UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
(Amendment No. 1 Filed on October 28, 1999)
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 1999.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from ___________to ___________
Commission file number 1-12738
ONSITE ENERGY CORPORATION
(Name of small business issuer in its charter)
Delaware 33-0576371
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
701 Palomar Airport Road, Suite 200
Carlsbad, California 92009
(Address of principal executive offices) (Zip Code) 92009
(Issuer's telephone number) (760) 931-2400
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
------------------------ -----------------------------------------
Class A Common Stock N/A
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
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 registrant'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. |_|
State issuer's revenues for its most recent fiscal year............$43,557,902
State the aggregate market value of the voting and non-voting common equity held
by non affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days......$1,117,682 as of September 27, 1999.
The number of shares of Common Stock outstanding as of September 27, 1999 is
18,641,302.
<PAGE>2
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The following table sets forth the persons currently serving as directors of the
Company, and certain information with respect to those persons.
Director Age Director Since
- --------------------- ----- --------------
Charles C. McGettigan 54 1993
H. Tate Holt 47 1994
Timothy G. Clark 60 1994
Richard T. Sperberg 48 1982 (1)
S. Lynn Sutcliffe 56 1998
Richard L. Wright 56 1998
(1) Includes time of service with Onsite Energy, a California corporation and a
predecessor of the Company ("Onsite-Cal").
Background of Current Directors.
Charles C. McGettigan. Mr. McGettigan has been a director of the Company since
its inception in 1993, and began serving as the Chairman of the Board in
December 1994. In May 1992, Mr. McGettigan became a director of Western Energy
Management, Inc. ("WEM"), which currently is a wholly-owned subsidiary of the
Company as a result of the reorganization of Onsite-Cal and WEM into Onsite
Energy Corporation. He was a founding partner in 1991 and is a general partner
of Proactive Investment Managers, L.P., which is the general partner of
Proactive Partners, L.P., a merchant banking fund. Mr. McGettigan co-founded
McGettigan, Wick & Co., Inc., an investment banking firm, in 1988. From 1984 to
1988, he was a Principal, Corporate Finance, of Hambrecht & Quist, Inc. He
currently serves on the Boards of Directors of Modtech, Inc., PMR Corporation,
Sonex Research, Inc., Tanknology - NDE Corporation and Wray-Tech Instruments,
Inc. Mr. McGettigan is a graduate of Georgetown University, and received his
Master of Business Administration from The Wharton School of Business of the
University of Pennsylvania.
H. Tate Holt. Mr. Holt has been a director of the Company since May 1994. Mr.
Holt currently is the President and Chief Executive Officer of Newstar Ltd.
("Newstar"), a technology firm. Prior to joining Newstar, Mr. Holt served as the
President of Holt & Associates, a corporate growth management consulting firm,
and held that position from July 1990 through August 1999. Previously, from 1987
to 1990, Mr. Holt was Senior Vice President of Automatic Data Processing, Inc.
("ADP"), in Santa Clara, California. Mr. Holt has over twenty (20) years of
experience in various senior sales and marketing positions with Fortune 50 and
Inc. 500 companies, including IBM, Triad Systems and ADP. He has participated in
major restructuring and strategic planning in several divisions of each of these
companies. Additionally, in his position with Holt & Associates, Mr. Holt
assisted small and medium-sized clients in developing and achieving aggressive
growth targets. Mr. Holt currently serves on the Boards of Directors of DBS
Industries, Inc., and AremisSoft Corporation. He is the author of the book "The
Business Doc - Prescriptions for Growth." Mr. Holt holds an A.B. from Indiana
University.
<PAGE>3
Timothy G. Clark. Mr. Clark began serving as a director of the Company in
October 1994. The former President and Chief Executive Officer of KA Industries,
Inc., a privately-owned corporation that manufactures and sells premium gift
baked goods, Mr. Clark currently serves as a consultant to a variety of clients
through his own firm, T.G. Clark & Associates. From 1991 to 1994, Mr. Clark was
a managing partner at Hankin & Co., a consulting company focusing on business
and financial planning, including turnarounds. Mr. Clark holds an A.B. from the
University of Southern California and a Master of Business Administration from
the Harvard University Graduate School of Business.
Richard T. Sperberg. Mr. Sperberg has been a director and the Chief Executive
Officer of the Company since its inception, served as the Company's President
through October 1998, when Mr. Sutcliffe was elected President, and served as
the Company's Chief Financial Officer from May 1997 through July 1998. He has
been the Chief Executive Officer of WEM since January 1993, and began serving as
a director of WEM in February 1994. In 1982, Mr. Sperberg co-founded Onsite-Cal,
and served as President, Chief Executive Officer and a director until February
1994, when Onsite-Cal and WEM reorganized into Onsite Energy Corporation. Mr.
Sperberg has been involved in project management of energy efficiency, advanced
energy technologies, alternative energy and cogeneration projects for over 23
years, with specific management experience with Onsite-Cal, the Gas Research
Institute ("GRI"), and the U.S. Department of Energy. He holds a Masters of
Science in Nuclear Engineering from the University of California, Los Angeles,
and a Bachelor of Science in Nuclear Engineering from the University of
California, Santa Barbara. Mr. Sperberg previously served on the Boards of
Directors of the American Cogeneration Association and the San Diego
Cogeneration Association, and currently serves as the President of the National
Association of Energy Service Companies (NAESCO), and as a member of its Board
of Directors.
S. Lynn Sutcliffe. In addition to serving as a director since 1998, Mr.
Sutcliffe currently serves as the President of the Company. Since 1990, Mr.
Sutcliffe also has served as the President and Chief Executive Officer of SYCOM
Corporation, which is the general partner of SYCOM LP. From 1968 through 1977,
Mr. Sutcliffe was General Counsel of the U.S. Senate Commerce Committee, which
had jurisdiction over all electric and gas utility issues. Mr. Sutcliffe left
the Commerce Committee to become one of the founding partners of Van Ness,
Feldman, Sutcliffe & Curtis, P.C., a law firm nationally recognized for its
expertise in energy law and policy. Mr. Sutcliffe participated in this law firm
until 1990. Mr. Sutcliffe's expertise includes a wide range of legislative,
regulatory, contractual, financial and developmental issues associated with the
energy industry. From 1994 through 1996, Mr. Sutcliffe served as the President
of the National Association of Energy Services Companies (NAESCO), and was a
member of the Energy and Transportation Task Force of the President's Council on
Sustainability in 1996. He currently serves as the Vice-Chairman of the
Distributed Power Coalition of America (DPCA). Mr. Sutcliffe brings to the
Company's Board over 24 years of experience in the energy services industry. He
holds an A.B. from Princeton University, and a Juris Doctorate from the
University of Washington.
Richard L. Wright. Mr. Wright has served as a director of the Company since
1998, and served as the Treasurer of SYCOM Corporation and SYCOM LP from 1995
through June 1999, during which time he performed project development and
strategic planning functions at the executive level. Mr. Wright has over 11
years of experience in developing and financing energy related companies and
projects. He has extensive knowledge of the federal and state legislative
processes as well as of the decision-making processes at the county and
municipal level. In 1977, Mr. Wright served on the White House Energy Task Force
and later as the Assistant Secretary at the Department of Energy. Prior to
joining the SYCOM entities, Mr. Wright served as the Chief of Staff of the
former Governor of New Jersey from 1993 through 1994, and as the Associate
Treasurer of the State of New Jersey from 1990 through 1993. Mr. Wright earned a
Bachelor of Arts in Religion from Princeton University, and a Juris Doctorate
from the University of California Boalt Hall School of Law.
Executive Officers. The following table sets forth certain information with
respect to the current executive officers of the Company.
