<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UBICS, INC.
(Exact name of registrant as specified in its charter)
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<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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share..... 2,300,000 shares $11.00 $25,300,000 $7,667
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(1) Includes 300,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
------------------------
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 SEPTEMBER 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. Application will be made for quotation of the Common Stock 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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Per Share........... $ $ $ $
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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
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 over 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. 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
<PAGE> 5
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."
Proposed 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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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>
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JUNE 30, 1997
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ACTUAL AS ADJUSTED(3)
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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
<PAGE> 7
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. 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
<PAGE> 8
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 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.
7
<PAGE> 9
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 Company anticipates that the Common Stock will be
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
<PAGE> 10
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."
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 the net proceeds of the
Offering. The Company reserves the right to reallocate the net proceeds of the
Offering among the various categories set forth under "Use of Proceeds" as it,
in its sole discretion, deems necessary or advisable based upon prevailing
business conditions and circumstances. 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 for: (i) expansion of existing operations, including the
development of a recruiting and training center in India and 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 5, 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 5, 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. If any of these factors change, the Company may find it necessary
or advisable to reallocate some of the proceeds within the above-described
categories or to use portions thereof for other purposes or may be required to
seek additional financing. 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 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
"Certain Transactions."
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 August 15, 1997, 47 IT professionals, or approximately 24% 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
August 15, 1997, IT professionals deployed from subcontractors comprised 84 of
the Company's 200 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; and (iv) establishing offices in the United Kingdom, South Africa,
Singapore and the Middle East, where the UB Group has an established presence,
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 primarily due to an increase in
the number of IT professionals deployed to provide services to new and existing
clients and higher average hourly billing rates resulting from a shift toward
higher value-added services and 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 to the Company's ability to support its
revenue growth without a proportionate increase in management or marketing
personnel and associated costs.
15
<PAGE> 17
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 primarily due to an increase in
the number of IT professionals deployed to provide services to new and existing
clients and 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. 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.
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 primarily due to an increase in the number
of IT professionals deployed to provide services to new and existing clients and
16
<PAGE> 18
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
"Certain Transactions."
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 "Certain
Transactions."
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. The Company
currently has no material commitments for capital expenditures.
The Company intends to use a portion of the net proceeds of the Offering to
establish a recruiting and training center in India and repay the principal
amount outstanding under the Line of Credit, which was $775,000 as of September
5, 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 5, 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 12 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 over 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. 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" 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.
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<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 to enhance its recruiting efforts there
and to increase the skill base of its IT professionals. The Company also plans
to establish offices in the United Kingdom, South Africa, 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 July 31, 1997, the Company derived
approximately 28% 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. The Company also intends to establish
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>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
<CAPTION>
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.
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<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. Over one-fourth of the
Company's IT professionals were placed in ERP projects as of August 15, 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 the United Kingdom, South Africa, 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.
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
General Instruments Home Shopping Network General Electric
Hughes Network 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 August 15,
1997, the Company had 200 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 the United Kingdom, South Africa,
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.
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<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 August 15, 1997, the Company had 141 employees
comprised of 116 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 August 15, 1997, 84 of its deployed IT professionals, or approximately 42%,
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.
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<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 "Certain
Transactions."
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. The UB Group has business interests in the consumer products,
pharmaceuticals, chemicals, leisure and IT service industries. 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, United Distillers
(Guinness) and Carlsberg. See "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 nominee, who has
agreed to serve as a director upon completion of the Offering, and their
respective ages and positions as of August 31, 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
</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 and Chief Executive Officer of United Craft Brewers, Inc., an
affiliate of the UB Group, and has been recognized by the World Economic Forum
in Switzerland as a business leader. 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.
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 and
serves in various senior management capacities for companies in the UB Group
from 1984 to the present, including Senior Vice President of the Corporate
Management Division--UB Group from 1995 to the present, 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.
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.
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.
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
Mr. Wolfanger and one other independent director 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 one to
be appointed within 90 days after the completion
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<PAGE> 31
of the Offering) 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.
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.
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<PAGE> 32
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.
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).
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
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<PAGE> 33
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 August 31, 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.
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, including a breach of the employment agreement. The
agreements prohibit the executive officers from competing with UBICS during
their employment by 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
32
<PAGE> 34
to the employee within five days following the date of termination or date of
resignation: (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 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.
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
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,
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<PAGE> 35
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."
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 an arm's-length basis
related to the value of the services received by the Company. 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 from 1994 to
March 1996. The Company has agreed to pay UB Services approximately $325,000 as
payment for the services and consultants provided to the Company by UB Services.
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 $433,000 for 1997 (as of August 31, 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."
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.
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<PAGE> 36
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 8, 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.
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<PAGE> 37
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 in its
entirety 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."
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<PAGE> 38
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 .
37
<PAGE> 39
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."
38
<PAGE> 40
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
39
<PAGE> 41
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. Such employees, directors
and outside parties are expected to purchase, in the aggregate, not more than
2.5% 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.
Application will be made for quotation and trading of the Common Stock on
the Nasdaq National Market under the symbol "UBIX."
40
<PAGE> 42
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 in all respects 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.
41
<PAGE> 43
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.
42
<PAGE> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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 Company's five largest clients
represented approximately 97%, 60%, 43%, 43% and 37% of revenues for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996
and 1997, respectively.
Three customers represented approximately 40%, 33% and 17% of revenues for
the year ended December 31, 1994. Four customers represented approximately 18%,
13%, 12% and 10% of revenues for the year ended December 31, 1995. One customer
represented approximately 14%, 16% and 11% of revenues for the year ended
December 31, 1996 and the six months ended June 30, 1996 and 1997, respectively.
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.
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.
F-8
<PAGE> 52
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.
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.
F-9
<PAGE> 53
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> 54
================================================================================
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...................... 33
Principal and Selling Stockholders........ 35
Description of Capital Stock.............. 36
Shares Eligible for Future Sale........... 38
Underwriting.............................. 39
Legal Matters............................. 41
Experts................................... 41
Additional Information.................... 41
Glossary.................................. 42
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 STOCKHOLDER 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> 55
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
II-1
<PAGE> 56
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.
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
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*
</TABLE>
II-2
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
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*
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
24.1 Power of Attorney (See Page II-4)
</TABLE>
- ---------
* To be filed by amendment.
(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> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on September 8, 1997.
UBICS, INC.
By: /s/ MANOHAR B. HIRA
--------------------------------------
Manohar B. Hira
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vijay Mallya, Manohar B. Hira and Babu Srinivas,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-1 of UBICS,
Inc. and any registration statement filed pursuant to Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ VIJAY MALLYA Chairman and Director September 8, 1997
- -----------------------------------
Vijay Mallya
/s/ MANOHAR B. HIRA President and Director September 8, 1997
- -----------------------------------
Manohar B. Hira
/s/ O'NEIL NALAVADI Senior Vice President, Chief September 8, 1997
- ----------------------------------- Financial Officer and Director
O'Neil Nalavadi
/s/ BABU SRINIVAS Vice President-Finance, Accounting September 8, 1997
- ----------------------------------- and Administration
Babu Srinivas
</TABLE>
II-4
<PAGE> 59
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> 60
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> 61
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
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*
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
24.1 Power of Attorney (See Page II-4)
</TABLE>
- ---------
* To be filed by amendment.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
U B INFORMATION & CONSULTANCY SERVICES INC.
-------------------------------------------
U B Information & Consultancy Services Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, as amended (the "GCL"), DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous
consent in writing, adopted a resolution proposing and declaring advisable the
amendment and restatement of the Corporation's Certificate of Incorporation as
set forth below and directing that said amendment and restatement be submitted
to the stockholders of the Corporation for approval.
SECOND: That in lieu of a meeting of stockholders, the holders of the
requisite number of the outstanding shares of stock of the Corporation have
consented in writing to said amendment and restatement in accordance with the
provisions of Section 228 of the GCL.
THIRD: That the Corporation filed its original Certificate of
Incorporation with the Delaware Secretary of State on July 19, 1993.
FOURTH: That the following amendment and restatement was duly adopted
in accordance with the applicable provisions of sections 228, 242 and 245 of the
GCL:
I. NAME. The name of the Corporation is UBICS, Inc.
II. REGISTERED OFFICE AND AGENT. The address of the registered office
of the Corporation in the State of Delaware is 2316 Baynard Boulevard, City
of Wilmington, County of New Castle, Delaware 19802, and the name of its
registered agent at such address is Delaware Registry, Ltd.
III. PURPOSE. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the GCL.
IV. STOCK.
A. Classes of Stock. The total number of shares of stock which the
Corporation shall have the authority to issue is 22,000,000; of such shares,
the number of common shares which the Corporation shall have the authority to
issue is 20,000,000, par value $.01 per share ("Common Stock"), and the number
of preferred shares which the Corporation shall have the authority to issue is
2,000,000, par value $.01 per share ("Preferred Stock").
B. Common Stock. Subject to the provisions of any series of Preferred
Stock which may at the time be outstanding, the holders of shares of Common
Stock shall be entitled to receive,
<PAGE> 2
when and as declared by the Board of Directors of the Corporation (the "Board of
Directors") out of any funds legally available for the purpose, such dividends
as may be declared from time to time by the Board of Directors. In the event of
the liquidation of the Corporation, or upon distribution of its assets, after
the payment in full or the setting apart for payment of such preferential
amounts, if any, to which the holders of shares of Preferred Stock at the time
outstanding shall be entitled, the remaining assets of the Corporation available
for payment and distribution to stockholders shall, subject to any participating
or similar rights of shares of Preferred Stock at the time outstanding, be
distributed ratably among the holders of shares of Common Stock at the time
outstanding. All shares of Common Stock shall have equal voting rights, and
shall have no preference, conversion, exchange, preemptive (except as otherwise
provided in any agreement between holders of shares of Common Stock and the
Corporation) or redemption rights.
C. Preferred Stock. The Board of Directors is hereby expressly
authorized at any time, and from time to time, to provide for the issuance of
2,000,000 shares of Preferred Stock in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other rights, and subject to such qualifications, limitations or
restrictions, as shall be stated in the resolution(s) providing for the issue
thereof adopted by the Board of Directors and the certificate of designations
filed under the GCL setting forth such resolution(s).
V. COMPROMISE OR ARRANGEMENT. Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of the Corporation or of any creditor or stockholder thereof, or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of the GCL, or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of the GCL, order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
VI. LIABILITY OF DIRECTORS. The personal liability of the directors of the
Corporation to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director is hereby eliminated to the fullest
extent permitted by the GCL (as the same exists or may hereafter be amended so
long as any such amendment authorizes action further eliminating or
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<PAGE> 3
limiting the personal liabilities of directors). Any repeal or modification of
this paragraph by the stockholders of the Corporation shall be prospective only
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation with respect to any act or omission occurring prior
to the time of such repeal or modification.
VII. INDEMNIFICATION. The Corporation shall, to the fullest extent
permitted by the GCL (as the same exists or may hereafter be amended),
indemnify any and all persons whom it shall have power to indemnify under the
GCL from and against any and all expenses, liabilities or other matters
with respect to which such indemnification is permitted under the GCL, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office, and shall 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 a person.
VIII. ELECTION OF DIRECTORS.
A. Cumulative Voting Prohibited. The stockholders of the Corporation
shall not have the right to cumulate their votes for the election of directors
of the Corporation.
B. Classified Board of Directors. The directors shall be divided into
three classes, with each class to be as nearly equal in number as reasonably
possible, and with the initial term of office of the first class of directors
to expire at the 1998 annual meeting of stockholders, the initial term of
office of the second class of directors to expire at the 1999 annual meeting of
stockholders and the initial term of office of the third class of directors to
expire at the 2000 annual meeting of stockholders. Commencing with the 1998
annual meeting of stockholders, directors elected to succeed those directors
whose terms have thereupon expired shall be elected to a term of office to
expire at the third succeeding annual meeting of stockholders after their
election and upon the election and qualification of their successors unless he
shall resign, die, become disqualified or be remove. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain or attain the number of directors in each class as nearly equal
as reasonably possible, but in no case will a decrease in the number of
directors shorten the term of any incumbent director.
C. No Written Ballots. Unless otherwise provided in the Bylaws of the
Corporation, election of directors need not be by written ballot.
IX. AMENDMENT OF BYLAWS. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
repeal, alter, amend and rescind from time to time any or all of the by-laws of
the Corporation, including by-law
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<PAGE> 4
amendments increasing or reducing the authorized number of directors. In
addition, the stockholders of the Corporation may adopt, amend, alter, change or
repeal any by-laws of the Corporation by the affirmative vote of the holders of
at least 66-2/3% of the voting power of all of the shares of capital stock of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class (notwithstanding the fact that a lesser
percentage may be specified by the GCL).
X. AMENDMENT. The Corporation hereby reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation. Except as may be
provided in a resolution or resolutions providing for any class or series of
Preferred Stock, any such amendment, alteration, change or repeal shall require
the affirmative vote of both (a) a majority of the members of the Board of
Directors then in office and (b) a majority of the voting power of all of the
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class; except that any
proposal to amend, alter, change or repeal the provisions of Article VI,
Article VII, Article VIII(B), Article IX and Article X shall require the
affirmative vote of the holders of at least 66-2/3% of the voting power of all
of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
XI. SEVERABLE PROVISIONS. In the event that any of the provisions of this
Certificate of Incorporation (including any provision within a single Section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by law.
XII. TRANSACTIONS WITH INTERESTED STOCKHOLDERS. The provisions of Section 203 of
the GCL shall not apply to the Corporation.
FIFTH: The undersigned hereby certifies that this Amended and Restated
Certificate of Incorporation has been duly adopted in accordance with Sections
228, 242 and 245 of the GCL.
WITNESS the due execution hereof this 8th day of September, 1997.
U B INFORMATION & CONSULTANCY
SERVICES INC.
By: /s/ MANOHAR B. HIRA
-------------------------
President
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<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
UBICS, INC.
-----------
Adopted September 2, 1997
<PAGE> 2
UBICS, INC.
AMENDED AND RESTATED BYLAWS
Adopted September 2, 1997
ARTICLE I
GENERAL
Section 1. Name.
The name of the corporation shall be
UBICS, INC.
Section 2. Office.
(a) The registered office of the corporation shall be at 2316
Baynard Boulevard in the City of Wilmington, County of New Castle, State of
Delaware, and the name of the registered agent shall be Delaware Registry, Ltd.
(b) The corporation may, in addition to its registered
office, establish and maintain such an office or offices, at such place or
places, as the Board of Directors may deem necessary, desirable or expedient
from time to time.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings.
Each meeting of the stockholders shall be held at the
principal office of the corporation or at such other place, within or without
the State of Delaware, as shall be designated in the notice of meeting.
Section 2. Annual Meeting.
(a) The annual meeting of the stockholders shall be held
pursuant to notice and at such date, time and place as shall be designated by
the Board of Directors in the notice of meeting, for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If for any reason any annual meeting shall not be held during any
year, the business thereof may be transacted at any special meeting of the
stockholders.
<PAGE> 3
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than one hundred twenty (120) calendar days in advance of the date
specified in the Corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders; PROVIDED,
HOWEVER, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30)
days from the date contemplated at the time of the previous year's proxy
statement, notice by the stockholder to be timely must be so received a
reasonable time before the solicitation is made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (A) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (B) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (C) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, (D) any material interest of the stockholder in such business and
(E) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), in his capacity as a proponent to a stockholder
proposal. Notwithstanding the foregoing, in order to include information with
respect to a stockholder proposal in the proxy statement and form of proxy for
a stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the Exchange Act. Notwithstanding anything in
these Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this paragraph
(b). The chairman of the annual meeting shall, if the facts warrant, determine
and declare at the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this paragraph (b), and, if he
should so determine, he shall so declare at the meeting that any such business
not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the Corporation entitled to
vote in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant
to timely notice in writing to the Secretary of the Corporation in accordance
with the provisions of paragraph (b) of this Section 2. Such stockholder's
notice shall set forth (i) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a Director: (1) the name,
age, business address and residence address of such person, (2) the principal
occupation or employment of such person, (3) the class and number of shares of
the Corporation which are beneficially owned by such person, (4) a description
of all arrangements or
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<PAGE> 4
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (5) any other information relating to such person
that is required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement, if any, as a nominee and to serve
as a Director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 2.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a Director shall furnish to the Secretary of the Corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a Director of the Corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and, if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
Section 3. Special Meetings.
Special meetings of the stockholders may be called at any
time by the Board of Directors, the Chairman or stockholders owning in the
aggregate shares representing not less than 30% of the voting power of all
outstanding shares of capital stock of the Corporation then entitled to vote
generally in the election of directors. At any time upon written request of any
person entitled to call a special meeting, said written request stating the
purpose or purposes for which said special meeting is to be called, it shall be
the duty of the Secretary of the corporation to call a special meeting of the
stockholders, to be held at such time as the Secretary may fix, not less than
ten (10) nor more than sixty (60) days after the receipt of the request. If the
Secretary shall neglect or refuse to issue such call, the person or persons
making the request may do so.
Section 4. Adjournments of Meeting.
Adjournment or adjournments of any annual or special meeting
of the stockholders may be taken, but any meeting at which directors are to be
elected shall be adjourned only from day to day until such directors have been
elected.
Section 5. Notice of Meetings.
The Secretary of the corporation shall give written notice of
every meeting of the stockholders to each stockholder of record entitled to
vote at the meeting. Such notice shall be given at least ten (10) and not more
than sixty (60) days prior to the day named for the meeting, unless a greater
period of notice is required by law. Such notice shall be given either
personally or by sending a copy thereof through the mail or by telefacsimile,
charges prepaid, to each stockholder at his address or telefacsimile number (as
applicable) appearing on the books of the corporation or supplied by him to the
corporation for the purpose of notice. Such notice shall specify the place, day
and hour of the meeting and, in the case of a special meeting, the general
nature of the business to be transacted. When a meeting is adjourned to another
place, date or time, written notice need not be
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given of the adjourned meeting if the place, date and time thereof are announced
at the meeting at which the adjournment is taken; provided, however, that if the
date of any adjourned meeting is more than thirty (30) days after the date for
which the meeting was originally noticed, or if a new record date is fixed for
the adjourned meeting, written notice of the place, date, and time of the
adjourned meeting shall be given in conformity with these Bylaws. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Waiver of Notice.
A waiver of notice in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of the person either in person or by proxy
at any meeting shall constitute a waiver of notice of such meeting, except
where such person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
Section 7. Quorum.
Except as otherwise provided by law or by the Certificate of
Incorporation of the corporation as the same may be amended or restated from
time to time (the "Certificate of Incorporation"), the presence in person or by
proxy of the holders of a majority of the outstanding shares entitled to vote
at a stockholders' meeting shall constitute a quorum entitled to take action
with respect to the vote on that matter. The presence in person or by proxy of
the holders of a majority of the issued and outstanding shares of each class or
series of stock which is entitled to vote as a class or series at a
stockholders' meeting shall constitute a quorum for any vote in which a vote of
such class or series is required. The stockholders present at a duly organized
meeting can continue to do business until adjournment, notwithstanding the
withdrawal of stockholders leaving less than a quorum then present. If a quorum
has not been attained, those present may adjourn the meeting to such time and
place as they may determine, but, in the case of any meeting called for the
election of directors, those who attend the second of such adjourned meetings,
although less than a quorum, shall nevertheless constitute a quorum for the
purpose of electing directors.
Section 8. Voting Power.
Every stockholder of record shall have the voting rights
specified in the Certificate of Incorporation for every share of each class or
series standing in his name on the books of the corporation. Except to the
extent provided in the Certificate of Incorporation, all questions shall be
decided by the vote of the majority of the capital stock represented and
entitled to vote at any meeting, or if the voting is by class or series, a
majority of the votes of each class or series of capital stock represented and
entitled to vote at any meeting, unless otherwise provided by law or by the
Certificate of Incorporation.
Section 9. Proxies.
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<PAGE> 6
Every stockholder may vote either in person or by proxy.
Every proxy shall be executed in writing by the stockholder or by his duly
authorized attorney-in-fact and filed with the Secretary of the corporation. A
proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the Secretary of the corporation. No proxy shall be
valid after eleven months from the date of its execution unless a longer time
is expressly provided therein, but in no event shall a proxy, unless coupled
with an interest, be voted on after three years from the date of its execution.
A proxy shall not be revoked by the death or incapacity of the maker unless
before the vote is counted or the authority is exercised, written notice of
such death or incapacity is given to the Secretary of the corporation.
Section 10. Inspectors of Election.
Elections for directors need not be by ballot, except upon
demand made by a stockholder at the election and before the voting begins. In
advance of any meeting of stockholders, the Board of Directors may and, if
required by Section 231 of the General Corporation Law of the State of Delaware
(the "GCL"), appoint one or more inspectors of election, who need not be
stockholders, to act at such meeting or any adjournment thereof. If the
inspectors of election be not so appointed, the chairman of any such meeting
may, and on the request of any stockholder or his proxy shall, make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of convening the meeting, or at the
meeting by the person or officer acting as chairman. The inspectors of election
shall (i) ascertain the number of shares outstanding and the voting power of
each; (ii) determine the shares represented at the meeting; (iii) determine the
existence of a quorum; (iv) determine the authenticity, validity, and effect of
proxies; (v) receive votes or ballots; (vi) hear and determine all challenges
and questions in any way arising in connection with the right to vote; (vii)
count and tabulate all votes; (viii) determine the result, and do such acts as
may be proper to conduct the election or vote with fairness to all
stockholders; and (ix) certify his determination of the number of shares
represented at the meeting, and his count of all votes and ballots. Each
inspector of election shall take and sign an oath to, and shall, faithfully
execute and perform his duties with strict impartiality and to the best of his
ability, and as expeditiously as is practicable. If there be more than one
inspectors of election, the decision, act or certificate of a majority shall be
effective in all respects as the decision, act or certificate of all. On
request of the chairman of the meeting, or of any stockholder or his proxy, the
inspectors shall make a report in writing of any challenge or question or
matter determined by him, and execute a certificate of any fact found by him.
Section 11. Presiding Officer and Order of Business.
All meetings of stockholders shall be called to order and
presided over by the Chairman of Directors, if any, or in his absence, by the
President, or in his absence, by the highest ranking Vice President, or in the
absence of all of them, by the Treasurer, or if none of them be present by a
chairman elected by the stockholders. The Secretary, or, in the absence of the
Secretary, an Assistant Secretary, or in the absence of both the Secretary and
Assistant Secretaries, a person appointed by the chairman of the meeting, shall
act as secretary.
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Section 12. Action by Stockholders without Formal Meeting.
Unless otherwise provided in the Certificate of
Incorporation, if all or not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted shall consent in writing to any
action to be taken by the corporation, such action may be taken without a
meeting, without prior notice and without a vote. Said written consent shall
set forth the action so taken, shall be signed by said stockholders and shall
be filed with the Secretary of the corporation. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 13. List of Stockholders.
The Secretary shall prepare, at least 10 days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of
each stockholder, and such list shall be open to examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
ARTICLE III
DIRECTORS
Section 1. Qualifications and Number.
The business and affairs of the corporation shall be managed
by or under the direction of the Board of Directors of the corporation. A
director need not be a stockholder, a citizen of the United States, or a
resident of the State of Delaware. The number of directors which shall
constitute the full Board of Directors shall be determined from time to time by
resolution of the board of directors but shall not be less than three (3) nor
more than twelve(12). The directors shall be divided into classes as provided
in Section 2 below.
Section 2. Classified Board of Directors; Terms.
The directors shall be divided into three classes, with each
class to be as nearly equal in number as reasonably possible, and with the
initial term of office of the first class of directors to expire at the 1998
annual meeting of stockholders, the initial term of office of the second class
of directors to expire at the 1999 annual meeting of stockholders and the
initial term of office of the third class of directors to expire at the 2000
annual meeting of stockholders. Commencing with the 1998 annual meeting of
stockholders, directors elected to succeed those directors whose terms have
thereupon expired shall be elected to a term of office to expire at the third
succeeding annual meeting of stockholders after their election and upon the
election and qualification of their
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successors unless he shall resign, die, become disqualified or be removed. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain or attain the number of
directors in each class as nearly equal as reasonably possible, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director.
Section 3. Vacancies.
Any vacancy that shall occur in the Board of Directors by
reason of death, resignation, removal, increase in the number of directors or
any other cause whatever shall be filled by a majority of the directors then in
office, although less than a quorum, and each person so elected shall be a
director until he or his successor is elected by the stockholders at a meeting
called for the purpose of electing the particular class of directors for which
the vacancy relates, or until his prior death, resignation or removal. No
decrease in the number of directors shall operate to shorten the term of any
incumbent director.
Section 4. Annual Meeting.
Annual meetings of the Board of Directors shall be held each
year at the same place as and immediately after the annual meeting of
stockholders, or at such other place and time as shall be determined by the
Board of Directors. At its annual meeting, the Board of Directors shall
organize itself and elect the officers of the corporation for the ensuing year,
and may transact any other business. Except as otherwise expressly required by
law, notice of the annual meeting of the Board of Directors need not be given.
Section 5. Regular Meetings.
Regular meetings of the Board of Directors may be held at
such intervals and at such time and place as shall from time to time be
established by the Board of Directors and publicized among all directors. After
there has been such determination and notice thereof has been given to each
person then a member of the Board of Directors, regular meetings may be held at
such intervals and time and place without further notice being given.
Section 6. Special Meetings.
The Board of Directors shall hold such special meetings as
shall be called by the Chairman, or President, or any two (2) directors. Each
such meeting shall be held at such time and place as shall be designated in the
notice of meeting.
Section 7. Notice of Meetings.
Written notice of all special meetings, and if required
hereunder or by law, any regular or annual meeting, of the Board of Directors
shall be given by, or at the direction of, the person or persons calling the
meeting at least two (2) business days prior to the day named for the meeting.
Such notice shall be given either personally or by sending a copy thereof by
overnight mail
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or courier or by telefacsimile, charges prepaid, to each director at his address
appearing on the books of the corporation or supplied by him to the corporation
for the purpose of notice.
Section 8. Waiver of Notice.
A waiver of written notice in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted nor the purpose of any meeting need be specified in
the waiver of notice of such meeting. Attendance of a person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting was not lawfully called or convened, and any
such person so states his purpose in attending such meeting and refrains from
participation in the business of the meeting.
Section 9. Quorum.
A majority of the directors in office shall be necessary to
constitute a quorum for the transaction of business. The affirmative vote of a
majority of the directors in office shall be required to constitute the act of
the Board of Directors.
Section 10. Indemnification of Directors and Officers.
(a) The corporation shall provide, to the fullest extent
permitted by law, indemnification for expenses (including attorneys' fees and
interest for expenses actually advanced), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by the following persons:
(i) Any person who was or is a party or threatened
to be made a party to any threatened, pending or completed
action, suit, or proceeding (whether civil, criminal,
investigative or administrative), by reason of the fact that
such person was or is a director, officer or employee (or, at
the discretion of the Board of Directors, if such person was
or is an agent of the corporation), or was or is serving at
the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint
venture, trust or other enterprises; or
(ii) Any person who was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of
the fact that such person was or is a director, officer or
employee (or, at the discretion of the Board of Directors, if
such person was or is acting as an agent of the corporation),
or was or is serving at the request of the corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(b) Such indemnification shall be made only if the person to
be indemnified acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best
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interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful;
provided, however, no indemnification shall be made for any person included
within subparagraph (a) (ii) above if such person is adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court which heard the action initially shall determine that,
under the circumstances of the particular case, such person is entitled to
indemnification.
