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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 333-35171
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UBICS, INC.
(Exact name of registrant as specified in its charter)
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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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
Of the 2,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of UBICS, Inc. (the "Company" or "UBICS") offered hereby (the
"Offering"), 1,500,000 shares are being sold by the Company and 500,000 shares
are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of Common Stock by the Selling Stockholders. See "Use of Proceeds" and
"Principal and Selling Stockholders."
Prior to the Offering, there has been no established public trading market
for the Common Stock. It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "UBIX."
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
THE PUBLIC DISCOUNT(1) THE COMPANY(2) PROCEEDS TO
THE SELLING
STOCKHOLDERS
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Per Share........... $ $ $ $
- --------------------------------------------------------------------------------------------------------
Total (3)........... $ $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses of the Offering, payable by the Company, estimated
at $500,000.
(3) The Principal Stockholder (as defined herein) has granted the Underwriters a
30-day option to purchase up to an additional 300,000 shares of Common
Stock, solely to cover over-allotments, if any, at the Price to the Public
shown above. If the option is exercised in full, the total Price to the
Public, Underwriting Discount and Proceeds to the Selling Stockholders will
be $ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by the Underwriters and to certain further
conditions. It is expected that delivery of certificates for the shares will be
made at the offices of Parker/Hunter Incorporated, Pittsburgh, Pennsylvania, on
or about , 1997.
PARKER/HUNTER SCOTT & STRINGFELLOW, INC.
INCORPORATED
The date of this Prospectus is , 1997.
<PAGE> 3
LOGO
When included in this Prospectus or in documents incorporated herein by
reference, the words "may," "will," "should," "expects," "intends,"
"anticipates," "believes," "estimates," and analogous expressions are intended
to identify forward-looking statements. These statements appear in a number of
places in this Prospectus, including "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Business," and include statements regarding the intent, belief
and current expectations of the Company and its directors and officers. Such
statements are inherently subject to a variety of risks and uncertainties,
including those discussed in "Risk Factors," that could cause the Company's
actual results to differ materially from those presented in or implied by the
forward-looking statements included in this Prospectus.
------------------------
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock. Such
transactions may include stabilizing, the purchase of Common Stock to cover
short positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
------------------------
UBICS(TM) is a service mark of the Company. All trademarks, service marks
and trade names referred to in this Prospectus are the property of their
respective owners.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements of the Company and related notes
thereto appearing elsewhere in this Prospectus. For a description of certain
terms used in this Prospectus, see "Glossary." Unless otherwise indicated, all
information contained in this Prospectus: (i) assumes that the Underwriters'
over-allotment option is not exercised; and (ii) has been adjusted to give
retroactive effect to a 5,000-for-1 split of the shares of Common Stock.
THE COMPANY
UBICS, Inc. ("UBICS" or the "Company") is a rapidly growing provider of
information technology ("IT") professional services to large and mid-sized
organizations. UBICS provides its clients with a wide range of professional
services in such areas as client/server design and development, enterprise
resource planning ("ERP") package implementation and customization, applications
maintenance programming and database administration. UBICS' services are
provided on a time-and-materials basis to client-managed projects, with UBICS IT
professionals providing integral support as project team members. Since
commencement of full operations in 1994, the Company's revenues have grown from
$303,000 for 1994 to $9.1 million for 1996 and to $5.1 million for the quarter
ended June 30, 1997. The Company attributes its growth in revenues in 1997
primarily to an increased focus on higher value-added services, particularly ERP
package implementation and customization services.
In the first six months of 1997, UBICS provided IT professional services to
over 80 clients in a range of industries and locations. The Company's clients
include Caterpillar, CompUSA, El Paso Natural Gas, Fruit of the Loom, Ralston
Purina and The Hartford. UBICS' high standards for responsiveness and service
quality promote growing client relationships and recurring revenues. The Company
believes that its centralized, low-overhead operating model enables it to
respond quickly to client demand for IT professional services. UBICS meets this
demand through its employed IT professionals and its management of an extensive
network of subcontractors. The Company currently has approximately 200 IT
professionals deployed with its clients in the U.S.
One of the key factors supporting UBICS' growth has been its ability to
recruit and deploy, on short notice, skilled IT professionals. The Company
recruits IT professionals from India and other countries worldwide. In order to
ensure a continuous supply of IT professionals for higher value-added
specialties, the Company intends to use a portion of the proceeds of the
Offering to establish a recruiting and training center in India by June 1998.
The Company will use this center to enhance its recruiting efforts and to train
its IT professionals prior to placement. The Company also selectively uses the
substantial resources and established reputation of its affiliate, the UB
International Group (hereinafter, the "UB Group"), to support its recruiting
efforts. The UB Group is a multinational group of companies headquartered in
India.
UBICS believes that the U.S. market for IT professional services will
continue to offer significant growth opportunities. The Company also believes
that its recruiting base in India will remain an attractive, highly
differentiated source of skilled IT professionals. As a means of continuing its
growth, UBICS intends to pursue the following strategies: (i) cultivate and
expand its client base by increasing the Company's sales and marketing efforts;
(ii) attract and retain high-quality IT professionals through increased
recruiting and training activities; (iii) continue to leverage its centralized,
low-overhead operating model to enhance profitability and maintain
responsiveness to client needs; (iv) increase its level and breadth of ERP
package implementation and customization services; and (v) continually broaden
its range of services, particularly in higher value-added specialties.
The Company was incorporated in Delaware on July 19, 1993. The Company
maintains its principal executive offices at 100 Sainte Claire Plaza, 1121 Boyce
Road, Pittsburgh, Pennsylvania 15241. The Company's telephone number is (412)
941-1800.
3
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THE OFFERING
Common Stock offered by:
The Company........................ 1,500,000 shares
The Selling Stockholders........... 500,000 shares
-----------------
Total......................... 2,000,000 shares
=================
Common Stock to be outstanding upon
completion of the Offering(1)........... 6,500,000 shares
Use of proceeds......................... Expansion of existing operations;
repayment of indebtedness; and
general corporate purposes,
including working capital. See "Use
of Proceeds."
Nasdaq National Market symbol........... UBIX
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(1) Excludes an aggregate of 750,000 shares of Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan (the "1997 Plan"). See
"Management--Stock Option Plan."
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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SIX MONTHS
ENDED JUNE 30,
YEAR ENDED DECEMBER 31, -----------------
1993( 1) 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................. $ 17 $ 303 $1,454 $9,072 $3,411 $8,685
Gross profit......................... 1 125 460 2,699 956 2,702
Income from operations............... 1 5 8 472(2) 85(2) 1,164
Net income........................... 1 3 3 219 37 678
Net income per share................. $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
Weighted average shares
outstanding....................... 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $ 833 $ 14,233
Total assets......................................................... 4,882 17,782
Total debt........................................................... 500 --
Stockholders' equity................................................. 907 14,307
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(1) The Company commenced operations on July 19, 1993.
(2) Reflects expenses of $257,000 and $125,000 for the year ended December 31,
1996 and the six months ended June 30, 1996, respectively, incurred on
behalf of the UB Group. Beginning January 1, 1997, such expenses ceased to
be incurred by the Company.
(3) Adjusted to give effect to the sale of the 1,500,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
4
<PAGE> 6
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following factors in connection with an
investment in the shares of Common Stock offered hereby.
RECRUITMENT AND RETENTION OF IT PROFESSIONALS
The Company's business involves the delivery of professional services and
is labor-intensive. The Company's success depends upon its ability to attract,
develop, motivate and retain highly-skilled IT professionals who possess the
technical skills and experience necessary to deliver the Company's services.
Qualified IT professionals are in great demand worldwide and are likely to
remain a limited resource for the foreseeable future. The Company currently
meets client demand for IT professionals with its own employees and by
subcontracting with other IT service providers. There can be no assurance that
qualified IT professionals will continue to be available to the Company, either
as employees of the Company or from subcontracting firms, in sufficient numbers
or that the Company will be successful in retaining current or future employees.
Failure to attract or retain qualified IT professionals in sufficient numbers
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Human Resources,"
"Business--Competition" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Overview."
U.S. REGULATION OF IMMIGRATION
The Company's services historically have been performed in the U.S., and
the Company has recruited most of its IT professionals outside the U.S. The
Company's business, therefore, is subject to U.S. immigration laws. Over 90% of
the Company's IT professionals are citizens of other countries, with most of
those in the U.S. working under H-1B temporary work permits. There is a limit on
the number of new H-1B permits that may be approved in any U.S. government
fiscal year. In the federal fiscal year ended September 30, 1996, this limit was
reached in September and in the federal fiscal year ending September 30, 1997,
this limit was reached in August. If in future years this limit is reached, the
Company may be unable to obtain enough H-1B permits to meet its requirements. If
the Company were unable to obtain H-1B permits for its IT professionals in
sufficient quantities or at a sufficient rate, the Company's business, operating
results and financial condition could be materially adversely affected.
Furthermore, Congress and administrative agencies with jurisdiction over
immigration matters have periodically expressed concerns over the levels of
legal and illegal immigration into the U.S. These concerns have often resulted
in proposed legislation, rules and regulations aimed at reducing the number of
work permits that may be issued. Any changes in such laws making it more
difficult to hire foreign nationals or limiting the ability of the Company to
retain foreign employees could require the Company to incur additional
unexpected labor costs and expenses. Any such restrictions or limitations on the
Company's hiring practices could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Human
Resources."
CONCENTRATION OF REVENUES; RISK OF TERMINATION
The Company has in the past derived, and may in the future derive, a
significant portion of its revenues from a relatively small number of clients.
The Company derived from its five largest clients approximately 43% and 37% of
its revenues for 1996 and for the six months ended June 30, 1997, respectively.
One client accounted for approximately 14% and 11% of the Company's revenues for
the same respective periods. Most of the Company's engagements are terminable by
the client at will. Unanticipated losses of major clients or termination of
client projects could result in the loss of substantial revenues and could
require the Company to support or terminate a significant number of unassigned
IT professionals. Such loss of revenues, or expenses resulting from unassigned
IT professionals or termination of IT professionals, could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and "Business--Clients."
5
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VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, and IT professional
deployment, hiring, attrition and utilization rates. The Company recognizes
revenues on its projects as the services are performed. Because a significant
percentage of the Company's selling, general and administrative expense is
relatively fixed, variations in revenues may cause significant variations in
operating results. Additionally, the Company expects to incur cost increases due
to both the hiring of new employees and strategic investments in its
infrastructure in anticipation of future opportunities for revenue growth. No
assurances can be given that quarterly results will not fluctuate, causing a
material adverse effect on the Company's business and financial condition. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition-- Quarterly Results."
INTENSE COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms, systems
consulting and implementation firms, applications software firms, service groups
of computer equipment companies, general management consulting firms, contract
programming companies and temporary staffing firms. Many of these competitors
have substantially greater financial, technical and marketing resources and
greater name recognition than the Company. In addition, there is a risk that
clients may elect to satisfy their applications solutions needs by increasing
their internal IT resources or by limiting the number of outside service
providers. Further, the IT services industry is undergoing consolidation which
may result in increasing pressure on margins. These factors may limit the
Company's ability to increase billing rates commensurate with increases in
compensation. There can be no assurance that the Company will compete
successfully with existing or new competitors. See "Business--Competition."
