<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1997
REGISTRATION NO. 333-35171
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UBICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 34-1744587
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
100 SAINTE CLAIRE PLAZA
1121 BOYCE ROAD
PITTSBURGH, PA 15241
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
VIJAY MALLYA
CHAIRMAN
UBICS, INC.
100 SAINTE CLAIRE PLAZA
1121 BOYCE ROAD
PITTSBURGH, PENNSYLVANIA 15241
(412) 941-1800
FAX: (412) 941-2829
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
DAVID J. LOWE, ESQ.
COHEN & GRIGSBY, P.C.
2900 CNG TOWER
625 LIBERTY AVENUE
PITTSBURGH, PENNSYLVANIA 15222
(412) 394-4900
FAX: (412) 391-3382
RONALD BASSO, ESQ.
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
ONE OXFORD CENTRE
20TH FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8800
FAX: (412) 562-1041
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1997
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
Of the 2,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of UBICS, Inc. (the "Company" or "UBICS") offered hereby (the
"Offering"), 1,500,000 shares are being sold by the Company and 500,000 shares
are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of Common Stock by the Selling Stockholders. See "Use of Proceeds" and
"Principal and Selling Stockholders."
Prior to the Offering, there has been no established public trading market
for the Common Stock. It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "UBIX."
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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========================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
THE PUBLIC DISCOUNT(1) THE COMPANY(2) PROCEEDS TO
THE SELLING
STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share........... $ $ $ $
- --------------------------------------------------------------------------------------------------------
Total (3)........... $ $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses of the Offering, payable by the Company, estimated
at $500,000.
(3) The Principal Stockholder (as defined herein) has granted the Underwriters a
30-day option to purchase up to an additional 300,000 shares of Common
Stock, solely to cover over-allotments, if any, at the Price to the Public
shown above. If the option is exercised in full, the total Price to the
Public, Underwriting Discount and Proceeds to the Selling Stockholders will
be $ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by the Underwriters and to certain further
conditions. It is expected that delivery of certificates for the shares will be
made at the offices of Parker/Hunter Incorporated, Pittsburgh, Pennsylvania, on
or about , 1997.
PARKER/HUNTER SCOTT & STRINGFELLOW, INC.
INCORPORATED
The date of this Prospectus is , 1997.
<PAGE> 3
LOGO
When included in this Prospectus or in documents incorporated herein by
reference, the words "may," "will," "should," "expects," "intends,"
"anticipates," "believes," "estimates," and analogous expressions are intended
to identify forward-looking statements. These statements appear in a number of
places in this Prospectus, including "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Business," and include statements regarding the intent, belief
and current expectations of the Company and its directors and officers. Such
statements are inherently subject to a variety of risks and uncertainties,
including those discussed in "Risk Factors," that could cause the Company's
actual results to differ materially from those presented in or implied by the
forward-looking statements included in this Prospectus.
------------------------
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock. Such
transactions may include stabilizing, the purchase of Common Stock to cover
short positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
------------------------
UBICS(TM) is a service mark of the Company. All trademarks, service marks
and trade names referred to in this Prospectus are the property of their
respective owners.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements of the Company and related notes
thereto appearing elsewhere in this Prospectus. For a description of certain
terms used in this Prospectus, see "Glossary." Unless otherwise indicated, all
information contained in this Prospectus: (i) assumes that the Underwriters'
over-allotment option is not exercised; and (ii) has been adjusted to give
retroactive effect to a 5,000-for-1 split of the shares of Common Stock.
THE COMPANY
UBICS, Inc. ("UBICS" or the "Company") is a rapidly growing provider of
information technology ("IT") professional services to large and mid-sized
organizations. UBICS provides its clients with a wide range of professional
services in such areas as client/server design and development, enterprise
resource planning ("ERP") package implementation and customization, applications
maintenance programming and database administration. UBICS' services are
provided on a time-and-materials basis to client-managed projects, with UBICS IT
professionals providing integral support as project team members. Since
commencement of full operations in 1994, the Company's revenues have grown from
$303,000 for 1994 to $9.1 million for 1996 and to $5.1 million for the quarter
ended June 30, 1997. The Company attributes its growth in revenues in 1997
primarily to an increased focus on higher value-added services, particularly ERP
package implementation and customization services.
In the first six months of 1997, UBICS provided IT professional services to
over 80 clients in a range of industries and locations. The Company's clients
include Caterpillar, CompUSA, El Paso Natural Gas, Fruit of the Loom, Ralston
Purina and The Hartford. UBICS' high standards for responsiveness and service
quality promote growing client relationships and recurring revenues. The Company
believes that its centralized, low-overhead operating model enables it to
respond quickly to client demand for IT professional services. UBICS meets this
demand through its employed IT professionals and its management of an extensive
network of subcontractors. The Company currently has approximately 200 IT
professionals deployed with its clients in the U.S.
One of the key factors supporting UBICS' growth has been its ability to
recruit and deploy, on short notice, skilled IT professionals. The Company
recruits IT professionals from India and other countries worldwide. In order to
ensure a continuous supply of IT professionals for higher value-added
specialties, the Company intends to use a portion of the proceeds of the
Offering to establish a recruiting and training center in India by June 1998.
The Company will use this center to enhance its recruiting efforts and to train
its IT professionals prior to placement. The Company also selectively uses the
substantial resources and established reputation of its affiliate, the UB
International Group (hereinafter, the "UB Group"), to support its recruiting
efforts. The UB Group is a multinational group of companies headquartered in
India.
UBICS believes that the U.S. market for IT professional services will
continue to offer significant growth opportunities. The Company also believes
that its recruiting base in India will remain an attractive, highly
differentiated source of skilled IT professionals. As a means of continuing its
growth, UBICS intends to pursue the following strategies: (i) cultivate and
expand its client base by increasing the Company's sales and marketing efforts;
(ii) attract and retain high-quality IT professionals through increased
recruiting and training activities; (iii) continue to leverage its centralized,
low-overhead operating model to enhance profitability and maintain
responsiveness to client needs; (iv) increase its level and breadth of ERP
package implementation and customization services; and (v) continually broaden
its range of services, particularly in higher value-added specialties.
The Company was incorporated in Delaware on July 19, 1993. The Company
maintains its principal executive offices at 100 Sainte Claire Plaza, 1121 Boyce
Road, Pittsburgh, Pennsylvania 15241. The Company's telephone number is (412)
941-1800.
3
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THE OFFERING
Common Stock offered by:
The Company........................ 1,500,000 shares
The Selling Stockholders........... 500,000 shares
-----------------
Total......................... 2,000,000 shares
=================
Common Stock to be outstanding upon
completion of the Offering(1)........... 6,500,000 shares
Use of proceeds......................... Expansion of existing operations;
repayment of indebtedness; and
general corporate purposes,
including working capital. See "Use
of Proceeds."
Nasdaq National Market symbol........... UBIX
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(1) Excludes an aggregate of 750,000 shares of Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan (the "1997 Plan"). See
"Management--Stock Option Plan."
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
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1993(1) 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................. $ 17 $ 303 $1,454 $9,072 $3,411 $8,685
Gross profit......................... 1 125 460 2,699 956 2,702
Income from operations............... 1 5 8 472(2) 85(2) 1,164
Net income........................... 1 3 3 219 37 678
Net income per share................. $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
Weighted average shares
outstanding....................... 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $ 833 $ 14,233
Total assets......................................................... 4,882 17,782
Total debt........................................................... 500 --
Stockholders' equity................................................. 907 14,307
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(1) The Company commenced operations on July 19, 1993.
(2) Reflects expenses of $257,000 and $125,000 for the year ended December 31,
1996 and the six months ended June 30, 1996, respectively, incurred on
behalf of the UB Group. Beginning January 1, 1997, such expenses ceased to
be incurred by the Company.
(3) Adjusted to give effect to the sale of the 1,500,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
4
<PAGE> 6
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following factors in connection with an
investment in the shares of Common Stock offered hereby.
RECRUITMENT AND RETENTION OF IT PROFESSIONALS
The Company's business involves the delivery of professional services and
is labor-intensive. The Company's success depends upon its ability to attract,
develop, motivate and retain highly-skilled IT professionals who possess the
technical skills and experience necessary to deliver the Company's services.
Qualified IT professionals are in great demand worldwide and are likely to
remain a limited resource for the foreseeable future. The Company currently
meets client demand for IT professionals with its own employees and by
subcontracting with other IT service providers. There can be no assurance that
qualified IT professionals will continue to be available to the Company, either
as employees of the Company or from subcontracting firms, in sufficient numbers
or that the Company will be successful in retaining current or future employees.
Failure to attract or retain qualified IT professionals in sufficient numbers
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Human Resources,"
"Business--Competition" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Overview."
U.S. REGULATION OF IMMIGRATION
The Company's services historically have been performed in the U.S., and
the Company has recruited most of its IT professionals outside the U.S. The
Company's business, therefore, is subject to U.S. immigration laws. Over 90% of
the Company's IT professionals are citizens of other countries, with most of
those in the U.S. working under H-1B temporary work permits. There is a limit on
the number of new H-1B permits that may be approved in any U.S. government
fiscal year. In the federal fiscal year ended September 30, 1996, this limit was
reached in September and in the federal fiscal year ending September 30, 1997,
this limit was reached in August. If in future years this limit is reached, the
Company may be unable to obtain enough H-1B permits to meet its requirements. If
the Company were unable to obtain H-1B permits for its IT professionals in
sufficient quantities or at a sufficient rate, the Company's business, operating
results and financial condition could be materially adversely affected.
Furthermore, Congress and administrative agencies with jurisdiction over
immigration matters have periodically expressed concerns over the levels of
legal and illegal immigration into the U.S. These concerns have often resulted
in proposed legislation, rules and regulations aimed at reducing the number of
work permits that may be issued. Any changes in such laws making it more
difficult to hire foreign nationals or limiting the ability of the Company to
retain foreign employees could require the Company to incur additional
unexpected labor costs and expenses. Any such restrictions or limitations on the
Company's hiring practices could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Human
Resources."
CONCENTRATION OF REVENUES; RISK OF TERMINATION
The Company has in the past derived, and may in the future derive, a
significant portion of its revenues from a relatively small number of clients.
The Company derived from its five largest clients approximately 43% and 37% of
its revenues for 1996 and for the six months ended June 30, 1997, respectively.
One client accounted for approximately 14% and 11% of the Company's revenues for
the same respective periods. Most of the Company's engagements are terminable by
the client at will. Unanticipated losses of major clients or termination of
client projects could result in the loss of substantial revenues and could
require the Company to support or terminate a significant number of unassigned
IT professionals. Such loss of revenues, or expenses resulting from unassigned
IT professionals or termination of IT professionals, could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and "Business--Clients."
5
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VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, and IT professional
deployment, hiring, attrition and utilization rates. The Company recognizes
revenues on its projects as the services are performed. Because a significant
percentage of the Company's selling, general and administrative expense is
relatively fixed, variations in revenues may cause significant variations in
operating results. Additionally, the Company expects to incur cost increases due
to both the hiring of new employees and strategic investments in its
infrastructure in anticipation of future opportunities for revenue growth. No
assurances can be given that quarterly results will not fluctuate, causing a
material adverse effect on the Company's business and financial condition. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition-- Quarterly Results."
INTENSE COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms, systems
consulting and implementation firms, applications software firms, service groups
of computer equipment companies, general management consulting firms, contract
programming companies and temporary staffing firms. Many of these competitors
have substantially greater financial, technical and marketing resources and
greater name recognition than the Company. In addition, there is a risk that
clients may elect to satisfy their applications solutions needs by increasing
their internal IT resources or by limiting the number of outside service
providers. Further, the IT services industry is undergoing consolidation which
may result in increasing pressure on margins. These factors may limit the
Company's ability to increase billing rates commensurate with increases in
compensation. There can be no assurance that the Company will compete
successfully with existing or new competitors. See "Business--Competition."
ABILITY TO SUSTAIN AND MANAGE GROWTH
The Company's business has experienced rapid growth over the past three
years. Revenues have grown from $303,000 in 1994 to $9.1 million in 1996 and
$8.7 million for the six months ended June 30, 1997, and the number of IT
professionals has grown from four at December 31, 1994 to 169 at June 30, 1997.
The Company intends to actively pursue its strategy of continued growth and will
seek to expand its sales and marketing efforts in order to add new clients and
expand existing client relationships. The Company's ability to sustain its
growth is dependent upon its ability to attract, develop, motivate and retain
highly skilled IT professionals and to manage its subcontractor network
effectively to ensure a supply of trained professionals. See "--Recruitment and
Retention of IT Professionals." There can be no assurance that the Company's
historical revenue growth will continue. Furthermore, this rapid growth could
strain the Company's managerial resources. Effective management of the Company's
growth will require the Company to continue to improve its operational,
financial and other management processes and systems. The failure to manage
growth effectively could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Business
Strategies."
ABILITY TO MAINTAIN MARGINS
The Company derives revenues primarily from the hourly billing for the
services of its IT professionals. The Company's most significant cost is
personnel cost, which consists of IT professionals' salaries and benefits. Thus,
the Company's financial performance is primarily based upon billing margin
(billable hourly rate less an IT professional's hourly cost) and personnel
utilization rates (number of days worked divided by number of days in each
billing cycle). To date, the Company has been able to maintain its billing
margins by offsetting increases in IT professional compensation with increases
in its hourly billing rates. There can be no assurance, however, that the
Company will be able to continue to pass along increases in its cost of services
to its clients. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Results of Operations."
6
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DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant extent on key
management, sales and marketing, technical and other personnel. In particular,
the Company's continued growth and success is highly dependent on the efforts
and abilities of Manohar B. Hira, the Company's President. In addition, the
Company is dependent on the services of O'Neil Nalavadi, its Senior Vice
President and Chief Financial Officer, who was hired as of August 1997. Although
Messrs. Hira and Nalavadi have entered into employment agreements containing
non-competition, non-disclosure and non-solicitation covenants, these agreements
do not guarantee that these individuals will continue their employment with the
Company. The loss of the services of Mr. Hira, Mr. Nalavadi or other key
employees for any reason could have a material adverse effect on the Company's
business, operating results and financial condition. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of the Offering, Vijay Mallya, Chairman of the Company,
will indirectly beneficially own and have voting power over 66.7% of the
Company's Common Stock (62.1% if the Underwriters' over-allotment option is
exercised in full). Such shares of Common Stock are held directly by United
Breweries Information Consultancy Services Ltd. (the "Principal Stockholder").
Accordingly, Mr. Mallya will be able to amend certain provisions of the
Company's Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), elect all of the directors, effect fundamental corporate
transactions such as mergers, asset sales and the sale of the Company, delay or
prevent a change in control of the Company and otherwise direct the Company's
business and affairs, without the approval of any other stockholder. See
"Management," "Principal and Selling Stockholders" and "Description of Capital
Stock."
RISKS OF INTERNATIONAL OPERATIONS
The Company's recruiting efforts to date in foreign countries have not been
supported by offices in those countries, other than offices of its affiliate,
the UB Group. An element of the Company's growth strategy is the development of
a recruiting and training center in India and the establishment of offices in
the United Kingdom, South Africa, Singapore and the Middle East in order to
broaden its recruiting efforts. There can be no assurance that the opening of
the recruiting center and international offices will enable the Company to
increase its ability to recruit additional IT professionals. The inability of
the Company to expand its recruiting of IT professionals from these countries
could have a material adverse effect on the Company's growth and its business,
operating results and financial condition. Another element of the Company's
growth strategy is the intention to establish marketing and software development
operations outside the U.S. These operations will depend greatly on the business
and technology transfer laws in those countries. There can be no assurance that
the Company will be able to establish these operations or that such operations
will be profitable and support the Company's growth.
Although the Company has filed a U.S. trademark registration application
covering the service mark "UBICS" which, if granted, would give the Company the
presumption of ownership in the U.S. of the "UBICS" mark for the services
identified in the registration, there can be no assurance that the Company is
entitled to use the designation "UBICS" in all international operations, and it
is possible that third parties have superior rights to the "UBICS" mark (or
similar marks) outside the U.S. See "Business--Business Strategies" and
"--Intellectual Property Rights."
POTENTIAL LIABILITY TO CLIENTS
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. The Company's failure or inability to meet a client's expectations
or the negligence or misconduct of the Company's IT professionals in the
performance of services could result in a material adverse change to the
client's operations. Such changes could give rise to claims against the Company
or damage the Company's reputation, adversely affecting its business, operating
results and financial condition. The Company does not maintain insurance
coverage for such negligence or misconduct or enter into formal arrangements to
reduce such potential liability.
7
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NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Although the Common Stock has been approved for trading on the
Nasdaq National Market, there can be no assurance that an active trading market
for the Common Stock will develop or be sustained after the Offering. The
initial public offering price per share of the Common Stock will be determined
by negotiations between management of the Company and the representatives of the
Underwriters (the "Representatives") and may not be indicative of the market
price of the Common Stock after the Offering. For a description of factors to be
considered in determining the initial public offering price in the Offering, see
"Underwriting." The securities markets have from time to time experienced
extreme price and volume fluctuations that have often been unrelated to the
operating performance of particular companies. In addition, factors such as
announcements of technological innovations, new products or services or new
client engagements by the Company or its competitors or third parties, as well
as market conditions in the IT services industry, may have a significant impact
on the market price of the Common Stock. See "Business--Competition" and
"Underwriting."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, the Company's Amended and
Restated Bylaws (the "Bylaws") and the Delaware General Corporation Law (the
"DGCL") include provisions that may be deemed to have anti-takeover effects and
may delay, deter or prevent a takeover that stockholders might consider in their
best interests. These provisions include the ability of the Board of Directors,
without stockholder approval, to have the Company issue shares of preferred
stock in one or more series with such rights, obligations and preferences as the
Board of Directors may provide, a provision under which only certain officers,
the Board of Directors and stockholders holding not less than 30% of the
outstanding shares of Common Stock may call meetings of stockholders and certain
advance notice procedures for nominating candidates for election to the Board of
Directors. Directors of the Company are divided into three classes and are
elected to serve staggered three-year terms. These provisions may have the
effect of lengthening the time required for a person to acquire control of the
Company through a proxy contest for the election of a majority of the Board of
Directors, may discourage bids for the Common Stock at a premium over the market
price and may deter efforts to obtain control of the Company. See
"Management--Directors and Executive Officers" and "Description of Capital
Stock--Certain Provisions Affecting Control of the Company."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in the public market
or the availability of such shares for future sale could adversely affect the
market price of the shares of Common Stock and the Company's ability to raise
additional capital at a price favorable to the Company. The Company and its
executive officers and directors and the Selling Stockholders have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
any Common Stock or any options or warrants to acquire shares of Common Stock,
or announce the intention to do any of the foregoing, until 180 days after the
date of this Prospectus without the prior written consent of Parker/Hunter
Incorporated, on behalf of the Underwriters. Promptly following completion of
the Offering, the Company also intends to file a registration statement on Form
S-8 with the Commission registering the 750,000 shares of Common Stock reserved
for issuance under the 1997 Plan. See "Shares Eligible for Future Sale" and
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock will be
substantially higher than the net tangible book value per share of the Common
Stock. At an assumed initial public offering price of $10.00 per share (the
mid-point of the estimated range of the initial public offering price),
purchasers of shares of Common Stock in the Offering will experience immediate
and substantial dilution of $7.80 in the pro forma net tangible book value per
share of Common Stock. See "Dilution."
8
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POSSIBLE ISSUANCES OF PREFERRED STOCK
Shares of Preferred Stock may be issued by the Company in the future
without stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of the Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding stock of the Company. The Company has no present
plans to issue any shares of Preferred Stock. See "Description of Capital
Stock--Preferred Stock."
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS
Existing stockholders of the Company are expected to realize certain
benefits as a result of the Offering, including the anticipated creation of a
public market for the Common Stock and unrealized gains represented by the
difference between the value of their shares of Common Stock following
completion of the Offering and the amount paid by the existing stockholders for
their shares. In addition, the Principal Stockholder is selling 400,000 shares
of Common Stock in the Offering and, assuming an initial public offering price
of $10.00 per share, will realize a net gain (after deduction of the estimated
underwriting discount) of approximately $3,700,000 from its sale of shares.
Also, as a result of repayment by the Company of certain indebtedness with a
portion of the net proceeds of the Offering, Mr. Mallya, Chairman of the Company
and the beneficial owner of the Principal Stockholder, will be released from his
guarantee of such indebtedness. See "Use of Proceeds," "Dilution" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition-- Liquidity and Capital Resources."
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial portion of the anticipated net proceeds of the Offering has
not been designated for specific uses. Therefore, the Board of Directors will
have broad discretion with respect to the use of such portion of the net
proceeds of the Offering. See "Use of Proceeds."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future and intends to retain earnings, if any, to develop,
operate and expand its business. See "Dividend Policy."
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company (after deduction of the estimated
underwriting discount and offering expenses payable by the Company) are
estimated to be $13,400,000. The Company expects to use the net proceeds from
the Offering as follows: (i) approximately $3,500,000 for expansion of existing
operations, including the development of a recruiting and training center in
India, the purchase of hardware and software with respect thereto and the
establishment of other offshore recruiting offices; (ii) repayment of the
Company's obligations to PNC Bank, National Association ("PNC") under a
Committed Line of Credit (the "Line of Credit"); and (iii) general corporate
purposes, including working capital. The outstanding balance under the Line of
Credit as of September 30, 1997 was $775,000, with amounts outstanding bearing
interest at a variable annual rate equal to 0.5% in excess of PNC's prime rate.
As of September 30, 1997, the annual interest rate under the Line of Credit was
9.0%. The Company's obligations under the Line of Credit mature on August 30,
1998.
The foregoing represents the Company's best estimate of its use of the net
proceeds based upon its current plans, certain assumptions regarding industry
and general economic conditions and the Company's future revenues and
expenditures. The Company reserves the right to increase or decrease the
proceeds allocated to expansion of its existing operations if the costs of such
expansion are higher or lower than currently anticipated or if the Company
decides to fund additional expansion projects beyond those currently planned.
Pending such uses, the net proceeds of the Offering will be invested in
short-term, investment-grade, interest-bearing securities. The principal
purposes of the Offering are to obtain additional working capital, create a
public market for the Common Stock and facilitate future access by the Company
to public equity markets. See "Business--Business Strategies." The Company
currently anticipates that the proceeds from the Offering, together with its
other existing sources of liquidity and cash generated from operations, will be
sufficient to fund its cash needs and currently planned future operations at
least through the next 24 months. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources."
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. The Principal Stockholder has agreed that, no
later than the completion of the Offering, the Company will be reimbursed for
expenses incurred by the Company on behalf of the UB Group during 1997. See
"Management--Compensation Committee Interlocks and Insider Participation."
DIVIDEND POLICY
The Company currently intends to retain all of its future earnings to fund
growth and the operation of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future. The payment in the future
of cash dividends, if any, will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and such other factors as the Board of
Directors may deem relevant. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources."
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the total capitalization of the Company as
of June 30, 1997, and as adjusted to give effect to the sale of the 1,500,000
shares of Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds." The
following table should be read in conjunction with the financial statements of
the Company and related notes thereto included elsewhere in this Prospectus:
<TABLE>
<CAPTION>
(IN THOUSANDS)
JUNE 30, 1997
-----------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Short-term debt(1).................................................. $ 500 $ --
====== =======
Long-term debt...................................................... -- --
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no
shares outstanding............................................. -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
5,000,000 shares issued and outstanding; 6,500,000 shares
issued and outstanding, as adjusted(2)......................... 3 18
Additional paid-in capital........................................ -- 13,385
Retained earnings................................................. 904 904
------ -------
Total stockholders' equity..................................... 907 14,307
------ -------
Total capitalization...................................... $ 907 $14,307
====== =======
</TABLE>
- ---------
(1) Represents borrowings under the Line of Credit. Upon completion of the
Offering, a portion of the net proceeds will be used to repay these
borrowings. See "Use of Proceeds."
(2) Excludes an aggregate of 750,000 shares of Common Stock reserved for
issuance under the 1997 Plan. See "Management--Stock Option Plan."
11
<PAGE> 13
DILUTION
As of June 30, 1997, the Company's net tangible book value was
approximately $907,000 or $0.18 per share. Net tangible book value per share
represents the Company's total tangible assets less the Company's total
liabilities, divided by the aggregate number of shares of Common Stock
outstanding. After giving effect to the sale of the 1,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $10.00 per share (the mid-point of the estimated range of the initial public
offering price) and less the estimated underwriting discount and other expenses
payable by the Company in connection with the Offering and the application of
the estimated net proceeds therefrom, the pro forma net tangible book value of
the Company at June 30, 1997 would have been $14,307,000 or $2.20 per share.
This amount represents an immediate increase in net tangible book value of $2.02
per share to existing stockholders and an immediate dilution of $7.80 per share
to purchasers of Common Stock in the Offering. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $10.00
Net tangible book value per share at June 30, 1997........... $ 0.18
Increase in net tangible book value per share attributable to
new investors............................................... 2.02
------
Pro forma net tangible book value per share after the Offering.... 2.20
------
Dilution in net tangible book value per share to new investors.... $ 7.80
======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and new investors at the assumed initial public offering
price of $10.00 per share (the mid-point of the estimated range of the initial
public offering price) before deducting the estimated underwriting discount and
other expenses payable by the Company in connection with the Offering, and does
not reflect the sale of the Common Stock by the Selling Stockholders in the
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)................. 5,000,000 76.9% $ 3,000 * **
New investors (1)......................... 1,500,000 23.1 15,000,000 100.0% $ 10.00
--------- ------ ----------- ------
Total................................... 6,500,000 100.0% $15,003,000 100.0%
========= ====== =========== ======
</TABLE>
- ---------
*Less than one-tenth of one percent.
**Less than $0.01 per share.
(1) Sales by the Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to 4,500,000, or 69.2% of the total
shares of Common Stock outstanding after the Offering (4,200,000 shares or
64.6% if the Underwriters' over-allotment option is exercised in full), and
will increase the number of shares held by new investors to 2,000,000, or
30.8% of the total shares of Common Stock outstanding after the Offering
(2,300,000 shares or 35.4% if the Underwriters' over-allotment option is
exercised in full). See "Principal and Selling Stockholders" and
"Underwriting."
The information in the table above excludes the effect of options to
purchase 457,500 shares of Common Stock to be granted upon completion of the
Offering, all of which will have an exercise price per share equal to the
initial public offering price in the Offering. See "Management--Stock Option
Plan," "Shares Eligible for Future Sale" and "Principal and Selling
Stockholders."
12
<PAGE> 14
SELECTED FINANCIAL DATA
The selected financial data presented below for each of the three years
ended December 31, 1996 and for the six months ended June 30, 1997 have been
derived from the financial statements included elsewhere in this Prospectus
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected financial data for the period from the Company's inception to
December 31, 1993 has been derived from financial statements that are not
included herein. The selected financial data for the six months ended June 30,
1996 has been derived from the Company's unaudited interim financial statements
contained elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for these periods. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition," "Business," "Risk Factors" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------- ------------------
INCOME STATEMENT DATA: 1993(1) 1994 1995 1996 1996 1997
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... $ 17 $ 303 $1,454 $9,072 $3,411 $8,685
Cost of revenues....................... 16 178 994 6,373 2,455 5,983
------- ------ ------ ------ ------ ------
Gross profit........................... 1 125 460 2,699 956 2,702
Selling, general and administrative
expense.............................. -- 120 452 2,227(2) 871(2) 1,538
------- ------ ------ ------ ------ ------
Income from operations................. 1 5 8 472 85 1,164
Interest expense....................... -- -- -- 23 9 21
------- ------ ------ ------ ------ ------
Income before income taxes............. 1 5 8 449 76 1,143
Provision for income taxes............. -- 2 5 230 39 465
------- ------ ------ ------ ------ ------
Net income............................. $ 1 $ 3 $ 3 $ 219 $ 37 $ 678
====== ====== ====== ====== ====== ======
Net income per share................... $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
====== ====== ====== ====== ====== ======
Weighted average shares outstanding.... 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------- ----------------
BALANCE SHEET DATA: 1993(1) 1994 1995 1996 1996 1997
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Working capital......................... $ 4 $ 7 $ (25) $ 179 $ 1 $ 833
Total assets............................ 16 120 619 2,601 1,827 4,882
Total debt.............................. -- -- 78 300 250 500
Total stockholders' equity.............. 4 7 10 229 47 907
</TABLE>
- ---------
(1) The Company commenced operations on July 19, 1993.
(2) Includes expenses of $257,000 and $125,000 for the year ended December 31,
1996 and the six months ended June 30, 1996, respectively, incurred on
behalf of the UB Group. Beginning January 1, 1997, such expenses ceased to
be incurred by the Company.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with "Selected
Financial Data" and the financial statements of the Company and related notes
thereto appearing elsewhere in this Prospectus.