<PAGE>4
Name Positions with the Company Age Office Held Since
- --------------------- -------------------------- --- -----------------
Charles C. McGettigan Chairman of the Board 54 1994
Richard T. Sperberg Chief Executive Officer 48 1982 (1)
S. Lynn Sutcliffe President 56 1998
J. Bradford Hanson Chief Financial Officer 44 1995 (2)
Frank J. Mazanec Senior Vice President 51 1992 (1)
Keith G. Davidson Senior Vice President 48 1994
Hector A. Esquer Vice President 41 1991 (1)
J. Derek Shockley Vice President 39 1997
Elizabeth T. Lowe Vice President 36 1997
Bruce A. Hedman Vice President 48 1998
Dominick J. Aiello Vice President 40 1998
Roger Dower Vice President 49 1998
Christian J. Bitters Vice President 42 1998
Russell Wm. Royal President/Chief 47 1992 (4)
Operating Officer-
Lighting Technology
Services, Inc. (3)
Audrey Nelson Stubenberg Secretary/General 36 1998
Counsel
(1) Includes time of service with Onsite-Cal.
(2) Mr. Hanson served as Chief Financial Officer of the Company from August
1995 through May 1997, rejoining the Company in October 1998.
(3) Lighting Technology Services, Inc. ("LTS"), is a wholly-owned subsidiary
of the Company. As previously disclosed, the Company is exploring the
sale or disposition of LTS.
(4) Includes time of service with LTS.
Executive officers are elected periodically (usually annually) by the Board of
Directors and serve at the pleasure of the Board. No family relationship exists
between any of the officers or directors.
Background of Executive Officers. For the business backgrounds of Messrs.
McGettigan, Sperberg and Sutcliffe, see Background of Current Directors above.
J. Bradford Hanson. Mr. Hanson has over 15 years of financial accounting,
administration and shareholder relations experience in the energy efficiency
services, financial, manufacturing, software development and retail market
sectors. Mr. Hanson, who has served as the Company's Chief Financial Officer
since October 1998, also served as the Company's Chief Financial Officer from
August 1995 through May 1997. From May 1997 through October 1998, Mr. Hanson
worked for Sports Group International, Inc., and as an independent financial and
<PAGE>5
accounting consultant. From 1991 through mid-1995, Mr. Hanson worked as an
independent financial and accounting consultant for small businesses. Prior to
1991, he held various Chief Financial Officer, Controller and Senior Auditing
positions with companies such as DAROX Company, BSD Bancorp, Inc., International
Totalizator Systems, Inc., and KPMG Peat Marwick. Mr. Hanson earned a Bachelor
of Science from San Diego State University and is a Certified Public Accountant.
Frank J. Mazanec. Since 1992, Mr. Mazanec has been employed by the Company and
its predecessor, Onsite-Cal. Mr. Mazanec is a licensed professional engineer in
Colorado, and currently serves as Senior Vice President of Onsite. Over the past
20 years, he has developed and managed over $100,000,000 in energy generation,
waste management and environmental projects. Prior to joining Onsite-Cal in
1992, Mr. Mazanec served as West Coast Regional Director for Wheelabrator
Technologies, which included responsibility for the Spokane and Pierce County,
Washington and Baltimore, Maryland, Waste-to-Energy facilities. In 1990, he
formed Integrated Waste Management, Inc., through which he served as a
consultant to Onsite-Cal until joining Onsite-Cal in 1992. Mr. Mazanec is
responsible for managing one of the Company's internal business units. Mr.
Mazanec has a Bachelor of Science in Civil Engineering from the University of
Vermont, a Bachelor of Science in Economics and Finance from Fairleigh Dickinson
University, and a Master of Business Administration from the University of
Southern California.
Keith G. Davidson. Mr. Davidson has been a Vice President of the Company since
1994, and currently serves as Senior Vice President. Mr. Davidson has over 20
years of diversified management experience in energy and environmental
technology, product commercialization and market development. Mr. Davidson is
responsible for one of the Company's internal business units. Prior to joining
the Company in 1994, Mr. Davidson was a Director at GRI (the Gas Research
Institute) in Chicago, Illinois, where he led the gas industry's collaborative
development programs directed at natural gas growth markets of electric power
generation, cogeneration and natural gas vehicles. Mr. Davidson was past
President of the American Cogeneration Association, and a member of the American
Society of Heating, Refrigerating and Air Conditioning Engineers, and previously
served as the co-Chairman of CADER. He is the recipient of several industry
honors, including the Association of Energy Engineers' Cogeneration Professional
of the Year and the American Gas Association's Industrial and Commercial Hall of
Flame. Mr. Davidson earned a Bachelor of Science in Mechanical Engineering from
the University of Missouri and a Master of Science in Mechanical Engineering
from Stanford University.
Hector A. Esquer. Mr. Esquer is a professional engineer licensed in the states
of California and Kansas. Mr. Esquer joined Onsite-Cal in 1986, and as Vice
President is responsible for the overall management of project implementation
for the Company's West Coast operations. Over the past 12 years, Mr. Esquer has
managed the implementation of over $30,000,000 of energy efficiency projects for
the Company. Mr. Esquer previously was a Project Engineer for San Diego Gas &
Electric Company and Fluor Corporation. He holds a Bachelor of Science in
Electrical Engineering from San Diego State University and is a Certified Energy
Manager.
J. Derek Shockley. Mr. Shockley is responsible for managing OES and OMS, direct
and indirect wholly-owned subsidiaries of the Company. These subsidiary
companies provide medium and high voltage electrical services, as well as
industrial water treatment services to municipal, industrial, large commercial
and institutional customers. Mr. Shockley has over 13 years of diversified
experience in the energy industry that includes planning, sales, marketing, and
project development work in the areas of demand side management,
electrotechnologies and applied research. He was a member of the Water &
Wastewater Research Project steering committee for the Electric Power Research
Institute ("EPRI") in Palo Alto, California, and a past member of the Kansas
Energy & Natural Resources advisory committee. Mr. Shockley is the recipient of
several national awards, including the EEI Common Goals Environmental Award, and
the EPRI Technology Innovators Award. Prior to joining the Company, Mr. Shockley
held a number of positions with Western Resources, including Director of
Business Development, Manager of National and Institutional Accounts, and an
energy use consultant. Mr. Shockley holds a Bachelor of Arts in Business
Administration (with an emphasis on Finance) from Washburn University.
<PAGE>6
Elizabeth T. Lowe. As Vice President, Ms. Lowe heads up the Company's Northern
California office. She is responsible for marketing, operations and regulatory
representation in Northern California. Ms. Lowe also adds to the Company's
consulting capabilities in the areas of natural gas and electricity purchases
and overall customer strategies to reduce energy costs. Ms. Lowe joined the
Company in 1997. Prior to joining the Company, Ms. Lowe served as Vice President
of Western Operations for DukeSolutions, Inc. (formerly Duke/Louis Dreyfus),
heading up the Western region operations for this Duke Energy subsidiary. The
Western region group worked with retail and wholesale customers to develop and
implement overall energy purchasing strategies through negotiations training,
strategic alliances, and engineering and pricing solutions. Prior to joining
DukeSolutions, Ms. Lowe spent 10 years in energy and environmental consulting,
and most recently developed and directed Barakat & Chamberlin's Corporate Energy
Management practice. In this capacity, she assisted large energy consumers in
the development of energy cost reduction strategies through procurement and
management of fuels, tariff and contract negotiations, aggregation strategies
and demand-side management planning. Ms. Lowe earned a Master of Environment
Management in Resource Economics and Policy from Duke University's Nicholas
School of Environment and a Bachelor of Arts in Public Policy Studies from Duke
University's School of Policy Studies and Public Affairs. Ms. Lowe is an
associate member of the California Manufacturers Association and the California
League of Food Processors, and is the President of the Power Association of
Northern California.
