30,000, in connection with an operating lease. The letter of
credit expires October 31, 1999.
10. INCENTIVE STOCK OPTION PLAN
The Company adopted an incentive stock option plan, for 1998, 1997, 1996
and 1995 under which a pool of 700,000, 500,000, 242,000 and 510,000
shares, respectively, 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 10 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 determine
the option price (not less than fair market value) at the date of grant.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
10. INCENTIVE STOCK OPTION PLAN (CONTINUED)
The Company applied APB Opinion No. 25 and related Interpretations in
accounting for its plans. Had compensation cost been determined in
accordance with FASB Statement No. 123, the Company's net income (loss)
and net income (loss) per share would have been the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
Year ended
----------------------------------------
1998 1997
------------------- -----------------
<S> <C> <C>
Net income (loss):
As reported $ (997,613) $ 721,073
Pro forma (1,225,712) 626,288
Net income (loss) per common share - Basic:
As reported (0.21) 0.15
Pro forma (0.25) 0.13
Net income (loss) per common share - Diluted:
As reported (0.21) 0.15
Pro forma (0.25) 0.13
</TABLE>
All options granted during the year ended December 31, 1998 and 1997
were issued pursuant to the incentive stock option plans. The fair value
of each option grant under the plan is estimated on the date of grant
using the Black-Scholes option-pricing model. The following
weighted-average assumptions for 1998 and 1997, respectively, were used:
expected dividend yields of 0.0% and 0.0%, expected volatility rates of
48% and 44.5%, risk-free rates of 5.5% and 5.4% and expected lives of 1
to 4 years.
At December 31, 1998 and 1997, the Company had outstanding options to
sell 434,937 and 126,000, respectively, shares of common stock to
officers and directors at exercise prices ranging from $1.11 to $3 per
share. The options expire through 2001.
During 1998 and 1997, the Company granted options for 1,182,225 and
383,509 shares of common stock, respectively, at exercise prices ranging
from $2.12 to $3.25 per share, respectively. The grant price per share
was equal or greater than the market price at the date of grant. During
1997, options for 144,000 of common stock expired and 5,000 were
exercised. As of December 31, 1997, options for 193,000 of the shares
are vested and outstanding. As of December 31, 1998, options for 781,885
of the shares are vested with the remainder scheduled to vest through
October 2002. The options expire through October 2006.
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
10. INCENTIVE STOCK OPTION PLAN (CONTINUED)
The following depicts activity in the plan for two years ended December
31, 1998:
<TABLE>
<CAPTION>
Options outstanding
-------------------------------------
Per share
Shares exercise prices
------------- -------------------
<S> <C> <C>
Outstanding, January 1, 1997 755,000 $ 1.10-3.25
Options granted 383,509 2.12-3.25
Options exercised (5,000) 1.10
Options expired (166,754) 2.12-3.25
------------- -------------------
Outstanding, December 31, 1997 966,755 1.10-3.25
Options granted 1,182,225 1.13-3.44
Options exercised (5,000) 1.11
Options expired (468,620) 2.13-3.00
------------- -------------------
Outstanding, December 31, 1998 1,675,360 $ 1.10-3.00
------------- -------------------
------------- -------------------
</TABLE>
11. INCOME TAXES
The amounts and sources of the provision for deferred income tax expense
(benefit) were as follows for the year ended December 31,:
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
<S> <C> <C>
Current
Federal $ (447,424) $ 447,401
State (111,769) 111,792
------------------ -----------------
(559,193) 559,193
Deferred
Federal 103,731 (10,681)
State 26,462 2,670
------------------ -----------------
$ (429,000) $ 551,182
------------------ -----------------
------------------ -----------------
</TABLE>
<PAGE>
ON-SITE SOURCING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
11. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary
differences between carrying amounts of assets and liabilities for
financial reporting purposes. Components of the Company's deferred tax
liability (benefit) are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------- ------------------
<S> <C> <C>
Excess of tax over financial accounting depreciation $ 365,477 $ 75,334
Loss carryforwards (138,315) -
Other (29,980) (8,345)
----------------- ------------------
Deferred tax liability $ 197,182 $ 66,989
----------------- ------------------
----------------- ------------------
</TABLE>
Beginning in 1998, the Company is required to report on the accrual
basis for federal and state income tax purposes. In accordance with
Internal Revenue Service Code, the amount of income tax due resulting
from the conversion from cash to accrual is payable during 1998. The
income tax payable was offset by current year losses and net operating
loss carryforwards. At December 31, 1998, the Company had approximately
$337,000 of operating loss carryforwards which expire in 2013.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following individuals are the Directors and Officers of the Company.
All Directors are elected annually by the shareholders to serve until the
next annual meeting of shareholders and until their successors are duly
elected and qualified. Officers are elected annually by the Board of
Directors to serve at the pleasure of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------- ------ ----------------------------------------------------
<S> <C> <C>
Christopher J. Weiler 36 President, Chief Executive Officer and Chairman of
the Board
Allen C. Outlaw 33 Vice President-Marketing and Director
Anthony A. Kopsidas 28 Vice President-Operations and Director
Alfred Duncan 54 Vice President-Finance and Chief Financial Officer
Edward Hook 44 Vice President-Reprographics
Charles B. Millar 38 Director
Jorge R. Forgues 43 Director
CHRISTOPHER J. WEILER founded the Company with 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. before
joining Pitney Bowes Management Services in 1991. During 1998, Mr. Weiler
was elected as Chairman of the Board.
ALFRED DUNCAN joined the Company as Executive Vice President and Chief
Financial Officer in July 1998. From June 1997 until July 1998, Mr Duncan
served as Vice President and Chief Financial Officer of Meadowlanders,
Inc., owners of the New Jersey Devils, a National Hockey League team. From
1992 until June 1997, Mr Duncan was an independent management consultant to
the computer, software and consumer electronics industries. Mr. Duncan
holds a BSCE from Duke University and an MBA from Harvard University.
ALLEN C. OUTLAW has been Vice President of Marketing since September 1997.
Prior thereto Mr. Outlaw served as 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.
<PAGE>
EDWARD HOOK joined the Company as Executive Vice President, Reprographics
Services in July 1998, having served the Company as a consultant since
April 1998. From February 1997 until April 1998, Mr. Hook served as an
independent consultant for ASE Associates, involving strategic planning and
corporate development. From 1984 to February 1997, Mr. Hook served as
Senior Vice President of Shields Business Solutions, a Company engaged in
the sales and service of office products to the financial and legal
industries.
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 the positions of Senior Vice President of Finance and
Administration, Chief Financial Officer and Treasurer of Network Imaging
Corporation since April 1996, a Herndon-based publicly traded software
developer. 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 harbor cruise line with
operations in nine states. Prior thereto, from 1987 to 1992, Mr. Forgues
was Vice President of Finance at Best Software, Inc., a computer software
developer. Mr. Forgues joined the Board of Directors, Compensation and
Audit Committees in July 1996.
Messrs. 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the Company's knowledge, in 1998, all Officers, Directors
and 10% shareholders have filed, on a timely basis, all forms required by
Section 16(a) of the Exchange Act of 1934, with the exception that three
outside directors did not timely file Form 4 reporting grants of stock
options in September 1997. Such reports have subsequently been filed.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of the Company's Chief Executive Officer and the other most
highly compensated executive officers (collectively, the "Named Executive
Officers") whose annual compensation (salary and bonus) for services
rendered in all capacities to the Company exceeded $100,000 for the years
ended December 31, 1998 and 1997.
<PAGE>
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- - --------------------------------------------------------------------------------------------------------------------------------
Other All
Annual Other
Name and Principal Compensation Options/ Compensation
Position Salary Bonus $ SAR's $
Year $ $ Shares
<S> <C> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------------------
Christopher Weiler 1998 125,145 - - 4,225 -
President and CEO 1997 118,917 20,000 - - -
- - --------------------------------------------------------------------------------------------------------------------------------
Lance Waagner 1998 148,754 - - 77,500 -
Vice President, Information 1997 - - - - -
Technology
- - --------------------------------------------------------------------------------------------------------------------------------
Allen Outlaw 1998 299,708 - 107,800 -
Vice President, Marketing 1997 99,028 - - - -
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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. For 1997, three outside directors each received options
to purchase 20,000 shares of Common Stock vesting over a period of three
years in equal portions at the end of each quarter. The options were
granted at the market price at the time of grant. For 1998, three outside
directors each received options to purchase 40,000 shares of Common Stock
vesting over a period of three years in equal portions at the end of each
quarter. The options were granted at the market price at the time of grant.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table enumerates, as of February 28, 1999, the name and
ownership, both by numerical holding and percentage interest, of the
Company's common stock by (1) each person or group, known to the Company,
who beneficially owns more than 5 percent of the Company's outstanding
common stock; (2) the Directors and Executive Officers of the Company,
individually, and (3) the Directors and Executive Officers as a group.
In preparing the following tables, the Company has relied upon statements
filed with the Securities and Exchange Commission by beneficial owners of
more than 5 percent of the Company's outstanding common stock pursuant to
Section 13(d) or 13(g) of the Securities Act of 1934, unless the Company
knew or had reason to believe that the information contained in such
statements was not complete or accurate, in which case the Company relied
upon information which it considered to be accurate and complete.
<PAGE>
<TABLE>
<CAPTION>
# OF SHARES APPROXIMATE % OF
NAME BENEFICIALLY OWNED BENEFICIAL OWNERSHIP (1)
---- ------------------ ------------------------
<S> <C> <C>
The Estate of John S. Stoppelman (2) 639,583 11.4%
10900 Equestrian Court
Reston, VA 20190
Denis A. Seynhaeve (1.A) 537,000 9.6%
220 Wardour Drive
Annapolis, MD 21401
Christopher J. Weiler (3) 364,225 6.5%
c/o the Company
Allen C. Outlaw (4) 231,467 4.1%
c/o the Company
Anthony A. Kopsidas (5) 129,412 2.3%
c/o the Company
Alfred Duncan (6) 44,225 *
c/o the Company
Lance Waagner (7) 33,725 *
c/o the Company
Jorge R. Forgues (8) 45,516 *
500 Huntmar Park Drive
Herndon, VA 20170
Charles B. Millar (9) 49,016 *
1101 Vermont Ave., N.W.
Washington, D.C. 20005
Edward Hook (10) 35,369 *
c/o the Company
All Officers and Directors as a group 2,109,537 37.6%
</TABLE>
- - -----------
* Less than 1%
(1) Based on 4,824,669 shares of Common Stock outstanding as of December
31, 1998 and 780,732 shares of vested excercisable options.
(1.A) Includes 88,000 shares purchased between March 1 and March 4, 1999
(2) Includes 9,583 shares subject to options that are exercisable currently
or exercisable within 60 days.
(3) Includes 4,225 shares subject to options that are exercisable currently
or exercisable within 60 days.
(4) 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". Includes 24,467 shares subject to
options that are exercisable currently or exercisable within 60 days.
(5) Includes 129,412 shares subject to options that are exercisable
currently or exercisable within 60 days.
(6) Includes 44,225 shares subject to options that are exercisable
currently or exercisable within 60 days.
(7) Includes 25,000 shares subject to options that are exercisable
currently or exercisable within 60 days.
(8) Includes 45,516 shares subject to options that are exercisable
currently or exercisable within 60 days.
<PAGE>
(9) Includes 45,516 shares subject to options that are exercisable
currently or exercisable within 60 days.
(10) Includes 16,269 shares subject to options that are exercisable
currently or exercisable within 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1996, the Company granted options to purchase 75,000 shares of
the Company's common stock at $2.125 per share to an officer of the
Company. 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 1997, the Company granted options to purchase 20,000 shares of
the Company's common stock at $3.00 per share to each of the Company's
three outside directors. The options vest in equal quarterly installments
over a period of three 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.
During 1998, the Company granted options to purchase 40,000 shares of the
Company's common stock at $3.00 per share to each of the Company's three
outside directors. 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
The President of the Company, his wife, and a former Director of the
Company personally guaranteed a revolving line of credit with a commercial
bank with a principal amount of $450,000 and interest at 1% over the prime
rate per year. The line was executed by the Company for business purposes
including the financing of receivables. On April 1, 1997 the line expired.
In March 1996, the Company loaned $89,900 to an officer/director. The loan
bears interest at 6%. The balance due at December 31, 1998 was $52,668.
In September 1996, the Company loaned $25,000 to an officer, pursuant to an
employment agreement. The loan bears interest at the prime rate at the date
of the loan and was due September 26, 1998. In November 1998, the Company
repurchased shares of common stock in satisfaction for the note.
REVENUES AND EXPENSES
During 1998 and 1997, the Company billed a shareholder and former officer
approximately $16,500 and $22,000, respectively, for reprographic services
and the sale of a photocopier. These transactions occurred at the same
prices available to non-related third parties.
During 1998 and 1997, the Company was billed approximately $40,000 and
$74,000, respectively, for legal services rendered by the Stoppelman Law
Firm, P.C., of which a shareholder and former officer, is a principal. 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 retainer of $5,000 per month for legal services which was
subsequently increased to $7,000 per month in July 1997. The arrangement
ended in July of 1998.
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.
<PAGE>
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT # DESCRIPTION OF DOCUMENT
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
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(2) Employment Agreement between the Company and Larry F. Morris
10.05(3) Employment Agreement between the Company and Joseph Sciacca
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
10.19(5) Lease with 443 Company/William Real Estate Co., Inc. for New
York, NY office
10.20(5) Lease with JRG/Lynn Associates 10/18/96
<PAGE>
10.21(5) Lease with Frederick Park Limited Partnership
10.22(5) Fifth Amendment to Lease with Suburban Station Associates
10.23(2) Revised 1996 Stock Option Plan
10.24(2) 1997 Stock Option Plan
10.25 (5) First Amendment to lease with Kingston Atlanta Partners, L.P.
10.26 Lease with Miller Properties.
10.27 Lease modification with Williams Real Estate
10.28 1998 Stock Option Plan
10.29 Employment agreement with Arne Christensen
10.30 Employment agreement with Allen Outlaw
10.31 Employment agreement with Alfred Duncan
10.32 Employment agreement with Edward Hook
10.33 Employment agreement with Jack Sabanush
16.01(4) Letter on change in certifying accountant
27.01 Financial Data Schedule
(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 Post Effective Amendment to
the Company's Registration Statement on Form SB-2 file No. 333-3544.
(3) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the period ended September 30, 1996.
(4) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 29, 1996 and amended December 9, 1996.
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the period ended December 31, 1996
(b) REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on this 30th day of March 1998.
ON-SITE SOURCING, INC.
BY: /s/ Christopher J. Weiler
-----------------------------------
Christopher J. Weiler, President
In accordance with the Exchange, this Report has been signed below by the
following persons on behalf of the Registrant, and in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C>
/s/ Christopher J. Weiler President, Chief Executive
- - ---------------------------- Officer and Director March 30, 1999
Christopher J. Weiler
/s/ Alfred Duncan
- - ---------------------------- Chief Financial Officer and March 30, 1999
Alfred Duncan Chief Accounting Officer
</TABLE>
<PAGE>
EXHIBIT 10.26
AGREEMENT OF LEASE
BY AND BETWEEN
22 LIGHT STREET, LLC.
and
On-Site Sourcing, Inc.
SECTION HEADING PAGE
1 Summary of Key Terms 3
2 Term 3
2.1.1 Original Term 3
2.2 Surrender 4
2.3 Holding Over 4
3 Commencement Date 4
4 Rent 4
4.1.1 Base Rent 4
4.1.2 Additional Rent 4
4.1.3 Rental Abatement 4
4.1.4 Real Estate Tax Base Year 4
4.1.5 Operating Costs Base Year 5
4.1.6 Payment of Passthrough Expenses 5
4.1.7 Landlord's Right to Estimate 5
4.2 When due and payable 5
4.3 Where payable 5
4.4 Advance Rent 6
4.5 Security Deposit 6
5 Use of Premises 6
6 Tenant's Proportionate Share 6
7 Utilities 6
8 Insurance and Indemnification 6
8.1 Increase in Risk 6
8.2 Insurance to be maintained by 6
Tenant
8.3 Insurance to be maintained by 6
Landlord
8.4 Waiver of subrogation 7
8.5 Liability of parties 7
9 Improvements to Premises 7
9.1 By Landlord 7
9.2 Acceptance of Possession 7
9.3 By Tenant 7
9.4 Mechanics Liens 7
9.5 Fixtures 8
9.6 Materials Used 8
10 Maintenance and Services 8
10.1 Janitorial and Trash Removal 8
10.2 Maintenance by Tenant 8
10.3 Maintenance by Landlord 8
11 Landlord's Right of Entry 8
<PAGE>
12 Fire and other Casualties 8
12.1 General 8
12.2 Substantial Destruction 8
12.3 Tenant's Negligence 9
13 Condemnation 9
13.1 Right to Award 9
13.2 Effect of Condemnation 9
14 Assignment & Subletting 10
15 Subordination; Attornment & Non- 10
Disturbance
15.1 Subordination 10
15.2 Attornment & Non-Disturbance 10
16 Default 10
16.1 Definition 10
16.2 Notice to Tenant; Grace Period 11
16.3 Landlord's Right on Event of 11
Default
16.4 Default by Landlord 12
17 Estoppel Certificate 12
18 Quiet Enjoyment 13
19 Relocation Clause 13
20 Notices 13
21 General 13
21.1 Effectiveness 13
21.2 Complete Understanding 13
21.3 Amendment 13
21.4 Applicable Law 13
21.5 Waiver 13
21.6 Time of Essence 13
21.7 Headings 13
21.8 Definitions 13
21.9 Exhibits 14
21.10 Severability 14
21.11 Definition of "the Tenant" 14
22 Deliveries 14
23 Expansion Options 14
24 Miscellaneous 14
Signature Page 15
<PAGE>
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (hereinafter referred to as "this Lease"), made
this 25th day of August, 1997, by and between 22 Light Street, LLC, a Limited
Liability Company organized and existing under the law of Maryland having an
address at 31 Light Street (hereinafter referred to as "the Landlord"), and
On-Site Sourcing, Inc., existing under the law of _________________ having a
primary address at ____________________ (hereinafter referred to as "the
Tenant"),
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into this
Lease by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party
hereto, the Landlord hereby leases to the Tenant and the Tenant hereby leases
from the Landlord all of that real property in Baltimore City, Maryland,
which consists of the space containing approximately 5,079 rentable square
feet of floor area shown outlined on a plat attached hereto as Exhibit A
(hereinafter referred to as "the Premises") and located in a building
(hereinafter referred to as "the Building") at 22 Light Street in Baltimore,
Maryland, on a tract of land (hereinafter referred to as "the Land") and any
other buildings or improvements thereon being hereinafter referred to
collectively as "the Property"),
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and
matters of record or in fact,
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
Section 1. SUMMARY OF KEY TERMS
a) Landlord: 22 Light Street, LLC
b) Tenant: On-Site Sourcing, Inc.
c) Premises: Suite 200 of 22 Light Street, containing
approximately 5,079 rentable square feet
d) Term: 10 Years, 4 Months beginning on October 15, 1997
e) Base Rental Rate: $15.00 per rentable square foot
f) Rental Concession: Tenant will be responsible for rental
payments during Year 1 based on 3,500 rentable square feet.