OVERVIEW
UBICS, founded in 1993, is a rapidly growing provider of IT professional
services to large and mid-sized organizations. UBICS provides its clients with a
wide range of professional services in such areas as client/ server design and
development, ERP package implementation and customization, applications
maintenance programming and database administration. UBICS' services are
provided on a time-and-materials basis to client-managed projects, with UBICS IT
professionals providing integral support as project team members. The Company
currently has offices in the Pittsburgh, Pennsylvania and San Francisco,
California areas.
The Company's revenues are based on the hourly billing of its IT
professionals. Revenue is recognized as services are provided. The Company has
increased the average billing rates of its IT professionals as the demand for
skilled and experienced professionals has expanded, in particular for IT
professionals placed on ERP package implementation and customization projects.
As of September 30, 1997, 44 IT professionals, or approximately 23% of the
Company's deployed IT professionals, were placed on such projects.
UBICS effectively minimizes the number of days IT professionals are not
assigned to projects by proactively marketing these professionals to clients.
Resource managers closely monitor the availability of IT professionals and
utilize subcontractors when UBICS IT professionals are unavailable. The Company
maintains strong relationships with nearly 50 subcontractors located worldwide.
Approximately 44% of the Company's revenues were derived from IT professionals
deployed from subcontractors for the six months ended June 30, 1997. As of
September 30, 1997, IT professionals deployed from subcontractors comprised 83
of the Company's 191 deployed IT professionals. The Company believes that its
network of subcontractors enables it to maintain closer relationships with
clients by fulfilling more of their needs for IT professional services.
Management believes that as the Company increases its investment in recruiting
and retaining qualified IT professionals, the ratio of UBICS IT professionals to
subcontractor IT professionals will increase.
Since inception the Company has developed relationships with 130 clients in
a range of industries and currently has IT professionals deployed at over 80 of
these clients. Although the Company's five largest clients accounted for
approximately 37% of revenues for the first six months of 1997, this revenue
concentration has steadily decreased since the Company's inception. The Company
believes that the continuing growth in its client base will further reduce the
percentage of revenue attributable to its largest clients. The Company's
strategy is to continue to provide services to clients across the U.S. in a
range of industries, in order to reduce credit risk from conditions or
occurrences within any specific industry or region in which these clients
operate.
The Company's strategy for maintaining strong revenue growth, maintaining
or improving margins and enhancing overall financial performance includes: (i)
continuing its focus on higher value-added services, such as ERP package
services; (ii) increasing its investment in systems and facilities necessary to
support continued growth; (iii) establishing a recruiting and training center in
India by June 1998; and (iv) establishing offices in South Africa, the United
Kingdom, Singapore and the Middle East, where the UB Group has an established
presence, during the second half of 1998 and during 1999 to increase the
Company's recruiting depth.
14
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
---------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................................. 58.8 68.3 70.3 72.0 68.9
----- ----- ----- ----- -----
Gross profit..................................... 41.2 31.7 29.7 28.0 31.1
Selling, general and administrative expense...... 39.5 31.1 24.5 25.5 17.7
----- ----- ----- ----- -----
Income from operations........................... 1.7 0.6 5.2 2.5 13.4
Interest expense................................. -- -- 0.3 0.3 0.2
----- ----- ----- ----- -----
Income before income taxes....................... 1.7 0.6 4.9 2.2 13.2
Provision for income taxes....................... 0.7 0.4 2.5 1.1 5.4
----- ----- ----- ----- -----
Net income....................................... 1.0% 0.2% 2.4% 1.1% 7.8%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues
Revenues for the six months ended June 30, 1997 were $8.7 million, compared
to $3.4 million for the six months ended June 30, 1996, an increase of $5.3
million, or 155%. The increase in revenues was predominantly due to an increase
in the number of IT professionals deployed to provide services to new and
existing clients. To a lesser extent, but to an increasing extent compared to
prior periods, the increase in revenues was due to higher average hourly billing
rates resulting from a shift toward higher value-added services including
ERP-related services as well as increased demand for IT professionals. The
number of deployed IT professionals increased to 169 at June 30, 1997 from 93 at
June 30, 1996, and the Company broadened its client base to 130 clients in the
first six months of 1997 from 57 clients in the first six months of 1996.
Gross Profit
Gross profit consists of revenues less cost of revenues. Cost of revenues
is comprised principally of IT professional salaries and benefits, including
subcontractor professional costs and relocation expenses. Gross profit for the
first six months of 1997 was $2.7 million, compared to $956,000 for the first
six months of 1996, an increase of $1.7 million, or 183%. Gross profit as a
percentage of revenues increased to 31.1% for the first six months of 1997
compared to 28.0% for the first six months of 1996. The increase in gross profit
as a percentage of revenues resulted primarily from a higher number of IT
professionals deployed in client engagements involving higher value-added
services, including ERP package implementation and customization services.
Selling, General and Administrative Expense
Selling, general and administrative expense consists of costs associated
with the Company's sales and marketing efforts, executive, finance and human
resource functions, facilities, telecommunications and other general overhead
expenses. Selling, general and administrative expense for the first six months
of 1997 was $1.5 million, compared to $871,000 for the first six months of 1996,
an increase of $667,000, or 77%. Selling, general and administrative expense as
a percentage of revenues decreased to 17.7% for the first six months of 1997
from 25.5% for the first six months of 1996. The increase in expense was
primarily due to increases in salaries, commissions and other personnel costs to
support the Company's growth. This increase was partially offset by the absence
of expenses incurred on behalf of the UB Group for the first six months of 1997,
which totaled $125,000 for the first six months of 1996. The decrease as a
percentage of revenues was primarily due
15
<PAGE> 17
to the Company's ability to support its revenue growth without a proportionate
increase in management or marketing personnel and associated costs.
Interest Expense
Interest expense for the first six months of 1997 was $21,000, compared to
$9,000 for the first six months of 1996, an increase of $12,000, or 131%. Such
increase was due to increased average borrowings under the Line of Credit.
Provision for Income Taxes
The Company's effective tax rate was 40.7% for the first six months of 1997
compared to 51.2% for the first six months of 1996. The primary reason for the
higher effective tax rate for the first six months of 1996 was related to the
delayed filing of tax returns pending a review of the structure of the UB Group
companies in the U.S.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues
Revenues for the year ended December 31, 1996 were $9.1 million, compared
to $1.5 million for the year ended December 31, 1995, an increase of $7.6
million, or 524%. The increase in revenues was predominantly due to an increase
in the number of IT professionals deployed to provide services to new and
existing clients and, to a lesser extent, due to higher average hourly billing
rates resulting from increased demand for IT professionals. The number of
deployed IT professionals increased to 110 at December 31, 1996 from 40 at
December 31, 1995, and the Company broadened its client base to 79 clients in
1996 from 27 clients in 1995.
Gross Profit
Gross profit for 1996 was $2.7 million, compared to $460,000 for 1995, an
increase of $2.2 million, or 486%. Gross profit as a percentage of revenues
decreased to 29.7% for 1996 from 31.7% for 1995. The decrease in gross profit as
a percentage of revenues resulted primarily from higher average costs for IT
professionals due to the increased demand for such professionals.
Selling, General and Administrative Expense
Selling, general and administrative expense for 1996 was $2.2 million,
compared to $452,000 for 1995, an increase of $1.8 million, or 392%. Selling,
general and administrative expense as a percentage of revenues decreased to
24.5% for 1996 from 31.1% for 1995. The increase in expense was primarily due to
increases in salaries, commissions and other personnel costs to support the
Company's growth. The increase in expense was also due to expenses of $257,000
for 1996 incurred on behalf of the UB Group. The decrease as a percentage of
revenues was primarily due to increased operating efficiencies.
Interest Expense
Interest expense for 1996 was $23,000, reflecting borrowings under the Line
of Credit. The Company had no interest expense for 1995.
Provision for Income Taxes
The Company's effective tax rate was 51.2% for 1996. The primary reasons
for the difference between the effective tax rate and the federal statutory rate
of 34% are (i) state income taxes and (ii) the delayed filing of tax returns
pending a review of the structure of the UB Group companies in the U.S. On
September 8, 1997, the Company filed its 1995 and 1996 federal and state income
tax returns and paid such taxes and estimated penalties and interest. Due to the
low levels of income recorded for 1995 and prior periods, the Company believes
that the effective tax rates for these periods are not meaningful.
16
<PAGE> 18
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Revenues for the year ended December 31, 1995 were $1.5 million, compared
to $303,000 for the year ended December 31, 1994, an increase of $1.2 million,
or 380%. The increase in revenues was predominantly due to an increase in the
number of IT professionals deployed to provide services to new and existing
clients and, to a lesser extent, due to higher average hourly billing rates
resulting from increased demand for IT professionals. The number of deployed IT
professionals increased to 40 at December 31, 1995 from four at December 31,
1994 and the Company broadened its client base to 27 clients in 1995 from seven
in 1994.
Gross Profit
Gross profit for 1995 was $460,000, compared to $125,000 for 1994, an
increase of $335,000, or 269%. gross profit as a percentage of revenues
decreased to 31.7% for 1995 from 41.2% for 1994. The decrease in gross profit as
a percentage of revenues resulted primarily from the diminished impact of IT
professionals being supplied at favorable rates on a subcontractor basis by an
affiliate of the UB Group. This relationship was terminated in March 1996. See
"Management--Compensation Committee Interlocks and Insider Participation."
Selling, General and Administrative Expense
Selling, general and administrative expense for 1995 was $452,000, compared
to $120,000 for 1994, an increase of $332,000, or 278%. Selling, general and
administrative expense as a percentage of revenues decreased to 31.1% for 1995
from 39.5% for 1994. The decrease as a percentage of revenues was a result of
the Company's ability to support its revenue growth without a proportionate
increase in management or marketing personnel and associated costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash have been to fund receivables and
other working capital, reflecting the Company's rapid growth. The Company has
financed its working capital requirements through internally generated funds,
borrowings under the Line of Credit and loans and advances from certain UB Group
affiliates. Net cash provided by (used by) operating activities was $(115,000),
$(181,000), $0 and $35,000 for the first six months of 1997 and for the years
ended December 31, 1996, 1995, 1994, respectively. The Principal Stockholder has
agreed, no later than the completion of the Offering, to repay expenses incurred
by the Company on behalf of the UB Group during 1997. See
"Management--Compensation Committee Interlocks and Insider Participation."
Capital expenditures for the first six months of 1997 and for 1996, 1995
and 1994 were $31,000, $25,000, $38,000 and $0, respectively. Except as set
forth below, the Company currently has no material commitments for capital
expenditures.
The Company intends to use approximately $3.5 million of the net proceeds
of the Offering to expand its existing operations, including the establishment
of a recruiting and training center in India by June 1998. The Company will also
use a portion of the net proceeds of the Offering to repay the principal amount
outstanding under the Line of Credit, which was $775,000 as of September 30,
1997, plus accrued interest on the closing date of the Offering. As of September
5, 1997, the amount available under the Line of Credit was increased to $1.0
million. Amounts outstanding under the Line of Credit bear interest at a
variable annual rate equal to 0.5% in excess of PNC's prime rate. As of
September 30, 1997, the annual interest rate under the Line of Credit was 9.0%.
The indebtedness under the Line of Credit was incurred by the Company for
working capital and other corporate purposes. The indebtedness under the Line of
Credit is guaranteed by Mr. Mallya, the Company's Chairman. Upon completion of
the Offering, (i) the Company will repay the outstanding indebtedness under the
Line of Credit and (ii) PNC has agreed to release Mr. Mallya's guarantee.
The Company currently anticipates that the proceeds from the Offering,
together with the existing sources of liquidity and cash generated from
operations, will be sufficient to satisfy its cash needs at least through the
next 24 months.
17
<PAGE> 19
QUARTERLY RESULTS
The following table sets forth certain items included in the Company's
unaudited statements of income for the six quarters ended June 30, 1997. The
operating results for any quarter are not necessarily indicative of results for
any future period.
<TABLE>
<CAPTION>
(IN THOUSANDS)
QUARTER ENDED
---------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................. $1,223 $2,188 $2,738 $2,923 $3,633 $5,052
Cost of revenues.......................... 899 1,556 1,863 2,055 2,583 3,400
------ ------ ------ ------ ------ ------
Gross profit.............................. 324 632 875 868 1,050 1,652
Selling, general and administrative
expense................................. 304 567 673 683 766 772
------ ------ ------ ------ ------ ------
Income from operations.................... 20 65 202 185 284 880
Interest expense.......................... 4 5 7 7 10 11
------ ------ ------ ------ ------ ------
Income before income taxes................ 16 60 195 178 274 869
Provision for income taxes................ 8 31 100 91 111 354
------ ------ ------ ------ ------ ------
Net income................................ $ 8 $ 29 $ 95 $ 87 $ 163 $ 515
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
---------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.......................... 73.5 71.1 68.0 70.3 71.1 67.3
----- ----- ----- ----- ----- -----
Gross profit.............................. 26.5 28.9 32.0 29.7 28.9 32.7
Selling, general and administrative
expense................................. 24.9 25.9 24.6 23.4 21.1 15.3
----- ----- ----- ----- ----- -----
Income from operations.................... 1.6 3.0 7.4 6.3 7.8 17.4
Interest expense.......................... 0.3 0.3 0.3 0.2 0.3 0.2
----- ----- ----- ----- ----- -----
Income before income taxes................ 1.3 2.7 7.1 6.1 7.5 17.2
Provision for income taxes................ 0.7 1.4 3.6 3.1 3.0 7.0
----- ----- ----- ----- ----- -----
Net income................................ 0.6% 1.3% 3.5% 3.0% 4.5% 10.2%
===== ===== ===== ===== ===== =====
</TABLE>
The Company's revenue and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, and IT professional
deployment, hiring, attrition and utilization rates. Because a significant
percentage of the Company's selling, general and administrative expense is
relatively fixed, variations in revenues may cause significant variations in
operating results. Due to seasonal business fluctuations resulting in fewer
working days, the Company's increase in revenues, gross profit, and income from
operations as a percentage of revenues tend to be lower for the fourth fiscal
quarter than for the first three fiscal quarters.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Under the provisions of SFAS No. 123, companies may
elect to account for stock-based compensation plans using a fair-value-based
method or may continue measuring compensation expense for those plans using the
intrinsic-value-based method. Companies electing to continue using the
intrinsic-value-based method must provide pro forma disclosure of net income and
earnings per share as if the fair-value-based method had been applied.
Management intends to account for stock-based compensation using the
intrinsic-value-based
18
<PAGE> 20
method and, as such, SFAS No. 123 will not have an impact on the Company's
results of operations or financial position. The required disclosure will be
provided in the Company's financial statements after stock options have been
granted.
The FASB also recently issued SFAS No. 128, "Earnings Per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structures." SFAS No. 128 was
issued in February 1997 and is effective for periods ending after December 15,
1997. This statement, upon adoption, will require all prior period earnings per
share ("EPS") data to be restated to conform to the provisions of the statement.
This statement's objective is to simplify the computations of EPS and to make
the U.S. standard for EPS computations more compatible with that of the
International Accounting Standards Committee. The Company will adopt SFAS No.
128 beginning with its fiscal year ending December 31, 1997. The adoption of
SFAS No. 128 will have no impact on the Company's reported EPS.
SFAS No. 129 was issued in February 1997 and is effective for fiscal
periods ending after December 15, 1997. This statement, upon adoption, will
require all companies to provide specific disclosure regarding their capital
structure. SFAS No. 129 will specify the disclosure for all companies, including
descriptions of their capital structure and the contractual rights of the
holders of such securities. The Company will adopt SFAS No. 129 beginning with
its fiscal year ending December 31, 1997 and does not anticipate that the
adoption of SFAS No. 129 will have a significant impact on its disclosure.
19
<PAGE> 21
BUSINESS
UBICS is a rapidly growing provider of IT professional services to large
and mid-sized organizations. UBICS provides its clients with a wide range of
professional services in such areas as client/server design and development, ERP
package implementation and customization, applications maintenance programming
and database administration. UBICS' services are provided on a
time-and-materials basis to client-managed projects, with UBICS IT professionals
providing integral support as project team members. Since commencement of full
operations in 1994, the Company's revenues have grown from $303,000 for 1994 to
$9.1 million for 1996 and to $5.1 million for the quarter ended June 30, 1997.
The Company attributes its growth in revenues in 1997 primarily to an increased
focus on higher value-added services, particularly ERP package implementation
and customization services.
In the first six months of 1997, UBICS provided IT professional services to
over 80 clients in a range of industries and locations. The Company's clients
include Caterpillar, CompUSA, El Paso Natural Gas, Fruit of the Loom, Ralston
Purina and The Hartford. UBICS' high standards for responsiveness and service
quality promote growing client relationships and recurring revenues. The Company
believes that its centralized, low-overhead operating model enables it to
respond quickly to client demand for IT professional services. UBICS meets this
demand through its employed IT professionals and its management of an extensive
network of subcontractors. The Company currently has approximately 200 IT
professionals deployed with its clients in the U.S.
One of the key factors supporting UBICS' growth has been its ability to
recruit and deploy, on short notice, skilled IT professionals. The Company
recruits IT professionals from India and other countries worldwide. In order to
ensure a continuous supply of IT professionals for higher value-added
specialties, the Company intends to use a portion of the proceeds of the
Offering to establish a recruiting and training center in India by June 1998.
The Company will use this center to enhance its recruiting efforts and to train
its IT professionals prior to placement. The Company also selectively uses the
substantial resources and established reputation of its affiliate, the UB Group,
to support its recruiting efforts. The UB Group is a multinational group of
companies headquartered in India. See "--The UB Group," "Management--
Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions."
THE IT SERVICES INDUSTRY
The growing worldwide demand for IT services has been driven by the
increasing reliance on IT as a strategic tool for addressing critical business
issues. Intense competition, deregulation, globalization and technological
innovation are accelerating the rate of change in business. Organizations face
constant pressures to improve product and service quality, reduce costs,
increase responsiveness, improve operating efficiencies and strengthen customer
relationships. In order to achieve these objectives, organizations are
re-engineering their business processes and improving the information systems
which enable and support the re-engineered processes. Simultaneously, rapid
advances in technology have accelerated demand for the transition from mainframe
to client/server architectures and from separate systems to enterprise-wide
integrated applications.
As a result of the variety and complexity of new technologies, IT
departments must integrate and manage distributed computing environments
consisting of multiple operating systems, databases, programming languages and
networking protocols. IT departments must also implement custom and packaged
software applications to support business objectives. In many cases, the
organization's internal IT staff lacks the skills necessary to address these
changing technologies. IT departments have also been overwhelmed by the large
number of software applications that need to be rewritten, re-engineered or
converted in order to effect the transition to newer technologies and address
issues such as the Year 2000 problem.
Faced with the challenge of implementing and operating more complex
information systems, many organizations are increasingly utilizing experienced
third-party IT service providers to assist in the development, implementation
and maintenance of IT solutions and services. Utilizing third-party IT service
providers: (i) allows a company's management to focus on core business
operations; (ii) increases the ability to adapt to and keep pace with rapidly
changing and increasingly complex technologies; (iii) provides access to
specialized technical skills on a temporary, project-by-project basis; (iv)
better matches staffing requirements to current needs, converting fixed labor
costs into variable costs; and (v) reduces the cost of recruiting, training and
terminating employees as evolving technologies require new programming skill
sets.
20
<PAGE> 22
A significant change has also occurred in recent years within the
population of IT professionals. These professionals increasingly are choosing to
work as consultants for IT service providers rather than as employees of a
single organization's IT department. IT professionals are attracted by the
ability of IT service providers to continually place them on new projects in
diverse industries and work environments, keep them current in technology and
develop their technical careers. In addition, such professionals generally are
able to maintain compensation levels comparable to or higher than that of
similarly skilled, full-time employees of end-user companies.
These factors have resulted in significant growth in the IT services
market. According to industry sources, the worldwide market for IT services was
estimated at $140 billion in 1996, with a projected market of $258 billion in
the year 2000. The U.S. IT services market is projected to grow from $56 billion
in 1996 to $97 billion in the year 2000.
The Company believes that the following key industry trends will have a
major influence on the IT services market:
Shortage of IT Professionals
There is a growing shortage of IT professionals in developed countries,
particularly the U.S., Western Europe and Japan. As companies continue to
migrate from centralized mainframe architectures to distributed client/server
technologies, the demand for IT professionals will rise. As an example, an
industry source predicts a 60% increase in the number of organizations utilizing
client/server platforms through the year 2000. In addition, the Year 2000
problem and Euro-currency conversions will exacerbate the shortage of IT
professionals over the next several years.
Growth in ERP Software
Organizations are increasingly turning to ERP software applications such as
Baan, PeopleSoft and Oracle. ERP packages typically consist of integrated
production, distribution, order entry and financial applications, enabling a
single transaction to affect all relevant areas of a company's operations. By
customizing and deploying these large, integrated applications packages,
organizations seek to replace, on a global, enterprise-wide basis, their aging
legacy applications, which have limited functionality and integration. However,
the implementation of these packages is a major undertaking and requires highly
specialized skill sets and functional expertise, which are in short supply and
command higher compensation.
Increasing Maintenance and Conversion Requirements
Many businesses and government organizations are currently faced with major
computer maintenance and conversion projects, including those related to the
Year 2000 problem and required Euro-currency conversions. Industry sources
estimate that a medium-sized company will spend approximately $4.0 million on
the Year 2000 problem, and that the total cost worldwide may exceed $300
billion. These one-time projects are occurring at the same time as demand is
increasing for major system upgrades and for conversion to advanced systems.
21
<PAGE> 23
BUSINESS STRATEGIES
UBICS' objective is to become a leading worldwide provider of IT services
by continuing its record of growth. The Company's business strategies leverage
the Company's strengths, distinguish UBICS from its competitors and position it
to capitalize on market opportunities for growth. The key elements of these
strategies are discussed below:
Cultivate and Expand Client Base
UBICS seeks to add new clients and enhance existing client relationships by
continuing to expand its sales and marketing efforts. These expanded efforts
include hiring additional sales personnel, marketing in new geographic
territories, leveraging existing customers to gain referrals, offering new
services, increasing market awareness of the Company through advertising and
attendance at technology conferences and selectively opening new offices. The
Company recently opened an office in the San Francisco area to increase its base
of clients in California, particularly the Silicon Valley market. The Company's
sales professionals seek to maintain close contact with existing clients and
visit client sites on a regular basis. Also, the Company's use of its network of
subcontracting firms enables it to better meet client needs by providing access
to a broader selection of skilled IT professionals.
Attract and Retain High-Quality IT Professionals
UBICS' growth has been driven by its ability to recruit and deploy, on
short notice, experienced IT professionals. The Company benefits from the
established reputation of its affiliate, the UB Group, and plans to establish a
recruiting and training center in India by June 1998 to enhance its recruiting
efforts there and to increase the skill base of its IT professionals. The
Company also plans, during the second half of 1998 and during 1999, to establish
offices in South Africa, the United Kingdom, Singapore and the Middle East,
where the UB Group has an established presence, in order to increase its
recruiting depth.
Leverage Centralized Low-Overhead Operating Model
UBICS has a centralized approach to selling and servicing its U.S. client
base. The Company currently serves over 80 clients in 28 states from its
corporate headquarters in Pittsburgh, Pennsylvania. This strategy has provided
the Company with the benefits of a national presence without the costs
associated with a large network of relatively autonomous branch offices. While
the Company has recently opened an office in the San Francisco area and may
selectively open other branch sales and marketing offices, these offices will
leverage the Company's headquarters infrastructure and add only incremental
overhead costs.
Provide ERP Software Services
UBICS leverages its client/server expertise by providing implementation and
customization services for Baan, PeopleSoft and Oracle ERP packages. A number of
the Company's IT professionals are trained on these ERP packages and the Company
intends to open a recruiting and training center in India to train additional IT
professionals on such packages. In addition, the Company is seeking alliances
with ERP applications vendors in order to increase its presence in this area.
During the quarter ended June 30, 1997, the Company placed 15 IT professionals
on ERP projects. For the month ended August 31, 1997, the Company derived
approximately 30% of its revenues from IT professionals deployed on ERP
projects.
Continually Broaden Range of Services
UBICS provides its clients with a wide range of professional services,
which enables it to meet the critical needs of its clients on short notice, for
a range of projects in such areas as client/server design and development, ERP
package implementation and customization, applications maintenance programming
and database administration. The Company intends to continually broaden the
range of services it offers, particularly in higher value-added specialties, in
order to better meet the needs of its clients. Included among such services are
Year 2000 and Euro-currency conversions. After the Company establishes its
offshore recruiting offices, it also intends to evaluate the establishment of an
offshore software development center to cost-effectively meet clients' needs for
outsourced projects.
22
<PAGE> 24
SERVICES
The Company's IT professionals help clients identify, analyze and solve
data processing and computing problems in such areas as: (i) client/server
design and development; (ii) ERP package implementation and customization; (iii)
applications maintenance programming, including Year 2000 conversion services;
and (iv) database and system administration. These services are provided in a
variety of computing environments utilizing leading technologies including
client/server architectures, object-oriented programming languages and tools,
distributed database management systems, computer-aided software engineering
("CASE") tools, ERP packages, groupware and advanced networking and
communications technologies. The Company's engagements cover every aspect of the
life cycle of computer systems, from strategy and design to development and
implementation and, finally, to maintenance and support.
All of the Company's services are provided on a time-and-materials basis
with UBICS IT professionals providing services as members of the client's
project team. Generally, these services are provided on-site to clients whose
current personnel do not have the requisite technical skills or to clients with
specific projects requiring additional staffing that do not justify permanent
personnel increases. The scope of the work performed by the Company ranges from
specific, minor tasks of three months in duration involving a single IT
professional to large, complex tasks that require several IT professionals for a
year or longer. Examples of larger tasks include developing new client/server
systems and maintaining mature mainframe systems that cannot be quickly
replaced.
ERP software services consist primarily of assisting clients in
implementing and customizing package application software on client/server
systems. Clients seeking these services are generally businesses that are
migrating from legacy mainframe applications or are implementing enterprise-wide
client/server architectures. The Company believes that as package software
companies such as Baan and PeopleSoft further enhance the functionality and
performance of their products and such products become more widely used, ERP
software services will continue to present an increasing opportunity for the
Company.
The Company will seek to expand the volume of ERP software services that it
provides by developing relationships with package software firms. In addition,
the Company intends to use a portion of the proceeds of the Offering to purchase
additional hardware and software and supporting facilities that will enable it
to train its IT professionals in the use and implementation of such ERP package
software. The market for ERP software services is an attractive one for the
Company because such projects have a longer duration, are billed at higher rates
and carry higher margins.
The Company continually adjusts the scope of services which it provides in
order to meet the changing needs of its clients. For example, the Company has
recently begun to provide Year 2000 services. As demand for a new service
arises, the Company intends to recruit and train IT professionals to meet such
demand.
23
<PAGE> 25
The Company's services are described below:
<TABLE>
- ---------------------------------------------------------------------------------------------
UBICS SERVICES METHODS/TOOLS DESCRIPTION
<S> <C> <C>
Client/Server Design and - Tools/Languages: - System design
Development PowerBuilder, Visual Basic, - Requirements analysis and
Developer 2000, Delphi, SQL definition
Windows, Visual C++, Java, - Data modeling
Lotus Notes, Smalltalk - Prototyping
- Development
- Databases: Oracle, - Testing and implementation
Informix, - Network design
Sybase, SQL Server, Unify - Internet/intranet solutions
- Legacy transformation/
- CASE Tools: ER-Win, data porting
Designer 2000, IEF
- ---------------------------------------------------------------------------------------------
ERP Package Implementation - ERP Packages: Baan, - Implementation of packaged
and Customization PeopleSoft, Oracle, SAP software solutions
- Customization
- Integration
- Data modeling
- System support
- Database administration
- End-user training
- ---------------------------------------------------------------------------------------------
Applications Maintenance - Programming environments: - System design
Programming COBOL, CICS, PL/1, - Development
RPG/400, COBOL/400 - Program conversion
- Data conversion
- Databases: DB2, IMS, IDMS - User interface conversion
- Testing and implementation
- Y2K Tools: MicroFocus - Date conversion
Revolve
- ---------------------------------------------------------------------------------------------
Database and System - Databases: Oracle, - Database administration
Administration Informix, - Datawarehousing
Sybase, SQL Server, Unify - Network administration
- Unix and Windows NT
- Tools: HP OpenView, system administration
CiscoWorks, Bytex Network
Management System,
AT&T OneVision
- ---------------------------------------------------------------------------------------------
</TABLE>
SALES AND MARKETING
The Company believes that a key factor in its revenue growth has been the
expertise of its sales and marketing team. UBICS focuses its sales effort
primarily on placing its IT professionals in high value-added positions within
large and mid-sized organizations through a direct sales force currently
consisting of ten professionals. Since June 1996, the Company has more than
doubled the size of its sales organization. The Company serves the U.S. market
primarily through its headquarters in Pittsburgh, Pennsylvania. UBICS leverages
the mobility of its IT professionals and its centralized, low-overhead sales and
marketing effort to service all areas of the U.S.