Dr. Bruce A. Hedman. Dr. Hedman joined the Company in 1998, as Vice President,
Consulting Services, and together with Mr. Davidson is responsible for the
Company's consulting services business. Dr. Hedman has over 20 years of
experience in energy and environmental technology development, new product
commercialization, and market research and development. Before joining the
Company, Dr. Hedman was Executive Director of the Industrial Center Inc. in
Arlington, Virginia, a natural gas industry technology transfer and market
development organization that supports commercial introduction of new natural
gas technologies in the industrial market. Prior to this, he was Senior Program
Manager at Battelle Pacific Northwest Laboratory's Washington, D.C. offices,
providing strategic planning and policy analysis support on natural gas issues
and end-use research, development and commercialization. Dr. Hedman started his
career at GRI in Chicago, holding a variety of research management positions in
power generation, alternative fueled vehicles and industrial end-use. When he
left GRI in 1994, Dr. Hedman was Group Manager, Industrial and Power Generation
Products and responsible for the development and commercialization of new
natural gas technologies for these priority markets. Dr. Hedman has a Bachelor
of Science, Master of Science and Ph.D. in Mechanical Engineering from Drexel
University in Philadelphia, Pennsylvania.
Dominick J. Aiello. Mr. Aiello, an employee of SYCOM Corporation, currently
serves as the Company's Vice President, and is directly responsible for
overseeing the Company's Project Development efforts primarily in the Eastern
U.S. Mr. Aiello has more than seven years experience in developing energy
efficiency projects in both the public and private sectors. He is responsible
for managing a national sales force of eight project developers. Mr. Aiello also
has been a key contributor in implementing a sales training curriculum for both
the current sales team and new hires. Prior to joining SYCOM Corporation, Mr.
Aiello served as a Sales Manager for IBM.
Roger Dower. Mr. Dower, the Company's Vice President, manages the Company's
Washington, D.C. business unit, where he oversees the development activity for
trade associations and federal projects as well as regional development. Mr.
Dower, an employee of SYCOM Corporation, also provides legislative and
regulatory support for the Company and the energy service industry's energy and
environmental agenda. Mr. Dower is an expert in energy and environmental
economics, policy, regulation and legislation. Prior to joining SYCOM
Corporation and the Company, Mr. Dower was Director of the Climate, Energy and
Pollution Program at the World Resources Institute from 1990 to 1996. Prior to
that, Mr. Dower was the head of the Energy and Environment Unit at the
<PAGE>7
Congressional Budget Office from 1985 to 1990. Mr. Dower has also served as a
consultant to the Executive Office of the President of the United States from
1979 to 1980 and was the Research Director and a Board Member of the
Environmental Law Institute from 1976 to 1985. With over 18 years of experience
in the energy business, Mr. Dower has an in- depth understanding of energy
markets, the role of energy efficiency and the environmental effects of energy.
Mr. Dower received a Masters of Science and Bachelor of Science in Resource
Economics from the University of Maryland.
Christian J. Bitters. Mr. Bitters serves as Vice President of Operations for the
Company. In this capacity, Mr. Bitters, an employee of SYCOM Corporation,
oversees the project management and engineering teams responsible for
implementation of all of the Company's projects primarily in the Eastern U.S.,
and has over eight years of experience in managing the implementation of energy
efficiency projects in commercial, industrial, governmental and institutional
facilities. Mr. Bitters is responsible for recruiting and training new team
members and developed a sophisticated Project Management Manual that defines the
roles, responsibilities, methods, procedures and specifications for implementing
the Company's projects. Mr. Bitters' experience includes project management of
commercial office space and recruiting, training and managing project managers
and engineers. Prior to joining SYCOM Corporation, he served as a Senior Project
Manager for OMNI Construction, Inc., in Washington, D.C. for 10 years, where he
managed construction and renovation projects with a total value of $205,000,000.
Mr. Bitters holds a Master of Science and Bachelor of Science in Civil
Engineering from the University of Maryland.
Russell Wm. Royal. Mr. Royal serves as the President and Chief Operating Officer
of LTS, a Southern California lighting contractor acquired by the Company in
June 1998. Mr. Royal has 20 years experience in all phases of building
automation, lighting retrofit and lighting controls. His specific project
experience includes numerous high-rise office building retrofit and control
projects through-out California, district-wide multi-facility lighting retrofit
and lighting controls projects for the Santa Ana Unified School District and
several comprehensive campus wide lighting retrofit and lighting controls
projects at several California community colleges and school districts. Mr.
Royal has a Bachelor of Science in Psychology from California State University,
San Bernardino.
Audrey Nelson Stubenberg, Esq. Ms. Nelson Stubenberg has over 10 years
experience as a practicing transactional attorney and currently serves as the
Company's Secretary and General Counsel. She joined the Company in 1994. Prior
to joining the Company, Ms. Nelson Stubenberg was an associate with the San
Diego law firm of Procopio, Cory, Hargreaves and Savitch, a business and
commercial transactions firm. A member of the California State Bar and the
American Bar Association, Ms. Nelson Stubenberg earned a Bachelor of Arts from
the University of Redlands and a Juris Doctorate from the University of San
Diego School of Law.
Compliance with Section 16(a) of the Securities Exchange Act of 1934. Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company
directors, executive officers and persons who own more than 10 percent of the
Company's Class A Common Stock to file reports of ownership and changes in
ownership with the SEC. Directors, officers and stockholders of more than 10
percent of the Company's Class A Common Stock are required by the SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to the Company, or
written representations that such filings were not required, the Company
believes that since July 1, 1998, through the end of the 1999 fiscal year, all
Section 16(a) filing requirements applicable to its directors, officers and
stockholders of more than 10 percent of the Company's Class A Common Stock were
complied with except as follows: (i) one report (Form 3) covering one
transaction inadvertently was filed late by Mr. Aiello; (ii) one report (Form 3)
covering one transaction inadvertently was filed late by Mr. Dower; (iii) one
report (Form 3) covering one transaction inadvertently was filed late by Mr.
Bitters; (iv) two reports (Form 4 and Form 5) covering two transactions
<PAGE>8
inadvertently were filed late by Mr. McGettigan; (v) one report (Form 4)
covering one transaction inadvertently was filed late by Mr. Esquer; and (vi)
one report (Form 5) covering one transaction inadvertently was filed late by Mr.
Mazanec. Additionally, the Company has not received copies of a Form 5 from two
(2) former officers of the Company.
Item 10. Executive Compensation.
The following table sets forth the aggregate cash compensation paid for the past
three fiscal years by the Company and its predecessors for services of Mr.
Sperberg (Chief Executive Officer), and the four most highly compensated
executive officers whose compensation exceeds $100,000 per year: Messrs.
Sutcliffe (President), Mazanec (Senior Vice President), Davidson (Senior Vice
President) and Aiello (Vice President).