(c) Expenses (including attorney's fees) incurred by an
officer or director in defending a civil or criminal action, suit, or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit upon receipt of an undertaking by or on behalf of the
person to be indemnified to repay such amount should it ultimately be
determined that he is not entitled to indemnification under this Section. Such
expenses (including attorney's fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
(d) The corporation shall have the power to purchase and
maintain liability insurance on behalf of any person it desires to indemnify,
whether or not the corporation would have the power to indemnify such person
against such liability under the provisions of this Section. The corporation
shall have the power to enter into separate indemnification agreements with
directors and officers of the corporation, as determined by the Board of
Directors.
(e) The indemnification provided by this Section shall not be
deemed to be exclusive, and shall not affect any other right to which any
person seeking indemnification may be entitled to under the GCL, any agreement,
vote of stockholders or disinterested directors, any provision of the
corporation's Bylaws or otherwise. The purpose of this Section is to provide
for indemnification of directors, officers and employees of the corporation to
the fullest extent provided for in the GCL as it may be in force from time to
time.
Section 11. Personal Liability of Directors.
(a) To the fullest extent that the laws of the State of
Delaware, as the same exist or may hereafter be amended, permit elimination of
the personal liability of directors, no director of this corporation shall be
personally liable to this corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
(b) The provisions of this Section shall be deemed to be a
contract with each director of this corporation who serves as such at any time
while this Section is in effect, and each such director shall be deemed to be
serving as such in reliance on the provisions of this Section. Any amendment or
repeal of this Section or adoption of any Bylaw of this corporation or other
provision of the Certificate of Incorporation which has the effect of
increasing director liability shall operate prospectively only and shall not
affect any action taken, or any failure to act, by a director of this
corporation prior to such amendment, repeal, Bylaw or other provision becoming
effective.
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Section 12. Presiding Officer and Order of Business.
All meetings of the Board of Directors shall be called to
order and presided over by the Chairman, if any, or in his absence by the
President. The Secretary, or in his absence any Assistant Secretary, or, in the
absence of the Secretary and the Assistant Secretaries, any person appointed by
the chairman of the meeting, shall act as secretary.
Section 13. Action by Board Without Formal Meeting.
If all of the Directors shall consent in writing to any
action to be taken by the corporation, such action shall be as valid a
corporate action as though it had been authorized at a meeting of the Board of
Directors. Said written consent shall set forth the action so taken, shall be
signed by all of the directors and shall be filed with the Secretary of the
corporation.
Section 14. Compensation.
Directors, as such, may be paid their expenses, if any, for
attendance at each regular and special meeting of the Board or of any committee
thereof and shall also receive such compensation and expenses as the Board of
Directors may by resolution provide. Directors shall also be entitled to
receive such compensation for services rendered to the corporation in any
capacity other than as directors, as may be provided from time to time by
resolution of the Board of Directors.
Section 15. Resignation; Removal.
(a) A director may resign at any time by giving written
notice to the Board of Directors, the President or Secretary of the
corporation. The resignation shall be effective upon receipt by the Board of
Directors or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
(b) Except as may be provided in the Certificate of
Incorporation, any director, or the entire Board of Directors, may be removed
from office at any time, but only by the affirmative vote of the holders of at
least a majority of the voting power of all of the shares of capital stock of
the corporation then entitled to vote generally in the election of directors,
voting together as a single class.
Section 16. Communications Equipment.
Members of the Board of Directors or any committee thereof
may participate in and act at any meeting of the Board of Directors or such
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this Section shall
constitute presence in person at the meeting.
Section 17. Committees.
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(a) The Board of Directors may, by resolution adopted by a
majority of the full Board of Directors, designate one or more committees
consisting of two or more directors, to have and exercise such authority of the
Board of Directors in the management of the business and affairs of the
corporation as the resolution of the Board of Directors creating such committee
may specify and as is otherwise permitted by law. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another director to act at the meeting in the place of such absent or
disqualified member. Each committee may determine the procedural rules for
meeting and conducting its business and shall act in accordance with such
rules, except as otherwise provided herein or required by law. Adequate
provision shall be made for notice to committee members of all committee
meetings.
(b) Audit Committee. There shall be an Audit Committee
composed of at least three members of the Board of Directors, at least two of
whom shall be independent directors The Audit Committee shall perform such
duties as shall be assigned to it from time to time in resolutions or charters
approved by the Board of Directors. The Audit Committee shall (i) make an
annual recommendation, based on a review of qualifications, to the Board of
Directors for the appointment of independent public accountants to audit the
financial statements of the corporation, and shall make a recommendation with
respect to the scope of audits conducted by such independent public
accountants; (ii) meet with the independent public accountants of the
corporation, and meet with the internal auditor of the corporation to review
all auditing control methods and procedures and for such other purposes as the
Audit Committee may deem appropriate in order to keep all audit controls and
procedures updated and in effect; and (iii) review reports from the
corporation's independent public accountants concerning compliance by
management with governmental laws and regulations and with the corporation's
policies relating to ethics, conflicts of interest and disbursements of funds
and make recommendations to the Board of Directors. The Audit Committee shall
report to the Board of Directors the results of its meetings with the
independent auditors and internal auditors of the corporation.
(c) Compensation Committee. There shall be a Compensation
Committee composed of at least three members of the Board of Directors, at
least two of whom shall be independent directors. The Compensation Committee
shall perform such duties as shall be assigned to it from time to time in
resolutions or charters approved by the Board of Directors. The Compensation
Committee shall be responsible for administering any stock option or stock
purchase plans of the corporation, unless otherwise provided by the Board of
Directors or by such plans, and for reviewing and making recommendations to the
Board of Directors with respect to the administration of salaries, bonuses and
other compensation of executive officers, including the terms and conditions of
their employment and other compensation matters.
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ARTICLE IV
OFFICERS AND AGENTS
Section 1. Officers, Term, Vacancies.
The officers of the corporation shall be a Chairman,
President, one or more Vice Presidents, a Treasurer and a Secretary, and the
Board of Directors may elect or appoint such additional officers and agents as
it may deem advisable. Any two or more offices may be held by the same person.
All officers shall hold office until the regular annual meeting of the Board of
Directors following their appointment or until their successors are appointed
and qualify, provided that they, or any of them, may be removed at any time,
with or without cause, by the affirmative vote therefor of a majority of the
Board of Directors. Vacancies occurring among the officers of the corporation
shall be filled by the Board of Directors.
Section 2. Authority, Duties and Compensation.
All elected or appointed officers and agents shall have such
authority and perform such duties as may be provided in these Bylaws or as may
be determined (i) by the Board of Directors or (ii) by the President with the
concurrence of the Chairman. They shall receive such compensation for their
services as may be determined by the Board of Directors, or with respect to all
officers and agents subordinate to the President, by the President with the
concurrence of the Chairman. Notwithstanding any other provisions of these
Bylaws, the Board of Directors shall have power from time to time by resolution
to prescribe by what officers or agents particular documents or instruments or
particular classes of documents or instruments shall be signed, countersigned,
endorsed or executed, provided, however, that any person, firm or corporation
shall be entitled to accept and to act upon any document or instrument signed,
countersigned, endorsed or executed by officers or agents of the corporation
pursuant to the provisions of these Bylaws unless prior to receipt of such
document or instrument such person, firm or corporation has been furnished with
a certified copy of a resolution of the Board of Directors prescribing a
different signature, countersignature, endorsement or execution.
Section 3. Chairman.
The Chairman shall preside at all meetings of stockholders
and of the Board of Directors.
Section 4. President.
In the absence of the Chairman, the President shall preside
at all meetings of stockholders and of the Board of Directors. The President
shall be the chief operating officer of the corporation and, subject to the
concurrence of the Chairman, shall be charged with and have the direction and
supervision of all of its business and operations and have the usual powers and
duties vested in a chief operating officer of a corporation. The President
shall perform such other duties and have such other powers as may be assigned
by the Board of Directors or the Chairman.
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Section 5. Vice Presidents.
In the absence or disability of the President, his duties
shall be performed by a Senior Vice President or any Vice President, as
authorized by the President or Chairman. Such officer or officers shall perform
such other duties and have such other powers as may be assigned by the
President or Chairman.
Section 6. Treasurer
The Treasurer shall keep and account for all moneys, funds
and property of the corporation which shall come into his hands, and shall
render such accounts and present such statements to the Board of Directors as
may be required of him. Unless the Board of Directors shall prescribe
otherwise, the Treasurer shall deposit all funds of the corporation which may
come into his hands in such bank or banks as the Board of Directors may
designate and in accounts in the name of the corporation, shall endorse for
collection bills, notes, checks and other negotiable instruments of the
corporation or cause them to be signed in facsimile or otherwise as the Board
of Directors may determine, and shall pay out money as the business of the
corporation may require, making proper vouchers therefor. In the absence or
disability of the Treasurer, the Assistant Treasurer shall have the authority
and perform the duties of the Treasurer.
Section 7. Secretary.
The Secretary shall give or cause to be given all required
notices of meetings of stockholders and of the Board of Directors, shall attend
such meetings when practicable, shall record and keep the minutes and all other
proceedings thereof, shall attest such records after every meeting by his
signature, shall safely keep all documents and papers which shall come into his
possession and shall truly keep the books and accounts of the corporation
appertaining to his office. When any instrument signed by another officer of
the corporation duly authorized to sign the same so requires, or when necessary
to attest any proceedings of the stockholders or directors, the Secretary may
affix the seal of the corporation to any instrument requiring the same and
shall attest the same with his signature. In the absence or disability of the
Secretary, an Assistant Secretary shall have authority and perform the duties
of the Secretary.
Section 8. Resignation and Removal of Officers.
Any executive officer of the corporation may be removed,
either for cause or without cause, by the affirmative vote of a majority of the
full Board of Directors. Other officers and agents may be removed either for
cause or without cause by the Board of Directors, the Chairman or the
President. Any officer may resign at any time by written notice to the
corporation.
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ARTICLE V
SHARES OF CAPITAL STOCK
Section 1. Share Certificates.
Every holder of stock in the corporation shall be entitled to
a certificate or certificates, to be in such form as the Board of Directors may
from time to time prescribe, signed by the Chairman, the President or any Vice
President, and by the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer, and where signed by a transfer agent or an assistant
transfer agent or by a registrar the signatures of such officers of the
corporation may be facsimile. Each such certificate shall exhibit the name of
the registered holder thereof, the number and class of shares and the
designation of the series, if any, which the certificate represents and the
number of shares represented thereby. The Board of Directors may, if it so
determines, direct that certificates for shares of stock of the corporation be
signed by a transfer agent and/or registered by a registrar, in which case such
certificates shall not be valid until so signed and/or registered.
In case any officer of the corporation who shall have signed,
or whose facsimile signature shall have been used on any certificate for shares
of stock of the corporation, shall cease to be such officer, whether because of
death, resignation or otherwise, before such certificate shall have been
delivered, it may be delivered by the corporation as though the person who
signed such certificate or whose facsimile signature shall have been used
thereon had not ceased to be such officer.
All certificates for classes of stock shall be consecutively
numbered and the name of the person owning the shares represented thereby, his
address, with the number of such shares and the date of issue, shall be entered
on the corporation's books.
Section 2. Transfers of Shares.
Transfers of shares of stock of the corporation shall be made
only on the books of the corporation by the registered holder thereof or by his
attorney thereunto authorized by an instrument duly executed and witnessed and
filed with the corporation, and on surrender of the certificate or certificates
for such shares properly endorsed and evidence of the payment of all taxes
imposed upon such transfer. Every certificate surrendered for transfer shall be
cancelled and no new certificate or certificate shall be issued in exchange for
any existing certificate until such existing certificate shall have been so
cancelled.
Section 3. Transfer Agents and Registrars.
The Board of Directors may appoint any one or more qualified
banks, trust companies or other corporations organized under any law of any
state of the United States or under the laws of the United States as agent or
agents for the corporation in the transfer of the stock of the corporation and
likewise may appoint any one or more qualified banks, trust companies or other
corporations as registrar or registrars of the stock of the corporation.
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Section 4. Lost, Stolen, Destroyed or Mutilated Certificates.
New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such terms and
conditions, which may but need not include the giving of a satisfactory bond or
indemnity, as the Board of Directors, the Chairman or the President may from
time to time determine.
Section 5. Regulations Relating to Shares.
The Board of Directors shall have power and authority to make
such rules and regulations not inconsistent with these Bylaws as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of stock of the corporation.
Section 6. Holders of Record; Record Date.
The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder and owner in fact thereof
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by the
laws of the State of Delaware. The Board of Directors may fix a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled (i) to notice of or to vote at any
meeting of stockholders or any adjournment thereof; (ii) to express consent to
corporate action in writing without a meeting; (iii) to receive payment of any
dividend or other distribution or allotment of any rights; or (iv) to exercise
any rights with respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
Section 7. Treasury Shares.
Shares of the corporation's stock held in its treasury shall
not be voted, directly or indirectly, at any meeting.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Corporate Seal.
The Board of Directors shall prescribe the form of a suitable
corporate seal, which shall contain the full name of the corporation and the
year and state of incorporation. Such seal may be used by causing it or a
facsimile or reproduction thereof to be affixed to or placed upon the document
to be sealed.
Section 2. Fiscal Year.
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The fiscal year of the corporation shall end on the last day
of December in each year or shall begin and end on such other days as shall be
fixed by resolution of the Board of Directors.
Section 3. Financial Reports to Stockholders.
The corporation shall furnish to its stockholders an annual
report following the end of each fiscal year, containing audited financial
statements reported on by independent public accountants, and quarterly reports
following the end of each of the first three fiscal quarters of each fiscal
year, containing unaudited financial statements for such quarter.
Section 4. Stock of Other Corporations.
The Chairman, or in his absence, the President and each Vice
President are each individually authorized on behalf of the corporation, in
person or by proxy, to attend, act and vote at meetings of the stockholders of
any corporation in which the corporation shall hold stock, and to exercise
thereat any and all rights and powers incident to the ownership of such stock,
and to execute waivers of notice of such meetings and calls therefor, and to
take or participate in the taking of action by the stockholders of such
corporation by consent in lieu of a meeting. The Board of Directors may also
authorize any other director, officer or other person on behalf of the
corporation to take any and all of such actions, and authority may be given to
exercise such authority either on one or more designated occasions, or
generally on all occasions until revoked by the Board of Directors.
Section 5. Execution of Corporate Instruments.
(a) The Board of Directors may, in its discretion, determine the
method and designate the signatory officer or officers, or other person or
persons, to execute any corporate instrument or document, or to sign the
corporate name, except where otherwise provided by law, and such execution or
signature shall be binding upon the corporation.
(b) The Board may, in its discretion, submit any contract or act for
approval or ratification by the stockholders at any annual meeting of
stockholders or at any special meeting of stockholders called for that purpose.
Any contract or act which shall be approved or ratified by the holders of a
majority of the voting power of the corporation represented at such meeting
shall be as valid and binding upon the corporation as though approved or
ratified by each and every stockholder of the corporation, unless a greater
vote is required by law or the Certificate of Incorporation for such purpose.
Section 6. Certain Transactions.
(a) No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for such reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors which authorizes the contract or transaction, or solely
because the vote of such director is counted for such purpose, if:
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(i) The material facts as to such director's interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors and the Board of Directors in good faith authorizes the
contract or transaction by a vote sufficient for such purposes without
counting the vote of the interested director or directors; or
(ii) The material facts as to such director's interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(iii) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by
the Board of Directors or the stockholders.
(b) Interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors which authorizes a contract or
transaction specified above.
ARTICLE VII
AMENDMENTS
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind from time to time any or all of these Bylaws of the
Corporation, including bylaw amendments increasing or reducing the authorized
number of directors. In addition, the stockholders of the Corporation may
adopt, amend, alter, change or repeal any Bylaws of the Corporation by the
affirmative vote of the holders of at least 66-2/3% of the voting power of all
of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class
(notwithstanding the fact that a lesser percentage may be specified by the
GCL). No provision of these Bylaws shall vest any property or contract right in
any stockholder.
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<PAGE> 1
Exhibit 10.1
UBICS, INC.
-----------
1997 STOCK OPTION PLAN
The purposes of the UBICS, Inc. 1997 Stock Option Plan (the
"Plan") are to encourage eligible directors, officers and employees of UBICS,
Inc. (the "Corporation") and its Subsidiaries (as defined below) to increase
their efforts to make the Corporation and each Subsidiary more successful, to
provide an additional inducement for such employees to remain with the
Corporation or a Subsidiary, to reward such persons by providing an opportunity
to acquire the Common Stock, par value $.01 per share, of the Corporation (the
"Common Stock") on favorable terms and to provide a means through which the
Corporation may attract able persons become directors or to enter the
employment of the Corporation or one of its Subsidiaries. For purposes of the
Plan, the term "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Corporation if each of the corporations (other
than the last corporation in the unbroken chain) owns stock possessing more
than fifty percent (50%) of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 1
Administration
The Plan shall be administered by the Compensation Committee
of the Board of Directors of the Corporation (the "Committee"); provided that
the Board of Directors shall administer the Plan until a Compensation Committee
has been established by the Board. References in the Plan to "the Committee"
shall be deemed to include the Board of Directors during any period in which
the Board administers the Plan as provided in the preceding sentence.
The Committee shall interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operation of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan.
The Committee shall keep records of action taken at its
meetings. A majority of the Committee shall constitute a quorum at any meeting
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the Committee,
shall be the acts of the Committee.
SECTION 2
Eligibility
Directors of the Corporation or any Subsidiary and those
employees of the Corporation or any Subsidiary who share the responsibility for
the management, growth or protection of the business of the Corporation or any
Subsidiary shall be eligible to receive stock options (with or without stock
appreciation rights) as described herein.
<PAGE> 2
Subject to the provisions of the Plan, the Committee shall
have full and final authority, in its discretion, to grant stock options (with
or without stock appreciation rights) as described herein and to determine the
employees to whom stock options (with or without stock appreciation rights)
shall be granted and the number of shares to be covered by each stock option.
In determining the eligibility of any employee, as well as in determining the
number of shares covered by each stock option, the Committee shall consider the
position and the responsibilities of the employee being considered, the nature
and value to the Corporation or a Subsidiary of his or her services, his or her
present and/or potential contribution to the success of the Corporation or a
Subsidiary and such other factors as the Committee may deem relevant.
SECTION 3
Shares Available under the Plan
The aggregate number of shares of the Common Stock which may
be issued or delivered and as to which stock options may be granted under the
Plan is 750,000 shares of Common Stock. All such shares are subject to
adjustment and substitution as set forth in Section 6.
If any stock option granted under the Plan is canceled by
mutual consent or terminates or expires for any reason without having been
exercised in full, the number of shares subject to such stock option shall
again be available for purposes of the Plan, except that to the extent that
stock appreciation rights granted in conjunction with a stock option under the
Plan are exercised and the related stock option surrendered, the number of
shares available for purposes of the Plan shall be reduced by the number of
shares, if any, of Common Stock issued or delivered upon exercise of such stock
appreciation rights.
The shares which may be issued or delivered under the Plan
may be either authorized but unissued shares or repurchased shares or partly
each.
SECTION 4
Grant of Stock Options,
Stock Appreciation Rights, and
Limited Stock Appreciation Rights
The Committee shall have authority, in its discretion, to
grant "incentive stock options" pursuant to Section 422 of the Internal Revenue
Code of 1986 (the "Code"), to grant "non-statutory stock options" (stock
options which do not qualify under such Section 422 of the Code) or to grant
both types of stock options (but not in tandem). The Committee also shall have
the authority, in its discretion, to grant stock appreciation rights in
conjunction with incentive stock options or non-statutory stock options with
the effect provided in Section 5(D). Stock appreciation rights granted in
conjunction with an incentive stock option may only be granted at the time such
incentive stock option is granted. Stock appreciation rights granted in
conjunction with a non-statutory stock option may be granted either at the time
such stock option is granted or at any time thereafter during the term of such
stock option. The Committee shall also have the authority, in its discretion,
to grant limited stock appreciation rights in accordance with the provisions
of, and subject to the terms and conditions set forth in, Section 8.
2
<PAGE> 3
No employee shall be granted a stock option or stock options
under the Plan (disregarding canceled, terminated or expired stock options) for
an aggregate number of shares in excess of ten percent (10%) of the total
number of shares which may be issued or delivered under the Plan. For the
purposes of this limitation, any adjustment or substitution made pursuant to
Section 6 with respect to shares which have not been issued or delivered under
the Plan upon the exercise of stock options shall also be made with respect to
shares already issued or delivered under the Plan upon the exercise of stock
options and with respect to shares which would have been issued or delivered
under the Plan but for the exercise of stock appreciation rights in lieu of the
exercise of stock options prior to such adjustment or substitution.
SECTION 5
Terms and Conditions of Stock Options and
Stock Appreciation Rights
Stock options and stock appreciation rights granted under the
Plan shall be subject to the following terms and conditions:
(A) The purchase price at which each stock option may be
exercised (the "option price") shall be such price as the Committee,
in its discretion, shall determine but shall not be less than one
hundred percent (100%) of the fair market value per share of Common
Stock covered by the stock option on the date of grant, except that in
the case of an incentive stock option granted to an employee who,
immediately prior to such grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or any Subsidiary (a "Ten Percent Employee"),
the option price shall not be less than 110% of such fair market value
on the date of grant. For purposes of this Section 5(A), the fair
market value of the Common Stock shall be determined as provided in
Section 5(H). Also, for purposes of this Section 5(A), an individual
(i) shall be considered as owning not only shares of the Common Stock
owned individually, but also all shares that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal
descendants and brothers and sisters (whether by the whole or half
blood) of such individual and (ii) shall be considered as owning
proportionately any shares owned, directly or indirectly, by or for
any corporation, partnership, estate or trust in which such individual
shall be a stockholder, partner or beneficiary.
(B) The option price shall be payable in full in any one or
more of the following ways:
(i) in cash; and/or
(ii) in shares of the Common Stock (which are owned
by the optionee free and clear of all liens and other
encumbrances and which are not subject to the restrictions
set forth in Section 7) having a fair market value on the
date of exercise of the stock option, determined as provided
in Section 5(H), equal to the option price for the shares
being purchased.
If the option price is paid in whole or in part in shares of
Common Stock, any portion of the option price representing a fraction
of a share shall be paid in cash. The date of exercise of a stock
option shall be determined under procedures established by the
Committee, and the option price shall be payable at such time or times
as the Committee, in its discretion, shall determine.
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<PAGE> 4
No shares shall be issued or delivered upon exercise of a stock option
until full payment of the option price has been made. When full payment
of the option price has been made and subject to the restrictions set
forth in Section 7, the optionee shall be considered for all purposes
to be the owner of the shares with respect to which payment has been
made. Payment of the option price with shares shall not increase the
number of shares of Common Stock which may be issued or delivered under
the Plan as provided in Section 3.
(C) Subject to Section 9 hereof, no stock option shall be
exercisable during the first six months of its term, except that this
limitation on exercise shall not apply (i) if the optionee dies during
such six-month period or (ii) if the optionee becomes disabled within
the meaning of Section 422(c)(6) of the Code (a "Disabled Optionee"),
or if his or her employment is voluntarily terminated with the consent
of the Corporation or a Subsidiary during such six-month period. No
incentive stock option shall be exercisable after the expiration of
ten years (five years in the case of a Ten Percent Employee) from the
date of grant. No non-statutory stock option shall be exercisable
after the expiration of ten years and six months from the date of
grant. Subject to this Section 5(C) and Sections 5(F), 5(G) and 5(H),
stock options may "vest" and be exercised at such times, in such
amounts and subject to such restrictions as shall be determined, in
its discretion, by the Committee and set forth in individual stock
option agreements.
(D) Stock appreciation rights shall be exercisable to the
extent that the related stock option is exercisable and only by the
same person or persons who are entitled to exercise the related stock
option. Stock appreciation rights shall entitle the optionee to
surrender the related stock option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of
shares of Common Stock having an aggregate fair market value equal to
the excess of the fair market value of one share of Common Stock on
such date of exercise over the option price per share, multiplied by
the number of shares covered by the stock option, or portion thereof,
which is surrendered. Cash shall be paid in lieu of any fractional
shares. The Committee shall have the authority, in its discretion, to
determine that the obligation of the Corporation shall be paid in cash
or part in cash and part in shares. The date of exercise of stock
appreciation rights shall be determined under procedures established
by the Committee, and payment under this Section 5(D) shall be made by
the Corporation as soon as practicable after the date of exercise. To
the extent that a stock option as to which stock appreciation rights
have been granted in conjunction therewith is exercised, the stock
appreciation rights shall be canceled. For the purposes of this
Section 5(D), the fair market value of Common Stock shall be
determined as provided in Section 5(H).
(E) No stock option or stock appreciation rights shall be
transferable by an optionee other than by will, or if an optionee dies
intestate, by the laws of descent and distribution of the state of
domicile of the optionee at the time of death, and all stock options
and stock appreciation rights shall be exercisable during the lifetime
of an optionee only by the optionee.
(F) Unless otherwise determined by the Committee and set
forth in the stock option agreement referred to in Section 5(G) or an
amendment thereto:
(i) Voluntary Termination or Retirement (Incentive
Stock Options): If the employment of an optionee who is not a
Disabled Optionee is voluntarily terminated with the written
consent of the Corporation or a Subsidiary or an optionee
retires under any retirement plan of the Corporation or a
Subsidiary, any then outstanding incentive stock option held
by such an optionee shall be exercisable (to the extent
exercisable on the date
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<PAGE> 5
of termination of employment) by such an optionee at any time
prior to the expiration date of such incentive stock option or
within three months after the date of termination of
employment, whichever is the shorter period;
(ii) Voluntary Termination (Non-Statutory Stock
Options): If the employment of an optionee who is not a
Disabled Optionee is voluntarily terminated with the written
consent of the Corporation or a Subsidiary, any then
outstanding non-statutory stock option held by such an
optionee shall be exercisable (to the extent exercisable on
the date of termination of employment) by such an optionee at
any time prior to the expiration date of such non-statutory
stock option or within three months after the date of
termination of employment, whichever is the shorter period;
(iii) Retirement (Non-Statutory Stock Options): If
an optionee retires under any retirement plan of the
Corporation or a Subsidiary, any then outstanding
non-statutory stock option held by such an optionee shall be
exercisable (to the extent exercisable on the date of
termination of employment) by such an optionee at any time
prior to the expiration date of such non-statutory stock
option or within one year after the date of termination of
employment, whichever is the shorter period;
(iv) Disabled Optionees: If the employment of an
optionee who is a Disabled Optionee is voluntarily terminated
with the written consent of the Corporation or a Subsidiary,
any then outstanding stock option held by such optionee shall
be exercisable in full (whether or not so exercisable on the
date of termination of employment) by the optionee at any
time prior to the expiration date of such stock option or
within one year after the date of termination of employment,
whichever is the shorter period; and
(v) Death of Optionee: Following the death of an
optionee during employment, any outstanding stock option held
by the optionee at the time of death shall be exercisable in
full (whether or not so exercisable on the date of the death
of the optionee) by such optionee's estate or by the person
or persons entitled to do so under the will of the optionee,
or, if the optionee shall fail to make testamentary
disposition of the stock option or shall die intestate, by
the legal representative of the optionee, at any time prior
to the expiration date of such stock option or within one
year after the date of death, whichever is the shorter
period. Following the death of an optionee after termination
of employment but during a period when a stock option is
exercisable as provided in clauses (i), (ii), (iii) and (iv)
above, any outstanding stock option held by the optionee at
the time of death shall be exercisable by such optionee's
estate or by such person or persons entitled to do so under
the Will of the optionee or by such legal representative to
the extent the stock option was exercisable by the optionee
at the time of death at any time prior to the expiration date
of such stock option or within one year after the date of
death, whichever is the shorter period.