24
<PAGE> 26
The Company's sales force is organized primarily by geographic region. The
Company's sales professionals are responsible for managing client relationships
and identifying new business opportunities within their assigned regions. UBICS'
sales professionals are required to meet monthly targets for new accounts and
placements, based upon the experience and tenure of the sales professional.
Compensation of sales professionals is based heavily upon incentives for strong
financial performance, including gross margin contribution, within their region.
In addition to its geographic focus, the Company has recognized the rapid
growth in ERP implementations as well as the specialized requirements of these
projects, and is focusing specifically on this sector. Approximately one-fourth
of the Company's IT professionals were placed in ERP projects as of September
30, 1997.
The Company's sales organization employs a variety of methods to identify
potential clients and industry trends, including referrals from existing clients
and the Company's IT professionals. The Company's sales professionals begin the
sales process by identifying and analyzing the prospective client's existing
software configuration and development requirements, and the size and scope of
its internal IT resources. The sales professional then submits a proposal with
the resumes of IT professionals having skills that match the prospective
client's project requirements. The Company's ability to closely match its IT
professionals with the client's IT needs enables the Company's sales
professionals to offer a 30 day guarantee. If the client is not satisfied with
an IT professional's services during the first 30 days of an assignment, the
Company will not charge the client for such professional's services. After the
client has engaged the Company, the sales professional continuously monitors and
builds the relationship between the client and the IT professionals to ensure
client satisfaction and the successful progress and completion of the
assignment.
While the Company's focus remains on expanding its sales and marketing
efforts in the U.S., it intends to increase its international operations by
opening offices in South Africa, the United Kingdom, Singapore and the Middle
East where the UB Group has an established presence. The Company believes it
will benefit from the UB Group's existing presence and reputation for quality
and by leveraging cost-effectively the UB Group's infrastructure in those areas.
The Company intends to use the UB Group's established offices in those locations
and UB Group personnel and support services at such offices until the Company's
own offices have been established. The Company's cost of using such offices,
personnel and support services will be based on the UB Group's cost and
allocable overhead, which the Company believes is a cost-effective method of
increasing its international operations. See "--The UB Group."
In addition to UBICS' pursuit of new clients, the Company actively markets
its services to its existing clients, seeking to proactively meet the needs of
its clients and maximize placement success. The Company's success in developing
and retaining clients is due, in large part, to its ability to maintain a
continuous supply of qualified IT professionals. This is made possible by the
Company's extensive network of nearly 50 subcontracting firms from which it can
source qualified IT professionals to supplement, if necessary, its employed IT
professionals. The Company believes that this network of subcontractors provides
the Company with a significant sales and marketing advantage. The Company's
relationship with these subcontractors ensures that the Company can effectively
meet client needs quickly, thus establishing UBICS as a primary provider of IT
professional services.
CLIENTS
Substantially all of the Company's clients are large and mid-sized
companies, systems integrators or other significant users of IT. During 1997,
the Company has provided services to over 80 clients in a range of industries in
the U.S. For the first six months of 1997, approximately 37% of the Company's
revenues were derived from its top five clients--El Paso Natural Gas, Fruit of
the Loom, The Hartford, Access Graphics and CompUSA. El Paso Natural Gas
accounted for approximately 14% and 11% of the Company's revenues for 1996 and
for the first six months of 1997, respectively.
25
<PAGE> 27
The following is a partial list of organizations to which the Company has
provided, or is providing, services:
<TABLE>
<CAPTION>
TECHNOLOGY RETAIL INDUSTRIAL
----------------------- ---------------------- --------------------
<S> <C> <C>
Access Graphics Advance Auto Parts Caterpillar
AMP Blockbuster Cummins
Baan CompUSA El Paso Natural Gas
Hughes Network Systems Home Shopping Network General Electric
NextLevel Systems Long John Silver's Johnson Controls
Oracle Sears PPG
</TABLE>
<TABLE>
<CAPTION>
CONSUMER PRODUCTS FINANCIAL
----------------------- --------------
<S> <C>
Fruit of the Loom Associates
McGraw-Hill Equitable
Paramount GE Capital
Philips Electronics State Farm
Ralston Purina The Hartford
</TABLE>
The Company seeks to provide high quality, responsive service in order to
maximize its client retention rate and secure follow-on engagements. A
significant number of the Company's clients have selected UBICS to provide
additional services.
HUMAN RESOURCES
The Company's success depends in large part on its ability to attract,
develop, motivate and retain highly skilled IT professionals. As of September
30, 1997, the Company had 191 IT professionals deployed at client sites. The
Company currently has five full-time resource managers dedicated to recruiting
IT professionals and managing human resources, all of whom have technical
backgrounds that enable them to effectively evaluate the skills and
qualifications of potential candidates. The Company also has a recruiting
manager dedicated to managing relationships with the Company's network of
subcontractors. UBICS takes a proactive approach to recruiting based on skills
requirements forecasts. The Company continually receives resumes from
prospective employees in response to advertisements placed in trade publications
and newspapers and on the internet. In addition, UBICS IT professionals are
actively involved in identifying and referring new employees and screening
candidates for new positions. The Company recruits primarily in India, but also
has recruited from other areas of the world, including the U.S., the United
Kingdom, the Middle East and the Far East.
As a result of its affiliation with the UB Group, UBICS benefits from the
established reputation and infrastructure that the UB Group has in India. A
priority for the Company is the expansion of its recruiting and training
infrastructure in India. In addition, the Company plans to expand its global
recruiting network by opening offices in South Africa, the United Kingdom,
Singapore and the Middle East and other countries where the UB Group has an
established presence.
UBICS employs a stringent selection method that consists of a three-stage
interview process. During the first stage, a general interview is conducted to
gather background information and references. The candidate next has a technical
interview with a UBICS resource manager or IT professional. During the final
step, a sales professional interviews the candidate to assess the candidate's
client interaction skills and to verify the candidate's suitability for
assignment to a project in the U.S.
26
<PAGE> 28
The Company believes that the qualifications of its IT professionals give
it a competitive edge. To maintain and enhance their skills, UBICS IT
professionals attend training workshops and seminars where they learn to use the
latest tools and techniques. The Company intends to use its training facility in
India, when established, to train UBICS IT professionals in ERP software
packages and other higher value-added technologies, and thereby enhance the
skill base of such professionals.
The Company maintains a database which catalogs the technical profiles,
location, availability, mobility and other factors relating to available IT
professionals. This database enables the Company to quickly identify and deploy
appropriate IT professionals for various client engagements.
The Company's IT professionals typically have Masters or Bachelors degrees
in Computer Science or another technical discipline as well as at least two
years of IT experience. As of September 30, 1997, the Company had 142 employees
comprised of 117 IT professionals, ten sales and marketing personnel and 15
general and administrative personnel. Over 90% of the Company's IT professionals
are citizens of other countries, with most of those in the U.S. working under
H-1B temporary work permits. UBICS engages legal counsel to prepare, file and
process H-1B visa applications with the U.S. Immigration and Naturalization
Service. See "Risk Factors--U.S. Regulation of Immigration."
The Company also uses subcontracted IT professionals to effectively meet
client needs when UBICS IT professionals are unavailable. The Company maintains
strong relationships with nearly 50 vendor subcontractors located worldwide. As
of September 30, 1997, 83 of its deployed IT professionals, or approximately
43%, were supplied by subcontractors. As the Company increases its investment in
recruiting and retaining qualified IT professionals, it believes the ratio of
UBICS IT professionals to IT professionals deployed from subcontractors will
increase. It has been and continues to be to the Company's advantage, however,
to maintain this subcontractor network to help meet its clients' needs. The
Company applies the same process and standards in selecting IT professionals
from subcontractors as it does in recruiting its employed IT professionals.
The Company has a focused employee retention strategy that includes career
planning, training and benefits. Additionally, the Company believes that its
ability to recruit and retain IT professionals should be further enhanced by its
ability to offer employees stock-based incentive awards, such as stock options,
after the Offering.
COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms, systems
consulting and implementation firms, applications software firms, service groups
of computer equipment companies, general management consulting firms, contract
programming companies and temporary staffing firms. Many of these competitors
have substantially greater financial, technical and marketing resources and
greater name recognition than the Company. In addition, there is a risk that
clients may elect to increase their internal IT resources or limit the number of
outside service providers to satisfy their applications solutions needs. The
Company believes that the principal competitive factors in the IT services
industry include the range of services offered, technical expertise,
responsiveness to client needs, quality of service and perceived value. The
Company believes that it competes favorably with respect to these factors.
27
<PAGE> 29
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of nondisclosure and other
contractual arrangements, including entering into confidentiality agreements
with its employees, and trade secret, copyright and trademark laws to protect
its proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company has filed a U.S. trademark
registration application covering the service mark "UBICS" which, if granted,
would give the Company the presumption of ownership in the U.S. of the "UBICS"
mark for the services identified in the registration. Although the Company does
not deem trademarks or service marks to be material to its business, when in its
best interests, the Company seeks such protection for its services. There can be
no assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of proprietary information or that the Company will be
able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.
FACILITIES
The Company's corporate headquarters is located in the Pittsburgh suburb of
Upper St. Clair, Pennsylvania. The Company's senior management, administrative
personnel, human resources and sales and marketing functions are housed in this
4,838 square foot facility which is leased by the Company pursuant to a lease
agreement which expires on May 31, 1999. The Company believes that this location
has sufficient space for its current and anticipated near-term needs. The
Company also leases a 4,439 square foot office in the San Francisco suburb of
Sausalito, California pursuant to a lease agreement which expires on June 2,
1999 for use as a sales and marketing office. The Company intends to sublease
approximately 3,000 square feet of this space to its affiliate, the UB Group,
pursuant to a sublease agreement which will expire on June 2, 1999 (subject to
obtaining the written consent of the lessor of such premises). See
"Management--Compensation Committee Interlocks and Insider Participation."
THE UB GROUP
The UB Group is one of the leading industrial groups of India with
operations in Asia, the Far East, the Middle East, Africa, Europe and the U.S.
The UB Group, which is headquartered in Bangalore, India, consists of companies
under the control of Vijay Mallya, Chairman of the Company and the indirect
beneficial owner of 94.7% of the outstanding shares of Common Stock prior to the
Offering. Companies in the UB Group are principally engaged in the manufacture
and sale of beer, spirits, pharmaceuticals, paint and coating products and in
the hotel and resort business. The worldwide revenue of the companies in the UB
Group is currently approximately $1 billion per annum. The UB Group also has
joint ventures in India with a number of leading international companies,
including Hoechst AG for pharmaceuticals, United Distillers (Guinness) for
spirits and Carlsberg for beer. See "Management--Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions."
LITIGATION
The Company is not a party to any litigation.
28
<PAGE> 30
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers, directors and director nominees, each of
whom has agreed to serve as a director upon completion of the Offering, and
their respective ages and positions as of September 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------
<S> <C> <C>
Vijay Mallya.................. 41 Chairman
Manohar B. Hira............... 57 President and Director
O'Neil Nalavadi............... 37 Senior Vice President, Chief Financial
Officer and Director
Babu Srinivas................. 42 Vice President--Finance, Accounting and
Administration
Craig A. Wolfanger............ 39 Nominee
Dennis S. Meteny.............. 44 Nominee
</TABLE>
Vijay Mallya has been the Chairman of the Company since its inception in
July 1993. Mr. Mallya has been chairman of the UB Group since 1983. Mr. Mallya
also is Chairman of United Craft Brewers, Inc., United Breweries Limited, UB
Engineering Limited, Mangalore Chemicals and Fertilisers Ltd., Herbertsons
Limited, McDowell & Co. Ltd. and other UB Group companies. He also sits on
boards of several foreign companies and organizations including companies
comprising the UB Group, The Institute of Economic Studies (India) and the
Federation of the Indian Chamber of Commerce and Industries. Mr. Mallya provides
strategic advice and guidance to the Company and will devote such time as is
necessary to fulfill his role as Chairman of the Company.
Manohar B. Hira has served as President and a director of the Company since
it was founded in 1993. Mr. Hira also served in various senior management
capacities for companies in the UB Group from 1981 to 1995, including Chief
Operating Officer--U.S. IT Operations, Export Manager, General Manager--Human
Resources and Vice President--Administration. Mr. Hira is a mechanical engineer
and has a Masters degree in management.
O'Neil Nalavadi has been Senior Vice President, Chief Financial Officer and
a director of the Company since August 1997. Mr. Nalavadi also has served in
various senior management capacities for companies in the UB Group from 1984 to
August 1997, including Senior Vice President of the Corporate Management
Division--UB Group from 1995 to August 1997, Chief Operating Officer and
director of United Breweries Plc. from December 1992 to January 1995 and General
Manager--Corporate Planning & Coordination of UB International Ltd. from January
1989 to December 1992. Mr. Nalavadi also is a director of United Craft Brewers,
Inc. and is a Chartered Accountant in India.
Babu Srinivas has been Vice President--Finance, Accounting & Administration
of the Company since April 1996. Mr. Srinivas served in various senior
management capacities for companies in the UB Group, including senior
manager--internal audit, controller and general manager, from 1990 to March
1996. Mr. Srinivas is a Chartered Accountant in India.
Craig A. Wolfanger has agreed to join the Board of Directors upon
completion of the Offering. Mr. Wolfanger has been Senior Managing Director of
Parker/Hunter Incorporated, an investment banking firm, since 1995. Mr.
Wolfanger also serves on the Management Committee at Parker/Hunter Incorporated.
From 1991 to 1995, Mr. Wolfanger was Senior Managing Director of the Corporate
Finance Division of PNC Securities Corp. Mr. Wolfanger previously was employed
in the investment banking departments of Alex. Brown & Sons Incorporated and
Kidder, Peabody & Co. Incorporated.
Dennis S. Meteny has agreed to join the Board of Directors upon completion
of the Offering. Mr. Meteny has been a director of Respironics, Inc.
("Respironics") since January 1986 and President and Chief Executive Officer of
Respironics since November 1994. From August 1992 through November 1994, Mr.
Meteny served as Executive Vice President and Chief Operating and Financial
Officer of Respironics. He also served as Vice President--General Manager and
Chief Financial Officer of Respironics from January 1988
29
<PAGE> 31
through August 1992 and was Vice President--Finance and Accounting from 1984
through January 1988. For eight years prior to joining Respironics he was
employed as an accountant in various auditing capacities by Ernst & Young LLP.
The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors.
The Board of Directors currently consists of three members. Upon completion
of the Offering, the Board of Directors will be increased to five members and
Messrs. Wolfanger and Meteny will be appointed to fill the two vacancies. The
Board of Directors is divided into three classes, each of whose members serve
for a staggered three-year term. The Board is comprised of one Class I Director
(Mr. Nalavadi), two Class II Directors (Mr. Hira and, upon his appointment to
the Board, Mr. Meteny) and two Class III Directors (Mr. Mallya and, upon his
appointment to the Board, Mr. Wolfanger). At each annual meeting of
stockholders, the appropriate number of directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. The terms of the Class I Directors, Class II Directors and Class III
Directors will expire upon the election and qualification of successor directors
at the annual meetings of stockholders held in calendar years 1998, 1999 and
2000, respectively. There are no family relationships between any director or
executive officer of the Company.
KEY EMPLOYEES
Certain information regarding the following persons, each of whom also are
considered key employees of the Company, is set forth below:
Scott A. Baxendell has been Director of Marketing of the Company since June
1995 with responsibilities including sales, hiring sales professionals,
geographic distribution of sales territories and training junior sales
representatives. From 1992 to June 1995, Mr. Baxendell was employed by Mastech
Corporation ("Mastech") as a National Account Manager with responsibilities
including contacting prospective clients, sales, maintaining client
relationships and training junior sales representatives.
Anthony P. Kernan has been Director of Sales of the Company since June 1995
with responsibilities including opening and maintaining national accounts,
hiring sales professionals and personnel, and training junior sales
representatives. From 1992 to June 1995, Mr. Kernan was employed by Mastech as a
National Account Manager with responsibilities including sales and marketing of
Mastech software consulting and contract programming services.
Jolly Joseph Paily has been General Manager, Software Development--Resource
of the Company since February 1996. Mr. Paily served as a systems analyst for
SKL Technologies Pte. Ltd. from 1995 to February 1996, software consultant for
Blue Star Ltd. from October 1993 to January 1995, and an analyst programmer for
Nippon Denro Ispat Ltd. from August 1992 to September 1992.
Gaurang Damani has been General Manager, Software Development--Technical of
the Company since April 1996. Mr. Damani was a programmer/systems analyst for
Tata Unisys Ltd. from September 1993 to April 1996 and a graduate engineer
trainee with Larsen & Toubro from July 1993 to August 1993.
BOARD COMMITTEES
The Company's Audit Committee will be responsible for: (i) making an annual
recommendation to the Board of Directors to appoint independent public
accountants to audit the financial statements of the Company and to determine
the scope of such audits; (ii) meeting with the Company's independent public
accountants and with its internal accountants to review all accounting controls
and procedures of the Company; (iii) reviewing the reports from the Company's
independent public accountants with respect to management's compliance with U.S.
laws and regulations and the Company's policies with respect to ethics,
conflicts of interest and disbursements of funds; and (iv) reporting to the
Board of Directors with respect to the results of clauses (i), (ii) and (iii)
above. The members of the Audit Committee have not yet been appointed. A
majority of the members of the Audit Committee will be independent directors.
30
<PAGE> 32
The Compensation Committee will be responsible for administering any stock
option or stock purchase plans, unless otherwise provided by such plan or the
Board of Directors, and for reviewing and making recommendations to the Board of
Directors with respect to salaries, bonuses and other compensation of the
Company's executive officers. The Compensation Committee will administer the
1997 Plan. The members of the Compensation Committee have not yet been
appointed. A majority of the members of the Compensation Committee will be
independent directors.
The Board of Directors does not have a nominating committee. The selection
of nominees for the Board of Directors will be made by the entire Board of
Directors.
DIRECTOR COMPENSATION
The Company will pay each director who is not an executive officer an
annual retainer of $20,000, and all directors will be reimbursed for travel
expenses incurred in connection with attending board and committee meetings.
Directors are not entitled to additional fees for serving on committees of the
Board of Directors. In addition, under the 1997 Plan each independent director
of the Company will be granted options to purchase 20,000 shares of Common Stock
at an exercise price equal to the initial public offering price in the Offering
upon completion of the Offering. See "Management--Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee prior to the Offering.
Accordingly, Messrs. Mallya and Hira, the Company's Chairman and President,
respectively, had responsibility for all decisions with respect to executive
officer compensation.
Mr. Mallya, Chairman and the beneficial owner of 94.7% of the outstanding
shares of Common Stock of the Company, is also deemed to be in "control" (within
the meaning of the Securities Act of 1933, as amended (the "Securities Act")) of
each company that is a member of the UB Group. See "Business--The UB Group." Any
transaction between the Company, on the one hand, and a company in the UB Group,
on the other hand, is a transaction between "affiliates" (within the meaning of
the Securities Act). In addition, Mr. Hira, President and a director of the
Company, was employed in various senior management capacities with the UB Group
and its affiliate, UB Services (as defined herein), from 1981 to 1995, and Mr.
Nalavadi, Senior Vice President, Chief Financial Officer and a director of the
Company, has been employed in various senior management capacities with the UB
Group since 1984. See "Management--Executive Officers and Directors."
In 1995, the Company made an advance to the UB Group of $150,000 which was
repaid in 1996. In 1996, the Company borrowed $258,000 from the UB Group, of
which $100,000 was repaid in 1996. In the six months ended June 30, 1997, the
Company had net advances and repayments to the UB Group of $170,000. At June 30,
1997, net advances to the UB Group were $12,000. Generally, such advances were
for working capital. In July 1996, the Company obtained the Line of Credit and
ceased utilizing advances from the UB Group to fund its working capital needs.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
From time to time, the UB Group has provided certain services to the
Company, primarily involving the provision of administrative services to the
Company by UB Group employees and allowing the Company the use of certain office
space and facilities in locations where the UB Group has an office. Prior to
1997, such services were provided on an informal basis and not under a written
contractual arrangement, although the Company reimbursed the UB Group for any
out-of-pocket cost of the services provided. The aggregate annual value of the
services provided by the UB Group to the Company was less than $10,000 in each
of 1995 and 1996 and is expected to be less than $20,000 in 1997. The UB Group
and the Company intend to enter into a Services Agreement (the "Services
Agreement") pursuant to which the UB Group will provide services and
accommodations to the Company, both in India and in other countries where the UB
Group has an office or location, from time to time on an as needed basis. The
Services Agreement will require the Company to pay the UB Group company
providing the services or accommodations compensation on terms no less favorable
than those which would be made to non-affiliated parties. Compensation for
services will be based on the
31
<PAGE> 33
estimated costs, including a reasonable allocation of direct and indirect
overhead costs, incurred by the UB Group company providing the services.
Compensation for use of facilities of a UB Group company will be based on the
provider's costs (including rent, taxes, utilities and other operating expenses)
for the portion of the facility used by the Company, prorated based on the
number of days of each month the Company actually uses the facility. The costs
incurred by the Company in the future pursuant to this agreement are expected to
be comparable to the costs incurred for such services for prior fiscal years.
One member of the UB Group, UB Information & Consultancy Services Ltd. ("UB
Services"), provided subcontracted IT professionals to the Company during 1994,
1995 and the first three months of 1996, for which UB Services charged the
Company $65,000, $231,000 and $102,000 in such respective periods. During 1994,
1995 and 1996, the Company collected receivables on behalf of UB Services, net
of collection expenses, totaling $424,000, $764,000 and $344,000, respectively,
and remitted $1,207,000 of these collections to UB Services. Upon completion of
the Offering, the Company has agreed to pay UB Services approximately $325,000,
the remaining net amount resulting from these transactions.
The Company and the UB Group also will enter into a non-competition
agreement pursuant to which the UB Group (including UB Services) will agree not
to compete with the Company or use the name "UBICS" and will cause UB Services
to cease business operations.
In addition, the Company intends to enter into a sublease agreement with
the UB Group pursuant to which the Company will sublease a portion of its office
space in Sausalito, California to the UB Group. Pursuant to the sublease, which
will be for a term expiring on June 2, 1999, the UB Group will pay its pro rata
share of the rent and operating expenses payable by the Company under its lease.
The UB Group's annual rental and operating expense payment under the sublease
will be approximately $83,000. See "Business--Facilities."
The Company incurred various expenses and personnel costs on behalf of the
UB Group during 1996 and 1997. Such expenses and costs totaled $257,000 for 1996
and $443,000 for 1997 (as of September 30, 1997). The Principal Stockholder has
agreed that, no later than the completion of the Offering, the Company will be
reimbursed for the expenses and costs incurred by the Company on behalf of the
UB Group during 1997. See "Use of Proceeds" and "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and Capital
Resources."
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
earned by the Company's Chairman and President (collectively, the "Named
Executive Officers") for the year ended December 31, 1996. No other executive
officer received salary and bonus compensation for the year ended December 31,
1996 in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
---------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- ----------------------------------------------- -------- ------- ------------
<S> <C> <C> <C>
Vijay Mallya
Chairman..................................... $125,000(1) $ -- $ --
Manohar B. Hira
President.................................... 60,000 15,000(2) 25,000(3)
</TABLE>
- ---------
(1) Amounts shown were paid in January 1997 for services rendered by Mr. Mallya
in 1996.
(2) Represents bonuses paid or to be paid to Mr. Hira in 1997 but earned in
1996.
(3) Represents amounts paid by the Company for Mr. Hira's use of a residence
($15,000) and an automobile ($10,000).
32
<PAGE> 34
STOCK OPTION PLAN
On September 2, 1997, the Board of Directors adopted, and the sole
stockholder of the Company approved, the 1997 Plan. Under the 1997 Plan, the
Compensation Committee of the Board of Directors is authorized to grant stock
options (with or without stock appreciation rights). The 1997 Plan has a 10-year
term and, subject to anti-dilution adjustments, a maximum of 750,000 shares of
Common Stock may be issued pursuant to exercise of options granted under the
1997 Plan. Directors, executive officers and other employees of the Company
(including any subsidiary of the Company) who, in the opinion of the Committee,
share responsibility for the management, growth, or protection of the Company
are eligible to receive stock options under the 1997 Plan.
The 1997 Plan permits the Company to grant to participants incentive stock
options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-statutory stock options, (i.e., stock options not
meeting the requirements of Section 422) and, in connection with a stock option
grant, stock appreciation rights ("SARs") and limited stock appreciation rights
("LSARs"). The term "option" as used in the following discussion without further
qualification means any of the foregoing. The Committee has the discretion to
determine the persons to whom grants of options shall be made and, subject to
the terms of the 1997 Plan, the terms and conditions of each stock option grant.
All securities to be issued upon exercise of options granted under the 1997
Plan will be issued by the Company out of its authorized, unissued stock or out
of repurchased shares held by the Company, or partly each. Such repurchased
shares held by the Company may have been purchased by the Company on the open
market or in private transactions from time to time.
The Committee will establish the exercise price of options at the time of
each grant. The exercise price of incentive stock options must be no less than
100% of the fair market value (determined as set forth in the 1997 Plan) of a
share of Common Stock on the grant date. The exercise price of incentive stock
options granted to a stockholder of the Company that owns more than 10% of the
total combined voting power of all classes of stock of the Company (a "Ten
Percent Employee"), must be no less than 110% of the fair market value of a
share of Common Stock on the grant date. Options become exercisable at such
times and in such installments as the Committee shall provide at the date of
grant. Options have a maximum term of 10 years (5 years for an incentive stock
option granted to a Ten Percent Employee). The option exercise price may be paid
in cash, in stock held by the optionee for at least six months prior to the
exercise date and owned free and clear of all liens or otherwise as the
Committee may approve.
If an optionee's employment by the Company is terminated for cause, all
options held by the optionee (whether or not then vested) will terminate and be
forfeited. The 1997 Plan also provides that outstanding vested options held by
an optionee who dies, becomes disabled, retires or voluntarily terminates his
employment may be exercised for a specified period following such event or as
determined by the Committee.
All outstanding options will vest in full and become exercisable upon the
occurrence of certain events specified in the 1997 Plan relating to a change in
control or possible change in control of the Company. In addition, any LSARs
granted in connection with a stock option will be exercisable for a period of 60
days following the occurrence of such events.
The Board has the authority to amend or terminate the 1997 Plan, provided
that stockholder approval of any amendment shall be obtained if the Board
determines, based on the recommendation of counsel, that stockholder approval is
necessary or advisable. No such amendment or termination does not adversely
affect any outstanding option unless the holder of such option has consented in
writing thereto.
As of September 30, 1997, the Company had not granted any options under the
1997 Plan. The Company intends to grant options to purchase an aggregate of
457,500 shares of Common Stock to its executive officers, directors and certain
other key employees under the 1997 Plan upon completion of the Offering at an
exercise price per share equal to the initial public offering price in the
Offering.
33
<PAGE> 35
EMPLOYMENT AGREEMENTS
UBICS has entered into substantially identical employment agreements with
Messrs. Mallya, Hira, Nalavadi and Srinivas pursuant to which each of them serve
as an executive officer of the Company. The initial terms of the employment
agreements are three years and the agreements provide for payment of an annual
base salary to Messrs. Mallya, Hira, Nalavadi and Srinivas of $150,000,
$120,000, $100,000 and $75,000, respectively, and an annual bonus as determined
by the Compensation Committee of the Board of Directors. The agreements with
Messrs. Mallya, Hira and Nalavadi automatically extend beginning on the second
anniversary of the agreements, so that the remaining term of each agreement is
always one year unless either party gives notice of their intention to terminate
the agreement at the end of the term. The agreements are terminable by UBICS
immediately for cause. The agreements prohibit the executive officers from
competing with UBICS during their employment with UBICS and for one year
thereafter, and from improperly disclosing or using UBICS' proprietary
information. The employment agreements also include the provisions relating to
severance described below.
The employment agreements with each of Messrs. Mallya, Hira, Nalavadi and
Srinivas provide that if, on or after the date of a "Change in Control" (as
defined herein), UBICS, for any reason, terminates the employee's employment or
the employee resigns "for good reason" (as defined herein), then UBICS shall pay
to the employee within five days following the date of termination or date of
resignation, as applicable: (i) the employee's salary and benefits through the
termination date or resignation date, both as in effect on the date prior to the
date of the Change in Control; and (ii) the amount of any bonus payable to the
employee for the year in which the Change in Control occurred, pro rated to take
into account the number of days that have elapsed in such year prior to the
termination date or resignation date. In addition, during a period following the
termination or resignation date equal to the remaining term of the employee's
employment agreement as of the date immediately prior to such termination or
resignation date, UBICS shall continue to pay to the employee his annual salary,
as in effect on the day prior to the date of the Change in Control, on the dates
when such salary would have been payable had the employee remained employed by
UBICS and shall continue to provide to the employee during such specified
period, at no cost to the employee, the benefits the employee was receiving on
the day prior to the date of the Change in Control or benefits substantially
similar thereto.