ABILITY TO SUSTAIN AND MANAGE GROWTH
The Company's business has experienced rapid growth over the past three
years. Revenues have grown from $303,000 in 1994 to $9.1 million in 1996 and
$8.7 million for the six months ended June 30, 1997, and the number of IT
professionals has grown from four at December 31, 1994 to 169 at June 30, 1997.
The Company intends to actively pursue its strategy of continued growth and will
seek to expand its sales and marketing efforts in order to add new clients and
expand existing client relationships. The Company's ability to sustain its
growth is dependent upon its ability to attract, develop, motivate and retain
highly skilled IT professionals and to manage its subcontractor network
effectively to ensure a supply of trained professionals. See "--Recruitment and
Retention of IT Professionals." There can be no assurance that the Company's
historical revenue growth will continue. Furthermore, this rapid growth could
strain the Company's managerial resources. Effective management of the Company's
growth will require the Company to continue to improve its operational,
financial and other management processes and systems. The failure to manage
growth effectively could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Business
Strategies."
ABILITY TO MAINTAIN MARGINS
The Company derives revenues primarily from the hourly billing for the
services of its IT professionals. The Company's most significant cost is
personnel cost, which consists of IT professionals' salaries and benefits. Thus,
the Company's financial performance is primarily based upon billing margin
(billable hourly rate less an IT professional's hourly cost) and personnel
utilization rates (number of days worked divided by number of days in each
billing cycle). To date, the Company has been able to maintain its billing
margins by offsetting increases in IT professional compensation with increases
in its hourly billing rates. There can be no assurance, however, that the
Company will be able to continue to pass along increases in its cost of services
to its clients. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Results of Operations."
6
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DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant extent on key
management, sales and marketing, technical and other personnel. In particular,
the Company's continued growth and success is highly dependent on the efforts
and abilities of Manohar B. Hira, the Company's President. In addition, the
Company is dependent on the services of O'Neil Nalavadi, its Senior Vice
President and Chief Financial Officer, who was hired as of August 1997. Although
Messrs. Hira and Nalavadi have entered into employment agreements containing
non-competition, non-disclosure and non-solicitation covenants, these agreements
do not guarantee that these individuals will continue their employment with the
Company. The loss of the services of Mr. Hira, Mr. Nalavadi or other key
employees for any reason could have a material adverse effect on the Company's
business, operating results and financial condition. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of the Offering, Vijay Mallya, Chairman of the Company,
will indirectly beneficially own and have voting power over 66.7% of the
Company's Common Stock (62.1% if the Underwriters' over-allotment option is
exercised in full). Such shares of Common Stock are held directly by United
Breweries Information Consultancy Services Ltd. (the "Principal Stockholder").
Accordingly, Mr. Mallya will be able to amend certain provisions of the
Company's Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), elect all of the directors, effect fundamental corporate
transactions such as mergers, asset sales and the sale of the Company, delay or
prevent a change in control of the Company and otherwise direct the Company's
business and affairs, without the approval of any other stockholder. See
"Management," "Principal and Selling Stockholders" and "Description of Capital
Stock."
RISKS OF INTERNATIONAL OPERATIONS
The Company's recruiting efforts to date in foreign countries have not been
supported by offices in those countries, other than offices of its affiliate,
the UB Group. An element of the Company's growth strategy is the development of
a recruiting and training center in India and the establishment of offices in
the United Kingdom, South Africa, Singapore and the Middle East in order to
broaden its recruiting efforts. There can be no assurance that the opening of
the recruiting center and international offices will enable the Company to
increase its ability to recruit additional IT professionals. The inability of
the Company to expand its recruiting of IT professionals from these countries
could have a material adverse effect on the Company's growth and its business,
operating results and financial condition. Another element of the Company's
growth strategy is the intention to establish marketing and software development
operations outside the U.S. These operations will depend greatly on the business
and technology transfer laws in those countries. There can be no assurance that
the Company will be able to establish these operations or that such operations
will be profitable and support the Company's growth.
Although the Company has filed a U.S. trademark registration application
covering the service mark "UBICS" which, if granted, would give the Company the
presumption of ownership in the U.S. of the "UBICS" mark for the services
identified in the registration, there can be no assurance that the Company is
entitled to use the designation "UBICS" in all international operations, and it
is possible that third parties have superior rights to the "UBICS" mark (or
similar marks) outside the U.S. See "Business--Business Strategies" and
"--Intellectual Property Rights."
POTENTIAL LIABILITY TO CLIENTS
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. The Company's failure or inability to meet a client's expectations
or the negligence or misconduct of the Company's IT professionals in the
performance of services could result in a material adverse change to the
client's operations. Such changes could give rise to claims against the Company
or damage the Company's reputation, adversely affecting its business, operating
results and financial condition. The Company does not maintain insurance
coverage for such negligence or misconduct or enter into formal arrangements to
reduce such potential liability.
7
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NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Although the Common Stock has been approved for trading on the
Nasdaq National Market, there can be no assurance that an active trading market
for the Common Stock will develop or be sustained after the Offering. The
initial public offering price per share of the Common Stock will be determined
by negotiations between management of the Company and the representatives of the
Underwriters (the "Representatives") and may not be indicative of the market
price of the Common Stock after the Offering. For a description of factors to be
considered in determining the initial public offering price in the Offering, see
"Underwriting." The securities markets have from time to time experienced
extreme price and volume fluctuations that have often been unrelated to the
operating performance of particular companies. In addition, factors such as
announcements of technological innovations, new products or services or new
client engagements by the Company or its competitors or third parties, as well
as market conditions in the IT services industry, may have a significant impact
on the market price of the Common Stock. See "Business--Competition" and
"Underwriting."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, the Company's Amended and
Restated Bylaws (the "Bylaws") and the Delaware General Corporation Law (the
"DGCL") include provisions that may be deemed to have anti-takeover effects and
may delay, deter or prevent a takeover that stockholders might consider in their
best interests. These provisions include the ability of the Board of Directors,
without stockholder approval, to have the Company issue shares of preferred
stock in one or more series with such rights, obligations and preferences as the
Board of Directors may provide, a provision under which only certain officers,
the Board of Directors and stockholders holding not less than 30% of the
outstanding shares of Common Stock may call meetings of stockholders and certain
advance notice procedures for nominating candidates for election to the Board of
Directors. Directors of the Company are divided into three classes and are
elected to serve staggered three-year terms. These provisions may have the
effect of lengthening the time required for a person to acquire control of the
Company through a proxy contest for the election of a majority of the Board of
Directors, may discourage bids for the Common Stock at a premium over the market
price and may deter efforts to obtain control of the Company. See
"Management--Directors and Executive Officers" and "Description of Capital
Stock--Certain Provisions Affecting Control of the Company."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in the public market
or the availability of such shares for future sale could adversely affect the
market price of the shares of Common Stock and the Company's ability to raise
additional capital at a price favorable to the Company. The Company and its
executive officers and directors and the Selling Stockholders have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
any Common Stock or any options or warrants to acquire shares of Common Stock,
or announce the intention to do any of the foregoing, until 180 days after the
date of this Prospectus without the prior written consent of Parker/Hunter
Incorporated, on behalf of the Underwriters. Promptly following completion of
the Offering, the Company also intends to file a registration statement on Form
S-8 with the Commission registering the 750,000 shares of Common Stock reserved
for issuance under the 1997 Plan. See "Shares Eligible for Future Sale" and
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock will be
substantially higher than the net tangible book value per share of the Common
Stock. At an assumed initial public offering price of $10.00 per share (the
mid-point of the estimated range of the initial public offering price),
purchasers of shares of Common Stock in the Offering will experience immediate
and substantial dilution of $7.80 in the pro forma net tangible book value per
share of Common Stock. See "Dilution."
8
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POSSIBLE ISSUANCES OF PREFERRED STOCK
Shares of Preferred Stock may be issued by the Company in the future
without stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of the Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding stock of the Company. The Company has no present
plans to issue any shares of Preferred Stock. See "Description of Capital
Stock--Preferred Stock."
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS
Existing stockholders of the Company are expected to realize certain
benefits as a result of the Offering, including the anticipated creation of a
public market for the Common Stock and unrealized gains represented by the
difference between the value of their shares of Common Stock following
completion of the Offering and the amount paid by the existing stockholders for
their shares. In addition, the Principal Stockholder is selling 400,000 shares
of Common Stock in the Offering and, assuming an initial public offering price
of $10.00 per share, will realize a net gain (after deduction of the estimated
underwriting discount) of approximately $3,700,000 from its sale of shares.
Also, as a result of repayment by the Company of certain indebtedness with a
portion of the net proceeds of the Offering, Mr. Mallya, Chairman of the Company
and the beneficial owner of the Principal Stockholder, will be released from his
guarantee of such indebtedness. See "Use of Proceeds," "Dilution" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition-- Liquidity and Capital Resources."
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial portion of the anticipated net proceeds of the Offering has
not been designated for specific uses. Therefore, the Board of Directors will
have broad discretion with respect to the use of such portion of the net
proceeds of the Offering. See "Use of Proceeds."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future and intends to retain earnings, if any, to develop,
operate and expand its business. See "Dividend Policy."
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company (after deduction of the estimated
underwriting discount and offering expenses payable by the Company) are
estimated to be $13,400,000. The Company expects to use the net proceeds from
the Offering as follows: (i) approximately $3,200,000 for the development of a
recruiting and training center in India by June 1998, and the purchase of
hardware and software with respect thereto; (ii) approximately $300,000 for the
establishment of four offshore recruiting offices over the next two years; (iii)
repayment of the Company's obligations to PNC Bank, National Association ("PNC")
under a Committed Line of Credit (the "Line of Credit"); and (iv) general
corporate purposes, including working capital. The outstanding balance under the
Line of Credit as of September 30, 1997 was $775,000, with amounts outstanding
bearing interest at a variable annual rate equal to 0.5% in excess of PNC's
prime rate. As of September 30, 1997, the annual interest rate under the Line of
Credit was 9.0%. The Company's obligations under the Line of Credit mature on
August 30, 1998.
The foregoing represents the Company's best estimate of its use of the net
proceeds based upon its current plans, certain assumptions regarding industry
and general economic conditions and the Company's future revenues and
expenditures. The Company reserves the right to increase or decrease the
proceeds allocated to expansion of its existing operations if the costs of such
expansion are higher or lower than currently anticipated or if the Company
decides to fund additional expansion projects beyond those currently planned.
Pending such uses, the net proceeds of the Offering will be invested in
short-term, investment-grade, interest-bearing securities. The principal
purposes of the Offering are to obtain additional working capital, create a
public market for the Common Stock and facilitate future access by the Company
to public equity markets. See "Business--Business Strategies." The Company
currently anticipates that the proceeds from the Offering, together with its
other existing sources of liquidity and cash generated from operations, will be
sufficient to fund its cash needs and currently planned future operations at
least through the next 24 months. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources."
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. The Principal Stockholder has agreed that, no
later than the completion of the Offering, the Company will be reimbursed for
expenses incurred by the Company on behalf of the UB Group during 1997. See
"Management--Compensation Committee Interlocks and Insider Participation."
DIVIDEND POLICY
The Company currently intends to retain all of its future earnings to fund
growth and the operation of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future. The payment in the future
of cash dividends, if any, will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and such other factors as the Board of
Directors may deem relevant. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources."