(vi) If the employment of an optionee terminates for
any reason other than voluntary termination with the consent
of the Corporation or a Subsidiary, retirement under any
retirement plan of the Corporation or a Subsidiary, voluntary
termination while a Disabled Optionee with the consent of the
Corporation or death, the rights of such optionee under any
then outstanding stock option shall terminate at the time of
such termination of employment. In addition, if an optionee
engages in the operation or
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<PAGE> 6
management of a business, whether as owner, partner, officer,
director, employee or otherwise and whether during or after
termination of employment, which is in competition with the
Corporation or any of its Subsidiaries, the Committee may in
its discretion immediately terminate all stock options held by
the optionee.
Whether termination of employment is a voluntary termination with the
written consent of the Corporation or a Subsidiary, whether an
optionee is a Disabled Optionee and whether an optionee has engaged in
the operation or management of a business which is in competition with
the Corporation or any of its Subsidiaries shall be determined in each
case by the Committee and any such determination by the Committee
shall be final and binding.
(G) All stock options and stock appreciation rights shall be
confirmed by a stock option agreement, or an amendment thereto, which
shall be executed by the Chairman or the President (if other than the
Chairman) on behalf of the Corporation and by the employee to whom
such stock options and stock appreciation rights are granted.
(H) Fair market value of the Common Stock,
(i) so long as the Common Stock is listed for
trading on the NASDAQ Small-Cap Market or the NASDAQ National
Market, shall be as set forth in such reliable publication as
the Committee, in its discretion, may choose to rely upon, by
taking the average of the "bid" and "ask" prices per share of
the Common Stock as quoted in such reliable publication on
the trading date immediately preceding the date as of which
fair market value is to be determined, or
(ii) in the event the Common Stock ceases to be
listed for trading on either of such NASDAQ Markets and is
traded on another exchange, shall be as set forth in such
reliable publication as the Committee, in its discretion, may
choose to rely upon, by taking the average of the highest and
lowest price per share of the Common Stock as quoted in such
reliable publication on the nearest date before the date as
of which fair market value is to be determined or by such
other reasonable method or formula as may be determined by
the Committee in its discretion.
(I) The obligation of the Corporation to issue or deliver
shares of Common Stock under the Plan shall be subject to (i) the
effectiveness of a registration statement under the Securities Act of
1933, as amended, with respect to such shares, if deemed necessary or
appropriate by counsel for the Corporation, (ii) the condition that
the shares shall have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange on which the
Common Stock may then be listed on the NASDAQ National Market or
Small-Cap Market if the Common Stock is then listed thereon and (iii)
all other applicable laws, regulations, rules and orders which may
then be in effect.
Subject to the foregoing provisions of this Section 5 and the
other provisions of the Plan, any stock option or stock appreciation rights
granted under the Plan shall be subject to such other terms and conditions as
the Committee shall deem advisable.
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SECTION 6
Adjustment and Substitution of Shares
If a dividend or other distribution shall be declared upon
the Common Stock payable in shares of Common Stock, the number of shares of
Common Stock then subject to any outstanding stock option and the number of
shares which may be issued or delivered under the Plan but are not then subject
to an outstanding stock option shall be adjusted by adding thereto the number
of shares which would have been distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend or distribution.
If the outstanding shares of Common Stock shall be changed
into or exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of Common Stock subject to any then outstanding stock option and for each
share of Common Stock which may be issued or delivered under the Plan but is
not then subject to an outstanding stock option, the number and kind of shares
of stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchangeable.
In the case of any adjustment or substitution as provided for
in this Section 6, the aggregate option price for all shares subject to each
then outstanding stock option prior to such adjustment or substitution shall be
the aggregate option price for all shares of stock or other securities
(including any fraction) to which such shares shall have been adjusted or which
shall have been substituted for such shares. Any new option price per share
shall be carried to at least three decimal places with the last decimal place
rounded upwards to the nearest whole number.
No adjustment or substitution provided for in this Section 6
shall require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution.
If any such adjustment or substitution provided for in this
Section 6 requires the approval of shareholders in order to enable the
Corporation to grant incentive stock options, then no such adjustment or
substitution shall be made without prior shareholder approval. Notwithstanding
the foregoing, in the case of incentive stock options, if the effect of any
such adjustment or substitution would be to cause the stock option to fail to
continue to qualify as an incentive stock option or to cause a modification,
extension or renewal of such stock option within the meaning of Section 424 of
the Code, the Committee may elect that such adjustment or substitution not be
made but rather shall use reasonable efforts to effect such other adjustment of
each then outstanding stock option as the Committee in its sole discretion
shall deem equitable and which will not result in any disqualification,
modification, extension or renewal (within the meaning of Section 424 of the
Code) of such incentive stock option.
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<PAGE> 8
SECTION 7
Restrictions on Transfer of
Certain Shares
Shares of Common Stock acquired upon exercise of an option by
a person then subject to the provisions of Section 16 of the Exchange Act shall
not be sold or otherwise transferred prior to the expiration of six months
after the date of grant of the stock option. Shares of Common Stock acquired
upon exercise of an incentive stock option shall not be sold or otherwise
transferred until after the expiration of any holding period required by
Section 422 of the Code, as may be amended from time to time. The Corporation
is authorized to (i) retain the certificate(s) representing such shares or
place such certificates in the custody of its transfer agent, (ii) place a
restrictive legend on such shares, and/or (iii) issue a stop transfer order to
the transfer agent with respect to such shares in order to enforce the transfer
restrictions of this Section.
SECTION 8
Limited Stock Appreciation Rights
Limited stock appreciation rights may, in the discretion of
the Committee, be granted in connection with all or part of (i) an incentive
stock option granted under this Plan at the time of the grant of such stock
option or (ii) a non-statutory option, at the time such option is granted or at
any time thereafter during the term of the such option.
Limited stock appreciation rights shall entitle the holder of
an option in connection with which such limited stock appreciation rights are
granted, upon exercise of the limited stock appreciation rights, to surrender
the stock option, or any applicable portion thereof, and any related stock
appreciation rights, to the extent unexercised, and to receive an amount of
cash determined pursuant to this Section 8. Such option, and any related stock
appreciation rights, shall, to the extent so surrendered, thereupon cease to be
exercisable.
Limited stock appreciation rights shall be subject to the
following terms and conditions and to such other terms and conditions not
inconsistent with the Plan as shall from time to time be approved by the
Committee:
(A) Limited stock appreciation rights shall be exercisable,
subject to Section 8(B), during any one or more of the following
periods:
(i) for a period of 60 days beginning on the date on
which shares of Common Stock are first purchased pursuant to
a tender offer or exchange offer (other than such an offer by
the Corporation), whether or not such offer is approved or
opposed by the Corporation and regardless of the number of
shares of Common Stock purchased pursuant to such offer;
(ii) for a period of 60 days beginning on the date
the Corporation acquires knowledge that any person or group
deemed a person under Section 13(d)(3) of the Exchange Act
(other than any director of the Corporation on January 30,
1997, any Affiliate or Associate of any such director (with
such terms having the respective
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<PAGE> 9
meanings set forth in Rule 12b-2 under the Exchange Act as in
effect on January 30, 1997), any member of the family of any
such director, any trust (including the trustees thereof)
established by or for the benefit of any such persons, or any
charitable foundation, whether a trust or a corporation
(including the trustees and directors thereof) established by
or for the benefit of any such persons), in a transaction or
series of transactions shall become the beneficial owner,
directly or indirectly (with beneficial ownership determined
as provided in Rule 13d-3, or any successor rule, under the
Exchange Act), of securities of the Corporation entitling the
person or group to 20% or more of all votes (without
consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all shareholders
of the Corporation would be entitled if the election of
Directors were an election held on such date;
(iii) for a period of 60 days beginning on the date
of filing under the Exchange Act of a Statement on Schedule
13D, or any amendment thereto, by any person or group deemed
a person under Section 13(d)(3) of the Exchange Act,
disclosing an intention or possible intention to acquire or
change control of the Corporation;
(iv) for a period of 60 days beginning on the date,
during any period of two consecutive years, when individuals
who at the beginning of such period constitute the Board of
Directors of the Corporation cease for any reason to
constitute at least a majority thereof, unless the election,
or the nomination for election by the shareholders of the
Corporation, of each new Director was approved by a vote of
at least two-thirds of the Directors then still in office who
were Directors at the beginning of such period; and
(v) for a period of 60 days beginning on the date of
approval by the shareholders of the Corporation of an
agreement (a "reorganization agreement") providing for (a)
the merger or consolidation of the Corporation with another
corporation where the shareholders of the Corporation,
immediately prior to the merger or consolidation, do not or
will not beneficially own, immediately after the merger or
consolidation, shares of the corporation issuing cash or
securities in the merger or consolidation entitling such
shareholders to 50% or more of all votes (without
consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all shareholders
of such corporation would be entitled in the election of
Directors or where the members of the Board of Directors of
the Corporation, immediately prior to the merger or
consolidation, do not or will not, immediately after the
merger or consolidation, constitute a majority of the Board
of Directors of the corporation issuing cash or securities in
the merger or consolidation or (b) the sale or other
disposition of all or substantially all the assets of the
Corporation.
(B) Subject to Section 9 hereof, limited stock appreciation
rights shall in no event be exercisable unless and until the holder of
the limited stock appreciation rights shall have completed at least
six months of continuous service with the Corporation or a Subsidiary,
or both, immediately following the date upon which the limited stock
appreciation rights shall have been granted.
(C) Upon exercise of limited stock appreciation rights, the
holder thereof shall be entitled to receive an amount of cash in
respect of each share of Common Stock subject to the related option
equal to the excess of the fair market value of such share over the
option price of such related option, and for this purpose fair market
value shall mean the highest last sale price of
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<PAGE> 10
the Common Stock as reported on the NASDAQ during the period beginning
on the 90th day prior to the date on which the limited stock
appreciation rights are exercised and ending on such date, except that
(a) in the event of a tender offer or exchange offer for Common Stock,
fair market value shall mean the greater of such last sale price or the
highest price paid for Common Stock pursuant to any tender offer or
exchange offer in effect at any time beginning on the 90th day prior to
the date on which the limited stock appreciation rights are exercised
and ending on such date, (b) in the event of the acquisition by any
person or group of beneficial ownership of securities of the
Corporation entitling the person or group to 10% or more of all votes
to which all shareholders of the Corporation would be entitled in the
election of Directors or in the event of the filing of a Statement on
Schedule 13D, or any amendment thereto, disclosing an intention or
possible intention by any person or group to acquire control of the
Corporation, fair market value shall mean the greater of such last sale
price or the highest price per share paid for Common Stock shown on the
Statement on Schedule 13D, or any amendment thereto, filed by the
person or group becoming a 10% beneficial owner or disclosing an
intention or possible intention to acquire control of the Corporation
and (c) in the event of approval by shareholders of the Corporation of
a reorganization agreement, fair market value shall mean the greater of
such last sale price or the fixed or formula price specified in the
reorganization agreement if such price is determinable as of the date
of exercise of the limited stock appreciation rights. Any securities or
property which are part or all of the consideration paid for Common
Stock in a tender offer or exchange offer or under an approved
reorganization agreement shall be valued at the higher of (a) the
valuation placed on such securities or property by the person making
the tender offer or exchange offer or by the corporation other than the
Corporation issuing securities or property in the merger or
consolidation or to whom the Corporation is selling or otherwise
disposing of all or substantially all the assets of the Corporation and
(b) the valuation placed on such securities or property by the
Committee.
(D) To the extent that limited stock appreciation rights
shall be exercised, the option in connection with which such limited
stock appreciation rights shall have been granted shall be deemed to
have been exercised and any related stock appreciation rights shall be
canceled. To the extent that the option in connection with which
limited stock appreciation rights shall have been granted or any
related stock appreciation rights shall be exercised, the limited
stock appreciation rights granted in connection with such option shall
be canceled.
SECTION 9
Acceleration of the Exercise Date of
Stock Options and Related Stock Appreciation Rights
Notwithstanding any other provision of this Plan, all stock
options and stock appreciation rights shall become exercisable upon the
occurrence of any of the events specified in Section 8(A) whether or not such
options are then exercisable under the provisions of the applicable agreements
relating thereto, except that if stock appreciation rights have been granted
along with limited stock appreciation rights to the same option holder with
respect to the same option, in no event may the stock appreciation rights be
exercised for cash during any of the 60-day periods provided for in Section 8.
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SECTION 10
Effect of the Plan on the Rights
of Employees and Employer
Neither the adoption of the Plan nor any action of the Board
or the Committee pursuant to the Plan shall be deemed to give any employee any
right to be granted a stock option (with or without stock appreciation rights)
under the Plan and nothing in the Plan, in any stock option or stock
appreciation rights granted under the Plan or in any stock option agreement
shall confer any right to any employee to continue in the employment of the
Corporation or any Subsidiary or interfere in any way with the rights of the
Corporation or any Subsidiary to terminate the employment of any employee at
any time.
SECTION 11
Amendment
The right to alter and amend the Plan at any time and from
time to time and the right to revoke or terminate the Plan are hereby
specifically reserved to the Board; provided always that no such revocation or
termination shall terminate any outstanding stock option or stock appreciation
rights theretofore granted under the Plan; and provided further that any
amendment to the Plan also shall be approved by the stockholders if the Board
determines, based upon the recommendation of counsel to the Corporation, that
such approval is necessary or advisable, no such alteration or amendment of the
Plan shall, without prior stockholder approval, (a) increase the total number
of shares which may be issued or delivered under the Plan, or (b) make any
changes in the class of eligible employees. No alteration, amendment,
revocation or termination of the Plan shall, without the written consent of the
holder of a stock option or stock appreciation rights theretofore granted under
the Plan, adversely affect the rights of such holder with respect to such stock
option or stock appreciation rights.
SECTION 12
Effective Date and Duration of Plan
The effective date and date of adoption of the Plan shall be
September 2, 1997 (the "Effective Date"), the date of adoption of the Plan by
the Board, provided that such adoption of the Plan by the Board is approved by
the affirmative vote of the holders of at least a majority of the outstanding
shares of Common Stock at a meeting of such holders duly called, convened and
held within one year of the Effective Date. No stock option or stock
appreciation rights granted under the Plan prior to such shareholder approval
may be exercised until after such approval. No stock option or stock
appreciation rights may be granted under the Plan subsequent to September 2,
2007.
11
<PAGE> 1
Exhibit 10.7
SAINTE CLAIRE PLAZA
LEASE AGREEMENT
BY AND BETWEEN
BR ASSOCIATES
LESSOR
AND
UB INFORMATION & CONSULTANCY SERVICES, INC.
LESSEE
Dated as of 2nd July 1997
--------------
<PAGE> 2
INDEX
Agreement of Lease
<TABLE>
<S> <C>
Assignment and Subletting .................. 9
Captions ................................... 13
Compliance with Laws ....................... 8
Condemnation ............................... 9
Corporate Tenant ........................... 12
Damage or Destruction ...................... 7
Default, Distress .......................... 10
Entire Agreement ........................... 13
Estoppel Certificate ....................... 11
Excessive Utilities ........................ 12
Holding Over ............................... 12
Improvements ............................... 8
Insurance .................................. 7
Late Charge ................................ 10
Lessee's Non-Performance ................... 8
Lessee's Property .......................... 10
Lessor's Access to Premises ................ 11
Miscellaneous .............................. 13
No Liens ................................... 10
No Waiver .................................. 11
Notices .................................... 12
Quiet Enjoyment ............................ 11
Remedies Cumulative ........................ 13
Rent ....................................... 5
Repairs .................................... 7
Rights of Mortgage Holder .................. 11
Rules and Regulations ...................... 13
Security Deposit ........................... 12
Successors and Assigns ..................... 13
Term ....................................... 5
Use of Premises ............................ 5
Utilities and Other Services ............... 6
Vacation ................................... 11
Waiver of Breach ........................... 13
Waiver of Notice to Quit ................... 10
Exhibit A - "Premises"
Exhibit B- "Rules and Regulations"
</TABLE>
<PAGE> 3
AGREEMENT OF LEASE
This Lease, dated the 2nd day of July, 1997, by and between WEST POINT
REALTY, INC., Agent for BR Associates, a Pennsylvania general partnership (the
"Lessor") and UB Information & Consultancy Services, Inc., a Delaware
Corporation, (the "Lessee").
WITNESSETH
That in consideration of the rents hereinafter agreed to be paid by Lessee to
Lessor, and in consideration of the covenants in the manner hereinafter
provided, Lessor does hereby lease and demise unto Lessee, and Lessee does
hereby hire and take from Lessor, Suite 100, 1900, and 2100 consisting of 4,838
square feet of space, including common area allocation, on the 1st floor of the
building known as Sainte Claire Plaza, located at 1121 Boyce Road, Pittsburgh,
PA 15241, (the "Building") as more fully described on the plans attached hereto
as Exhibit "A" (the "Premises"). The Premises include the right to use in
common with others the lobbies, stairs, entrances, elevators, parking lot and
other common areas of the Building. Lessor shall regulate parking, loading and
unloading and use of the common areas, including designating and enforcing the
use of specified areas for parking, and Lessee will at all times comply with
such regulations.
TO HAVE AND TO HOLD the above-described Premises, subject to the terms and
conditions herein stated.
AND IN CONSIDERATION OF THE LETTING AND HIRING OF SAID PREMISES, AS
HEREINABOVE PROVIDED, THE PARTIES HEREBY COVENANT AND AGREE AS FOLLOWS:
1. Term. The term of this Lease (the "Lease Term") will be for a period of
25 months, beginning on May 1, 1997 (the "Commencement Date") and ending on May
31, 1999 (the "Expiration Date"), unless it is terminated earlier under the
express provisions of this Lease.
2. Use of Premises. Lessee does hereby agree to use the Premises
exclusively for office purposes and for no other purpose. Lessee will not
conduct itself or permit its employees, agents or invitees to conduct themselves
in the Premises or in the Building in a manner inconsistent with the character
of the Building or which would interfere with the comfort and convenience of
other tenants. Lessee will not install or operate in the Premises any
electrically operated equipment or other machinery, other than typewriters and
adding machines, and such other electrically operated office machinery and
computer equipment normally used in modern offices, without first obtaining the
prior written consent of the Lessor, and upon the payment by the Lessee of
additional rent as compensation for such excess consumption of water and or
electricity as may be occasioned by the operation of said equipment or
machinery; nor shall the Lessee install any other equipment of any kind or
nature whatsoever which will or may necessitate any changes, replacements or
additions to or require the use of the water system, plumbing system, heating
system, air conditioning system or the electrical system of the Premises without
the prior written consent of the Lessor.
3. Rent. Lessee does hereby agree to pay to West Point Realty at such
address as it may from time to time specify, unless otherwise directed by BR
Associates, rent for the Premises in the total amount of One Hundred Sixteen
Thousand One Hundred Twelve and 00/100 ($116,112.00) Dollars payable, without
further demand, monthly in advance, as follows:
(a) $4,838.00 on May 1, 1997, and on the first day of each month
thereafter, through and including April 30, 1998;
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<PAGE> 4
(b) $4,838.00 on May 1, 1998, and on the first day of each month
thereafter, through and including May 31, 1999;
In the event the term of this Lease commences on a day other than the first
business day of a calendar month, the Lessee shall pay to the Lessor, on or
before the commencement date of the term, a pro rata portion of the monthly
installment of rent, such pro rata portion to be based on the number of days
remaining in such partial month after the commencement date of the term.
4. Utilities and Other Services. As long as Lessee is not in default in the
performance of its obligations under this Lease, Lessor will provide the
following services and facilities:
(a) air conditioning, ventilation and heating, as required by the season.
Lessee agrees to cooperate fully with Lessor and to abide by all the regulations
and requirements which Lessor may reasonably prescribe for the proper
functioning and protection of the heating, ventilating and air conditioning
systems;
(b) maintenance and service of the public toilet rooms in the Building;
(c) cleaning and maintenance of common areas in the Building, the parking
lot and the grounds, including snow removal;
(d) janitor service customary for the Building;
(e) hot and cold water for lavatory facilities and drinking fountains; and
(f) electricity and light-bulb replacement for the standard number and type
of light fixtures installed in the Building and the Premises by Lessor and
electricity for normal small office machines used during normal business days
and hours. If Lessee desires to install any electrical equipment in addition to
the aforesaid or an amount of equipment which is more than an ordinary executive
office amount of such equipment, then the yearly minimum rent shall be
appropriately increased to reflect the additional electric consumption caused
thereby based upon an electrical survey procured by Lessor, at the expense of
Lessee, provided, however, that nothing herein shall be construed to require
Lessor to furnish such additional electric current.
(g) Lessor shall not be liable for any interruption in or failure to
furnish any utilities or other services when such interruption or failure is
caused by acts of God, accidents, breakage, repairs, strikes, lockouts, other
labor disputes, the making of repairs, alterations or improvements to the
Premises, the Land, or the Building, the inability to obtain an adequate supply
of fuel, steam, water, electricity, labor or other supplies, or by any other
condition beyond Lessor's reasonable control, including, without limitation, any
governmental energy conservation program, and Lessee shall not be entitled to
any damages resulting from such failure nor shall such failure relieve Lessee of
the obligation to pay the rent and additional rent reserved hereunder or
constitute or be construed as a constructive or other eviction of Lessee. In
the event any governmental entity promulgates or revises any statute, ordinance
or building, fire or other code or imposes mandatory or voluntary controls or
guidelines on Lessor, or the Land, or the Building or any part thereof, relating
to the use or conservation of energy, water. gas, light, or electricity or the
reduction of automobile or other emissions or the provision of any other utility
or other service provided with respect to this Lease or in the event Lessor is
required or elects to make alterations to any part of the Building or the Land
in order to comply with such mandatory or voluntary controls or guidelines,
Lessor may, in its sole discretion, comply with such mandatory or voluntary
controls guidelines or make such alterations to the Building or the Land. Such
compliance and the making of such alterations shall in no event entitle Lessee
to any damages, relieve Lessee of the obligations to pay the full rent and
additional rent
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<PAGE> 5
reserved hereunder or constitute or be construed as a constructive or other
eviction of Lessee.
5. Insurance. Lessee covenants and agrees to maintain, at Lessee's sole
cost and expense, at all times during the Lease Term, public liability insurance
for the Premises under which Lessor shall be named as an additional insured,
properly protecting and indemnifying Lessor in an amount not less than
$1,000,000 for personal injury (including death) to any one person, not less
than $1,000,000 for personal injuries (including death) in any one accident, and
not less than $1,000,000 for property damage.
Lessee shall furnish Lessor with a certificate or certificates of insurance
covering said insurance so maintained by Lessee, stipulating that such insurance
shall not be canceled without thirty (30) days' written notice in advance to
Lessor.
Lessor will, at Lessor's expense, carry insurance against loss or damage to
the Building and Lessee will, at Lessee's expense, carry insurance against loss
or damage to the Lessee's improvements and personal property in the Premises.
Lessor will not be liable for damage to Lessee's improvements or personal
property or for resulting loss suffered to the business or occupation of Lessee.
6. Damage or Destruction. If the Premises or any portion thereof shall be
damaged by fire or any other casualty, such Premises or portion thereof shall,
as soon as possible, be repaired and/or rebuilt in good workmanlike manner, so
that the restored Premises are substantially similar to the construction at the
time of the fire or other casualty, by and at the expense of Lessor (except for
Lessee's improvements and personal property). Until the repairs and/or
rebuilding shall have been completed, the rent shall be proportionately abated
according to the part of the Premises which shall be rendered untenantable by
reason of the fire or other casualty. However, if the Premises or the building
shall be substantially or completely destroyed by FIRE OR ANY other casualty,
then Lessor may, within sixty (60) days after the occurrence of the damage,
cancel and terminate this Lease by giving notice to the Lessee and, if such
notice shall be given, the Lease Term shall expire on the tenth day after such
notice shall be given, with the same effect as if that day were the date herein
specified for the expiration of the term, and Lessee shall vacate the Premises
and surrender the same to Lessor. Lessor shall not be liable for any damage,
compensation or claim by reason of inconvenience or annoyance arising from the
necessity of repairing any portion of the Premises or the interruption in the
use of the Premises, or the termination of this Lease by reason of the
destruction of the Premises.
7. Repairs.
(a) Lessor will make, at its sole cost and expense, all repairs necessary
to maintain the plumbing, air conditioning and electrical systems, windows,
floors (excluding carpeting), and all other items which constitute a part of the
Premises and are installed or furnished by Lessor, except repairs of Lessee's
trade fixtures and property and installations which Lessee was obligated to make
or which were performed by Lessor or others at Lessee's request provided,
however, that Lessor will not be obligated for any such repairs until the
expiration of a reasonable period of time after receipt of written notice from
Lessee that such repairs are needed. In no event will lessor be obligated under
this Paragraph to repair any damage caused by any act, omission or negligence of
the Lessee or its employees, agents, invitees, licensees, subtenants, or
contractors.
(b) lessee will take good care of the Premises and the fixtures and
appurtenances therein. Lessee will, at its sole cost and expense, repair and
replace
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<PAGE> 6
all damage or injury to the Premises and the Building and to fixtures and
equipment caused by Lessee or its employees, agents, invitees, licensees,
subtenants, or contractors, or as a result of all or any of them moving in or
out of the Building or by installation or removal of furniture, fixtures or
other property, which repairs and replacements will be in quality and class
equal to the original, undamaged condition. If Lessee fails to make such
repairs or replacements, the same may be made by Lessor and such expense will
be collectible as additional rental and paid by Lessee within fifteen (15) days
after rendition of a bill therefor.
8. Compliance with Laws. Lessee agrees that Lessee will, during the Lease
Term, or any extension or renewal thereof, at Lessee's own expense, observe and
comply with all valid laws, orders, regulations, rules, ordinances and
requirements of the Federal, State, County and other municipal governments, or
any subdivision thereof, having jurisdiction over the Premises and of the Board
of Fire Underwriters or any other body exercising similar functions. Lessee
agrees to pay all costs, expenses, claims, fines, penalties and other losses
that may arise out of or be imposed because of the failure of Lessee to comply
therewith.
Lessee may in good faith contest in Lessee's own name, or when necessary,
in Lessor's name, but at Lessee's expense (and Lessor agrees in the latter case
to sign any necessary or appropriate papers) the validity of any law, order,
regulation, rules, ordinance or other requirement, or the applicability thereof
to the Premises, and may postpone compliance therewith until after the end of
such contest.
9. Lessee's Non-Performance. In the event that Lessee shall be in default
in the performance of any of the terms, covenants or provisions herein
contained, Lessor may, but is not required to, immediately or at any times
thereafter perform the same for the account of Lessee and any amount paid or
expense or liability incurred by Lessor in the performance of the same shall be
deemed to be additional rent payable by Lessee for the Premises and the same
may, at the option of Lessor, be added to any fixed rent then due or thereafter
falling due hereunder.
10. Improvements.
(a) Lessor will make, at its expense, the improvements to the Premises
shown on the plans attached hereto as Exhibit "A". Lessor and Lessee will
cooperate and use their best efforts to complete the improvements as quickly as
possible.
(b) Lessee shall not, without Lessor's prior written approval, make any
additional alterations, rebuilding, replacement, changes, additions or
improvements to the Premises.
(c) Any such alterations, rebuilding, replacements, changes, additions and
improvements made by Lessee shall be and become part of the realty, and upon
expiration, forfeiture or termination of this Lease or any extension or renewal
thereof, for any reason whatsoever, shall become the sole and absolute property
of Lessor; provided, however, that Lessor shall have the right to require Lessee
to remove all or any portion of such improvements from the Premises at the
expiration of the Lease Term, at Lessee's sole expense. Upon removal, Lessee
will restore Premises to the same condition as existed at the beginning of the
Lease Term.