For purposes of the employment agreements, a "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity becomes the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of securities of UBICS representing
50% or more of the combined voting power of UBICS' then outstanding voting
securities; (ii) the individuals who as of the date of the agreements are
members of the Board of Directors of UBICS (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of UBICS
(provided, however, that if the election, or nomination for election by UBICS'
shareholders, of any new director was approved by a vote of at least a majority
of the Incumbent Board, such new director will, for purposes of such agreements,
be considered as a member of the Incumbent Board); (iii) an agreement by UBICS
to consolidate or merge with any other entity pursuant to which UBICS will not
be the continuing or surviving corporation or pursuant to which shares of the
Common Stock of UBICS would be converted into cash, securities or other
property, other than a merger of UBICS in which holders of the Common Stock of
UBICS immediately prior to the merger would have the same proportion of
ownership of Common Stock of the surviving corporation immediately after the
merger; (iv) an agreement of UBICS to sell, lease, exchange or otherwise
transfer in one transaction or a series of related transactions substantially
all of the assets of UBICS; (v) the adoption of any plan or proposal for a
complete or partial liquidation or dissolution of UBICS; or (vi) an agreement to
sell more than 50% of the outstanding voting securities of UBICS in one or a
series of related transactions other than an initial public offering of voting
securities registered with the Securities and Exchange Commission.
The term "good reason" means: (i) a material diminution by UBICS of the
employee's title or responsibilities, as that title and those responsibilities
existed on the day prior to the date of a Change in Control; or (ii) a material
diminution by UBICS in the employee's salary, benefits or incentive or other
forms of compensation, all as in effect on the day prior to the date of a Change
in Control.
34
<PAGE> 36
INDEMNIFICATION AGREEMENTS
The Company intends to enter into indemnification agreements with each of
its directors pursuant to which the Company has agreed to indemnify such party
to the full extent permitted by law, subject to certain exceptions, if such
party becomes subject to an action because such party is a director, officer,
employee, agent or fiduciary of the Company.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH THE UB GROUP
The Company has entered and intends to enter into certain arrangements and
agreements with companies in the UB Group. See "Management--Executive Officers
and Directors" and "Management--Compensation Committee Interlocks and Insider
Participation."
GUARANTEE OF INDEBTEDNESS
Vijay Mallya, Chairman of the Company, is the guarantor with respect to the
Company's obligations to PNC under the Line of Credit. Upon completion of the
Offering, (i) the Company will repay the outstanding indebtedness under the Line
of Credit and (ii) PNC has agreed to release Mr. Mallya's guarantee. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
FUTURE TRANSACTIONS
The Board of Directors of the Company has adopted a resolution requiring
all future transactions, including any loans from the Company to its officers,
directors, principal stockholders or affiliates, to be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested directors or, if required by law, a majority of the disinterested
stockholders, and requiring such transactions to be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
35
<PAGE> 37
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1997, and as
adjusted to reflect the sale of the shares offered hereby, by: (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each Selling Stockholder; (iii) each director of the
Company; (iv) each Named Executive Officer; and (v) all directors and executive
officers of the Company as a group. All information with respect to beneficial
ownership has been furnished to the Company by the persons listed below. Except
as noted, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)
-------------------- TO BE --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SOLD NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
United Breweries Information Consultancy
Services Ltd.(2)............................ 4,733,751 94.7% 400,000 4,333,751 66.7%
Vijay Mallya(3)(4)(5)......................... 4,733,751 94.7 400,000 4,333,751 66.7
Arco Investment Group Ltd.(6)................. 100,000 2.0 100,000 -- --
Manohar B. Hira(4)(5)......................... -- -- -- -- --
O'Neil Nalavadi(4)(5)......................... -- -- -- -- --
All directors and executive officers as a
group (4 persons)(3)(5)..................... 4,733,751 94.7 400,000 4,333,751 66.7
</TABLE>
- ---------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes shares as to which the
listed person has or shares voting and/or investment power. Shares of Common
Stock subject to options or warrants currently exercisable or exercisable
within 60 days after the date of this Prospectus are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage of any
other person.
(2) United Breweries Information Consultancy Services Ltd., the Principal
Stockholder, is a corporation organized under the laws of the British Virgin
Islands. The Principal Stockholder's address is P.O. Box 3149, Pasea Estate,
Road Town, BVI. Vijay Mallya (directly and through other entities owned and
controlled by Mr. Mallya) owns all of the outstanding equity interests in
the Principal Stockholder and therefore is the indirect beneficial owner of
such shares.
(3) Includes shares owned by the Principal Stockholder, which shares are
indirectly beneficially owned by Mr. Mallya as set forth in footnote 2.
(4) The address of Mr. Mallya, Mr. Hira and Mr. Nalavadi is c/o UBICS, Inc., 100
Sainte Claire Plaza, 1121 Boyce Road, Pittsburgh, Pennsylvania 15071.
(5) Amounts shown do not include shares of Common Stock that may be acquired
pursuant to the exercise of options to be granted under the 1997 Plan upon
completion of the Offering. Such options will have an exercise price equal
to the initial public offering price in the Offering and will vest in three
equal installments on the six-month, two-year and three-year anniversaries
of the date of grant. These options will be granted to the directors and
Named Executive Officers in the following share amounts: Mr. Mallya, 75,000;
Mr. Hira, 90,000; and Mr. Nalavadi, 52,000.
(6) The address of Arco Investment Group Ltd. ("Arco") is Residence Du
Metropole, 19th Avenue, Des Spelugues, MC 98,000 Monaco. A beneficiary of
Arco is a member of the supervisory board of the UB Group and a director of
certain UB Group companies.
36
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, par value $.01 per
share, and 2,000,000 shares of Preferred Stock, par value $.01 per share. The
following description of the capital stock of the Company is a summary, and as
such, it does not purport to be complete and is subject, and qualified by
reference to, the more complete descriptions contained in: (i) the Certificate
of Incorporation and the Bylaws, each of which has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part; and (ii) the
certificate of designation relating to any series of Preferred Stock that may be
established by the Board of Directors. Upon completion of the Offering, the
Company will have outstanding 6,500,000 shares of Common Stock and no shares of
Preferred Stock.
COMMON STOCK
The Company is authorized to issue up to 20,000,000 shares of Common Stock.
Subject to the rights and preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive dividends,
when, if and as declared by the Board of Directors of the Company.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by stockholders. Stockholders do not have cumulative
voting rights in the election of directors, meaning that the holders of a
majority of the shares entitled to vote in any election of directors may elect
all of the directors standing for election. The Bylaws require stockholders
desiring to either nominate persons for election as a director or present
matters for business at a stockholders meeting to give advance notice of such
nominations and/or matters to the Company.
Generally, whenever any corporate action is to be taken by vote of the
stockholders of the Company, or by a class of such stockholders of the Company,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by such stockholders, or by such class of stockholders, entitled to
vote thereon. The Bylaws provide that the stockholders may remove any director,
any class of directors or the entire Board of Directors without cause by the
vote of a majority of the votes cast by stockholders entitled to vote thereon.
The Bylaws permit stockholder action to be taken by the written consent of the
stockholders entitled to cast the minimum number of votes that would be
necessary to authorize the action at a meeting at which all stockholders
entitled to vote thereon are present and voting.
The Certificate of Incorporation provides that the Board of Directors may
fix the number of directors of the Company (the Board will fix the number of
directors at five following completion of the Offering). The Certificate of
Incorporation further provides that the Board shall be divided into three
classes of directors, each class as nearly equal in number as possible, with one
class being elected each year for a three-year term. The classification of the
Board helps to ensure continuity of corporate leadership and policy; however, it
also has the effect of making it more difficult for a person to acquire control
of the Company's Board of Directors because at least two annual meetings are
necessary to effect a change in a majority of the Company's directors.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after the payment of all liabilities of the Company and subject to the
liquidation preferences of any outstanding Preferred Stock. The Common Stock
does not carry preemptive rights, is not redeemable, does not have any
conversion rights, is not subject to further calls and is not subject to any
sinking fund provisions. The outstanding shares of Common Stock are and the
shares offered by the Company in the Offering will be, when issued and paid for,
fully paid and nonassessable. Except in certain circumstances as discussed below
under "Certain Provisions Affecting Control of the Company," the Common Stock is
not subject to discriminatory provisions based on ownership thresholds.
The rights, preferences and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. See "--Preferred Stock."
37
<PAGE> 39
PREFERRED STOCK
The Company is authorized to issue up to 2,000,000 shares of Preferred
Stock. The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue such shares of
Preferred Stock in one or more series, with such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be established by
the Board of Directors at the time of issuance.
The issuance of Preferred Stock by the Board of Directors could adversely
affect the rights of holders of Common Stock. For example, the issuance of
shares of Preferred Stock could result in securities outstanding that would have
preference over the Common Stock with respect to dividends and in liquidation
and that could (upon conversion or otherwise) enjoy all of the rights of the
Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by third persons to obtain
control of the Company through merger, tender offer, proxy or consent
solicitation or otherwise, by making such attempts more difficult to achieve or
more costly. The Board of Directors may issue Preferred Stock without
stockholder approval and with voting rights that could adversely affect the
voting power of holders of Common Stock. There are no agreements or
understandings for the issuance of Preferred Stock, and the Company has no plans
to issue any shares of Preferred Stock. See "Risk Factors--Possible Issuances of
Preferred Stock."
CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY
Certain provisions of the Certificate of Incorporation and the DGCL operate
with respect to extraordinary corporate transactions, such as mergers,
reorganizations, tender offers, sales or transfers of substantially all of the
Company's assets or the liquidation of the Company, and could have the effect of
delaying or making more difficult a change in control of the Company in certain
circumstances.
As permitted by the provisions of the DGCL, the Certificate of
Incorporation eliminates in certain circumstances the monetary liability of
directors of the Company for a breach of their fiduciary duty as directors.
These provisions do not eliminate the liability of a director for: (i) a breach
of the director's duty of loyalty to the Company or its stockholders; (ii) acts
or omissions by a director not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) liability arising under Section
174 of the DGCL (relating to the declaration of dividends and purchase or
redemption of shares in violation of the DGCL); or (iv) any transaction from
which the director derived an improper personal benefit. In addition, these
provisions do not limit the rights of the Company or its stockholders, in
appropriate circumstances, to seek equitable remedies such as injunctive or
other forms of non-monetary relief. Such remedies may not be effective in all
cases.
In addition, as permitted by the DGCL, the Certificate of Incorporation
requires the Company to indemnify all directors and officers of the Company.
Under such provisions, any director or officer who, in his or her capacity as
such, is made or threatened to be made a party to any suit or proceeding must be
indemnified if such director or officer acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company. The Certificate of Incorporation and the DGCL further provide that such
indemnification is not exclusive of any other rights to which such individuals
may be entitled under the Certificate of Incorporation, any agreement, insurance
policies, vote of stockholders or disinterested directors or otherwise. The
Company intends to purchase directors' and officers' insurance.
The Certificate of Incorporation also provides that the provisions of the
Certificate of Incorporation that govern amending certain provisions of the
Certificate of Incorporation, establishing the Company's classified Board of
Directors and establishing additional voting requirements may be amended only by
the affirmative vote of not less than two-thirds of the outstanding shares of
voting stock of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
38
<PAGE> 40
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 6,500,000 shares of
Common Stock outstanding. In addition, the Company will have issued upon
completion of the Offering options exercisable for an aggregate of 457,500
shares of Common Stock at an exercise price equal to the initial public offering
price in the Offering. See "Capitalization."
Of the shares of Common Stock outstanding upon completion of the Offering,
the 2,000,000 shares sold in the Offering (together with any shares sold upon
exercise of the Underwriters' over-allotment option) will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares purchased by an "affiliate" of the Company, as that term is
defined in Rule 144 under the Securities Act ("Affiliate"), generally may be
sold only in compliance with the requirements of Rule 144 under the Securities
Act ("Rule 144") described below. The remaining 4,500,000 shares of Common Stock
will be restricted securities within the meaning of Rule 144, and may not be
sold in the absence of registration under the Securities Act unless an exemption
from registration is available, including the exemption provided by Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Offering, a person (or persons whose shares are aggregated in a group) who
has beneficially owned restricted securities for at least one year from the date
such restricted securities were last acquired from the Company or an Affiliate,
including a person who may be deemed an Affiliate of the Company, may sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then outstanding shares of Common Stock of the
Company (65,000 shares after giving effect to the Offering) or the average
weekly trading volume of the Common Stock as reported on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
also are subject to certain restrictions relating to manner of sale, notice and
the availability of current public information about the Company. In addition,
under Rule 144(k) of the Securities Act, a person who is not an Affiliate of the
Company at any time during the 90 day period preceding a sale would be entitled
to sell such shares immediately following the Offering without regard to the
volume limitations, manner of sale provisions or notice or other requirements of
Rule 144 if a period of at least two years has elapsed from the date the shares
were last acquired from the Company or an Affiliate.
The Company's executive officers and directors and the Selling Stockholders
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Parker/ Hunter Incorporated,
on behalf of the Underwriters, directly or indirectly, sell, offer, contract or
grant an option to sell (including, without limitation, any short sale),
transfer, establish an open put equivalent position or otherwise dispose of any
shares of Common Stock, options or warrants to acquire shares of Common Stock
held by them, or publicly announce the intention to do any of the foregoing. In
addition, the Company has agreed that, for a period of 180 days after the date
of this Prospectus, it will not, without the prior written consent of
Parker/Hunter Incorporated, on behalf of the Underwriters, directly or
indirectly, sell, offer, contract or grant an option to sell, transfer or
otherwise dispose of or announce the offering of, or the filing of any
registration statement under the Securities Act, in respect of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or publicly
announce the intention to do any of the foregoing. See "Underwriting." Following
the 180 day lock-up period, all of the restricted securities will become
eligible for sale, subject to the manner of sale, volume, and other conditions
of Rule 144.
Promptly following completion of the Offering, the Company also intends to
file a registration statement on Form S-8 with the Commission registering
750,000 shares of Common Stock reserved for issuance under the 1997 Plan. Once
registered, shares issued under the 1997 Plan upon exercise of options generally
may be sold immediately in the public market subject to the lock-up restrictions
described above.
Prior to the Offering there has been no market for the Common Stock of the
Company. The Company can make no prediction as to the number of shares that will
be sold under Rule 144, or the effect, if any, that market sales of shares of
Common Stock or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant numbers
of shares of the Common Stock in the public market, or the perception that such
sales could occur, could adversely affect the market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities. See "Risk Factors--Shares Eligible for Future
Sale."
39
<PAGE> 41
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for whom
Parker/Hunter Incorporated and Scott & Stringfellow, Inc. are serving as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders the number of shares of Common Stock
set forth below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
----------------------------------------------------- ----------------
<S> <C>
Parker/Hunter Incorporated...........................
Scott & Stringfellow, Inc............................
Total...................................... 2,000,000
===========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the shares are such that if any of the shares are
purchased by the Underwriters pursuant to the Underwriting Agreement, all the
shares agreed to be purchased by the Underwriters must be purchased (other than
the shares covered by the over-allotment option described below).
The Principal Stockholder has granted to the Underwriters an option to
purchase up to an additional 300,000 shares of Common Stock exercisable solely
to cover over-allotments, if any, in the sale of the shares offered by this
Prospectus. Each Underwriter will be committed, subject to certain conditions,
to purchase the additional shares in approximately the same proportion as set
forth in the above table. The option is exercisable within 30 days after the
date of this Prospectus at a price per share equal to the public offering price,
less the underwriting discount.
The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the Common Stock to the public initially at the
initial public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow and such dealers may reallow a
discount not to exceed $ per share to certain other dealers. After the
initial public offering, the public offering price, concessions and discounts
may be changed by the Representatives.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments which the Underwriters may be
required to make in respect thereof.
The Company's executive officers and directors and the Selling Stockholders
have entered into a "lock-up" agreement with the Underwriter pursuant to which
they have agreed that for a period of 180 days following the date of this
Prospectus they will not, without the prior written consent of Parker/Hunter
Incorporated, on behalf of the Underwriters, directly or indirectly, sell,
offer, contract or grant an option to sell (including without limitation any
short sale), transfer, establish an open put equivalent position or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock held by them, or publicly announce the intention to do any of the
foregoing, except for the shares of Common Stock offered hereby. In addition,
the Company has entered into a similar "lock-up" agreement with the Underwriters
pursuant to which it has agreed that for a period of 180 days after the date of
this Prospectus it will not, without the consent of Parker/Hunter Incorporated,
on behalf of the Underwriters, directly or indirectly, sell, offer, contract or
grant an option to sell, transfer or otherwise dispose of, or announce the
offering of, or file any registration statement under the Securities Act in
respect of, any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities convertible into or exchangeable
40
<PAGE> 42
or exercisable for shares of Common Stock, or publicly announce the intention to
do any of the foregoing, except for shares of Common Stock offered hereby. See
"Shares Eligible for Future Sale."
The Representative has informed the Company that it does not expect
discretionary sales by Underwriters to exceed 5% of the shares of the Common
Stock offered hereby.
The Underwriters have reserved for sale, at the initial public offering
price in the Offering, shares of Common Stock for certain employees and
directors of the Company, and certain outside parties, who have expressed an
interest in purchasing such shares of Common Stock for investment purposes only.
Such employees, directors and outside parties are expected to purchase, in the
aggregate, not more than 1.0% of the Common Stock offered in the Offering. The
number of shares available for sale to the general public in the Offering will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered to the general public on the
same basis as other shares offered hereby.
Prior to the Offering, there has been no established public trading market
for the Common Stock. See "Risk Factors--No Prior Public Market; Possible
Volatility of Stock Price." Accordingly, the initial public offering price for
the Common Stock will be determined by negotiations among the Company, the
Selling Stockholder and the Representatives. Among the factors to be considered
in determining the initial public offering price will be prevailing market
conditions, the historical performance and future prospects of the Company and
its industry in general, the Company's position in its industry and certain
financial and operating information of companies engaged in activities similar
to those of the Company. The estimated initial public offering price set forth
on the cover page of this Preliminary Prospectus is subject to change as a
result of market conditions and other factors.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission (the "Commission") may limit the ability of
the Underwriters and certain selling group members, if any, to bid for and
purchase the Common Stock. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Common Stock. If the
Underwriters create a short position in the Common Stock in connection with the
Offering, i.e., if they sell more shares of Common Stock than are set forth on
the cover page of this Prospectus, the Underwriters may reduce that short
position by purchasing Common Stock in the open market. The Underwriters may
also elect to reduce any short position by exercising all or part of the
over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. Neither the Company nor the
Underwriters make any representations or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor the Underwriters
make any representation that the Underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
The Common Stock has been approved for quotation and trading on the Nasdaq
National Market under the symbol "UBIX."
41
<PAGE> 43
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby and certain
other legal matters in connection with the Offering will be passed upon for the
Company by Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania. Certain legal
matters in connection with the Offering will be passed upon for the Underwriters
by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania.
EXPERTS
The financial statements as of December 31, 1995 and 1996 and for each of
the three years ended December 31, 1996 and as of June 30, 1997 and for the six
months then ended included in this Prospectus and the financial statement
schedule included in this Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, to the extent and for the periods
as indicated in their reports with respect thereto, and are included therein in
reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a Registration Statement, of
which this Prospectus constitutes a part, on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
with respect to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part of the Registration Statement. Statements contained in this Prospectus
concerning the contents of any contract or any other document referred to are
not necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified by such reference to such exhibit.
The Registration Statement, including exhibits and schedules thereto, may
be inspected without charge at the Commission's public reference facilities
maintained at its principal office, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the following regional offices of the Commission: Seven World Trade
Center, Room 1400, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street N.W., Washington, D.C. 20549, Room 1024, at prescribed rates.
The Registration Statement, including the exhibits and schedules thereto, is
also available at the Commission's site on the World Wide Web at
http://www.sec.gov. Copies of reports, proxy and information statements and
other information regarding the Company are also available at the Commission's
web site.
Prior to the Offering, the Company has not been required to file reports
under the Exchange Act. However, following completion of the Offering, the
Company will be required to file reports, proxy statements and other information
with the Commission pursuant to the Exchange Act. Such reports, proxy statements
and other information can be inspected and copied at the addresses, and may be
accessed electronically at the web site, set forth above. The Company intends to
furnish to its stockholders annual reports containing audited financial
statements following the end of each fiscal year and to make available quarterly
reports containing unaudited summary financial information for the first three
fiscal quarters of each fiscal year.
42
<PAGE> 44
GLOSSARY
Set forth below are the definitions of certain terms used in this
Prospectus:
"Applications" are the computer software programs that perform a desired
task, such as inventory control analysis, cost analysis, accounts receivable and
payable, payroll, or shipping and scheduling.
"Client/server" describes the linking, or networking, of two or more
computers to allow multiple users to access and share information. Client/server
design is contrasted with "mainframe" design.
"Conversion" is the process of converting data and applications from one
format to another in connection with an organization's adoption of different,
usually more technologically advanced, hardware or software.
"Distributed computing environments" describes the use of multiple types of
hardware and software applications within an organization, often in multiple
locations.
"Enterprise resource planning" or "ERP" packages, such as Oracle, Baan,
PeopleSoft and SAP, are large, integrated applications packages used to manage
information on an enterprise-wide basis.
"Euro-currency conversion" refers to the modification of software
applications to reflect the adoption of a single currency by countries that are
members of the European Union.
"Hardware" is the physical computer system on which software applications
operate.
"Information technology" describes the use of computers and software
applications to manage information within an organization.
"Legacy" hardware and applications are information technology systems based
on older technologies.
"Mainframe" describes a large, centralized computer on which an
organization maintains information.
"Migration" is the process of moving applications and data from one
computing environment, such as a mainframe environment, to another, such as a
client/server environment.
"Object-oriented programming" is a type of software design in which various
independently developed software applications are linked together as needed to
achieve the desired programming result.
"Operating system" is the software that controls the allocation of computer
resources to various software applications in order to maximize the efficiency
of those resources.
"Software" is the code that directs computer hardware to manipulate other
software or data in a desired way.
"Year 2000" refers to the software problems resulting from the date change
on December 31, 1999 to the year 2000. Many software applications must be
modified in order to operate properly after this date.
43
<PAGE> 45
UBICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1995 and 1996, June 30, 1996 (unaudited) and June
30, 1997............................................................................ F-3
Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1996 (unaudited) and 1997............................. F-4
Statements of Changes in Stockholders' Equity for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1997................................ F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the
six months ended June 30, 1996 (unaudited) and 1997................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To UBICS, Inc.:
We have audited the accompanying balance sheets of UBICS, Inc. (a Delaware
corporation) as of December 31, 1995 and 1996 and June 30, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996 and for the six
months ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
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 UBICS, Inc. as of December
31, 1995 and 1996 and June 30, 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996 and
for the six months ended June 30, 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
September 5, 1997
(except for the matters discussed in
Note 9 for which the date is
September 8, 1997)
F-2
<PAGE> 47
UBICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------- ------------------------
1995 1996 1997
-------- ---------- 1996 ----------
----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 93,698 $ 219,427 $ 147,500
Accounts receivable, net of allowance for
doubtful accounts of $0, $50,000, $16,000
and $125,000, respectively............... 281,175 1,343,245 710,388 2,342,259
Unbilled receivables........................ 274,004 943,818 819,223 1,725,722
Employee advances........................... 23,410 96,364 18,949 123,033
Due from principal stockholder.............. -- -- -- 383,371
Prepaids and other.......................... 6,397 16,802 13,050 18,115
Deferred tax asset.......................... -- 56,811 -- 67,940
-------- ---------- ---------- ----------
Total current assets..................... 584,986 2,550,738 1,781,037 4,807,940
-------- ---------- ---------- ----------
Property and equipment:
Computer equipment.......................... 26,376 44,227 38,578 67,386
Furniture and fixtures...................... 8,198 14,678 11,345 22,442
Office and other equipment.................. 3,666 4,316 3,997 4,551
-------- ---------- ---------- ----------
Total property and equipment............. 38,240 63,221 53,920 94,379
Accumulated depreciation.................... (3,766) (13,068) (8,004) (20,311)
-------- ---------- ---------- ----------
Net property and equipment............... 34,474 50,153 45,916 74,068
-------- ---------- ---------- ----------
Total assets........................ $619,460 $2,600,891 $1,826,953 $4,882,008
======== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft.............................. $ 78,294 $ -- $ -- $ --
Credit facility borrowings.................. -- 300,000 250,000 500,000
Accounts payable............................ 175,787 517,778 570,206 1,329,370
Payroll liabilities......................... 71,180 689,680 402,706 892,740
Due to affiliates, net...................... 225,056 483,483 491,132 313,483
Accrued taxes............................... 9,584 293,840 48,409 770,523
Other current liabilities................... 49,684 87,001 17,567 169,037
-------- ---------- ---------- ----------
Total current liabilities................ 609,585 2,371,782 1,780,020 3,975,153
Long-term liabilities......................... -- -- -- --
Total liabilities........................ 609,585 2,371,782 1,780,020 3,975,153
-------- ---------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued and
outstanding.............................. -- -- -- --
Common stock, no par value, 20,000,000
shares authorized, 5,000,000 shares
issued and outstanding................... 3,000 3,000 3,000 3,000
Retained earnings........................... 6,875 226,109 43,933 903,855
-------- ---------- ---------- ----------
Total stockholders' equity............... 9,875 229,109 46,933 906,855
-------- ---------- ---------- ----------
Total liabilities and stockholders'
equity............................ $619,460 $2,600,891 $1,826,953 $4,882,008
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 48
UBICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 302,906 $1,453,743 $9,072,307 $3,411,030 $8,685,255
Cost of revenues................. 178,224 993,404 6,373,759 2,454,860 5,983,152
---------- ---------- ---------- ---------- ----------
Gross profit................... 124,682 460,339 2,698,548 956,170 2,702,103
Selling, general and
administrative expense......... 119,568 452,392 2,226,926 871,130 1,537,612
---------- ---------- ---------- ---------- ----------
Income from operations........... 5,114 7,947 471,622 85,040 1,164,491
Interest expense................. -- -- 22,699 9,157 21,191
---------- ---------- ---------- ---------- ----------
Income before income taxes....... 5,114 7,947 448,923 75,883 1,143,300
Provision for income taxes....... 2,040 5,300 229,689 38,825 465,554
---------- ---------- ---------- ---------- ----------
Net income..................... $ 3,074 $ 2,647 $ 219,234 $ 37,058 $ 677,746
========== ========== ========== ========== ==========
Net income per share............. $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
========== ========== ========== ========== ==========
Weighted average shares
outstanding.................... 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 49
UBICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993..................... 5,000,000 $3,000 $ 1,154 $ 4,154
Net income................................... -- -- 3,074 3,074
--------- ------ -------- ---------
Balance, December 31, 1994..................... 5,000,000 3,000 4,228 7,228
Net income................................... -- -- 2,647 2,647
--------- ------ -------- ---------
Balance, December 31, 1995..................... 5,000,000 3,000 6,875 9,875
Net income................................... -- -- 219,234 219,234
--------- ------ -------- ---------
Balance, December 31, 1996..................... 5,000,000 3,000 226,109 229,109
Net income................................... -- -- 677,746 677,746
--------- ------ -------- ---------
Balance, June 30, 1997......................... 5,000,000 $3,000 $903,855 $ 906,855
========= ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 50
UBICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- ------------------------
1994 1995 1996 1997
-------- -------- ----------- 1996 ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 3,074 $ 2,647 $ 219,234 $ 37,058 $ 677,746
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation................... 136 3,573 9,302 4,238 7,243
Changes in operating assets and
liabilities--
Accounts receivable, net..... (26,586) (247,799) (1,062,070) (429,213) (999,014)
Unbilled receivables......... (36,642) (233,782) (669,814) (545,219) (781,904)
Employee advances............ (7,030) (16,380) (72,954) 4,461 (26,669)
Due from principal
stockholder............... -- -- -- -- (383,371)
Due to affiliates, net....... 89,425 137,852 258,427 266,076 (170,000)
Deferred tax asset........... -- -- (56,811) -- (11,129)
Prepaids and other........... (1,300) (5,097) (10,405) (6,653) (1,313)
Bank overdraft............... -- 78,294 (78,294) (78,294) --
Accounts payable............. 7,815 157,307 341,991 394,419 811,592
Payroll liabilities.......... -- 71,180 618,500 331,526 203,060
Accrued taxes and other
current liabilities....... 6,360 52,024 321,573 6,708 558,719
-------- -------- ----------- ----------- ---------
Net cash provided (used) by
operating activities......... 35,252 (181) (181,321) (14,893) (115,040)
-------- -------- ----------- ----------- ---------
Cash flows from investing
activities:
Purchases of property and
equipment...................... -- (37,560) (24,981) (15,680) (31,158)
-------- -------- ----------- ----------- ---------
Net cash used by
investing activities......... -- (37,560) (24,981) (15,680) (31,158)
-------- -------- ----------- ----------- ---------
Cash flows from financing
activities:
Proceeds from borrowings.......... -- -- 300,000 250,000 200,000
-------- -------- ----------- ----------- ---------
Net cash provided by
financing activities......... -- -- 300,000 250,000 200,000
-------- -------- ----------- ----------- ---------
Net increase (decrease) in cash and
cash equivalents.................. 35,252 (37,741) 93,698 219,427 53,802
Cash and cash equivalents, at
beginning of year................. 2,489 37,741 -- -- 93,698
-------- -------- ----------- ----------- ---------
Cash and cash equivalents, at
end of year....................... $ 37,741 $ -- $ 93,698 $ 219,427 $ 147,500
======== ======== ========== =========== =========
Supplemental data:
Cash payments for interest........ $ -- $ -- $ 22,699 $ 9,157 $ 21,191
Cash payments for income taxes.... $ -- $ 204 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 51
UBICS, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION RELATED TO JUNE 30, 1996 IS UNAUDITED)
1. OPERATIONS:
UBICS, Inc. ("UBICS" or "the Company"), a Delaware corporation, is a
rapidly growing provider of information technology services to large and
mid-sized organizations. The Company provides its clients with a wide range of
professional services in such areas as client/server design and development,
enterprise resource planning package implementation and customization,
applications maintenance programming and database administration.