[Remainder of page intentionally left blank]
<PAGE>9
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Fiscal Salary Bonus Compensation Awards(s) Options Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ------ ------ ----- ------------ ---------- ---------- ------- ------------
Richard T. Sperberg 1999 $175,000 $ -0- $12,372 (4) -0- -0- -0- $ -0-
CEO 1998 $149,125 (2) $32,500 $17,889 (4) -0- 126,954 (7) -0- $ -0-
1997 $136,000 $ -0- $15,781 (4) -0- 314,616 (8) -0- $ -0-
S. Lynn Sutcliffe (1) 1999 $278,486 $ -0- $6,600 (4) -0- -0- -0- $ -0-
President
Frank J. Mazanec 1999 $140,000 $40,000 $8,909 (4) -0- -0- -0- $ -0-
Senior Vice 1998 $137,154 (2) $22,083 $10,923 (4) (5) -0- 75,000 (9) -0- $ -0-
President 1997 $127,000 $ -0- $64,471 (4) (5) -0- 268,352 (10) -0- $ -0-
Keith G. Davidson 1999 $140,000 $40,000 $8,385 (4) -0- -0- -0- $ -0-
Senior Vice 1998 $121,342 (2) $23,333 $7,702 (4) (5) -0- 140,000 (11) -0- $ -0-
President 1997 $102,000 $ -0- $20,838 (4) (5) -0- 119,118 (12) -0- $ -0-
Dominick J. Aiello (1)1999 $120,000 $36,000 (3) $65,741 (4) (6) -0- 164,281 (13) -0- $ -0-
Vice President
</TABLE>
(1) Messrs. Sutcliffe and Aiello are executive officers of the Company but
employees of SYCOM Corporation. In connection with the acquisition of
the assets of SYCOM, LLC, and as an integral part of the transactions
contemplated by the underlying asset purchase and sale agreement,
pursuant to a Sale and Noncompetition Agreement the Company acquired the
right to the services and expertise of all of the employees of SYCOM
Corporation, including Messrs. Sutcliffe and Aiello. In accordance with
the terms and conditions of the Sale and Noncompetition Agreement, the
Company reimburses SYCOM Corporation for the costs of the SYCOM
Corporation employees at their current salary and fringe benefit levels
(including reasonable general and administrative costs). Because Messrs.
Sutcliffe and Aiello became officers of the Company in fiscal year 1999,
information for Messrs. Sutcliffe and Aiello is being reported for
fiscal year 1999 only.
(2) In fiscal year 1997, certain executive officers agreed to defer certain
portions of their base salary and other compensation from approximately
December 1, 1996 through June 30, 1997. This deferred compensation was
repaid on December 31, 1997, with simple interest at the rate of 15
percent per annum.
(3) Mr. Aiello was entitled to a management bonus of $72,000, and he agreed
to accept payment of one-half of this bonus, plus certain commissions as
disclosed in footnote (6) below, in the form of a five year option to
purchase 164,281 shares of the Company's Class A Common Stock at $0.4185
per share, which options are fully vested.
(4) Includes a company car or car expense allowance and premiums for
life insurance.
<PAGE>10
(5) Includes commissions paid or advanced in connection with negotiated
customer contracts pursuant to the commission policy of the Company.
(6) Pursuant to the commission policy of SYCOM Corporation, Mr. Aiello was
entitled to certain commissions payable in cash, and he agreed to accept
payment of one-half of these commissions, plus certain bonuses as disclosed
in footnote (3) above, in the form of a five year option to purchase
164,281 shares of the Company's Class A Common Stock at $0.4185 per share,
which options are fully vested.
(7) Includes a five year option to purchase 126,954 shares of Class A Common
Stock at $0.704 per share granted on April 1, 1998, subject to vesting as
follows: 42,318 shares vested on April 1, 1999, and 42,318 shares will vest
on April 1 in each of fiscal year 2000 and 2001.
(8) Includes (i) a five year option to purchase 250,000 shares of Class A
Common Stock at $0.3251 per share granted on March 13, 1997, subject to
vesting as follows: 83,334 shares vested on each of March 13, 1998, and
March 13, 1999; and 83,333 shares vest on March 13, 2000; and (ii) a 10
year option to purchase 64,616 shares of Class A Common Stock at $0.2956
per share, as repriced on March 13, 1997 (which options are fully vested).
Mr. Sperberg previously reported five year options to purchase (i) 38,100
shares of Class A Common Stock at $0.2956 per share, as repriced on March
13, 1997, which options were exercised in January 1998; and (ii) 4,000
shares of Class A Common Stock at $0.2956 per share, as repriced on March
13, 1997, which options were exercised in February 1999.
(9) Includes a five year option to purchase 75,000 shares of Class A Common
Stock at $0.64 per share granted on April 1, 1998, subject to vesting as
follows: 25,000 shares vested on April 1, 1999; and 25,000 shares vest on
April 1 in each of fiscal year 2000 and 2001.
(10) Includes (i) a 10 year option to purchase 250,000 shares of Class A Common
Stock at $0.2956 per share granted on March 13, 1997, subject to vesting as
follows: 83,334 shares vested on each of March 13, 1998 and 1999; and
83,333 shares vest on March 13, 2000; and (ii) a 10 year option to purchase
18,352 of Class A Common Stock at $0.2956 per share, as repriced on March
13, 1997 (which options are fully vested). Mr. Mazanec previously reported
five year options to purchase (i) 9,300 shares of Class A Common Stock at
$0.2956 per share, as repriced on March 13, 1997, which options were
exercised in December 1997 (500) and January 1998 (8,800); and (ii) 4,000
shares of Class A Common Stock at $0.2956 per share, as repriced on March
13, 1997, which options were exercised in February 1999.
(11) Includes 10 year options to purchase (i) 40,000 shares of Class A Common
Stock at $0.53 per share granted on October 27, 1997, subject to vesting as
follows: 13,334 shares vested on each of October 27, 1998 and 1999; and
13,333 shares vest on October 27, 2000; and (ii) 100,000 shares of Class A
Common Stock at $0.64 per share granted on April 1, 1998, subject to
vesting as follows: 33,334 shares vested on April 1, 1999; and 33,333
shares vest on April 1 in each of fiscal year 2000 and 2001.
(12) Includes 10 year options to purchase (i) 100,000 shares of Class A Common
Stock at $0.2956 per share granted on March 13, 1997, subject to vesting as
follows: 33,334 shares vested on each of March 13, 1998 and 1999; and
33,333 shares vest on March 13, 2000; and (ii) 19,118 shares of Class A
Common Stock at $0.2956 per share granted on May 22, 1996, as repriced on
March 13, 1997 (which options are fully vested).
(13) As disclosed in footnotes (3) and (6) above, includes a five year option to
purchase 164,281 shares of Class A Common Stock at $0.4185 per share
granted on May 26, 1999, which options are fully vested.
<PAGE>11
The following table sets forth options granted by the Company to the individuals
listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<S> <C> <C> <C> <C> <C>
Number of Percentage
Securities of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or Market
Granted Employees Base Price Price on Date Expiration Date
Name (#) In Fiscal Year ($/Share) of Grant
- ------------------- ------------ -------------- ----------- ------------- ---------------
Richard T. Sperberg -0- N/A N/A N/A N/A
S. Lynn Sutcliffe -0- N/A N/A N/A N/A
Frank J. Mazanec -0- N/A N/A N/A N/A
Keith G. Davidson -0- N/A N/A N/A N/A
Dominick J. Aiello 164,281 12.7 (1) $0.4185 $0.4185 5/26/04
</TABLE>
(1) Mr. Aiello's options are non-plan options, and were not granted under
the Company's 1993 Stock Option Plan. This percentage is calculated
based upon the total number of options granted to employees of both the
Company under the 1993 Stock Option Plan and SYCOM Corporation as
non-plan options.
[Remainder of page intentionally left blank]
<PAGE>12
<TABLE>
<CAPTION>
Aggregated Option/SARs Exercises in Last Fiscal Year and
FISCAL YEAR-END OPTION/SARS VALUES
<S> <C> <C> <C> <C>
Number of Value of
Securities Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs at FY Options
On Value End (#) at FY End
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable*
------------------- -------- -------- --------------------- --------------
Richard T. Sperberg 4,000 $1,568 584,190/167,969 $16,242/$1,650
S. Lynn Sutcliffe -0- $ -0- -0-/ -0- $ -0-/$ -0-
Frank J. Mazanec 4,000 $2,193 264,571/133,333 $9,140/$4,117
Keith G. Davidson -0- $ -0- 250,932/126,665 $10,888/$1,647
Dominick J. Aiello -0- $ -0- 164,281/ -0- $ -0-/$ -0-
</TABLE>
*Based upon the average price of $0.345 as of June 30, 1999.