(d) Lessee shall not, without the prior written consent of Lessor, remove,
damage or destroy improvements, equipment or appurtenances and/or any part of
them located in or upon the Premises at the commencement of the Lease Term or
which Lessor may hereafter put in or upon the Premises.
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<PAGE> 7
11. Assignment and Subletting.
(a) References elsewhere herein to assignees or sub-lessees
notwithstanding, Lessee may not assign this Lease nor sublet the whole or any
part of the Premises nor permit any other person to occupy the whole or any part
of the Premises without first obtaining the written consent of Lessor. Any
attempted assignment or subletting by Lessee without Lessor's prior written
consent will be void and will constitute a default under this Lease. The
acceptance of rent from any other person will not be deemed to be a waiver of
any of the terms, conditions, covenants and provisions of this Lease or to be a
consent to the assignment of this Lease or the subletting of the Premises or any
part thereof.
(b) If this Lease is assigned or if the whole or any part of the Premises
is sublet, Lessee will nevertheless remain fully liable for the performance of
all obligations under this Lease to be performed by Lessee and Lessee will not
be released therefrom in any manner. Any consent of Lessor to an assignment or
subletting will not be deemed to waive the obligation to obtain Lessor's written
consent to any further assignment or subletting.
(c) In the event an order for relief is entered in favor of Lessee under
the provisions of the Bankruptcy Reform Act of 1978, as amended, 11 U.S.C.
Section 101 et seq. (hereinafter referred to as the "Bankruptcy Code"), this
Lease may not be assigned by Lessee or any Trustee of Lessee unless this Lease
is first assumed in accordance with the provisions of Section 365 of the
Bankruptcy Code. At the time of such assumption, Lessee or Lessee's Trustee
shall cure all defaults under this Lease, which, with respect to the curing of
rent arrearages, shall require full payment therefor, in cash or cash
equivalent, on or before the tenth day after the entry of an order of court
approving such assumption, and Lessee or Lessee's Trustee shall provide adequate
assurance of future performance by the assignee under this Lease, including,
without limitation, the deposit with Lessor of a security deposit in an amount
equivalent to the monthly rental due for the next succeeding three (3) months
after the assumption. In the event this Lease is assigned to any person or
entity pursuant to the provisions of the Bankruptcy Code, any and all monies or
other consideration payable or otherwise to be delivered in connection with such
assignment shall be and remain the exclusive property of Lessor and shall not
constitute property of Lessee or of the estate of Lessee within the meaning of
the Bankruptcy Code. Any and all monies or other consideration constituting
Lessor's property under the preceding sentence not paid or delivered to Lessor
shall be held in trust for the benefit of Lessor and be promptly paid or
delivered to Lessor. Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Lease and any amendments and/or rules and regulations relating thereto, on and
after the date of such assignment.
(d) In the event of any request by Lessee for approval of subletting or
assignment hereunder, Lessee will pay Lessor's reasonable attorneys' fees for
processing and reviewing all sublease or assignment documents, whether or not
such subletting or assignment is approved.
12. Condemnation. If the whole of the Premises is taken by any government
or public authority under the Power of eminent domain, or conveyed in lieu
thereof, then the Lease Term will cease from the day possession of the Premises
is taken and the rent will be paid up to that day. In the event that less than
the whole of the Premises is taken, Lessor will have the option, to be exercised
within thirty (30) days of the date that possession of the part of the Premises
is taken, to terminate this Lease and the rent will be paid up to the date of
termination.
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<PAGE> 8
If Lessor does not exercise said option, then this Lease will continue in
full force and effect, except that the rent will be reduced to an amount bearing
the same proportion to the rent before such taking or condemnation as the size
of the Premises after such taking or condemnation bears to the size of the
Premises before such taking or condemnation.
The entire compensation award, both fee and leasehold, will belong to the
Lessor without any deductions therefrom for any present or future estate of
Lessee, and Lessee hereby assigns to Lessor all its right, title and interest to
any such award. Lessee will, however, be entitled to such award as may be
allowed for fixtures and other equipment installed by it, and any other
compensation allowed under the laws of the Commonwealth of Pennsylvania, but
only if such award or other compensation is in addition to the award for the
land and Building containing the Premises.
13. Default. Distress. In the event Lessee fails to pay rent when due or
commits any other material event of default under this agreement, and such
default shall continue for a period of thirty (30) days after Lessor provides
Lessee with notice of said default in writing, Lessor is entitled to declare the
rent for the remaining unexpired term immediately due and payable and may take
any actions allowed by law to protect its interests hereunder, subject, however,
to Lessee's right to defend its interests in a manner consistent with applicable
law.
14. Late Charge. In the event any installment of Monthly Rental or
Additional Rental becomes overdue for a period in excess of ten (10) days, a
"Late Charge" in the amount of five percent (5%) per month of such overdue
installment shall be charged to Lessee by Lessor for the purpose of defraying
the expenses incurred in handling such delinquent payments, which Late Charge
will be payable monthly on the same day of the month as installments of monthly
rental, until such overdue installment is paid. This charge will be in addition
to, and not in lieu of, any other remedy Lessor may have and is in addition to
any reasonable fees and charges of any agents or attorneys which Lessor is
entitled to employ on any default hereunder, whether authorized herein, or by
law.
15. Waiver of Notice to Quit. "Lessee hereby accepts notice to quit, remove
from and surrender up possession of the Premises to Lessor, its successors or
assigns, at the end of the Lease Term consistent with Paragraph 1 hereof, all
further notices being hereby waived. This waiver of notice to quit is to apply
at the Expiration Date".
16. Lessee's Property. Lessee hereby undertakes and agrees to remove all
equipment and fixtures placed or installed in the Premises by Lessee prior to
the expiration or other termination of this Lease or any renewal thereof, and,
at its sole expense, to repair any and all damage to the Premises which shall
have been occasioned either by the installation or the removal thereof. Any and
all such equipment and fixtures which shall remain in the Premises more than
thirty (30) days after the termination of this Lease, shall be deemed abandoned
by Lessee and shall become the sole property of Lessor.
17. No Liens. In case there shall at any time be filed against the Premises
any mechanic's or materialman's lien (with the exception of any lien filed for
work done or for material's supplied at the request of Lessor, in which case
Lessor shall promptly cause such lien to be discharged), Lessee will, within ten
(10) days after it shall have received notice thereof, cause said lien to be
discharged either by paying the amount claimed or by bonding or otherwise.
10
<PAGE> 9
18. Vacation. At the expiration or other termination of the Lease Term,
Lessee shall vacate and surrender to Lessor full and actual possession of the
Premises in a good state of repair, damage by the elements and ordinary wear and
tear excepted.
19. Quiet Enjoyment. Lessor hereby covenants that Lessee, upon payment of
the rent as herein reserved and performing all the covenants and agreements
herein contained on the part of Lessee, shall and may peaceably and quietly
have, hold and enjoy the Premises hereby demised.
20. No Waiver. The receipt of any rent by Lessor, whether the same be that
originally reserved or that which may be payable under any of the covenants, or
agreements herein contained or any portion thereof, shall not be deemed to
operate as a waiver of the rights of Lessor to enforce the payment of rent
previously due or which may thereafter become due, to forfeit any of the
remedies reserved by Lessor hereunder, and the failure of Lessor to enforce any
covenants or conditions concerning which Lessee shall be guilty of a breach or
be in default shall not be deemed to avoid the right of Lessor to enforce the
same or any other conditions or covenants on the occasion of any subsequent
breach or default.
21. Lessor's Access to Premises. Subject to the security regulations of any
government authority, Lessee agrees that it will permit Lessor to have free
access to the Premises, on reasonable notice to Lessee, for the purpose of
inspecting the same or making repairs that Lessee may neglect or refuse to make
in accordance with the provisions of this Lease, and also for the purpose of
showing the Premises to prospective tenants or purchasers and representatives of
governmental agencies, insurance carriers and lending institutions.
22. Estoppel Certificate. At any time, and from time to time, upon the
written request of Lessor or any Mortgagee, Lessee, within ten (10) days of the
date of such written request, agrees to execute and deliver to Lessor and/or
such Mortgagee without charge and in a form satisfactory to Lessor and/or such
Mortgagee, a written Estoppel Certificate, provided it is reasonable, factually
accurate and does not materially impair its rights under the Lease.
23. Rights of Mortgage Holder.
(a) This Lease and all its terms, covenants and conditions are, and each of
them is, subject and subordinate to any and all mortgages and to mortgage notes,
bonds and judgments, entered thereon, now or hereafter placed upon the Premises
and/or upon the Building to the same effect as if any such mortgage and/or
accompanying note, bond or judgment thereon had been fully executed and recorded
before the execution of this Lease, it being the intent of this Paragraph that
any such mortgage, whether a first or second mortgage, placed upon the Premises,
and/or upon the Building, shall be a valid lien upon both and legal and
equitable title to the Premises, and/or Building, as if this Lease were not in
existence. Lessee agrees to execute and deliver, upon demand, such further
instruments subordinating this Lease to the lien of such mortgage or mortgages
as Lessor or any Mortgagee may request, within five (5) days after written
notice to do so.
(b) In the event of any act or omission by Lessor which would give Lessee
the right to terminate this Lease or to claim a partial or total eviction,
Lessee shall not exercise any such right until (i) it has notified in writing
the holder of any mortgage on the land or building, if the name and address of
such holder shall previously have been furnished by a written notice to Lessee,
of such act or omission, and (ii) a
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<PAGE> 10
reasonable period for remedying such act or omission shall have elapsed
following the giving of such notice, provided such holder, with reasonable
diligence, shall have commenced and continued to remedy such act or omission or
to cause the same to be remedied. During the period between the giving of such
notice and the remedying of such act or omission, the base rent, and any
additional rent due hereunder shall be abated and apportioned to the extent
that any part of the Premises shall be untenantable.
24. Holding Over. If Lessee retains possession of the Premises or any part
thereof after the termination of the term of this Lease by lapse of time or
otherwise, Lessee will pay to Lessor rent at two hundred percent of the monthly
rental specified in paragraph 3 hereof, for each month or portion thereof Lessee
remains in possession, and, in addition thereto, will pay Lessor all damages
sustained by reason of Lessee's retention of possession. Lessee will be deemed
to be a tenant-at will and there will be no renewal of this Lease by operation
of law.
25. Security Deposit. Lessor acknowledges receipt upon the execution hereof
from Lessee the sum of N/A Dollars to be held as collateral security for the
payment of any rentals and other sums of money payable by Lessee under this
Lease, and for the faithful performance of all other covenants and agreements of
Lessee hereunder; the amount of said deposit, without interest, to be repaid to
Lessee after the termination of this Lease and any renewal thereof, provided
Lessee shall have made all such payments and performed all such covenants and
agreements. Upon any default by Lessee hereunder, all or part of said deposit
may, at Lessor's sole option, be applied on account of such default, and
thereafter Lessee shall promptly restore the resulting deficiency in said
deposit to be held in escrow or in trust and said deposit shall be deemed to be
the property of Lessor. The Lessee may not offset the security deposit against
any rental payment due hereunder.
26. Corporate Tenant. If Lessee is a corporation, each individual executing
this lease on behalf of said corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with the duly adopted resolution of the Board of Directors of said
corporation or in accordance with the By-Laws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms.
27. Excessive Utilities. Lessee covenants that its utility needs are
ordinary and usual requirements of typical business tenants and that it will not
require substantially greater utility service; in such case the Lessee shall, at
its expense, pay for any extra utility service.
28. Notices. All notices required or desired to be given hereunder shall be
in writing and shall for the purpose of this Lease be deemed to have been duly
given:
(a) To Lessor if a Copy thereof be mailed by registered or certified mail,
postage prepaid, addressed to West Point Realty, Inc., Suite 2500 Saint Clair
Plaza, 1121 Boyce Road, Pittsburgh, PA 15241, or to such other address as Lessor
may from time to time designate in writing to Lessee.
(b) To Lessee if a copy thereof be mailed by registered or certified mail,
postage prepaid, addressed to Lessee at the Premises or to such other address as
Lessee may from time to time designate in writing to Lessor.
All notices served by prepaid registered or certified mail as aforesaid
shall be effective on the date they are so mailed.
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<PAGE> 11
29. Successors and Assigns. The covenants, agreements and conditions
contained in this Lease shall run with the land and the Premises hereby leased
and shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
30. Entire Agreement. This Lease contains the entire agreement of the
parties hereto with respect to the letting and hiring of the Premises and such
Lease may not be amended, modified, released, surrendered or discharged, in
whole or in part, except by an instrument in writing signed by all of the
parties hereto, their successors or assigns.
31. Captions. The captions of the Paragraphs of this Lease are used solely
for convenience of reference and shall not control or affect the meaning or
interpretation of any provision of this Lease.
32. Waiver of Breach. The waiver of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or of any other term, covenant or condition herein contained.
The subsequent acceptance of rent due hereunder or any or all other monetary
obligations of Lessee hereunder, whether or not denoted as rent hereunder, by
Lessor will not be deemed to be a waiver of any breach by Lessee of any term,
covenant or condition of this Lease, regardless of Lessor's knowledge of such
breach at the time of acceptance of such rent.
33. Remedies Cumulative. Mention in this Lease or institution of any
particular remedy will not preclude any other remedies under this Lease, or now
or hereafter existing at law or in equity or by statute.
34. Miscellaneous. As used in this Lease and when required by the context,
each number (singular or plural) includes all numbers, each gender includes all
genders and the word "it" includes any appropriate pronoun as the context
requires.
35. Rules and Regulations. The Rules and Regulations of the Building,
attached hereto as Exhibit "B", as modified from time to time, shall constitute
material covenants and conditions, and are hereby made a part of this Lease.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound have
executed this Agreement on the day and year first above written.
LESSOR:
ATTEST: WEST POINT REALTY, INC., Agent
for BR Associates
/s/ HEIDI R. SHIRING By /s/ DANIEL F. KILANEN
-------------------- --------------------------
Heidi R. Shiring
LESSEE:
WITNESS/ATTEST: UB Information & Consultancy
Services, Inc.
/s/ HEIDI R. SHIRING
-------------------- By /s/ KEITH STEVENSON
Heidi R. Shiring ---------------------------
Keith Stevenson
---------------------------
Director Personnel & Admin.
2nd July 1997
<PAGE> 13
EXHIBIT "A"
Suite 2100
----------
26 ft. X 52 ft. = 1352 sq. ft.
Suite 100
---------
77 ft. X 26 ft. = 2002 sq. ft.
11 ft. X 12 ft. = 132 sq. ft.
------------
Total 2134 sq. ft.
Suite 1900
----------
26 ft. X 52 ft. = 1352 sq. ft.
Suite 2100 = 1352 sq. ft.
Suite 100 = 2134 sq. ft.
Suite 1900 = 1352 sq. ft.
------------
Total 4838 sq. ft.
============
<PAGE> 14
EXHIBIT "B"
RULES AND REGULATIONS
1. DEFINITIONS: Wherever in the Lease or in these Rules and Regulations the
word "LESSEE" is used, it shall be taken to apply to and include the Lessee
and its agents, employees, invites, licensees, subtenants and contractors,
and is to be deemed of such number and gender as the circumstances require.
The word "Premises" is to be taken to mean and include the space covered by
this Lease. The word "Lessor" shall be taken to include the employees and
agents of Lessor.
2. OPERATIONS: The streets, sidewalks, entrances, halls, passages, elevators,
stairways and other common areas provided by Landlord shall not be
obstructed by Lessee, or used by Lessee for any other purpose than for
ingress and egress.
3. WASHROOMS: Toilet rooms, water closets and other water apparatus shall
not be used for any purposes other than those for which they were
constructed.
4. TELEPHONES: If Lessee desires to install telephones or electric wires, the
Lessor will direct where and how the same are to be placed. No wires shall
be run in any part of the Building excepting by or under the direction of
Lessor. The attaching of wires to the outside of the Building is
absolutely prohibited.
5. INSURANCE REGULATIONS: Lessee will not do or permit anything to be done,
keep or permit anything to be kept, in the Premises, which would increase
or tend to increase the risk of fire or the fire or other casualty
insurance rate on the Building or the property therein, or which would
result in insurance companies of good standing refusing to insure the
building or any such property in amounts reasonably satisfactory to Lessor,
or which would conflict with the regulations of the Fire Department or with
the fire laws, or with any insurance policy on the Building or any part
thereof, or which would in any way conflict with any law, ordinance, rule
or regulation affecting the occupancy and use of the Premises, which are or
may hereafter be enacted or promulgated by any public authority or by the
Board of Fire Insurance Underwriters, or any equivalent body. In the event
that any use of the Premises by Lessee increases such cost of fire or other
casualty insurance, Lessee will pay such increased cost to Lessor on
demand, but any demand or acceptance of such payment will not be construed
as a consent by Lessor to Lessee's use or limit Lessor's further remedies
under the Lease.
6. GENERAL PROHIBITIONS: In order to insure proper use and care of the
Premises, Lessee shall not:
(a) Keep animals or birds in the Premises.
(b) Use the Premises or any rooms therein as sleeping apartments.
(c) Allow any sign, advertisement, or notice to be fixed to the
Building, inside or outside, without Lessor's written consent.
(d) Make improper noises or disturbances of any kind, sing, play or
operate any musical instrument, without consent of Landlord, or
otherwise do anything which would disturb other Tenants or tend to
injure the reputation of the building.
<PAGE> 15
(e) Mark or defile elevators, water-closets, toilet rooms, walls,
windows, doors or any other part of the Building.
(f) Place anything on the outside of the Building, including roof
setbacks, window ledges and other projections or drop any-thing
from the windows, stairways or parapets; or place trash or other
matter in the halls, stairways, elevators or light wells of the
Building.
(g) Cover or obstruct any window, skylight, door or transom that admits
light, except with building standard window coverings.
(h) Fasten any article, drill holes, drive nails or screws into the
walls, floors, woodwork, window frames, or partitions of the
Premises or the Building; nor shall the same be painted, papered or
otherwise covered or in any way marked or broken without the prior
consent of Lessor.
(i) Operate any machinery, manufacture any commodity, or prepare,
dispense, sell or permit to be sold any foods or beverages, whether
by vending or dispensing machines or otherwise, or ice, tobacco,
drugs, flowers, or other commodities or articles- without the
consent of Lessor.
(j) Interfere with the heating or cooling apparatus.
(k) Allow anyone but Lessor's janitor to clean the Premises. Lessor
shall not be responsible for damage to furniture or other property
of Lessee caused by the janitor or any other person.
(l) Leave the Premises without locking doors, stopping all office
machines, and extinguishing all lights.
(m) Install or hang any shades, drapes, blinds or other window
treatment, except as may be approved by the Landlord, in its sole
discretion.
(n) Use any heating device without permission of Lessor.
(o) Install call boxes, or any kind of wire in or on the Premises or
the Building without Lessor's permission and direction.
(p) Change existing locks or the mechanism thereof on any doors to or
in the Premises, or attach or permit to be attached additional
locks or similar devices to any door or window of the Premises. If
additional locks are required, Lessor will provide them at Lessee's
expense. Duplicate keys shall not be made for any door except for
those made and provided by Lessor. Lessor will provide replacements
for lost keys only upon payment by Lessee of $5.00 for each
replacement key. Lessee shall maintain a written record of all
persons to whom Lessee has delivered keys. Upon the termination of
employment of any employee to whom Lessee has delivered keys,
Lessee will cause such employee to return the keys to the Lessee.
If Lessee fails to obtain such keys, Lessee will immediately notify
Lessor, and Lessor will change the locks to which such employee
kept keys, at Lessee's sole expense. Upon termination of the Lease
or of
16
<PAGE> 16
Lessee's possession of the Premises, Lessee will surrender all keys
to the Premises and the Building. If Lessee fails to surrender all
keys, Lessee will be solely responsible for the cost of changing
locks to the Building and the Premises.
(q) Give his employees or other persons permission to go upon the roof
of the Building without the written consent of Lessor.
(r) Place door mats in public corridors without the consent of Lessor.
(s) Use passenger elevators for freight during normal business hours.
(t) Schedule, nor will Lessor receive, deliver or accept freight for
Lessee other than during normal business hours, or at such other
times designated by Lessor.
(u) Use the Premises for housing accommodations, or use any
illumination, other than electric light, or use or permit to be
brought into the Building any flammable oils or fluids such as
gasoline, kerosene, naphtha, and benzine, or any explosive,
radioactive materials or other articles hazardous to life, limb or
property.
(v) Display at any time festive lighting in any window. Artificial
Christmas trees and decorations only will be permitted.
(w) Keep the doors to the corridors open except when in use for ingress
and egress; nor place or allow anything to be placed against or
near the doors to the corridors which may diminish the light in or
be unsightly from the corridors.
7. ALTERATIONS: Lessor reserves the right to make any and all alterations to
the Premises which may be required by Lessee, the expense of such
alterations to be paid by Lessee.
8. OTHER LESSEES: Lessor shall not be responsible to Lessee for any
non-observance of rules and regulations by any other Lessee.
9. PARKING: Lessee will park only in those areas designated for parking and
will do so within the lined spaces designated therefor. The parking areas
adjacent to the Building shall at all times be subject to the exclusive
control and management of Lessor and Lessor reserves the right to close
temporarily any or all portions of said parking areas, and to make such
other reasonable rules and regulations as, in the judgment of Lessor, may
from time to time be needful for the safety, appearance, care and
cleanliness of said parking areas and for the preservation of good order
thereon. Lessor shall not be responsible for any violation of rules and
regulations covering said areas by other Lessees.
10. PUBLICITY: Lessee will not advertise the business, profession or activities,
of Lessee conducted in the Building in any manner which violates the letter
or spirit of any code of ethics adopted by any recognized association
pertaining to such business, profession or activities, and will not use the
name of the Building for any purpose other than to state the business
address of the Lessee, and Lessee will never use any picture or likeness of
the Building in any circulars, advertisements or correspondence without
Lessor's prior written consent. Lessor will also have the right to prohibit
any advertising by Lessee which in its opinion, tends to impair the
reputation of the Building or its desirability as a commercial office
building; and upon written notice from Lessor, Lessee will refrain from or
discontinue such advertising.
17
<PAGE> 17
11. BUSINESS MACHINES: Business machines and mechanical equipment which cause
vibration, noise, cold or heat that may be transmitted to Building
structure, or to any leased space outside the Premises shall be placed and
maintained by Tenant, at its sole cost and expense, in settings of cork,
rubber, or spring type vibration eliminators sufficient to absorb and
prevent such vibration, noise, cold or heat. No business machines or
mechanical equipment which require unusually large amounts of electricity
shall be used or installed in the Premises without Landlord's prior written
consent.
12. MOVEMENT OF EQUIPMENT: Landlord reserves the right to designate the time
and method whereby freight, small office equipment, furniture, safes and
other like articles may be brought into, moved in or removed from the
Building or the Premises, and to designate the location for temporary
disposition of such items. In no event shall any of the foregoing items be
taken from Lessee's Premises for the purpose of removing same from the
Building without the express consent of Lessor.
13. PUBLIC ENTRANCE: Landlord reserves the right to exclude the general public
from the Building upon such days and at such hours as in the Landlord's
judgment will be for the best interest of the Building and its Lessees.
Lessee is responsible for the custody and control of the Building when
Lessee is in the Building during other than normal business hours.
14. RESERVED RIGHTS TO LANDLORD: Without abatement or diminution in rent,
Landlord reserves and shall have the following additional rights:
(a) To change the name or street address of the Building and the
arrangement and/or location of entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilet or other public
parts of the Building, provided that such acts shall not
unreasonably interfere with Lessee's use and occupancy of the
Premises as a whole;
(b) To install and maintain a sign or signs on the exterior of the
Building;
(c) To have access for Lessor to inspect the Premises at any reasonable
time, and in case of emergency, to enter the Premises at any time;
(d) To designate all sources furnishing sign painting and lettering,
ice, drinking water, towels and toilet supplies, and other like
services used on the Premises;
(e) At any time or times Lessor, either voluntarily or pursuant to
governmental requirement, may, at Lessor's own expense, make
repairs, alterations, or improvements in or to the Building or any
part thereof, and during such alterations, may close entrances,
doors, windows, corridors, elevators or other facilities, provided
that such acts shall not unreasonably interfere with Lessee's use
and occupancy of the Premises as a whole;
(f) To erect, use and maintain pipes and conduits in and through the
Premises:
(g) During the last six (6) months of the term, if during or prior to
that time the Lessee vacates the Premises, to decorate, remodel,
repair, alter or otherwise prepare the Premises for re-occupancy;
(h) To constantly have pass keys to the Premises;
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<PAGE> 18
(i) To grant to anyone the exclusive right to conduct any particular
business or under taking in the Building;
(j) To take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Premises or to
the Building, as may be necessary or desirable for the safety,
protection or preservation of the Premises or the Building or
Lessor's interests, or as may be necessary or desirable in the
operation of the Building. Lessor may enter upon the Premises and
may exercise any or all of the foregoing rights hereby reserved
without being deemed guilty of an eviction or disturbance of
Lessee's use or possession and without being liable in any manner
to the Lessee.
15. REGULATION CHANGE: Lessor shall have the right to make such other and
further reasonable rules and regulations as time be needed for the safety,
appearance, care and cleanliness of the Building and for the preservation
of good order therein.
19
<PAGE> 1
EXHIBIT 10.8
LEASE
HARBOR DRIVE
EXECUTIVE PARK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
1. PREMISES: TERM................................................................................1
2. COMMENCEMENT OF TERM..........................................................................1
3. SPECIAL PROVISIONS............................................................................1
4. RENT: ADJUSTMENT OF RENT AND ADDITIONAL RENT..................................................1
5. USE...........................................................................................3
6. CONSTRUCTION OF BUILDINGS, ALTERATIONS, FIXTURES..............................................3
7. REPAIRS.......................................................................................3
8. LAW, ORDINANCES, REQUIREMENT OF PUBLIC AUTHORITIES............................................3
9. INSURANCE.....................................................................................4
10. DAMAGE BY FIRE OR OTHER CAUSE.................................................................4
11. ASSIGNMENT, SUBLETTING, MORTGAGING............................................................5
12. NO LIABILITY ON LANDLORD......................................................................5
13. CONDEMNATION..................................................................................6
14. ENTRY, RIGHT TO CHANGE PORTIONS OF THE PROJECT, 6
RELOCATION....................................................................................6
15. BANKRUPTCY....................................................................................6
16. DEFAULT.......................................................................................7
17. COVENANT OF QUIET ENJOYMENT...................................................................7
18. SERVICES AND EQUIPMENT........................................................................7
19. BROKER........................................................................................8
20. SUBORDINATION.................................................................................8
21. ESTOPPEL CERTIFICATE..........................................................................9
22. SURRENDER OF PREMISES.........................................................................9
23. RULES AND REGULATIONS.........................................................................9
24. PERSONS BOUND.................................................................................9
25. NOTICES.......................................................................................9
26. SECURITY DEPOSIT..............................................................................10
27. NO WAIVER: ENTIRE AGREEMENT...................................................................10
28. ELECTRIC INCLUSION............................................................................10
29. MISCELLANEOUS.................................................................................11
30. INABILITY TO PERFORM..........................................................................11
EXHIBITS:
A. FLOOR PLAN OF DEMISED PREMISES................................................................
B. RULES AND REGULATIONS.........................................................................
</TABLE>
<PAGE> 3
LEASE
This Lease made this 28th day of May, 1996 between MARIN EXECUTIVE PARK, a
general partnership existing under the laws of the State of California and
having its office at One Harbor Drive, Suite 102, Sausalito, CA 94965, and
hereinafter referred to as "Landlord," and UBICS, Inc., a Delaware corporation
with its principal office located at 1121 Boyce Road, Pittsburgh, Pennsylvania
hereinafter referred to as "Tenant". It is mutually agreed that the letting
hereunder is upon and subject to the following terms, covenants and conditions
and lessee covenants as a material part of the consideration for this lease, to
keep and perform each and all of said terms, covenants and conditions by him to
be kept or performed and that this Lease is made upon the condition of such
performance.