The Company is indirectly beneficially owned by Vijay Mallya, the chairman
of the Company.
The Risk Factors on page 5 of the Prospectus entitled "Recruitment and
Retention of IT Professionals," "U.S. Regulation of Immigration" and
"Concentration of Revenues; Risk of Termination" are incorporated herein by
reference.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements reflect the application of the
following significant accounting policies:
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Revenue Recognition
The Company recognizes revenue on its time-and-materials contracts as the
services are performed for clients.
Unbilled Receivables
Unbilled receivables represent time and materials provided to customers in
the last month of each fiscal period which are billed early in the following
month.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the properties as
follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Computer equipment............................... 5
Furniture and fixtures........................... 7
Office and other equipment....................... 7
</TABLE>
Disclosures about Fair Value of Financial Instruments
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
during 1996.
The following methods and assumptions were used to estimate fair value of
each class of financial instrument for which it is practicable to estimate that
value:
Cash and Cash Equivalents--The carrying amount approximates fair value
because of the short maturity of those instruments.
F-7
<PAGE> 52
Long-Term Debt--The fair values and carrying amounts of the Company's
line of credit are deemed to be approximately equivalent as it bears
interest at a floating rate based upon current market rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:
The Company has derived a significant portion of its revenues from a
relatively limited number of clients.
The following table presents the Company's five largest clients during each
of the years ended December 31, 1994, 1995 and 1996 and the six months ended
June 30, 1996 and 1997 and the approximate percentage of revenue from each
client for the respective periods:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- --------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Client A........................................... 40% -- -- -- --
Client B........................................... 33% 12% -- -- --
Client C........................................... 17% -- -- -- --
Client D........................................... -- 18% 14% 16% 11%
Client E........................................... -- 13% -- -- --
Client F........................................... -- 10% -- -- --
Client G........................................... -- -- 8% 8% 9%
Client H........................................... -- -- 8% 7% 4%
Client I........................................... -- -- 7% -- 8%
Client J........................................... -- -- 6% 6% --
Others, individually and collectively less than 10%
of revenue....................................... 7% 7% -- 6% 5%
---- ---- ---- ---- ----
Total of Five Largest Clients................. 97% 60% 43% 43% 37%
</TABLE>
The Company grants credit to clients based upon management's assessment of
their creditworthiness. The Company's revenues and resulting accounts receivable
are derived primarily from large and mid-sized organizations in various
industries throughout the U.S.
4. REVOLVING CREDIT FACILITY:
The Company has available borrowings under a revolving credit facility with
PNC Bank, National Association ("PNC"). Borrowings under this arrangement are
limited to $600,000, bear interest at prime (8.50%, 8.25%, 8.25% and 8.50% at
December 31, 1995 and 1996 and June 30, 1996 and 1997, respectively) as defined
plus 0.5% and are payable upon demand. The revolving credit facility is secured
by the assets of the Company and personally guaranteed by the Company's
chairman.
There were no borrowings under this arrangement during the year ended
December 31, 1995. Borrowings of $250,000, $300,000 and $500,000 were
outstanding as of June 30, 1996, December 31, 1996 and June 30, 1997,
respectively.
Average outstanding borrowings under this arrangement were $250,438,
$236,264 and $475,138 for the year ended December 31, 1996 and the six months
ended June 30, 1996 and 1997, respectively.
On September 5, 1997, the maximum amount available under the Company's
revolving credit facility with PNC was increased to $1,000,000.
F-8
<PAGE> 53
5. LEASE OBLIGATIONS:
The Company leases real estate and facilities at several locations. Lease
expenses charged to operations were $9,450, $39,594, $126,448, $46,961 and
$55,505, respectively, for the years ended December 31, 1994, 1995 and 1996 and
the six months ended June 30, 1996 and 1997.
Minimum future rental payments under noncancelable operating leases for
each of the next five years are as follows as of June 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
------------
<S> <C> <C>
1998................................................... $ 111,010
1999................................................... 97,076
---------
Totals................................................. $ 208,086
=========
</TABLE>
6. RELATED PARTY TRANSACTIONS:
As of December 31, 1995 and 1996 and June 30, 1996 and 1997, the Company
had a net payable to the UB Group, including UB Information and Consultancy
Services Ltd. ("UB Services"), totaling $225,056, $483,483, $491,132 and
$313,483, respectively, resulting from the Company's collection of receivables
on behalf of UB Services and advances to or from the UB Group. The Company
ceased collection of receivables on behalf of UB Services and ceased all other
transactions with UB Services during the year ended December 31, 1996.
As of June 30, 1997 the Company has amounts due from the principal
stockholder totaling $383,371 resulting from expenses incurred by the Company on
behalf of the UB Group.
Certain expenses were incurred by the Company on behalf of the UB Group, of
which $0, $256,818, $124,913 and $0 are included in selling, general and
administrative expenses in the accompanying statements of operations for the
years ended December 31, 1995 and 1996 and the six months ended June 30, 1996
and 1997, respectively.
7. EARNINGS PER SHARE:
The earnings per share calculated in the accompanying financial statements
is based on a weighted average of 5,000,000 shares. The Company's stockholders'
equity accounts and the number of shares in the accompanying financial
statements have been retroactively restated to give effect to the stock split
and increase in authorized capital stock as described in Note 9 to the financial
statements.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement on Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 differs from current accounting guidance in that earnings
per share is classified as basic earnings per share and diluted earnings per
share, compared to primary earnings per share and fully diluted earnings per
share under current standards. Basic earnings per share differs from primary
earnings per share in that it includes only the weighted average common shares
outstanding and does not include any dilutive securities in the calculation.
Diluted earnings per share under the new standard differs in certain
calculations compared to fully diluted earnings per share under existing
standards. Adoption of SFAS No. 128 is required for interim and annual periods
ending after December 15, 1997. Had the Company applied the provisions of SFAS
No. 128, there would have been no impact compared to that which has been
reported.
8. INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes are
recognized for temporary differences between the tax and financial bases of the
Company's assets and liabilities, using the enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income.
F-9
<PAGE> 54
As of September 5, 1997, the Company had not filed either its 1995 or 1996
federal or state income tax returns. The tax provision includes estimated
penalties and interest arising from not paying such taxes when due. The filing
of such returns was delayed pending a review of the structure of the UB Group
companies in the U.S. The Company anticipates that by September 8, 1997 it will
have filed its 1995 and 1996 federal and state income tax returns and paid the
aforementioned taxes and estimated penalties and interest.
The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes was as follows for the year ended
December 31, 1995 and 1996 and the six months ended June 30, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Federal income taxes at the statutory rate..... $2,800 $140,897 $23,816 $392,122
State income taxes at the statutory rate, net
of federal benefit........................... 1,200 22,792 3,853 63,432
Penalties and interest......................... 1,300 66,000 11,156 10,000
------ -------- ------- --------
Provision for income taxes..................... $5,300 $229,689 $38,825 $465,554
====== ======== ======= ========
</TABLE>
The provision for income taxes as shown in the accompanying statement of
operations for the year ended December 31, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 included the following components:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Current federal provision...................... $4,050 $253,297 $34,325 $410,472
Current state provision........................ 1,250 33,203 4,500 66,481
Deferred federal provision..................... -- (48,900) -- (9,850)
Deferred state provision....................... -- (7,911) -- (1,549)
------ -------- ------- --------
Provision for income taxes..................... $5,300 $229,689 $38,825 $465,554
====== ======== ======= ========
</TABLE>
The components of the deferred tax asset as of December 31, 1995 and 1996
and June 30, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts................ $ -- $ 19,750 $ -- $ 49,375
Accrued liabilities............................ -- 37,061 -- 18,565
------ -------- ------- --------
Deferred tax asset............................. $ -- $ 56,811 $ -- $ 67,940
====== ======== ======= ========
</TABLE>
9. SUBSEQUENT EVENTS:
On September 8, 1997, the following transactions occurred: (i) a
5,000-for-1 stock split effected in the form of a dividend; (ii) an increase in
the authorized capital stock to 20,000,000 shares of common stock and 2,000,000
shares of preferred stock; (iii) a change in the par value of the common stock
from no par to $.01 per share; and (iv) the change in the name of the Company to
UBICS, Inc.
Accordingly, the Company's stockholders' equity accounts and the number of
shares in the accompanying financial statements have been retroactively restated
to give effect to the stock split and increase in authorized capital stock.
F-10
<PAGE> 55
LOGO
<PAGE> 56
================================================================================
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 5
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Data.............. 13
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................ 14
Business............................. 20
Management........................... 29
Certain Transactions................. 35
Principal and Selling Stockholders... 36
Description of Capital Stock......... 37
Shares Eligible for Future Sale...... 39
Underwriting......................... 40
Legal Matters........................ 42
Experts.............................. 42
Additional Information............... 42
Glossary............................. 43
Index to Financial Statements........ F-1
</TABLE>
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES, OR AN OFFER
TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
================================================================================
================================================================================
2,000,000 SHARES
LOGO
COMMON STOCK
----------------
PROSPECTUS
----------------
PARKER/HUNTER
INCORPORATED
SCOTT &
STRINGFELLOW, INC.
, 1997
================================================================================
<PAGE> 57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All fees and
expenses are estimated other than the Securities and Exchange Commission
registration fee, NASD filing fee and Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee....................... $ 7,667
NASD filing fee........................................................... 2,800
Blue Sky fees and expenses................................................
Nasdaq National Market listing fee........................................ 33,750
Transfer agent fees.......................................................
Printing and engraving expenses...........................................
Legal fees and expenses...................................................
Accounting fees and expenses..............................................
Miscellaneous expenses....................................................
--------
Total................................................................ $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
provisions for mandatory and discretionary indemnification of a corporation's
directors, officers and other personnel, and related matters.
Under Section 145(a), subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed circumstances
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action,
suit or proceeding, whether civil, criminal, administrative or investigative, to
which any of them is a party by reason of his being a representative, director
or officer of the corporation or serving at the request of the corporation as a
representative of another corporation, partnership, joint venture, trust or
other enterprise, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Under Section 145(c), indemnification is
mandatory to the extent that the officer or director has been successful on the
merits or otherwise in defense of any action or proceeding if the appropriate
standards of conduct are met.
Section 145(b) provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 145(d) provides that, unless ordered by a court, any
indemnification under Section 145(a) or 145(b) shall be made by the corporation
only as authorized in the specific case upon a determination that the
representative met the applicable standard of conduct, and such determination
will be made by the board of directors (i) by a majority vote of a quorum of
directors not parties to the action, suit or proceeding; (ii) if a quorum is not
obtainable, or if obtainable and a majority of disinterested directors so
directs, by independent legal counsel; or (iii) the stockholders.
Section 145(e) provides that expenses incurred by an officer, director,
employee or agent in defending a civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such amount if it
shall ultimately be determined that he or she is not entitled to be indemnified
by the corporation.
II-1
<PAGE> 58
Section 145(f) provides that the indemnification and advancement of
expenses provided by the other subsections of Section 145 shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding that
office.
Section 145(g) also grants to a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him or her in his or her capacity as officer or director, whether or
not the corporation would have the power to indemnify him or her against the
liability under the provisions of Section 145 of the DGCL.
Sections 145(h) and 145(i) extend the indemnification and advancement of
expenses provisions contained in Section 145 of the DGCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 145(j) provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, Section 145 of the DGCL, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Reference is made to Article VII of the Registrant's Amended and Restated
Certificate of Incorporation, which provides in general for the indemnification
of the Registrant's officers and directors to the fullest extent authorized by
law. The Registrant also intends to enter into indemnification agreements with
its directors providing for such indemnification to the fullest extent permitted
by law. In addition, the Registrant intends to obtain officers' and directors'
liability insurance which will insure against liabilities that officers and
directors of the Registrant may incur in such capacities.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases, or (iv) for any transaction from which the
director derived an improper personal benefit. Article VI of the Registrant's
Amended and Restated Certificate of Incorporation contains such a provision
concerning the limitation of liability of directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has not issued or sold any unregistered securities during
the past three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 The Registrant's Amended and Restated Certificate of Incorporation**
3.2 The Registrant's Amended and Restated Bylaws**
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding the
legality of the shares of Common Stock being registered
10.1 UBICS, Inc. 1997 Stock Option Plan**
10.2 Noncompetition Agreement between the Company and the UB Group*
10.3 Employment Agreement dated , 1997 between the Registrant and Vijay
Mallya*
10.4 Employment Agreement dated , 1997 between the Registrant and Manohar B.
Hira*
10.5 Employment Agreement dated , 1997 between the Registrant and O'Neil
Nalavadi*
10.6 Employment Agreement dated , 1997 between the Registrant and Babu
Srinivas*
10.7 Lease Agreement dated July 2, 1997 between the Company and BR Associates**
</TABLE>
II-2
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
10.8 Lease dated May 28, 1996 between the Company and Marin Executive Park, as amended**
10.9 Services Agreement dated , 1997 between the Company and the UB Group*
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National Association and the
Registrant, and Amendment to Note and Letter Agreement dated November 1, 1996,
Second Amendment to Note and Letter Agreement dated April 1, 1997, Third Amendment
to Note and Letter Agreement dated August 29, 1997 and Fourth Amendment to Note and
Letter Agreement dated September 5, 1997**
10.11 Form of Director Indemnification Agreement*
10.12 Sublease and Consent dated , 1997 among the Company, Marin Executive Park
and *
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP, independent public accountants
23.3 Consent of Craig A. Wolfanger, nominee to the Company's Board of Directors
23.4 Consent of Dennis S. Meteny, nominee to the Company's Board of Directors
24.1 Power of Attorney**
</TABLE>
- ---------
* To be filed by amendment.
** Previously filed.
(b) Index to Financial Statement Schedules
II. Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the DGCL, the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of the registrant, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Commonwealth of Pennsylvania, on October 8, 1997.
UBICS, INC.
By: /s/ MANOHAR B. HIRA
--------------------------------------
Manohar B. Hira
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated and on the date indicated above.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ------------------------------------
<C> <S> <C>
* Chairman and Director
- -----------------------------------
Vijay Mallya
/s/ MANOHAR B. HIRA President and Director
- -----------------------------------
Manohar B. Hira
* Senior Vice President, Chief
- ----------------------------------- Financial Officer and Director
O'Neil Nalavadi
* Vice President-Finance, Accounting
- ----------------------------------- and Administration (Principal
Babu Srinivas Accounting Officer)
</TABLE>
* By: /s/ MANOHAR B. HIRA
- ------------------------------------
Manohar B. Hira
Attorney-in-fact
II-4
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
We have audited in accordance with generally accepted auditing standards,
the financial statements of UBICS, Inc. and have issued our report thereon dated
September 5, 1997. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in the
accompanying index is presented for purposes of complying with the Securities
and Exchange Commission's rules and regulations and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
September 5, 1997
<PAGE> 62
SCHEDULE II
UBICS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS--
AMOUNTS
BALANCE AT CHARGED TO DEEMED BALANCE AT
BEGINNING COSTS AND TO BE END
PERIOD ENDED DESCRIPTION OF PERIOD EXPENSES UNCOLLECTIBLE OF PERIOD
- ------------------------ ---------------------------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1994....... Allowance for uncollectible accounts $ -- $ -- $-- $ --
December 31, 1995....... Allowance for uncollectible accounts -- -- -- --
December 31, 1996....... Allowance for uncollectible accounts -- 50 -- 50
June 30, 1997........... Allowance for uncollectible accounts 50 75 -- 125
</TABLE>
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 The Registrant's Amended and Restated Certificate of Incorporation**
3.2 The Registrant's Amended and Restated Bylaws, as amended**
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding the
legality of the shares of Common Stock being registered
10.1 UBICS, Inc. 1997 Stock Option Plan**
10.2 Noncompetition Agreement between the Company and the UB Group*
10.3 Employment Agreement dated , 1997 between the Registrant and Vijay
Mallya*
10.4 Employment Agreement dated , 1997 between the Registrant and Manohar B.
Hira*
10.5 Employment Agreement dated , 1997 between the Registrant and O'Neil
Nalavadi*
10.6 Employment Agreement dated , 1997 between the Registrant and Babu
Srinivas*
10.7 Lease Agreement dated July 2, 1997 between the Company and BR Associates**
10.8 Lease dated May 28, 1996 between the Company and Marin Executive Park, as amended**
10.9 Services Agreement dated , 1997 between the Company and the UB Group*
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National Association and the
Registrant, and Amendment to Note and Letter Agreement dated November 1, 1996,
Second Amendment to Note and Letter Agreement dated April 1, 1997, Third Amendment
to Note and Letter Agreement dated August 29, 1997 and Fourth Amendment to Note and
Letter Agreement dated September 5, 1997**
10.11 Form of Director Indemnification Agreement*
10.12 Sublease and Consent dated , 1997 among the Company, Marin Executive Park
and *
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP, independent public accountants
23.3 Consent of Craig A. Wolfanger, nominee to the Company's Board of Directors
23.4 Consent of Dennis S. Meteny, nominee to the Company's Board of Directors
24.1 Power of Attorney**
</TABLE>
- ---------
* To be filed by amendment.
** Previously filed.
<PAGE> 1
Exhibit 1.1
Draft 10-6-97
2,000,000 Shares*
UBICS, Inc.
Common Stock
Underwriting Agreement
____________ ___, 1997
Parker/Hunter Incorporated
Scott & Stringfellow, Inc.
As Representatives of the
Several Underwriters named
in Schedule II hereto
c/o Parker/Hunter Incorporated
600 Grant Street, 31st Floor
Pittsburgh, Pennsylvania 15219
Dear Sirs:
UBICS, Inc., a Delaware corporation (the "Company"), and each of the
selling stockholders listed in Schedule I hereto (each, a "Selling Stockholder"
and collectively, the "Selling Stockholders") jointly and severally propose to
sell to you and the other underwriters named in Schedule II hereto
(collectively, the "Underwriters") for whom you are acting as Representatives
("you" or the "Representatives") an aggregate of 2,000,000 shares (the "Firm
Shares") of common stock, par value $.01 per share, of the Company (the "Common
Stock"). The number of Firm Shares which the Selling Stockholders have agreed
to sell to you is set forth opposite the name of such Selling Stockholder in
Schedule I hereto. The Firm Shares consist of 1,500,000 shares to be issued and
sold by the Company and 500,000 outstanding shares to be sold by the Selling
Stockholders. As indicated in Schedule I hereto, one of the Selling
Stockholders also proposes to sell to the Underwriters an aggregate of not more
than 300,000 additional shares of Common Stock (the "Option Shares") if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Option Shares are herein collectively called the "Shares." The Company
and the Selling Stockholders are hereinafter collectively called the "Sellers."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company represents that
it prepared and filed on September 8, 1997 with the Securities and Exchange
Commission (the "Commission"), in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively called the "Act"), a registration statement
on Form S-1 (including the related preliminary prospectus) (File
- --------
* Plus a 30-day option to purchase up to an additional 300,000 shares of
Common Stock solely to cover over-allotments.
<PAGE> 2
No. 333-35171) with respect to the Shares and such amendments thereof as may
have been required to the date of this Agreement. Copies of such registration
statement and any amendments, and all forms of the related prospectuses
contained therein, have been delivered to you. Such registration statement,
including the prospectus, Part II, any documents incorporated therein by
reference and all financial statements and exhibits included therein or filed
therewith, as amended at the time and on the date it becomes effective (the
"Effective Date"), is herein referred to as the "Registration Statement."
Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the Act and paragraph (b) of Rule 424 ("Rule
424(b)") of the Act. The information included in such prospectus that was
omitted from the Registration Statement at the time it became effective but
that is deemed to be part of the Registration Statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before the Registration Statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information that was used after such effectiveness and prior to the execution
and delivery of this Agreement is herein called a "preliminary prospectus." Any
registration statement filed pursuant to Rule 462(b) of the Act is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Shares is herein
called the "Prospectus." For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
The Company and the Underwriters agree that up to 50,000
shares of the Common Stock to be purchased by the Underwriters (the "Reserved
Shares") shall be reserved for sale by the Underwriters to certain employees
and directors of the Company and certain outside parties (the "Eligible
Persons"), as part of the distribution of the Common Stock by the Underwriters,
subject to the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. (the
"NASD") and all other applicable laws, rules and regulations. To the extent
that such Reserved Shares are not orally confirmed for purchase by such
Eligible Persons by the end of the first business day after the date of this
Agreement, such Reserved Shares may be offered to the public as part of the
public offering contemplated hereby.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, (i) the Company agrees to issue and sell to the
Underwriters 1,500,000 Firm Shares, (ii) each Selling Stockholder agrees to
sell to the Underwriters the number of Firm Shares set forth opposite such
Selling Stockholder's name in Schedule I hereto and (iii) each Underwriter
agrees, severally and not jointly, to purchase the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II hereto, at a
purchase price per share of $________ (the "Purchase Price").
- 2 -
<PAGE> 3
On the basis of the representations and warranties contained in this
Agreement and subject to the terms and conditions hereof, the Selling
Stockholder identified in Schedule I hereto hereby grants to the several
Underwriters an option to purchase, severally and not jointly, all or part of
the Option Shares at the Purchase Price (the "Option"). The Option may be
exercised only to cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part from time to time and
within 30 days after the Effective Date. Any such exercise to purchase Option
Shares may be exercised only by written notice by the Representatives to the
Company and the Attorneys-in-Fact (defined herein) for the Selling Stockholders
setting forth the aggregate number of Option Shares to be purchased and the
date on which such Option Shares are to be delivered. If any Option Shares are
to be purchased, each Underwriter, severally and not jointly, agrees to
purchase the number of Option Shares (subject to such adjustments to eliminate
fractional shares as you may determine) which bears the same proportion to the
total number of Option Shares to be purchased as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II hereto.
3. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that the
Underwriters propose (i) to make a public offering of the Shares on or as soon
after the Effective Date as in your judgment is advisable and (ii) initially to
offer the Firm Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to you, as Representatives for the
respective accounts of the Underwriters, of the certificates and payment for
the Firm Shares shall be made and all other closing matters and transactions
with respect to the Firm Shares shall take place at the offices of Buchanan
Ingersoll Professional Corporation in Pittsburgh, Pennsylvania at 10:00 a.m.,
Pittsburgh time, on the fourth business day following the Effective Date, or at
any such other time as may be agreed upon by the Representatives, the Company
and the Selling Stockholders (the "Firm Closing Date"). The Firm Closing Date,
the location of the delivery of the certificates and payment for the Firm
Shares and the location of all other closing matters and transactions with
respect thereto may be varied by agreement between you and the Sellers.
Delivery to the Underwriters of the certificates and payment for any
Option Shares to be purchased by the Underwriters shall be made at the offices
of Buchanan Ingersoll Professional Corporation in Pittsburgh, Pennsylvania, at
10:00 a.m., Pittsburgh time, on such date (the "Option Closing Date"), which
may be the same as the Firm Closing Date but shall in no event be earlier than
the Firm Closing Date nor later than ten business days after the giving of the
notice referred in Section 2 hereof, as shall be specified in a written notice
from you to the Company and the Attorneys-in-Fact for the Selling Stockholders
of your determination to purchase a number, specified in said notice, of Option
Shares. All other closing matters and transactions with respect to the Option
Shares shall take place at 10:00 a.m., Pittsburgh time, at the offices of
Buchanan Ingersoll Professional Corporation in Pittsburgh, Pennsylvania on the
Option Closing Date. The Option Closing Date, the location of the delivery of
the certificates and payment for the Option Shares and the location of all
other closing matters and transactions with respect thereto may be varied by
agreement between you and the Sellers. The Firm Closing Date and the Option
Closing Date are individually referred to as a "Closing Date" and together as
the "Closing Dates."
- 3 -
<PAGE> 4
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Firm Closing Date or the Option Closing Date,
as the case may be. Such certificates shall be made available to you for
inspection not later than 9:30 a.m., Pittsburgh time, on the business day next
preceding the Firm Closing Date or the Option Closing Date, as the case may be.
Certificates in definitive form evidencing the Firm Shares and Option Shares
shall be delivered to you on the Firm Closing Date or the Option Closing Date,
as the case may be, with any transfer taxes thereon duly paid by the respective
Sellers, for the respective accounts of the several Underwriters, against
payment of the purchase price therefor by certified or official bank check
payable in New York Clearing House or other next day funds to the order of the
Company and Manohar B. Hira, O'Neil Nalavadi or Babu Srinivas as custodians for
each of the Selling Stockholders.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
with you and each Underwriter as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective at the
earliest possible time, and will comply with the
provisions of, and make all requisite filings with,
the Commission pursuant to Rule 430A, as applicable,
in a timely manner, and if filing of the prospectus
with the Commission is required under Rule 424(b),
the Company shall file the Prospectus, properly
completed, with the Commission pursuant to Rule
424(b) within the time period therein prescribed and
shall provide evidence satisfactory to you of such
timely filing, and prepare and file with the
Commission, promptly upon your reasonable request,
any amendments of the Registration Statement or
amendments of or supplements to the Prospectus
which, in your opinion, may be necessary or
advisable in connection with the distribution of the
Shares.
(b) The Company will, within the time during which a
Prospectus relating to the Shares is required to be
delivered under the Act, comply with all
requirements imposed upon it by the Act, as now or
hereafter amended, so far as is necessary to permit
the continuance of sales of or dealings in the
Shares as contemplated by the provisions hereof and
the Prospectus.
(c) The Company will comply with the requirements of
Rule 430A and will advise you promptly and, if
requested by you, confirm such advice in writing,
(i) when the Registration Statement has become
effective, any Rule 462(b) Registration Statement
has become effective, when the Prospectus has been
filed, when any post-effective amendment to the
Registration Statement has become effective, or any
amendment of or supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of
the receipt of any comments from the Commission,
(iii) of any request by the Commission for
amendments to the Registration Statement
- 4 -
<PAGE> 5
or any amendment or supplement to the Prospectus or
for additional information, (iv) of the issuance by
the Commission or any state or other regulatory body
of any stop order or other order suspending the
effectiveness of the Registration Statement, any
462(b) Registration Statement or suspending or
preventing the use of any preliminary prospectus or
the Prospectus or suspending the qualification of the
Shares for offering or sale in any jurisdiction, or
the threatening or initiation of any proceeding for
any such purpose, (v) of receipt by the Company or
any representative of or attorney for the Company of
any other communications from the Commission relating
to the Company, the Registration Statement (including
any amendments thereto), any 462(b) Registration
Statement, any preliminary prospectus, Prospectus or
the transactions contemplated by this Agreement, and
(vi) of the happening of any event during the period
referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration
Statement or the preliminary prospectus untrue or
which requires the making of any additions to or
changes in the Registration Statement or the
Prospectus in order to make the statements therein
not misleading. If at any time the Commission or any
state or other regulatory body shall issue any stop
order suspending the effectiveness of the
Registration Statement (including any post-effective
amendments thereto) or any 462(b) Registration
Statement, the Company will make every reasonable
effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(d) The Company will not file the Registration Statement
(including any amendment thereto), any 462(b)
Registration Statement or any amendment, supplement
or revision to either the prospectus included in the
Registration Statement at the time it became
effective or to the Prospectus which is not first
approved by you after reasonable notice thereof.