Commencing on Year 2, Tenant will pay rental based on its
square footage of 5,079 rentable square feet for the
remainder of the lease term.
g) Tenant's Operating Costs Percentage: 11.1%
h) Annual Base Rental Increase: 3% annual increase
i) Tenant Improvement: Landlord will build out space as
stipulated in Section 9.1 and Exhibit A.
j) Security Deposit: 1 month rent equalling $6,348.75
k) Advance Rent: 1 month equalling $4,375.00
l) Real Estate Tax Base Year: 1998
m) Operating Expense Base Year: 1998
n) Utilities: Directed metered and/or billed to Tenant
o) Rental Abatement: The initial two and one half months of
the lease term (October 15, 1997 - December 31, 1997) shall be
rent free plus January and February of 1999 shall be rent free.
Section 2. TERM.
2.1 LENGTH.
2.1.1. ORIGINAL TERM. This Lease shall be for a term (hereinafter
referred to as the ("Original Term") (a) commencing on October 15, 1997,
(hereinafter referred to as the "Commencement Date" and (b) terminating at
11:59 o'clock P.M., local time, on the day immediately preceding the tenth
(10th) year fourth (4th) month anniversary of the first (1st) day of the
first (1st) full calendar month during the Term (hereinafter referred to as
the ("Termination Date"). Such termination date is February 14, 2007.
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2.2. SURRENDER. The Tenant shall at its expense, at the expiration of the
Term or any earlier termination of this Lease, (a) promptly surrender to the
Landlord possession of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by the
Landlord) in good order and repair damages reasonably beyond the Tenant's
control and ordinary wear and tear excepted) and broom clean, (b) remove
therefrom the Tenant's signs, goods and effects and any machinery, trade
fixtures and equipment which are used in conducting the Tenant's trade or
business and are not owned by the Landlord, and (c) repair any substantial
damage to the Premises or the Building caused by such removal.
2.3 HOLDING OVER. If the Tenant continues to occupy the Premises after
the expiration of the term or any earlier termination of this Lease without
having obtained the Landlord's express, written consent thereto, then without
altering or impairing any of the Landlord's rights under this Lease or
applicable law, (a) the Tenant hereby agrees to pay to the Landlord
immediately on demand by the Landlord, as Rent for the Premises, for each
calendar month or portion thereof after such expiration of the Term or such
earlier termination of this Lease, as aforesaid, until the Tenant surrenders
possession of the Premises to the Landlord, a sum equaling one hundred
twenty-five percent (125%) of the amount of the monthly Base Rent and
Additional Rent which would have been due and payable under the provisions of
the Lease and (b) the Tenant shall surrender possession of the Premises to
the Landlord immediately on the Landlord's having demanded the same. Nothing
in the provisions of this Lease shall be deemed in any way to give the Tenant
any right to remain in possession of the Premises after such expiration or
termination, regardless of whether the Tenant has paid any such Rent to the
Landlord.
Section 3. COMMENCEMENT DATE.
3.1 The Commencement Date is October 15, 1997. In the event this lease
is executed later than August 15, 1997, then the commencement date may be
extended, at Landlord's sole option, on a day by day basis whereas the
Premises will be ready for occupancy 60 days after lease execution. In the
event the Premises is not ready for occupancy within 60 days after lease
execution, then Landlord will use commercially reasonable efforts to complete
the tenant improvements as expeditiously as possible thereafter.
Section 4. BASE RENTAL RATE.
4.1 AMOUNT. As rent for the Premises (all of which is hereinafter
referred to collectively as "Rent"), the Tenant shall pay to the Landlord all
of the following:
4.1.1. BASE RENT. An annual base rent (hereinafter referred to as
"the Base Rent") which
(a) the base rental rate for the initial 12 months of the
Lease Term commencing on October 15, 1997 through October 14, 1998 is $15.00
per rentable square foot. The rental rate shall increase 3% annually during
the course of the lease term.
(b) the Tenant will pay rental for Year 1 of the lease based
on 3,500 rentable square feet. The Year 1 annual payment is $52,500.
Commencing in Year 2, the tenant will pay rental based on 5,079 rentable
square feet.
(c) for the initial Lease Year 1 Commencing October 15, 1997
through October 14, 1998 during the Original Term, is in the sum of $52,500.
If the Term commences on a day other than the first (1st) day of a calendar
month), for the initial Lease Year Tenant shall pay one
three-hundred-sixty-fifth (1/365) of such sum for each day of such calendar
month falling within the Term; and
(d) for each Lease Year thereafter during the Term, the
rental rate shall increase in a sum equaling a 3% annual increase to the Base
Rental Rate as compared to the previous years rental rate. For instance, the
initial lease year rental rate is $15.00 per rentable square foot, the second
lease year rental rate shall increase by 3% to $15.45 per rentable square
foot ($15.00 x 1.03%), the third lease year shall increase to $15.91 (15.45 x
1.03%) per rentable square foot and so on.
(e) the rental payment for Year 2 commencing on October 15,
1997 to October 14, 1998 is $78,470.55 (5,079 rentable square feet x $15.45).
The annual rental payment shall increase by 3% per year thereafter.
4.1.2. ADDITIONAL RENT. Additional rent (hereinafter referred to as
"Additional Rent") in the amount of any payment referred to as such in any
provision of this Lease which accrues while this Lease is in effect (which
Additional Rent shall include any and all charges or other amounts which the
Tenant is obligated to pay to the Landlord under any of the provisions of
this Lease, other than the Base Rent).
4.1.3. RENTAL ABATEMENT. The initial two and one half months of the
lease term shall be rent free and January, 1999 and February 1999 shall be
rent free.
4.1.4. REAL ESTATE TAX BASE YEAR. Tenant covenants and agrees to
pay to the Landlord, in addition to the Base Rent hereinabove provided, its
proportionate share of any increase in real estate taxes and other
assessments levied on the Premises and Improvements during the term of the
Lease, or any renewal thereof, in excess of the real estate taxes levied
against the building for tax year July 1, 1997 to June 30, 1998. Landlord
shall furnish
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to Tenant a copy of each bill for taxes or other assessments which Tenant is
required to pay. Tenant shall pay to Landlord, any sums due hereunder on
demand and Landlord shall pay the taxes directly to the taxing authority.
Tenant shall have the right, at its own expense, to protest any assessment
increase upon the demised Premises. Tenant shall make any such protest in
Landlord's name and Landlord will cooperate with Tenant in making and
completing such protests. For calculation purposes, Base Year Real Estate
Taxes shall reflect a fully assessed building.
4.1.5. OPERATING COSTS BASE YEAR: Tenant covenants and agrees to
pay as additional rent during the term of this Lease (and any renewal) its
proportionate share of the costs and expenses incurred by Landlord in
connection with the operation and maintenance of the Premises, Building and
the Property (hereinafter "Operating Costs") over an actual amount for
Operating Costs for calendar year 1998. The aforegoing Operating Costs shall
be limited to those costs and expenses incurred by Landlord in (a) janitorial
services (b) building insurance (c) property management fees (d) fire
protection and fire systems monitoring (e) common area lighting (f) water and
sewer service (g) elevator service (h) trash removal (i) security system
operation (j) changes or fees for governmental permits (k) premiums for
hazard, liability, worker's compensation or similar insurance upon any or all
of the Property and (l) the cost of any other items which, under generally
accepted accounting principals consistently applied from year to year with
respect to the Property, constitute operating or maintenance costs
attributable to any or all of the Property and shall exclude costs associated
with the renovation of the Property including but not necessarily limited to
the roof, structural supports and facade.
4.1.6. PAYMENT OF PASSTHROUGH EXPENSES. After the end of each
calendar year during the Term, the Landlord shall compute the total of the
Operating Costs incurred for all of the Property during such calendar year,
and shall compare Operating Costs to that of the Base year Operating Costs.
In the event the Operating Costs for any given year exceed the Operating
Costs of the Base Year then Tenant will pay to Landlord the difference, based
on its proportionate share of space leased. Such difference shall be paid to
Landlord within thirty (30) days after demand by the Landlord. Such demand
will be provided in accordance with Lease Section 20 and accompanied by a
statement setting forth such Operating Costs and itemized Building expense
statements for the Base Year and year(s) for which Tenant is being billed.
4.1.7. LANDLORD'S RIGHT TO ESTIMATE. Anything contained in the
foregoing provisions of this subsection to the contrary notwithstanding, the
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under such
provisions for any calendar year, (b) require the Tenant to pay to the
Landlord for each calendar month during such year one twelfth (1/12) of such
Additional Rent, at the time and in the manner that the Tenant is required
hereunder to pay the monthly installment of the Base Rent for such month, and
(c) at the Landlord's reasonable discretion, increase or decrease from time
to time during such calendar year the amount initially so estimated for such
calendar year, all by giving the Tenant written notice thereof, provided in
accordance with Lease Section 19 accompanied by a schedule setting forth in
reasonable detail the expenses comprising the Operating Costs, as so
estimated. In such event, the Landlord shall cause the actual amount of such
Additional Rent to be computed and certified to the Tenant within 120 days
after the end of such calendar year, and the Tenant or the Landlord, as the
case may be, shall promptly thereafter pay to the other the amount of any
deficiency or overpayment therein, as the case may be.
4.2. WHEN DUE AND PAYABLE
4.2.1. The Base Rent for any Lease Year shall be due and payable in
twelve (12) consecutive, equal monthly installments, in advance, on the first
(1st) day of each calendar month during such Lease Year. For instance, the
annual rental payments for the first year of the lease is $52,500; therefore,
rental payments for year one will be payable in 12 equal monthly payments of
$4,375 on the first day of each calendar month.
4.2.2. Any Additional Rent accruing under any provision of this
Lease shall, except as is otherwise set forth herein, be due and payable when
the installment of the Base Rent next falling due after such Additional Rent
accrues becomes due and payable.
4.2.3. Each such payment shall be made promptly when due, without
any deduction or setoff whatsoever, and without demand. Any payment made by
the Tenant to the Landlord on account of Rent may be credited by the Landlord
to the payment of any Rent then past due before being credited to Rent
currently falling due. Any such payment which is less than the amount of Rent
then due shall constitute a payment made on account thereof, the parties
hereto hereby agreeing that the Landlord's acceptance of such payment
(whether or not with or accompanied by an endorsement or statement that such
lesser amount or the Landlord's acceptance thereof constitutes payment in
full of the amount of Rent then due) shall not alter or impair the Landlord's
rights hereunder to be paid all of such amount then due, or in any other
respect.
4.3. WHERE PAYABLE. The Tenant shall pay the Rent, in lawful currency of
the United States of America, to the Landlord by delivering or mailing it to
the Landlord's address which is 31 Light Street, Suite 200, Baltimore,
Maryland 21202 set forth hereinabove, or to such other address or in such
other manner as the Landlord from time to time specifies by written notice to
the Tenant.
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4.4. ADVANCE RENT. Upon execution of this lease, Tenant agrees to pay to
Landlord one (1) month of advance rent in the amount of $4,375.00. Such
advance rent shall be applied towards rental payments for January 1998.
4.5. SECURITY DEPOSIT. Upon execution of the lease, tenant agrees to pay
to Landlord a security deposit in the amount of $6,348.75.
Section 5. USE OF PREMISES.
5.1. The Tenant shall, throughout the Term, occupy and use the Premises
for and only for general office purposes and general photo copying services.
5.2. In its use of the Premises and the remainder of the Property, the
Tenant shall not violate any applicable law, ordinance or regulation, and
shall comply with all applicable laws relating to its specific occupancy and
use of the Premises.
Section 6. TENANT'S PROPORTIONATE SHARE
For calculation purposes, the Tenant's proportionate share of office
space leased is 11.7% of the entire office area. Such determination is
calculated based on Tenant's rentable square footage (5,079 share feet)
divided by the total rentable square footage of office space on floors 2-6
which is 43,320 square feet.
Section 7. UTILITIES
a) Tenant shall pay all costs of electricity, gas, power, telephone and
other utilities used or consumed on their premises located within Tenant's
suite of 22 Light Street, and there shall be no obligation of the Landlord to
furnish same. Notwithstanding the aforegoing. Tenant agrees to maintain
sufficient heat within the Premises so that the sprinkler system remains in
operation at all times. The Landlord may have Tenant's premises separately
metered. In the event the above utilities are not separately metered and/or
billed, Tenant shall pay its proportionate share of said utilities based on
an allocation to be made by the Landlord in the exercise of reasonable
judgement.
b) Landlord shall, under no circumstances, be liable to Tenant, in
damages or otherwise, for any interruption in the service of water,
electricity, gas, heating, air-conditioning or other utilities or services
caused by an unavoidable delay, by the making of any necessary repairs or
improvements or by any cause beyond Landlord's reasonable control.
Section 8. INSURANCE AND INDEMNIFICATION.
8.1. INCREASE IN RISK. The Tenant (a) shall not do or permit to be done
any act or thing as a result of which either (i) any policy of insurance of
any kind covering (1) any or all of the Property or (2) any liability of the
Landlord in connection therewith may become void or suspended, or (ii) the
insurance risk under any such policy would (in the opinion of the insurer
thereunder be made greater; and (b) shall pay as Additional Rent the amount
of any increase in any premium for such insurance resulting from any breach
of such covenant, within ten (10) days after the Landlord notifies the Tenant
in writing of such increase.
8.2. INSURANCE TO BE MAINTAINED BY TENANT.
8.2.1. The Tenant shall maintain at its expense, throughout the
Term, insurance against loss or liability in connection with bodily injury,
death, property damage or destruction, occurring within the Premises or
arising out of the use thereof by the Tenant or its agents, employees,
officers, subtenants, invitees, visitors and guests, under one or more
policies of general public liability insurance having such limits as to each
as are reasonably required by the Landlord from time to time, but in any
event of not less than (a) Two Million Dollars ($2,000,000) for bodily injury
to or death of any person or persons and damage to property. Each such policy
shall (a) name Tenant as the insured thereunder and the Landlord (and, at the
Landlord's request, any Mortgagee), as additional insureds, (b) by its terms,
be considered primary and non-contributory with respect to any other
insurance carried by the Landlord or its successors and assigns, (c) by its
terms, be cancelable only on at least thirty (30) days' prior written notice
to the Landlord (and, at the Landlord's request, any such Mortgagee), and (d)
be issued by an insurer of recognized responsibility licensed to issue such
policy in Maryland.
8.2.2. (a) At least five (5) days before the Commencement Date, the
Tenant shall deliver to the Landlord a certificate of such policy and (b) at
least thirty (30) days before any such policy expires, the Tenant shall
deliver to the Landlord a certificate of a replacement policy therefor;
provided, that so long as such insurance is otherwise in accordance with the
provisions of this Section, the Tenant may carry any such insurance under a
blanket policy covering the Premises for the risks and in the minimum amounts
specified in paragraph 8.2.1, in which event the Tenant shall deliver to the
Landlord two (2) insurer's certificates therefor in lieu of an original or a
copy thereof, as aforesaid.
8.3. INSURANCE TO BE MAINTAINED BY LANDLORD. The Landlord shall maintain
throughout the Term all-risk
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fire and extended coverage insurance upon the Building, in at least such
minimum amounts and having at least such forms of coverage as are required
from time to time by the Landlord's lender. The cost of the premiums for such
insurance and of each endorsement thereto shall be deemed, for purposes of
the provisions of Section 4.1.4., to be a cost of operating and maintaining
the Property.
8.4. WAIVER OF SUBROGATION. If either party hereto is paid any proceeds
under any policy of insurance naming such party as an insured, on account of
any loss or damage, then such party hereby releases the other party hereto,
to and only to the extent of the amount of such proceeds, from any and all
liability for such loss or damage, notwithstanding that such loss, damage or
liability may arise out of the negligent or intentionally tortious act or
omission of the other party, its agents or employees; provided, that such
release shall be effective only as to a loss or damage occurring while the
appropriate policy of insurance of the releasing party provides that such
release shall not impair the effectiveness of such policy or the insured's
ability to recover thereunder. Each party hereto shall use reasonable efforts
to have a clause to such effect included in its said policies. In the event
Landlord is unable to have a Waiver of Suborgation clause in its policy, then
neither Landlord nor Tenant will be obligated to have such clause in its
policy.
8.5. LIABILITY OF PARTIES. Except if and to the extent that such party
is released from liability to the other party hereto pursuant to the
provisions of subsection 8.4,
8.5.1. the Landlord (a) shall be responsible for, and shall defend,
indemnify and hold harmless the Tenant against and from any and all liability
or claim of liability arising out of, any injury to or death of any person or
damage to any property, occurring anywhere upon the Property, if, only if and
to the extent that such injury, death or damage is proximately caused by the
negligent or intentionally tortious act or omission of the Landlord or its
agents, officers or employees, but (b) shall not be responsible for or be
obligated to defend, indemnify or hold harmless the Tenant against or from
any liability for any such injury, death or damage occurring anywhere upon
the Property (including the Premises), (i) by reason of the Tenant's
occupancy or use of the Premises or any other portion of the Property, or
(ii) because of fire, windstorm, act of God or other cause unless proximately
caused by such negligent or intentionally tortious act or omission of the
Landlord, as aforesaid; and
8.5.2. excluding those situations in which the Landlord is
obligated to indemnify and hold harmless the Tenant under the provisions of
paragraph 8.5.1, the Tenant shall be responsible for, and shall defend,
indemnify and hold harmless the Landlord against and from, any and all
liability or claim of liability arising out of (a) the use, occupancy,
conduct, operation or management of the Premises during the Term, or (b) any
work or thing whatsoever done or not done on the Premises during the Term, or
(c) any breach or default by the Tenant in performing any of its obligations
under the provisions of this Lease or applicable law, or (d) any negligent,
intentionally tortious or other act or omission of the Tenant or any of its
agents, contractors, servants, employees, subtenants, licensees or invitees
during the Term, or (e) any injury to or death of any person or damage to any
property occurring on the Premises during the Term.