1. PREMISES: Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, upon the terms and conditions hereof, certain space in one of the
two buildings in the Project located at One Harbor Drive in the City of
Sausalito, County of Marin, State of California (hereinafter called the
"Project") more particularly described on Exhibit "A", (the "Demised
Premises") together with the right to use, in common with others, the
lobbies, elevators and other public portion of the building, subject to the
provisions hereinafter set forth.
2. TERM 2.01 Provided that this lease is executed not later than 5:00 PM,
Monday, May 15, 1996, the term of this Lease shall commence on June 3, 1996
and end on June 2, 1999. In the event that the lease is executed at a later
date the occupancy date will be delayed one day for each day of delay in the
execution date.
2.02 If for any reason Landlord is unable to give possession of the Demised
Premises on the date designated in 2.01, the rent shall not commence until
possession of the Demised Premises is given or is available for occupancy by
Tenant. If such failure to give possession has been caused by any act or
omission on the part of the Tenant, there shall be no abatement of rent.
Landlord shall not be subjected to any liability for the failure to give
possession on the specified date. Failure to give possession on such
specified date or failure to complete the Demised Premises on such date shall
not affect the validity of this Lease or the obligations of Tenant hereunder
or be deemed to extend the term of this Lease.
2.03 Tenant shall have the right to cancel this Lease without penalty if
through no fault of the Tenant, Landlord is unable to deliver possession
within thirty (30) days of the specified commencement date.
3. SPECIAL PROVISIONS:
3.01 RIGHT OF EARLY TERMINATION: Provided that Tenant is not in default of
the terms and conditions of this lease, Tenant shall have a one-time right to
terminate this lease at the end of the 24th full calendar month of the term
by giving Landlord written notice not later than April 1, 1998. In
consideration of this right to early termination Tenant will pay Landlord a
cancellation fee in the amount of one month's current rent. The cancellation
fee shall be paid by Tenant to Landlord on the effective date of the notice
of cancellation.
3.02. TENANT IMPROVEMENTS: Tenant accepts the premises in its current As-Is
condition with the exception of paint touch up as required.
4. RENT: ADJUSTMENT OF RENT AND ADDITIONAL RENT 4.01 During the term of this
Lease, Tenant covenants and agrees to pay to Landlord a rent (the "rent") at
an annual rate of $58,147.20, payable in equal minimum monthly rent
installments of $4,845.60, without deduction, setoff, prior notice, or demand
in advance on the first day of each month, commencing on the date the term
commences, and continuing during the term. Included in the annual rent herein
specified is an allowance for Tenant's share of building operating expenses.
This allowance is $16,5678.22 annually, or $1,380.60. Rent shall be paid to
Landlord on the day the term commences at the office of the Landlord or at
such other place as the Landlord may designate from time to time.
4.02 Landlord and Tenant agree that the rent stated in Paragraph 4.01 above
is the minimum rent. The minimum monthly rent is subject to adjustment as
provided in paragraphs 4.03, 4.04, and 4.05. Nothing contained in any
provision of this Lease however, dealing with adjustments of rent or
additional rent shall be construed so as to reduce the rent below the sum set
forth in 4.01. All additional costs, charges, expenses, and adjustments of
rent which Tenant assumes, agrees or is obligated to pay to Landlord or
others pursuant to this Lease or any other agreement shall be deemed
"Additional Rent".
4.03 Minimum Monthly Rent Adjustment: The minimum monthly rent provided for
in paragraph 4.01, minus that portion of the rent which is an allowance for
Tenant's share of the building operating expenses, shall be subject to
adjustment on each anniversary of the commencement date of this Lease as
follows:
The base for computing the adjustment is the Consumer Price Index For All
Urban Consumers, San Francisco, Oakland, California, all items (1982-84=100),
as published by the United States Department of Labor, Bureau of Labor
Statistics, which is published for the month nearest the date of the
commencement of the term of the Lease. If the index published nearest the
adjustment date has increased over the index published nearest the month of
the commencement of the Lease, the minimum monthly rent for the second lease
year and each following year shall be set by multiplying the minimum monthly
tent set forth in paragraph 4.01 less allowance for Tenant's share of
building operating expenses by a fraction, the numerator of which is the
index value published nearest the adjustment date and the denominator of
which is the index value published nearest the commencement of the Lease. In
no case shall the minimum monthly rent be less than the minimum monthly rent
set forth in paragraph 4.01. On adjustment of the minimum monthly rent as
provided in this lease, the parties shall immediately execute an amendment to
the lease stating the new minimum monthly rent. If the index is changed so
that the base year differs from that used as of the month immediately
preceding the month in which the term commences, the index shall be converted
in accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics. If the index is discontinued
or revised during the term of the lease, such other government index or
computation with which it is replaced shall he used in order to obtain
substantially the same result as would be obtained if the index had not been
discontinued or revised.
4.04 Operating Expense Adjustment: On the January 1, 199_, and each year
thereafter, the operating expense portion of the minimum monthly rent shall
be increased by one hundred percent (100%) of any increase over the allowance
for Tenant's share of building operating expenses specified in 4.01 above.
Landlord will as soon as practicable, at or after the start of any calendar
year, commencing January 1, 199 _, notify Tenant of the amount which Landlord
reasonably estimates any anticipated increase in operating expenses for the
next year and during each such year or portion thereof Tenant shall pay to
Landlord as additional rent together with minimum rent, an amount per month
equal to one-twelfth (1/12) of the increase, which increase shall be obtained
by multiplying the estimated increase in operating expenses by a fraction,
hereinafter referred to as "Tenant Proportionate Share" the numerator of
which is the area of space of the Demised Premises and the denominator of
which is the total area of the Project, which, for the purpose of this
computation is agreed to be 1.74%. Statements of the increase in rent payable
by Tenant for each year subsequent hereunder shall be given to Tenant on or
before the first day of January of each year or such other date within such
year as Landlord shall select.
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<PAGE> 4
4.05 Within ninety (90) days after the end of each calendar year, commencing
December 31, 1995, Landlord shall determine the actual operating expenses for
such year, Landlord shall submit to Tenant a statement of the amount, if any,
due to Landlord or Tenant under the provisions of this paragraph. If the
total payments made by Tenant to Landlord on account of anticipated increased
operating expenses during any such year exceed the actual amount which Tenant
is obligated to pay Landlord, such excess shall be promptly credited by
Landlord to Tenant. If, however, said payments made by Tenant were not
sufficient to pay Tenant's proportionate share of actual operating expenses
for the applicable year, then Tenant agrees to pay to Landlord the amount
necessary to make up the deficiency within thirty (30) days after notice by
Landlord. Tenant shall have a period of thirty (30) days from the receipt of
such statement to examine and question the amount, propriety and
reasonableness of the items referred to therein, and tenant, or its
authorized representative, shall have the right, during reasonable business
hours, to examine the records pertaining thereto at the office of Landlord,
which records shall be kept at such office.
4.06 The term "operating expenses" as used herein shall include all costs of
operation and maintenance of the Project of which the Demised Premises are a
part and shall include the following costs by way of illustration but not
limitation:
a) Salaries, wages, and related payroll costs;
b) Payments made to independent contractors for maintenance or operation
of the Project;
c) The cost of all charges for gas, heat, electricity, ventilation, air
conditioning and water, including sewage, furnished to the Project,
including the common areas, landscaping and parking lot maintenance,
together with any taxes on such utilities;
d) The cost of all premiums for casualty, fire, liability, earthquake and
property damage, rent loss, indemnification, glass and all risk
insurance on the Project;
e) The cost of all supplies (including cleaning supplies), tools,
materials and equipment used in operating or maintaining the Project;
f) All building repairs and maintenance, including reasonable reserves
therefore;
g) Management fees and expenses payable with respect to the Project;
h) Vault taxes, sales, use and frontage taxes payable with respect to the
Project;
i) Property taxes, licenses, permits and inspection fees with
respect to the Project.
When calculating the actual operating expenses for any year, the operating
costs for the base year shall be adjusted (grossed-up) to compensate for any
vacancies in the building so that operating costs shall be based on a
ninety-five (95%) percent occupied building and shall include (1) those costs
actually incurred during that year, (2) sums needed to compensate for any
vacancies in the building and (3) those additional costs that would have been
incurred by Landlord for servicing a particular tenant's premises if that
tenant had not furnished its own services in whole or in part during the base
cost year.
4.07 The term "property taxes" as used herein shall include all real estate
taxes or personal property taxes and other taxes, charges and assessments
which are levied with respect to the Project of which the Demised Premises
are a part, and any improvements, fixtures and equipment and all other
property of Landlord, real or personal, located in said Project and used in
connection with the operation of said Project and the amount of such taxes
shall be determined by applying to the assessed valuation (as finally
determined, if contested) of such property on July 1 of each year the annual
tax rate applicable on said July 1.
4.08 Except as hereinafter provided, as used in this Article, "taxes" shall
mean all federal, state and local taxes and assessments of every kind, nature
and description, whether general, ordinary, special or extraordinary, and the
water rates (or charges in lieu thereof) which Landlord shall pay or become
obligated to pay because of or in connection with the ownership, leasing,
management, control or operation of the Project (including the land) or of
the personal property-fixtures and equipment located in or used in
connection with the Project. Any special assessment or levy which is imposed
upon the Project and/or the land or Landlord's interest therein and all taxes
and assessments payable by Landlord under any ground or underlying lease
shall be deemed to be included in the term "taxes". There shall be included
in taxes for any year the amount of all fees, costs and expenses (including
attorney's fees) paid by Landlord during such year in seeking or obtaining
any refund or reduction of taxes. If a special assessment payable in
installment is levied against the Project or the land on which the Project is
situated, taxes for any year shall include only the installments of such
assessment, and any interest, payable during such year. Taxes shall not
include any federal, state or local, sales, use, franchise, capital stock,
inheritance, general income, gift or estate taxes, except that if a change
occurs in the method of taxation resulting in the substitution of any such
taxes for any taxes as above defined, such substituted taxes shall be
included in taxes.
4.09 Prepaid Rent: Concurrently with Tenant's execution of this Lease, Tenant
shall pay to Landlord the sum of $__________ as prepaid rent for the first
month of the Lease term. If the Commencement Date shall be a date other than
the first day of a calendar month, Tenant shall pay to Landlord, for the
second month of lease rent, an amount equal to such proportion of a monthly
rent as the number of days from and including the Commencement Date bears to
the total number of days in said calendar month, and said payment shall
represent the pro rata rent from the first day of the month to the end of
such calendar month.
4.10 Late Charges: Tenant hereby acknowledges that late payment by Tenant to
Landlord of the minimum rent or additional rent due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such cost include, but are
not limited to, loss of discounts offered by vendors for prompt payment of
bills, processing and accounting charges, and late charges which may be
imposed upon Landlord by terms of any ground lease (wherein the Landlord has
leased the land on which the Demised Premises is situated) or mortgage or
trust deed covering the Demised Premises. Accordingly, if any installment of
rent or any sum due from Tenant shall not be received by Landlord or
Landlord's designee after said amount is due, then Tenant shall pay to
Landlord 110% of said amount, plus any attorneys' fees incurred by Landlord
by reason of Tenant's failure to pay said amount when due hereunder. The
parties hereby agree that such late charges represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of the late payment
by Tenant. Acceptance of such late charges by the Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount,
nor prevent Landlord from exercising any of the other rights and remedies
granted hereunder.
4.11 In the event this Lease shall terminate or come to an end on any date
other than the last day of a calendar year, the amount of increase in rent
payable by Tenant or decrease in rent to which Tenant is entitled during the
calendar year in which said lease terminates or comes to an end shall be
prorated on the basis which the number of days from the commencement of said
calendar year to and including said date on which the lease terminates or
comes to an end bears to 365 days and shall be due and payable when rendered
notwithstanding the termination of this lease.
5. USE Tenant shall use and occupy the Demised Premises for general office and
related uses and for no other purpose without the prior written consent of
Landlord. Tenant shall not do or permit anything to be done in or about the
Demised Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of either building or injure or annoy them or
use or allow the Demised Premises to be used for any illegal purpose, nor
shall Tenant cause or maintain or permit any nuisance in, on, or about the
premises. Tenant shall not commit or suffer the commission of any waste in,
on, or about the premises.
2
<PAGE> 5
6. CONSTRUCTION OF BUILDINGS, ALTERATIONS, FIXTURES 6.01 Tenant shall make no
alterations, installations, additions or improvements in or to the Demised
Premises, including, but not limited to, removal or installation of
partitions, doors, electrical installations, plumbing installations, water
coolers, air-conditioning or cooling systems, units or parts thereof or other
apparatus of like or other nature, whether structural or non-structural,
without Landlord's prior written consent. Tenant shall be liable for the
removal of any improvements made without Landlord's consent.
6.02 Where furnished by or at the expense of Tenant (except where same is a
replacement of an item furnished and paid for by Landlord or against which
Tenant has received a credit), all movable property, furniture, furnishings
and trade fixtures, other than those affixed to the realty so that they
cannot be removed without damage, shall remain the property of Tenant, and
may be removed by Tenant prior to the expiration of the term of this Lease,
and, in case of damage by reason of the removal, Tenant shall restore the
Demised Premises to good order and condition. In case Tenant shall decide to
not remove any part of such property, Tenant shall notify Landlord in writing
not less than sixty (60) days prior to the expiration of the term of this
Lease specifying the items of property which Tenant has decided not to
remove. If within thirty (30) days after the service of such notice Landlord
shall request Tenant to remove any of said property, Tenant shall, at
Tenant's expense, at or prior to the expiration of the term of this Lease,
remove said property, and, in case of damage by reason of such removal,
restore the Demised Premises to good order and condition. If Tenant shall
fail to remove such property, Landlord may remove such property, and dispose
of it or place it in storage, and restore the Demised Premises to good order
and condition, and Tenant shall reimburse Landlord for Landlord's expense in
connection therewith as additional rent within ten (10) days after written
notice to Tenant of the amount of such expense. Any of such property not
removed by Tenant shall, at the election of Landlord, be deemed to be
abandoned by Tenant, and Landlord may retain or dispose of such property as
Landlord shall elect, without any liability to Tenant.
6.03 All alterations, partitions, installations, carpeting, additions or
improvements upon the Demised Premises, made by either party, which are
affixed to the realty shall become the property of Landlord and shall remain
upon, and be surrendered with, the Demised Premises, as a part thereof, at
the end of the term or renewal term, as the case may be. In the event the
Landlord shall so elect, then such alterations, installations, additions or
improvements made by Tenant upon the Demised Premises as the Landlord shall
designate by written notice to Tenant shall be removed by the Tenant and
Tenant shall restore the Demised Premises to its original condition, at
Tenants sole cost and expense, and prior to the expiration of the term. If
any fixture, equipment, improvement, installation or appurtenance which, as
herein provided, shall be required to be removed from the Demised Premises by
Tenant shall not be removed by Tenant from the Demised Premises within the
time above specified therefor, the Landlord (in addition to all other rights
and remedies to which Landlord may be entitled at any time) may, at its
election, by written notice to such effect to Tenant, deem that the same has
been abandoned by Tenant to Landlord, or Landlord may remove the same and
restore the Demised Premises to its original condition at the expense of
Tenant and Tenant shall reimburse Landlord for such expense, as additional
rent within ten (10) days after written notice to Tenant of the amount of
such expense.
7. REPAIRS 7.01 Tenant shall take good care of the Demised Premises and the
fixtures, glass, appurtenances and equipment therein. All damage or injury to
the Demised Premises or the building, including both structural and
non-structural, or to its fixtures, window glass, plate glass (in or forming
a part of the Demised Premises), appurtenances and equipment caused by
tenant, its agents, contractors, employees, guests, licensees or invitees
shall be repaired, restored or replaced promptly by Tenant, at its sole cost
and expense. All aforesaid repairs, restorations and replacements shall be in
quality and class equal to the original work or installations and shall be
done in good and workmanlike manner, using prime quality materials. Tenant
hereby waives all rights to terminate this Lease under end benefits of
subsection 1 of Section 1932 of the Civil Code of California.
7.02 Landlord, at its expense, shall make all structural repairs or
replacements necessary in order to keep in good order and repair the exterior
of the building and the public portion of the building other than those
required to be made by Tenant as provided in Section 7.01 hereof. If Tenant
shall by written notice to Landlord demand that Landlord shall make a repair
or replacement of the kind described in the immediately preceding sentence of
this paragraph 7.02, Landlord shall, within ten (10) days after receipt
thereof, either commence such repair or replacement, reach agreement with
Tenant upon a date such repair or replacement shall be commenced or state in
writing to Tenant Landlord's reasons for not undertaking such repair or
replacement. There shall be no allowance to Tenant for a diminution of rental
value or interruption of business and no liability on the part of Landlord by
reason of inconvenience, annoyance or injury to business arising from
Landlord, Tenant or others making any repairs, alterations, additions,
improvements, restorations or replacements, in or to any portion of the
building of which the Demised Premises are a part or the Demised Premises, or
in or to fixtures, appurtenances or equipment thereof, and no liability upon
Landlord (except for Landlord's gross negligence) for failure of Landlord or
others to make any repairs, alterations, additions, improvements,
restorations or replacements in or to any portion of the building or the
Demised Premises or in or to fixtures, appurtenances or equipment thereof.
7.03 If any bureau, department or official of the state, county, or city
government, shall require the installation or alteration of the building or
its fire protection facilities due to the Tenant's particular use of the
Demised Premises or if any such installations or modifications become
necessary to prevent the imposition of added insurance premiums as a result
of the Tenant's particular use of the Demised Premises, Tenant, at Tenant's
expense, shall promptly make such installations or modifications.
8. LAW, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES 8.01 Tenant shall not do
or permit to be done any act or thing in or upon the Demised Premises which
will invalidate or be in conflict with the Certificate of Occupancy for the
Demised Premises or the building. Tenant shall, at its expense, comply with
all laws, orders, ordinances and regulation of federal, state, county, and
city, or other governmental authorities and with any direction made pursuant
to law by any public officer or officers which shall (with respect to the
occupancy, use or manner of use of, or installations in the Demised Premises
or with respect to any abatement of nuisance) impose any violation, order or
duty upon Landlord or Tenant arising from, or in connection with Tenant's
occupancy, use or manner of use of the Demised Premises, or any installations
therein or required by reason of a breach of any of Tenant's covenants or
agreements hereunder, whether or not such law, order, ordinance, regulation
or direction shall be presently in effect or hereafter enacted or issued, and
whether or not any work required shall be ordinary or extraordinary or
foreseen or unforeseen at this time.
8.02 If Tenant receives written notice of any violation of law, ordinance,
rule, order or regulation applicable to the Demised Premises, Tenant shall
give prompt notice, in writing, thereof to Landlord.
8.03 If any governmental license or permit shall be required for the proper
and lawful conduct of Tenant's business and if the failure to secure such
license or permit would, in any way, affect Landlord, or the Project, Tenant,
at Tenant's expense, shall duly procure and thereafter maintain such license
or permit, and submit the same to inspection by Landlord. Tenant, at Tenant's
expense, shall, at all times, comply with the terms and conditions of each
such license or permit.
9. INSURANCE 9.01 Tenant shall not do or permit to be done any act or thing in
or upon the Demised Premises which will invalidate or be in conflict with the
terms of the California standard form of fire, with extended coverage,
liability, boiler, sprinkler, water damage or other insurance policies
covering the building of which the Demised Premises are a part and the
fixtures and property
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therein; and shall not knowingly do or permit anything to be done in or upon
the Demised Premises or bring or keep anything therein or use the Demised
Premises in a manner which increases the rate of premium for any of the
insurance upon the Project or on any property or equipment located therein
over the rate in effect at the commencement of the term of this Lease.
9.02 Tenant, at Tenant's own cost and expense, shall maintain comprehensive
general liability insurance protecting and indemnifying Landlord and Tenant
against any and all claims and liabilities for injury or damage to persons
or property or for the loss of life or of property occurring upon, in or
about the Demised Premises, and the public portions of the building of which
the Demised Premises are a part, caused by or resulting from any act or
omission of Tenant, its employees, agents, guests, invitees, contractors and
subcontractors; such insurance to afford minimum protection during the term
of this Lease, of not less than $300,000/$1,000,000 in respect of bodily
injury or death to any one person or in respect of any one occurrence or
accident, and not less than $50,000 for property damage. Tenant, at Tenant's
own cost and expense, shall also maintain insurance protecting and
indemnifying Landlord and Tenant against any and all claims and liability
for damage to or loss of Tenant's fixtures and contents occurring upon, in
or about the Demised Premises to the extent of the full insurable value of
such fixtures and contents. All such insurance shall be effected under valid
and enforceable policies (which may cover the Demised Premises and other
locations); shall be issued by insurers of recognized responsibility; and
shall contain a provision whereby the insurer agrees not to cancel the
insurance nor reduce the limits of liability thereunder without ten (10)
days written notice to Landlord.
On or before the Commencement Date, Tenant shall furnish Landlord with a
certificate, evidencing the aforesaid insurance coverage, and renewal
policies or certificates therefor shall be furnished to Landlord at least
thirty (30) days prior to the expiration date of each policy for which a
certificate was theretofore furnished.
9.03 Landlord shall cause each insurance policy carried by Landlord insuring
the Demised Premises against loss, and Tenant shall cause each insurance
policy carried by Tenant and insuring the Demised Premises and its fixtures
and contents against loss, to be written in a manner so as to provide that
the insurance company waives all right of recovery by way of subrogation
against Landlord or Tenant in connection with any loss or damage covered by
any such policies. Neither party shall be liable to the other for any loss
or damage caused by fire or any of the risks enumerated in its policies,
provided such waiver was obtainable at the time of such loss or damage.
However, if such waiver cannot be obtained, or is obtainable only by the
payment of an additional premium charge above that charged by companies
carrying such insurance without such waiver of subrogation, the party
undertaking to obtain such waiver shall notify the other party of such fact
and such other party shall have a period of ten (10) days after the giving
of such notice either to: (a) place such insurance in companies which are
reasonably satisfactory to the other party and will carry such insurance
with waiver of such subrogation, or (b) agree to pay such additional premium
if such policy is obtainable at additional cost (in the case of Tenant, pro
rata in proportion of Tenant's rentable area to the total rentable area
covered by such insurance). If neither "(a)" nor "(b)" is done, this section
shall be null and void for so long as either such waiver cannot be obtained
or the party in whose favor a waiver of subrogation is desired shall refuse
to pay the additional premium charge. If the release of either Landlord or
Tenant, as set forth in the second sentence of this section shall contravene
any law with respect to exculpatory agreements, the liability of the party
in question shall be deemed not released but no action or rights shall be
sought or enforced against such party unless and until all rights and
remedies against the latter's insurer are exhausted and the latter party
shall be unable to collect such insurance proceeds.
10. DAMAGE BY FIRE OR OTHER CAUSE 10.01 If the Demised Premises or any part
thereof shall be damaged by fire or other insurance casualty and Tenant
shall give prompt written notice thereof to Landlord, Landlord shall, if in
the reasonable opinion Landlord restoration of the Demised Premises can be
accomplished within a period of ninety (90) days (working during normal
working hours), proceed with reasonable diligence to repair or cause to be
repaired such damage. If the Demised Premises, or any part thereof, shall be
rendered untenantable by reason of such damage, and such damage shall not be
due to the fault of Tenant, its agents, contractors, employees, guests,
invitees or licensees, the rent hereunder, or an amount thereof apportioned
according to the area of the Demised Premises so rendered untenantable (if
less than the entire Demised Premises shall be so rendered untenantable),
shall be abated for a period from the date of such damage to the date when
the damage shall have been repaired as aforesaid. If Landlord, or any
mortgagee of any mortgage to which this Lease is subordinate shall be unable
to collect the insurance proceeds (including rent insurance proceeds)
applicable to such damage because of some action or inaction on the part of
Tenant, or the agents, contractors, employees, guests or invitees, licensees
or Tenant, the cost of repairing such damage shall be paid by Tenant and
there shall be no abatement of rent.
10.02 Except as provided in Section 10.01, Landlord shall not be liable for
any inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from damage from fire or other casualty or the repair
thereof.
10.03 Notwithstanding the above sections, in the event:
(i) the building of which the Demised Premises are a part shall be so
damaged by such fire or other casualty that substantial alteration or
reconstruction of the building shall, in Landlord's opinion, be
required to restore the use and habitability of the building which
cannot be readily accomplished within ninety (90) days (whether or not
the Demised Premises shall have been damaged by such fire or other
casualty), or
(ii) the Demised Premises are totally, or substantially damaged or are
rendered wholly or substantially untenantable, such that they could
not reasonably be restored within ninety (90) days, or
(iii) there is any damage to the Demised Premises within the last year of
the term hereof when the cost of repair exceeds $50,000,
then Landlord may, at its option, terminate this Lease and the term and
estate hereby granted, by notifying Tenant, in writing, of such termination,
within ninety (90) days after the date of such damage.
In the event that such notice of termination shall be given, this Lease and
the term and estate hereby granted shall expire as of the date of
termination specified in such notice of termination with the same effect as
if that were the date hereinbefore set for the expiration of this term of
this Lease, and the rent and additional rent hereunder shall be apportioned
as of such date.
10.04 Except as may be provided in Section 9.03, nothing herein contained
shall relieve Tenant from any liability to Landlord or to its insurers in
connection with any damage to the Demised Premises or the building by fire
or other casualty if Tenant shall be legally liable in such respect.
10.05 Landlord's obligation to restore or rebuild the Demised Premises shall
not include the repair, reconstruction or replacement of any fixtures,
improvements, personal property or decorations of Tenant whether or not
Tenant has received an allowance therefor.
11. ASSIGNMENT, SUBLETTING, MORTGAGING 11.01 Tenant agrees, for Tenant and its
heirs, executors, administrators, legal representatives, successors, and
assigns, that neither this Lease nor the term and estate hereby granted, nor
any part thereof, will be assigned, mortgaged, pledged, encumbered or otherwise
transferred, by operation of law or otherwise, and that neither the Demised
Premises, nor any part thereof, will be sublet or advertised for subletting or
occupied, by anyone other than Tenant. The transfer of
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controlling interest by or of a corporate tenant, or of a major partnership
interest of a partnership tenant, shall not be deemed an assignment for
purposes of this Article.
11.02 if this Lease is assigned or if the Demised Premises or any part
thereof is sublet or occupied by anyone other than Tenant, Landlord may
collect rent, additional rent and other charges from the assignee, sublessee
or occupant, and apply the net amount collected to the rent, additional rent
and other charges herein provided, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of the covenant by Tenant
under this Article 11, nor shall the same be deemed the acceptance of the
assignee, sublessee or occupant as a tenant, or a release of Tenant from the
further performance on the part of Tenant herein contained.
11.03 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or the assignee from obtaining the express consent, in
writing, of Landlord to any further assignment or subletting.