Directors' Compensation. Prior to June 1, 1998, directors who are not employees
of the Company were not compensated, other than the grant of stock options, for
their service on the Board of Directors. Beginning June 1, however, non-employee
directors are paid a fixed fee for personal attendance at a Board meeting
($1,000 per meeting), or for attendance at a meeting via telephone ($750).
Additionally, non-employee directors' out-of-pocket expenditures currently are
reimbursed. Non-employee directors also receive periodic grants of stock options
issued under the Company's 1993 Stock Option Plan. Each non-employee director
automatically is granted an option to purchase 25,000 shares of Class A Common
Stock on the date he or she becomes a director of the Company, and on each
anniversary date thereafter. The exercise price is the fair market value of the
Company's Class A Common Stock on the date of becoming a director and on the
anniversary date, as appropriate. Each option when granted is immediately
exercisable and has a five year term. Directors who also are officers of the
Company do not receive additional compensation for serving as directors.
Employment Agreements with Executive Officers. In June 1998, when the Company
acquired LTS, Mr. Royal executed an Employment Agreement with the Company and
LTS (together referred to in the Employment Agreement as the "Company") pursuant
to which the Company secured the services of Mr. Royal on an exclusive basis
(upon the terms and conditions set forth in the Employment Agreement) until
March 31, 2000 (unless terminated earlier in accordance with the Employment
Agreement) at a base salary of $125,000 per year, subject to increases as
determined by the Company's Board of Directors based upon a number of factors.
Mr. Royal also receives a monthly car allowance, and is entitled to participate
in employee benefit and fringe benefits plans that LTS makes available generally
to its employees. Mr. Royal also is entitled to certain bonus and/or severance
payments. Under the terms of the Employment Agreement, Mr. Royal is prohibited
from engaging in any activity competitive with the Company during the term of
the Employment Agreement. As previously disclosed, the Company is exploring the
sale or disposition of LTS.
<PAGE>13
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information about the ownership of the
Company's Class A Common Stock as of October 26, 1999, by (i) those persons
known by the Company to be the beneficial owners of more than 5 percent of the
total number of outstanding shares of any class entitled to vote; (ii) each
director and highly compensated officer; and (iii) all directors and officers of
the Company as a group. The table includes Class A Common Stock issuable upon
the exercise of Options or Warrants that are exercisable within 60 days. Except
as indicated in the footnotes to the table, the named persons have sole voting
and investment power with respect to all shares of the Company Class A Common
Stock shown as beneficially owned by them, subject to community property laws
where applicable. The ownership figures in the table are based on the books and
records of the Company.
Class A Common Stock
Name and Address Amount of
of Beneficial Owner Ownership Percent of Class
- ----------------------------------- ----------- ----------------
Dominick J. Aiello
27 Worlds Fair Drive, First Floor 164,281 (1) *
Somerset, NJ 08873
Timothy G. Clark
701 Palomar Airport Road, Suite 200 175,000 (2) *
Carlsbad, CA 92009
Keith G. Davidson
701 Palomar Airport Road, Suite 200 298,295 (3) 1.58
Carlsbad, CA 92009
William M. Gary III
701 Palomar Airport Road, Suite 200 1,837,947 (4) 9.85
Carlsbad, CA 92009
Gruber & McBaine Capital Management., LLC
50 Osgood Place 4,502,073 (5) 20.45
San Francisco, CA 94133
Jon D. Gruber
50 Osgood Place 9,675,041 (6) 38.13
San Francisco, CA 94133
H. Tate Holt
701 Palomar Airport Road, Suite 200 348,082 (7) 1.85
Carlsbad, CA 92009
Lagunitas Partners, L.P.
50 Osgood Place
San Francisco, CA 94133 4,233,102 (8) 19.28
<PAGE>14
Thomas Lloyd-Butler
50 Osgood Place 4,510,073 (9) 20.05
San Francisco, CA 94133
Frank J. Mazanec
Mazanec Family Trust 728,709 (10) 3.85
701 Palomar Airport Road, Suite 200
Carlsbad, CA 92009
J. Patterson McBaine
50 Osgood Place 9,668,441 (11) 38.10
San Francisco, CA 94133
Charles C. McGettigan
50 Osgood Place 5,554,468 (12) 24.97
San Francisco, CA 94133
Proactive Investment Managers, L.P.
50 Osgood Place 5,049,468 (13) 22.95
San Francisco, CA 94133
Proactive Partners, L.P.
50 Osgood Place 4,909,633 (14) 22.40
San Francisco, CA 94133
Richard T. Sperberg
701 Palomar Airport Road, Suite 200 3,115,082 (15) 15.93
Carlsbad, CA 92009
S. Lynn Sutcliffe
27 Worlds Fair Drive, First Floor 1,750,000 (16) 9.39
Somerset, NJ 08873
SYCOM Enterprises, LLC
27 Worlds Fair Drive, First Floor 1,750,000 (17) 9.39
Somerset, NJ 08873
Westar Capital, Inc.
818 South Kansas Street 7,745,600 (18) 35.39
Topeka, KS 66601
Myron A. Wick III
50 Osgood Place 5,049,468 (19) 22.95
San Francisco, CA 94133
All Directors and Officers as a Group(17) 13,098,266 (20) 52.54
(1) Includes Options to purchase 164,281 shares of Class A Common Stock
exercisable until May 26, 2004. Additionally, in August 1999 in connection
with the private placement of shares of Series E Convertible Preferred
Stock to certain existing shareholders of the Company, certain executive
officers of the Company, including Mr. Aiello, entered into Salary
Reduction Agreements pursuant to which they agreed to reductions in salary
and/or commissions owed (for a six month period from August 1999 through
January 2000) in exchange for shares of Class A Common Stock and certain
Warrants. Under the terms of the Salary Reduction Agreements, the shares of
Class A Common Stock and Warrants are subject to forfeiture in the event
the officer voluntarily terminates his or her employment during the
six-month reduction period. In the event of involuntary termination by the
Company, however, the officer is entitled to a prorata portion of such
stock and Warrants (as earned through the date of termination).
<PAGE>15
Thus the table does not reflect all or any prorata portion of 50,000
shares of Class A Common Stock and 25,000 shares of Class A Common
Stock underlying Warrants expiring August 13, 2009, that Mr. Aiello
will be entitled to (immediately or upon the exercise of the Warrants)
under the terms of his Salary Reduction Agreement.
Each of the Salary Reduction Agreements entered into by certain
executive officers of the Company, as described above, hereinafter
in these footnotes shall be referred to as the "Salary Reduction
Agreement."
(2) Includes Options to purchase 50,000, 25,000, 25,000, 25,000, 25,000
and 25,000 shares of Class A Common Stock exercisable until January
25, 2001, October 3, 2001, April 23, 2002, October 3, 2002, October 3,
2003, and October 3, 2004, respectively.
(3) In addition to 34,030 shares of Class A Common Stock over which Mr.
Davidson has sole voting and investment power (which number includes
30,600 shares held by Mr. Davidson's minor children), the table
reflects 264,265 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Options expiring August 9,
2005 (70,000 shares), November 20, 2005 (37,072 shares), January 25,
2006 (11,407 shares), May 22, 2006 (19,118 shares), March 13, 2007
(66,667 shares), October 28, 2007 (26,667) and April 1, 2008 (33,334).
The table does not reflect 33,333 shares of Class A Common Stock that
may be acquired upon the exercise of Options expiring March 13, 2007,
in the event a change in control is deemed to have occurred. In this
event, Mr. Davidson's percent of class ownership would be 1.75
percent.