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the total capitalization of the Company as
of June 30, 1997, and as adjusted to give effect to the sale of the 1,500,000
shares of Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds." The
following table should be read in conjunction with the financial statements of
the Company and related notes thereto included elsewhere in this Prospectus:
<TABLE>
<CAPTION>
(IN THOUSANDS)
JUNE 30, 1997
-----------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Short-term debt(1).................................................. $ 500 $ --
====== =======
Long-term debt...................................................... -- --
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no
shares outstanding............................................. -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
5,000,000 shares issued and outstanding; 6,500,000 shares
issued and outstanding, as adjusted(2)......................... 3 18
Additional paid-in capital........................................ -- 13,385
Retained earnings................................................. 904 904
------ -------
Total stockholders' equity..................................... 907 14,307
------ -------
Total capitalization...................................... $ 907 $14,307
====== =======
</TABLE>
- ---------
(1) Represents borrowings under the Line of Credit. Upon completion of the
Offering, a portion of the net proceeds will be used to repay these
borrowings. See "Use of Proceeds."
(2) Excludes an aggregate of 750,000 shares of Common Stock reserved for
issuance under the 1997 Plan. See "Management--Stock Option Plan."
11
<PAGE> 13
DILUTION
As of June 30, 1997, the Company's net tangible book value was
approximately $907,000 or $0.18 per share. Net tangible book value per share
represents the Company's total tangible assets less the Company's total
liabilities, divided by the aggregate number of shares of Common Stock
outstanding. After giving effect to the sale of the 1,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $10.00 per share (the mid-point of the estimated range of the initial public
offering price) and less the estimated underwriting discount and other expenses
payable by the Company in connection with the Offering and the application of
the estimated net proceeds therefrom, the pro forma net tangible book value of
the Company at June 30, 1997 would have been $14,307,000 or $2.20 per share.
This amount represents an immediate increase in net tangible book value of $2.02
per share to existing stockholders and an immediate dilution of $7.80 per share
to purchasers of Common Stock in the Offering. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $10.00
Net tangible book value per share at June 30, 1997........... $ 0.18
Increase in net tangible book value per share attributable to
new investors............................................... 2.02
------
Pro forma net tangible book value per share after the Offering.... 2.20
------
Dilution in net tangible book value per share to new investors.... $ 7.80
======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and new investors at the assumed initial public offering
price of $10.00 per share (the mid-point of the estimated range of the initial
public offering price) before deducting the estimated underwriting discount and
other expenses payable by the Company in connection with the Offering, and does
not reflect the sale of the Common Stock by the Selling Stockholders in the
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).................. 5,000,000 76.9% $ 3,000 * **
New investors(1).......................... 1,500,000 23.1 15,000,000 100.0% $ 10.00
--------- ----- ----------- -----
Total................................... 6,500,000 100.0% $15,003,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------
*Less than one-tenth of one percent.
**Less than $0.01 per share.
(1) Sales by the Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to 4,500,000, or 69.2% of the total
shares of Common Stock outstanding after the Offering (4,200,000 shares or
64.6% if the Underwriters' over-allotment option is exercised in full), and
will increase the number of shares held by new investors to 2,000,000, or
30.8% of the total shares of Common Stock outstanding after the Offering
(2,300,000 shares or 35.4% if the Underwriters' over-allotment option is
exercised in full). See "Principal and Selling Stockholders" and
"Underwriting."
The information in the table above excludes the effect of options to
purchase 437,500 shares of Common Stock to be granted upon completion of the
Offering, all of which will have an exercise price per share equal to the
initial public offering price in the Offering. See "Management--Stock Option
Plan," "Shares Eligible for Future Sale" and "Principal and Selling
Stockholders."
12
<PAGE> 14
SELECTED FINANCIAL DATA
The selected financial data presented below for each of the three years
ended December 31, 1996 and for the six months ended June 30, 1997 have been
derived from the financial statements included elsewhere in this Prospectus
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected financial data for the period from the Company's inception to
December 31, 1993 has been derived from financial statements that are not
included herein. The selected financial data for the six months ended June 30,
1996 has been derived from the Company's unaudited interim financial statements
contained elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for these periods. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition," "Business," "Risk Factors" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------- ------------------
INCOME STATEMENT DATA: 1993(1) 1994 1995 1996 1996 1997
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... $ 17 $ 303 $1,454 $9,072 $3,411 $8,685
Cost of revenues....................... 16 178 994 6,373 2,455 5,983
------- ------ ------ ------ ------ ------
Gross profit........................... 1 125 460 2,699 956 2,702
Selling, general and administrative
expense.............................. -- 120 452 2,227(2) 871(2) 1,538
------- ------ ------ ------ ------ ------
Income from operations................. 1 5 8 472 85 1,164
Interest expense....................... -- -- -- 23 9 21
------- ------ ------ ------ ------ ------
Income before income taxes............. 1 5 8 449 76 1,143
Provision for income taxes............. -- 2 5 230 39 465
------- ------ ------ ------ ------ ------
Net income............................. $ 1 $ 3 $ 3 $ 219 $ 37 $ 678
====== ====== ====== ====== ====== ======
Net income per share................... $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
====== ====== ====== ====== ====== ======
Weighted average shares outstanding.... 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------- ----------------
BALANCE SHEET DATA: 1993(1) 1994 1995 1996 1996 1997
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Working capital......................... $ 4 $ 7 $ (25) $ 179 $ 1 $ 833
Total assets............................ 16 120 619 2,601 1,827 4,882
Total debt.............................. -- -- 78 300 250 500
Total stockholders' equity.............. 4 7 10 229 47 907
</TABLE>
- ---------
(1) The Company commenced operations on July 19, 1993.
(2) Includes expenses of $257,000 and $125,000 for the year ended December 31,
1996 and the six months ended June 30, 1996, respectively, incurred on
behalf of the UB Group. Beginning January 1, 1997, such expenses ceased to
be incurred by the Company.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with "Selected
Financial Data" and the financial statements of the Company and related notes
thereto appearing elsewhere in this Prospectus.
OVERVIEW
UBICS, founded in 1993, is a rapidly growing provider of IT professional
services to large and mid-sized organizations. UBICS provides its clients with a
wide range of professional services in such areas as client/ server design and
development, ERP package implementation and customization, applications
maintenance programming and database administration. UBICS' services are
provided on a time-and-materials basis to client-managed projects, with UBICS IT
professionals providing integral support as project team members. The Company
currently has offices in the Pittsburgh, Pennsylvania and San Francisco,
California areas.
The Company's revenues are based on the hourly billing of its IT
professionals. Revenue is recognized as services are provided. The Company has
increased the average billing rates of its IT professionals as the demand for
skilled and experienced professionals has expanded, in particular for IT
professionals placed on ERP package implementation and customization projects.
As of September 30, 1997, 44 IT professionals, or approximately 23% of the
Company's deployed IT professionals, were placed on such projects.
UBICS effectively minimizes the number of days IT professionals are not
assigned to projects by proactively marketing these professionals to clients.
Resource managers closely monitor the availability of IT professionals and
utilize subcontractors when UBICS IT professionals are unavailable. The Company
maintains strong relationships with nearly 50 subcontractors located worldwide.
Approximately 44% of the Company's revenues were derived from IT professionals
deployed from subcontractors for the six months ended June 30, 1997. As of
September 30, 1997, IT professionals deployed from subcontractors comprised 83
of the Company's 191 deployed IT professionals. The Company believes that its
network of subcontractors enables it to maintain closer relationships with
clients by fulfilling more of their needs for IT professional services.
Management believes that as the Company increases its investment in recruiting
and retaining qualified IT professionals, the ratio of UBICS IT professionals to
subcontractor IT professionals will increase.
Since inception the Company has developed relationships with 130 clients in
a range of industries and currently has IT professionals deployed at over 80 of
these clients. Although the Company's five largest clients accounted for
approximately 37% of revenues for the first six months of 1997, this revenue
concentration has steadily decreased since the Company's inception. The Company
believes that the continuing growth in its client base will further reduce the
percentage of revenue attributable to its largest clients. The Company's
strategy is to continue to provide services to clients across the U.S. in a
range of industries, in order to reduce credit risk from conditions or
occurrences within any specific industry or region in which these clients
operate.
The Company's strategy for maintaining strong revenue growth, maintaining
or improving margins and enhancing overall financial performance includes: (i)
continuing its focus on higher value-added services, such as ERP package
services; (ii) increasing its investment in systems and facilities necessary to
support continued growth; (iii) establishing a recruiting and training center in
India by June 1998; and (iv) establishing offices in South Africa, the United
Kingdom, Singapore and the Middle East, where the UB Group has an established
presence, during the second half of 1998 and during 1999 to increase the
Company's recruiting depth.
14
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
---------------------------------------------
SIX MONTHS
YEAR 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%. Approximately 75% of the increase in revenues was due to an
increase in the number of IT professionals deployed to provide services to new
and existing clients and approximately 25% of the increase in revenues was due
to higher average hourly billing rates resulting from a shift toward higher
value-added services including ERP-related services as well as increased demand
for IT professionals. The number of deployed IT professionals increased to 169
at June 30, 1997 from 93 at June 30, 1996, and the Company broadened its client
base to 130 clients in the first six months of 1997 from 57 clients in the first
six months of 1996.
Gross Profit
Gross profit consists of revenues less cost of revenues. Cost of revenues
is comprised principally of IT professional salaries and benefits, including
subcontractor professional costs and relocation expenses. Gross profit for the
first six months of 1997 was $2.7 million, compared to $956,000 for the first
six months of 1996, an increase of $1.7 million, or 183%. Gross profit as a
percentage of revenues increased to 31.1% for the first six months of 1997
compared to 28.0% for the first six months of 1996. The increase in gross profit
as a percentage of revenues resulted primarily from a higher number of IT
professionals deployed in client engagements involving higher value-added
services, including ERP package implementation and customization services.
Selling, General and Administrative Expense
Selling, general and administrative expense consists of costs associated
with the Company's sales and marketing efforts, executive, finance and human
resource functions, facilities, telecommunications and other general overhead
expenses. Selling, general and administrative expense for the first six months
of 1997 was $1.5 million, compared to $871,000 for the first six months of 1996,
an increase of $667,000, or 77%. Selling, general and administrative expense as
a percentage of revenues decreased to 17.7% for the first six months of 1997
from 25.5% for the first six months of 1996. The increase in expense was
primarily due to increases in salaries, commissions and other personnel costs to
support the Company's growth. This increase was partially offset by the absence
of expenses incurred on behalf of the UB Group for the first six months of 1997,
which totaled $125,000 for the first six months of 1996. The decrease as a
percentage of revenues was primarily due 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%. Approximately 85% of the increase in revenues was due to an
increase in the number of IT professionals deployed to provide services to new
and existing clients and approximately 15% of the increase in revenues was due
to higher average hourly billing rates resulting from increased demand for IT
professionals. The number of deployed IT professionals increased to 110 at
December 31, 1996 from 40 at December 31, 1995, and the Company broadened its
client base to 79 clients in 1996 from 27 clients in 1995.
Gross Profit
Gross profit for 1996 was $2.7 million, compared to $460,000 for 1995, an
increase of $2.2 million, or 486%. Gross profit as a percentage of revenues
decreased to 29.7% for 1996 from 31.7% for 1995. The decrease in gross profit as
a percentage of revenues resulted primarily from higher average costs for IT
professionals due to the increased demand for such professionals.