11.04 Each permitted assignee or transferee shall assume and be deemed to
have assumed this Lease and shall remain liable jointly and severally with
Tenant for the payment of the rent and additional rent and for the due
performance of and compliance with all the terms covenants, conditions and
agreements herein contained on Tenant's part to be performed or complied
with for the term of this Lease. No assignment shall be binding on Landlord
unless such assignee or Tenant shall deliver to Landlord a duplicate
original of the instrument of assignment which contains a covenant of
assumption by the assignee of all of the obligations aforesaid and shall
obtain from Landlord written consent prior thereto.
11.05 In the event Tenant desires to assign this Lease or sublet all or any
portion of the Demised Premises, Tenant shall provide Landlord with written
notice thereof sixty (60) days prior to the date when Tenant desires to
assign the Lease or sublet the Demised Premises and as part of said notice
give Landlord an accurate description of that portion of the Demised
Premises (if less than the entire Demised Premises) which Tenant desires to
vacate.
11.06 After notice in accordance with provision of Section 11.05, Landlord
shall have an irrevocable option to cancel this Lease for that portion of
the Demised Premises which Tenant desires to vacate. Such option shall
expire upon the earlier of (a) the date Landlord notifies Tenant, in
writing, that it chooses not to exercise its option; or (b) sixty (60) days
following the service of Tenant's notice.
11.07 If Landlord decides to exercise its option to cancel this Lease in
whole or in part, Landlord shall prepare appropriate agreement which shall
fix a date for Tenant to surrender the Demised Premises in whole or in part,
which date shall not be later than ninety (90) days following the service of
tenant's notice in accordance with the terms of the Section.
11.08 Tenant immediately and irrevocably assigns to Landlord all rent,
minimum rent, additional rent or any other sum due by any subtenant from any
subletting of all or a part of the premises as permitted by the Lease, and
Landlord, as assignee and as attorney-in-fact for Tenant, may collect such
rent.
12. NO LIABILITY ON LANDLORD 12.01 Landlord shall not be liable to Tenant for
any injury or damage that may result to any person or property by or from
any cause whatsoever, and without limiting the generality of the foregoing,
whether caused by water leakage of any character from the roof, walls,
basement or other portion of the premises, or caused by gas, fire, oil,
electricity or any cause whatsoever, in, on, or about the premises or any
part thereof.
12.02 Tenant agrees to hold Landlord harmless from and defend Landlord
against any and all claims or liability for any injury or damage to any
person or property whatsoever: (1) occurring in, on or about the premises
or any part thereof, and (2) occurring in, on or about any facilities
(including, without prejudice to the generality of the term "facilities",
elevators, stairways, passageways or hallways) the use of which Tenant may
have in conjunction with other Tenants of the building, when such injury or
damage shall be caused in part or in whole by the act, negligence or fault
of, or omission of any duty with respect to the same by Tenant, his agents,
servants or employees.
12.03 Tenant shall reimburse and compensate Landlord as additional rent
within thirty (30) days after rendition of a statement for all expenditures
made by or damages or fines sustained or incurred by Landlord (including,
but not limited to, counsel fees and disbursement incurred in connection
with any action or proceeding) due to the operation of this Article or
non-performance or non-compliance with or breach or failure by Tenant to
observe any term, covenant or condition of this Lease. Tenant agrees that
its sole remedies in cases where Landlord's reasonableness in exercising its
judgment or withholding its consent or approval is applicable, if any, shall
be those in the nature of an injunction, declaratory judgment, or specific
performance, the rights to money damages or other remedies being hereby
specifically waived.
12.04 Notwithstanding anything to the contrary provided in this Lease or
otherwise at law or in equity, there shall be absolutely no liability on the
part of landlord nor any successor in interest thereto in excess of its
interest in the building of which the Demised Premises are a part with
respect to any of the terms, covenants and/or conditions of this Lease. In
the event of a breach or default by Landlord, or any successor in interest
thereof, of any of its obligations under this Lease, Tenant shall look
solely to the then equity of Landlord or such successor in interest in the
fee estate of Landlord in the building of which the Demised Premises are a
part for the satisfaction of each and every remedy of Tenant, such
exculpation of personal and additional liability in excess of such interest
to be absolute and unconditional.
13. CONDEMNATION 13.01 If the whole of the Demised Premises shall be lawfully
condemned or taken in any manner for any public or quasi-public use, this
Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. If only a part of the Demised
Premises shall be so condemned or taken, then, effective as of the date of
vesting of title, the rent and additional rent hereunder shall be abated in
an amount thereof apportioned according to the area of the Demised Premises
so condemned or taken. If only a part of the building shall be so condemned
or taken (whether or not the Demised Premises be affected), then (a)
Landlord may, at Landlord's option, terminate this Lease and the term and
estate hereby granted as of the date of such vesting of title by notifying
Tenant in writing of such termination within sixty (60) days following the
date on which Landlord shall have received notice of vesting of title and
(b) if such condemnation or taking shall deprive Tenant of access to the
Demised Premises and Landlord shall not have provided or undertaken to
provide other means of access thereto, Tenant may at Tenant's option, by
delivery of notice in writing to Landlord within sixty (60) days following
the date on which Tenant shall have received notice of vesting of title,
terminate this Lease and the term. If neither Landlord not Tenant elects to
terminate this Lease, as aforesaid, this Lease shall be and remain
unaffected by such condemnation or taking, except that the rent and
additional rent shall be abated to the extent, if any, hereinbefore provided
in this Article 13. If only a part of the Demised Premises shall be so
condemned or taken and this Lease and the term and estate hereby granted are
not terminated as hereinbefore provided, Landlord will, with reasonable
diligence and at its expense, restore the remaining portion of the Demised
Premises as nearly as practicable to the same condition as it was in prior
to such condemnation or taking.
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13.02 In the event of any condemnation or taking hereinbefore mentioned of
all or a part of the building or the Demised Premises, Landlord shall be
entitled to receive the entire award in the condemnation proceeding,
including any award made for the value of the estate vested by this Lease in
Tenant and Tenant hereby expressly assigns to Landlord any and all right,
title and interest of Tenant now or hereafter arising in or to any such
award or any part thereof, and Tenant shall be entitled to receive no part
of such award, In any condemnation proceeding, Tenant may submit a claim for
the value of Tenant's trade fixtures so long as any award made to Tenant
based upon such claim does not reduce the award otherwise payable to
Landlord.
13.03 If all or a portion of the Demised Premises shall be taken by the
exercise of the right of eminent domain for occupancy for a limited period,
this Lease shall continue in full force and effect and Tenant shall continue
to pay in full the rent, additional rent and other charges herein reserved,
without reduction or abatement, and Tenant shall be entitled to receive, for
itself, so much of any award or payment made for such use as is equal to
actual payments made by Tenant to Landlord during such temporary taking,
except as hereinafter provided. If the taking is for a period not extending
beyond the term of this Lease and if such award or payment is made in a lump
sum, Landlord shall receive out of such lump sum an amount equal to the
total of the rent, additional rent and other charges due to Landlord or to
be paid by Tenant under the terms of this Lease for the period of such
taking, and the same shall be held by Landlord as a fund which Landlord
shall apply from time to time to the payments due to Landlord from Tenant
under the terms of this Lease, and the balance of such sum shall be paid to
Tenant if the taking is for a period extending beyond the term of this
Lease, and if such award or payment is made in a lump sum, such award or
payment shall be apportioned between Landlord and Tenant as of the stated
expiration date of such term and Tenant's share thereof shall then be paid
and applied in accordance with the previous sentence hereof. If such taking
results in changes or alterations in the Demised Premises, then Tenant at
the termination of such taking shall, at its expense, restore the Demised
Premises to its former condition from such award or payment payable to
Tenant, or such portion thereof necessary to cover the expenses of such
restoration.
14. ENTRY, RIGHT TO CHANGE PORTIONS OF THE PROJECT, RELOCATION 14.01 Landlord
reserves the right, from time to time to make changes, alterations,
additions, improvements, repairs or replacements in or to either building,
and the fixtures and equipment thereof, and the operation of such equipment,
as well as in or to the street entrance, lobbies, halls, washrooms,
passages, elevators, stairways and other parts thereof, and to erect,
maintain and use pipes, ducts and conduits in and through the Demised
Premises, all as Landlord may deem necessary or desirable.
14.02 Landlord may enter the premises at reasonable hours to (a) inspect the
same, (b) exhibit the same to prospective purchasers, lenders or tenants,
(c) determine whether Tenant is complying with all its obligations
hereunder, (d) supply janitor service and any other service to be provided
by Landlord to Tenant hereunder, (e) post notices of non-responsibility, and
(f) make repairs required by Landlord under the terms hereof or repairs to
any adjoining space or utility services or make repairs, alterations or
improvements to any other portion of either building, provided, however,
that all such work shall be done as promptly as reasonably possible and so
as to cause as little interference to Tenant as reasonably possible. Tenant
hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet
enjoyment of the Demised Premises or any other loss occasioned by such
entry. Landlord shall at all times have and retain a key with which to
unlock all of the doors in, on or about the Demised Premises (excluding
Tenant's vaults, safes and similar areas designated in writing by Tenant in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem proper to open said doors in an emergency in order to
obtain entry to the Demised Premises, and any entry to the Demised Premises
obtained by Landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into
or a detainer of the Demised Premises or an eviction, actual or
constructive, of Tenant from the Demised Premises, or any portion thereof.
14.03 Landlord may permit access to the Demised Premises and open the same,
upon demand of any officer entitled to, or reasonably purporting to be
entitled to, such access for any lawful purpose or upon demand of any
representative of the fire, police, building, sanitation or other department
of the city, state or federal government.
14.04 Landlord shall have the full right at any time to name and change the
name of the Project and to change the designated address of the building of
which the Demised Premises are a part. The Project or building may be named
after any person, firm, or otherwise, whether or not such name is. or
resembles. the name of a tenant.
14.05 Landlord may relocate Tenant within the Project upon giving Tenant
ninety (90) days written notice provided the new premises are as large or
larger than the Demised Premises in Exhibit "A", the new premises are built
out to provide substantially the same configuration of offices and equal or
better improvements, fixtures, and amenities, and provided that the rent
shall be the same as for the original premises and Landlord shall pay all
costs reasonably necessary to accomplish the relocation. Tenant's use of
premises will not be interrupted during normal business hours.
15. BANKRUPTCY 15.01 If at any time prior to the date herein fixed as the
Commencement Date there shall be filed by or against Tenant in any court
pursuant to any statute either of the United States or of any state a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Tenant's
property, and within thirty (30) days thereof Tenant fails to secure a
discharge thereof, or if Tenant makes an assignment for the benefit of
creditors, or petitions for or enters into any arrangement with creditors or
admits, in writing, its inability to pay its debts as they mature, this
Lease shall ipso facto be canceled and terminated, in which event neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or of an order of any court shall be entitled to possession of the
Demised Premises and Landlord, in addition to other rights and remedies
given by virtue of any statute or rule of law, may retain as liquidated
damages any rent, security, deposit or monies received by it from Tenant or
others in behalf of Tenant upon the execution hereof.
16. DEFAULT 16.01 The occurrence of any one or more of the following events
("default") shall constitute a breach of this Lease by Tenant: (a) if Tenant
shall fail to pay any rent when and as the same becomes due and payable; or
(b) if Tenant shall fail to pay any other sum when as the same becomes due
and payable and such failure shall continue for more than 15 days, or (c) if
Tenant shall fail to perform or observe any other term hereof or of the
rules and regulations described in Exhibit "B" to be performed or observed
by Tenant, such failure shall continue for more than thirty (30) days after
written notice thereof to Tenant from Landlord, and Tenant shall not within
such period commence with due diligence and dispatch the curing of such
default, or, having so commenced, shall thereafter fail or neglect to
prosecute or complete with due diligence and dispatch the curing of such
default; (d) if Tenant shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due or shall file a petition in bankruptcy, or shall be adjudicated
as bankrupt or insolvent, or shall file a petition in any proceeding seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file an answer admitting or fail timely to contest the
material allegations of a petition filed against it in any such proceeding,
or shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or any material part of its properties; or
(e) if within ninety (90) days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present
or future statute, law or regulation, such proceeding shall not have been
dismissed, or if, within ninety (90) days after the appointment without the
consent or acquiescence of
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Tenant, of any trustee, receiver or liquidator of Tenant or of any material
part of its properties, such appointment shall not have been vacated; of (f)
if this Lease or any estate of Tenant hereunder shall be levied upon under
any attachment or execution and such attachment or execution is not vacated
within ten (10) days.
16.02 If an event of default shall occur, Landlord at any time thereafter
may give a written termination notice to Tenant, and on the date specified
in such notice (which shall not be less than three (3) days after giving of
such notice) Tenant's right to possession shall terminate and this Lease
shall terminate, unless on or before such date all arrears of rental and all
other sums payable by Tenant under this lease and all costs and expenses
incurred by or on behalf of Landlord hereunder shall have been paid by
Tenant and all other breaches of this Lease by Tenant at the time existing
shall have been fully remedied to the satisfaction of Landlord. Upon such
termination, Landlord may recover from Tenant: (a) the worth at the time of
award of the unpaid rental which had been earned at the time of termination;
(b) the worth at the time of award of the amount by which the unpaid rental
which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; (c) the worth at the time of award of the amount by
which the unpaid rental for the balance of the term of this Lease after the
time of award exceeds the amount of such loss that Tenant proves could be
reasonably avoided; and (d) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The "worth at the time of award"
of the amounts referred to in clauses (a) and (b) above is computed by
allowing interest at the rate of ten percent (10%) per annum or, if a higher
rate is legally permissible, at the highest rate legally permitted. The
"worth at the time of award" of the amounts referred to in clause (c) above
is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
16.03 Even though Tenant has breached this Lease and abandoned the Demised
Premises, this Lease shall continue in effect for so long as Landlord does
not terminate tenant's right to possession, and Landlord may enforce all its
rights and remedies under this Lease, including the right to recover the
rent as it becomes due under this Lease. Acts of maintenance or preservation
or efforts to re-lease the premises or the appointment of a receiver upon
initiative of Landlord to protect Landlord's interest under this Lease shall
not constitute a termination of Tenant's right to possession.
16.04 The remedies provided for in this Lease are in addition to any other
remedies available to Landlord in equity by statute or otherwise.
16.05 All agreements and provisions to be performed by Tenant under any of
the terms of this Lease shall be at its sole cost and expense and without
any abatement of rent. If Tenant shall fail to pay any sum of money, other
than rent, required to be paid by it hereunder or shall fail to perform any
other act on its part to be performed hereunder and such failure shall
continue for thirty (30) days after notice thereof by Landlord, Landlord
may, but shall not be obligated so to do, and without waiving or releasing
Tenant from any obligations of Tenant, make any such payment or perform any
such other act on Tenant's part to be made or performed as in this Lease
provided. All sums so paid by Landlord and all necessary incidental costs
shall be deemed additional rent hereunder and shall be payable to landlord
on demand, and Landlord shall have (in addition to any other right or remedy
of Landlord) the same rights and remedies in the event of the nonpayment
thereof by Tenant as in the case of default by Tenant in the payment of
rent.
16.06 If as a result of any breach or default in the performance of any of
the provisions of this Lease, Landlord uses the services of an attorney in
order to secure compliance with such provisions or recover damages therefor,
or to terminate this Lease or evict Tenant, Tenant shall reimburse Landlord
upon demand for any and all attorneys' fees and expenses so incurred by
Landlord, provided that if Tenant shall be the prevailing party in any legal
action brought by Landlord against Tenant, Tenant shall be entitled to
recover for the fees of its attorneys in such amount as the court may
adjudge reasonable.
17. COVENANT OF QUIET ENJOYMENT 17.01 Landlord covenants that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
agreements, covenants, provisions and conditions of this Lease on Tenant's
part to be observed and performed, Tenant may peaceably and quietly enjoy
the Demised premises, subject nevertheless to the terms and conditions of
this Lease and provided, however, that Tenant's leasehold is subordinate to
any ground leases, underlying leases and mortgages now or hereinafter
constituting a lien against the Project of which the Demised Premises forms
a part. This covenant shall bind and be enforceable against Landlord or any
successor to Landlord's interest, subject to the terms hereof, only so long
as Landlord or any successor to Landlord's interest, is in possession and is
collecting rent from Tenant but not thereafter.
17.02 In the event of a sale or conveyance by Landlord of the building
containing the Demised Premises, the same shall operate to release Landlord
from any future liability upon any of the covenants or conditions, expressed
or implied, herein contained in favor of Tenant, and is such event Tenant
agrees to look solely to the responsibility of the successor in interest of
Landlord in and to this Lease.
18. SERVICES AND EQUIPMENT 18.01 Provided the Tenant shall not be in default
hereunder, and subject to the provisions elsewhere herein contained, the
Landlord agrees to:
(a) Furnish to the Demised Premises during ordinary business hours of
generally recognized business days, to be determined by Landlord and subject
to the rules and regulations of the building of which the Demised Premises
are a part, water and electricity suitable for the intended use of the
Demised Premises, heat and air conditioning required in Landlord's judgment
for the comfortable use and occupation of the Demised Premises, janitorial
service, and elevator service which shall mean service either by
non-attended automatic elevators or elevators with attendants, either of
both, at the option of the Landlord. Tenant agrees at all times to cooperate
fully with Landlord and to abide by all the regulations and requirements
which Landlord may prescribe for the proper functioning and protection of
said heating, ventilating, and air-conditioning system. Landlord shall not
be liable for, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of Landlord's failure to furnish any of the
foregoing when such failure is caused by accident, breakage, repairs,
strikes, lockouts or other labor disturbances or labor disputes of any
character, or by any other cause, similar or dissimilar beyond the
reasonable control of Landlord. Landlord shall not be liable under any
circumstances for loss of or injury to property, however occurring, through
or in connection with or incidental to failure to furnish any of the
foregoing. Whenever heat-generating machines or equipment are used in the
Demised Premises which affect the temperature otherwise maintained by the
air-conditioning system, Landlord reserves the right to install
supplementary air conditioning units in the Demised Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord. Tenant will not without the written consent of Landlord use any
apparatus or device in the Demised Premises, including but without
limitation thereto, electronic data processing machines, using current in
excess of 110 volts, which will in any way increase the amount of
electricity or water, usually furnished or supplied for use of the Demised
Premises as general office space; nor connect with electric current, except
through existing electrical outlets in the Demised Premises, or water pipes
(if any there be), any apparatus or device for the purposes of using
electrical current or water or air. If Tenant shall require water or
electric current in excess of that usually furnished or supplied for use of
the Demised Premises as general office space, Tenant shall first procure the
consent of Landlord to the use thereof, and Landlord may cause a water meter
or electric meter to be installed in the Demised Premises so as to measure
the amount of water and electric current consumed for any such other use.
The cost of any such meters and of
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installation, maintenance, and repair thereof shall be paid for by Tenant
and Tenant agrees to pay to Landlord promptly upon demand therefor by
Landlord for all such additional water and electric current consumed, as
shown by said meters, at the rates charged for such services by the local
utility, as the case may be, furnishing the same, plus any additional
expense incurred in keeping account of the water and electric current so
consumed.
(b) Maintain and keep in good order and repair the central air-conditioning,
heating and ventilating system installed by Landlord. The aforesaid system
will be operated by Landlord during the applicable seasons on Mondays
through Fridays, holidays excepted, and shall be in operation from 8 a.m. to
6 p.m. Landlord will not be responsible for the failure of the
air-conditioning system if such failure results from the occupancy of the
Demised Premises by more than an average of one person for each 100 square
feet of if Tenant installs and operates machines, lighting and appliances
the total connected electrical load of which exceeds 2 volt-amperes per
square foot of area of the Demised Premises
(c) Provide standard office cleaning services, Mondays through Fridays,
holidays excepted. "Holidays" shall be deemed to mean all Federal holidays,
State holidays and Building Service Employees Union contract holidays now or
hereafter in effect. A list of such days shall be published by Landlord
annually.
(d) Furnish hot and cold water for lavatory and drinking and office cleaning
purposes. If Tenant requires, uses or consumes water for any other purposes,
Tenant agrees that Landlord may install a meter or meters or other means to
measure Tenant's water consumption, and Tenant further agrees to reimburse
Landlord for the cost of the meter or meters and the installation thereof,
and to pay for the maintenance of said meter equipment and/or to pay
Landlord's cost of other means of measuring such cost of all water consumed
as measured by said meter or meters or as otherwise measured, including
sewer fees.
18.02 Tenant shall pay to Landlord the cost of removal of Tenant's refuse
and rubbish from the building other than ordinary refuse and rubbish
normally generated as a result of the permitted use. Bills for the same
shall be rendered by Landlord to Tenant at such time as Landlord may elect
and shall be due and payable when rendered, and the amount of such bills
shall be deemed to be, and be paid, as additional rent.
18.03 Landlord makes no representations as the habitability of the Demised
Premises at times other than the service hours referred to in Section 18.01
(b). Landlord reserves the right to stop service of the air-conditioning,
heating, elevator, plumbing and electric systems, and other services when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Landlord desirable or
necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed, and Landlord shall have no
responsibility or liability for failure to supply air-conditioning, heating,
elevator, plumbing and electric systems, and other services during said
period or when prevented from so doing by strikes, lockouts, difficulty of
obtaining materials, accidents or by any cause beyond Landlord's control, or
by laws, orders or regulations of any federal, state or municipal authority,
or failure of electricity, water, stem, coal, oil or other suitable fuel or
power supply, or inability by exercise of reasonable diligence to obtain
electricity, water steam, coal, oil or other suitable fuel or power. No
diminution or abatement of rent or additional rent shall or will be claimed
by Tenant as a result therefrom, nor shall this Lease or any of the
obligations of Tenant be affected or reduced by reason of such interruption,
curtailment or suspension.
18.04 Tenant agrees to cause all windows in the Demised Premises to be kept
closed whenever the air-cooling system is in operation and agrees, at all
times, to cooperate with Landlord and to abide by all requirements which
Landlord may prescribe for the proper protection and functioning of its
air-cooling and heating system.
19. BROKER Tenant warrants and represents that the only broker(s) who negotiated
and brought about this transaction was (were) None, as Landlord's
representative and None as Tenant's representative and Landlord agrees to
pay a commission therefor as per separate agreement. Tenant agrees to
indemnify and save Landlord harmless from and against any and all cost,
liability or expense, including reasonable attorney's fee other than the
claim of the above named broker(s) incurred as a result of the assertion by
any person, firm or entity that he or it is due a commission, a finder's fee
or any other compensation in connection with this Lease as a result of the
acts of Tenant or any of its employees, agents or representatives. The
indemnity set forth herein shall survive the expiration or sooner
termination of the term hereof.
20. SUBORDINATION 20.01 This Lease is subject and subordinate to all present and
future ground and underlying leases affecting all or any part of the land or
the buildings and to all mortgages which may now or hereafter be placed on
or affect such leases, and (to the extent Landlord may request), the real
property of which the Demised Premises forms a part or parts of such real
property, or any interest in such real property, and to each advance made or
hereafter to be made and to all renewals, modifications, replacements,
substitutions, additions and extension of such ground or underlying leases
or mortgages. In confirmation of such subordination, Tenant shall execute
and deliver promptly any certificate that Landlord or its successors in
interest may request. Tenant hereby constitutes and appoints Landlord as
Tenant's attorney-in-fact to execute and deliver any such certificate or
certificates for and on behalf of Tenant. Notwithstanding any provision in
this Lease or any separate agreement with Tenant, Tenant covenants and
agrees that Tenant shall not do any act that would constitute a default or
breach of any ground or underlying lease or mortgage to which this Lease is
subordinate.
20.02 Tenant agrees that, except during the last year of the term hereof,
this Lease may not be modified or amended so as to reduce the rent, shorten
the term, cancel this Lease or otherwise adversely affect the rights of the
Landlord hereunder, without, in each instance, the prior written consent of
the holder of any mortgage to which this Lease is subordinate.
20.03 At the option of any ground lessor and/or mortgagee, Tenant agrees
that neither the cancellation nor termination of said ground or underlying
lease to which this Lease is subject and subordinate, nor any foreclosure of
a mortgage affecting the Demised Premises, nor the institution of any suit,
action, summary or other proceeding against the Landlord herein or any
successor Landlord, or any foreclosure proceeding brought by the holder of
any such mortgage to recover possession of such property, shall by operation
of law or otherwise result in cancellation or termination of this Lease or
the obligations of the Tenant hereunder, and upon the request of any such
ground lessor, or the holder of such mortgage, or the tenant under such new
ground or underlying lease, Tenant covenants and agrees to execute an
instrument in writing satisfactory to such party or parties or to the
purchaser of the mortgaged premises in foreclosure whereby Tenant attorns to
such in interest.
20.04 In the event of any act or omission by Landlord which would give
Tenant the right to terminate this Lease or claim a partial or total
eviction, or make and claim against Landlord for the payment of money,
Tenant will not exercise such right until it has given written notice by
certified mail of such act or omission to the Landlord; and the holder of
any leasehold mortgage, the holder of any fee mortgage, and any ground
lessor as to whom Landlord has instructed Tenant in writing to give copies
of all of Tenant's notice to Landlord; and a reasonable period for remedying
such act or omission shall have elapsed following the giving of such
notices, during which such parties or any of them with reasonable diligence
following the giving of such notice, has not commenced and continued to
remedy such act or omission
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or to cause the same to be remedied. Nothing herein contained shall be
deemed to create any rights in Tenant not specifically granted in the Lease
or under any applicable provision of law.
21. ESTOPPEL CERTIFICATE Tenant agrees, at any time, and from time to time, upon
not less than ten (10) days' prior written notice by Landlord to Tenant, to
execute, acknowledge and deliver to Landlord, a statement in writing
addressed to Landlord certifying that this Lease is unmodified and in full
force and effect, or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications, stating the
dates to which the rent, additional rent and other charges have been paid,
and stating whether or not to the best knowledge of the signer of such
certificate, there exists any default by either party in the performance of
any covenant, agreement, term, provision or condition contained in this
Lease, and, if so, specifying each such default of which the signer may have
knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by Landlord or a purchaser of Landlord's interest
and by any mortgagee or prospective mortgagee of any mortgage affecting the
building of which the Demised Premises are a part or the building and the
land, an by any Landlord or prospective Landlord under a ground or
underlying lease affecting the land or building, or both, and by any
mortgagee or prospective mortgagee of any such ground or underlying lease.
22. SURRENDER OF PREMISES Upon the expiration or other termination of the term
of this Lease, Tenant shall quit and surrender the Demised Premises in good
order and condition, ordinary wear and tear and damage by fire or other
insured casualty excepted, and shall remove all its property therefrom,
except as otherwise provided in this Lease. Tenant's obligation to observe
and perform this covenant shall survive the expiration or other termination
of the term of this Lease. If the Tenant holds over after expiration of this
lease then the rent shall be 150% the last due rent under this lease Pro
rata for each day of hold over.
23. RULES AND REGULATIONS Tenant, its contractors, employees, agents, visitors,
guests and licensees shall faithfully observe and comply with the rules and
regulations set forth in Exhibit "B" annexed hereto and hereby made a part
hereof and such additional reasonable rules and regulations as Landlord
hereafter at any time or from time to time may make and may communicate in
writing to Tenant, which, in the judgment of Landlord, shall be necessary or
desirable for the reputation, safety, care or appearance of the Project, or
the preservation of good order therein, or the operation or maintenance of
the Project, or the equipment thereof, or the comfort of tenants and others
in the building of which the Demised Premises are a part, provided, however,
that in the case of any conflict between the provisions of this Lease and
any such rules or regulations, the provisions of this Lease shall control,
and provided further that nothing contained in this Lease shall be construed
to impose upon Landlord any duty or obligation to enforce the rules and
regulations or the terms, covenants or conditions in any other lease as
against any other tenant and provided further that Landlord shall not be
liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors, invitees, subtenants or licensees.