Additionally, as previously disclosed, in August 1999 certain executive
officers of the Company, including Mr. Davidson, entered into a Salary
Reduction Agreement. Thus the table does not reflect all or any
prorata portion of 90,000 shares of Class A Common Stock and 50,000
shares of Class A Common Stock underlying Warrants expiring August 13,
2009, that Mr. Davidson will be entitled to (immediately or upon the
exercise of the Warrants) under the terms of his Salary Reduction
Agreement.
(4) The table reflects an aggregate of 1,545,926 shares of Class A Common
Stock (which number includes 130,000 shares held by Mr. Gary's minor
children and family members) (i) of which 1,159,016 shares are subject
to a Stockholders Agreement among certain stockholders of the Company,
including Mr. Gary, and Westar Capital (the "Stockholders Agreement");
and (ii) all of which shares are subject to a Voting Agreement among
certain stockholders of the Company, including Mr. Gary, SYCOM, LLC
and SYCOM Corporation (the "Voting Agreement"). Under the Stockholders
Agreement, Westar Capital (i) has the right to nominate a certain
number of directors, and the principal stockholders of the Company
that are a party to the Stockholders Agreement, including Mr. Gary,
have agreed to vote for Westar Capital's nominees; and (ii) shall vote
for the remaining nominees selected by the Nominating Committee of the
Company. The Stockholders Agreement terminates the earlier of (i) five
years after the date of the Agreement; or (ii) the date upon which the
stockholdings of Westar Capital and its affiliates, counted on an
as-converted basis, falls below 10 percent of the outstanding Common
Stock of the Company, calculated on a fully-diluted basis as specified
in the Stockholders Agreement.
Under the Voting Agreement (i)SYCOM, LLC and SYCOM Corporation have
the right to nominate a certain number of directors, and the principal
stockholders of the Company that are a party to the Voting Agreement,
including Mr. Gary, have agreed to vote for such nominees; (ii) SYCOM,
LLC and SYCOM Corporation have agreed to vote for the remaining
director nominees selected by the Company; and (iii) all parties to
the Voting Agreement, including Mr. Gary, have agreed to vote at the
next annual meeting to authorize the issuance of additional common
stock to permit the conversion of the Series D Convertible Preferred
Stock to Class A Common Stock in accordance with the terms of the Sale
and Noncompetition Agreement among the Company, SYCOM Corporation and
others. The Voting Agreement terminates June 30, 2001.
Additionally the table reflects 292,021 shares of Class A Common Stock
that are subject to an Agreement of Stock Purchase and Sale among
Messrs. Gary, Esquer, Mazanec and Sperberg. Messrs. Gary, Esquer and
Sperberg have entered into such Agreement whereby they have sold,
subject to payment and vesting schedules, shares of Onsite-Cal to
Messrs. Esquer and Mazanec. Until a share is paid for all voting and
dispositive rights remain with the seller. Upon vesting and payment,
each such purchaser of the Onsite-Cal shares became entitled to the
same number of the Company Class A Common Stock received by the
sellers, pursuant to the Reorganization, with respect to the shares
sold. The table reflects all adjustments for shares that have vested
and been paid for in full.
(5) Gruber & McBaine Capital Management, LLC ("Gruber & McBaine"), the
successor-in-interest to Gruber & McBaine Capital Management, Inc., a
California corporation, is an investment advisor and a general partner
of Lagunitas Partners, L.P. Consequently, Gruber & McBaine has or
shares voting or dispositive power over 3,377,073 shares of Class A
Common Stock (which number includes 2,250,000 shares of Class A Common
Stock underlying 22,500 shares of Series E Convertible Preferred
Stock) and 1,125,000 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Warrants expiring August 2,
2009. See also footnote (8).
<PAGE>16
(6) Mr. Gruber is a member of Gruber & McBaine Capital Management, LLC,
which is an investment advisor and a general partner of Lagunitas
Partners, L.P., and is a general partner of Proactive Investment
Managers, L.P., which also is an investment advisor and general
partner of Proactive Partners, L.P., and Fremont Proactive Partners,
L.P. Consequently, in addition to 123,500 shares of Class A Common
Stock over which Mr. Gruber has sole voting and investment power
(which number includes shares held by Mr. Gruber's family members and
foundations), Mr. Gruber also has or shares voting or dispositive
power over 7,066,541 shares of Class A Common Stock (which number
includes 4,250,000 shares of Class A Common Stock underlying 42,500
shares of Series E Convertible Preferred Stock) and 2,485,000 shares
of Class A Common Stock that may be immediately acquired upon the
exercise of Warrants expiring September 11, 2002, June 30, 2003, and
August 2, 2009. See also footnotes (8) and (14).
(7) Includes 175,000 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Options expiring January 25,
2001 (50,000 shares), May 4, 2001 (25,000 shares), April 23, 2002
(25,000 shares), May 4, 2002 (25,000 shares), May 4, 2003 (25,000
shares), and May 4, 2004 (25,000). Additionally the table reflects
30,000 shares held by Mr. Holt's children. The table also reflects
143,082 shares of Class A Common Stock that are subject to the Voting
Agreement among certain stockholders of the Company, including Mr.
Holt as the President of Holt & Associates, SYCOM, LLC and SYCOM
Corporation.
(8) Includes 2,250,000 shares of Class A Common Stock underlying 22,500
shares of Series E Convertible Preferred Stock and 1,125,000 shares of
Class A Common Stock that may be immediately acquired upon the
exercise of Warrants expiring August 2, 2009, and over which Lagunitas
Partners, L.P. ("Lagunitas") has sole voting and investment power. The
table also reflects an aggregate of 858,102 shares of Class A Common
Stock (i) of which 550,982 shares are subject to the Stockholders
Agreement among certain stockholders of the Company, including
Lagunitas, and Westar Capital; and (ii) all of which shares are
subject to the Voting Agreement among certain stockholders of the
Company, including Lagunitas, SYCOM, LLC and SYCOM Corporation.
(9) Mr. Lloyd-Butler is a member of Gruber & McBaine Capital Management,
LLC, an investment advisor and a general partner of Lagunitas
Partners, L.P. Consequently, in addition to the 8,000 shares of Class
A Common Stock over which he has sole voting and investment power, Mr.
Lloyd-Butler has or shares voting or dispositive power over 3,377,073
shares of Class A Common Stock (which number includes 2,250,000 shares
of Class A Common Stock underlying 22,500 shares of Series E
Convertible Preferred Stock) and 1,125,000 shares of Class A Common
Stock that may be immediately acquired upon the exercise of Warrants
expiring August 2, 2009. See also footnote (8).
(10) Includes 264,571 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Options expiring November
20, 2005 (7,736 shares), January 25, 2006 (46,816 shares), May 22,
2006 (18,352 shares), March 13, 2007 (166,667 shares), and April 1,
2008 (25,000). Additionally, the table reflects 187,757 shares of
Class A Common Stock over which Mr. Mazanec, as a trustee of the
Mazanec Family Trust, has or shares voting or dispositive power. The
table does not reflect 83,333 shares of Class A Common Stock that may
be acquired upon the exercise of Options expiring March 13, 2007, in
the event a change in control is deemed to have occurred. In this
event, Mr. Mazanec's percent of class ownership would be 4.28 percent
The table also reflects 276,381 shares of Class A Common Stock that
are subject to an Agreement of Stock Purchase and Sale among Messrs.
Mazanec, Esquer, Gary and Sperberg. As previously disclosed, Messrs.