Section 9. IMPROVEMENTS TO PREMISES.
9.1. BY LANDLORD.
Landlord, at its cost, will buildout the Premises with building standard
material and within the specifications as outlined in Exhibit A.
9.2. ACCEPTANCE OF POSSESSION. Except for (a) latent defects or
incomplete work which would not reasonably have been revealed by an
inspection of the Premises made for the purpose of discovering the same when
the Landlord delivers possession of the Premises to the Tenant, and (b) any
other item of incomplete work set forth on a "punch list" prepared by the
Tenant and approved in writing by the Landlord before such delivery of
possession, by its assumption of possession of the Premises the Tenant shall
for all purposes of the provisions of this Lease be deemed to have accepted
them and to have acknowledged them to be in the condition called for
hereunder.
9.3. BY TENANT. The Tenant shall not make any alteration, addition or
improvement to the Premises without first obtaining the Landlord's written
consent thereto and to the identity of the contractor or other person who
would make the same which, in the case of non-structural alterations,
additions and improvements only, shall not unreasonably be withheld. If the
Landlord consents to any such proposed alteration, addition or improvement,
it shall be made at the Tenant's sole expense and the Tenant shall hold the
Landlord harmless from any cost incurred on account thereof, and at such time
and in such manner as not unreasonably to interfere with the use and
enjoyment of the remainder of the Property by tenant thereof or other person.
9.4. MECHANICS' LIENS. The Tenant shall (a) immediately after it is
filed or claimed, have released by bonding or otherwise any mechanics',
materialman's or other lien filed or claimed against any or all of the
Premises, the Property, or any other property owned or leased by the
Landlord, by reason of labor or materials provided for the Tenant or any of
its contractors or subcontractors (other than labor or materials provided by
the Landlord pursuant to the provisions of this Lease), or otherwise arising
out of the Tenant's use or occupancy of the Premises or any other portion of
the Property, and (b) defend, indemnify and hold harmless the Landlord
against and from any and all liability, claim of liability or expense
including, by way of example rather than of limitation, that of reasonable
attorneys' fees incurred by the Landlord on account of any such lien or claim.
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9.5. FIXTURES. Any and all improvements, repairs, alterations and all
other property attached to or otherwise installed as a fixture within the
Premises by the Landlord or the Tenant shall, immediately on the completion
of their installation, become the Landlord's property without payment
therefor by the Landlord, except that any machinery, equipment or fixtures
installed by the Tenant at no expense to the Landlord and used in the conduct
of the Tenant's trade or business rather than to service the Premises or any
of the remainder of the Building or the Property generally shall remain the
Tenant's property, and shall be removed by the Tenant at the end of the Term.
9.6. MATERIALS USED. Any improvements made to the Premises by either
party hereto shall be made only in a good and workmanlike manner, using new,
first-class materials.
Section 10. MAINTENANCE AND SERVICES.
10.1. JANITORIAL AND TRASH REMOVAL.
10.1.1. The Landlord shall provide janitorial service and trash removal
service. Landlord shall strip the production area floor on a quarterly basis.
Tenant will be responsible for the cost of its trash dumpster.
10.2. MAINTENANCE BY TENANT. The Tenant shall maintain the nonstructural
parts of the interior of the Premises in good repair and condition, ordinary
wear and tear excepted. Tenant shall also be responsible for the care and
cleaning of its production room floor.
10.3. MAINTENANCE BY LANDLORD. The Landlord shall furnish, supply and
maintain in good order and repair (a) the roof, structure and remainder of
the exterior of the Building, (b) any and all hallways, stairways, lobbies,
elevators, sanitary sewer and water lines and facilities, restroom
facilities, grounds, sidewalks (including the removal of snow from such
sidewalks), (c) the plumbing, electrical and HVAC systems within the Building
including the Premises and other common areas, all if located within the
Building or the rest of the Property but not within the Premises unless
stated otherwise in the Lease, all at the Landlord's expense except for so
much of such expense as is to be borne by the Tenant under the provisions of
Section 4.1.5. or any other provision of this Lease.
Section 11. LANDLORD'S RIGHT OF ENTRY.
With reasonable notice except in the case of bona fide emergencies the
Landlord and its agents shall be entitled to enter the Premises at any time
during the Tenant's business hours and at any other reasonable time (a) to
inspect the Premises, (b) to exhibit the Premises to any existing or
prospective purchaser, tenant or Mortgagee thereof, (c) to make any
alteration, improvement or repair to the Building or the Premises, or (d) for
any other purpose relating to the operation or maintenance of the Property;
provided, that the Landlord use reasonable efforts to avoid thereby
interfering more than is reasonably necessary with the Tenant's use and
enjoyment thereof.
Section 12. FIRE AND OTHER CASUALTIES.
12.1. GENERAL. If the Premises are damaged by fire or other casualty
during the Term,
12.1.1. the Landlord shall restore the Premises with reasonable
promptness taking into account the time required by the Landlord to effect a
settlement with, and to procure any insurance proceeds from, any insurer
against such casualty, but in any event within one hundred eighty (180) days
after the date of such casualty to substantially the condition of the
Premises immediately before such casualty, and may temporarily enter and
possess any or all of the Premises for such purpose provided, that the
Landlord shall not be obligated to repair, restore or replace any fixture,
improvement, alteration, furniture or other property owned, installed or made
by the Tenant, but
12.1.2. the times for commencement and completion of any such
restoration shall be extended for the period not longer than sixty (60) days
of any delay occasioned by the Landlord in doing so arising out of any of the
causes enumerated in the provisions of subsection 9.1. If the Landlord
undertakes to restore the Premises and such restoration is not accomplished
within the said period of one hundred eighty (180) days plus the period of
any extension thereof, as aforesaid, the Tenant may terminate this Lease by
giving written notice thereof to the Landlord within thirty (30) days after
the expiration of such period, as so extended; and
12.1.3. so long as the Tenant is deprived of the use of any or all
of the Premises on account of such casualty, the Base Rent and any Additional
Rent payable under the provisions of subsection 4.1.4 shall be abated in
proportion to the number of square feet of the Premises rendered
substantially unfit for occupancy by such casualty, unless, because of any
such damage, the undamaged portion of the Premises is made materially
unsuitable for use by the Tenant for the purposes set forth in the provisions
of Section 5, in which event the Base Rent and any such Additional Rent shall
be abated entirely during such period of deprivation.
12.2. SUBSTANTIAL DESTRUCTION. Anything contained in the foregoing
provisions of this Section to the contrary notwithstanding,
12.2.1. if during the Term the Building is so damaged by fire or
other casualty that (a) either the
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Premises or (whether or not the Premises are damaged) the Building are
rendered substantially unfit for occupancy, as reasonably determined by the
Landlord, or (b) the Building is damaged to the extent that the Landlord
reasonably elects to demolish the Building, or if any Mortgagee requires that
any or all of such insurance proceeds be used to retire any or all of the
debt secured by its Mortgage, then in any such case the Landlord may elect to
terminate this Lease as of the date of such casualty, by giving written
notice thereof to the Tenant within thirty (30) days after such date; and
12.2.2. in such event, (a) the Tenant shall pay to the Landlord the
Base Rent and any Additional Rent payable by the Tenant hereunder and accrued
through the date of such termination, (b) the Landlord shall repay to the
Tenant any and all prepaid Rent for periods beyond such termination, and (c)
the Landlord may enter upon and repossess the Premises without further notice.
12.3. TENANT'S NEGLIGENCE. Anything contained in any provision of this
Lease to the contrary notwithstanding, if any such damage to the Premises,
the Building or both are caused by or result from the negligent or
intentionally tortious act or omission of the Tenant, those claiming under
the Tenant or any of their respective officers, employees, agents or
invitees, (a) the Rent shall not be suspended or apportioned as aforesaid,
and (b) except if and to the extent that the Tenant is released from
liability therefor pursuant to the provisions of subsection 8.4, the Tenant
shall pay to the Landlord upon demand, as Additional Rent, the cost of (i)
any repairs and restoration made or to be made as a result of such damage.
Section 13. CONDEMNATION.
13.1 RIGHT TO AWARD.
13.1.1. If any or all of the Premises or the remainder of the
Property are taken by the exercise of any power of eminent domain or are
conveyed to or at the direction of any governmental entity under a threat of
any such taking (each of which is hereinafter referred to as a
"Condemnation"), the Landlord shall be entitled to collect from the
condemning authority thereunder this entire amount of any award made in any
such proceeding or as consideration for such conveyance, without deduction
therefrom for any leasehold or other estate or right held by the Tenant under
this Lease.
13.1.2. The Tenant hereby (a) assigns to the Landlord all of the
Tenant's right, title and interest, if any, in and to any such award; (b)
waives any right which it may otherwise have in connection with such
Condemnation, against the Landlord or such condemning authority, to any
payment for (i) the value of the then-unexpired portion of the Term, (ii)
leasehold damages, and (iii) any damage to or diminution of the value of the
Tenant's leasehold interest hereunder or any portion of the Premises not
covered by such Condemnation, and (c) agrees to execute any and all further
documents which may be required to facilitate the Landlord's collection of
any and all such awards.
13.1.3. Subject to the operation and effect of the foregoing
provisions of this Section, the Tenant may seek, in a separate proceeding, a
separate award on account of any damages or costs incurred by the Tenant as a
result of any Condemnation of any or all of the Premises, so long as such
separate award in no way diminishes any award or payment which the Landlord
would otherwise receive as a result of such Condemnation.
13.2. EFFECT OF CONDEMNATION.
13.2.1. If (a) all of the Premises are covered by a Condemnation,
or (b) any part of the Premises is covered by a Condemnation and the
remainder thereof is insufficient for the reasonable operation therein of the
Tenant's business, or (c) any of the Building is covered by a Condemnation
and, in the Landlord's reasonable opinion, it would be impractical to restore
the remainder thereof, or (d) any of the rest of the Property is covered by a
Condemnation and, in the Landlord's reasonable opinion, it would be
impractical to continue to operate the remainder of the Property thereafter,
then, in any such event, the Term shall terminate on the date on which
possession of so much of the Premises, the Building or the rest of the
Property, as the case may be, as is covered by such Condemnation is taken by
the condemning authority thereunder, and all Rent (including, by way of
example rather than of limitation, any Additional Rent payable under the
provisions of subsection 4.1.4, taxes and other charges payable hereunder
shall be apportioned and paid to such date.
13.2.2. If there is a Condemnation and the Term does not terminate
pursuant to the foregoing provisions of this subsection, the operation and
effect of this Lease shall be unaffected by such Condemnation, except that
the Base Rent and any Additional Rent payable under the provisions of
subsection 4.1.4 shall be reduced in proportion to the square footage of
floor area, if any, of the Premises covered by such Condemnation.
13.3. If there is a Condemnation, the Landlord shall have no liability
to the Tenant on account of any (a) interruption of the Tenant's business
upon the Premises, (b) diminution in the Tenant's ability to use the
Premises, or (c) other injury or damage sustained by the Tenant as a result
of such Condemnation.
13.4. Except for any separate proceeding brought by the Tenant under the
provisions of paragraph 13.1.3, the Landlord shall be entitled to conduct any
such condemnation proceeding and any settlement thereof free of interference
from the Tenant, and the Tenant hereby waives any right which it otherwise
has to participate therein.
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Section 14. ASSIGNMENT AND SUBLETTING.
a) Tenant shall not assign its interest in nor sublet the Premises in
whole or in part without the Landlord's prior written consent first had and
obtained, which consent shall not be unreasonably withheld. In the event the
Premises are sublet or assigned, Tenant shall continue to be and remain
liable to the Landlord for the performance of all it its obligations,
covenants and conditions of this Lease, notwithstanding the fact that the
assignment or subletting is made with the Landlord's consent. Any assignment
or sale under execution or other legal process or by virtue of bankruptcy or
insolvency not in the ordinary course of business, or the appointment of a
trustee or a receiver, voluntarily or involuntarily, by operation of law or
otherwise, shall be deemed an assignment within the meaning of this section.
Notwithstanding the aforegoing, Tenant shall have the right to assign this
Lease or any of its rights hereunder or sublease any or all of the Premises
to any subsidiary, affiliate or related company of the Tenant without the
consent of the Landlord.
b) Tenant shall pay to Landlord, all reasonable costs and expenses,
including reasonable attorney's fees incurred by Landlord, in connection with
any subleasing of the Premises or any part thereof or any assignment of this
Lease by the Tenant, such subletting or assignment being subject to the prior
written consent of the Landlord as hereinabove provided. In the event
Landlord gives Tenant consent for subleasing of the Premises or assignment of
this Lease, that consent shall not be considered as consent to any future
assignment or subletting.
c) In the event Tenant assigns this Lease or any of its rights hereunder
or subleases any or all of the Premises, and Landlord consents to such
assignment or sublease, Tenant shall furnish to Landlord as part of said
consent request the proposed terms of the assignment of sublease. In the
event that the amount of base rent received by Tenant as Sublessor or
Assignor is greater than the Base Rent paid by Tenant under Section 4
hereunder, such amount above the base rental payments and additional rent
shall be shared equally between Landlord and Tenant after deducting any
marketing or Tenant Improvement costs incurred by Tenant. Such sum is due
Landlord (1) in the event of a sum paid Tenant for its rights under this
Lease, immediately at the commencement of such assignment of sublease; or (2)
payable monthly on the same date the Base Rent under this Lease is due.
Section 15. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE.
15.1 SUBORDINATION. This Lease shall be subject and subordinate to the
lien, operation and effect of each mortgage, deed of trust, ground lease
and/or other, similar instrument of encumbrance now or at any time hereafter
during the Term covering any or all of the Premises or the remainder of the
Property and each renewal, modification, consolidation, replacement or
extension thereof (each of which is herein referred to as a "Mortgage"), all
automatically and without the necessity of any action by either party hereto.
15.2 ATTORNMENT AND NON-DISTURBANCE. The tenant shall, promptly after
receipt of written notice provided in accordance with Lease Section 19
containing the request of the Landlord or the holder of any Mortgage (herein
referred to as a "Mortgage"), execute, enseal, acknowledge and deliver such
further instrument or instruments
15.2.1. evidencing subordination as the Landlord or such Mortgagee
deems necessary or desirable, and
15.2.2. at such Mortgagee's request attorning to such Mortgagee,
provided that such Mortgagee agrees with the Tenant that such Mortgagee will,
in the event of a foreclosure of any such mortgage or deed of trust or
termination of any such ground lease take no action to interfere with the
Tenant's rights hereunder, except on the occurrence of an Event of Default.
15.3. Anything contained in the provisions of this Section to the
contrary notwithstanding, any Mortgagee may at any time subordinate the lien
of its Mortgage to the operation and effect of this Lease without obtaining
the Tenant's consent thereto, by giving the Tenant written notice thereof, in
which event this Lease shall be deemed to be senior to such Mortgage without
regard to their respective dates of execution, delivery and/or recordation
among the Land Records of the said County, and thereafter such Mortgagee
shall have the same rights as to this Lease as it would have had, were this
Lease executed and delivered before the execution of such Mortgage.
Section 16. DEFAULT.
16.1. DEFINITION: As used in the provisions of this Lease, each of the
following events shall constitute, and is hereinafter referred to as, an
"Event of Default":
16.1.1. If the Tenant fails to (a) pay any Rent or any other sum
which it is obligated to pay by any provision of this Lease, when and as due
and payable hereunder and without demand therefor, or (b) perform any of its
other obligations under the provisions of this Lease; or
16.1.2. if the Tenant (a) applies for or consents to the
appointment of a receiver, trustee or liquidator of the Tenant or of all or a
substantial part of its assets, (b) files a voluntary petition in bankruptcy
or admits in writing its inability to pay its debts as they come due, (c)
makes an assignment for the benefit of its creditors, (d) files a petition or
an answer seeking a reorgnization or an arrangement with creditors, or seeks
to take advantage of any insolvency law, (e) performs any other act of
bankruptcy, or (f) files an answer admitting the
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material allegations of a petition filed against the Tenant in any
bankruptcy, reorganization or insolvency proceeding; or
16.1.3. if (a) an order, judgment or decree is entered by any court
of competent jurisdiction adjudicating the Tenant a brankrupt or an
insolvent, approving a petition seeking such a reorganization, or appointing
a receiver, trustee or liquidator of the Tenant or of all or a substantial
part of its assets, or (b) there otherwise commences as to the Tenant or any
of its assets any proceeding under any bankruptcy, reorganization,
arrangement, insolvency, readjustment, receivership or similar law, and if
such order, judgment, decree or proceeding continues unstayed for more than
sixty (60) consecutive days after any stay thereof expires; or
16.2. NOTICE TO TENANT; GRACE PERIOD. Anything contained in the
provisions of this Section to the contrary notwithstanding, on the occurrence
of an Event of Default the Landlord shall not exercise any right or remedy on
account thereof which it holds under any provision of this Lease or
applicable law unless and until
16.2.1. the Landlord has given written notice thereof to the
Tenant, and
16.2.2. the Tenant has failed, (a) if such Event of Default
consists of a failure to pay money, within ten (10) days thereafter to pay
all of such money, or (b) if such Event of Default consists of something
other than a failure to pay money, within thirty (30) days thereafter to cure
such Event of Default or, if and only if such Event of Default is not
reasonably curable within such period of thirty (30) days, to proceed within
such period actively, diligently and in good faith to begin to cure such
Event of Default and to continue thereafter to do so until it is fully cured.
16.2.3. No such notice shall be required to be given, and even if
the Landlord gives such notice the Tenant shall be entitled to no such grace
period, (1) in any emergency situation in which, in the Landlord's reasonable
judgment, it is necessary for the Landlord to act to cure such Event of
Default without giving such notice, or (ii) more than twice during any twelve
(12) month period.