(e) The Company has delivered to each Underwriter,
without charge, as many copies of the preliminary
prospectus as such Underwriter reasonably requested,
and the Company hereby consents to the use of such
copies for purposes permitted by the Act. The
Company will promptly, after the Registration
Statement becomes effective and from time to time
thereafter for such period that a prospectus
relating to the Shares is required by law to be
delivered, furnish to you and to each Underwriter
and each dealer designated by you, without charge,
as many copies of the Prospectus (including any
amendment or supplement thereto) as you may from
time to time reasonably request. The Prospectus and
any amendments or supplements thereto furnished to
the Underwriters will be identical to the
electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
- 5 -
<PAGE> 6
(f) The Company will comply with the Act so as to
permit the completion of the distribution of the
Shares as contemplated by this Agreement and in the
Prospectus. If, during the period specified in
paragraph (e) above, any event shall occur as a
result of which the Prospectus as then amended or
supplemented includes any untrue statement of a
material fact or omits to state any material fact
required to be stated therein or necessary to make
the statements therein, in light of the
circumstances under which they were made, not
misleading or if it shall be necessary at any time
to amend the Registration Statement or amend or
supplement the Prospectus to comply with the Act and
any other law, the Company will forthwith prepare
and file with the Commission (at the expense of the
Company), subject to the provisions of paragraph (e)
above, an appropriate post-effective amendment to
the Registration Statement or amendment or
supplement to the Prospectus so that the statements
in the Registration Statement and the Prospectus as
so amended or supplemented, respectively, will
correct such statement or omission and shall use its
reasonable best efforts to have any such
post-effective amendment to the Registration
Statement declared effective as soon as possible,
and to furnish to you and to each Underwriter and
each dealer as you shall specify, such number of
copies thereof as you may reasonably request.
(g) The Company will promptly deliver to you three (3)
manually signed copies of the Registration
Statement, including exhibits and all amendments
thereto, and to those persons (including your
counsel) whom you identify to the Company, such
quantity of conformed copies of the Registration
Statement with exhibits, any 462(b) Registration
Statement, each preliminary prospectus, the
Prospectus and all amendments of and supplements to
such documents, if any, as you may reasonably
request. The copies of the Registration Statement
and each amendment thereto and the Prospectus and
any amendments or supplements thereto furnished to
the Underwriters will be identical to the
electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(h) The Company will cooperate with you and counsel for
the Underwriters in connection with the registration
or qualification of the Shares for offer and sale by
the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions
(domestic or foreign), as you may reasonably
request, to continue such qualification in effect so
long as reasonably required for distribution of the
Shares and to file such consents to service of
process or other documents as may be necessary in
order to effect such registration or qualification;
provided, however, that the Company shall not be
required to register or qualify as a foreign
corporation or to take any action which would
subject it to the service of process in suits, other
than as to matters and transactions relating to the
- 6 -
<PAGE> 7
offer and sale of the Shares, in any jurisdiction
where it is not now so subject. In each
jurisdiction in which the Shares have been so
qualified, the Company will file such amendments and
reports as may be required by the laws of such
jurisdiction to continue such qualification in
effect for a period of not less than one year from
the later of the Effective Date of the Registration
Statement and the effective date of any Rule 462(b)
Registration Statement.
(i) The Company will timely file such reports pursuant
to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as are necessary in order to
make generally available to its security holders as
soon as practicable an earnings statement for the
purposes of, and to provide the benefits
contemplated by, the last paragraph of Section 11(a)
of the Act.
(j) The Company will, during the period of five years
after the date of this Agreement, furnish to you, in
such quantity as you may reasonably request for
distribution to the Underwriters, as soon as
available, a copy of (i) each report of the Company
mailed to security holders and (ii) all reports,
financial statements and proxy or information
statements filed by the Company with the Commission
or with any national securities exchange.
(k) The Company, during the period when the Prospectus
is required to be delivered under the Act or the
Exchange Act, will file all documents required to be
filed with the Commission pursuant to the Exchange
Act, and the rules and regulations of the Commission
thereunder.
(l) The Company will use its best efforts to do and
perform all things required or necessary to be done
and performed under this Agreement by the Company
prior to the Firm Closing Date or the Option Closing
Date, as the case may be, and to satisfy all
conditions precedent to the delivery of the Shares.
(m) The Company, for a period of 180 days after the
date of the Prospectus, will not, without the prior
written consent of Parker/Hunter Incorporated,
directly or indirectly, sell, offer, contract or
grant an option to sell, pledge, transfer or
otherwise dispose of or announce the offering of or
the filing of any registration statement under the
Act, in respect of any shares of Common Stock,
options or warrants to acquire shares of Common
Stock, or publicly announce the intention to do any
of the foregoing; other than (i) the Company's
issuance and sale of Shares in accordance with this
Agreement, and (ii) the grant of stock options under
the Company's 1997 Stock Option Plan as set forth in
the Prospectus (and the filing of a registration
statement on Form S-8 in connection therewith).
(n) The Company will apply the net proceeds of the sale
of the Shares sold by the Company as set forth under
the "Use of Proceeds" in the Prospectus.
- 7 -
<PAGE> 8
(o) The Company shall take such steps as shall be
necessary to ensure that the Company shall not
become an "investment company" or a company
"controlled" by an "investment company" within the
meaning of such terms under the Investment Company
Act of 1940, as amended (the "Investment Company
Act").
(p) Prior to the Firm Closing Date, and if the Option
Shares are purchased by the Underwriters, the Option
Closing Date, without your prior written consent,
the Company shall issue no press release or other
communication or hold any press conference with
respect to the offering of the Shares or the
financial condition, results of operations,
operations, business, business prospects,
properties, assets or liabilities of the Company.
(q) The Company will use its best efforts to cause the
Common Stock to be quoted on the Nasdaq National
Market.
(r) The Company hereby agrees that it will ensure that
the Reserved Shares will be restricted as required
by the NASD or the NASD rules from sale, transfer,
assignment, pledge or hypothecation for a period of
three months following the date of this Agreement.
The Underwriters will notify the Company as to which
persons will need to be so restricted. At the
request of the Underwriters, the Company will direct
the transfer agent to place a stop transfer
restriction upon such securities for such period of
time. Should the Company release, or seek to
release, from such restrictions any of the Reserved
Shares, the Company agrees to reimburse the
Underwriters for any reasonable expenses (including,
without limitation, legal expenses) they incur in
connection with such release.
(s) The Company shall comply with all provisions of all
undertakings contained in the Registration
Statement.
6. COVENANTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders, severally and not jointly, covenants and agrees with you and each
Underwriter as follows:
(a) Such Selling Stockholder, for a period of 180 days
from the date of the Prospectus, will not, without
the prior written consent of Parker/Hunter
Incorporated, directly or indirectly, sell, offer,
contract or grant an option to sell (including,
without limitation, any short sale), pledge,
transfer, establish an open put equivalent position
or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common
Stock held by it or publicly announce the intention
to do any of the foregoing; other than such Selling
Stockholder's sale of Shares in accordance with this
Agreement.
(b) To take all reasonable actions in cooperation with
the Company and the Underwriters to cause the
Registration Statement to become effective at
- 8 -
<PAGE> 9
the earliest practicable time, and to do and perform
all things to be done and performed by it under this
Agreement prior to each Closing Date and to satisfy
all conditions precedent to the delivery of the
Shares pursuant to this Agreement.
(c) If, at any time during the period described in
Section 5(e) hereof, there is any change in the
information referred to in Section 7(e), 7(f), 7(g)
or 7(h), if applicable, hereof, to immediately
notify you and the Company of such change.
(d) Such Selling Stockholder will not take, directly or
indirectly, prior to the termination of the offering
of the Shares contemplated by this Agreement, any
action designed to stabilize or manipulate the price
of the Common Stock or that might reasonably be
expected to cause or result in stabilization or
manipulation of the price of the Common Stock.
(e) In order to document the Underwriters' compliance
with the reporting and withholding provision of the
Internal Revenue Code of 1986, as amended (the
"Code"), such Selling Stockholder shall deliver to
you, on or prior to the Firm Closing Date, a
properly completed and executed United States
Treasury Department Form W-8 (or other applicable
form or statement specified by Treasury Department
Regulations in lieu thereof).
7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
Each of the Selling Stockholders with respect to itself and severally and not
jointly, represents and warrants to you and each Underwriter that:
(a) Such Selling Stockholder is the sole owner of the
number of Shares set forth opposite such Selling
Stockholder's name in Schedule I hereto; and, upon
delivery of and payment for the Shares to be sold by
the Selling Stockholder to each Underwriter in
accordance with this Agreement, title to such Shares
will be free and clear of all liens, security
interests, pledges, charges, encumbrances,
stockholders' agreements, voting trusts and any
claims whatsoever (other than any placed thereon by
the Underwriters).
(b) Such Selling Stockholder has been duly organized and
is validly existing as a corporation in good
standing under the laws of the British Virgin
Islands and has all requisite corporate power and
authority to enter into and perform its obligations
under this Agreement.
(c) This Agreement has been duly and validly
authorized, executed and delivered by such Selling
Stockholder (or the Attorneys-in-Fact on behalf of
such Selling Stockholder) and is a legal and binding
obligation of such Selling Stockholder, enforceable
against such Selling Stockholder in accordance with
its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws
- 9 -
<PAGE> 10
affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general
principles of equity, including principles of
commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity) and except
insofar as rights to indemnification and contribution
contained herein may be limited by federal or state
securities laws or related public policy.
(d) The execution and delivery by such Selling
Stockholder (or the Attorneys-in-Fact, on behalf of
such Selling Stockholder) of, and its performance of
its obligations under, this Agreement, the Custody
Agreement (defined herein) and the consummation of
the transactions contemplated hereby and thereby,
respectively (including the sale of the Shares
hereunder), will not (i) conflict with or result in
a breach of any of the terms and provisions of, or
constitute a default under (or an event that with
notice or lapse of time, or both, would constitute a
default under) or require approval or consent under,
or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of
such Selling Stockholder or any of its subsidiaries
pursuant to the terms of any agreement, contract,
indenture, mortgage, lease, license, arrangement or
understanding to which such Selling Stockholder or
any of its subsidiaries is a party, or to which any
of its respective properties is subject, that is
material to such Selling Stockholder or any of its
subsidiaries or any governmental franchise, license
or permit heretofore issued to such Selling
Stockholder or any of its subsidiaries that is
material to such Selling Stockholder or any of its
subsidiaries, or (ii) violate or conflict with any
provision of the articles or certificate of
incorporation, by-laws or similar governing
instruments of such Selling Stockholder or any of
its subsidiaries or any judgment, decree, order,
statute, rule or regulation of any court or any
public, governmental or regulatory agency or body
having jurisdiction over such Selling Stockholder or
any of its subsidiaries or any of their respective
properties or assets, except for those violations or
conflicts that, individually or in the aggregate,
would not have a Material Adverse Effect (defined
herein) on such Selling Stockholder or any of its
subsidiaries, taken as a whole.
(e) No filing with, or consent, approval,
authorization, order, registration, qualification,
license, permit or decree of, any court or any
public, governmental or regulatory agency or body
having jurisdiction over a Selling Stockholder or
any of its properties or assets is required for (i)
such Selling Stockholder's execution and delivery
of, and performance of its obligations under, this
Agreement, the Custody Agreement and the
consummation of the transactions contemplated hereby
and thereby, respectively (including the sale of the
Shares hereunder), except for the registration of
the Shares under the Act and the Exchange Act, the
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<PAGE> 11
authorization of the Shares for quotation on the
Nasdaq National Market, such filings and
registration as may be required under state
securities or Blue Sky laws and the securities laws
of foreign jurisdictions in connection with the
purchase and distribution of the Shares by the
Underwriters and those already obtained.
(f) Such Selling Stockholder has placed in custody
under the Irrevocable Power of Attorney and Custody
Agreement with Manohar B. Hira, O'Neil Nalavadi and
Babu Srinivas, or any of them, as Attorneys-in-Fact
(the "Custody Agreement"), for delivery under this
Agreement, certificates in negotiable form
representing the Shares to be sold by such Selling
Stockholder hereunder. Such Selling Stockholder
specifically agrees that the Shares represented by
the certificates so held in custody for such Selling
Stockholder are subject to the interest of the
Underwriters, that the arrangements made by such
Selling Stockholder for such custody are to that
extent irrevocable and that the obligations of such
Selling Stockholder hereunder shall not be
terminated by any act of such Selling Stockholder,
by operation of law, by dissolution or insolvency of
such Selling Stockholder or the occurrence of any
other event.
(g) To the extent that statements or omissions are made
in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and
in conformity with written information furnished to
the Company by such Selling Stockholder specifically
for use therein (the "Written Information"), on the
Effective Date, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b) of
the Act (if required), at all times subsequent
thereto and including the Firm Closing Date, when
any 462(b) Registration Statement becomes effective,
when any post-effective amendment to the
Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed
with the Commission, and during such longer period
as the Prospectus may be required to be delivered in
connection with sales of Shares by the Underwriters
or a dealer, the Registration Statement, any 462(b)
Registration Statement, and the Prospectus (as
amended or supplemented if the Company shall have
filed with the Commission an amendment or supplement
thereto) did not and will not contain an untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary in order to make the statements made
therein (in the case of the Prospectus, in light of
the circumstances under which it was made) not
misleading. Such Selling Stockholder has reviewed
the most recent preliminary prospectus, the
Prospectus (if the same shall be in existence) and
the Registration Statement, and the information
regarding such Selling Stockholder set forth therein
that is based upon the Written Information is
complete and accurate. From the Effective Date
through the Firm Closing Date, such Selling
Stockholder will advise the Representatives in
writing
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<PAGE> 12
if and to the extent that such information
based upon the Written Information does not conform
with the requirements of the Act or contains any
untrue statement of a material fact or omits to
state any material fact required to be stated
therein or necessary in order to make the statements
made therein (in the case of the Prospectus, in
light of the circumstances under which it was made)
not misleading.
(h) There are no contracts, agreements or understandings
between such Selling Stockholder and any person
entitling such person to any fee, commission or
payment from such Selling Stockholder in connection
with the Shares to be sold by such Selling
Stockholder, other than the compensation due and
payable to the Underwriters as described in the
Registration Statement.
Any certificate signed by any officer of such Selling Stockholder
delivered to the Representatives or to counsel to the Underwriters shall be
deemed a representation and warranty by such Selling Stockholder to each
Underwriter as to the matters covered thereby.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE PRINCIPAL
STOCKHOLDER AND VIJAY MALLYA. Each of the Company, United Breweries Information
Consultancy Services Ltd., a British Virgins Islands corporation (the
"Principal Stockholder"), and Vijay Mallya, the beneficial owner of the
Principal Stockholder, jointly and severally, represent and warrant to you and
to each Underwriter that:
(a) Each of the Registration Statement and any Rule
462(b) Registration Statement has become effective
under the Act.
(i) At the respective times the Registration
Statement, any Rule 462(b) Registration
Statement and any post-effective amendments
thereto became effective and at the Firm
Closing Date (and, if any Option Shares are
purchased, at the Option Closing Date), the
Registration Statement, any Rule 462(b)
Registration Statement and any amendments
and supplements thereto complied and will
comply in all material respects with the
requirements of the Act and did not and
will not contain an untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements therein
not misleading, and the Prospectus, any
preliminary prospectus and any amendment or
supplement thereto, at their respective
times of issuance and at the Firm Closing
Date, (and, if any Option Shares are
purchased, at the Option Closing Date),
complied and will comply in all material
respects with the requirements of the Act
and did not and will not contain an untrue
statement of a material fact or omit to
state a material fact required to be stated
therein or necessary to make the statements
therein not misleading. Neither the
Prospectus nor any
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<PAGE> 13
amendments or supplements thereto, at the
time the Prospectus or any such amendment or
supplement was issued and at the Firm
Closing Date, (and, if any Option Shares are
purchased, at the Option Closing Date),
included or will include an untrue statement
of a material fact or omitted or will omit
to state a material fact necessary in order
to make the statements therein, in the light
of the circumstances under which they were
made, not misleading.
(ii) No stop order preventing or suspending the
use of any preliminary prospectus has been
issued by the Commission; and no
proceedings for that purpose have been
instituted or are pending or, to the
knowledge of the Company, the Principal
Stockholder or Vijay Mallya, are
contemplated by the Commission, and any
request on the part of the Commission for
additional information has been complied
with, and when any preliminary prospectus
was first filed with the Commission
(whether filed as part of the Registration
Statement or as an amendment thereof or any
Rule 462(b) Registration Statement or
pursuant to Rule 424(b)) and when any
amendment thereof or supplement thereto was
first filed with the Commission, such
preliminary prospectus and any amendments
thereof and supplements thereto conformed
in all material respects with the
applicable requirements of the Act and did
not contain an untrue statement of a
material fact or omit to state any material
fact required to be stated therein or
necessary to make the statements made
therein, in light of the circumstances
under which they were made, not misleading.
(iii) Each preliminary prospectus and the
Prospectus delivered to the Underwriters for
use in connection with this offering was
identical to the electronically transmitted
copies thereof filed with the Commission
pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(iv) No representation and warranty, however,
is made in this subsection 8(a) by the
Company, the Principal Stockholder and
Vijay Mallya with respect to written
information contained in or omitted from
the Registration Statement, any Rule 462(b)
Registration Statement, the Prospectus, any
preliminary prospectus, or any amendment or
supplement thereto, in reliance upon and in
conformity with written information with
respect to the Underwriters and the plan of
distribution of the Shares furnished to the
Company on your behalf by the
Representatives expressly for use in
connection with the preparation thereof.
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<PAGE> 14
(b) The Shares have been approved for quotation upon
notice of issuance on the Nasdaq National Market.
(c) Each contract, agreement, instrument, lease, license
or other item required to be described in the
Registration Statement or the Prospectus or filed as
an exhibit to the Registration Statement has been so
described or filed, as the case may be.
(d) Arthur Andersen LLP, whose separate report appears
in the Registration Statement, are independent
public accountants with respect to the Company, as
required by and within the meaning of the Act. The
financial statements (including the related notes
thereto) of the Company (the "Company Financials")
included in the Registration Statement or any
preliminary prospectus, or to be included in the
Prospectus, fairly present the financial position,
results of operations and cash flows of the Company
and the other information purported to be shown
therein at the respective dates and for the
respective periods to which they apply. The Company
Financials have been prepared in accordance with
generally accepted accounting principles as in
effect in the United States ("US GAAP") consistently
applied throughout the periods involved, except as
disclosed therein, and are, in all material
respects, in accordance with the books and records
of the Company. Any "pro forma" and "pro forma as
adjusted" financial information included in the
Registration Statement or any preliminary
prospectus, or to be included in the Prospectus,
fairly present the information purported to be shown
therein at the respective dates thereof and for the
respective periods covered thereby and all
adjustments have been properly applied. The
selected financial data and the summary financial
information included in the Registration Statement
and Prospectus present fairly the information shown
therein and have been compiled on a basis consistent
with that of the audited financial statements
included in the Registration Statement. No other
financial statements are required by Form S-1 or
otherwise to be included in the Registration
Statement or the Prospectus other than those
included therein.
(e) Subsequent to the respective dates as of which
information is given in the Registration Statement,
except as set forth in the Registration Statement or
as may be set forth in the Prospectus, there has not
been any material adverse change in the business,
business prospects, properties, operations,
condition (financial or other) or results of
operations of the Company, whether or not arising
from transactions in the ordinary course of business
(a "Material Adverse Effect"), and since the date of
the latest balance sheet of the Company included in
the Registration Statement, and except as described
in the Prospectus, (i) the Company (A) has not
incurred or undertaken any liabilities or
obligations, direct or contingent, that are,
individually or in the aggregate, material to the
Company; or (B) entered
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<PAGE> 15
into any transaction not in the ordinary course of
business that is material to the Company; and (ii)
the Company has not declared or paid any dividend on
or made any distribution of or with respect to any
shares of its capital stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(f) The Company has all requisite corporate power and
authority to execute, deliver and perform its
obligations under this Agreement and to issue, sell
and deliver the Shares in accordance with the terms
and conditions thereof.
(g) This Agreement has been duly and validly
authorized, executed and delivered by the Company
and is a legal and binding obligation of the
Company, enforceable against the Company in
accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws
affecting rights and remedies of creditors and other
obligees generally, and subject, as to
enforceability, to general principles of equity,
including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in
equity), and except insofar as rights to
indemnification and contribution contained herein
may be limited by federal or state securities laws
or related public policy.
(h) The Company's execution and delivery of, and its
performance of its obligations under, this Agreement
and the consummation of the transactions
contemplated hereby and in the Registration
Statement (including the issuance and sale of the
Shares and the use of proceeds from the sale of
Shares as described in the Prospectus under the
caption "Use of Proceeds") will not (i) conflict
with or result in a breach of any of the terms and
provisions of, or constitute a default under (or an
event that with notice or lapse of time, or both,
would constitute a default under) or require
approval or consent under, or result in the creation
or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant
to the terms of any agreement, contract, indenture,
mortgage, lease, license, arrangement or
understanding to which the Company is a party, or to
which any of its properties is subject, that is
material to the Company (hereafter, collectively,
"Material Contracts"), or any governmental
franchise, license or permit heretofore issued to
the Company that is material to the Company
(hereafter, collectively, "Material Permits"), (ii)
violate or conflict with any provision of the
certificate of incorporation, by-laws or similar
governing instruments of the Company or (iii)
violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or
any public, governmental or regulatory agency or
body, domestic or foreign, having jurisdiction over
the Company or any of its properties or assets
except for those violations
- 15 -
<PAGE> 16
or conflicts that, individually or in the aggregate,
would not have a Material Adverse Effect on the
Company.
(i) No filing with, or consent, approval,
authorization, order, registration, qualification,
license, permit or decree of, any court or any
public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its
respective properties or assets is required for (i)
the Company's execution and delivery of, and its
performance of its obligations under, this
Agreement, and the consummation of the transactions
contemplated hereby (including the issuance and sale
of the Shares and the use of proceeds from the sale
of Shares as described in the Prospectus under the
caption "Use of Proceeds"), except the registration
of the Shares under the Act and the Exchange Act,
the approval of the Shares for quotation on the
Nasdaq National Market, such filings and
registrations as may be required under state
securities or Blue Sky laws and the securities laws
of foreign jurisdictions in connection with the
purchase and distribution of the Shares by the
Underwriters and those already obtained.
(j) All of the currently outstanding shares of capital
stock of the Company have been duly and validly
authorized and issued, are fully paid and
nonassessable and were not issued in violation of or
subject to any preemptive rights.
(k) The Shares have been duly authorized and, when
issued, delivered and sold in accordance with the
terms of this Agreement, will be validly issued,
fully paid and nonassessable, and will not have been
issued in violation of or be subject to any
preemptive rights, and the Underwriters will receive
valid title to those Shares to be purchased by them
from the Company, free and clear of all liens,
security interests, pledges, charges, encumbrances,
stockholders' agreements, voting trusts and any
claims whatsoever (other than any placed thereon by
the Underwriters).
(l) The Company has, as of the date hereof, and will
have, as of the Firm Closing Date and the Option
Closing Date, if any, an authorized and outstanding
capitalization as set forth in the Registration
Statement and as shall be set forth in the
Prospectus, both on an historical basis and as
adjusted basis to give effect to the offering of the
Shares. The Company's capital stock conforms to the
description thereof set forth in the Registration
Statement and as shall be set forth in the
Prospectus. The authorized, issued and outstanding
capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement,
pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or
pursuant to the exercise of options referred to in
the Prospectus).
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<PAGE> 17
(m) There is no commitment, plan or arrangement to issue,
and no outstanding option, warrant or other right
calling for the issuance of, any shares of capital
stock (or similar interests) of the Company or any
security or other instrument that by its terms is
convertible into, exercisable for or exchangeable for
or evidencing the right to purchase capital stock (or
similar interests) of the Company, except as
described in the Registration Statement and as shall
be described in the Prospectus.
(n) The Company has been duly organized and is validly
existing as a corporation in good standing under the
laws of the State of Delaware and has all requisite
corporate power and authority to enter into and
perform its obligations under this Agreement.
(o) The Company is qualified and in good standing as a
foreign corporation in each jurisdiction in which
the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its
business makes such qualification necessary except
for those failures to be so qualified or in good
standing that will not in the aggregate have a
Material Adverse Effect.
(p) The Company is not in any material respect in
violation or breach of, or in default under (nor has
an event occurred that with notice, lapse of time or
both, would constitute a default under), any
Material Contract, and each Material Contract is in
full force and effect, and is the legal, valid and
binding obligation of the Company, enforceable
against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium
and other similar laws affecting the rights and
remedies of creditors and other obligees generally
and subject, as to enforceability, to general
principles of equity, including principles of
commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(q) There is no action, suit, litigation, arbitration,
claim, governmental or other proceeding before or
brought by any court or governmental agency or body,
domestic or foreign, pending or, to the best
knowledge of the Company, the Principal Stockholder
or Vijay Mallya, threatened or contemplated with
respect to the Company or any of their respective
operations, businesses, properties or assets, except
as described in the Registration Statement and as
shall be described in the Prospectus. The Company is
not or, to the best knowledge of the Company, the
Principal Stockholder or Vijay Mallya, with the
giving of notice or lapse of time or both would be,
in violation of or noncompliance with the
requirements of any Material Permit or the
provisions of any law, rule, regulation, order,
judgment or decree, including, but without
limitation thereto, all
- 17 -
<PAGE> 18
applicable federal, state and local laws and
regulations relating to (i) immigration, (ii) zoning,
land use, protection of the environment, human health
and safety or hazardous or toxic substances, wastes,
pollutants or contaminants and (ii) employee or
occupational safety, discrimination in hiring,
promotion or pay of employees, employee hours and
wages or employee benefits, except for such
violations or failures of compliance that,
individually or in the aggregate, would not have a
Material Adverse Effect.
(r) Except as described in the Registration Statement
and as shall be described in the Prospectus, the
Company has (i) good and marketable title to all
real and personal properties owned by it, free and
clear of all liens, security interests, pledges,
charges, claims, encumbrances, restrictions and
mortgages and (ii) valid, subsisting and enforceable
leases and subleases for all real and personal
properties leased by it, subject to such exceptions
as, individually or in the aggregate, do not have
and are not reasonably likely to have a Material
Adverse Effect, and the Company has not had any
notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the
Company under any of the leases or subleases
mentioned above, or affecting or questioning the
rights of the Company to the continued possession of
the leased or subleased premises under any such
lease or sublease. No real property owned, leased,
licensed or used by the Company lies in an area that
is, or to the best knowledge of the Company will be,
subject to zoning, use or building code restrictions
that would prohibit, and, to the best knowledge of
the Company, no state of facts relating to the
actions or inaction of another person or entity or
his, her or its ownership, leasing, licensing or use
of any real or personal property exists that would
prevent, the continued effective ownership, leasing,
licensing or use of such real property in the
business of the Company as presently conducted or as
the Prospectus indicates are contemplated to be
conducted, subject to such exceptions as,
individually or in the aggregate, do not have, and
are not reasonably likely to have, a Material
Adverse Effect.
(s) The Company directly owns or possesses all patents,
patent rights, licenses, inventions, copyrights,
trademarks, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures),
service marks and trade names or other intellectual
property and intangibles (collectively,
"Intellectual Property") necessary to conduct its
business as now conducted and proposed to be
conducted as disclosed in the Registration Statement
and as shall be disclosed in the Prospectus, except
where the failure to own or possess such
Intellectual Property, individually or in the
aggregate, would not have a Material Adverse Effect.
Other than as disclosed in the Registration
Statement and as shall be disclosed in the
- 18 -
<PAGE> 19
Prospectus, neither the Company, the Principal
Stockholder nor Vijay Mallya has received any
notice, or is otherwise aware of, infringement of or
conflict with the asserted rights of others with
respect to any Intellectual Property or any facts or
circumstances which would render any Intellectual
Property invalid or inadequate to protect the
interest of the Company therein, and which
infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or
invalidity or inadequacy, individually or in the
aggregate which, if adversely determined, would have
a Material Adverse Effect. To the best knowledge of
the Company, the Principal Stockholder and Vijay
Mallya, there is no infringement by others of any
Intellectual Property of the Company that has had or
is reasonably likely to have a Material Adverse
Effect. The Company has registered and owns the
rights to the trademark and related logo for "UBICS"
in all jurisdictions, domestic or foreign, in which
such trademarks and logos are currently being or are
contemplated to be used and in which such
registration is currently permitted.
(t) The Company possesses such permits, licenses,
approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct
the business now operated by it; the Company is in
compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so
to comply would not, individually or in the
aggregate, have a Material Adverse Effect; all of
the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such
Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect; and the
Company has not received any notice of proceedings
relating to the revocation or modification of any
such Governmental Licenses which, individually or in
the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a
Material Adverse Effect.
(u) Except as described in the Registration Statement
and except as would not, individually or in the
aggregate, result in a Material Adverse Effect (A)
the Company is not in violation of any federal,
state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of
common law or any judicial or administrative
interpretation thereof, including any judicial or
administrative order, consent, decree or judgment,
relating to pollution or protection of human health,
the environment (including, without limitation,
ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations
relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous
Materials") or
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<PAGE> 20
to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company has all permits,
authorizations and approvals required under any
applicable Environmental Laws and is in compliance
with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violations,
investigations or proceedings relating to any
Environmental Law against the Company, and (D) there
are no events or circumstances that might reasonably
be expected to form the basis of an order for
clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body
or agency, against or affecting the Company relating
to Hazardous Materials or any Environmental Laws.