Selling, General and Administrative Expense
Selling, general and administrative expense for 1996 was $2.2 million,
compared to $452,000 for 1995, an increase of $1.8 million, or 392%. Selling,
general and administrative expense as a percentage of revenues decreased to
24.5% for 1996 from 31.1% for 1995. The increase in expense was primarily due to
increases in salaries, commissions and other personnel costs to support the
Company's growth. The increase in expense was also due to expenses of $257,000
for 1996 incurred on behalf of the UB Group. The decrease as a percentage of
revenues was primarily due to increased operating efficiencies.
Interest Expense
Interest expense for 1996 was $23,000, reflecting borrowings under the Line
of Credit. The Company had no interest expense for 1995.
Provision for Income Taxes
The Company's effective tax rate was 51.2% for 1996. The primary reasons
for the difference between the effective tax rate and the federal statutory rate
of 34% are (i) state income taxes and (ii) the delayed filing of tax returns
pending a review of the structure of the UB Group companies in the U.S. On
September 8, 1997, the Company filed its 1995 and 1996 federal and state income
tax returns and paid such taxes and estimated penalties and interest. Due to the
low levels of income recorded for 1995 and prior periods, the Company believes
that the effective tax rates for these periods are not meaningful.
16
<PAGE> 18
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Revenues for the year ended December 31, 1995 were $1.5 million, compared
to $303,000 for the year ended December 31, 1994, an increase of $1.2 million,
or 380%. Approximately 83% of the increase in revenues was due to an increase in
the number of IT professionals deployed to provide services to new and existing
clients and approximately 17% of the increase in revenues was due to higher
average hourly billing rates resulting from increased demand for IT
professionals. The number of deployed IT professionals increased to 40 at
December 31, 1995 from four at December 31, 1994 and the Company broadened its
client base to 27 clients in 1995 from seven in 1994.
Gross Profit
Gross profit for 1995 was $460,000, compared to $125,000 for 1994, an
increase of $335,000, or 269%. gross profit as a percentage of revenues
decreased to 31.7% for 1995 from 41.2% for 1994. The decrease in gross profit as
a percentage of revenues resulted primarily from the diminished impact of IT
professionals being supplied at favorable rates on a subcontractor basis by an
affiliate of the UB Group. This relationship was terminated in March 1996. See
"Management--Compensation Committee Interlocks and Insider Participation."
Selling, General and Administrative Expense
Selling, general and administrative expense for 1995 was $452,000, compared
to $120,000 for 1994, an increase of $332,000, or 278%. Selling, general and
administrative expense as a percentage of revenues decreased to 31.1% for 1995
from 39.5% for 1994. The decrease as a percentage of revenues was a result of
the Company's ability to support its revenue growth without a proportionate
increase in management or marketing personnel and associated costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash have been to fund receivables and
other working capital, reflecting the Company's rapid growth. The Company has
financed its working capital requirements through internally generated funds,
borrowings under the Line of Credit and loans and advances from certain UB Group
affiliates. Net cash provided by (used by) operating activities was $(115,000),
$(181,000), $0 and $35,000 for the first six months of 1997 and for the years
ended December 31, 1996, 1995, 1994, respectively. The Principal Stockholder has
agreed, no later than the completion of the Offering, to repay expenses incurred
by the Company on behalf of the UB Group during 1997. See
"Management--Compensation Committee Interlocks and Insider Participation."
Capital expenditures for the first six months of 1997 and for 1996, 1995
and 1994 were $31,000, $25,000, $38,000 and $0, respectively. Except as set
forth below, the Company currently has no material commitments for capital
expenditures.
The Company intends to use approximately $3.5 million of the net proceeds
of the Offering to expand its existing operations, including approximately $3.2
million for the establishment of a recruiting and training center in India by
June 1998 (including the purchase of hardware and software with respect thereto)
and approximately $300,000 for the establishment of four offshore recruiting
offices over the next two years. The Company will also use a portion of the net
proceeds of the Offering to repay the principal amount outstanding under the
Line of Credit, which was $775,000 as of September 30, 1997, plus accrued
interest on the closing date of the Offering. As of September 5, 1997, the
amount available under the Line of Credit was increased to $1.0 million. Amounts
outstanding under the Line of Credit bear interest at a variable annual rate
equal to 0.5% in excess of PNC's prime rate. As of September 30, 1997, the
annual interest rate under the Line of Credit was 9.0%. The indebtedness under
the Line of Credit was incurred by the Company for working capital and other
corporate purposes. The indebtedness under the Line of Credit is guaranteed by
Mr. Mallya, the Company's Chairman. Upon completion of the Offering, (i) the
Company will repay the outstanding indebtedness under the Line of Credit and
(ii) PNC has agreed to release Mr. Mallya's guarantee.
17
<PAGE> 19
The Company currently anticipates that the proceeds from the Offering,
together with the existing sources of liquidity and cash generated from
operations, will be sufficient to satisfy its cash needs at least through the
next 24 months.
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>
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
18
<PAGE> 20
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 method and, as such, SFAS No. 123 will not have an impact
on the Company's results of operations or financial position. The required
disclosure will be provided in the Company's financial statements after stock
options have been granted.
The FASB also recently issued SFAS No. 128, "Earnings Per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structures." SFAS No. 128 was
issued in February 1997 and is effective for periods ending after December 15,
1997. This statement, upon adoption, will require all prior period earnings per
share ("EPS") data to be restated to conform to the provisions of the statement.
This statement's objective is to simplify the computations of EPS and to make
the U.S. standard for EPS computations more compatible with that of the
International Accounting Standards Committee. The Company will adopt SFAS No.
128 beginning with its fiscal year ending December 31, 1997. The adoption of
SFAS No. 128 will have no impact on the Company's reported EPS.
SFAS No. 129 was issued in February 1997 and is effective for fiscal
periods ending after December 15, 1997. This statement, upon adoption, will
require all companies to provide specific disclosure regarding their capital
structure. SFAS No. 129 will specify the disclosure for all companies, including
descriptions of their capital structure and the contractual rights of the
holders of such securities. The Company will adopt SFAS No. 129 beginning with
its fiscal year ending December 31, 1997 and does not anticipate that the
adoption of SFAS No. 129 will have a significant impact on its disclosure.
19
<PAGE> 21
BUSINESS
UBICS is a rapidly growing provider of IT professional services to large
and mid-sized organizations. UBICS provides its clients with a wide range of
professional services in such areas as client/server design and development, ERP
package implementation and customization, applications maintenance programming
and database administration. UBICS' services are provided on a
time-and-materials basis to client-managed projects, with UBICS IT professionals
providing integral support as project team members. Since commencement of full
operations in 1994, the Company's revenues have grown from $303,000 for 1994 to
$9.1 million for 1996 and to $5.1 million for the quarter ended June 30, 1997.
The Company attributes its growth in revenues in 1997 primarily to an increased
focus on higher value-added services, particularly ERP package implementation
and customization services.
In the first six months of 1997, UBICS provided IT professional services to
over 80 clients in a range of industries and locations. The Company's clients
include Caterpillar, CompUSA, El Paso Natural Gas, Fruit of the Loom, Ralston
Purina and The Hartford. UBICS' high standards for responsiveness and service
quality promote growing client relationships and recurring revenues. The Company
believes that its centralized, low-overhead operating model enables it to
respond quickly to client demand for IT professional services. UBICS meets this
demand through its employed IT professionals and its management of an extensive
network of subcontractors. The Company currently has approximately 200 IT
professionals deployed with its clients in the U.S.
One of the key factors supporting UBICS' growth has been its ability to
recruit and deploy, on short notice, skilled IT professionals. The Company
recruits IT professionals from India and other countries worldwide. In order to
ensure a continuous supply of IT professionals for higher value-added
specialties, the Company intends to use a portion of the proceeds of the
Offering to establish a recruiting and training center in India by June 1998.
The Company will use this center to enhance its recruiting efforts and to train
its IT professionals prior to placement. The Company also selectively uses the
substantial resources and established reputation of its affiliate, the UB Group,
to support its recruiting efforts. The UB Group is a multinational group of
companies headquartered in India. See "--The UB Group," "Management--
Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions."
THE IT SERVICES INDUSTRY
The growing worldwide demand for IT services has been driven by the
increasing reliance on IT as a strategic tool for addressing critical business
issues. Intense competition, deregulation, globalization and technological
innovation are accelerating the rate of change in business. Organizations face
constant pressures to improve product and service quality, reduce costs,
increase responsiveness, improve operating efficiencies and strengthen customer
relationships. In order to achieve these objectives, organizations are
re-engineering their business processes and improving the information systems
which enable and support the re-engineered processes. Simultaneously, rapid
advances in technology have accelerated demand for the transition from mainframe
to client/server architectures and from separate systems to enterprise-wide
integrated applications.
As a result of the variety and complexity of new technologies, IT
departments must integrate and manage distributed computing environments
consisting of multiple operating systems, databases, programming languages and
networking protocols. IT departments must also implement custom and packaged
software applications to support business objectives. In many cases, the
organization's internal IT staff lacks the skills necessary to address these
changing technologies. IT departments have also been overwhelmed by the large
number of software applications that need to be rewritten, re-engineered or
converted in order to effect the transition to newer technologies and address
issues such as the Year 2000 problem.
Faced with the challenge of implementing and operating more complex
information systems, many organizations are increasingly utilizing experienced
third-party IT service providers to assist in the development, implementation
and maintenance of IT solutions and services. Utilizing third-party IT service
providers: (i) allows a company's management to focus on core business
operations; (ii) increases the ability to adapt to and keep pace with rapidly
changing and increasingly complex technologies; (iii) provides access to
specialized technical skills on a temporary, project-by-project basis; (iv)
better matches staffing requirements to current needs, converting fixed labor
costs into variable costs; and (v) reduces the cost of recruiting, training and
terminating employees as evolving technologies require new programming skill
sets.
20
<PAGE> 22
A significant change has also occurred in recent years within the
population of IT professionals. These professionals increasingly are choosing to
work as consultants for IT service providers rather than as employees of a
single organization's IT department. IT professionals are attracted by the
ability of IT service providers to continually place them on new projects in
diverse industries and work environments, keep them current in technology and
develop their technical careers. In addition, such professionals generally are
able to maintain compensation levels comparable to or higher than that of
similarly skilled, full-time employees of end-user companies.
These factors have resulted in significant growth in the IT services
market. According to industry sources, the worldwide market for IT services was
estimated at $140 billion in 1996, with a projected market of $258 billion in
the year 2000. The U.S. IT services market is projected to grow from $56 billion
in 1996 to $97 billion in the year 2000.
The Company believes that the following key industry trends will have a
major influence on the IT services market:
Shortage of IT Professionals
There is a growing shortage of IT professionals in developed countries,
particularly the U.S., Western Europe and Japan. As companies continue to
migrate from centralized mainframe architectures to distributed client/server
technologies, the demand for IT professionals will rise. As an example, an
industry source predicts a 60% increase in the number of organizations utilizing
client/server platforms through the year 2000. In addition, the Year 2000
problem and Euro-currency conversions will exacerbate the shortage of IT
professionals over the next several years.