24. PERSONS BOUND The covenants, agreements, terms, provisions and conditions of
this Lease shall bind and inure to the benefit of the respective heirs,
distributees, executors, administrators, successors, assigns and legal
representatives of the parties hereto with the same effect as if mentioned
in each instance where a party hereto is named or referred to, except that
no violation of the provisions of Article 11 hereof shall operate to vest
any rights in any successor, assignee or legal representative of Tenant and
that the provisions of this Article 24 shall not be construed as modifying
the conditions of limitation contained in Article 15 and 16 hereof. It is
understood and agreed, however, that the covenants and obligations on the
part of Landlord under this Lease shall not be binding upon Landlord herein
named with respect to any period subsequent to the transfer of its interest
in the Project or any part thereof, by operation of law or otherwise, and
that in the event of such transfer or any subsequent transfer Tenant agrees
to look solely to the transferee for the performance of said covenants and
obligations.
25. NOTICES Any notice, request or demand permitted or required to be given by
the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be
in writing. Unless otherwise required by such law or regulation such notice,
request or demand shall be given, and shall be deemed to have been served
and given by Landlord and received by Tenant, when Landlord shall have
deposited such notice, request or demand by registered or certified mail,
return receipt requested, in either case, enclosed in a securely closed
postpaid wrapper, in a United States Government general or branch post
office, addressed to Tenant at the Demised Premises. Such notice, request or
demand shall be given, and shall be deemed to have been served and given by
Tenant and received by Landlord, when Tenant shall have deposited such
notice, request or demand and duplicates thereof by registered or certified
mail enclosed in securely closed postpaid wrappers in such a post office
addressed to Landlord as stated below. Either party may, by notice as
aforesaid, designate a different address or addresses for notices, requests
or demands to it.
LANDLORD: TENANT:
Marina Executive Park UBICS, INC.
One Harbor Drive, Suite 102 One Harbor Drive, Suite 102
Sausalito, CA 94965 Sausalito, CA 94965
26. SECURITY DEPOSIT Tenant has paid Landlord upon the delivery of this Lease
the sum of $4,845.60,as security for the full and faithful performance by
Tenant of each and every term, provision, covenant and condition of this
Lease. If Tenant defaults in respect of any of the terms, provisions,
covenants and conditions of this Lease, including but not limited to payment
of rent and additional rent, Landlord may, but shall not be required to,
use, apply or retain the whole or any part of the security for the payments
of any rent and additional rent or for any other sum which Landlord may
expend or be required to expend by reason of Tenant's default, including any
damages or deficiency in the re-leasing of the Demised Premises, whether
such damages or deficiency accrue before or after summary proceedings or
other re-entry by Landlord. If Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this Lease,
the security, or any balance thereof, shall be returned to Tenant after the
time fixed as the expiration of the herein term and after the removal of
Tenant and surrender of possession of the Demised Premises to Landlord.
Whenever and as often as the amount of the security held by Landlord shall
be diminished by Landlord's application thereof in accordance with the
provisions hereof, Tenant shall, within 10 days after Landlord's request
therefor deposit additional money with Landlord sufficient to restore the
security to its original amount of $4,845.60.
In the absence of evidence satisfactory to Landlord of an assignment of the
right to receive the security, or the remaining balance thereof, Landlord
may return the security to the original Tenant, regardless of one or more
assignments of the Lease. If at the commencement of the term herein demised
there is in the possession of Landlord any security fund deposited under the
terms of a pre-existing lease which under the terms of such pre-existing
lease would be returnable to Tenant, said fund shall be retained by landlord
on account of the security herein provided for, and Tenant shall deposit
with Landlord the difference, if any, between the amount of the security
herein provided for and the amount of such security fund. In case of a sale
or transfer of the fee of the Project, or any cessation of Landlord's
interest therein, whether in whole or in part, Landlord may pay over any
unapplied part of said security to the succeeding owner of the Project and
from and after such payment Landlord shall be relieved of all liability with
respect thereto. The provisions of the preceding sentence shall apply to
every subsequent sale or transfer of the fee of the Project, and any
successor of Landlord may, upon a sale, transfer, or other cessation of the
interest of such successor in the Project, whether in whole or in part, pay
over any unapplied part of said security to the successor owner and shall
thereupon be relieved of all liability with respect thereto.
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upon a sale, transfer, or other cessation of the interest of such successor
in the Project, whether in whole or in part, pay over any unapplied part of
said security to the successor owner and shall thereupon be relieved of all
liability with respect thereto.
27. NO WAIVER: ENTIRE AGREEMENT 27.01 The failure of Landlord to seek redress
for violation of, or to insist upon the strict performance of any covenant,
agreement, term, provision or condition of this Lease, or any of the rules
set forth in Exhibit "B" annexed hereto shall not constitute a waiver
thereof and Landlord shall have all remedies provided herein and by
applicable law with respect to any subsequent act which would have
originally constituted a violation. The receipt by Landlord of rent and
additional rent with knowledge of the breach of any covenant, agreement,
term, provision or condition of this Lease shall not be deemed a waiver of
such breach. No provision of this Lease shall be deemed to have been waived
by Landlord unless such waiver be in writing signed by Landlord. No payment
by Tenant or receipt by Landlord of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of such rent
or additional rent or other charge owing by Tenant, as Landlord shall elect,
nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or additional rent be deemed
binding on Landlord or an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to landlord's right to recover the
balance of the rent, additional rent or other charge owing by Tenant, and to
pursue each and every remedy in this Lease or by law provided. The receipt
and retention by Landlord of rent or additional rent from anyone other than
Tenant shall not be deemed a waiver by Landlord of any breach by Tenant of
any covenant, agreement, term, provision or condition herein contained, or
the acceptance of such other person as a tenant, or a release of Tenant from
the further performance by Tenant of the covenants, agreements, terms,
provisions and conditions herein contained. It is specifically understood
and acknowledged by the Tenant that the failure of landlord to bill or
collect rent and additional rent in a timely fashion shall not be construed
as a waiver of Landlord's right to collect said rent or additional rent at
any time during the lease term or any time thereafter.
27.02 This Lease with the schedules, riders, addenda, and exhibits, if any,
annexed hereto contains the entire agreement between Landlord and Tenant,
and any agreement hereafter made between Landlord and Tenant shall be
ineffective to change, modify, waive, release, discharge, terminate or
effect a surrender or abandonment of this Lease, in whole or in part, unless
such agreement is in writing and signed by the party against whom
enforcement is sought. If Tenant shall have any right to an extension or
renewal of the term, or any right to lease other space from Landlord,
Landlord's exercise of Landlord's right to terminate this Lease shall
operate, ipso facto, to terminate such renewal, extension or other right,
whether or not theretofore exercised by Tenant. Any option on the part of
Tenant herein contained for an extension or renewal hereof shall not be
deemed to give Tenant any option for a further extension beyond the first
renewal or extended term.
27.03 No act or thing done by Landlord or Landlord's agents during the term
hereof shall constitute an eviction by Landlord, nor shall be deemed an
acceptance of a surrender of the Demised Premises, and no agreement to
accept such surrender shall be valid unless in writing signed by Landlord.
No employee of Landlord or of Landlord's agents shall have any power to
accept the keys of the Demised Premised prior to the termination of the
Lease. The delivery of keys to an employee of Landlord or of Landlord's
agents shall not operate as a termination of the Lease or a surrender of the
Demised Premises. In the event of Tenant at any time desiring to have
Landlord sublet the Demised Premises for Tenant's account, Landlord or
Landlord's agents are authorized to receive said keys for such purposes
without releasing Tenant from any of the obligations under this Lease, and
Tenant hereby relieves Landlord of any liability for loss of or damage to
any of Tenant's effects in connection with such subletting.
28. ELECTRIC INCLUSION 28.01 Landlord shall furnish the electric energy that
Tenant shall require in the Demised Premises on a rent inclusion basis. That
is, there shall be no charge to Tenant for such electric energy by way of
measuring the same on any meter or otherwise, such electric energy being
included in Landlord's services which are covered by the rent reserved
hereunder. The amount included in the rent is based upon normal office use
of electric energy between the hours of 8:00 a.m. and 6:00 p.m., Mondays
through Fridays, holidays excepted. Landlord shall not be liable in any way
to Tenant for any failure or defect in the supply or character of electric
energy furnished to the Demised Premises by reason of any requirement, act
or omission of the public utility serving the building with electricity or
for any other reason enumerated in Article 28 hereof.
28.02 Subject to the terms of Section 28.03 hereof, Tenant covenants and
agrees that at no time will the total connected electrical load in the
Demised Premises exceed two (2) volt-amperes per square foot of the Demised
Premises.
28.03 Tenant's use of electric energy in the Demised Premises shall not at
any time exceed the capacity of any of the electrical conductors and
equipment in the Demised Premises. In order to insure that such capacity is
not exceeded and to avert possible adverse effect upon the building electric
service, Tenant shall not, without Landlord's prior written consent in each
instance, connect any fixtures, appliances or equipment (other than lamps,
typewriters and similar small office machines) to the building's electric
distribution system of the Demised Premises. Should Landlord grant such
consent, all additional wiring or equipment required therefor shall be
provided by Landlord and the cost thereof shall be paid by Tenant within ten
(10) days after being billed therefor. As a condition to granting such
consent, Landlord may require Tenant to agree to an increase in the rent by
an amount which will reflect the value to Tenant of the additional service
to be furnished by Landlord, that is, the potential additional energy to be
made available to Tenant based upon the estimated additional capacity of
such additional wiring or other equipment. If Landlord and Tenant cannot
agree thereon, such amount shall be determined by a reputable, independent
electrical engineer, to be selected by Landlord and paid equally by both
parties. When the amount of such increase is so determined, the parties
shall execute an agreement supplementary hereto to reflect such increase in
the amount of rent stated in this Lease.
28.04 Landlord reserves the right upon giving thirty (30) days written
notice to have the Demised Premises separately metered and thereafter to
require the Tenant to pay the utility company directly for the separately
measured service. Landlord will credit against Tenant's rent the amount of
such payments made in so far as such expense is within the normal office
electric usage permitted under this Lease.
29. MISCELLANEOUS 29.01 Taking possession of the Demised Premises by Tenant
shall be conclusive that Tenant accepts the same and that the Demised
Premises are in good and satisfactory condition. Tenant agrees that neither
Landlord, nor any broker, Landlord's agent, employee or representative of
Landlord nor any other party has made, and Tenant does not rely on, any
representations, warranties or promises with respect to the Demised Premises
or this Lease, except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this Lease.
29.02 The article headings of this Lease are for convenience only and shall
not limit or define the meaning or content hereof. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identity of the person or persons may
require.
29.03 Additional Definitions: If the term "Tenant" as used in this Lease
refers to more than one person, then, as used in this Lease, said term shall
be deemed to include all of such persons or any of them; if any of the
obligations of Tenant under this Lease is guaranteed, the term "Tenant" as
used in Article 15 shall be deemed to mean the Tenant, the guarantor, or
either of them; and if this Lease shall have
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29.04 Landlord reserves the right from time to time to establish, modify and
enforce reasonable rules and regulations with respect to the parking areas
and access roads; to construct, maintain and operate lighting facilities in
the parking areas; to police the same; from time to time to change the
arrangement of the parking facilities; to restrict employee parking to
employee parking areas; to establish and from time to time change the level
of surface parking and to create sub-surface or elevated parking on the
parking areas; to close, if necessary, all or any portion of the parking
areas and the access roads or the minimum length of time as may in the
opinion of counsel be legally sufficient to prevent a dedication thereof, or
the accrual of any rights of the public therein; to close temporarily, if
necessary, all or any portion of the parking areas to discourage non-tenant
parking; and to do and perform such other acts in and to the parking areas
and the access roads as in the use of good business judgment by Landlord
will improve the convenience and use thereof.
30. INABILITY TO PERFORM 30.01 This Lease and the obligation of Tenant to pay
rent and additional rent hereunder, and perform and comply with all of the
other covenants and agreements hereunder on the part of Tenant to be
performed or complied with, shall in nowise, be affected impaired or excused
because of landlord's delay or failure to perform or comply with any of the
covenants and agreements hereunder on the part of Landlord to be performed
or complied with, or to furnish any service or facility, for reasons beyond
the reasonable control of landlord, including, without limiting the
generality of the foregoing, strikes, lock-outs or labor problems,
governmental pre-emption in connection with a national emergency, or by
reason of any rule, order or regulation of any department of subdivision
thereof, of any governmental agency, or by reason of the conditions of
supply and demand which have been or shall be affected by war or other
emergency.
30.02 11 any provision of this Lease or the application thereof to any
person or circumstance shall be determined to be invalid or unenforceable,
the remaining provisions of this agreement or the application of such
provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid
and enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this
Lease as of the day and year first above written.
LANDLORD: MARIN EXECUTIVE PARK TENANT: UBICS, Inc.
BY: /s/ ROBERT S. WELLS BY: /s/ HARMOHAN BEDI
-------------------------------- --------------------------------
(Print or Type) (Print or Type)
Name: Robert S. Wells Name: Harmohan Bedi
______________________________ _______________________________
Title ______________________________ Title Director
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ADDENDUM TO LEASE AGREEMENT
Referring to that certain "LEASE, ONE HARBOR DRIVE", dated May 28, 1996, made
between Marin Executive Park, a California general partnership, as Landlord,
and UBICS, Inc., as Tenant, concerning office space leased by Tenant from
Landlord at ONE HARBOR DRIVE, Sausalito, CA., (Suite 102).
Landlord and Tenant hereby agree to the following additional terms and
conditions:
1. EXPANSION OF PREMISES: Tenant and Landlord agree that, on November 1, 1996,
Tenant's premises will expand to include the additional area designated
"Expansion Area" on the attached ADDENDUM EXHIBIT "A". The expanded area is
approximately 1,198 rentable sq. ft.
2. TENANT'S PRO-RATA SHARE: Commencing November 1, 1996, Tenant's pro-rata
share of the total building area, for computing Tenant's share of building
operating expenses per Paragraph 4.04 of the Lease, will be 2.97% of the
total project area.
3. OCCUPANCY: Tenant will occupy the Expansion Area commencing upon the
completion of the tenant improvements. Landlord agrees to diligently pursue
a completion of the tenant improvements by November 1, 1996. In the event
that occupancy cannot be delivered by November 1, 1996, all dates of this
agreement and Tenant's obligation to pay rent on the expansion will be
delayed one day for each day of delay in occupancy beyond November 1, 1996.
In the event that Landlord cannot deliver occupancy by November 15, 1996,
Tenant, as Tenant's option, may terminate this Addendum and the lease will
remain unchanged as previously written and agreed.
4. INCREASED RENTAL RATE: Commencing with the November 1, 1996 rental payment,
Tenants minimum monthly rent will increase as follows:
<TABLE>
<CAPTION>
Current Rent Expansion Area Rent Total Rent
------------ ------------------- ---------
<S> <C> <C> <C>
Minimum Rent $3,465.00 $1,868.88 $5,333.88
Operating Expense Rent $1,380.60 $ 826.62 $2,207.22
- ---------------------- --------- --------- ---------
Total Monthly Rent $4,845.60 $2,695.50 $7,541.10
</TABLE>
5. TENANT IMPROVEMENTS: Landlord, at Landlord's expense, shall patch and paint
all walls to smooth finish in off-white color. Landlord will open hallway to
connect with Tenant's current premises. Carpets will be steam cleaned prior
to occupancy.
6. SECURITY DEPOSIT: Together with this agreement, Tenant agrees to submit an
additional amount of $2,695.50, which amount shall increase Tenant's
security deposit to a total amount of $7,541.10.
Except for the modifications provided herein, all other terms and provisions of
the lease remain in full force and effect as previously written and agreed.
LANDLORD: Marin Executive Park, TENANT: UBICS, Inc.
a California general partnership
by --------------- by /s/ HARMOHAN BEDI
Robert S. Wells ---------------------------
Harmohan Bedi, Director
<PAGE> 15
EXHIBIT "A"
FLOORPLAN OF DEMISED PREMISES
HARBOR DRIVE
EXECUTIVE OFFICE PARK
ONE HARBOR DRIVE
FIRST FLOOR
12
<PAGE> 16
EXHIBIT "B"
BUILDING RULES AND REGULATIONS
1. The rights of Tenants in the entrances, corridors, elevators and escalators
of either building are limited to ingress and to egress from the Tenants'
Demised Premises for the Tenants and their employees, licensees and
invitees, and no Tenant shall use, or permit the use of, the entrances,
corridors, escalators or elevators for any other purpose. No Tenant shall
invite to the Tenant's premises, or permit the visit of, persons in such
numbers or under such conditions as to interfere with the use and enjoyment
of any of the plazas, entrances, corridors, escalators, elevators and other
facilities of either building or by other Tenants. Fire exits and stairways
are for emergency use only, and they shall not be used for any other
purposes by the Tenants, their employees, licensees or invitees. No Tenant
shall encumber or obstruct, or permit the encumbrance or obstruction of any
of the lobbies, sidewalks, plazas, entrances, corridors, escalators,
elevators, fire exits, stairways or other public portions of either
building. The Landlord reserves the right to control and operate the public
portions of the buildings and the public facilities, as well as facilities,
furnished for the common use of the Tenants, in such manner as it deems best
for the benefit of the Tenants generally.
2. The Landlord may refuse admission to either building outside of ordinary
business hours to any person not known to the watchman in charge or not
having a pass issued by the Landlord or not properly identified, and may
require all persons admitted to or leaving either building outside of
ordinary business hours to register. Tenant's employees, agents and visitors
shall be permitted to enter and leave either building whenever appropriate
arrangements have been previously made between the Landlord and Tenant with
respect thereto. Each Tenant shall be responsible for all persons for whom
he requests such permission and shall be liable to the Landlord for all acts
of such persons. Any person whose presence in either building shall, in the
judgment of the Landlord for all acts of such persons. Any person whose
presence in either building shall, in the judgment of the Landlord, be
prejudicial to the safety, character, reputation and interests of either
building or its tenants may be denied access to the building or may be
ejected therefrom. In case of invasion, riot, public excitement or other
commotion the Landlord may prevent all access to either building during the
continuance of the same, by closing the doors or otherwise, for the safety
of the tenants and protection of property in the buildings. The Landlord may
require any person leaving either building with any package or other object
to exhibit a pass from the Tenant from whose premises the package or object
is being removed, but the establishment and enforcement of such requirement
shall not impose any responsibility on the Landlord for the protection of
any Tenant against the removal of property from the premises of the Tenant.
The Landlord shall, in no way, be liable to any Tenant for damages or loss
arising from the admission, exclusion or ejection of any person to or from
the Tenant's Demised Premises or either building under the provisions of
this rule.
3. No Tenant shall obtain or accept for use in its Demised Premises ice,
drinking water, food, beverage, towel, barbering, floor polishing, lighting
maintenance, cleaning, or other similar services from any persons not
authorized by the Landlord in writing to furnish such services, provided
always that the charges for such services by persons authorized by the
Landlord are not excessive. Such services shall be furnished only at such
hours in such places within the Tenant's Demised Premises and under such
regulations as may be fixed by the Landlord.
4. No awnings or other projections over or around the windows other than
curtains and draperies shall be installed by any tenant, and only such
window coverings permitted by the Landlord shall be used in a Tenant's
Demised Premises.
5. There shall not be used in any space, or in the public halls of either
building, either by the tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
6. All entrance doors in each Tenant's Demised Premises shall be left locked
when the Tenant's Demised Premises are not in use. Entrance doors shall not
be left open at any time. All windows in each Tenant's Demised Premises
shall be kept closed at all limes and window coverings therein shall be
lowered when and as reasonably required because of the position of the sun,
during the operation of either building air conditioning system to cool or
ventilate the Tenant's Demised Premises.
7. No noise, including the playing of any musical instruments, radio or
television, which in the judgment of the Landlord might disturb other
tenants in either building shall be made or permitted by any tenant, and no
cooking shall be done in the Tenant's Demised Premises, except as expressly
approved by the Landlord in writing. Nothing shall be done or permitted in
and Tenant's Demised Premises, which would impair or interfere with either
building's services or the proper and economic heating, cleaning or other
servicing of either building or the Demised Premises, or the use or
enjoyment by any other Tenant of any other premises, nor shall there be
installed by any Tenant any ventilating, air conditioning, electrical or
other equipment of any kind which, in the judgment of the Landlord, might
cause any such impairment or interference. No dangerous, flammable,
combustible or explosive object or material shall be brought into either
building by any tenant or with the permission of any tenant.
8. No acids, vapors or other materials shall be discharged or permitted to be
discharged into the waste lines, vents or flues of either building which may
damage them. The water and wash closets and other plumbing fixtures in or
serving any Tenant's Demised Premises shall not be used for any purpose
other than the purpose for which they were designed or constructed, and nor
shall sweepings, rubbish, rags acids or other foreign substances be
deposited therein. All damages resulting from any misuse of the fixtures
shall be borne by the tenant who, or whose servants, employees, agents,
visitors or licensees, shall have caused the same.
9. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside or inside
of either building without the written consent of Landlord first had and
obtained and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without prior notice to and at the
expense of Tenant. All approved signs or lettering on doors and walls shall
be primed, painted, affixed or inscribed at the expense of Tenant by a
person approved of by Landlord.
10. The bulletin board or directory of either building will be provided
exclusively for the display of the name and location of Tenant only and
Landlord reserves the right to exclude any other names therefrom.
11. Tenant shall not alter any lock nor install any new or additional locks or
any bolts on any door of the premises without written consent of the
Landlord.
12. Tenant shall not overload the floor of the premises or mark, drive nails,
screw or drill into the partitions, woodwork or plaster or in any way deface
the premises or any part thereof, reasonable wear and tear excepted.
13. No furniture, freight or equipment of any kind shall be brought into either
building without the consent of Landlord and all moving of the same into or
out of either building shall be done at such time and in such manner as
Landlord shall designate. Landlord shall have the right to prescribe the
weight, size and position of all safes and other heavy equipment brought
into either building and also the times and
13
<PAGE> 17
manner of moving the same in and out of either building. Safes and other
heavy objects shall, if considered necessary by Landlord, stand on a
platform of such thickness as is necessary to properly distribute the
weight. Landlord will not be responsible for loss of or damage to any such
safe or property from any cause, and all damage done to either building by
moving or maintaining any such safe or other property shall be repaired at
the expense of Tenant.
14. Tenant shall not employ any person or persons other than the janitor of
landlord for the purpose of cleaning the Demised Premises unless otherwise
agreed to by Landlord. Except with the written consent of Landlord no person
or persons other than those approved by Landlord shall be permitted to enter
either building for the purpose of cleaning the same. Tenant shall not cause
any unnecessary labor by reason of Tenant's carelessness or indifference in
the preservation of good order and cleanliness. Landlord shall in nowise be
responsible to any tenant for any loss of property in the Demised Premises
however occurring, or for any damage done to the effects of any tenant by
the janitor or any other employee or any other person. Janitorial service
shall include ordinary dusting and cleaning by the janitor assigned to such
work and shall not include beating of carpets or rugs or moving of furniture
or other special services. Janitorial service will not be furnished on
nights when rooms are occupied after 9:30 p.m. Window cleaning shall be done
only by Landlord, and only between 6:00 a.m. and 5:00 p.m.
15. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of Landlord. The location of telephones, call
boxes and other office equipment affixed to the Demised Premises shall be
subject to the approval of Landlord.
16. Each tenant, upon the termination of the tenancy, shall deliver to the
Landlord the keys of offices, rooms and toilet rooms which shall have been
furnished the Tenant or which the Tenant shall have had made, and in the
event of loss of any keys so furnished, shall pay the Landlord therefor.
17. No tenant shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Demised Premises in
any manner except as approved by the Landlord. The expense of repairing any
damage resulting from a violation of this rule or removal of any floor
covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
18. Tenant shall see that the doors of the Demised Premises are closed and
securely locked before leaving and must observe strict care and caution that
all water faucets or water apparatus are entirely shut off before Tenant or
Tenant's employees leave, and that all electricity, gas or air shall
likewise be carefully shut off, so as to prevent waste or damage, and for
any default or carelessness Tenant shall make good all injuries sustained by
other tenants or occupants of either building or Landlord.
19. The requirements of Tenant will be attended to only upon application at the
office of the Project. Employees of Landlord shall not perform any work or
do anything outside of their regular duties unless under special
instructions from the Landlord, and no employee will admit any person
(Tenant or otherwise) to any office without specific instructions from the
Landlord.
20. No pets or animals of any kind are allowed in either building at any time,
with the exception of seeing eye dogs while aiding a blind person.
21. Tenants agree to follow the building guidelines for moving in or out of the
building.
22. The word "building" as used herein means the building of which the Demised
Premises are a part.
23. The word "Project" as used herein means the two buildings and the real
property on which they are placed, more commonly known as One Harbor Drive.
24. The phrase "Demised Premises" as used herein means the actual space occupied
by the Tenant or Tenant's permitted assigns.
14
<PAGE> 18
2ND ADDENDUM TO LEASE AGREEMENT
Referring to that certain "LEASE, ONE HARBOR DRIVE" agreement dated May
28, 1996, between Marin Executive Park, a California general partnership, as
Landlord, and UBICS, Inc., as Tenant, for office space leased by Tenant from
Landlord at ONE HARBOR DRIVE, Sausalito, CA, (Suite 102).
Landlord and Tenant hereby agree to the following additional terms and
conditions:
1. SUBSTITUTION OF PREMISES: Tenant and Landlord agree that, on July 15, 1997,
Tenant's demised premises will change from Suite 102 at One Harbor Drive to
Suite 115 at Three Harbor Drive. (See 2ND ADDENDUM, EXHIBIT "A-2".)
2. TENANT'S PRO-RATA SHARE: Commencing July 15, 1997, Tenant's pro-rata share of
the total building area, for computing Tenant's pro-rata share of building
operating expenses per Paragraph 4.04 of the Lease, will be 3.85%.
3. RENTAL RATE: Commencing the July 15, 1997, Tenant's monthly rent will
increase to the following:
Minimum Monthly Rent: $ 7,085.19
Operating Expense: $ 3,124.51
Total: $10,209.70
Operating Expense adjustments and CPI increases on the minimum monthly rent
shall continue as outlined in Paragraph 4 of the Lease.
4. TENANT IMPROVEMENTS: Landlord, at Landlord's expense, shall provide the
following tenant improvements to Suite 115:
A. Clean carpet
B. Touch up wall surfaces as necessary.
5. SECURITY DEPOSIT: Together with this agreement, Tenant agrees to submit the
additional amount of $2,668.60 which amount shall increase Tenant's security
deposit to a total amount of $10,209.70.
6. DELETIONS AND CHANGES:
Paragraphs 3.03 Reception Desk and 3.04 Replacement of Carpet are
deleted.
Paragraph 14.05: Change referenced exhibit to Exhibit "A-2".
Paragraph 25 Notices: Change Landlord address to Three Harbor Drive,
Suite 101: change Tenant address to Three Harbor Drive, Suite 115.
Except for the modifications provided herein, all other terms and provisions of
the May 28, 1996 Lease remain in full force and effect as previously written
and agreed.
LANDLORD: Marin Executive Park, TENANT: UBICS, Inc.
a California General Partnership
by /s/ RICHARD H. MORAN by /s/ HARMOHARR BEDI
---------------------------- ----------------------------
Richard H. Moran, Partner Mr. Harmoharr Bedi, Director
Date: June 20, 1997 Date: 06/20/97
-------------------------- -------------------------------
<PAGE> 1
Exhibit 10.10
July 26, 1996 [PNCBANK LOGO]
Manohar B. Hira
President and Chief Executive Officer
UB Information & Consultancy Services Inc.