16.3. LANDLORD'S RIGHTS ON EVENT OF DEFAULT.
16.3.1. On the occurrence of any Event of Default, the Landlord may
subject to the operation and effect of the provisions of subsection 16.2 take
any or all of the following actions:
(a) reenter and repossess any or all of the Premises and any
or all improvements thereon and additions thereto; and/or
(b) terminate this Lease by giving written notice of such
termination to the Tenant, which termination shall be effective as of the
date of such notice or any later date therefor specified by the Landlord
therein provided, that without limiting the generality of the foregoing
provisions of this subparagraph 16.3.1(c), the Landlord shall not be deemed
to have accepted any abandonment or surrender by the Tenant of any or all of
the Premises or the Tenant's leasehold estate under this Lease unless the
Landlord has so advised the Tenant expressly and in writing, regardless of
whether the Landlord has reentered or relet any or all of the Premises or
exercised any or all of the Landlord's other rights under the provisions of
this Section or applicable law; and/or
(c) in the Landlord's own name but either (i) as agent for the
Tenant, if this Lease has not then been terminated, or (ii) on the Landlord's
own behalf, if this Lease has then been terminated, relet any or all of the
Premises with or without any additional premises, for any or all of the
remainder of the Term or, if this Lease has then been terminated, for any or
all of the period which would, but for such termination, have constituted the
remainder of the Term or for a period exceeding such remainder, on such terms
and subject to such conditions as are acceptable to the Landlord in its sole
and absolute discretion including, by way of example rather than of
limitation, the alteration of any or all of the Premises in any manner which,
in the Landlord's judgment, is necessary or desirable as a condition to or
otherwise in connection with such reletting, and the allowance of one or more
concessions or "free-rent" or reduced-rent periods, and collect and receive
the rents therefor. Anything contained in the provisions of this Lease or
applicable law to the contrary notwithstanding, (1) the Landlord shall not
have any duty or obligation to relet any or all of the Premises as the result
of any Event of Default, or any liability to the Tenant or any other person
for any failure to do so or to collect any rent or other sum due from any
such reletting; (ii) the Tenant shall have no right in or to any surplus
which may be derived by the Landlord from any such reletting, in the event
that the proceeds of such reletting exceed any Rent, installment thereof or
other sum owed by the Tenant to the Landlord hereunder; and (iii) the
Tenant's liability hereunder shall not be diminished or affected by any such
failure to relet or the giving of any such initial or other concessions or
"free-rent" or reduced rent period in the event of any such reletting. In
such event, the Tenant shall pay to the Landlord, at the times and in the
manner specified by the provisions of Section 2, both (i) the installments of
the Base Rent and any Additional Rent accruing during such remainder or, if
this Lease has then been terminated, damages equaling the respective amounts
of such installments of the Base Rent and any Additional Rent which would
have accrued during such remainder, had this Lease not been terminated, less
any monies received by the Landlord with respect to such remainder from such
reletting of any or all of the Premises, plus (ii) the cost to the Landlord
of any such reletting (including, by way
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of example rather than of limitation, any attorneys' fees, leasing or
brokerage commissions, repair or improvement expenses and the expense of any
other actions taken in connection with such reletting), plus (iii) any other
sums for which the Tenant is liable under the provisions of paragraph 16.3
and the Tenant hereby waives any and all rights which it may have under
applicable law, the exercise of which would be inconsistent with the
foregoing provisions of this subparagraph 16.3.1(d); and/or
(d) cure such Event of Default in any other manner; and/or
(e) pursue any combination of such remedies and/or any other
right or remedy available to the Landlord on account of such Event of Default
under this Lease and/or at law or in equity.
(f) collect entire amount of rent due for the remainder of the
lease term at time of default.
16.3.2. No such expiration or termination of this Lease, or summary
proceedings, abandonment or vacancy, shall relieve the Tenant of any of its
liabilities and obligations under this Lease (whether or not any or all of
the Premises are relet); accordingly, in any such event the Tenant shall pay
to the Landlord the Rent and all other charges required to be paid by Tenant
up to the time of such event, and thereafter
(a) at any time after the expiration or termination of this
Lease pursuant to this Section 16, in lieu of collecting any further monthly
installments, as aforesaid, the Landlord shall be entitled to recover from
the Tenant, and the Tenant shall pay to the Landlord, on demand, damages
computed in the manner set forth in clause (i) of subparagraph 16.3.2(b),
minus the amount of any such monthly installments previously recovered from
the Tenant; and
(b) in the case of any Event of Default under the provisions
of paragraphs 16.1.2 or 16.1.3, the Landlord shall immediately and
automatically, without the necessity of notice or other action by the
Landlord, become entitled to recover from the Tenant as damages for such
breach, in addition to any damages or other payments becoming due from the
Tenant under any other provision of this Lease, an amount equaling the
difference between the Base Rent and the Additional Rent reserved in this
Lease from the date of such breach to the date of the expiration of the Term
and the then-fair and reasonable rental value of the Premises for the same
period. Such damages shall become due and payable to the Landlord immediately
upon the occurrence of such Event of Default and without regard to whether
or, if so, how this Lease is terminated.
16.3.3. Each party hereto hereby waives any right which it may
otherwise have at law or in equity to a trial by jury in connection with any
suit or proceeding at law or in equity brought by the other against the
waiving party or which otherwise relates to this Lease, as a result of an
Event of Default or otherwise.
16.4. DEFAULT BY LANDLORD. If the Landlord violates any of its
obligations under the provisions of this Lease, the Tenant may (subject to
the operation and effect of the provisions of paragraph 4.2.3, requiring the
Tenant to pay all Rent when due, which deduction or set-off whatsoever)
exercise any right or remedy which it holds on account thereof hereunder, at
law or in equity; provided, that if any or all of the Premises is then
subject to any first Mortgage, the Tenant shall not exercise any of its
rights or remedies on account thereof unless and until it has given written
notice of its intention to do so, by certified or registered mail, return
receipt requested, to the Mortgagee under such first Mortgage, specifying
therein the nature of such default in reasonable detail, and unless such
Mortgagee has not cured such default on the Landlord's behalf within thirty
(30) days after such notice is given. See Rider 8
Section 17. ESTOPPEL CERTIFICATE.
The Tenant shall from time to time, within ten (10) days after being
requested to do so by written notice provided in accordance with Lease
Section 19, by the Landlord or any Mortgagee, execute, enseal, acknowledge
and deliver to the Landlord or, at the Landlord's request, to any existing or
prospective purchaser, transferee, assignee or Mortgagee of any or all of the
Premises, the Property, any interest therein or any of the Landlord's rights
under this Lease an instrument in recordable form,
17.1. certifying (a) that this Lease is unmodified and in full force and
effect or, if there has been any modification thereof, that it is in full
force and effect as so modified, stating therein the nature of such
modification; (b) as to the dates to which the Base Rent and any Additional
Rent and other charges arising hereunder have been paid; (c) as to the amount
of any prepaid Rent or any credit due to the Tenant hereunder; (d) that the
Tenant has accepted possession of the Premises, and the date on which the
Term commenced; (e) as to whether, to the best knowledge, information and
belief of the signer of such certificate, the Landlord or the Tenant is then
in default in performing any of its obligations hereunder and, if so,
specifying the nature of each such default; and (f) as to any other fact or
condition reasonably requested by the Landlord or such other addressee; and
17.2. acknowledging and agreeing that any statement contained in such
certificate may be relied upon by the Landlord and any such other addressee.
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Section 18. QUIET ENJOYMENT.
The Landlord hereby covenants that the Tenant, on paying the Rent and
performing the covenants set forth herein, shall peaceably and quietly hold
and enjoy, throughout the Term, (a) the Premises, and (b) such rights as the
Tenant may hold hereunder with respect to the remainder of the Property.
Nothing in the provisions of this Lease shall be deemed to impose upon the
Landlord any liability on account of any act or failure to act by any person
other than the Landlord or, where expressly so provided herein, the
Landlord's agents and employees.
Section 19. INTENTIONALLY OMITTED
Section 20. NOTICES.
Any notice, demand, consent, approval, request or other communication or
document to be provided hereunder to a party hereto shall be (a) in writing,
and (b) deemed to have been provided (i) (1) forty-eight (48) hours after
being sent as certified or registered mail in the United States mails,
postage prepaid, return receipt requested, or (2) the next business day after
having been deposited in time for delivery by such service on such business
day with Federal Express or another national courier service, or (3) if such
party's receipt thereof is acknowledged in writing upon having been sent by
telefax or another means of immediate electronic communication, in each case
to the address of such party set forth hereinabove or to such other address
in the United States of America as such party may designate from time to
time by notice to each other party hereto, or (ii) upon being given by hand
or other actual delivery with a written acknowledgement of receipt to such
party. See Rider 14
Section 21. GENERAL.
21.1. EFFECTIVENESS. This lease shall become effective upon and only
upon its execution and delivery by each party hereto.
21.2. COMPLETE UNDERSTANDING. This Lease represents the complete
understanding between the parties hereto as the subject matter hereof, and
supersedes all prior written or oral negotiations, representations,
warranties, statements or agreements between the parties hereto as to the
same. No inducements, representations, understandings or agreements have been
made or relied upon in the making of this Lease, except those specifically
set forth in the provisions of this Lease. Neither party hereto has any right
to rely on any other prior or contemporaneous representation made by anyone
concerning this Lease which is not set forth herein.
21.3. AMENDMENT. This lease may be amended by and only by an instrument
executed and delivered by each party hereto.
21.4. APPLICABLE LAW. This Lease shall be given effect and construed by
application of the law of Maryland, and any action or proceeding arising
hereunder shall be brought in the courts of Maryland; provided, that if such
action or proceeding arises under the Constitution, laws or treaties of the
United States of America, or if there is a diversity of citizenship between
the parties thereto, so that it is to be brought in a United States District
Court, it shall be brought in the United States District Court for the
District of Maryland or any successor federal court having original
jurisdiction.
21.5 WAIVER. The Landlord shall not be deemed to have waived the
excercise of any right which it holds hereunder unless such waiver is made
expressly and in writing (and no delay or omission by the Landlord in
excercising any such right shall be deemed a waiver of its future excercise).
No such waiver made as to any instance involving the excercise of any such
right shall be deemed a waiver as to any other such instance, or any other
such right. Without limiting the generality of the foregoing, no action taken
or not taken by the Landlord under the provisions of this Section or any
other provision of this Lease including, by way of example rather than of
limitation, the Landlord's acceptance of the payment of Rent after the
occurrence of any Event of Default shall operate as a waiver of any right to
be paid a late charge or any other right or remedy which the Landlord would
otherwise have against the Tenant on account of such Event of Default under
the provisions of this Lease or applicable law the Tenant hereby
acknowledging that, in the interest of maintenance of good relations between
the Landlord and the Tenant, there may be instances in which the Landlord
chooses not immediately to excercise some or all of its rights on occurrence
of an Event of Default.
21.6. TIME OF ESSENCE. Time shall be of the essence of this Lease.
21.7. HEADINGS. The headings of the Sections, subsections, paragraphs
and subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
21.8. DEFINITIONS. As used herein, (a) the term "person" means a natural
person, a trustee, a corporation, a partnership and any other form of legal
entity; and (b) all references made (i) in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders, (ii) in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well, and (iii) to any Section, subsection,
paragraph or subparagraph shall, unless therein expressly indicated to the
contrary, be deemed to have been made to such Section, subsection, paragraph
or subparagraph of this Lease.
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21.9. EXHIBITS. Each writing or plat referred to herein as being
attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.
21.10. SEVERABILITY. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid
or unenforceable in any instance shall affect the validity or enforceability
of (a) any other such provision, or (b) such provision in any circumstance
not controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
21.11. DEFINITION OF "THE TENANT". As used herein, the term "the Tenant"
means each person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and priveleges as it would have possessed
had it originally executed this Lease as the Tenant; provided, that no such
right or privilege shall inure to the benefit of any assignee of the Tenant,
immediate or remote, unless the assignment to such assignee is made in
accordance with the provisions of Section 10. Whenever two or more persons
constitute the Tenant, all such persons shall be jointly and severally liable
for performing the Tenant's obligations hereunder.
Section 22. DELIVERIES. Tenant agrees to use the freight elevator located on
the north side of the building for all of its paper good deliveries.
Section 23. EXPANSION OPTION. Tenant is granted a Right of First Refusal for
the remaining space as outlined in Exhibit B. In this event, Landlord agrees
to notify Furman Wood of the potential leaseup of the remaining space on the
second floor of 22 Light Street. In the event Tenant is interested in leasing
the remaining space on the second floor, then Furman Wood must notify
Landlord within 5 business days, via certified mail, of its intent to lease
the space at its current terms as stipulated in this lease. As far as
buildout is concerned, Landlord will fully buildout the additional space if
the space is leased by Tenant no later than January 1, 2001.
Section 24. MISCELLANEOUS. From time to time, the Tenant may seek to
refinance the certain obligations of the Tenant existing as of the date
hereof. In this regard, Tenant may ask a lender or lenders (the "Lenders") to
provide refinancing for the Tenant, which refinancing may be secured, among
other things, all of Tenant's equipment set forth in Exhibit C attached
hereto, together with all accessions to, products of and proceeds thereof
(collectively the "Collateral"). Future Landlord's waiver shall not be
unreasonably withheld for pieces of equipment which cost in excess of $50,000.
Any Landlord's lien, right of distraint or levy or security interest which
the Landlord may now or hereafter acquire in any of the Collateral for unpaid
rent or otherwise, whether by virtue of a lease, landlord-tenant
relationship, statue or otherwise shall be subordinated Collateral now or
hereafter held by the Lenders.
(Signature follows on page 15)
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IN WITNESS WHEREOF, each part hereto has executed and ensealed this
Lease or caused it to be executed and ensealed on its behalf by its duly
authorized representatives, the day and year first above written.
WITNESS or ATTEST:
/s/ Andra Tonloumes By: /s/ Joseph Sinera (SEAL)
- - ------------------------------ ---------------------------------
Tenant
Anthony Kopsidas, Executive Vice
President
On-Site Sourcing, Inc.
/s/ Melissa O'Brien By: /s/ [Illegible] (SEAL)
- - ------------------------------ ----------------------------------
Landlord
Ira J. Miller
Managing Member
22 Light Street, LLC
As condition to entering into this Lease Agreement, On-Site Sourcing, Inc.
has agreed to guarantee the full and timely payment of all monies due to
Landlord as stipulated in this Lease.
/s/ [Illegible]
----------------------------------
On-Site Sourcing, Inc.
STATE OF VIRGINIA
------------
CITY/COUNT OF ARLINGTON
-------------
I HEREBY CERTIFY that on this 22nd day of August, 1997, before me the
undersigned officer, personally appeared who acknowledged himself/herself to
be the VP-Finance of On-Site Sourcing, Inc., and that (s)he, in such
capacity, being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing his/her name as Joseph Sinera of
On-Site Sourcing, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and Notarial Seal.
/s/ Scott Pearce Fisher
-----------------------------
Notary Public
My Commission expires: March 31, 2001
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FIRST LEASE MODIFICATION AGREEMENT
AGREEMENT dated 6-8, 1998 between 443 COMPANY, c/o Williams Real Estate Co.
Inc., 360 Madison Avenue, New York, New York 10017. as Landlord, and ON SITE
SOURCING, INC., a Delaware corporation, as Tenant.
WHEREAS, by Lease Agreement dated July 17, 1996 (the "Lease"), Tenant leased
from Landlord the entire rentable area of the ninth (9th) floor as now
occupied ("Original Demised Premises"), in the building known as 443 Park
Avenue South, New York, New York (the "Building") for a term of ten (10)
years which is to expire on October 31, 2006;
WHEREAS, Tenant seeks to amend the Lease so that it may lease additional
space known as a portion of the third (3rd) floor known as Room 301, as now
divided (the "Additional Space") in the Building from Landlord for the
balance of the Lease term Tenant is leasing the Original Demised Premises.
NOW THEREFORE, in consideration of their mutual covenant herein contained,
the parties hereto mutually covenant and agree as follows.
1. Except as set forth herein, the Lease is unchanged. The Lease is
modified and affirmed as modified herein.
2. On October 1, 1998, subject only to delays beyond Landlord's
reasonable control Landlord shall deliver, and Tenant shall accept the
Additional Space in "as is" condition except that no work is to be performed
by Landlord other than as may be indicated on an Exhibit "A" amended hereto
and the premises declared to Tenent shall consist of the Original Demised
Premises and the Additional Space. In addition, the following amendments to
the Lease, with respect to the Additional Space only, shall become effective,
the [Illegible] herein being that Tenant shall pay both the charges set forth
in the Lease in the manner set forth in the Lease for the Original Demised
Premises and the charges set forth herein in the manner set forth herein for
the Additional Space
(a) the annual rental rate payable hereunder shall be:
(i) Sixty Eight Thousand ($68,000.00) Dollars per year ($5,666.67 per
month) from October 1, 1998 to and including September 30, 1999;
(ii) Seventy Thousand Forty ($70,040.00) Dollars per year ($5,836.67 per
month) from October 1, 1999 to and including September 30, 2000.
(iii) Seventy Two Thousand One Hundred Forty Two ($72,142.00) Dollars per
year ($6,011.84 per month) from October 1, 2000 to and including September
30, 2001;
(iv) Seventy Four Thousand Three Hundred Six ($74,306.00) Dollars per
year ($6,192.17 per month) from October 1, 2001 to and including September 30,
2002;
(v) Seventy Six Thousand Five Hundred Thirty Five ($76,535.00) Dollars
per year ($6,377.92 per month) from October 1, 2002 to and including
September 30, 2003;
(vi) Seventy Eight Thousand Eight Hundred Thirty One ($78,831.00)
Dollars per year ($6,569.25 per month) from October 1, 2003 to and including
September 30, 2004;
(vii) Eighty One Thousand One Hundred Ninety Six ($81,196.00) Dollars per
year ($6,766.34 per month) from October 1, 2004 to and including September
30, 2005; and
(viii) Eighty Three Thousand Six Hundred Thirty Two Dollars ($83,632.00)
Dollars per year ($6,969.34 per month) from October 1, 2005 to and including
October 31, 2006;
(b) the percentage and base year utilized for computing additional rent
due to Real Estate Tax increases as set forth in Article 41 shall be 4.121%
and 1998/1999 respectively;
(c) the "Water Charge" set forth in Article 29 of the Lease shall be
$20.00;
(d) the "Sprinkler Charge set forth in Article 30 of the Lease shall be
$20.00;
(e) the "Base Year" set forth in Article 68(A)(iii) shall remain the
calendar year 1998; and
(f) the Tenant's Share" set forth in Article 68 A (v) of the Lease
shall remain 4.121%.