Growth in ERP Software
Organizations are increasingly turning to ERP software applications such as
Baan, PeopleSoft and Oracle. ERP packages typically consist of integrated
production, distribution, order entry and financial applications, enabling a
single transaction to affect all relevant areas of a company's operations. By
customizing and deploying these large, integrated applications packages,
organizations seek to replace, on a global, enterprise-wide basis, their aging
legacy applications, which have limited functionality and integration. However,
the implementation of these packages is a major undertaking and requires highly
specialized skill sets and functional expertise, which are in short supply and
command higher compensation.
Increasing Maintenance and Conversion Requirements
Many businesses and government organizations are currently faced with major
computer maintenance and conversion projects, including those related to the
Year 2000 problem and required Euro-currency conversions. Industry sources
estimate that a medium-sized company will spend approximately $4.0 million on
the Year 2000 problem, and that the total cost worldwide may exceed $300
billion. These one-time projects are occurring at the same time as demand is
increasing for major system upgrades and for conversion to advanced systems.
21
<PAGE> 23
BUSINESS STRATEGIES
UBICS' objective is to become a leading worldwide provider of IT services
by continuing its record of growth. The Company's business strategies leverage
the Company's strengths, distinguish UBICS from its competitors and position it
to capitalize on market opportunities for growth. The key elements of these
strategies are discussed below:
Cultivate and Expand Client Base
UBICS seeks to add new clients and enhance existing client relationships by
continuing to expand its sales and marketing efforts. These expanded efforts
include hiring additional sales personnel, marketing in new geographic
territories, leveraging existing customers to gain referrals, offering new
services, increasing market awareness of the Company through advertising and
attendance at technology conferences and selectively opening new offices. The
Company recently opened an office in the San Francisco area to increase its base
of clients in California, particularly the Silicon Valley market. The Company's
sales professionals seek to maintain close contact with existing clients and
visit client sites on a regular basis. Also, the Company's use of its network of
subcontracting firms enables it to better meet client needs by providing access
to a broader selection of skilled IT professionals.
Attract and Retain High-Quality IT Professionals
UBICS' growth has been driven by its ability to recruit and deploy, on
short notice, experienced IT professionals. The Company benefits from the
established reputation of its affiliate, the UB Group, and plans to establish a
recruiting and training center in India by June 1998 to enhance its recruiting
efforts there and to increase the skill base of its IT professionals. The
Company also plans, during the second half of 1998 and during 1999, to establish
offices in South Africa, the United Kingdom, Singapore and the Middle East,
where the UB Group has an established presence, in order to increase its
recruiting depth.
Leverage Centralized Low-Overhead Operating Model
UBICS has a centralized approach to selling and servicing its U.S. client
base. The Company currently serves over 80 clients in 28 states from its
corporate headquarters in Pittsburgh, Pennsylvania. This strategy has provided
the Company with the benefits of a national presence without the costs
associated with a large network of relatively autonomous branch offices. While
the Company has recently opened an office in the San Francisco area and may
selectively open other branch sales and marketing offices, these offices will
leverage the Company's headquarters infrastructure and add only incremental
overhead costs.
Provide ERP Software Services
UBICS leverages its client/server expertise by providing implementation and
customization services for Baan, PeopleSoft and Oracle ERP packages. A number of
the Company's IT professionals are trained on these ERP packages and the Company
intends to open a recruiting and training center in India to train additional IT
professionals on such packages. In addition, the Company is seeking alliances
with ERP applications vendors in order to increase its presence in this area.
During the quarter ended June 30, 1997, the Company placed 15 IT professionals
on ERP projects. For the month ended August 31, 1997, the Company derived
approximately 30% of its revenues from IT professionals deployed on ERP
projects.
Continually Broaden Range of Services
UBICS provides its clients with a wide range of professional services,
which enables it to meet the critical needs of its clients on short notice, for
a range of projects in such areas as client/server design and development, ERP
package implementation and customization, applications maintenance programming
and database administration. The Company intends to continually broaden the
range of services it offers, particularly in higher value-added specialties, in
order to better meet the needs of its clients. Included among such services are
Year 2000 and Euro-currency conversions. After the Company establishes its
offshore recruiting offices, it also intends to evaluate the establishment of an
offshore software development center to cost-effectively meet clients' needs for
outsourced projects.
22
<PAGE> 24
SERVICES
The Company's IT professionals help clients identify, analyze and solve
data processing and computing problems in such areas as: (i) client/server
design and development; (ii) ERP package implementation and customization; (iii)
applications maintenance programming, including Year 2000 conversion services;
and (iv) database and system administration. These services are provided in a
variety of computing environments utilizing leading technologies including
client/server architectures, object-oriented programming languages and tools,
distributed database management systems, computer-aided software engineering
("CASE") tools, ERP packages, groupware and advanced networking and
communications technologies. The Company's engagements cover every aspect of the
life cycle of computer systems, from strategy and design to development and
implementation and, finally, to maintenance and support.
All of the Company's services are provided on a time-and-materials basis
with UBICS IT professionals providing services as members of the client's
project team. Generally, these services are provided on-site to clients whose
current personnel do not have the requisite technical skills or to clients with
specific projects requiring additional staffing that do not justify permanent
personnel increases. The scope of the work performed by the Company ranges from
specific, minor tasks of three months in duration involving a single IT
professional to large, complex tasks that require several IT professionals for a
year or longer. Examples of larger tasks include developing new client/server
systems and maintaining mature mainframe systems that cannot be quickly
replaced.
ERP software services consist primarily of assisting clients in
implementing and customizing package application software on client/server
systems. Clients seeking these services are generally businesses that are
migrating from legacy mainframe applications or are implementing enterprise-wide
client/server architectures. The Company believes that as package software
companies such as Baan and PeopleSoft further enhance the functionality and
performance of their products and such products become more widely used, ERP
software services will continue to present an increasing opportunity for the
Company.
The Company will seek to expand the volume of ERP software services that it
provides by developing relationships with package software firms. In addition,
the Company intends to use a portion of the proceeds of the Offering to purchase
additional hardware and software and supporting facilities that will enable it
to train its IT professionals in the use and implementation of such ERP package
software. The market for ERP software services is an attractive one for the
Company because such projects have a longer duration, are billed at higher rates
and carry higher margins.
The Company continually adjusts the scope of services which it provides in
order to meet the changing needs of its clients. For example, the Company has
recently begun to provide Year 2000 services. As demand for a new service
arises, the Company intends to recruit and train IT professionals to meet such
demand.
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<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.
24
<PAGE> 26
The Company's sales force is organized primarily by geographic region. The
Company's sales professionals are responsible for managing client relationships
and identifying new business opportunities within their assigned regions. UBICS'
sales professionals are required to meet monthly targets for new accounts and
placements, based upon the experience and tenure of the sales professional.
Compensation of sales professionals is based heavily upon incentives for strong
financial performance, including gross margin contribution, within their region.
In addition to its geographic focus, the Company has recognized the rapid
growth in ERP implementations as well as the specialized requirements of these
projects, and is focusing specifically on this sector. Approximately one-fourth
of the Company's IT professionals were placed in ERP projects as of September
30, 1997.
The Company's sales organization employs a variety of methods to identify
potential clients and industry trends, including referrals from existing clients
and the Company's IT professionals. The Company's sales professionals begin the
sales process by identifying and analyzing the prospective client's existing
software configuration and development requirements, and the size and scope of
its internal IT resources. The sales professional then submits a proposal with
the resumes of IT professionals having skills that match the prospective
client's project requirements. The Company's ability to closely match its IT
professionals with the client's IT needs enables the Company's sales
professionals to offer a 30 day guarantee. If the client is not satisfied with
an IT professional's services during the first 30 days of an assignment, the
Company will not charge the client for such professional's services. After the
client has engaged the Company, the sales professional continuously monitors and
builds the relationship between the client and the IT professionals to ensure
client satisfaction and the successful progress and completion of the
assignment.
While the Company's focus remains on expanding its sales and marketing
efforts in the U.S., it intends to increase its international operations by
opening offices in South Africa, the United Kingdom, Singapore and the Middle
East where the UB Group has an established presence. The Company believes it
will benefit from the UB Group's existing presence and reputation for quality
and by leveraging cost-effectively the UB Group's infrastructure in those areas.
The Company intends to use the UB Group's established offices in those locations
and UB Group personnel and support services at such offices until the Company's
own offices have been established. The Company's cost of using such offices,
personnel and support services will be based on the UB Group's cost and
allocable overhead, which the Company believes is a cost-effective method of
increasing its international operations. See "--The UB Group."
In addition to UBICS' pursuit of new clients, the Company actively markets
its services to its existing clients, seeking to proactively meet the needs of
its clients and maximize placement success. The Company's success in developing
and retaining clients is due, in large part, to its ability to maintain a
continuous supply of qualified IT professionals. This is made possible by the
Company's extensive network of nearly 50 subcontracting firms from which it can
source qualified IT professionals to supplement, if necessary, its employed IT
professionals. The Company believes that this network of subcontractors provides
the Company with a significant sales and marketing advantage. The Company's
relationship with these subcontractors ensures that the Company can effectively
meet client needs quickly, thus establishing UBICS as a primary provider of IT
professional services.
CLIENTS
Substantially all of the Company's clients are large and mid-sized
companies, systems integrators or other significant users of IT. During 1997,
the Company has provided services to over 80 clients in a range of industries in
the U.S. For the first six months of 1997, approximately 37% of the Company's
revenues were derived from its top five clients--El Paso Natural Gas, Fruit of
the Loom, The Hartford, Access Graphics and CompUSA. El Paso Natural Gas
accounted for approximately 14% and 11% of the Company's revenues for 1996 and
for the first six months of 1997, respectively.
25
<PAGE> 27
The following is a partial list of organizations to which the Company has
provided, or is providing, services:
<TABLE>
<CAPTION>
TECHNOLOGY RETAIL INDUSTRIAL
----------------------- ---------------------- --------------------
<S> <C> <C>
Access Graphics Advance Auto Parts Caterpillar
AMP Blockbuster Cummins
Baan CompUSA El Paso Natural Gas
Hughes Network Systems Home Shopping Network General Electric
NextLevel Systems Long John Silver's Johnson Controls
Oracle Sears PPG
</TABLE>
<TABLE>
<CAPTION>
CONSUMER PRODUCTS FINANCIAL
----------------------- --------------
<S> <C>
Fruit of the Loom Associates
McGraw-Hill Equitable
Paramount GE Capital
Philips Electronics State Farm
Ralston Purina The Hartford
</TABLE>
The Company seeks to provide high quality, responsive service in order to
maximize its client retention rate and secure follow-on engagements. A
significant number of the Company's clients have selected UBICS to provide
additional services.
HUMAN RESOURCES
The Company's success depends in large part on its ability to attract,
develop, motivate and retain highly skilled IT professionals. As of September
30, 1997, the Company had 191 IT professionals deployed at client sites. The
Company currently has five full-time resource managers dedicated to recruiting
IT professionals and managing human resources, all of whom have technical
backgrounds that enable them to effectively evaluate the skills and
qualifications of potential candidates. The Company also has a recruiting
manager dedicated to managing relationships with the Company's network of
subcontractors. UBICS takes a proactive approach to recruiting based on skills
requirements forecasts. The Company continually receives resumes from
prospective employees in response to advertisements placed in trade publications
and newspapers and on the internet. In addition, UBICS IT professionals are
actively involved in identifying and referring new employees and screening
candidates for new positions. The Company recruits primarily in India, but also
has recruited from other areas of the world, including the U.S., the United
Kingdom, the Middle East and the Far East.