#100 Sainte Claire Plaza
1121 Boyce Road
Pittsburgh, Pennsylvania 15241
Re: $500,000.00 Committed Line of Credit
Dear Mr. Hira:
We are pleased to inform you that PNC Bank, National Association (the
"Bank"), has approved your request for a committed line of credit to UB
Information & Consultancy Services Inc., a Delaware corporation (the
"Borrower"). We look forward to this opportunity to help you meet the financing
needs of your business. All the details regarding your loan are outlined in the
following sections of this letter. If these terms are satisfactory, please
follow the instructions for proceeding with your loan provided at the end of
this letter.
1. Type of Facility and Use of Proceeds. This is a committed revolving line of
credit under which the Borrower may request and the Bank, subject to the terms
and conditions of this letter, will make advances to the Borrower from time to
time until the Expiration Date, in an amount in the aggregate at any time
outstanding not to exceed $500,000.00 (the "Line of Credit"). The "Expiration
Date" means October 31, 1996, or such later date as may be designated by the
Bank by written notice to the Borrower. Advances may be used for working
capital or other general business purposes of the Borrower.
2. Interest Rate. Interest on the unpaid balance of the Line of Credit advances
will be charged at a rate per annum which is at all times equal to the sum of
the rate of interest publicly announced by the Bank from time to time as its
prime rate (the "Prime Rate") plus one half of one percent (0.50%).
3. Repayment. Subject to the terms and conditions of this letter, the Borrower
may borrow, repay and reborrow until the Expiration Date, on which date the
outstanding principal balance and any accrued but unpaid interest shall be due
and payable. Interest will be due and payable on a monthly basis, and will be
computed on the basis of a year of 360 days and paid on the actual number of
days elapsed.
4. Note. The obligation of the Borrower to repay loans under the Line of Credit
shall be evidenced by a promissory note (the "Note") in form and content
satisfactory to the Bank.
<PAGE> 2
5. Security. The Borrower must cause the following to be executed and delivered
to the Bank in form and content satisfactory to the Bank as security for the
Line of Credit:
(a) a guaranty and suretyship agreement, under which Vijay Mallya (the
"Guarantor") will unconditionally guarantee the due and punctual payment of all
indebtedness owed to the Bank by the Borrower.
(b) a security agreement granting the Bank a first priority perfected lien on
the Borrower's existing and future accounts, general intangibles, chattel
paper, documents and instruments.
6. Covenants. Unless compliance is waived in writing by the Bank or until
payment in full and termination of the Line of Credit:
(a) The Borrower will promptly submit to the Bank such information relating to
the Borrower's affairs (including but not limited to annual financial
statements and tax returns for the Borrower and any guarantor) or any security
for the Line of Credit as the Bank may reasonably request.
(b) The Borrower will not make or permit any change in the nature of its
business as carried on as of the date of this letter or in its senior
management or equity ownership.
(c) The Borrower will comply with the financial and other covenants included in
Exhibit "A" hereto.
7. Representations and Warranties. To induce the Bank to extend the Line of
Credit and upon the making of any advance to the Borrower, the Borrower
represents and warrants as follows:
(a) The Borrower's latest financial statements provided to the Bank are true,
complete and accurate in all material respects and fairly present the financial
condition, assets and liabilities, whether accrued, absolute, contingent or
otherwise and the results of the Borrower's operations for the period specified
therein. The Borrower's financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied from period
to period subject in the case of interim statements to normal year-end
adjustments. Since the date of the latest financial statements provided to the
Bank, the Borrower has not suffered any damage, destruction or loss which has
materially adversely affected its business, assets, operations, financial
condition or results of operations.
(b) There are no actions, suits, proceedings or governmental investigations
pending or, to the knowledge of the Borrower, threatened against the Borrower
which could result in a material adverse change in its business, assets,
operations, financial condition or results of operations and there is no basis
known to the Borrower or its officers, directors or shareholders for any such
action, suit, proceedings or investigation.
(c) The Borrower has filed all returns and reports that are required to be
filed by it in connection with any federal, state or local tax, duty or charge
levied, assessed or imposed upon the Borrower or its property, including
unemployment, social security and similar taxes and all of such taxes have been
either paid or adequate reserve or other provision has been made therefor.
- 2 -
<PAGE> 3
(d) If not a natural person, the Borrower is duly organized, validly existing
and in good standing under the laws of the state of its incorporation or
organization and has the power and authority to own and operate its assets and
to conduct its business as now or proposed to be carried on, and is duly
qualified, licensed and in good standing to do business in all jurisdictions
where its ownership of property or the nature of its business requires such
qualification or licensing.
(e) The Borrower has full power and authority to enter into the transactions
provided for in this Letter Agreement and has been duly authorized to do so by
all necessary and appropriate action and when executed and delivered by the
Borrower, this Letter Agreement and the other loan documents executed and
delivered pursuant hereto will constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms.
(f) There does not exist any default or violation by the Borrower of or under
any of the terms, conditions or obligations of: (i) its organizational
documents; (ii) any indenture, mortgage, deed of trust, franchise, permit,
contract, agreement, or other instrument to which it is a party or by which it
is bound; or (iii) any law, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon the Borrower by
any law or by any governmental authority, court or agency.
8. Reimbursement of Expenses. The Borrower will reimburse the Bank for the
Bank's out-of-pocket expenses incurred or to be incurred in conducting UCC,
title and other public record searches, and in filing and recording documents
in the public records to perfect the Bank's liens and security interests. The
Borrower shall also reimburse the Bank for the Bank's expenses (including the
reasonable fees and expenses of the Bank's outside and in-house counsel) in
documenting and closing this transaction and in connection with any amendments,
modifications, renewals or enforcement actions relating to the Line of Credit.
9. Depository. The Borrower will establish and maintain at the Bank the
Borrower's primary depository accounts.
10. Fees. On the date of the Note, the Borrower shall pay to the Bank a fee of
$5,000.00.
11. Additional Provisions. Before the first advance under the Line of Credit,
the Borrower agrees to sign and deliver to the Bank the Note and other required
documents and such other instruments and documents as the Bank may reasonably
request, such as certified resolutions, incumbency certificates or other
evidence of authority. The Bank will not be obligated to make any advance under
the Line of Credit if any Event of Default (as defined in the Note) or event
which with the passage of time, provision of notice or both would constitute an
Event of Default under the Note shall have occurred and be continuing.
Prior to execution of the final documents, the Bank may terminate this letter
if a material adverse change occurs with respect to the Borrower, any
guarantor, any collateral for the Line of Credit or any other person or entity
connected in any way with the Line of Credit, or if the Borrower fails to
comply with any of the terms and conditions of this letter, or if the Bank
reasonably determines that any of the conditions cannot be met.
- 3 -
<PAGE> 4
This letter is governed by the laws of the Commonwealth of Pennsylvania. No
modification or waiver of any of the terms of this letter will be valid and
binding unless agreed to in writing by the Bank. When accepted, this letter and
the other documents described herein will constitute the entire agreement
between the Bank and the Borrower concerning the Line of Credit, and shall
replace all prior understandings, statements, negotiations and written
materials relating to the Line of Credit.
To accept these terms, please sign the enclosed copy of this letter as set
forth below and return it to the Bank within 30 days from the date of this
letter. If accepted, the final documents must be executed within 60 days from
the date of this letter, or this letter may be terminated at the Bank's option
without liability or further obligation of the Bank.
Thank you for giving PNC Bank this opportunity to work with your business. We
look forward to other ways in which we may be of service to your business or to
you personally.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JAMES P. NICKEL
------------------------
James P. Nickel
Assistant Vice President
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted this day of July, 1996.
BORROWER:
UB INFORMATION & CONSULTANCY SERVICES, INC.
a Delaware corporation
By: /s/ MANOHAR B. HIRA
-------------------- (Seal)
Name: Manohar B. Hira
Title: President
By: /s/ SOUMITRA RATHOD
-------------------- (Seal)
Name: Soumitra Rathod
Title: Vice President
- 4 -
<PAGE> 5
AMENDMENT TO NOTE AND LETTER AGREEMENT
THIS AMENDMENT TO NOTE AND LETTER AGREEMENT (this "AMENDMENT") is made
as of November , 1996, by and between UB INFORMATION & CONSULTANCY SERVICES,
INC. (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION (the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a note
dated July 31, 1996, in the original principal amount of Five Hundred Thousand
Dollars ($500,000.00) (the "NOTE"), pursuant to a letter agreement dated July
26, 1996 (the "AGREEMENT"), to evidence the Borrower's indebtedness to the Bank
for a certain loan (the "LOAN");
WHEREAS, the Borrower and the Bank desire to amend the Note and the
Agreement as provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. The Note and the Agreement are amended as set forth in Exhibit A
attached hereto and made a part hereof. Any and all references to the Note or
the Agreement in any document, instrument or certificate evidencing, securing
or otherwise delivered in connection with the Loan shall be deemed to refer to
the Note and the Agreement as amended hereby. Any initially capitalized terms
used in this Amendment without definition shall have the meanings assigned to
those terms in the Note or the Agreement.
2. This Amendment is deemed incorporated into the Note and the
Agreement. To the extent that any term or provision of this Amendment is or may
be deemed expressly inconsistent with any term or provision in the Note or the
Agreement, the terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Agreement are true and correct, (b) no
default or Event of Default exists under the Note or the Agreement, and (c)
this Amendment has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms.
4. The Borrower hereby confirms that any collateral for the Loan,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
5. This Amendment may be signed in any number of counterpart copies
and by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
<PAGE> 6
6. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
7. Except as amended hereby, the terms and provisions of the Note and
the Agreement remain unchanged and in full force and effect. Except as
expressly provided herein, this Amendment shall not constitute an amendment,
waiver, consent or release with respect to any provision of the Note or the
Agreement, a waiver of any default or Event of Default thereunder, or a waiver
or release of any of the Bank's rights and remedies (all of which are hereby
reserved). THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF
JUDGMENT AND WAIVER OF JURY TRIAL PROVISIONS (IF APPLICABLE).
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: UB INFORMATION & CONSULTANCY
SERVICES, INC.
A DELAWARE CORPORATION
/s/ BABU SRINIVAS By: /s/ MANOHAR B. HIRA
- ----------------------------- -----------------------
Print Name: Babu Srinivas Manohar B. Hira, President
-----------------
By: /s/ SOUMITRA RATHOD
- ----------------------------- -----------------------
Print Name: Soumitra Rathod, Vice President
------------------
PNC BANK, NATIONAL ASSOCIATION
/s/ JAMES P. NICKEL
------------------------
James P. Nickel
Assistant Vice President
- 2 -
<PAGE> 7
EXHIBIT "A" TO
AMENDMENT TO NOTE AND LETTER AGREEMENT
EXTENSION OF EXPIRATION DATE. The Agreement and Note are hereby amended by
extending the Expiration Date from October 31, 1996 to March 31, 1997, on which
date the entire principal balance and any accrued but unpaid interest shall be
due and payable. This extension is effective as of November 1, 1996.
AMENDMENT TO AGREEMENT. Exhibit "A" of the Agreement is hereby amended and
restated to read in its entirety as follows:
"EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(A) The Borrower will deliver to the Bank:
(i) Financial Statements for its fiscal year by March 31, 1997 prepared on
a reviewed basis, by a certified public accountant acceptable to the Bank;
(ii) Federal income tax returns by March 31, 1997;
(iii) Financial Statements for each fiscal quarter, except the fourth
quarter, within 45 days after the quarter end, prepared on an internal
basis.
"Financial Statements" means the balance sheet and statements of income
and cash flows for the fiscal year end statements and the balance sheet
and statements of income for the interim statements prepared in accordance
with generally accepted accounting principles in effect from time to time
("GAAP") applied on a consistent basis (subject in the case of interim
statements to normal year-end adjustments).
(B) Other Financial Reporting Requirements:
(i) Personal financial update (including liquidity evaluation from Myja
Services S.A.) of the Guarantor shall be delivered to the Bank within 30
days of the Expiration Date, if the Borrower is seeking renewal or
extension of the Line of Credit.
(ii) Borrower will deliver to the Bank within 30 days following the close
of each month, the Borrower's detailed schedule of accounts receivable.
FINANCIAL COVENANTS:
(A) Profit before interest and taxes at December 31, 1996, will be a minimum
of $1,050,000.00.
(B) Funds from operations coverage of Uses will be a minimum of 1.0 to 1,
beginning at fiscal year end 1996. "Funds" means profit before taxes plus
corporate overheads. "Uses" means principal repayments plus unfunded
capital expenditures plus distributions plus Corporate Overheads.
"Corporate Overheads" means any funds moved to either United Breweries or
Vijay Mallya in any fashion.
- 3 -
<PAGE> 8
SECOND AMENDMENT TO NOTE AND LETTER AGREEMENT
THIS SECOND AMENDMENT TO NOTE AND LETTER AGREEMENT (this "AMENDMENT")
is made as of April 1, 1997, by and between UB INFORMATION & CONSULTANCY
SERVICES INC. (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION (the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a note
dated July 31, 1996, in the original principal amount of Five Hundred Thousand
Dollars ($500,000.00) (the "Note"), pursuant to a letter agreement dated July
26, 1996 (the "AGREEMENT"), as amended, to evidence the Borrower's indebtedness
to the Bank for a certain loan (the "LOAN");
WHEREAS, the Borrower and the Bank desire to amend the Note and the
Agreement as provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. The Note and the Agreement are amended as set forth in Exhibit A
attached hereto and made a part hereof. Any and all references to the Note or
the Agreement in any document, instrument or certificate evidencing, securing
or otherwise delivered in connection with the Loan shall be deemed to refer to
the Note and the Agreement as amended hereby. Any initially capitalized terms
used in this Amendment without definition shall have the meanings assigned to
those terms in the Note or the Agreement.
2. This Amendment is deemed incorporated into the Note and the
Agreement. To the extent that any term or provision of this Amendment is or may
be deemed expressly inconsistent with any term or provision in the Note or the
Agreement, the terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Agreement are true and correct, (b) no
default or Event of Default exists under the Note or the Agreement, and (c)
this Amendment has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms.
4. The Borrower hereby confirms that any collateral for the Loan,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
5. This Amendment may be signed in any number of counterpart copies
and by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
<PAGE> 9
6. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
7. Except as amended hereby, the terms and provisions of the Note and
the Agreement remain unchanged and in full force and effect. Except as
expressly provided herein, this Amendment shall not constitute an amendment,
waiver, consent or release with respect to any provision of the Note or the
Agreement, a waiver of any default or Event of Default thereunder, or a waiver
or release of any of the Bank's rights and remedies (all of which are hereby
reserved). THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF
JUDGMENT AND WAIVER OF JURY TRIAL PROVISIONS (IF APPLICABLE).
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: UB INFORMATION & CONSULTANCY
SERVICES, INC.
A DELAWARE CORPORATION
/s/ BABU SRINIVAS By: /s/ MANOHAR B. HIRA
- ---------------------------- ----------------------------
Print Name: Babu Srinivas Manohar B. Hira, President
----------------
By: /s/ BABU SRINIVAS
- ---------------------------- -----------------------------
Print Name: Babu Srinivas, Chief
---------------- Financial Officer
PNC BANK, NATIONAL ASSOCIATION
/s/ JAMES P. NICKEL
--------------------------
James P. Nickel
Vice President
- 2 -
<PAGE> 10
EXHIBIT "A" TO
SECOND AMENDMENT TO NOTE AND LETTER AGREEMENT
FEE. On the date of this Amendment, the Borrower will pay to the Bank a fee of
$1,000.00.
EXTENSION OF EXPIRATION DATE. The Agreement and Note are hereby amended by
extending the Expiration Date from March 31, 1997 to June 30, 1997, on which
date the entire principal balance and any accrued but unpaid interest shall be
due and payable. This extension is effective as of April 1, 1997.
INCREASE IN LOAN AMOUNT. The maximum principal amount of the Loan is hereby
increased to Six Hundred Thousand Dollars ($600,000.00).
AMENDMENT TO EXHIBIT "A" OF THE AGREEMENT. Exhibit "A" of the Agreement is
hereby amended and restated to read in its entirety as follows:
"EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(A) The Borrower will deliver to the Bank:
(i) Financial Statements for each fiscal year by June 1, prepared on a
reviewed basis, by a certified public accountant acceptable to the Bank;
(ii) Federal income tax returns by June 1 of each year;
(iii) Financial Statements for each fiscal quarter, except the fourth
quarter, within 45 days after the quarter end, prepared on an internal
basis.
"Financial Statements" means the balance sheet and statements of income
and cash flows for the fiscal year end statements and the balance sheet
and statements of income for the interim statements prepared in accordance
with generally accepted accounting principles in effect from time to time
("GAAP") applied on a consistent basis (subject in the case of interim
statements to normal year-end adjustments).
(B) Other Financial Reporting Requirements:
(i) Personal financial update (including liquidity evaluation from Myja
Services S.A.) of the Guarantor shall be delivered to the Bank within 30
days of the Expiration Date, if the Borrower is seeking renewal or
extension of the Line of Credit.
(ii) Borrower will deliver to the Bank within 30 days following the close
of each month, the Borrower's detailed schedule of accounts receivable.
- 3 -
<PAGE> 11
FINANCIAL COVENANTS:
(A) Total Shareholder's Funds as of June 30, 1997, will be a minimum of
$900,000.00.
(B) Funds from operations coverage of Uses will be a minimum of 1.0 to 1,
beginning at fiscal year end 1996. "Funds" means profit before taxes plus
corporate overheads. "Uses" means principal repayments plus unfunded
capital expenditures plus distributions plus Corporate Overheads.
"Corporate Overheads" means any funds moved to either United Breweries or
Vijay Mallya in any fashion.
NEGATIVE COVENANTS:
(A) The Borrower will not create, incur, guarantee, endorse (except
endorsements in the course of collection), assume or suffer to exist any
indebtedness, except (i) indebtedness to the Bank, (ii) open account trade
debt incurred in the ordinary course of business and not past due, or
(iii) other indebtedness disclosed on the Borrower's latest Financial
Statements which have been provided to the Bank prior to the date of this
letter.
- 4 -
<PAGE> 12
THIRD AMENDMENT TO NOTE AND LETTER AGREEMENT
THIS THIRD AMENDMENT TO NOTE AND LETTER AGREEMENT (this "AMENDMENT") is
made as of August 29, 1997, by and between UB INFORMATION & CONSULTANCY
SERVICES, INC. (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION (the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a note
dated July 31, 1996, in the amended principal amount of Six Hundred Thousand
Dollars ($600,000.00) (the "NOTE"), pursuant to a letter agreement dated July
26, 1996 (the "AGREEMENT"), as amended, to evidence the Borrower's indebtedness
to the Bank for a certain loan (the "LOAN");
WHEREAS, the Borrower and the Bank desire to amend the Note and the
Agreement as provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. The Note and the Agreement are amended as set forth in Exhibit A
attached hereto and made a part hereof. Any and all references to the Note or
the Agreement in any document, instrument or certificate evidencing, securing
or otherwise delivered in connection with the Loan shall be deemed to refer to
the Note and the Agreement as amended hereby. Any initially capitalized terms
used in this Amendment without definition shall have the meanings assigned to
those terms in the Note or the Agreement.
2. This Amendment is deemed incorporated into the Note and the
Agreement. To the extent that any term or provision of this Amendment is or may
be deemed expressly inconsistent with any term or provision in the Note or the
Agreement, the terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Agreement are true and correct, (b) no
default or Event of Default exists under the Note or the Agreement as amended
hereby, and (c) this Amendment has been duly authorized, executed and delivered
and constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
4. The Borrower hereby confirms that any collateral for the Loan,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
5. This Amendment may be signed in any number of counterpart copies
and by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
6. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
<PAGE> 13
7. Except as amended hereby, the terms and provisions of the Note and
the Agreement remain unchanged and in full force and effect. Except as
expressly provided herein, this Amendment shall not constitute an amendment,
waiver, consent or release with respect to any provision of the Note or the
Agreement, a waiver of any default or Event of Default thereunder, or a waiver
or release of any of the Bank's rights and remedies (all of which are hereby
reserved). THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF
JUDGMENT AND WAIVER OF JURY TRIAL PROVISIONS (IF APPLICABLE).
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: UB INFORMATION & CONSULTANCY
SERVICES, INC.
/s/ BABU SRINIVAS By: /s/ MANOHAR B. HIRA
- ----------------------- --------------------------
Print Name: Babu Srinivas Print Name: Manohar B. Hira
------------- ------------------
Title: President
----------------------
/s/ MANOHAR B. HIRA By: /s/ BABU SRINIVAS
- ----------------------- --------------------------
Print Name: Manohar B. Hira Print Name: Babu Srinivas
--------------- ------------------
Title: Secretary
----------------------
PNC BANK, NATIONAL ASSOCIATION
/s/ JAMES P. NICKEL
-------------------------------
James P. Nickel
Vice President
- 2 -
<PAGE> 14
EXHIBIT "A" TO
THIRD AMENDMENT TO NOTE AND LETTER AGREEMENT
FEE. On the date of this Amendment, the Borrower will pay to the Bank a fee of
$1,000.00.
EXTENSION OF EXPIRATION DATE. The Agreement and Note are hereby amended by
extending the Expiration Date from August 30, 1997 to August 30, 1998, on which
date the entire principal balance and any accrued but unpaid interest shall be
due and payable. This extension is effective as of August 31, 1997.
AMENDMENT TO EXHIBIT "A" OF THE AGREEMENT. Section (A)(i) on Exhibit "A" of the
Agreement under the heading entitled "Financial Reporting Covenants" is hereby
amended and restated to read in its entirety as follows:
"(i) Financial Statements for the fiscal years ending December 31,
1994, December 31, 1995, December 31, 1996, as well as the period ending
June 30, 1997 by September 30, 1997, prepared on an audited basis and
containing an unqualified opinion by Arthur Anderson, LLP. These
Financial Statements may not contain any material differences from their
draft version presented to the Bank on August 28, 1997."
- 3 -
<PAGE> 15
FOURTH AMENDMENT TO NOTE AND LETTER AGREEMENT
THIS FOURTH AMENDMENT TO NOTE AND LETTER AGREEMENT (this "AMENDMENT")
is made as of September 5, 1997, by and between UB INFORMATION & CONSULTANCY
SERVICES, INC. (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION (the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a note
dated July 31, 1996, in the amended principal amount of Six Hundred Thousand
Dollars ($600,000.00) (the "NOTE"), pursuant to a letter agreement dated July
26, 1996 (the "AGREEMENT"), as amended, to evidence the Borrower's indebtedness
to the Bank for a certain loan (the "LOAN");
WHEREAS, the Borrower and the Bank desire to amend the Note and the
Agreement as provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. The Note and the Agreement are amended as set forth in Exhibit A
attached hereto and made a part hereof. Any and all references to the Note or
the Agreement in any document, instrument or certificate evidencing, securing
or otherwise delivered in connection with the Loan shall be deemed to refer to
the Note and the Agreement as amended hereby. Any initially capitalized terms
used in this Amendment without definition shall have the meanings assigned to
those terms in the Note or the Agreement.
2. This Amendment is deemed incorporated into the Note and the
Agreement. To the extent that any term or provision of this Amendment is or may
be deemed expressly inconsistent with any term or provision in the Note or the
Agreement, the terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Agreement are true and correct, (b) no
default or Event of Default exists under the Note or the Agreement as amended
hereby, and (c) this Amendment has been duly authorized, executed and delivered
and constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
4. The Borrower hereby confirms that any collateral for the Loan,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
5. This Amendment may be signed in any number of counterpart copies and
by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
6. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
<PAGE> 16
7. Except as amended hereby, the terms and provisions of the Note and
the Agreement remain unchanged and in full force and effect. Except as
expressly provided herein, this Amendment shall not constitute an amendment,
waiver, consent or release with respect to any provision of the Note or the
Agreement, a waiver of any default or Event of Default thereunder, or a waiver
or release of any of the Bank's rights and remedies (all of which are hereby
reserved). THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF
JUDGMENT AND WAIVER OF JURY TRIAL PROVISIONS (IF APPLICABLE).
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: UB INFORMATION & CONSULTANCY
SERVICES, INC.
/s/ BABU SRINIVAS By: /s/ MANOHAR B. HIRA
- ----------------------- --------------------------
Print Name: Babu Srinivas Print Name: Manohar B. Hira
------------- ------------------
Title: President
----------------------
/s/ MANOHAR B. HIRA By: /s/ BABU SRINIVAS
- ----------------------- --------------------------
Print Name: Manohar B. Hira Print Name: Babu Srinivas
--------------- ------------------
Title: Secretary
----------------------
PNC BANK, NATIONAL ASSOCIATION
/s/ JAMES P. NICKEL
-------------------------------
James P. Nickel
Vice President
- 2 -
<PAGE> 17
EXHIBIT "A" TO
FOURTH AMENDMENT TO NOTE AND LETTER AGREEMENT
FEE. On the date of this Amendment, the Borrower will pay to the Bank a fee of
$4,000.00.
INCREASE IN LOAN AMOUNT. The maximum principal amount of the Loan is hereby
increased to One Million Dollars ($1,000,000.00).
AMENDMENT TO EXHIBIT "A" OF THE AGREEMENT. Exhibit "A" of the Agreement is
hereby amended and restated to read in its entirety as follows:
"EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(A) The Borrower will deliver to the Bank:
(i) Financial Statements for its fiscal year, by May 31 of each
calendar year, audited and certified without qualification by a
certified public accountant acceptable to the Bank.
(ii) Financial Statements for each fiscal quarter, except the
fourth quarter, within 45 days after the quarter end.
"Financial Statements" means the balance sheet and statements of income
and cash flows for the fiscal year end statements and the balance sheet
and statements of income for the interim statements prepared in
accordance with generally accepted accounting principles in effect from
time to time ("GAAP") applied on a consistent basis (subject in the case
of interim statements to normal year-end adjustments).
(B) The Borrower will deliver to the Bank within 45 days following the
close of each fiscal quarter, the Borrower's detailed schedule of
accounts receivable analysis.
FINANCIAL COVENANTS:
(A) The Borrower will maintain at all times a minimum total
stockholder's equity of $200,000.00 plus (ii) an amount equal to 60% of
the Borrower's net income for each fiscal year ending after December 31,
1996.
(B) The Borrower will maintain a ratio of Funds from Operations coverage
to Uses of at least 1.25 to 1. "Funds from Operations" means net income
plus other non-cash items. "Uses" means Current Maturities plus Unfunded
Capital Expenditures plus distributions. "Current Maturities" the
current principal maturities of all indebtedness for borrowed money
(including but not limited to amortization of capitalized lease
obligations) having an original
- 3 -
<PAGE> 18
term of one year or more, as well as any prepayments of such
indebtedness prior to scheduled maturity. "Unfunded Capital
Expenditures" means capital expenditures made from the Borrower's funds
other than borrowed funds.
(C) The Borrower will not create, incur, guarantee, endorse (except
endorsements in the course of collection), assume or suffer to exist any
indebtedness, without the prior written approval of the Bank, which
approval shall not be unreasonably withheld, except (i) indebtedness to
the Bank, (ii) open account trade debt incurred in the ordinary course
of business and not past due, (iii) other indebtedness disclosed on the
Borrower's latest Financial Statements which have been provided to the
Bank prior to the date of this letter, or (iv) amounts borrowed for
short term working capital from related entities."
- 4 -
<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
September 8, 1997