Esquer, Gary and Sperberg have entered into such Agreement whereby
they have sold, subject to payment and vesting schedules, shares of
Onsite-Cal to Messrs. Esquer and Mazanec. Until a share is paid for
all voting and dispositive rights remain with the seller. Upon vesting
and payment, each such purchaser of the Onsite-Cal shares became
entitled to the same number of the Company Class A Common Stock
received by the sellers, pursuant to the Reorganization, with respect
to the shares sold. The table reflects all adjustments for shares that
have vested and been paid for in full.
Additionally,as previously disclosed, in August 1999 certain executive
officers of the Company, including Mr. Mazanec, entered into a Salary
Reduction Agreement. Thus the table does not reflect all or any
prorata portion of 90,000 shares of Class A Common Stock and 50,000
shares of Class A Common Stock underlying Warrants expiring August 13,
2009, that Mr. Mazanec will be entitled to (immediately or upon the
exercise of the Warrants) under the terms of his Salary Reduction
Agreement.
(11) Mr. McBaine is a member of Gruber & McBaine Capital Management, LLC,
an investment advisor and a general partner of Lagunitas Partners,
L.P., and is a general partner of Proactive Investment Managers, L.P.,
also an investment advisor and a general partner of Proactive
Partners, L.P., and Fremont Proactive Partners, L.P. Consequently, in
addition to the 116,900 shares of Class A Common Stock over which he
has sole voting and investment power (which number includes shares
held by Mr. McBaine's family members), Mr. McBaine has or shares
voting or dispositive power over 7,066,541 shares of Class A Common
Stock (which number includes 4,250,000 shares of Class A Common Stock
underlying 42,500 shares of Series E Convertible Preferred Stock) and
2,485,000 shares of Class A Common Stock that may be immediately
acquired upon the exercise of Warrants expiring September 11, 2002,
June 30, 2003, and August 2, 2009. See also footnotes (8) and (14).
<PAGE>17
(12) Includes Options to purchase 75,000, 25,000, 25,000, 25,000, 25,000
and 25,000 shares of Class A Common Stock exercisable until January
25, 2001, July 13, 2001, April 23, 2002, July 13, 2002, July 13, 2003,
and July 13, 2004, respectively. In addition to 305,000 shares of
Class A Common Stock in which Mr. McGettigan has sole voting and
investment power (which number includes 250,000 shares of Class A
Common Stock underlying 2,500 shares of Series E Convertible Preferred
Stock), Mr. McGettigan is a general partner of Proactive Investment
Managers, L.P., an investment advisor and a general partner of
Proactive Partners, L.P., and Fremont Proactive Partners, L.P., and is
a general partner of McGettigan, Wick & Co., Inc., and consequently
has or shares voting or dispositive power over 3,689,468 shares of
Class A Common Stock (which number includes 2,250,000 shares of Class
A Common Stock underlying 22,500 shares of Series E Convertible
Preferred Stock), and 1,360,000 shares of Class A Common Stock that
may be immediately acquired upon the exercise of Warrants expiring
September 11, 2002, June 30, 2003, and August 2, 2009. See also
footnote (14).
(13) Proactive Investment Managers, L.P. ("PIM"), is a general partner of
Proactive Partners, L.P., and Fremont Proactive Partners, L.P., and
consequently has or shares voting or dispositive power over 3,689,468
shares of Class A Common Stock (which number includes 2,250,000 shares
of Class A Common Stock underlying 22,500 shares of Series E
Convertible Preferred Stock) and 1,280,000 shares of Class A Common
Stock that may be immediately acquired upon the exercise of Warrants
expiring September 11, 2002, June 30, 2003, and August 2, 2009. The
table also reflects 80,000 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Warrants expiring June 30,
2003, and over which PIM has sole voting and investment power. See
also footnote (14).
(14) In addition to 2,036,678 shares of Class A Common Stock over which
Proactive Partners, L.P. ("Proactive") has sole voting and investment
power (which number includes 2,000,000 shares of Class A Common Stock
underlying 20,000 shares of Series E Convertible Preferred Stock), the
table reflects 1,280,000 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Warrants expiring September
11, 2002, June 30, 2003, and August 2, 2009. The table also reflects
an aggregate of 1,592,955 shares of Class A Common Stock (i) of which
1,073,905 shares are subject to the Stockholders Agreement among
certain stockholders of the Company, including Proactive, and Westar
Capital; and (ii) all of which shares are subject to the Voting
Agreement among certain stockholders of the Company, including
Proactive, SYCOM, LLC and SYCOM Corporation.
(15) Includes 584,190 shares of Class A Common Stock that may be
immediately acquired upon the exercise of Options expiring August 9,
2005 (150,000 shares), November 20, 2005 (107,781 shares), January 25,
2006 (52,808 shares), May 22, 2006 (64,616 shares), March 13, 2002
(166,667 shares), and April 1, 2003 (42,318), 325,988 shares of Class
A Common Stock that may be immediately acquired upon the exercise of
Warrants expiring September 11, 2002, and 4,090 shares over which Mr.
Sperberg has sole voting and investment power. The table does not
reflect 83,333 shares of Class A Common Stock that may be acquired
upon the exercise of Options expiring March 13, 2002, in the event a
change in control is deemed to have occurred. In this event, Mr.
Sperberg's percent of class ownership would be 15.93 percent.
The table also reflects an aggregate of 1,848,922 shares of Class A
Common Stock (including 70,545 shares held by Mr. Sperberg's minor
son), (i) of which 1,216,097 shares are subject to the Stockholders
Agreement among certain stockholders of the Company, including Mr.
Sperberg, and Westar Capital; and (ii) all of which shares are subject
to the Voting Agreement among certain stockholders of the Company,
including Mr. Sperberg, and SYCOM, LLC and SYCOM Corporation.
Additionally the table reflects 351,892 shares of Class A Common Stock
that are subject to an Agreement of Stock Purchase and Sale among
Messrs. Sperberg, Esquer, Gary and Mazanec. As previously disclosed,
Messrs. Sperberg, Esquer and Gary have entered into such Agreement
whereby they have sold, subject to payment and vesting schedules,
shares of Onsite-Cal to Messrs. Esquer and Mazanec. Until a share
is paid for all voting and dispositive rights remain with the seller.
Upon vesting and payment, each such purchaser of the Onsite-Cal shares
became entitled to the same number of the Company Class A Common
Stock received by the sellers, pursuant to the Reorganization,
with respect to the shares sold. The table reflects all adjustments
for shares that have vested and been paid for in full.
Finally, as previously disclosed, in August 1999 certain executive
officers of the Company, including Mr. Sperberg, entered into a
Salary Reduction Agreement. Thus the table does not reflect all or
any prorata portion of 87,500 shares of Class A Common Stock and
43,750 shares of Class A Common Stock underlying Warrants expiring
August 13, 2009, that Mr. Sperberg will be entitled to (immediately or
upon the exercise of the Warrants) under the terms of his Salary
Reduction Agreement.
(16) Mr. Sutcliffe is the majority shareholder of SSBKK, Inc., the sole
member of SYCOM, LLC, and of SYCOM Corporation, and consequently has
or shares voting or dispositive power over 1,750,000 shares of Class A
Common Stock. Additionally, as previously disclosed, in August 1999
certain executive officers of the Company, including Mr. Sutcliffe,
entered into a Salary Reduction Agreement. Thus the table does not
reflect all or any prorata portion of 139,000 shares of Class A Common
Stock and 69,500 shares of Class A Common Stock underlying Warrants
expiring August 13, 2009, that Mr. Sutcliffe will be entitled to
(immediately or upon the exercise of the Warrants) under the terms of
his Salary Reduction Agreement. The table also does not reflect
157,500 shares of Series D Convertible Preferred Stock (or the
15,750,000 shares of Class A Common Stock underlying the same) issued
<PAGE>18
to SYCOM Corporation that currently is being held in escrow under an
Escrow Agreement because such shares are non-voting and the conditions
precedent to the release of such shares will not be satisfied within
the next 60 days. See also footnote (17).