As a result of its affiliation with the UB Group, UBICS benefits from the
established reputation and infrastructure that the UB Group has in India. A
priority for the Company is the expansion of its recruiting and training
infrastructure in India. In addition, the Company plans to expand its global
recruiting network by opening offices in South Africa, the United Kingdom,
Singapore and the Middle East and other countries where the UB Group has an
established presence.
UBICS employs a stringent selection method that consists of a three-stage
interview process. During the first stage, a general interview is conducted to
gather background information and references. The candidate next has a technical
interview with a UBICS resource manager or IT professional. During the final
step, a sales professional interviews the candidate to assess the candidate's
client interaction skills and to verify the candidate's suitability for
assignment to a project in the U.S.
26
<PAGE> 28
The Company believes that the qualifications of its IT professionals give
it a competitive edge. To maintain and enhance their skills, UBICS IT
professionals attend training workshops and seminars where they learn to use the
latest tools and techniques. The Company intends to use its training facility in
India, when established, to train UBICS IT professionals in ERP software
packages and other higher value-added technologies, and thereby enhance the
skill base of such professionals.
The Company maintains a database which catalogs the technical profiles,
location, availability, mobility and other factors relating to available IT
professionals. This database enables the Company to quickly identify and deploy
appropriate IT professionals for various client engagements.
The Company's IT professionals typically have Masters or Bachelors degrees
in Computer Science or another technical discipline as well as at least two
years of IT experience. As of September 30, 1997, the Company had 142 employees
comprised of 117 IT professionals, ten sales and marketing personnel and 15
general and administrative personnel. Over 90% of the Company's IT professionals
are citizens of other countries, with most of those in the U.S. working under
H-1B temporary work permits. UBICS engages legal counsel to prepare, file and
process H-1B visa applications with the U.S. Immigration and Naturalization
Service. See "Risk Factors--U.S. Regulation of Immigration."
The Company also uses subcontracted IT professionals to effectively meet
client needs when UBICS IT professionals are unavailable. The Company maintains
strong relationships with nearly 50 vendor subcontractors located worldwide. As
of September 30, 1997, 83 of its deployed IT professionals, or approximately
43%, were supplied by subcontractors. As the Company increases its investment in
recruiting and retaining qualified IT professionals, it believes the ratio of
UBICS IT professionals to IT professionals deployed from subcontractors will
increase. It has been and continues to be to the Company's advantage, however,
to maintain this subcontractor network to help meet its clients' needs. The
Company applies the same process and standards in selecting IT professionals
from subcontractors as it does in recruiting its employed IT professionals.
The Company has a focused employee retention strategy that includes career
planning, training and benefits. Additionally, the Company believes that its
ability to recruit and retain IT professionals should be further enhanced by its
ability to offer employees stock-based incentive awards, such as stock options,
after the Offering.
COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms, systems
consulting and implementation firms, applications software firms, service groups
of computer equipment companies, general management consulting firms, contract
programming companies and temporary staffing firms. Many of these competitors
have substantially greater financial, technical and marketing resources and
greater name recognition than the Company. In addition, there is a risk that
clients may elect to increase their internal IT resources or limit the number of
outside service providers to satisfy their applications solutions needs. The
Company believes that the principal competitive factors in the IT services
industry include the range of services offered, technical expertise,
responsiveness to client needs, quality of service and perceived value. The
Company believes that it competes favorably with respect to these factors.
27
<PAGE> 29
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of nondisclosure and other
contractual arrangements, including entering into confidentiality agreements
with its employees, and trade secret, copyright and trademark laws to protect
its proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company has filed a U.S. trademark
registration application covering the service mark "UBICS" which, if granted,
would give the Company the presumption of ownership in the U.S. of the "UBICS"
mark for the services identified in the registration. Although the Company does
not deem trademarks or service marks to be material to its business, when in its
best interests, the Company seeks such protection for its services. There can be
no assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of proprietary information or that the Company will be
able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.
FACILITIES
The Company's corporate headquarters is located in the Pittsburgh suburb of
Upper St. Clair, Pennsylvania. The Company's senior management, administrative
personnel, human resources and sales and marketing functions are housed in this
4,838 square foot facility which is leased by the Company pursuant to a lease
agreement which expires on May 31, 1999. The Company believes that this location
has sufficient space for its current and anticipated near-term needs. The
Company also leases a 4,439 square foot office in the San Francisco suburb of
Sausalito, California pursuant to a lease agreement which expires on June 2,
1999 for use as a sales and marketing office. The Company intends to sublease
approximately 3,000 square feet of this space to its affiliate, the UB Group,
pursuant to a sublease agreement which will expire on June 2, 1999 (subject to
obtaining the written consent of the lessor of such premises). See
"Management--Compensation Committee Interlocks and Insider Participation."
THE UB GROUP
The UB Group is one of the leading industrial groups of India with
operations in Asia, the Far East, the Middle East, Africa, Europe and the U.S.
The UB Group, which is headquartered in Bangalore, India, consists of companies
under the control of Vijay Mallya, Chairman of the Company and the indirect
beneficial owner of 94.7% of the outstanding shares of Common Stock prior to the
Offering. Companies in the UB Group are principally engaged in the manufacture
and sale of beer, spirits, pharmaceuticals, paint and coating products and in
the hotel and resort business. The worldwide revenue of the companies in the UB
Group is currently approximately $1 billion per annum. The UB Group also has
joint ventures in India with a number of leading international companies,
including Hoechst AG for pharmaceuticals, United Distillers (Guinness) for
spirits and Carlsberg for beer. See "Management--Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions."
LITIGATION
The Company is not a party to any litigation.
28
<PAGE> 30
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers, directors and director nominees, each of
whom has agreed to serve as a director upon completion of the Offering, and
their respective ages and positions as of September 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ---- ---------------------------------------------
<S> <C> <C>
Vijay Mallya.................. 41 Chairman
Manohar B. Hira............... 57 President and Director
O'Neil Nalavadi............... 37 Senior Vice President, Chief Financial
Officer and Director
Babu Srinivas................. 42 Vice President--Finance, Accounting and
Administration
Craig A. Wolfanger............ 39 Nominee
Dennis S. Meteny.............. 44 Nominee
</TABLE>
Vijay Mallya has been the Chairman of the Company since its inception in
July 1993. Mr. Mallya has been chairman of the UB Group since 1983. Mr. Mallya
also is Chairman of Mendocino Brewing Company, Inc., United Breweries Limited,
UB Engineering Limited, Mangalore Chemicals and Fertilisers Ltd., Herbertsons
Limited, McDowell & Co. Ltd. and other UB Group companies. He also sits on
boards of several foreign companies and organizations including companies
comprising the UB Group, The Institute of Economic Studies (India) and the
Federation of the Indian Chamber of Commerce and Industries. Mr. Mallya provides
strategic advice and guidance to the Company and will devote such time as is
necessary to fulfill his role as Chairman of the Company.
Manohar B. Hira has served as President and a director of the Company since
it was founded in 1993. Mr. Hira also served in various senior management
capacities for companies in the UB Group from 1981 to 1995, including Chief
Operating Officer--U.S. IT Operations, Export Manager, General Manager--Human
Resources and Vice President--Administration. Mr. Hira is a mechanical engineer
and has a Masters degree in management.
O'Neil Nalavadi has been Senior Vice President, Chief Financial Officer and
a director of the Company since August 1997. Mr. Nalavadi also has served in
various senior management capacities for companies in the UB Group from 1984 to
August 1997, including Senior Vice President of the Corporate Management
Division--UB Group from 1995 to August 1997, Chief Operating Officer and
director of United Breweries Plc. from December 1992 to January 1995 and General
Manager--Corporate Planning & Coordination of UB International Ltd. from January
1989 to December 1992. Mr. Nalavadi also is a director of Mendocino Brewing
Company, Inc. and is a Chartered Accountant in India.
Babu Srinivas has been Vice President--Finance, Accounting & Administration
of the Company since April 1996. Mr. Srinivas served in various senior
management capacities for companies in the UB Group, including senior
manager--internal audit, controller and general manager, from 1990 to March
1996. Mr. Srinivas is a Chartered Accountant in India.
Craig A. Wolfanger has agreed to join the Board of Directors. Mr. Wolfanger
has been Senior Managing Director of Parker/Hunter Incorporated, an investment
banking firm, since 1995. Mr. Wolfanger also serves on the Management Committee
at Parker/Hunter Incorporated. From 1991 to 1995, Mr. Wolfanger was Senior
Managing Director of the Corporate Finance Division of PNC Securities Corp. Mr.
Wolfanger previously was employed in the investment banking departments of Alex.
Brown & Sons Incorporated and Kidder, Peabody & Co. Incorporated.
Dennis S. Meteny has agreed to join the Board of Directors. Mr. Meteny has
been a director of Respironics, Inc. ("Respironics") since January 1986 and
President and Chief Executive Officer of Respironics since November 1994. From
August 1992 through November 1994, Mr. Meteny served as Executive Vice President
and Chief Operating and Financial Officer of Respironics. He also served as Vice
President--General Manager and Chief Financial Officer of Respironics from
January 1988 through August
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<PAGE> 31
1992 and was Vice President--Finance and Accounting from 1984 through January
1988. For eight years prior to joining Respironics he was employed as an
accountant in various auditing capacities by Ernst & Young LLP.
The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors.
The Board of Directors currently consists of three members. Upon completion
of the Offering, the Board of Directors will be increased to five members and
Messrs. Wolfanger and Meteny will be appointed to fill the two vacancies. The
Board of Directors is divided into three classes, each of whose members serve
for a staggered three-year term. The Board is comprised of one Class I Director
(Mr. Nalavadi), two Class II Directors (Mr. Hira and, upon his appointment to
the Board, Mr. Meteny) and two Class III Directors (Mr. Mallya and, upon his
appointment to the Board, Mr. Wolfanger). At each annual meeting of
stockholders, the appropriate number of directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. The terms of the Class I Directors, Class II Directors and Class III
Directors will expire upon the election and qualification of successor directors
at the annual meetings of stockholders held in calendar years 1998, 1999 and
2000, respectively. There are no family relationships between any director or
executive officer of the Company.
KEY EMPLOYEES
Certain information regarding the following persons, each of whom also are
considered key employees of the Company, is set forth below:
Scott A. Baxendell has been Director of Marketing of the Company since June
1995 with responsibilities including sales, hiring sales professionals,
geographic distribution of sales territories and training junior sales
representatives. From 1992 to June 1995, Mr. Baxendell was employed by Mastech
Corporation ("Mastech") as a National Account Manager with responsibilities
including contacting prospective clients, sales, maintaining client
relationships and training junior sales representatives.
Anthony P. Kernan has been Director of Sales of the Company since June 1995
with responsibilities including opening and maintaining national accounts,
hiring sales professionals and personnel, and training junior sales
representatives. From 1992 to June 1995, Mr. Kernan was employed by Mastech as a
National Account Manager with responsibilities including sales and marketing of
Mastech software consulting and contract programming services.