(v) The Company and any entity which would be treated
as a single employer under Section 414(b), (c), (m)
or (o) of the Code, including the regulations and
published interpretations thereunder (the "Code")
(each such entity, an "ERISA Affiliate"), is in
compliance in all material respects with all
presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended,
including the regulations and published
interpretations thereunder ("ERISA") and, if
applicable, the Code; no "reportable event" (as
defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the
Company or any ERISA Affiliate would have any
liability; neither the Company nor any ERISA
Affiliate has incurred or expects to incur liability
under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any such
"pension plan" or (ii) Sections 412 or 4971 of the
Code; and each "pension plan" for which the Company
or any ERISA Affiliate would have any liability that
is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects
and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such
qualification.
(w) Neither the Company nor, to the Company's, the
Principal Stockholder's or Vijay Mallya's best
knowledge, any director, officer or employee of the
Company or the Principal Stockholder has, directly
or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other
unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic
government officials or employees or to foreign or
domestic political parties or campaigns from
corporate funds; violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
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<PAGE> 21
(x) No person or entity has the right, by contract or
otherwise, to require registration under the Act of
shares of capital stock or other securities of the
Company.
(y) Neither the Company, the Principal Stockholder nor
any of their respective officers, directors or
affiliates (as defined in the Act) has taken or will
take, directly or indirectly, prior to the
termination of the offering of the Shares
contemplated by this Agreement, any action designed
to stabilize or manipulate the price of the Common
Stock or that might reasonably be expected to cause
or result in stabilization or manipulation of the
price of the Common Stock.
(z) The Company is not, and upon the issuance and sale
of the Shares as herein contemplated and the
application of the net proceeds therefrom as
described in the Prospectus will not be, an
"investment company" or a company "controlled" by an
"investment company" as such terms are defined in
the Investment Company Act.
(aa) Except as may be set forth in the Prospectus, the
Company has not incurred any liability for a fee,
commission or other compensation on account of the
employment of a broker or finder in connection with
the transactions contemplated by this Agreement.
(bb) The Company maintains systems of internal
accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in
accordance with management's general or specific
authorization; (ii) transactions are recorded as
necessary to permit preparation of financial
statements in conformity with US GAAP and to
maintain accountability for assets; (iii) the access
to the respective assets of the Company is permitted
only in accordance with management's general or
specific authorization; and (iv) the recorded
accountability for assets is compared with existing
assets at reasonable intervals, and appropriate
action is taken with respect to any differences.
(cc) Other than as disclosed in the Registration
Statement and as shall be disclosed in the
Prospectus, no labor dispute with the employees of
the Company exists or, to the best knowledge of the
Company, the Principal Stockholder or Vijay Mallya,
is imminent, and the Company, the Principal
Stockholder and Vijay Mallya are not aware of any
existing or imminent labor disturbance by the
employees of any of the Company's suppliers,
customers or contractors which, in either case, is
or is reasonably likely to have a Material Adverse
Effect.
(dd) (i) All United States federal income tax returns of
the Company required by law to be filed have been
filed, and all taxes shown by such returns or
otherwise assessed that are due and payable have
been paid, except
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<PAGE> 22
assessments against which appeals have been or will
be promptly taken and (ii) the Company has filed all
other tax returns that are required to have been
filed by them pursuant to the applicable laws of all
other jurisdictions, and the Company has paid all
taxes due pursuant to said returns or pursuant to any
assessment received by the Company, except for such
taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided
in accordance with US GAAP. The charges, accruals
and reserves on the consolidated books of the Company
in respect of any tax liability for any years not
finally determined are adequate to meet any
assessments or reassessments for additional tax for
any years not finally determined.
(ee) The Company is insured by insurers of recognized
financial responsibility against such losses and
risks and in such amounts as are prudent and
customary in the businesses in which the Company is
engaged. The Company has no reason to believe that
it will not be able to renew its existing insurance
coverage from similar insurers as may be necessary
to continue its business, except as are disclosed in
the Registration Statement and as shall be disclosed
in the Prospectus.
(ff) No relationship, direct or indirect, exists between
or among the Company on the one hand and the
directors, officers, the Principal Stockholder,
customers or suppliers of the Company on the other
hand, which is required to be described in the
Registration Statement and Prospectus by the Act and
which is not so described.
(gg) There are no contracts or documents which are
required to be described in the Registration
Statement or the Prospectus or to be filed as
exhibits thereto which have not been so described
and filed as required.
Any certificate signed by any officer of the Company or by any officer
of the Principal Stockholder delivered to the Representatives or to counsel for
the Underwriters shall be deemed a representation and warranted by the Company
or the Principal Stockholder, as the case may be, to each Underwriter as to the
matters covered thereby.
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<PAGE> 23
9. INDEMNIFICATION.
(a) Each of the Company, the Principal Stockholder and
Vijay Mallya agrees, jointly and severally, to
indemnify and hold harmless each Underwriter, and
each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities,
judgments or expenses (including the reimbursement
of any legal or other expenses incurred by them in
connection with investigating, preparing or
defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or
litigation), to which they or any of them may become
subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or action in respect
thereof) (i) arise out of or based upon any untrue
statement or alleged untrue statement made by the
Company, the Principal Stockholder and Vijay Mallya
in Section 8 hereof or (ii) arise out of or based
upon any untrue statement or alleged untrue
statement of a material fact contained in the
Registration Statement (or any amendment thereto),
including the Rule 430A Information or the
Prospectus or any preliminary prospectus, or in any
amendment or supplement thereto, any Rule 462(b)
Registration Statement, or caused by any omission or
alleged omission to state in such document such
material fact if required to be stated therein or
necessary to make the statements therein not
misleading or (iii) or in any Blue Sky application
or other document executed by the Company
specifically for that purpose or based upon any
written information furnished by the Company filed
in that state or other jurisdiction in order to
qualify any Shares under the securities laws
thereof, or arise out of or are based upon any
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; provided, however, that such indemnity
shall not inure to the benefit of any Underwriter
(or any person controlling such Underwriter) to the
extent that but only to the extent that any such
losses, claims, damages, liabilities, judgments or
expenses arise out of or are based upon any such
untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon
and in conformity with information furnished in
writing to the Company by you or on your behalf with
respect to the Underwriters expressly for use
therein.
(b) Each of the Selling Stockholders agrees, severally
and not jointly, to indemnify and hold harmless each
Underwriter, and each person, if any, who controls
any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages,
liabilities, judgments or expenses (including the
reimbursement of any legal or other expenses
incurred by them in
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<PAGE> 24
connection with investigating, preparing or defending
against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation) to which they
or any of them may become subject under the act or
otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect
thereof) (i) arise out of or based upon any untrue
statement or alleged untrue statement made by such
Selling Stockholder in Section 7 hereof or (ii) arise
out of or based only upon an untrue statement or
alleged untrue statement of a material fact contained
in the section entitled "Principal and Selling
Stockholders" (including the table and notes thereto)
or elsewhere in the Registration Statement (or any
amendment thereto), including Rule 430A Information
or the Prospectus or any preliminary prospectus, or
in any amendment or supplement thereto, any Rule
462(b) Registration Statement, or caused by any
omission or alleged omission to state in such
document or section such material fact if required to
be stated therein or necessary to make the statements
therein not misleading; provided, however, that such
indemnity shall not inure to the benefit of any
Underwriter to the extent that but only to the extent
that any such losses, claims, damages, liabilities,
judgments or expenses arise out of or are based upon
any such untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon
and in conformity with information furnished in
writing to the Company by you or on your behalf with
respect to the Underwriters expressly for use
therein.
(c) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its
directors, each of its officers who signed the
Registration Statement, the Selling Stockholders,
and any person, if any, controlling the Company and
the Selling Stockholders within the meaning of
Section 15 of the Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity
from the Company and the Selling Stockholders to
each Underwriter, but only with reference to
information furnished in writing by or on behalf of
such Underwriter expressly for use in the
Registration Statement (or any amendment thereto)
including Rule 430A Information, the Prospectus or
any preliminary prospectus, or in any amendment or
supplement thereto; provided, however, that in no
case shall the Underwriters be liable or responsible
for any amount in excess of the aggregate
underwriting discounts and commissions applicable to
the Shares purchased by such Underwriters hereunder.
This indemnity will be in addition to any liability
that the Underwriters may otherwise have to the
Company or any such director, officer or controlling
person, or the Selling Stockholders, including under
this Agreement. The Company acknowledges that the
statements set forth in the last paragraph of the
cover page, the legend concerning stabilization on
the inside front cover page of the Prospectus and
the statements set forth under the captions
"Underwriting" in the Prospectus constitute the only
information furnished
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<PAGE> 25
in writing by or on behalf of any Underwriter
expressly for use in the Registration Statement (or
any amendment thereto), and any related preliminary
prospectus and the Prospectus, or in any amendment or
supplement thereto.
(d) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after
receipt of notice of commencement of any action,
suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying
party or parties under this Section, notify each
such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all
papers served (but the omission so to notify such
indemnifying party of such action, suit or
proceeding shall not relieve it from any liability
that it may have to any indemnified party under this
Section and except to the extent that it has been
prejudiced in any material respect by such failure
or from any liability that it may have otherwise).
In case any action, suit or proceeding shall be
brought against any Underwriter or any person
controlling such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange
Act, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party
shall assume the defense thereof, including the
employment of counsel and payment of all fees and
expenses. In case any such action, suit or
proceeding shall be brought against any other
indemnified party and it shall notify the
indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate
in and, to the extent that it shall wish, jointly
with any other indemnifying party similarly
notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party
to such indemnified party of its election so to
assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party
for any legal or other expenses, except as provided
below and except for the reasonable costs of
investigation subsequently incurred by such
indemnified party in connection with the defense
thereon. Any indemnified party shall have the right
to employ separate counsel in any such action, but
the fees and expenses of such counsel shall be at
the expense of such indemnified party, unless (i)
the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying
parties, (ii) the indemnified party shall have
reasonably concluded that there may be a conflict of
interest between the indemnifying parties and the
indemnified party in the conduct of the defense of
such action (in which case the indemnifying parties
shall not have the right to direct the defense of
such action on behalf of the indemnified party), or
(iii) the indemnifying parties shall not have
employed counsel to assume the defense of such
action within a reasonable time after notice of the
commencement thereof, in each of
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<PAGE> 26
clauses (i), (ii) and (iii), the fees and expenses of
counsel shall be borne by the indemnifying parties;
provided, however, that the indemnifying parties
shall not be liable for more than one firm of counsel
on behalf of the indemnified parties. An
indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim
effected without its written consent (which consent
shall not be unreasonably withheld).
(e) In connection with the offer and sale of the
Reserved Shares, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless
the Underwriters from and against any and all
losses, liabilities, claims, damages and expenses
incurred by them as a result of the failure of the
Eligible Persons to pay for and accept delivery of
Reserved Shares which, by the end of the first
business day following the date of this Agreement,
were subject to a properly confirmed agreement to
purchase.
(f) In order to provide for contribution in
circumstances in which the indemnification provided
for in this Section 9 is for any reason held to be
unavailable or is insufficient to hold harmless a
party indemnified thereunder, the indemnifying party
shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature
contemplated by such indemnification provisions
(including any investigation, legal and other
expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or
proceeding or any claims, damages, liabilities and
expenses suffered by the Company and the Selling
Stockholders, any contribution received by the
Company and the Selling Stockholders from persons,
other than one or more of the Underwriters, who may
also be liable for contribution, including persons
who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange
Act, directors of the Company and officers of the
Company who signed the Registration Statement) to
which the indemnified party may be subject, in such
proportions as are appropriate to reflect the
relative benefits received by the Company, the
Selling Stockholders and Vijay Mallya, on the one
hand, and the Underwriters, on the other hand, from
the offering of the Shares or, if such allocation is
not permitted by applicable law or indemnification
is not available as a result of the indemnifying
party not having received notice as provided in this
Section 9, in such proportion as is appropriate to
reflect not only the relative benefits referred to
above but also the relative fault of the Company,
the Selling Stockholders and Vijay Mallya, on the
one hand, and the Underwriters, on the other hand,
in connection with the statements or omissions that
resulted in such losses, claims, damages,
liabilities or expenses, as well as any other
relevant equitable considerations. The relative
benefits received by the Company, the Selling
Stockholders and Vijay Mallya, on the one hand, and
the Underwriters, on the other hand, shall be deemed
to be in the same proportion as (x) the total
proceeds from the offering (net of
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<PAGE> 27
underwriting discounts and commissions but before
deducting expenses) received by the Company and the
Selling Stockholders (the "Net Proceeds") and (y) the
underwriting discounts and commissions received by
the Underwriters, respectively bear to the total
proceeds to the public of the Shares, in each case as
set forth in the table on the cover page of the
Prospectus. The relative fault of the Company, the
Selling Stockholders and Vijay Mallya, on the one
hand, and the Underwriters, on the other hand, shall
be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to
state a material fact relates to information supplied
by the Company, the Selling Stockholders or Vijay
Mallya, as such, on the one hand, or the
Underwriters, on the other hand, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or
omission. The Company, the Selling Stockholders,
Vijay Mallya and the Underwriters agree that it would
not be just and equitable if contribution pursuant to
this Subsection 9(f) were determined by pro rata
allocation or by any other method of allocation that
does not take account of the equitable considerations
referred to above. The Company's, the Selling
Stockholders' and Vijay Mallya's obligations in this
Subsection 9(f) to contribute are joint and several,
and the Underwriters' obligations under this
Subsection 9(f) to contribute are several and not
joint. Notwithstanding the provisions of this
Subsection 9(f), (i) in no case shall any Underwriter
be required to contribute any amount in excess of the
amount by which the aggregate public offering price
of the Shares underwritten by it and distributed to
the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement
or such omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For
purposes of this Subsection 9(f), each person, if
any, who controls any Underwriter within the meaning
of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to
contribution as such Underwriter and each person, if
any, who controls the Company or the Selling
Stockholders within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, the directors
of the Company and each officer of the Company who
shall have signed the Registration Statement shall
have the same rights to contribution as the Company,
subject in each case to clauses (i) and (ii) of this
Subsection 9(f). Any party entitled to contribution
shall, promptly after receipt of notice of
commencement of any action, suit or proceeding
against such party in respect of which a claim for
contribution may be made against another party or
parties under this Subsection 9(f), notify such party
or parties from whom contribution may be sought, but
the omission to so notify such party or parties shall
not relieve the party or
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<PAGE> 28
parties from whom contribution may be sought from
any obligation it or they may have under this
Subsection 9(f) or otherwise. No party shall be
liable for contribution with respect to any action
or claim settled without its written consent;
provided, however, that such written consent was not
unreasonably withheld. For purposes of this
Section, the Net Proceeds deemed to be received by
the Company shall be deemed to be also for the
benefit of the Selling Stockholders and Vijay Mallya
and information supplied by the Company shall also
be deemed to have been supplied by the Selling
Stockholders and Vijay Mallya.
(g) The obligations of the Company, the Selling
Stockholders and Vijay Mallya under this Section 9
shall be in addition to any liability which the
Company, the Selling Stockholders and Vijay Mallya
may otherwise have, and shall extend, upon the same
terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange
Act; and the obligations of the Underwriters under
this Section 9 shall be in addition to any liability
that the respective Underwriters may otherwise have,
and shall extend, upon the same terms and
conditions, to each director of the Company
(including any person who, with his consent, is
named in the Registration Statement as about to
become a director of the Company), to each officer
of the Company who has signed the Registration
Statement and to each person, if any, who controls
the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Shares are subject to the
satisfaction of each of the following conditions:
(a) All of the representations and warranties of the
Company and the Selling Stockholders contained in
this Agreement shall be true and correct in all
material respects on each Closing Date with the same
force and effect as if made on and as of such
Closing Date, and the Company and the Selling
Stockholders shall have performed all covenants and
agreements and satisfied all the conditions in this
Agreement required to be performed or satisfied by
them at or prior to such Closing Date.
(b) The Registration Statement, including any Rule
462(b) Registration Statement, has become effective
under the Act not later than 5:00 p.m., Pittsburgh
time, on the date of this Agreement or at such later
date and time as you may approve in writing, and all
other post-effective amendments thereto shall have
become effective and, if applicable, all filings
required by Rule 424(b) and Rule 430A shall have
been timely made and no stop order suspending the
effectiveness of the Registration Statement or the
use of the Prospectus shall have been issued and no
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<PAGE> 29
proceedings for that purpose shall have been
initiated or threatened or shall be pending or
contemplated by the Commission; and any request of
the Commission for additional information (to be
included in the Registration Statement or the
Prospectus or otherwise) shall have been disclosed
to you and complied with to your satisfaction.
(c) (i) Since the date of the latest balance sheet
included in the Registration Statement, there shall
not have been any material adverse change in the
condition, financial or otherwise, or in the
earnings, affairs or business prospects, whether or
not arising in the ordinary course of business, of
the Company, from that set forth in the Registration
Statement; (ii) since the date of the latest balance
sheet included in the Registration Statement, except
as contemplated in the Registration Statement, there
shall not have been any change in the capital stock
or material increase in the debt of the Company from
that set forth in the Registration Statement; (iii)
since the date of the latest balance sheet included
in the Registration Statement, the Company shall not
have become a party to or subject to any litigation
which is material to the Company; and (iv) the
Company shall have no liability or obligation,
direct or contingent, which is material to the
Company, other than those reflected in or
contemplated by the Registration Statement and the
Prospectus or incurred in the ordinary course of
business.
(d) The representations and warranties of the Company
contained in this Agreement shall be true and
correct on each Closing Date with the same force and
effect as if made on and as of such Closing Date,
and you shall have received a certificate of each of
the Company and Vijay Mallya dated such Closing Date
and addressed to you, and, in the case of the
certificate of the Company, executed by the Chairman
and the Chief Financial Officer in their capacities
as executive officers of the Company, and, in each
case, confirming the matters set forth in paragraphs
(a), (b) and (c) of this Section 10 and confirming
that the signers have carefully examined the
Registration Statement (including any amendment
thereto), any 462(b) Registration Statement, and the
Prospectus, and any amendments or supplements
thereto, and they do not include any untrue
statement of material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(e) The representations and warranties of the Selling
Stockholders contained in this Agreement shall be
true and correct on each Closing Date with the same
force and effect as if made on and as of such
Closing Date, and you shall have received a
certificate of each of the Selling Stockholders
dated such Closing Date and addressed to you, signed
by a person authorized to legally bind such Selling
Stockholder in his capacity as such, confirming
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<PAGE> 30
the matters set forth in paragraph (a) with respect
to such Selling Stockholder.
(f) You shall have received an opinion on the Firm
Closing Date, addressed to the Underwriters
(satisfactory to you and counsel for the
Underwriters) and dated such Closing Date, of Cohen
& Grigsby, P.C., counsel to the Company, to the
effect that:
(i) The Company is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Delaware and has the corporate power and
authority to own, lease and operate its
properties and to conduct its business as
described in the Prospectus and to enter
into and perform its obligations under this
Agreement; the Company does not control,
directly or indirectly, any corporation,
partnership, joint venture, association or
other business association; and the Company
is duly qualified and in good standing as a
foreign corporation authorized to do
business in each jurisdiction in which the
nature of its business or its ownership or
leasing of property requires such
qualification, except for failures to be so
qualified which would not, individually or
in the aggregate, have a Material Adverse
Effect on the Company.
(ii) The Company has all requisite corporate
power and authority to execute, deliver and
perform its obligations under this Agreement
and to issue, sell and deliver the Shares in
accordance with the terms and conditions
herein.
(iii) The Company has all requisite power and
authority and all necessary material
authorizations, approvals, consents,
orders, licenses, certificates and permits
to own, lease and license its respective
properties and conduct its respective
businesses as now being conducted and as
described in the Registration Statement and
the Prospectus, no such authorization,
approval, consent, order, license,
certificate or permit contains a materially
burdensome restriction other than as
disclosed in the Registration Statement and
the Prospectus; and the Company has all
requisite power and authority and all
necessary authorizations, approvals,
consents, orders, licenses, certificates
and permits to enter into, deliver and
perform this Agreement and to issue and
sell the Shares to be sold by it hereunder,
other than those required under foreign and
state Blue Sky or securities laws;
(iv) This Agreement has been duly authorized,
executed and delivered by the Company and
is a valid and binding agreement and
obligation of the Company and is
enforceable against the Company
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<PAGE> 31
in accordance with its terms, subject to
applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization,
moratorium and other similar laws affecting
rights and remedies of creditors and other
obligees generally, and subject, as to
enforceability, to general principles of
equity, including principles of commercial
reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought
in a proceeding at law or in equity).
(v) No holder of any security of the Company or
of any right to receive any security of the
Company has the right to have any
securities owned by such holder registered
pursuant to the Registration Statement or
otherwise registered by the Company under
the Act.
(vi) The authorized, issued and outstanding
capital stock of the Company is as set
forth in the Prospectus (except for
subsequent issuances, if any, pursuant to
this Agreement or pursuant to reservations,
agreements or employee benefit plans
referred to in the Prospectus or pursuant
to the exercise of options referred to in
the Prospectus) and the shares of issued
and outstanding capital stock of the
Company have been duly authorized and
validly issued, fully paid and
nonassessable and none of the outstanding
shares of capital stock of the Company was
issued in violation of or subject to any
preemptive or other similar rights.
(vii) The Shares have been duly authorized and,
when issued, delivered and sold in
accordance with the terms of this Agreement
will be validly issued, fully paid and
nonassessable and will not have been issued
in violation of or be subject to any
preemptive rights; and upon delivery of the
Shares and payment therefor in the manner
described in this Agreement, each of the
Underwriters will receive title to such
Shares, free and clear of all liens,
pledges, charges, claims, security
interests, restrictions on transfer,
agreements or other defects of title
whatsoever other than those resulting from
any action taken by the Underwriters, if
such Underwriters acquire the Shares in
good faith and without notice of adverse
claim.
(viii) There is no outstanding option, warrant or
other right calling for the issuance of,
and no commitment, plan or arrangement to
issue, any share of capital stock of the
Company or any security convertible into or
exercisable for or exchangeable for capital
stock of the Company other than as referred
to herein or described in the Registration
Statement and the Prospectus.
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<PAGE> 32
(ix) The Common Stock conforms in all material
respects to the description thereof
contained in the Registration Statement and
the Prospectus under the caption
"Description of Capital Stock;" all of the
shares of capital stock of the Company
outstanding prior to the Effective Date have
been legended to restrict the
transferability thereof.
(x) The Registration Statement, including any
462(b) Registration Statement, and all
post-effective amendments have been
declared effective under the Act, all
filings required by Rule 424(b) and Rule
430A have been timely made, and no stop
order suspending the use of any preliminary
prospectus or the Prospectus or the
effectiveness of the Registration Statement
or any Rule 462(b) Registration Statement
has been issued, and no proceedings for
that purpose have been taken or are pending
before or are threatened or contemplated by
the Commission.
(xi) The statements under the captions
"Management," "Business--Litigation" and
"Description of Capital Stock" in the
Registration Statement and the Prospectus,
and under Items 14 and 15 of Part II of the
Registration Statement, insofar as such
statements constitute summaries of legal
matters, documents or proceedings referred
to therein, the Company's charter and bylaws
or legal conclusions, has been reviewed by
us and is correct in all material respects.
(xii) The Company owns or possesses adequate and
enforceable rights to use, all Intellectual
Property necessary in all material respects
for the conduct of its business as
described in the Registration Statement and
the Prospectus and there is no material
claim pending against the Company with
respect to such Intellectual Property, and
the Company has not received notice that
use of such Intellectual Property infringes
upon or conflicts with the rights of any
third party which might materially
adversely affect the properties, business,
financial condition or results of operation
of the Company.
(xiii) The form of certificate used to evidence
the Common Stock complies in all material
respects with all applicable statutory
requirements and with any applicable
requirements of the charter and by-laws of
the Company.
(xiv) There is not pending or, to our best
knowledge after due inquiry, threatened any
action, suit, proceeding, inquiry or
investigation, to which the Company is a
party, or to which the property of the
Company is subject, before or brought by
any court or
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<PAGE> 33
governmental agency or body, domestic or
foreign, which might reasonably be expected
to result in a Material Adverse Effect, or
which might reasonably be expected to
materially adversely affect the consummation
of the transactions contemplated in this
Agreement (including, the issuance and sale
of the Shares and the use of proceeds from
the sale of Shares as described in the
Prospectus under the caption "Use of
Proceeds") or the performance by the Company
of its obligations thereunder.
(xv) There is not pending or, to our best
knowledge after due inquiry, threatened any
action, suit, proceeding, inquiry or
investigation, to which the Company is a
party, or to which the property of the
Company is subject, before or brought by
any court or any governmental agency or
other proceeding, domestic or foreign,
which is required to be described in the
Registration Statement or the Prospectus
and is not so described, or of any contract
or other document which is required to be
described in the Registration Statement or
the Prospectus or is required to be filed
as an exhibit to the Registration Statement
which is not described or filed as
required.
(xvi) There are no statutes or regulations that
are required to be described in the
Prospectus that are not described as
required.
(xvii) All descriptions in the Registration
Statement of contracts and other documents
to which the Company is a party are
accurate in all material respects; there
are no franchises, contracts, indentures,
mortgages, loan agreements, notes, leases
or other instruments required to be
described or referred to in the
Registration Statement or to be filed as
exhibits thereto other than those described
or referred to therein or filed as exhibits
thereto, and the descriptions thereof or
references thereto are correct in all
material respects.
(xviii) The Company is not in violation of its
charter or by-laws and no default by the
Company exists in the due performance or
observance of any material obligation,
agreement, covenant or condition contained
in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or
instrument that is described or referred to
in the Registration Statement or the
Prospectus or filed as an exhibit to the
Registration Statement.
(xix) The Company's execution and delivery of,
and its performance of its obligations
under, this Agreement and the consummation
of the transactions contemplated hereby and
in the Registration Statement (including
the issuance and sale of the Shares and the
use of the
- 33 -
<PAGE> 34
proceeds from the sale of the Shares as
described in the Prospectus under the
caption "Use of Proceeds") will not (i)
conflict with or result in a breach of any
of the terms and provisions of, or
constitute a default under (or an event that
with notice or lapse of time, or both, would
constitute a default under) or require
approval or consent under, or result in the
creation or imposition of any lien, charge
or encumbrance upon any property or assets
of the Company pursuant to the terms of any
Material Contract or any Material Permit,
(ii) violate or conflict with any provision
of the certificate of incorporation, by-laws
or similar governing instruments of the
Company or (iii) violate or conflict with
any judgment, decree, order, statute, rule
or regulation of any court or any public,
governmental or regulatory agency or body,
domestic or foreign, having jurisdiction
over the Company or any of its properties or
assets, except for those violations or
conflicts that, individually or in the
aggregate, would not have a Material Adverse
Effect on the Company.
(xx) Except for the order of the Commission
declaring the Registration Statement
effective and permits and similar
authorizations required under foreign or
state securities or Blue Sky laws, no filing
with, or authorization, approval, consent,
license, order, registration, qualification
or decree of, any court or governmental
authority or agency, domestic or foreign, is
necessary or required in connection with the
due authorization, execution and delivery of
this Agreement or for the offering, issuance
or sale of the Shares.
(xxi) All sales by the Company of its capital
stock since the date of incorporation
(except for sales by the Company of Shares
pursuant to this Agreement) were duly
registered or the subject of an available
exemption from the registration requirements
of applicable securities laws (except in all
such cases for any application of the
principles or doctrine of integration of
offerings or issuances, as to which such
counsel need express no opinion).
(xxii) The Registration Statement (including any
amendment thereto), any Rule 462(b)
Registration Statement and the Rule 430A
Information, all preliminary prospectuses
and the Prospectus, and any supplement or
amendment thereto (including any document
incorporated by reference into the
Prospectus), comply as to form in all
material respects with the Act and Form S-1
promulgated under the Act (except the
financial statements, selected financial
data and financial schedules, if any, as to
which such counsel need express no
opinion), including the published rules and
regulations
- 34 -
<PAGE> 35
of the Commission thereunder; the conditions
for use of Form S-1, set forth in the
General Instructions thereto, have been
satisfied.
(xxiii) The Company is not an "investment company"
or an entity "controlled" by an investment
company," as such terms are defined in the
1940 Act.
In addition to the matters set forth above, such
opinion shall also include a statement to the effect
that although such counsel has not independently
verified the accuracy or completeness of the
information in the Registration Statement and
Prospectus, they have participated in conferences
with representatives of the Company and its
independent accountants and investment bankers and
their counsel at which the contents of the
Registration Statement and the Prospectus were
discussed at length and nothing has come to their
attention that causes them to believe that (except
for financial statements and schedules and other
financial or statistical data, as to which such
counsel need express no opinion) the Registration
Statement and the Prospectus included therein at the
time the Registration Statement became effective,
contained any untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, as
amended or supplemented, if applicable (except for
financial statements and schedules and other
financial or statistical data, as to which such
counsel need express no opinion) contained any
untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the
circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely as
to matters of fact (but not as to legal
conclusions), on certificates of the executive
officers of the Company and of governmental
officials, provided that their opinion states that
they are so doing and that the Underwriters are
justified in relying on such certificates and copies
of such certificates of executive officers of the
Company are attached to the opinion.
Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other
document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
(g) You will have received an opinion on each Closing
Date, addressed to the Underwriters (satisfactory to
you and counsel for the Underwriters) and dated such
Closing Date, of Cohen & Grigsby, P.C., special
counsel to each Selling Stockholder, to the effect
that:
- 35 -
<PAGE> 36
(i) Each Selling Stockholder is a corporation
duly organized, validly existing and in good
standing under the laws of the British
Virgin Islands.
(ii) Each Selling Stockholder has all requisite
corporate power and authority to execute,
deliver and perform its obligations under
this Agreement and to sell and deliver the
Shares in accordance with the terms and
conditions herein.
(iii) Each Selling Stockholder has good and clear
title to the certificates for the Shares to
be sold by it and upon delivery thereof,
pursuant hereto and payment therefor, good
and clear title will pass to the
Underwriters, severally, free of all
restrictions on transfer, liens,
encumbrances, security interests and claims
whatsoever, assuming the Underwriters
purchase without notice of any adverse
claim to the Shares.
(iv) This Agreement and the Custody Agreement
have been duly authorized, executed and
delivered by each Selling Stockholder (or
the Attorneys-in-Fact, on behalf of the
Selling Stockholders) and are valid and
binding instruments, agreements and
obligations of each Selling Stockholder and
are enforceable against each Selling
Stockholder in accordance with their terms,
subject to applicable bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and other
similar laws affecting rights and remedies
of creditors and other obligees generally,
and subject, as to enforceability, to
general principles of equity, including
principles of commercial reasonableness,
good faith and fair dealing (regardless of
whether enforcement is sought in a
proceeding at law or in equity).
(v) Except for permits and similar
authorizations required under the securities
or Blue Sky laws of certain jurisdictions,
no filing with, or authorization, approval,
consent, license, order, registration,
qualification or decree of, any court or
governmental authority or agency, domestic
or foreign, is necessary or required in
connection with the due authorization,
execution and delivery of this Agreement or
for the offering, issuance or sale of the
Shares.
(vi) The execution and delivery by each Selling
Stockholder (or the Attorneys-in-Fact, on
behalf of the Selling Stockholders), and
its performance of its obligations under
this Agreement, the Custody Agreement and
the consummation of the transactions
contemplated hereby and thereby,
respectively (including the sale of the
Shares by such Selling Stockholder), will
not (i) conflict with or result in a
- 36 -
<PAGE> 37
breach of any of the terms and provisions
of, or constitute a default under (or an
event that with notice or lapse of time, or
both, would constitute a default under) or
require approval or consent under, or result
in the creation or imposition of any lien,
charge or encumbrance upon any property or
assets of such Selling Stockholder or any of
its subsidiaries pursuant to the terms of
any agreement, contract, indenture,
mortgage, lease, license, arrangement or
understanding to which such Selling
Stockholder or any of its subsidiaries is a
party, or to which any of their properties
is subject, that is material to such Selling
Stockholder or any of its subsidiaries or
any governmental franchise, license or
permit heretofore issued to such Selling
Stockholder or any of its subsidiaries that
is material to such Selling Stockholder, or
(ii) violate or conflict with any provision
of the articles or certificate of
incorporation, by-laws or similar governing
instruments of such Selling Stockholder or
any of its subsidiaries or any judgment,
decree, order, statute, rule or regulation
of any court or any public, governmental or
regulatory agency or body having
jurisdiction over such Selling Stockholder
or any of its subsidiaries or any of their
respective properties or assets except for
those violations or conflicts that,
individually or in the aggregate, would not
have a Material Adverse Effect on such
Selling Stockholder or any of its
subsidiaries, taken as a whole.
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of the laws
of the British Virgin Islands, upon the opinion of
___________, special counsel to the Company (which
opinion shall be dated and furnished to the
Representatives at the Firm Closing Date or the
Option Closing Date, as the case may be, shall be
satisfactory in form and substance to counsel for
the Underwriters and shall expressly state that the
Underwriters may rely on such opinion as if it were
addressed to them), provided that Cohen & Grigsby,
P.C. shall state in their opinion that they believe
that they and the Underwriters are justified in
relying upon such opinion, and (B), as to matters of
fact (but not as to legal conclusions), to the
extent they deem proper, on certificates of
responsible officers of each Selling Stockholder and
public officials, provided that their opinion states
that they are doing so and that the Underwriters are
justified in relying on such certificates and copies
of certificates of officers of such Selling
Stockholder are attached to the opinion. Such
opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to,
any treatise, written policy or other document
relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
- 37 -
<PAGE> 38
(h) You shall have received on each Closing Date, an
opinion (satisfactory to you and counsel for the
Underwriters), dated such Closing Date, of
______________________, special immigration counsel
for the Company, to the effect that: the statements
under the captions "Risk Factors-Recruitment and
Retention of IT Professionals," "-U.S. Regulation
of Immigration," and "Business-Human Resources" in
the Prospectus insofar as such statements constitute
a summary of legal matters, documents or proceedings
referred to therein, fairly present the information
called for with respect to such legal matters,
documents and proceedings and that, except as
disclosed therein, nothing has come to such
counsel's attention that would cause such counsel to
believe that the Company is not conducting its
business in compliance with such summary as so
stated, except for such violations that would not,
individually or in the aggregate, have a Material
Adverse Effect on the Company.
In rendering such opinion, such counsel may rely as
to matters of fact (but not as to legal
conclusions), on certificates of the executive
officers of the Company and of governmental
officials, provided that their opinion states that
they are so doing and that the Underwriters are
justified in relying on such certificates and copies
of such certificates of executive officers of the
Company are to attached to the opinion.
(i) You shall have received on each Closing Date an
opinion, dated the date of such Closing Date, from
Buchanan Ingersoll Professional Corporation, counsel
for the Underwriters, as to the matters referred to
in clauses (iv) (but only as to authorization,
execution and delivery of this Agreement by the
Company), (vi) and (vii) (but only as to the shares
to be issued and sold by the Company), (x), (xx),
(xxii) and to the effect of the first unnumbered
paragraph of the foregoing paragraph (f), and to the
effect that the statements under the caption
"Underwriting" in the Prospectus, insofar as such
statements constitute a summary of the documents
referred to therein, fairly present the information
called for with respect to such documents. In
rendering such opinion with respect to the matters
covered by clause (xxii), such counsel may state
that their opinion and belief are based upon the
procedures specified in such opinion.
In addition to the matters set forth above, such
opinion shall also include a statement to the effect
that although such counsel has not independently
verified the accuracy or completeness of the
information in the Registration Statement and
Prospectus, they have participated in conferences
with representatives of the Company, its independent
accountants and its counsel and the investment
bankers at which the contents of the Registration
Statement and the Prospectus were discussed at
length and nothing has come to their attention that
causes them to believe that (except for financial
statements and schedules and other
- 38 -
<PAGE> 39
financial or statistical data, as to which such
counsel need express no opinion) the Registration
Statement and the Prospectus included therein at the
time the Registration Statement became effective,
contained any untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, as
amended or supplemented, if applicable (except for
financial statements and schedules and other
financial or statistical data, as to which such
counsel need express no opinion) contained any untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading.
(j) At the time of the execution of this Agreement, the
Representatives shall have received from Arthur
Andersen LLP a letter dated such date and addressed
to the Underwriters, in form and substance
satisfactory to the Representatives, together with
signed or reproduced copies of such letter for each
of the Underwriters, (i) confirming that they are
independent public accountants within the meaning of
the Act including the applicable published rules and
regulations and are in compliance with the
applicable requirements relating to the
qualification of accountants under Regulation S-X
and (ii) containing statements and information of
the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to
the financial statements and certain financial
information contained in the Registration Statement
and the Prospectus.
(k) At the Firm Closing Date, the Representatives shall
have received from Arthur Andersen LLP a letter,
dated as of such Closing Date, to the effect that
they reaffirm the statements made in the letter
furnished pursuant to subsection (j) of this
Section, except that the specified date referred to
shall be a date not more than three business days
prior to the Firm Closing Date.
(l) At the Firm Closing Date, the Shares shall have been
approved for quotation on the Nasdaq National
Market, subject only to official notice of issuance.
(m) The NASD shall have confirmed that it has not raised
any objection with respect to the fairness and
reasonableness of the underwriting terms and
arrangements.
(n) At the date of this Agreement, the Representatives
shall have received an agreement (i) from the
Company substantially in the form of Exhibit A-1
hereto, (ii) from the Selling Stockholders
substantially in the form of
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<PAGE> 40
Exhibit A-2 hereto and (iii) from the persons and
entities listed on Exhibit C hereto substantially in
the form of Exhibit B hereto.
(o) In the event that the Underwriters exercise their
option provided in Section 2 hereof to purchase all
or any portion of the Option Shares, the
representations and warranties of the Company and
the Selling Stockholders contained herein and the
statements in any certificates furnished by the
Company, the Selling Stockholders hereunder or Vijay
Mallya shall be true and correct as of each Closing
Date, the Representatives shall have received:
(i) Certificates, dated such Closing Date, of
the President and Chief Financial Officer of
the Company, an authorized representative of
the Principal Stockholder and Vijay Mallya,
respectively, each confirming that the
certificates delivered at the Firm Closing
Date remain true and correct as of such
date.
(ii) The favorable opinions of Cohen & Grigsby,
P.C., counsel for the Company and the
Principal Stockholder, together with the
favorable opinion of _____________, special
counsel to the Company, each in form and
substance satisfactory to counsel for the
Underwriters, dated such Closing Date,
relating to the Option Shares to be
purchased on such Closing Date and
otherwise to the same effect as the
opinions required by Sections 10(f), 10(g)
and 10(h) hereof.
(iii) The favorable opinion of Buchanan Ingersoll
Professional Corporation, counsel for the
Underwriters, dated such Closing Date
relating to the Option Shares to be
purchased on such Closing Date and
otherwise to the same effect as the
opinions required by Section 10(i) hereof.
(iv) A letter from Arthur Andersen LLP, in form
and substance satisfactory to the
Representatives and dated such Closing
Date, substantially in the same form and
substance as the letter furnished to the
Representatives pursuant to Section 10(k)
hereof, except that the "specified date" in
the letter furnished pursuant to this
paragraph shall be a date not more than
five days prior to such Closing Date.
(p) On each date requested, counsel for the
Underwriters shall have been furnished with such
documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance
and sale of the Shares as herein contemplated, or in
order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all
proceedings taken by the Company in connection
- 40 -
<PAGE> 41
with the issuance and sale of the Shares as herein
contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the
Underwriters.
(q) If any condition specified in this Section shall
not have been fulfilled when and as required to be
fulfilled, by the date of this Agreement, or, in the
case of any condition to the purchase of Option
Shares, on a date which is after the Firm Closing
Date, the obligations of the several Underwriters to
purchase the relevant Option Shares, may be
terminated by the Representatives by notice to the
Company at any time at or prior to such Closing
Date, as the case may be, and such termination shall
be without liability or any party to any other party
except as provided in Section 13 is and except that
Sections 7, 8, 9 and 14 shall survive any such
termination and remain in full force and effect.
11. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement
shall become effective when notification of the effectiveness of the
Registration Statement has been released by the Commission.
This Agreement may be terminated at any time prior to the Firm Closing
Date by you by written notice to the Company and the Selling Stockholders if
any of the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
adverse change or a development involving a prospective adverse change in or
affecting particularly the condition, financial or otherwise, of the Company or
the earnings, business affairs or business prospects of the Company, whether or
not arising in the ordinary course of business, which would, in your reasonable
judgment, materially impair the investment quality of the Shares, (ii) any
outbreak of hostilities or other national or international calamity or crisis
or change in the economic conditions, if the effect of such outbreak, calamity,
crisis or change on the financial markets of the United States would, in your
reasonable judgment, make the offering or delivery of the Shares impracticable,
(iii) suspension of trading in securities generally on the New York Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on such exchange, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially and
adversely affect the business or operations of the Company, (v) declaration of
a banking moratorium by either federal, New York or Pennsylvania state
authorities, (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
reasonable opinion has a material adverse effect on the financial markets in
the United States, or (vii) if there shall have been such a material change in
the general economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States shall be
such as, in your reasonable judgment, makes it inadvisable to proceed with the
delivery of the Shares. Any termination of this Agreement pursuant to this
paragraph of Section 11 shall be without liability on the part of the Company
or the Selling Stockholder or any Underwriter, except as otherwise provided in
Sections 9 and 12 hereof.
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<PAGE> 42
If on the Firm Closing Date or on the Option Closing Date, as the case
may be, any of the Underwriters shall fail or refuse to purchase the Firm
Shares or Option Shares, as the case may be, which it has agreed to purchase
hereunder on such date, and arrangements satisfactory to the non-defaulting
Underwriter(s) for purchase of such Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of
the non-defaulting Underwriter(s); provided, however, that if the number of
Shares to be purchased by the defaulting Underwriter(s) on such Closing Date
shall not exceed 10% of the Shares that all the Underwriters are obligated to
purchase on such date, then each of the non-defaulting Underwriter(s) shall be
obligated to purchase such Shares on the terms herein set forth in proportion
to their respective obligations hereunder. In any such case which does not
result in termination of this Agreement, either the non-defaulting
Underwriter(s) or the Company shall have the right to postpone the Firm Closing
Date or the Option Closing Date, as the case may be, but in no event for longer
than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve the defaulting Underwriter(s) from liability in respect of any default
of such Underwriter(s) under this Agreement. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 11.
Failure or refusal by any Selling Stockholder (otherwise than for a
reason sufficient hereunder to justify the termination of this Agreement) to
sell and deliver on the Firm Closing Date or the Option Closing Date, as the
case may be, the aggregate number of Shares agreed to be sold and delivered by
such Selling Stockholder shall in no manner relieve the Company of its
obligations under this Agreement, and the Underwriters shall have the right to
elect to purchase on such Closing Date, in accordance with the terms and
provision of this Agreement, the number of Shares to be sold by the Company. In
the event the Underwriters elect to purchase the remaining Shares, then the
Firm Closing Date or the Option Closing Date, as the case may be, may be
postponed, in your discretion, for a period of not more than seven days in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
12. EXPENSES. Whether or not this Agreement becomes effective or is
terminated or the sale of Shares to the Underwriters is consummated, the
Company shall pay all costs, including mailing costs, expenses (including stock
transfer taxes), fees (other than the fees of counsel for the Underwriters
except to the extent set forth in clause (iv) of this Section 12 or in Section
14 hereof) and taxes incident to (i) the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and exhibits thereto) and the Prospectus, each
preliminary prospectus and all amendments and supplements to any of them prior
to or during the period specified in paragraph (e) of Section 5 hereof, but not
exceeding ten months after the Effective Date, (ii) the printing and
distribution of the Prospectus and all amendments or supplements to it during
the period specified in paragraph (e) of Section 5 hereof, but not exceeding
ten months after the Effective Date, (iii) the preparation, printing and
distribution of the Blue Sky Memoranda and the printing and distribution of
this Agreement and other underwriting documents, including the Agreement Among
Underwriters, the Dealer Agreement, the Underwriters' Questionnaire and Power
of Attorney, and all other agreements,
- 42 -
<PAGE> 43
memoranda, correspondence and other documents printed and delivered in
connection with the offering of the Shares, (iv) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the several states (including the fees and disbursements of counsel for
the Underwriters relating to such registration or qualification), (v) filing
fees and clearance of the NASD in connection with the offering, (vi)
underwriter, dealer and institutional meetings (including the travel, lodging
and other expenses of the Company's representatives), except that the
Underwriters shall pay their own respective travel and lodging expenses, and
(vii) the performance by the Company and the Selling Stockholder of their other
obligations under this Agreement.
13. NOTICES. All notices and communications given pursuant to
this Agreement shall be in writing and mailed or transmitted by any standard
form of telecommunication: (a) if to the Company, at 100 Sainte Claire Plaza,
1121 Boyce Road, Pittsburgh, PA 15241, Attention: Manohar B. Hira, telephone
number: (412) 941-1800, facsimile number: (412) 941-2829, with a copy to Cohen
& Grigsby, P.C., 2900 CNG Tower, 625 Liberty Avenue, Pittsburgh, PA
15222-3115, Attention: David Lowe, Esq., telephone number: (412) 394-4900,
facsimile number: (412) 391-3382; (b) if to the Selling Stockholders, to the
Selling Stockholders c/o UBICS, Inc., 100 Sainte Claire Plaza, 1121 Boyce Road,
Pittsburgh, PA 15241, Attention: Manohar B. Hira, telephone number: (412)
941-1800, facsimile number: (412) 941-2829, with a copy to Cohen & Grigsby,
P.C., 2900 CNG Tower, 625 Liberty Avenue, Pittsburgh, PA 15222-3115,
Attention: David Lowe, Esq., telephone number: (412) 394-4900, facsimile
number: (412) 391-3382; and (c) if to you, c/o Parker/Hunter Incorporated at
600 Grant Street, 31st Floor, Pittsburgh, PA 15219, Attention: Syndicate
Department, telephone number: (412) 562-8000, facsimile number (412) 562-7843,
with a copy to Buchanan Ingersoll Professional Corporation, One Oxford Centre,
301 Grant Street, 20th Floor, Pittsburgh, PA 15219-1410, Attention: Ronald
Basso, Esq., telephone number: (412) 562-8800, facsimile number: (412)
562-1041; or in any case to such other address as the person to be notified may
have requested in writing.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The respective indemnities, agreements,
representations, warranties and other statements of
the Selling Stockholders, the Company, Vijay Mallya,
the officers and directors of the Company and
Selling Stockholders and of the several Underwriters
set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect,
and will survive delivery and payment for the
Shares, regardless of (i) any investigation, or
statement as to the results thereof, made by or on
behalf of any Underwriter or by or on behalf of
Vijay Mallya, the Company, its officers or directors
or any controlling person of the Company or the
Selling Stockholders or any controlling person of
the Selling Stockholders or (ii) acceptance of the
Shares and payment for them hereunder.
(b) If this Agreement is terminated pursuant to this
Section, such termination shall be without liability
of any party to any other party except as provided
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<PAGE> 44
in Section 12 hereof, and provided further that
Sections 7, 8, 9 and 14 shall survive such
termination and remain in full force and effect.
(c) If this Agreement shall be terminated by the
Underwriters because of any failure or refusal on
the part of the Sellers to comply with the terms or
to fulfill any of the conditions of this Agreement,
the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses
(including the fees and expenses of its counsel)
reasonably incurred by them.
15. PARTIES. Except as otherwise expressly provided, this Agreement
has been and is made solely for the benefit of and shall be binding upon the
Company, the Selling Stockholders, the Underwriters, any controlling persons
referred to herein and their respective heirs, executors, successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The terms "successors and assigns" shall not include a purchaser of any of the
Shares from any of the several Underwriters merely because of such purchase.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
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<PAGE> 45
17. COUNTERPARTS. This Agreement may be signed in various counterparts
which together shall constitute one and the same instrument. Please confirm by
signing and returning to us four counterparts of this Agreement that the
foregoing correctly sets forth the agreement among the Company, the Selling
Stockholders, Vijay Mallya and the several Underwriters.
Very truly yours,
UBICS, INC.
By:
-----------------------------------
Name:
Title:
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE I
By:
-----------------------------------
Name:
Title: Attorney-in-Fact
--------------------------------------
Vijay Mallya
The foregoing Underwriting Agreement is hereby confirmed and accepted on behalf
of each Underwriter as of the date first above written.
PARKER/HUNTER INCORPORATED
By:
----------------------------
Name:
Title:
SCOTT & STRINGFELLOW, INC.
By:
----------------------------
Name:
Title:
Acting on behalf of themselves and as Representatives of the several
Underwriters named in Schedule II annexed hereto.
- 45 -
<PAGE> 46
SCHEDULE I
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Option Shares
Selling Stockholders to be sold to be sold
-------------------- ---------- ----------
<S> <C> <C>
United Breweries Information & 400,000 300,000
Consultancy Services Ltd.
Arco Investment Group Ltd. 100,000 --------
</TABLE>
<PAGE> 47
SCHEDULE II
<TABLE>
<CAPTION>
Firm Shares
to be Purchased
<S> <C>
Parker/Hunter Incorporated...............................
Scott & Stringfellow, Inc................................
</TABLE>
<PAGE> 48
EXHIBIT A-1 TO UNDERWRITING AGREEMENT
UBICS, Inc.
Initial Public Offering of Common Stock
Parker/Hunter Incorporated
Scott & Stringfellow, Inc.
as Representatives of the several Underwriters
c/o Parker/Hunter Incorporated
600 Grant Street, 31st Floor
Pittsburgh, Pennsylvania 15219
Re: UBICS, Inc.
Initial Public Offering of Common Stock
---------------------------------------
Ladies and Gentlemen:
The undersigned, on behalf of UBICS, Inc., a Delaware corporation (the
"Company"), has been advised and understands that in connection with the
proposed initial public offering of common stock, par value $.01 per share (the
"Common Stock"), of the Company, the Company intends to enter into the
Underwriting Agreement (the "Underwriting Agreement") with you. In order to
induce you to execute the Underwriting Agreement, the undersigned, on behalf of
the Company, agrees that, during the period of 180 days from the date of the
Prospectus (as defined in the Underwriting Agreement), without the prior
written consent of Parker/Hunter Incorporated, the Company will not, directly
or indirectly, sell, offer, pledge, contract or grant an option to sell,
transfer, or otherwise dispose of, or announce the offering of, or file any
registration statement under the Securities Act of 1933, as amended, in respect
of, any shares of Common Stock or securities convertible into or exchangeable
or exercisable for shares of Common Stock or publicly announce the intention to
do any of the foregoing, except for sales of shares of Common Stock in
accordance with the Underwriting Agreement.
If for any reason the Underwriting Agreement shall be terminated prior
to the Firm Closing Date (as defined in the Underwriting Agreement), the
agreement set forth herein shall likewise be terminated.
Dated: ________________ __, 1997.
Very truly yours,
UBICS, INC.
----------------------------------------
Name:
Title:
<PAGE> 49
EXHIBIT A-2 TO UNDERWRITING AGREEMENT
UBICS, Inc.
Initial Public Offering of Common Stock
Parker/Hunter Incorporated
Scott & Stringfellow, Inc.
as Representatives of the several Underwriters
c/o Parker/Hunter Incorporated
600 Grant Street, 31st Floor
Pittsburgh, Pennsylvania 15219
Re: UBICS, Inc.
Initial Public Offering of Common Stock
---------------------------------------
Ladies and Gentlemen:
The undersigned has been advised and understands that in connection
with the proposed initial public offering of common stock, par value $.01 per
share (the "Common Stock"), of UBICS, Inc., a Delaware corporation (the
"Company"), the Company intends to enter into the Underwriting Agreement (the
"Underwriting Agreement") with you. In order to induce you to execute the
Underwriting Agreement, the undersigned agrees that, during the period of 180
days from the date of the Prospectus (as defined in the Underwriting
Agreement), without the prior written consent of Parker/Hunter Incorporated,
the undersigned will not, directly or indirectly, sell, offer, pledge, contract
or grant an option to sell (including without limitation any short sale),
transfer, establish an open put equivalent or otherwise dispose of any shares
of Common Stock, options or warrants to acquire shares of Common Stock held by
the undersigned, or publicly announce the intention to do any of the foregoing,
except for sales of shares of Common Stock in accordance with the Underwriting
Agreement.
If for any reason the Underwriting Agreement shall be terminated prior
to the Firm Closing Date (as defined in the Underwriting Agreement), the
agreement set forth herein shall likewise be terminated.
Dated: ___________ __, 1997.
Very truly yours,
[INSERT NAME OF SELLING STOCKHOLDER]
----------------------------------------
Name:
Title:
<PAGE> 50
EXHIBIT B TO UNDERWRITING AGREEMENT
UBICS, Inc.
Initial Public Offering of Common Stock
Parker/Hunter Incorporated
Scott & Stringfellow, Inc.
as Representatives of the several Underwriters
c/o Parker/Hunter Incorporated
600 Grant Street, 31st Floor
Pittsburgh, Pennsylvania 15219
Re: UBICS, Inc.
Initial Public Offering of Common Stock
---------------------------------------
Ladies and Gentlemen:
The undersigned has been advised and understands that in connection
with the proposed initial public offering of common stock, par value $.01 per
share (the "Common Stock"), of UBICS, Inc., a Delaware corporation (the
"Company"), the Company intends to enter into the Underwriting Agreement (the
"Underwriting Agreement") with you. In order to induce you to execute the
Underwriting Agreement, the undersigned agrees that, during the period of 180
days from the date of the Prospectus (as defined in the Underwriting
Agreement), without the prior written consent of Parker/Hunter Incorporated,
the undersigned will not, directly or indirectly, sell, offer, pledge, contract
or grant an option to sell (including without limitation any short sale),
transfer, establish an open put equivalent or otherwise dispose of any shares
of Common Stock, options or warrants to acquire shares of Common Stock held by
the undersigned, or publicly announce the intention to do any of the foregoing,
except for sales of shares of Common Stock in accordance with the Underwriting
Agreement.
If for any reason the Underwriting Agreement shall be terminated prior
to the Firm Closing Date (as defined in the Underwriting Agreement), the
agreement set forth herein shall likewise be terminated.
Dated: ______________ __, 1997.
Very truly yours,
----------------------------------------
Name:
<PAGE> 51
EXHIBIT C
Vijay Mallya
Manohar B. Hira
O'Neil Nalavadi
Babu Srinivas
<PAGE> 1
Exhibit 5.1
October 8, 1997
Board of Directors of
UBICS, Inc.
100 Sainte Claire Plaza
1121 Boyce Road
Pittsburgh, PA 15241
Ladies and Gentlemen:
We have acted as counsel to UBICS, Inc. (the "Company") in connection
with the preparation and filing with the Securities and Exchange Commission of
a Registration Statement on Form S-1, File No. 333-35171 (the "Registration
Statement"), in order to register under the Securities Act of 1933, as amended,
2,000,000 shares of the Company's common stock, $0.01 par value (the "Common
Stock") and the contemplated issue and sale by the Company of 1,500,000 of such
shares of Common Stock to the Underwriters (as defined in the Registration
Statement) in accordance with the terms of an Underwriting Agreement (the
"Agreement") to be entered into by and among the Company, the Selling
Stockholders (as defined in the Registration Statement) and the Underwriters.
In connection with the foregoing, we have examined: (a) the
Registration Statement and all amendments thereto; (b) the Company's Amended
and Restated Certificate of Incorporation and Amended and Restated Bylaws; (c)
resolutions of the Board of Directors and stockholders of the Company; (d) the
form of Agreement; and (e) such other corporate records and documents as we
consider relevant, necessary or appropriate for purposes of this opinion.
In all such examinations, we have assumed the genuineness of all
signatures on originals and certified documents and the conformity to original
or certified documents of all copies submitted to us as conformed or
photocopies. With respect to various questions of fact material to this
opinion, we have made no independent investigations and have relied upon
statements and certificates of officers and directors of the Company and of
other appropriate persons.
We have also assumed that the shares of Common Stock will be issued
and sold in accordance with the terms of the Agreement and the Registration
Statement, including receipt by the Company of the full consideration for the
shares of Common Stock set forth therein. With respect to the Agreement, we
have assumed the execution and delivery of the Agreement by the parties thereto
and that the Agreement as executed and delivered will conform, as to the
issuance and sale of the Common Stock, in all material respects to the draft
reviewed by us.
Based upon such examination and assumptions, and subject to compliance
with applicable state securities and "Blue Sky" laws, in our opinion the shares
of Common Stock to be issued by the Company, when issued as contemplated by the
Registration Statement and the Agreement, will be validly issued, fully-paid
and non-assessable shares of Common Stock of the Company.
<PAGE> 2
Board of Directors of
UBICS, Inc.
October 8, 1997
Page 2
We hereby consent to the reference to us in the Prospectus of the
Company constituting part of the Registration Statement filed with the
Securities and Exchange Commission registering the Common Stock and to the
inclusion of this letter as an exhibit to the Registration Statement.
Very truly yours,
/s/ COHEN & GRIGSBY, P.C.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 8, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named in the Registration Statement on Form
S-1 of UBICS, Inc. ("UBICS") (Registration No. 333-35171) as a person to become
a director of UBICS.
Dated: October 8, 1997
/s/ CRAIG A. WOLFANGER
--------------------------------------
Craig A. Wolfanger
<PAGE> 1
EXHIBIT 23.4
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named in the Registration Statement on Form
S-1 of UBICS, Inc. ("UBICS") (Registration No. 333-35171) as a person to become
a director of UBICS.
Dated: October 8, 1997
/s/ DENNIS S. METENY
--------------------------------------
Dennis S. Meteny