(17) Represents 1,750,000 shares of Class A Common Stock that are subject
to the Voting Agreement among certain stockholders of the Company,
SYCOM, LLC and SYCOM Corporation.
(18) Includes the following securities that are subject to the Stockholders
Agreement among certain stockholders of the Company and Westar
Capital: 4,500,000 shares of Class A Common Stock, and 3,245,600
shares of Class A Common Stock underlying 649,120 shares of Series C
Convertible Preferred Stock.
(19) Mr. Wick is a general partner of Proactive Investment Managers, L.P.,
an investment advisor and a general partner of Proactive Partners,
L.P., and Fremont Proactive Partners, L.P., and is a general partner
of McGettigan, Wick & Co., Inc., and consequently has or shares voting
or dispositive power over 3,689,468 shares of Class A Common Stock and
1,360,000 shares of Class A Common Stock that may be immediately
acquired upon the exercise of Warrants expiring September 11, 2002,
June 30, 2003, and August 2, 2009. See also footnote (14).
(20) Includes the aggregate of ownership of Messrs. Aiello, Clark,
Davidson, Holt, Mazanec, McGettigan, Sperberg and Sutcliffe as set
forth in footnotes (1), (2), (3), (7), (10), (12), (15) and (16), and
an aggregate of 417,720 shares of Class A Common Stock held by other
officers and directors, 524,149 shares of Class A Common Stock that
may be acquired within the next sixty (60) days upon the exercise of
options held by other officers (but not including any shares of Class
A Common Stock and/or shares of Class A Common Stock underlying
Warrants expiring August 13, 2009, that such officers will be entitled
to (immediately or upon the exercise of the Warrants) under the terms
of their respective Salary Reduction Agreements), and 374,372 shares
of Class A Common Stock that are subject to a Stock Purchase Agreement
among Hector A. Esquer, and Messrs. Gary, Mazanec and Sperberg. For
purposes of calculating this footnote, the number of shares
attributable to Mr. Sperberg does not include 351,892 shares that are
subject to the above Stock Purchase Agreement because these shares are
counted as owned by Messrs. Mazanec and Esquer.
* Less than one percent (1%).
Item 12. Certain Relationships and Related Transactions.
Guaranty of Bonds. In connection with the Company's acquisition of OBS, the
Company entered into a Transition Agreement pursuant to which Westar Energy,
Inc. ("Westar Energy"), a sister corporation to Westar Capital, a shareholder of
the Company, agreed, for a period of one year after the closing of the OBS
acquisition (November 1997), to maintain an indemnity agreement with Westar
Capital at a level sufficient to provide credit support to OBS for bid and
performance bonds required to be posted in connection with OBS's business. OBS
pays all actual and out-of-pocket fees and costs associated with these bonds.
OBS (individually or with the Company) currently has three bonds outstanding on
projects that are in the final stages of completion and for which Westar Energy
and/or Westar Capital have provided the requisite credit support. Westar Capital
is a 5 percent or more shareholder of the Company.
Westar Transaction. As previously disclosed, in February 1998, OMS acquired the
operating assets of Mid-States Armature in exchange for $290,000. In connection
with this transaction, the Company executed an agreement with Westar Energy
pursuant to which Westar Energy agreed to loan to the Company an amount equal to
the amount paid by the Company for the operating assets. In April 1998, this
loan was made by Westar Energy to the Company, and was to be repaid by the first
anniversary of the closing of the asset acquisition. Pursuant to a February 1999
settlement agreement entered into by the Company, Westar Capital, Westar Energy
and Western Resources in connection with litigation among the parties, Westar
Energy, Westar Capital and Western Resources agreed to apply certain payments
due from Western Resources to OES under existing water treatment plant contracts
to repayment of the subject loan in the event the same was not repaid as above.
Westar Capital is a 5 percent or more shareholder of the Company.
<PAGE>19
Guaranty of Performance. In March 1998, the Company entered into an energy
services agreement with a customer to install energy efficient equipment in a
large number of the customer's facilities. A condition precedent to the
customer's execution of its agreement, however, was the customer's receipt of a
guaranty from Westar Capital, guaranteeing the payment obligations of the
Company under the customer agreement. Accordingly, in exchange, and as
consideration for, Westar Capital's execution of the guaranty, the Company
agreed, in essence, to indemnify Westar Capital in the event Westar Capital must
perform under its guaranty, executed a promissory note to cover any amounts the
Company may owe to Westar Capital as a result of Westar Capital's performance
under its guaranty, and granted Westar Capital a security interest in the
Company's assets to secure its payment of the note. The security agreement
includes certain exceptions in the security interest granted therein. No amounts
currently are outstanding under the note. Westar Capital is a 5 percent or more
shareholder of the Company.
Engagement of Investment Advisor. In connection with acquisition of the assets
of SYCOM, LLC, the Company engaged McGettigan Wick & Co., Inc., an investment
banking firm ("McGettigan Wick"), to assist the Company in the structure and
negotiation of the transaction. Under the terms of the engagement, the Company
agreed to pay McGettigan Wick $50,000 one year after the closing the transaction
(which was June 30, 1998), and issue warrants to McGettigan Wick (which warrants
immediately were transferred by McGettigan Wick to its affiliates, Proactive and
Proactive Investment Managers, L.P. ("PIM")) to acquire 160,000 shares of Class
A Common Stock of the Company at the exercise price of $1.17 per share, which
was the current price of the Company's Class A Common Stock on the OTC
Electronic Bulletin Board on June 30, 1998. These warrants subsequently were
repriced on May 26, 1999, to $0.4185 per share, which was the current price of
the Company's Class A Common Stock on May 26, 1999. Mr. McGettigan is a general
partner of Proactive and PIM, 5 percent or more shareholders of the Company, and
is the Chairman of the Board of Directors of the Company.
Outstanding Obligations. Under agreements with Western Resources, OES maintains
equipment for supplying demineralized water for boiler makeup water that OES
installed at Western Resources' Lawrence Energy Center and Tecumseh Energy
Center. As of the fiscal year ended June 30, 1999, OBS had outstanding accounts
receivable from Western Resources in the amount of $47,415. As previously
disclosed, Westar Capital is a 5 percent or more shareholder of the Company.
August 1999 Private Placement. In August 1999, the Company completed a private
placement of shares of Series E Convertible Preferred Stock and the issuance of
warrants to purchase shares of the Company Class A Common Stock with Mr.
McGettigan, the Chairman of the Board, and other related investors, including
Proactive and Lagunitas Partners, L.P., current shareholders of the Company.
Terms of the placement include the issuance of 50,000 shares of Series E
Convertible Preferred Stock (which is convertible initially into 5,000,000
shares of Class A Common Stock) in exchange for $1,000,000, warrants to purchase
1,250,000 shares of the Company Class A Common Stock at $0.50 per share, and
warrants to purchase 1,250,000 shares of the Company Class A Common Stock at
$0.75 per share. As stated above, Mr. McGettigan is a general partner of
Proactive, a 5 percent or more shareholder of the Company, and is the Chairman
of the Board of Directors of the Company.
Item 13. Exhibits and Reports on Form 8-K
No Form 8-Ks were filed during the last quarter of fiscal year ended June 30,
1999.
<PAGE>20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Form 10-KSB/A to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: October 27, 1999 /S/ RICHARD T. SPERBERG
RICHARD T. SPERBERG
Chief Executive Officer
Date: October 27, 1999 /S/ J. BRADFORD HANSON
J. BRADFORD HANSON
Chief Executive Officer