Jolly Joseph Paily has been General Manager, Software Development--Resource
of the Company since February 1996. Mr. Paily served as a systems analyst for
SKL Technologies Pte. Ltd. from 1995 to February 1996, software consultant for
Blue Star Ltd. from October 1993 to January 1995, and an analyst programmer for
Nippon Denro Ispat Ltd. from August 1992 to September 1992.
Gaurang Damani has been General Manager, Software Development--Technical of
the Company since April 1996. Mr. Damani was a programmer/systems analyst for
Tata Unisys Ltd. from September 1993 to April 1996 and a graduate engineer
trainee with Larsen & Toubro from July 1993 to August 1993.
BOARD COMMITTEES
The Company's Audit Committee will be responsible for: (i) making an annual
recommendation to the Board of Directors to appoint independent public
accountants to audit the financial statements of the Company and to determine
the scope of such audits; (ii) meeting with the Company's independent public
accountants and with its internal accountants to review all accounting controls
and procedures of the Company; (iii) reviewing the reports from the Company's
independent public accountants with respect to management's compliance with U.S.
laws and regulations and the Company's policies with respect to ethics,
conflicts of interest and disbursements of funds; and (iv) reporting to the
Board of Directors with respect to the results of clauses (i), (ii) and (iii)
above. The members of the Audit Committee have not yet been appointed. A
majority of the members of the Audit Committee will be independent directors.
30
<PAGE> 32
The Compensation Committee will be responsible for administering any stock
option or stock purchase plans, unless otherwise provided by such plan or the
Board of Directors, and for reviewing and making recommendations to the Board of
Directors with respect to salaries, bonuses and other compensation of the
Company's executive officers. The Compensation Committee will administer the
1997 Plan. The members of the Compensation Committee have not yet been
appointed. A majority of the members of the Compensation Committee will be
independent directors.
The Board of Directors does not have a nominating committee. The selection
of nominees for the Board of Directors will be made by the entire Board of
Directors.
DIRECTOR COMPENSATION
The Company will pay each director who is not an executive officer an
annual retainer of $20,000, and all directors will be reimbursed for travel
expenses incurred in connection with attending board and committee meetings.
Directors are not entitled to additional fees for serving on committees of the
Board of Directors. In addition, under the 1997 Plan each independent director
of the Company will be granted options to purchase 20,000 shares of Common Stock
at an exercise price equal to the initial public offering price in the Offering
upon their appointment to the Board of Directors. See "Management--Stock Option
Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee prior to the Offering.
Accordingly, Messrs. Mallya and Hira, the Company's Chairman and President,
respectively, had responsibility for all decisions with respect to executive
officer compensation.
Mr. Mallya, Chairman and the beneficial owner of 94.7% of the outstanding
shares of Common Stock of the Company, is also deemed to be in "control" (within
the meaning of the Securities Act of 1933, as amended (the "Securities Act")) of
each company that is a member of the UB Group. See "Business--The UB Group." Any
transaction between the Company, on the one hand, and a company in the UB Group,
on the other hand, is a transaction between "affiliates" (within the meaning of
the Securities Act). In addition, Mr. Hira, President and a director of the
Company, was employed in various senior management capacities with the UB Group
and its affiliate, UB Services (as defined herein), from 1981 to 1995, and Mr.
Nalavadi, Senior Vice President, Chief Financial Officer and a director of the
Company, was employed in various senior management capacities with the UB Group
from 1984 to 1997. See "Management--Executive Officers and Directors."
Mr. Mallya 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."
In 1995, the Company made an advance to the UB Group of $150,000 which was
repaid in 1996. This represents the largest amount of indebtedness of the UB
Group to the Company in each of 1995 and 1996. In 1996, the Company borrowed
$258,000 from the UB Group, of which $100,000 was repaid in 1996. In the six
months ended June 30, 1997, the Company had repayments and advances to the UB
Group of $150,000 and $20,000, respectively. At June 30, 1997, advances to the
UB Group were $12,000. Generally, such advances were for working capital. The
advances to and the borrowings from the UB Group did not bear interest. In July
1996, the Company obtained the Line of Credit and ceased utilizing advances from
the UB Group to fund its working capital needs. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and Capital
Resources."
From time to time, the UB Group has provided certain services to the
Company, primarily involving the provision of administrative services to the
Company by UB Group employees and allowing the Company the use of certain office
space and facilities in locations where the UB Group has an office. Prior to
1997, such services were provided on an informal basis and not under a written
contractual arrangement, although the Company reimbursed the UB Group for any
out-of-pocket cost of the services provided. The aggregate annual
31
<PAGE> 33
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 Company has entered into Services Agreements with Mr. Mallya and
certain UB Group companies (the "Services Agreements") pursuant to which the UB
Group will provide services and accommodations to the Company, including the
right to use the "UB Group" name, 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 Agreements, which have an initial term of five years, require the
Company to pay the UB Group company providing the services or accommodations
compensation on terms no less favorable to the Company than those which would be
made to non-affiliated parties. Compensation for services will be based on the
estimated costs, including a reasonable allocation of direct and indirect
overhead costs, incurred by the UB Group company providing the services.
Compensation for use of facilities of a UB Group company will be based on the
provider's costs (including rent, taxes, utilities and other operating expenses)
for the portion of the facility used by the Company, prorated based on the
number of days of each month the Company actually uses the facility. The costs
incurred by the Company in the future pursuant to these agreements 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 for use on
projects generated by the Company during 1994, 1995 and the first three months
of 1996, for which UB Services charged the Company and the Company paid $65,000,
$231,000 and $102,000 in such respective periods. In such capacity, UB Services
acted as a vendor of IT professionals to the Company.
During 1994, 1995 and 1996, the Company collected, on behalf of UB
Services, receivables for services performed by UB Services for its own clients,
net of collection expenses, totaling $424,000, $764,000 and $344,000,
respectively, and remitted $337,000, $476,000 and $394,000, respectively, of
these collections to UB Services. In such capacity, the Company acted as
collection agent for UB Services. Upon completion of the Offering, the Company
has agreed to pay UB Services approximately $325,000, the remaining amount
resulting from these collection activities.
The Company also has entered into non-competition agreements with Mr.
Mallya and certain UB Group companies pursuant to which the UB Group (including
UB Services) and Mr. Mallya have agreed not, and to cause their respective
affiliates not, to compete with the Company or use the name "UBICS" and to cause
UB Services to cease business operations. Each non-competition agreement has a
term of five years subject to earlier termination upon certain events involving
a change in control of the Company.
In addition, the Company intends to enter into a sublease agreement with
the UB Group pursuant to which the Company will sublease a portion of its office
space in Sausalito, California to the UB Group. Pursuant to the sublease, which
will be for a term expiring on June 2, 1999, the UB Group will pay its pro rata
share of the rent and operating expenses payable by the Company under its lease.
The UB Group's annual rental and operating expense payment under the sublease
will be approximately $83,000. See "Business--Facilities."
The Company incurred various expenses and personnel costs on behalf of the
UB Group during 1996 and 1997. Such expenses and costs totaled $257,000 for 1996
and $443,000 for 1997 (as of September 30, 1997). The Principal Stockholder has
agreed that, no later than the completion of the Offering, the Company will be
reimbursed for the expenses and costs incurred by the Company on behalf of the
UB Group during 1997. See "Use of Proceeds" and "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and Capital
Resources."
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
earned by the Company's Chairman and President (collectively, the "Named
Executive Officers") for the year ended December 31, 1996. No other executive
officer received salary and bonus compensation for the year ended December 31,
1996 in excess of $100,000.
32
<PAGE> 34
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 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.
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<PAGE> 35
All outstanding options will vest in full and become exercisable upon the
occurrence of certain events specified in the 1997 Plan relating to a change in
control or possible change in control of the Company. In addition, any LSARs
granted in connection with a stock option will be exercisable for a period of 60
days following the occurrence of such events.
The Board has the authority to amend or terminate the 1997 Plan, provided
that stockholder approval of any amendment shall be obtained if the Board
determines, based on the recommendation of counsel, that stockholder approval is
necessary or advisable. No such amendment or termination does not adversely
affect any outstanding option unless the holder of such option has consented in
writing thereto.
As of September 30, 1997, the Company had not granted any options under the
1997 Plan. The Company intends to grant options to purchase an aggregate of
437,500 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. The agreements prohibit the executive officers from
competing with UBICS during their employment with UBICS and for one year
thereafter, and from improperly disclosing or using UBICS' proprietary
information. The employment agreements also include the provisions relating to
severance described below.
The employment agreements with each of Messrs. Mallya, Hira, Nalavadi and
Srinivas provide that if, on or after the date of a "Change in Control" (as
defined herein), UBICS, for any reason, terminates the employee's employment or
the employee resigns "for good reason" (as defined herein), then UBICS shall pay
to the employee within five days following the date of termination or date of
resignation, as applicable: (i) the employee's salary and benefits through the
termination date or resignation date, both as in effect on the date prior to the
date of the Change in Control; and (ii) the amount of any bonus payable to the
employee for the year in which the Change in Control occurred, pro rated to take
into account the number of days that have elapsed in such year prior to the
termination date or resignation date. In addition, during a period following the
termination or resignation date equal to the remaining term of the employee's
employment agreement as of the date immediately prior to such termination or
resignation date, UBICS shall continue to pay to the employee his annual salary,
as in effect on the day prior to the date of the Change in Control, on the dates
when such salary would have been payable had the employee remained employed by
UBICS and shall continue to provide to the employee during such specified
period, at no cost to the employee, the benefits the employee was receiving on
the day prior to the date of the Change in Control or benefits substantially
similar thereto.
For purposes of the employment agreements, a "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Mallya or an
affiliate of Mallya) 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
34
<PAGE> 36
purposes of such agreements, be considered as a member of the Incumbent Board);
(iii) an agreement by UBICS to consolidate or merge with any other entity
pursuant to which UBICS will not be the continuing or surviving corporation or
pursuant to which shares of the Common Stock of UBICS would be converted into
cash, securities or other property, other than a merger of UBICS in which
holders of the Common Stock of UBICS immediately prior to the merger would have
the same proportion of ownership of Common Stock of the surviving corporation
immediately after the merger; (iv) an agreement of UBICS to sell, lease,
exchange or otherwise transfer in one transaction or a series of related
transactions substantially all of the assets of UBICS; (v) the adoption of any
plan or proposal for a complete or partial liquidation or dissolution of UBICS;
or (vi) an agreement to sell more than 50% of the outstanding voting securities
of UBICS in one or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and Exchange
Commission.
The term "good reason" means: (i) a material diminution by UBICS of the
employee's title or responsibilities, as that title and those responsibilities
existed on the day prior to the date of a Change in Control; or (ii) a material
diminution by UBICS in the employee's salary, benefits or incentive or other
forms of compensation, all as in effect on the day prior to the date of a Change
in Control.
INDEMNIFICATION AGREEMENTS
The Company intends to enter into indemnification agreements with each of
its directors pursuant to which the Company has agreed to indemnify such party
to the full extent permitted by law, subject to certain exceptions, if such
party becomes subject to an action because such party is a director, officer,
employee, agent or fiduciary of the Company.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH THE UB GROUP
The Company has entered and intends to enter into certain arrangements and
agreements with companies in the UB Group. See "Management--Executive Officers
and Directors" and "Management--Compensation Committee Interlocks and Insider
Participation."