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3. Provided that Tenant does not interfere with the completion of any
work required to be performed by Landlord hereunder, Tenant may take
posession of the Additional Space from the Additional Space Posession Dates
stated below. Such posession shall be subject to all terms, convenants and
conditions contained in the Lease, except that Tenant shall not be required
to pay any installments of the annual rent with respect to the Additional
Space for the period prior to the Additional Space Commencement Date stated
below. Tenant shall, however, pay the installment(s) of the annual rent due
and payable by Tenant and attributable to the Additional Space on the
execution and delivery of this Agreement to Landlord. Tenant shall also pay,
within ten (10) days after receipt of Landlord's invoice therefore, all
charges attributable to electric service and other utilities, and all other
items of additional rent herein provided for (excluding any payments of
operating escalations, real estate taxes, cost of living adjustments and
pocter's wage escalations) from the Additional Space Possession Date through
the Additional Space Commencement Date as if the Additional Space Possession
Date was the Additional Space Commencement Date.
ADDITIONAL SPACE POSSESSION DATE: Upon the delivery of a fully executed
copy of this Agreement to Tenant.
ADDITIONAL SPACE COMMENCEMENT DATE: October 1, 1998
4. Effective upon the execution of this agreement:
(a) Article 48 of the Lease shall be modified so that in lien of the
address set forth therein the address of Landlord's agent, Williams Real
Estate Co. Inc., shall be 380 Madison Avenue, New York, NY 10017;
(b) the third paragraph of Article 63 is hereby deemed deleted;
(c) the amount set forth in Article 66 of the lease shall be $2
million; and
(d) Article 73 of the Lease is here by deemed deleted and replaced
with the following Article 73:
73. AIR CONDITIONING MAINENANCE
Throughout the term of this lease Tenant shall at its own cost and
expense (i) cause to be performed all maintenance of the air conditioning
system, equipment and facilities (hereafter called the "A/C System"), if any,
located to or servicing the demised premises, including all repairs and
replacements thereto, and (ii) maintain in future and provide a copy of same
to Landlord on air conditioning service repair and full service maintenance
contract to satisfactory to Landlord with an air conditioning contractor or
servicing approved by Landlord thirty (30) days after Tenant takes posession
of the demised premises for the conduct of Tenant's business. Any such
contract shall expressly state (i) that it shall be an agreeably renewing
contract terminable by no less than thirty (30) days prior written notice to
the Landlord, and, (ii) that the contractor providing such service shall
maintain a log at the demised premises detailing the service provided during
each visit to such contract. Tenant shall keep such log at the demised
premises and permit Landlord to preview promptly after Landlord's request.
The entire A/C System is and shall at all times remain the property of
Landlord, and at the expiration or termination of this lease Tenant shall
surrender to Landlord the entire A/C System in good working order and
condition. Tenant shall not make any changes or additions to the A/C System
until Tenant shall have Landlord's written consent thereto. Should Tenant
fail to obtain the contract required herein, Landlord may do so and charge
the Tenant the monthly cost of same plus an administrative fee equal to
fifteen percent (15%) of such cost, an additional rent hereunder, and Tenant
shall pay the first installment of by no later than the sooner to occur of
(a) the tenth (10th) day after Landlord bills Tenant for such charge, or (b)
the Tenant's next installment of fixed rent is due. Thereafter, Tenant shall
pay such monthly charge with its monthly fixed rental installment"
79. SUBJECT TO ORDINARY WEAR & TEAR
In the event Landlord requires Tenant to install such control
devises or procedures to eliminate such odors, noise or vibrations (as the of
may be) the size and location of such installations shall be subject to
Landlord's prior written approval. Such work shall not be concerned places
and specifications, hereforth have been submitted to and approved by
Landlord."
B SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD
(e) Articles 77 and 78 are hereby deemed added to the Lease
77. CERTAIN RENTAL PAYMENT PROVISIONS
Tenant agrees that annual rental shall be payable as provided in
this lease without prior notice or demand. All rental payable under this
lease shall be paid by check, subject to collection drawn on a New York City
branch of a member of the New York Clearinghouse. If Tenant shall fail to pay
any installment of annual rental or any other additional rent payable under
this lease within ten (10) days after the same shall have become due and
payable hereunder, at Landlord's option such unpaid sums shall thereof until
paid in full as a monthly of equal to the lesser of (i) one-twelfth
(1/12th) of the [Illegible] annual rate of [Illegible] permitted by law of
(ii) one and one-half (1-1/2%) percent.
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78. ODORS, NOISE AND VIBRATIONS
Tenant shall not permit any odors, noise or vibrations to
[Illegible] from the demised premises. Tenant shall, within five (5) days
after written notice from Landlord, install at its cost and expense, control
devices or procedures to eliminate such odors, noise or vibrations (in the
case or cases may be) if any. In the event such condition is not remedied
within said five (5) day period, Landlord may, at its solo discretion, either
(a) cure such condition and thereafter add the cost and expense incurred by
Landlord therefor to the next monthly rental to become due and Tenant shall
pay said amount in additional rent; or (b) such failure on the part of
Tenant to eliminate such odors, noise or vibrations (as the case or cases may
be) as a control hereunder entitling Landlord to enforce any or all of the
rights and remedies provided for under the terms of this lease, including but
not limited to its [Illegible]. Landlord shall have the right to enter the
demised premises at any time to inspect the same and ascertain whether they
are clean and free of odors, noises and vibration."
5. The parties acknowledges that the existing security deposit
under Article 32 has been reduced to $30,240.00 on February 1, 1998 and the
Tenant has been credited with the as provided under Article 71 of the Lease.
The parties further agree that the further partial refund of security to
occur on February 1, 1999 as set forth in Article 71 shall no longer be
applicable.
6. Tenant acknowledges that it permanently owes to Landlord the sum
of $1,582.27 (no part of which has been paid) which sum consists of all or
any of: fixed annual rent, additional rent and other charges to and
including May 31, 1998 which became due and payable to the Lease. The
Tenant agrees that it shall pay the above mentioned sum of $1,582.27 upon the
expiration of this Agreement.
7. In addition to the forgoing, the Landlord shall not be by any
representations, under
8. This agreement may not be changed, modified or canceled and
shall be binding upon and to the benefit of the respective parties , their
accessors, and except as otherwise provided in the Lease, their assigns. As
modified and extended by the terms of this agreement, the Lease is hereby
notified and confirmed in all aspects.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first above written.
Witness 443 COMPANY
/s/ Carole Brooks by: /s/ Jonathan P.
- - ----------------------- --------------------------
Witness ON SITE SOURCING, INC.
/s/ [Illegible] by: /s/ [Illegible]
- - ----------------------- --------------------------
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<PAGE>
EXHIBIT A
ON-SITE SOURCING, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
This 1998 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 of 1986, as amended (the "Code"), and the regulations issued
thereunder, 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. 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.
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
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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
700,000, all of which may be in the form of either Incentive Stock Options or
Nonqualified Stock Options. The aggregate number of shares of Common Stock as to
which Options may be granted under the Plan to an individual in any calendar
year shall not exceed 350,000. If any Option expires, is canceled, or terminates
for any other reason, the shares of Common Stock available under that Option
will again be available for the granting of new options (but will be counted
against that calendar year's limit for a given individual). The limitation
established by this Section 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.
5.2 TEN PERCENT STOCKHOLDER.
In the case of an Incentive Stock Option granted to a Ten Percent
Stockholder, (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.
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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 as of which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted,
unless the resolution specifies otherwise.
7.4 MEDIUM AND TIME OF PAYMENT.
The Option Price shall be paid in full, at the time of exercise, as the
Committee provides in the Option Agreement, initially or by amendment. Payment
shall be 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, or by such
other method as the Committee permits. The Optionee may engage in a cashless
exercise using a broker to pay the exercise price. The Committee may restrict
the use of Common Stock as a payment method. The exercise 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 Section 425(a) of the Code 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.
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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 Company or any such
division or Subsidiary Corporation to terminate such employment.
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 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
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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 therefore 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.
(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 Code.
(7) Except as otherwise 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 issuance 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.
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7.10 RIGHTS AS A STOCKHOLDER.
An Optionee or an allowable transferee of an Option shall have no rights as
a stockholder 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.
8. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES.
As a condition to 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 Option, 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 ask 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 on such market; or (iii) in case no reported sale takes place, the
average of the closing bid and ask 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 a
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.
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(c) "PARENT COMPANY" shall mean any corporation (other than the
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) "RETIREMENT" shall mean an Optionee's termination of employment for
any reason at or after age 65.
(e) "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.
(f) "TEN PERCENT STOCKHOLDER" 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, to the extent necessary to preserve
Incentive Stock Option treatment or comply with regulatory requirements, any
such amendment shall be subject to the approval of the holders of a majority of
the Common Stock issued and outstanding. 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 STOCKHOLDERS.
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.
A-7
<PAGE>
Exhibit 10.29
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") IS ENTERED INTO AS OF THIS FIRST
day of July, 1998 by and between On-Site Sourcing, Inc. with address of 1111
N. 19th Street, Sixth Floor, Arlington, Virginia 22209 ("OSS" or the
"Company") and Arne Christensen (Mr. Christensen) with home address at 1705
East Avenue, McLean, VA 22101.
WHEREAS, OSS desires to employ the services of Mr. Christensen utilizing
Mr. Christensen's 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.
Christensen desires to be employed full time by the Company; and
WHEREAS, OSS and Mr. Christensen desire to enter into an Agreement
reflecting the terms under which Mr. Christensen will be employed by the
Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. TERM. This Agreement will remain in effect for a period of one year
and will be reviewed annually by the Board of Directors before the terms are
renewed for another year.
2. NATURE OF EMPLOYMENT. Mr. Christensen shall be employed as the
Arlington, VA Sales Manager of the Company with full power and authority as
determined by the Board of Directors of OSS (the "Board"). Mr. Christensen
agrees to perform diligently and faithfully 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. Christensen's duties include but are not limited to the following:
(a) Managing the Arlington, Va sales staff,
(b) Sales and Marketing of the Company's services;
(c) Assisting the Company in the development of all phases of the
Company's business.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Christensen for
services rendered under this Agreement, OSS shall compensate Mr. Christensen
as follows:
(a) BASE SALARY. Mr. Christensen shall receive a base salary of $220,000
annually, payable monthly. Effective January 1, 2000, this base salary will
be increased to $242,000 annually.
(b) BENEFITS. The Employee shall be entitled to three weeks (15) days
paid Annual Leave per year for each of the first five (5) years of employment
beginning at commencement of employment. No annual leave accrues nor may be
taken during the 90 day Introductory Period. Annual Leave shall accrue during
each year but may not be carried over and accumulated in subsequent calendar
years and no additional wages or salary will be paid to the Employee in lieu
of Annual Leave unless approval in writing is granted by management. Any
annual leave taken
1
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but not yet earned at the time of termination/resignation of employment will
be deducted from the Employee's final paycheck. The Employee shall be
entitled to four weeks paid annual leave each year after the fifth
anniversary which is to be considered March 1, 2000. No more than one week
shall be taken consecutively without the prior written approval by the
Company.
Annual Leave may be used for the purpose of vacations, visiting medical
professionals, recovering from illness or other personal reasons. In the
event that the Employee is required to take a disability leave of absence,
any accrued annual leave will be taken at the time the leave commences.
Annual Leave will not accrue in the event that a disability leave of absence
or a personal leave of absence is taken. Annual Leave does not apply if leave
is needed as a result of self-inflicted injury, illegal substance abuse or
alcohol abuse, or illness or injury incurred while in the act of committing a
felony. In the event of an illness or injury which is covered by workers'
compensation insurance, the annual leave policy will not apply.
(d) REIMBURSEMENT FOR BUSINESS EXPENSES. OSS shall reimburse Mr.
Christensen within fifteen (15) days of receipt by OSS of proper
documentation of OSS business expenses incurred by Mr. Christensen in
accordance with Company policy. These expenses shall include parking
expenses, travel and entertainment, mileage and cellular phone expenses in
accordance with Company policy.
(4) RESPONSIBILITIES OF MR. CHRISTENSEN. The responsibilities of Mr.
Christensen under this Agreement are as follows:
(a) Mr. Christensen agrees to (i) devote his full business time to the
business and affairs of OSS, (ii) use his 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 Paragraph 2 of this Agreement.
(b) During the term of this Agreement, Mr. Christensen shall not sell,
market, engage in, assist or manage reprographic, facilities management,
imaging or technology services except on behalf of OSS. Mr. Christensen
agrees to disclose in writing to the Board any non-Company business
activities for which Mr. Christensen receives income. If the board deems such
activities to be excessive and to conflict with Mr. Christensen's full time
commitment, the Company shall notify Mr. Christensen in writing to limit
those activities to periods in which no time conflict occurs.
(c) Mr. Christensen 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. RESTRICTIVE COVENANTS.
a. COVENANT NOT TO COMPETE. Employee acknowledges as a sales manager,
Employee shall be engaged, without limitation, in managing the Company and
other duties set forth in paragraph 2 herein in which capacity, employee
performs specialized tasks and has access to the Company's trade secrets,
intellectual property and customer lists. Employee also acknowledges that the
Company is currently engaged managing the Company which has reprographic,
imaging, facilities management and technology facilities in the territories
within a twenty-five (25) mile radius of the Company's offices located in
Arlington, VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD
at 22 Light Street Baltimore, MD, New York, NY at 443 Park Avenue South, New
York, NY 10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103. Employee
agrees
2
<PAGE>
that, during the term of his employment and for a period of one (1) year
after the termination of his employment with Company, whether such
termination is voluntary or involuntary, with or without cause, he shall not
either directly or indirectly, for himself or through, on behalf of, or in
conjunction with any other person or legal entity, perform the services of
managing operations for any Company selling and/or managing reprographic,
imaging, facilities management and technology accounts for any other business
engaged in the provision of reprographic, imaging and/or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(b) NON-INTERFERENCE WITH EMPLOYEES. During the term of Employee's
employment and for a period of one (1) year after the termination of his
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, recruit, solicit, or induce or attempt to recruit,
solicit or induce any employee of the Company to become employed by or to be
engaged in a business which provides reprographic, imaging and/ or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(c) NON-SOLICITATION COVENANT. Employee agrees that during the term
of his employment and for a period of one (1) year after the termination of
his employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, actively solicit the business or patronage of any of
the clients, customers or accounts of the Company served by Employee during
the term of his Agreement for the purpose of providing information system
services to those clients and customers within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue south, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(i) "Trade Secrets" shall be defined as information, without
regard to form, belonging to the Company or licensed by it including, but not
limited to, technical or nontechnical data, formulae, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which is not commonly known by or available to the public and which
information: (a) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons or entities who can obtain economic value from their
disclosure or use; and (b) are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy.
(ii) "Confidential Information" shall be defined as any
information belonging to the Company or licensed by it other than Trade
Secrets which is material to the Company and not generally known by the
public.
(iii) Employee will treat as confidential and will not, without
the prior written approval of the Company, use (other than the performance of
his duties of employment
3
<PAGE>
with the Company), publish, disclose, copyright or authorize anyone else to
use, publish, disclose or copyright, either during the term of Employee's
employment or subsequent thereto, any information which constitutes Trade
Secrets of the Company whether or not the Trade Secrets are in written or
tangible form.
(iv) Employment will treat as confidential and will not,
without the prior written approval of the Company, use (other than in the
performance of his duties of employment with the Company), publish, disclose,
copyright or authorize anyone else to use, publish, disclose or copyright any
Confidential Information either during the term of his employment or for two
(2) years after termination of employment, whether voluntary or involuntary,
with or without cause, and whether or not the Confidential Information is in
written or other tangible form.
(v) All records, notes, files, drawings, documents, plans and
like items, and all copies thereof, relating to or containing or disclosing
Confidential Information or Trade Secrets of the Company which are made or
kept by Employee or which are disclosed to or come into the possession of
Employee, shall be and remain the sole and exclusive property of the Company.
Upon termination of employment, Employee agrees to deliver immediately to
Allen Outlaw or his designee, the originals and all copies of any of the
foregoing.
6. REMEDIES. In the event of Employee's actual or threatened breach of
the provisions of Paragraph 5, the Company, in addition to all other rights,
shall be entitled to an injunction restraining Employee therefrom. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages from Employee. This provision shall remain in full force and
effect in the event Employee should claim that the Company violated any of
the terms of his Agreement. In such event, Employee agrees to pursue such
claim against the Company independently of his covenants set forth in such
Paragraphs.
7. TERMINATION BY THE COMPANY. The Board of Directors may terminate the
employment of Mr. Christensen 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 Employee of his duties hereunder, willful failure by the
Employee to perform his duties hereunder, conviction of the Employee 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 Employee in connection with the
performance of his duties hereunder, willful engagement in conduct by the
Employee which he has reason to know is materially injurious to the Company
or willful refusal without proper legal cause by the Employee to perform his
duties and responsibilities.
a. In the event of termination for cause, as defined above, by OSS,
all salary and other benefits paid or provided to the Employee hereunder
shall cease as of the date of termination, and the Company shall have no
further obligations to the Employee. Upon a finding by the Board of Directors
that the Employee has willfully failed or refused to observe or perform his
duties or grossly neglected his duties as specifically set forth in Section 2
and 4 hereof. OSS may terminate this agreement for cause provided that the
Board of Directors has first notified the Employee on two separate occasions
of such failure and has given the Employee 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 Employee with the following:
4
<PAGE>
(i) Mr. Christensen 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. Christensen would have received under this
Agreement but for such termination. All commission compensation for accounts
closed by the Employee that remain unpaid at the time of termination will be
paid to the Employee if such accounts receivable are paid to OSS within
thirty days of the date of termination. No commissions shall be paid to the
Employee on accounts that remain unpaid thirty days after such termination.
Such amount shall be payable to Employee in one installment two weeks
following termination with any additional commissions to be paid forty five
days after the termination.
(ii) "Termination without cause" shall be defined as:
termination for any reason other than "cause" (as defined previously in
Section 7), continuous disability or incapacity of Mr. Christensen which
prevents his from performing his duties for a period of not less than three
(3) months as determined by an independent, licensed medical doctor, or death.
8. TERMINATION BY EMPLOYEE. Employee may terminate his employment under
this Agreement at any time upon thirty (30) days notice to the Company. In
such event, Employee, if requested by the Company, shall continue to render
his services and shall be paid his regular salary and receive his normal
benefits up to the date of termination.
9. CHANGE IN CONTROL. In the event that a change in control, as defined
in Section 9 (c) occurs, the following provisions shall become effective and
shall control over any other provisions of this Agreement.
(a) All options granted to Employee shall terminate as of a date to
be fixed by the Board of Directors; provided, however, that not less than 30
days' written notice of the date so fixed shall be given to Employee, who
shall have the right, during the period 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 have not as yet
vested.
(b) In the event that Employee is terminated by the Company or the
successor or surviving corporation, with or without cause, within forty-five
days after a change in control, employee shall receive six months pay
("Termination Payment") at the higher of the rate in effect at (i) the time
of the change in control or (ii) sixty days prior to the change in control.
Such Termination Payment shall be made within thirty days of the Termination.
(c) A "change in control" with respect to the Company shall be
deemed to have occurred if:
(i) substantially all of the assets of the Company are sold,
other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting
equity securities of the surviving or successor corporation;
(ii) the Company is merged or consolidated with, or becomes a
subsidiary of, another corporation, other than any such transaction following
which the stockholders of the Company prior to the transaction retain at
least a majority of the voting equity securities of the surviving or
successor corporation;
(iii) any "person" or "group" of persons (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than the Company or a subsidiary of the Company, and other than persons
holding greater than 10% of the outstanding voting securities as disclosed in
the Company's Prospectus dated July 9, 1996 and as updated by
5
<PAGE>
successive 13D filings, becomes the "beneficial owner" (as defined in rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding securities, or
(iv) the resignation or removal of a majority of Board of
Directors.
10. 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.
11. NO WAIVER BY COMPANY. The waiver by the Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as
a waiver of any subsequent breach by Employee. No waiver shall be valid
unless in writing and signed by an authorized officer of the Company.
12. EFFECT ON SUCCESSORS IN INTEREST. This agreement shall inure to the
benefit of and be binding upon heirs, administrators, executors and
successors of each of the parties hereto.
13. 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 Employee shall have no right to assign this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. 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.
15. 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 by an arbitrator
or court of competent jurisdiction, such invalidity or unenforceability shall
not in any way affect the validity or enforceability of the remaining
provisions hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and preliminary agreements. This
Agreement may not be amended except in writing executed by the parties
hereto. The Company's execution must be by a duly authorized officer or Board
member of the Company.
EMPLOYEE STATES THAT HE HAS CAREFULLY READ THE WITHIN AND
FOREGOING "EMPLOYMENT AGREEMENT" AND KNOWS AND UNDERSTANDS THE
CONTENTS THEREOF AND THAT he IS EXECUTING THE SAME AS HIS OWN FREE ACT
AND DEED.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Mr. Christensen 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/Christopher Weiler
------------------------------
Christopher Weiler
Chairman
Sworn to and subscribed
before me this 19th day
--
of August, 1998.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - -----------------------
Employee: /s/ Arne Christensen
-------------------------------
Arne Christensen
Address: 1705 East Avenue
McLean, VA 22101
Sworn to and subscribed
before me this 19th day
--
of August, 1997.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - ----------------------
7
<PAGE>
Exhibit 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") IS ENTERED INTO AS OF THIS FIRST
day of July, 1998 by and between On-Site Sourcing, Inc. with address of 1111
N. 19th Street, Sixth Floor, Arlington, Virginia 22209 ("OSS" or the
"Company") and Allen Outlaw (Mr. Outlaw) with home address 3016 North 5th
St., Arlington, VA 22201.
WHEREAS, OSS desires to employ the services of Mr. Outlaw utilizing Mr.
Outlaw's 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. Outlaw
desires to be employed full time by the Company; and
WHEREAS, OSS and Mr. Outlaw desire to enter into an Agreement reflecting
the terms under which Mr. Outlaw will be employed by the Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. TERM. This Agreement will remain in effect for a period of one year
and will be reviewed annually by the Board of Directors before the terms are
renewed for another year.
2. NATURE OF EMPLOYMENT. Mr. Outlaw shall be employed as the Director of
Reprographic Sales of Manager the Company with full power and authority as
determined by the Board of Directors of OSS (the "Board"). Mr. Outlaw agrees
to perform diligently and faithfully 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. Outlaw's duties include but are not limited to the following:
(a) Managing the reprographic sales staff,
(b) Sales and Marketing of the Company's services;
(c) Assisting the Company in the development of all phases of the
Company's business.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Outlaw for
services rendered under this Agreement, OSS shall compensate Mr. Outlaw as
follows:
(a) BASE SALARY. Mr. Outlaw shall receive a base salary of $240,000
annually, payable monthly.
(b) Bonus. Mr. Outlaw shall receive a bonus of between 0 and three and
one half percent (0-3.5%) of the Company's quarterly gross reprographic
revenues over $4.55 million dollars (excluding revenue derived from any
mergers or acquisitions). The Revenue target shall be increased by
twelve percent (12%) compounded quarterly. The Bonus Percentage shall be
calculated by the use of an interpolated scale based upon the
profitability of the reprographic division. The Bonus Percentage shall
be 3.5% if net profit after tax is equal or greater than seven percent
of gross revenue while the Bonus
1
<PAGE>
Percentage shall be zero if net profit after tax is equal or lesser than
zero percent of gross revenue. In the event that the weighted average of
the gross margin of sales managed or closed by Mr. Outlaw falls below
40% in any quarter, such deficit shall be deducted from the above Bonus.
The Bonus shall be paid quarterly within forty-five days of the end of
the quarter. All calculations shall be based upon the Company's publicly
reported financial results.
(c) BENEFITS. The Employee shall be entitled to three weeks (15) days
paid Annual Leave per year for each of the first five (5) years of employment
beginning at commencement of employment. No annual leave accrues nor may be
taken during the 90 day Introductory Period. Annual Leave shall accrue during
each year but may not be carried over and accumulated in subsequent calendar
years and no additional wages or salary will be paid to the Employee in lieu
of Annual Leave unless approval in writing is granted by management. Any
annual leave taken but not yet earned at the time of termination/resignation
of employment will be deducted from the Employee's final paycheck. The
Employee shall be entitled to four weeks paid annual leave each year after
the fifth anniversary which is to be considered March 1, 2000. No more than
one week shall be taken consecutively without the prior written approval by
the Company.
Annual Leave may be used for the purpose of vacations, visiting medical
professionals, recovering from illness or other personal reasons. In the
event that the Employee is required to take a disability leave of absence,
any accrued annual leave will be taken at the time the leave commences.
Annual Leave will not accrue in the event that a disability leave of absence
or a personal leave of absence is taken. Annual Leave does not apply if leave
is needed as a result of self-inflicted injury, illegal substance abuse or
alcohol abuse, or illness or injury incurred while in the act of committing a
felony. In the event of an illness or injury which is covered by workers'
compensation insurance, the annual leave policy will not apply.
(d) REIMBURSEMENT FOR BUSINESS EXPENSES. OSS shall reimburse Mr. Outlaw
within fifteen (15) days of receipt by OSS of proper documentation of OSS
business expenses incurred by Mr. Outlaw in accordance with Company policy.
These expenses shall include parking expenses, travel and entertainment,
mileage and cellular phone expenses in accordance with Company policy.
(4) RESPONSIBILITIES OF MR. OUTLAW. The responsibilities of Mr. Outlaw
under this Agreement are as follows:
(a) Mr. Outlaw agrees to (i) devote his full business time to the
business and affairs of OSS, (ii) use his 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 Paragraph 2 of
this Agreement.
(b) During the term of this Agreement, Mr. Outlaw shall not sell,
market, engage in, assist or manage reprographic, facilities management,
imaging or technology services except on behalf of OSS. Mr. Outlaw agrees to
disclose in writing to the Board any non-Company business activities for
which Mr. Outlaw receives income. If the board deems such activities to be
excessive and to conflict with Mr. Outlaw's full time commitment, the
Company shall notify Mr. Outlaw in writing to limit those activities to
periods in which no time conflict occurs.
(c) Mr. Outlaw 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. RESTRICTIVE COVENANTS.
<PAGE>
a. COVENANT NOT TO COMPETE. Employee acknowledges as a sales manager,
Employee shall be engaged, without limitation, in managing the Company and
other duties set forth in paragraph 2 herein in which capacity, employee
performs specialized tasks and has access to the Company's trade secrets,
intellectual property and customer lists. Employee also acknowledges that the
Company is currently engaged managing the Company which has reprographic,
imaging, facilities management and technology facilities in the territories
within a twenty-five (25) mile radius of the Company's offices located in
Arlington, VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD
at 22 Light Street Baltimore, MD, New York, NY at 443 Park Avenue South, New
York, NY 10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103. Employee
agrees that, during the term of his employment and for a period of one (1) year
after the termination of his employment with Company, whether such
termination is voluntary or involuntary, with or without cause, he shall not
either directly or indirectly, for himself or through, on behalf of, or in
conjunction with any other person or legal entity, perform the services of
managing operations for any Company selling and/or managing reprographic,
imaging, facilities management and technology accounts for any other business
engaged in the provision of reprographic, imaging and/or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(b) NON-INTERFERENCE WITH EMPLOYEES. During the term of Employee's
employment and for a period of one (1) year after the termination of his
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, recruit, solicit, or induce or attempt to recruit,
solicit or induce any employee of the Company to become employed by or to be
engaged in a business which provides reprographic, imaging and/ or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(c) NON-SOLICITATION COVENANT. Employee agrees that during the term
of his employment and for a period of one (1) year after the termination of
his employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, actively solicit the business or patronage of any of
the clients, customers or accounts of the Company served by Employee during
the term of his Agreement for the purpose of providing information system
services to those clients and customers within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue south, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(i) "Trade Secrets" shall be defined as information, without
regard to form, belonging to the Company or licensed by it including, but not
limited to, technical or nontechnical data, formulae, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which is not commonly known by or available to the public and which
3
<PAGE>
information: (a) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons or entities who can obtain economic value from their
disclosure or use; and (b) are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy.
(ii) "Confidential Information" shall be defined as any
information belonging to the Company or licensed by it other than Trade
Secrets which is material to the Company and not generally known by the
public.
(iii) Employee will treat as confidential and will not, without
the prior written approval of the Company, use (other than the performance of
his duties of employment with the Company), publish, disclose, copyright or
authorize anyone else to use, publish, disclose or copyright, either during
the term of Employee's employment or subsequent thereto, any information
which constitutes Trade Secrets of the Company whether or not the Trade
Secrets are in written or tangible form.
(iv) Employment will treat as confidential and will not,
without the prior written approval of the Company, use (other than in the
performance of his duties of employment with the Company), publish, disclose,
copyright or authorize anyone else to use, publish, disclose or copyright any
Confidential Information either during the term of his employment or for two
(2) years after termination of employment, whether voluntary or involuntary,
with or without cause, and whether or not the Confidential Information is in
written or other tangible form.
(v) All records, notes, files, drawings, documents, plans and
like items, and all copies thereof, relating to or containing or disclosing
Confidential Information or Trade Secrets of the Company which are made or
kept by Employee or which are disclosed to or come into the possession of
Employee, shall be and remain the sole and exclusive property of the Company.
Upon termination of employment, Employee agrees to deliver immediately to
Allen Outlaw or his designee, the originals and all copies of any of the
foregoing.
6. REMEDIES. In the event of Employee's actual or threatened breach of
the provisions of Paragraph 5, the Company, in addition to all other rights,
shall be entitled to an injunction restraining Employee therefrom. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages from Employee. This provision shall remain in full force and
effect in the event Employee should claim that the Company violated any of
the terms of his Agreement. In such event, Employee agrees to pursue such
claim against the Company independently of his covenants set forth in such
Paragraphs.
7. TERMINATION BY THE COMPANY. The Board of Directors may terminate the
employment of Mr. Outlaw 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 Employee of his duties hereunder, willful failure by the
Employee to perform his duties hereunder, conviction of the Employee 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 Employee in connection with the
performance of his duties hereunder, willful engagement in conduct by the
Employee which he has reason to know is materially injurious to the Company
or willful refusal without proper legal cause by the Employee to perform his
duties and responsibilities.
a. In the event of termination for cause, as defined above, by OSS,
all salary and other benefits paid or provided to the Employee hereunder
shall cease as of the date of termination, and the Company shall have no
further obligations to the Employee. Upon a finding
4
<PAGE>
by the Board of Directors that the Employee has willfully failed or refused
to observe or perform his duties or grossly neglected his duties as
specifically set forth in Section 2 and 4 hereof. OSS may terminate this
agreement for cause provided that the Board of Directors has first notified
the Employee on two separate occasions of such failure and has given the
Employee 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 Employee with the following:
(i) Mr. Outlaw 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. Outlaw would have received under this
Agreement but for such termination. All commission compensation for accounts
closed by the Employee that remain unpaid at the time of termination will be
paid to the Employee if such accounts receivable are paid to OSS within
thirty days of the date of termination. No commissions shall be paid to the
Employee on accounts that remain unpaid thirty days after such termination.
Such amount shall be payable to Employee in one installment two weeks
following termination with any additional commissions to be paid forty five
days after the termination.
(ii) "Termination without cause" shall be defined as:
termination for any reason other than "cause" (as defined previously in
Section 7), continuous disability or incapacity of Mr. Outlaw which
prevents his from performing his duties for a period of not less than three
(3) months as determined by an independent, licensed medical doctor, or death.
8. TERMINATION BY EMPLOYEE. Employee may terminate his employment under
this Agreement at any time upon thirty (30) days notice to the Company. In
such event, Employee, if requested by the Company, shall continue to render
his services and shall be paid his regular salary and receive his normal
benefits up to the date of termination.
9. CHANGE IN CONTROL. In the event that a change in control, as defined
in Section 9 (c) occurs, the following provisions shall become effective and
shall control over any other provisions of this Agreement.
(a) All options granted to Employee shall terminate as of a date to
be fixed by the Board of Directors; provided, however, that not less than 30
days' written notice of the date so fixed shall be given to Employee, who
shall have the right, during the period 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 have not as yet
vested.
(b) In the event that Employee is terminated by the Company or the
successor or surviving corporation, with or without cause, within forty-five
days after a change in control, employee shall receive six months pay
("Termination Payment") at the higher of the rate in effect at (i) the time
of the change in control or (ii) sixty days prior to the change in control.
Such Termination Payment shall be made within thirty days of the Termination.
(c) A "change in control" with respect to the Company shall be
deemed to have occurred if:
(i) substantially all of the assets of the Company are sold,
other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting
equity securities of the surviving or successor corporation;
5
<PAGE>
(ii) the Company is merged or consolidated with, or becomes a
subsidiary of, another corporation, other than any such transaction following
which the stockholders of the Company prior to the transaction retain at
least a majority of the voting equity securities of the surviving or
successor corporation;
(iii) any "person" or "group" of persons (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than the Company or a subsidiary of the Company, and other than persons
holding greater than 10% of the outstanding voting securities as disclosed in
the Company's Prospectus dated July 9, 1996 and as updated by successive 13D
filings, becomes the "beneficial owner" (as defined in rule 13d-3 under the
1934 Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities, or
(iv) the resignation or removal of a majority of Board of
Directors.
10. 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.
11. NO WAIVER BY COMPANY. The waiver by the Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as
a waiver of any subsequent breach by Employee. No waiver shall be valid
unless in writing and signed by an authorized officer of the Company.
12. EFFECT ON SUCCESSORS IN INTEREST. This agreement shall inure to the
benefit of and be binding upon heirs, administrators, executors and
successors of each of the parties hereto.
13. 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 Employee shall have no right to assign this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. 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.
15. 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 by an arbitrator
or court of competent jurisdiction, such invalidity or unenforceability shall
not in any way affect the validity or enforceability of the remaining
provisions hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and preliminary agreements. This
Agreement may not be amended except in writing
6
<PAGE>
executed by the parties hereto. The Company's execution must be by a duly
authorized officer or Board member of the Company.
EMPLOYEE STATES THAT HE HAS CAREFULLY READ THE WITHIN AND
FOREGOING "EMPLOYMENT AGREEMENT" AND KNOWS AND UNDERSTANDS THE
CONTENTS THEREOF AND THAT he IS EXECUTING THE SAME AS HIS OWN FREE ACT
AND DEED.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Mr. Outlaw 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/Christopher Weiler
------------------------------
Christopher Weiler
Chairman
Sworn to and subscribed
before me this 21th day
--
of August, 1998.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - -----------------------
Employee: /s/ Allen Outlaw
-------------------------------
Allen Outlaw
Address: 1705 East Avenue
McLean, VA 22101
Sworn to and subscribed
before me this 21th day
--
of August, 1997.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - ----------------------
7
<PAGE>
Exhibit 10.31
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of this
Thirtieth day of June, 1998 by and between On-Site Sourcing, Inc. with
address of 1111 N. 19th Street, Sixth Floor, Arlington, Virginia 22209 ("OSS"
or the "Company") and Alfred T. Duncan ("Mr. Duncan" or the "Employee") with
home address at 1004 Monroe Street, Herndon, VA 20170.
WHEREAS, OSS desires to employ the services of Mr. Duncan utilizing
Mr. Duncan's 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.
Duncan desires to be employed full time by the Company; and
WHEREAS, OSS and Mr. Duncan desire to enter into an Agreement
reflecting the terms under which Mr. Duncan will be employed by the
Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. TERM. This Agreement will remain in effect for a three year period
from the date of the Agreement. It will be reviewed automatically for
succeeding periods of one year unless sooner terminated as provided in
section 6 below.
2. NATURE OF EMPLOYMENT. Mr. Duncan shall be employed as Chief Financial
Officer of the Company with full power and authority as determined by the
Board of Directors of OSS (the "Board"). Mr. Duncan agrees to perform
diligently and faithfully such duties and serve in the above capacity or in
such capacities as the Board of Directors of the Company shall determine.
Mr. Duncan's duties include but are not limited to the following:
(a) Report to the President of the Company.
(b) Manage the Financial Operations of the Company.
(c) Assist the Company in the development of all phases of the Company's
business.
Mr. Duncan shall be employed by the Company on a full-time basis and
shall not during the term of this Agreement be engaged in any other business
activity that, in the judgment of the Company's Board of Directors, impedes
or distracts from Mr. Duncan's performance of services for the Company
hereunder. During the period of employment, Mr. Duncan further agrees not to
(i) solely or jointly with others undertake or join any planning for or
organization of any business activities of the Company, and (ii) directly or
indirectly, engage or participate in any other activities in conflict with
the basic interests of the Company.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Duncan for
services rendered under this Agreement, OSS shall compensate Mr. Duncan
as follows:
<PAGE>
(a) BASE SALARY. Mr. Duncan shall receive a base salary of $10,633.33
and thereafter to be determined at the discretion of the Board of Directors.
(b) BENEFITS. The Employee shall be entitled to three weeks (15) days
paid Annual Leave per year for each of the first five (5) years of employment
beginning at commencement of employment. No annual leave accrues nor may be
taken during the 90 day Introductory Period. Annual Leave shall accrue during
each year but may not be carried over and accumulated in subsequent calendar
years and no additional wages or salary will be paid to the Employee in lieu
of Annual Leave unless approval in writing is granted by management. Any
annual leave taken but not yet earned at the time of termination/resignation
of employment will be deducted from the Employee's final paycheck. The
Employee shall be entitled to four weeks paid annual leave each year after
the fifth anniversary which is to be considered June , 2003. No more than
one week shall be taken consecutively without the prior written approval by
the Company.
Annual Leave may be used for the purpose of vacations, visiting medical
professionals, recovering from illness or other personal reasons. In the
event that the Employee is required to take a disability leave of absence,
any accrued annual leave will be taken at the time the leave commences.
Annual Leave will not accrue in the event that a disability leave of absence
or a personal leave of absence is taken. Annual Leave does not apply if leave
is needed as a result of self-inflicted injury, illegal substance abuse or
alcohol abuse, or illness or injury incurred while in the act of committing a
felony. In the event of an illness or injury which is covered by workers'
compensation insurance, the annual leave policy will not apply.
(d) REIMBURSEMENT FOR BUSINESS EXPENSES. Mr. Duncan shall be reimbursed
within fifteen (15) days of receipt by OSS of proper documentation of OSS
business expenses incurred by the Employee in accordance with Company policy.
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. Mr. Duncan shall receive stock options to purchase
80,000 shares of the Company's stock at $ILLEGIBLE per share, based on the
decision of the Board of Directors. Options to purchase 32,000 shares of
common stock shall vest upon the signing of this agreement, with the
remaining options vesting in equal portions at the end of each quarter over a
period of two (2) years. The options shall be exercisable for a period of
five years from the date of grant. The options are cancelable upon Mr.
Duncan's termination from the Company as defined in Section 6 below.
Furthermore, the options shall inure to the benefit of the Employee's heirs
and designees.
(4) RESPONSIBILITIES OF EMPLOYEE. The responsibilities of Mr.
Duncan under this Agreement are as follows:
(a) Mr. Duncan agrees to serve OSS for the term of employment specified
in Section 1 above. Mr. Duncan agrees to (i) devote his full business time to
the business and affairs of OSS, (ii) use his 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 Paragraph 2 of
this Agreement.
(b) During the term of this Agreement, Mr. Duncan shall not perform
services for any person or entity that competes directly or indirectly with
the Company. Mr. Duncan agrees to disclose in writing to the Board any
non-Company business activities for which Mr. Duncan receives compensation
for services rendered. If the board deems such activities to be excessive and
to conflict with Mr. Duncan's full time commitment, the Company shall notify
Mr. Duncan in writing to limit those activities to periods in which no time
conflict occurs.
<PAGE>
(c) Mr. Duncan 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. RESTRICTIVE COVENANTS.
a. COVENANT NOT TO COMPETE. Employee acknowledges as Chief Financial
Officer, Employee shall be engaged, without limitation, in managing the
Company's Financial operations and other duties set forth in paragraph 2
herein in which capacity, employee performs specialized tasks and has access
to the Company's trade secrets, intellectual property and customer lists.
Employee also acknowledges that the Company is currently engaged in operating
and selling facilities management accounts in the territories within a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103. Employee
agrees that, during the term of his employment and for a period of one (1)
year after the termination of his employment with Company, whether such
termination is voluntary or involuntary, with or without cause, he shall not
either directly or indirectly, for himself or through, on behalf of, or in
conjunction with any other person or legal entity, perform the services of
managing operations for any Company selling and/or managing reprographic,
imaging, facilities management and technology accounts for any other business
engaged in the provision of reprographic, imaging and/or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(b) NON-INTERFERENCE WITH EMPLOYEES. During the term of Employee's
employment and for a period of one (1) year after the termination of his
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, recruit, solicit, or induce or attempt to recruit,
solicit or induce any employee of the Company to become employed by or to be
engaged in a business which provides reprographic, imaging and/ or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(c) NON-SOLICITATION COVENANT. Employee agrees that during the term
of his employment and for a period of one (1) year after the termination of
his employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, actively solicit the business or patronage of any of
the clients, customers or accounts of the Company served by Employee during
the term of his Agreement for the purpose of providing information system
services to those clients and customers within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
<PAGE>
(i) "Trade Secrets" shall be defined as information, without
regard to form, belonging to the Company or licensed by it including, but not
limited to, technical or nontechnical data, formulae, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which is not commonly known by or available to the public and which
information: (a) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons or entities who can obtain economic value from their
disclosure or use; and (b) are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy.
(ii) "Confidential Information" shall be defined as any
information belonging to the Company or licensed by it other than Trade
Secrets which is material to the Company and not generally known by the
public.
(iii) Employee will treat as confidential and will not, without
the prior written approval of the Company, use (other than the performance of
his duties of employment with the Company), publish, disclose, copyright or
authorize anyone else to use, publish, disclose or copyright, either during
the term of Employee's employment or subsequent thereto, any information
which constitutes Trade Secrets of the Company whether or not the Trade
Secrets are in written or tangible form.
(iv) Employment will treat as confidential and will not,
without the prior written approval of the Company, use (other than in the
performance of his duties of employment with the Company), publish, disclose,
copyright or authorize anyone else to use, publish, disclose or copyright any
Confidential Information either during the term of his employment or for two
(2) years after termination of employment, whether voluntary or involuntary,
with or without cause, and whether or not the Confidential Information is in
written or other tangible form.
(v) All records, notes, files, drawings, documents, plans and
like items, and all copies thereof, relating to or containing or disclosing
Confidential Information or Trade Secrets of the Company which are made or
kept by Employee or which are disclosed to or come into the possession of
Employee, shall be and remain the sole and exclusive property of the Company.
Upon termination of employment, Employee agrees to deliver immediately to
Allen Outlaw or his designee, the originals and all copies of any of the
foregoing.
6. TERMINATION BY THE COMPANY. The Board of Directors may terminate the
employment of Mr. Duncan 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 Employee of his duties hereunder, willful failure by the
Employee to perform his duties hereunder, conviction of the Employee 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 Employee in connection with the
performance of his duties hereunder, willful engagement in conduct by the
Employee or willful refusal without proper legal cause by the Employee 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 Employee hereunder
shall cease as of the date of termination, and the Company shall have no
further obligations to the Employee. Upon a finding by the Board of Directors
that the Employee has willfully failed or refused to observe or perform his
duties or
<PAGE>
grossly neglected his duties as specifically set forth in Section 4 hereof.
OSS may terminate this agreement for cause provided that the Board of
Directors has first notified the Employee on two separate occasions of such
failure and has given the Employee 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 Employee with the following:
(i) Mr. Duncan shall receive an amount equal to six months base
salary plus the value of his other employment benefits accrued at the time of
termination that Mr. Duncan would have received under this Agreement but for
such termination. Such amount shall be payable to Employee in one installment
two weeks following termination with any additional commissions to be paid
forty five days after the 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. Duncan which
prevents his from performing his duties for a period of not less than three
(3) months as determined by an independent, licensed medical doctor, or death.
7. CHANGE IN CONTROL. In the event that a change in control, as defined
in Section 7(c) occurs, the following provisions shall become effective and
shall control over any other provisions of this Agreement.
(a) All options granted to Employee shall terminate as of a date to
be fixed by the Board of Directors; provided, however, that not less than 30
days' written notice of the date so fixed shall be given to Employee, who
shall have the right, during the period 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 have not as yet
vested.
(b) In the event that Employee is terminated by the Company or the
successor or surviving corporation, with or without cause, within forty-five
days after a change in control, employee shall receive six months pay
("Termination Payment") at the higher of the rate in effect at (i) the time
of the change in control or (ii) sixty days prior to the change in control.
Such Termination Payment shall be made within thirty days of the Termination.
(c) A "change in control" with respect to the Company shall be
deemed to have occurred if:
(i) substantially all of the assets of the Company are sold,
other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting
equity securities of the surviving or successor corporation;
(ii) the Company is merged or consolidated with, or becomes a
subsidiary of, another corporation, other than any such transaction following
which the stockholders of the Company prior to the transaction retain at
least a majority of the voting equity securities of the surviving or
successor corporation;
(iii) any "person" or "group" of persons (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than the Company or a subsidiary of the Company, and other than persons
holding greater than 10% of the outstanding voting securities as disclosed in
the Company's Prospectus dated July 9, 1996 and as updated by successive 13D
filings,
<PAGE>
becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Company's then outstanding securities, or
(iv) the resignation or removal of a majority of Board of
Directors.
8. 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.
9. 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.
10. 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 Employee shall have no right to assign this Agreement.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. 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.
12. 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 by an arbitrator
or court of competent jurisdiction, such invalidity or unenforceability shall
not in any way affect the validity or enforceability of the remaining
provisions hereof.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and preliminary agreements. This
Agreement may not be amended except in writing executed by the parties
hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Mr. Duncan 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
Employee:
/s/ Alfred T. Duncan
-------------------------------
Alfred T. Duncan
<PAGE>
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") IS ENTERED INTO AS OF THIS FIRST
day of August, 1998 by and between On-Site Sourcing, Inc. with address of
1111 N. 19th Street, Sixth Floor, Arlington, Virginia 22209 ("OSS" or the
"Company") and Edward Hook ("Mr. Hook" or the "Employee") with home address
at [ILLEGIBLE]
WHEREAS, OSS is presently in the business of providing reprographic,
imaging, printing facilities management, and technology services;
WHEREAS, OSS desires to employ the services of Mr. Hook 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. Hook desires to be
employed full time by the Company; and
WHEREAS, OSS and Mr. Hook desire to enter into an Agreement reflecting
the terms under which Mr. Hook will be employed by the Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, and other good and valuable consideration, the adequacy of
which the parties hereby acknowledge, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. TERM. This Agreement will remain in effect for a period of three years
and will be renewed automatically for succeeding periods of one year unless
sooner terminated as provided in sections 7 and 8 below.
2. NATURE OF EMPLOYMENT. Mr. Hook shall be employed as a Vice President
of the Document Services, Facilities Management and Imaging Divisions of the
Company. Mr. Hook's duties include but are not limited to the management of
these operations of the Company. Mr. Hook agrees to perform diligently and
faithfully such duties and serve in the above capacity or in such capacities
as the Board of Directors of OSS (the "Board") shall determine from time to
time.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Hook for
services rendered under this Agreement, OSS shall compensate Mr. Hook
as follows:
(a) BASE SALARY. Mr. Hook shall receive a base salary of $125,000 per
year, payable monthly.
(b) BENEFITS. The Employee shall be entitled to four weeks (20 days)
paid Annual Leave per year for each of the first five (5) years of employment
beginning at commencement of employment. Annual Leave shall accrue during
each year but may not be carried over and accumulated in subsequent calendar
years and no additional wages or salary will be paid to the Employee in lieu
of Annual Leave unless approval in writing is granted by management. Any
annual leave taken but not yet earned at the time of termination/resignation
of employment will be deducted from the Employee's final paycheck. The
Employee shall be entitled to four weeks paid annual leave each year after
the fifth anniversary which is to be considered March 1, 2000. No more than
one week shall be taken consecutively without the prior written approval by
the Company.
Page 1 of 7
<PAGE>
Annual Leave may be used for the purpose of vacations, visiting medical
professionals, recovering from illness or other personal reasons. In the
event that the Employee is required to take a disability leave of absence,
any accrued annual leave will be taken at the time the leave commences.
Annual Leave will not accrue in the event that a disability leave of absence
or a personal leave of absence is taken. Annual Leave does not apply if leave
is needed as a result of self-inflicted injury, illegal substance abuse or
alcohol abuse, or illness or injury incurred while in the act of committing a
felony. In the event of an illness or injury which is covered by workers'
compensation insurance, the annual leave policy will not apply.
(c) REIMBURSEMENT. Mr. Hook shall be reimbursed within fifteen (15) days
for all properly documented OSS business expenses incurred by the
Employee in accordance with Company policy. These expenses shall
include parking expenses, travel and entertainment, mileage and
cellular phone expenses to the extent these expenses are incurred in
accordance with Company policy. 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.
(d) BONUS. Employee shall be eligible to be paid a bonus upon the
following terms and conditions:
(i) Employee's performance and the performance of the Company
shall be reviewed by the Board of Directors at the end of each
quarter. Based upon this quarterly review, employee shall be
eligible to be paid a stock or cash bonus in an amount to be
determined at the sole discretion of the Board of Directors.
(ii) Employee shall receive a $15,000 signing bonus at the
commencement of employment with Company, and $15,000 bonus at
the completion of ninety days with the Company.
(e) STOCK OPTIONS. Mr. Hook shall receive stock options to purchase
70,000 shares of the Company's common stock at $1.62 per share, the
current bid price, based on the decision of the Board. The options
shall vest at the end of each quarter at 5,833.33 shares per quarter
for a period of three years from the date of grant. The options are
cancelable upon Mr. Hook's termination from the Company for cause as
defined in Section 7 below. Furthermore, the options shall inure to
the benefit of the Employee's heirs and designees.
(4) RESPONSIBILITIES OF EMPLOYEE. The responsibilities of Mr.
Hook under this Agreement are as follows:
(a) Mr. Hook agrees to serve OSS for the term of employment specified in
Section 1 above. Mr. Hook agrees to (i) devote his full business time to the
business and affairs of OSS, (ii) use his 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. Hook shall not perform
services for any person or entity that competes directly or indirectly with
the Company. Mr. Hook agrees to disclose in writing to the Board any
non-Company business activities for which Mr. Hook receives compensation for
services rendered. If the board deems such activities to be excessive and to
Page 2 of 7
<PAGE>
conflict with Mr. Hook's full time commitment, the the Company shall notify
Mr. Hook in writing to limit those activities to periods in which no time
conflict occurs.
(c) Mr. Hook 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. RESTRICTIVE COVENANTS.
a. COVENANT NOT TO COMPETE. Employee acknowledges as CEO and President,
Employee shall be engaged, without limitation, in managing the Company and
other duties set forth in paragraph 2 herein in which capacity, employee
performs specialized tasks and has access to the Company's trade secrets,
intellectual property and customer lists. Employee also acknowledges that the
Company is currently engaged managing the Company which has reprographic,
imaging, facilities management and technology facilities in the territories
within a twenty-five (25) mile radius of the Company's offices located in
Arlington, VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD
at 22 Light Street Baltimore, MD, New York, NY at 443 Park Avenue South, New
York, NY 10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103. Employee
agrees that, during the term of his employment and for a period of one (1) year
after the termination of his employment with Company, whether such
termination is voluntary or involuntary, with or without cause, he shall not
either directly or indirectly, for himself or through, on behalf of, or in
conjunction with any other person or legal entity, perform the services of
managing operations for any Company selling and/or managing reprographic,
imaging, facilities management and technology accounts for any other business
engaged in the provision of reprographic, imaging and/or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(b) NON-INTERFERENCE WITH EMPLOYEES. During the term of Employee's
employment and for a period of one (1) year after the termination of his
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, recruit, solicit, or induce or attempt to recruit,
solicit or induce any employee of the Company to become employed by or to be
engaged in a business which provides reprographic, imaging and/ or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(c) NON-SOLICITATION COVENANT. Employee agrees that during the term
of his employment and for a period of one (1) year after the termination of
his employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, actively solicit the business or patronage of any of
the clients, customers or accounts of the Company served by Employee during
the term of his Agreement for the purpose of providing information system
services to those clients and customers within the territory comprised by a
twenty-five (25) mile radius of the Company's
Page 3 of 7
<PAGE>
offices located in Arlington, VA at 1111 North 19th Street, Arlington, VA
22209, Baltimore, MD at 22 Light Street Baltimore, MD, New York, NY at 443
Park Avenue south, New York, NY 10016, Atlanta, GA at 1375 Peachtree Street,
Atlanta, Georgia and Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA
19103.
(i) "Trade Secrets" shall be defined as information, without
regard to form, belonging to the Company or licensed by it including, but not
limited to, technical or nontechnical data, formulae, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which is not commonly known by or available to the public and which
information: (a) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons or entities who can obtain economic value from their
disclosure or use; and (b) are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy.
(ii) "Confidential Information" shall be defined as any
information belonging to the Company or licensed by it other than Trade
Secrets which is material to the Company and not generally known by the
public.
(iii) Employee will treat as confidential and will not, without
the prior written approval of the Company, use (other than the performance of
his duties of employment with the Company), publish, disclose, copyright or
authorize anyone else to use, publish, disclose or copyright, either during
the term of Employee's employment or subsequent thereto, any information
which constitutes Trade Secrets of the Company whether or not the Trade
Secrets are in written or tangible form.
(iv) Employment will treat as confidential and will not,
without the prior written approval of the Company, use (other than in the
performance of his duties of employment with the Company), publish, disclose,
copyright or authorize anyone else to use, publish, disclose or copyright any
Confidential Information either during the term of his employment or for two
(2) years after termination of employment, whether voluntary or involuntary,
with or without cause, and whether or not the Confidential Information is in
written or other tangible form.
(v) All records, notes, files, drawings, documents, plans and
like items, and all copies thereof, relating to or containing or disclosing
Confidential Information or Trade Secrets of the Company which are made or
kept by Employee or which are disclosed to or come into the possession of
Employee, shall be and remain the sole and exclusive property of the Company.
Upon termination of employment, Employee agrees to deliver immediately to
Allen Outlaw or his designee, the originals and all copies of any of the
foregoing.
6. REMEDIES. In the event of Employee's actual or threatened breach of
the provisions of Paragraph 5, the Company, in addition to all other rights,
shall be entitled to an injunction restraining Employee therefrom. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages from Employee. This provision shall remain in full force and
effect in the event Employee should claim that the Company violated any of
the terms of his Agreement. In such event, Employee agrees to pursue such
claim against the Company independently of his covenants set forth in such
Paragraphs.
7. TERMINATION BY THE COMPANY. The Board of Directors may terminate the
employment of Mr. Hook 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 Employee of his duties hereunder, willful failure by the
Employee of his duties
Page 4 of 7
<PAGE>
hereunder, willful failure by the Employee to perform his duties hereunder,
conviction of the Employee 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
Employee in connection with the performance of his duties hereunder, willful
engagement in conduct by the Employee which he has reason to know is
materially injurious to the Company or willful refusal without proper legal
cause by the Employee to perform his duties and responsibilities.
a. In the event of termination for cause, as defined above, by OSS,
all salary and other benefits paid or provided to the Employee hereunder
shall cease as of the date of termination, and the Company shall have no
further obligations to the Employee. Upon a finding by the Board of Directors
that the Employee has willfully failed or refused to observe or perform his
duties or grossly neglected his duties as specifically set forth in Section 2
and 4 hereof. OSS may terminate this agreement for cause provided that the
Board of Directors has first notified the Employee on two separate occasions
of such failure and has given the Employee 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 Employee with the following:
(i) Mr. Hook shall receive an amount equal to three months
base salary plus the value of his other employment benefits accrued at the
time of termination that Mr. Hook would have received under this
Agreement but for such termination. All commission compensation for accounts
closed by the Employee that remain unpaid at the time of termination will be
paid to the Employee if such accounts receivable are paid to OSS within
thirty days of the date of termination. No commissions shall be paid to the
Employee on accounts that remain unpaid thirty days after such termination.
Such amount shall be payable to Employee in one installment two weeks
following termination with any additional commissions to be paid forty five
days after the termination.
(ii) "Termination without cause" shall be defined as:
termination for any reason other than "cause" (as defined previously in
Section 7), continuous disability or incapacity of Mr. Hook which
prevents his from performing his duties for a period of not less than three
(3) months as determined by an independent, licensed medical doctor, or death.
8. TERMINATION BY EMPLOYEE. Employee may terminate his employment under
this Agreement at any time upon thirty (30) days notice to the Company. In
such event, Employee, if requested by the Company, shall continue to render
his services and shall be paid his regular salary and receive his normal
benefits up to the date of termination.
9. CHANGE IN CONTROL. In the event that a change in control, as defined
in Section 9 (c) occurs, the following provisions shall become effective and
shall control over any other provisions of this Agreement.
(a) All options granted to Employee shall terminate as of a date to
be fixed by the Board of Directors; provided, however, that not less than 30
days' written notice of the date so fixed shall be given to Employee, who
shall have the right, during the period 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 have not as yet
vested.
Page 5 of 7
<PAGE>
(b) In the event that Employee is terminated by the Company or the
successor or surviving corporation, with or without cause, within forty-five
days after a change in control, employee shall receive six months pay
("Termination Payment") at the higher of the rate in effect at (i) the time
of the change in control or (ii) sixty days prior to the change in control.
Such Termination Payment shall be made within thirty days of the Termination.
(c) A "change in control" with respect to the Company shall be
deemed to have occurred if:
(i) substantially all of the assets of the Company are sold,
other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting
equity securities of the surviving or successor corporation;
(ii) the Company is merged or consolidated with, or becomes a
subsidiary of, another corporation, other than any such transaction following
which the stockholders of the Company prior to the transaction retain at
least a majority of the voting equity securities of the surviving or
successor corporation;
(iii) any "person" or "group" of persons (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than the Company or a subsidiary of the Company, and other than persons
holding greater than 10% of the outstanding voting securities as disclosed in
the Company's Prospectus dated July 9, 1996 and as updated by successive 13D
filings, becomes the "beneficial owner" (as defined in rule 13d-3 under the
1934 Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities, or
(iv) the resignation or removal of a majority of Board of
Directors.
10. 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.
11. NO WAIVER BY COMPANY. The waiver by the Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as
a waiver of any subsequent breach by Employee. No waiver shall be valid
unless in writing and signed by an authorized officer of the Company.
12. EFFECT ON SUCCESSORS IN INTEREST. This agreement shall inure to the
benefit of and be binding upon heirs, administrators, executors and
successors of each of the parties hereto.
13. 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 Employee shall have no right to assign this Agreement.
Page 6 of 7
<PAGE>
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. 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.
15. 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 by an arbitrator
or court of competent jurisdiction, such invalidity or unenforceability shall
not in any way affect the validity or enforceability of the remaining
provisions hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and preliminary agreements. This
Agreement may not be amended except in writing executed by the parties
hereto. The Company's execution must be by a duly authorized officer or Board
member of the Company.
EMPLOYEE STATES THAT HE HAS CAREFULLY READ THE WITHIN AND
FOREGOING "EMPLOYMENT AGREEMENT" AND KNOWS AND UNDERSTANDS THE
CONTENTS THEREOF AND THAT he IS EXECUTING THE SAME AS HIS OWN FREE ACT
AND DEED.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Mr. Hook 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/ Christopher Weiler
------------------------------
Christopher Weiler
Chairman
Sworn to and subscribed
before me this 4th day
--
of August, 1998.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - -----------------------
Employee:
Page 7 of 7
<PAGE>
/s/ Edward Hook
-------------------------------
Edward Hook
Address:
Sworn to and subscribed
before me this 4th day
--
of August, 1998.
------
/s/Alexandra Touloumes
- - ----------------------
Notary Public
My Commission Expires:
6/30/2001
- - ----------------------
Page 8 of 7
<PAGE>
Exhibit 10.33
EMPLOYMENT AGREEMENT
This Employment Agreement ("agreement") is entered into as of this ___
day of June, 1998 by and between On-Site Sourcing, Inc. with address of 1111
N. 19th Street, Sixth Floor, Arlington, Virginia 22209 ("OSS" or the
"Company") and John C. Sabanosh ("Mr. Sabanosh" or the "Employee") with home
address at 1004 Monroe Street, Herndon, VA 20170.
WHEREAS, OSS desires to employ the services of Mr. Sabanosh utilizing
Mr. Sabanosh's 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.
Sabanosh desires to be employed full time by the Company; and
WHEREAS, OSS and Mr. Sabanosh desire to enter into an Agreement
reflecting the terms under which Mr. Sabanosh will be employed by the
Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. TERM. This Agreement will remain in effect for a three year period
from the date of the Agreement. It will be reviewed automatically for
succeeding periods of one year unless sooner terminated as provided in
section 6 below.
2. NATURE OF EMPLOYMENT. Mr. Sabanosh shall be employed as the Chief
Operations Officer of the Company with full power and authority as determined
by the Board of Directors of OSS (the "Board"). Mr. Sabanosh agrees to perform
diligently and faithfully such duties and serve in the above capacity or in
such capacities as the Board of Directors of the Company shall determine.
Mr. Sabanosh's duties include but are not limited to the following:
(a) Report to the President of the Company.
(b) Manage the Operations of the Company.
(c) Assist the Company in the development of all phases of the
Company's business.
Mr. Sabanosh shall be employed by the Company on a full-time basis and
shall not during the term of this Agreement be engaged in any other business
activity that, in the judgment of the Company's Board of Directors, impedes
or distracts from Mr. Sabanosh's performance of services for the Company
hereunder. During the period of employment, Mr. Sabanosh further agrees not to
(i) solely or jointly with others undertake or join any planning for or
organization of any business activities of the Company, and (ii) directly or
indirectly, engage or participate in any other activities in conflict with
the basic interests of the Company.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Sabanosh for
services rendered under this Agreement, OSS shall compensate Mr. Sabanosh
as follows:
<PAGE>
(a) BASE SALARY. Mr. Sabanosh shall receive a base salary of $9,166.65
per month and thereafter to be determined at the discretion of the Board of
Directors.
(b) BENEFITS. The Employee shall be entitled to three weeks (15) days
paid Annual Leave per year for each of the first five (5) years of employment
beginning at commencement of employment. No annual leave accrues nor may be
taken during the 90 day Introductory Period. Annual Leave shall accrue during
each year but may not be carried over and accumulated in subsequent calendar
years and no additional wages or salary will be paid to the Employee in lieu
of Annual Leave unless approval in writing is granted by management. Any
annual leave taken but not yet earned at the time of termination/resignation
of employment will be deducted from the Employee's final paycheck. The
Employee shall be entitled to four weeks paid annual leave each year after
the fifth anniversary which is to be considered June 10, 2003. No more than
one week shall be taken consecutively without the prior written approval by
the Company.
Annual Leave may be used for the purpose of vacations, visiting medical
professionals, recovering from illness or other personal reasons. In the
event that the Employee is required to take a disability leave of absence,
any accrued annual leave will be taken at the time the leave commences.
Annual Leave will not accrue in the event that a disability leave of absence
or a personal leave of absence is taken. Annual Leave does not apply if leave
is needed as a result of self-inflicted injury, illegal substance abuse or
alcohol abuse, or illness or injury incurred while in the act of committing a
felony. In the event of an illness or injury which is covered by workers'
compensation insurance, the annual leave policy will not apply.
(d) REIMBURSEMENT. Mr. Sabanosh shall be reimbursed within fifteen (15)
days of receipt by OSS of proper documentation of OSS business expenses
incurred by the Employee in accordance with Company policy. To the extent
permitted by applicable law, OSS, shall treat these expenses as senior in the
right of payment to any other collection of OSS.
(e) STOCK OPTIONS. Mr. Sabanosh shall receive stock options to purchase
50,000 shares of the Company's stock at $2.6875 per share, based on the
decision of the Board of Directors. Options to purchase 20,000 shares of
common stock shall vest upon the signing of this agreement, with the
remaining options vesting in equal portions at the end of each quarter over a
period of two (2) years. The options shall be exercisable for a period of
five years from the date of grant. The options are cancelable upon Mr.
Sabanosh's termination from the Company as defined in Section 6 below.
Furthermore, the options shall inure to the benefit of the Employee's heirs
and designees.
(4) RESPONSIBILITIES OF EMPLOYEE. The responsibilities of Mr.
Sabanosh under this Agreement are as follows:
(a) Mr. Sabanosh agrees to serve OSS for the term of employment
specified in Section 1 above. Mr. Sabanosh agrees to (i) devote his full
business time to the business and affairs of OSS, (ii) use his 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. Sabanosh shall not perform
services for any person or entity that competes directly or indirectly with
the Company. Mr. Sabanosh agrees to disclose in writing to the Board any
non-Company business activities for which Mr. Sabanosh receives compensation
for services rendered. If the board deems such activities to be excessive and
to conflict with Mr. Sabanosh's full time commitment, the the Company shall
notify Mr. Sabanosh in writing to limit those activities to periods in which no
time conflict occurs.
(c) Mr. Sabanosh 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. RESTRICTIVE COVENANTS.
a. COVENANT NOT TO COMPETE. Employee acknowledges that as Chief
Operations Officer, Employee shall be engaged, without limitation, in
managing the Company and other duties set forth in paragraph 2 herein in
which capacity, employee performs specialized tasks and has access to the
Company's trade secrets, intellectual property and customer lists. Employee
also acknowledges that the Company is currently engaged in operating and
selling facilities management accounts in the territories within a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103. Employee
agrees that, during the term of his employment and for a period of one (1)
year after the termination of his employment with Company, whether such
termination is voluntary or involuntary, with or without cause, he shall not
either directly or indirectly, for himself or through, on behalf of, or in
conjunction with any other person or legal entity, perform the services of
managing operations for any Company selling and/or managing reprographic,
imaging, facilities management and technology accounts for any other business
engaged in the provision of reprographic, imaging and/or facilities
management, and technology services within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(b) NON-INTERFERENCE WITH EMPLOYEES. During the term of Employee's
employment and for a period of one (1) year after the termination of his
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, recruit, solicit, or induce or attempt to recruit,
solicit or induce any employee of the Company to become employed by or to be
engaged in a business which provides reprographic, imaging and/ or facilities
management services within the territory comprised by a twenty-five (25) mile
radius of the Company's offices located in Arlington, VA at 1111 North 19th
Street, Arlington, VA 22209, Baltimore, MD at 22 Light Street Baltimore, MD,
New York, NY at 443 Park Avenue South, New York, NY 10016, Atlanta, GA at
1375 Peachtree Street, Atlanta, Georgia and Philadelphia, PA at 1617 JFK
Boulevard, Philadelphia, PA 19103.
(c) NON-SOLICITATION COVENANT. Employee agrees that during the term
of his employment and for a period of one (1) year after the termination of
his employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, Employee will not directly or indirectly,
on his own behalf or on behalf of or in conjunction with any person or entity
other that the Company, actively solicit the business or patronage of any of
the clients, customers or accounts of the Company served by Employee during
the term of his Agreement for the purpose of providing information system
services to those clients and customers within the territory comprised by a
twenty-five (25) mile radius of the Company's offices located in Arlington,
VA at 1111 North 19th Street, Arlington, VA 22209, Baltimore, MD at 22 Light
Street Baltimore, MD, New York, NY at 443 Park Avenue South, New York, NY
10016, Atlanta, GA at 1375 Peachtree Street, Atlanta, Georgia and
Philadelphia, PA at 1617 JFK Boulevard, Philadelphia, PA 19103.
(i) "Trade Secrets" shall be defined as information, without
regard to form, belonging to the Company or licensed by it including, but not
limited to, technical or nontechnical data, formulae, patterns, compilations,
programs, devices, methods, techniques,
<PAGE>
drawings, processes, financial data, financial plans, product plans or lists
of actual or potential customers or suppliers which is not commonly known by
or available to the public and which information: (a) derive economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons or entities who can obtain
economic value from their disclosure or use; and (b) are the subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
(ii) "Confidential Information" shall be defined as any
information belonging to the Company or licensed by it other than Trade
Secrets which is material to the Company and not generally known by the
public.
(iii) Employee will treat as confidential and will not, without
the prior written approval of the Company, use (other than the performance of
his duties of employment with the Company), publish, disclose, copyright or
authorize anyone else to use, publish, disclose or copyright, either during
the term of Employee's employment or subsequent thereto, any information
which constitutes Trade Secrets of the Company whether or not the Trade
Secrets are in written or tangible form.
(iv) Employment will treat as confidential and will not,
without the prior written approval of the Company, use (other than in the
performance of his duties of employment with the Company), publish, disclose,
copyright or authorize anyone else to use, publish, disclose or copyright any
Confidential Information either during the term of his employment or for two
(2) years after termination of employment, whether voluntary or involuntary,
with or without cause, and whether or not the Confidential Information is in
written or other tangible form.
(v) All records, notes, files, drawings, documents, plans and
like items, and all copies thereof, relating to or containing or disclosing
Confidential Information or Trade Secrets of the Company which are made or
kept by Employee or which are disclosed to or come into the possession of
Employee, shall be and remain the sole and exclusive property of the Company.
Upon termination of employment, Employee agrees to deliver immediately to the
President of the Company or his designee, the originals and all copies of any
of the foregoing.
6. TERMINATION BY THE COMPANY. The Board of Directors may terminate the
employment of Mr. Sabanosh 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 Employee of his duties hereunder, willful failure by the
Employee to perform his duties hereunder, conviction of the Employee 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 Employee in connection with the
performance of his duties hereunder, willful engagement in conduct by the
Employee which he has reason to know is materially injurious to the Company
or willful refusal without proper legal cause by the Employee to perform his
duties and responsibilities.
a. In the event of termination for cause, as defined above, by OSS,
all salary and other benefits paid or provided to the Employee hereunder
shall cease as of the date of termination, and the Company shall have no
further obligations to the Employee. Upon a finding by the Board of Directors
that the Employee has willfully failed or refused to observe or perform his
duties or grossly neglected his duties as specifically set forth in 4 hereof.
OSS may terminate this agreement for cause provided that the Board of
Directors has first notified the Employee on two separate occasions of such
failure and has given the Employee at least thirty (30) days after each such
occasion to remedy such breach of duty.
<PAGE>
b. In the event of termination by OSS without cause, the Company
agrees to provide the Employee with the following:
(i) Mr. Sabanosh shall receive an amount equal to three weeks
base salary plus the value of his other employment benefits accrued at the
time of termination that Mr. Sabanosh would have received under this
Agreement but for such termination. Such amount shall be payable to Employee
in one installment two weeks following termination with any additional
commissions to be paid forty five days after the 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. Sabanosh which
prevents his from performing his duties for a period of not less than three
(3) months as determined by an independent, licensed medical doctor, or death.
7. CHANGE IN CONTROL. In the event that a change in control, as defined
in Section 7(c) occurs, the following provisions shall become effective and
shall control over any other provisions of this Agreement.
(a) All options granted to Employee shall terminate as of a date to
be fixed by the Board of Directors; provided, however, that not less than 30
days' written notice of the date so fixed shall be given to Employee, who
shall have the right, during the period 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 have not as yet
vested.
(b) In the event that Employee is terminated by the Company or the
successor or surviving corporation, with or without cause, within forty-five
days after a change in control, employee shall receive six months pay
("Termination Payment") at the higher of the rate in effect at (i) the time
of the change in control or (ii) sixty days prior to the change in control.
Such Termination Payment shall be made within thirty days of the Termination.
(c) A "change in control" with respect to the Company shall be
deemed to have occurred if:
(i) substantially all of the assets of the Company are sold,
other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting
equity securities of the surviving or successor corporation;
(ii) the Company is merged or consolidated with, or becomes a
subsidiary of, another corporation, other than any such transaction following
which the stockholders of the Company prior to the transaction retain at
least a majority of the voting equity securities of the surviving or
successor corporation;
(iii) any "person" or "group" of persons (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than the Company or a subsidiary of the Company, and other than persons
holding greater than 10% of the outstanding voting securities as disclosed in
the Company's Prospectus dated July 9, 1996 and as updated by successive 13D
filings, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities, or
(iv) the resignation or removal of a majority of Board of
Directors.
8. EFFECT ON SUCCESSORS IN INTEREST. This Agreement shall inure to the
benefit of and
<PAGE>
be binding upon heirs, administrators, executors, successors
and assigns of each of the parties hereto.
9. 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.
10. 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 Employee shall have no right to assign this Agreement.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. 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.
12. 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 by an arbitrator
or court of competent jurisdiction, such invalidity or unenforceability shall
not in any way affect the validity or enforceability of the remaining
provisions hereof.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and preliminary 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. Sabanosh 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
Employee:
/s/ John C. Sabanosh
-------------------------------
John C. Sabanosh
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