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> 37
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1997, and as
adjusted to reflect the sale of the shares offered hereby, by: (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each Selling Stockholder; (iii) each director of the
Company; (iv) each Named Executive Officer; and (v) all directors and executive
officers of the Company as a group. All information with respect to beneficial
ownership has been furnished to the Company by the persons listed below. Except
as noted, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)
-------------------- TO BE --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SOLD NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
United Breweries Information Consultancy
Services Ltd.(2)............................ 4,733,751 94.7% 400,000 4,333,751 66.7%
Vijay Mallya(3)(4)(5)......................... 4,733,751 94.7 400,000 4,333,751 66.7
Arco Investment Group Ltd.(6)................. 100,000 2.0 100,000 -- --
Manohar B. Hira(4)(5)......................... -- -- -- -- --
O'Neil Nalavadi(4)(5)......................... -- -- -- -- --
All directors and executive officers as a
group (4 persons)(3)(5)..................... 4,733,751 94.7 400,000 4,333,751 66.7
</TABLE>
- ---------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes shares as to which the
listed person has or shares voting and/or investment power. Shares of Common
Stock subject to options or warrants currently exercisable or exercisable
within 60 days after the date of this Prospectus are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage of any
other person.
(2) United Breweries Information Consultancy Services Ltd., the Principal
Stockholder, is a corporation organized under the laws of the British Virgin
Islands. The Principal Stockholder's address is P.O. Box 3149, Pasea Estate,
Road Town, BVI. Vijay Mallya (directly and through other entities owned and
controlled by Mr. Mallya) owns all of the outstanding equity interests in
the Principal Stockholder and therefore is the indirect beneficial owner of
such shares.
(3) Includes shares owned by the Principal Stockholder, which shares are
indirectly beneficially owned by Mr. Mallya as set forth in footnote 2.
(4) The address of Mr. Mallya, Mr. Hira and Mr. Nalavadi is c/o UBICS, Inc., 100
Sainte Claire Plaza, 1121 Boyce Road, Pittsburgh, Pennsylvania 15071.
(5) Amounts shown do not include shares of Common Stock that may be acquired
pursuant to the exercise of options to be granted under the 1997 Plan upon
completion of the Offering. Such options will have an exercise price equal
to the initial public offering price in the Offering and will vest in three
equal installments on the six-month, two-year and three-year anniversaries
of the date of grant. These options will be granted to the directors and
Named Executive Officers in the following share amounts: Mr. Mallya, 75,000;
Mr. Hira, 90,000; and Mr. Nalavadi, 52,000.
(6) The address of Arco Investment Group Ltd. ("Arco") is Residence Du
Metropole, 19th Avenue, Des Spelugues, MC 98,000 Monaco. A beneficiary of
Arco is a member of the supervisory board of the UB Group and a director of
certain UB Group companies.
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<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, par value $.01 per
share, and 2,000,000 shares of Preferred Stock, par value $.01 per share. The
following description of the capital stock of the Company is a summary, and as
such, it does not purport to be complete and is subject, and qualified by
reference to, the more complete descriptions contained in: (i) the Certificate
of Incorporation and the Bylaws, each of which has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part; and (ii) the
certificate of designation relating to any series of Preferred Stock that may be
established by the Board of Directors. Upon completion of the Offering, the
Company will have outstanding 6,500,000 shares of Common Stock and no shares of
Preferred Stock.
COMMON STOCK
The Company is authorized to issue up to 20,000,000 shares of Common Stock.
Subject to the rights and preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive dividends,
when, if and as declared by the Board of Directors of the Company.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by stockholders. Stockholders do not have cumulative
voting rights in the election of directors, meaning that the holders of a
majority of the shares entitled to vote in any election of directors may elect
all of the directors standing for election. The Bylaws require stockholders
desiring to either nominate persons for election as a director or present
matters for business at a stockholders meeting to give advance notice of such
nominations and/or matters to the Company.
Generally, whenever any corporate action is to be taken by vote of the
stockholders of the Company, or by a class of such stockholders of the Company,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by such stockholders, or by such class of stockholders, entitled to
vote thereon. The Bylaws provide that the stockholders may remove any director,
any class of directors or the entire Board of Directors without cause by the
vote of a majority of the votes cast by stockholders entitled to vote thereon.
The Bylaws permit stockholder action to be taken by the written consent of the
stockholders entitled to cast the minimum number of votes that would be
necessary to authorize the action at a meeting at which all stockholders
entitled to vote thereon are present and voting.
The Certificate of Incorporation provides that the Board of Directors may
fix the number of directors of the Company (the Board will fix the number of
directors at five following completion of the Offering). The Certificate of
Incorporation further provides that the Board shall be divided into three
classes of directors, each class as nearly equal in number as possible, with one
class being elected each year for a three-year term. The classification of the
Board helps to ensure continuity of corporate leadership and policy; however, it
also has the effect of making it more difficult for a person to acquire control
of the Company's Board of Directors because at least two annual meetings are
necessary to effect a change in a majority of the Company's directors.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after the payment of all liabilities of the Company and subject to the
liquidation preferences of any outstanding Preferred Stock. The Common Stock
does not carry preemptive rights, is not redeemable, does not have any
conversion rights, is not subject to further calls and is not subject to any
sinking fund provisions. The outstanding shares of Common Stock are and the
shares offered by the Company in the Offering will be, when issued and paid for,
fully paid and nonassessable. Except in certain circumstances as discussed below
under "Certain Provisions Affecting Control of the Company," the Common Stock is
not subject to discriminatory provisions based on ownership thresholds.
The rights, preferences and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. See "--Preferred Stock."
37
<PAGE> 39
PREFERRED STOCK
The Company is authorized to issue up to 2,000,000 shares of Preferred
Stock. The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue such shares of
Preferred Stock in one or more series, with such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be established by
the Board of Directors at the time of issuance.
The issuance of Preferred Stock by the Board of Directors could adversely
affect the rights of holders of Common Stock. For example, the issuance of
shares of Preferred Stock could result in securities outstanding that would have
preference over the Common Stock with respect to dividends and in liquidation
and that could (upon conversion or otherwise) enjoy all of the rights of the
Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by third persons to obtain
control of the Company through merger, tender offer, proxy or consent
solicitation or otherwise, by making such attempts more difficult to achieve or
more costly. The Board of Directors may issue Preferred Stock without
stockholder approval and with voting rights that could adversely affect the
voting power of holders of Common Stock. There are no agreements or
understandings for the issuance of Preferred Stock, and the Company has no plans
to issue any shares of Preferred Stock. See "Risk Factors--Possible Issuances of
Preferred Stock."
CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY
Certain provisions of the Certificate of Incorporation and the DGCL operate
with respect to extraordinary corporate transactions, such as mergers,
reorganizations, tender offers, sales or transfers of substantially all of the
Company's assets or the liquidation of the Company, and could have the effect of
delaying or making more difficult a change in control of the Company in certain
circumstances.
As permitted by the provisions of the DGCL, the Certificate of
Incorporation eliminates in certain circumstances the monetary liability of
directors of the Company for a breach of their fiduciary duty as directors.
These provisions do not eliminate the liability of a director for: (i) a breach
of the director's duty of loyalty to the Company or its stockholders; (ii) acts
or omissions by a director not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) liability arising under Section
174 of the DGCL (relating to the declaration of dividends and purchase or
redemption of shares in violation of the DGCL); or (iv) any transaction from
which the director derived an improper personal benefit. In addition, these
provisions do not limit the rights of the Company or its stockholders, in
appropriate circumstances, to seek equitable remedies such as injunctive or
other forms of non-monetary relief. Such remedies may not be effective in all
cases.
In addition, as permitted by the DGCL, the Certificate of Incorporation
requires the Company to indemnify all directors and officers of the Company.
Under such provisions, any director or officer who, in his or her capacity as
such, is made or threatened to be made a party to any suit or proceeding must be
indemnified if such director or officer acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company. The Certificate of Incorporation and the DGCL further provide that such
indemnification is not exclusive of any other rights to which such individuals
may be entitled under the Certificate of Incorporation, any agreement, insurance
policies, vote of stockholders or disinterested directors or otherwise. The
Company intends to purchase directors' and officers' insurance.
The Certificate of Incorporation also provides that the provisions of the
Certificate of Incorporation that govern amending certain provisions of the
Certificate of Incorporation, establishing the Company's classified Board of
Directors and establishing additional voting requirements may be amended only by
the affirmative vote of not less than two-thirds of the outstanding shares of
voting stock of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
38
<PAGE> 40
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 6,500,000 shares of
Common Stock outstanding. In addition, the Company will have issued upon
completion of the Offering options exercisable for an aggregate of 457,500
shares of Common Stock at an exercise price equal to the initial public offering
price in the Offering. See "Capitalization."
Of the shares of Common Stock outstanding upon completion of the Offering,
the 2,000,000 shares sold in the Offering (together with any shares sold upon
exercise of the Underwriters' over-allotment option) will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares purchased by an "affiliate" of the Company, as that term is
defined in Rule 144 under the Securities Act ("Affiliate"), generally may be
sold only in compliance with the requirements of Rule 144 under the Securities
Act ("Rule 144") described below. The remaining 4,500,000 shares of Common Stock
will be restricted securities within the meaning of Rule 144, and may not be
sold in the absence of registration under the Securities Act unless an exemption
from registration is available, including the exemption provided by Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Offering, a person (or persons whose shares are aggregated in a group) who
has beneficially owned restricted securities for at least one year from the date
such restricted securities were last acquired from the Company or an Affiliate,
including a person who may be deemed an Affiliate of the Company, may sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then outstanding shares of Common Stock of the
Company (65,000 shares after giving effect to the Offering) or the average
weekly trading volume of the Common Stock as reported on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
also are subject to certain restrictions relating to manner of sale, notice and
the availability of current public information about the Company. In addition,
under Rule 144(k) of the Securities Act, a person who is not an Affiliate of the
Company at any time during the 90 day period preceding a sale would be entitled
to sell such shares immediately following the Offering without regard to the
volume limitations, manner of sale provisions or notice or other requirements of
Rule 144 if a period of at least two years has elapsed from the date the shares
were last acquired from the Company or an Affiliate.
The Company's executive officers and directors and the Selling Stockholders
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Parker/ Hunter Incorporated,
on behalf of the Underwriters, directly or indirectly, sell, offer, contract or
grant an option to sell (including, without limitation, any short sale),
transfer, establish an open put equivalent position or otherwise dispose of any
shares of Common Stock, options or warrants to acquire shares of Common Stock
held by them, or publicly announce the intention to do any of the foregoing. In
addition, the Company has agreed that, for a period of 180 days after the date
of this Prospectus, it will not, without the prior written consent of
Parker/Hunter Incorporated, on behalf of the Underwriters, directly or
indirectly, sell, offer, contract or grant an option to sell, transfer or
otherwise dispose of or announce the offering of, or the filing of any
registration statement under the Securities Act, in respect of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or publicly
announce the intention to do any of the foregoing. See "Underwriting." Following
the 180 day lock-up period, all of the restricted securities will become
eligible for sale, subject to the manner of sale, volume, and other conditions
of Rule 144.
Promptly following completion of the Offering, the Company also intends to
file a registration statement on Form S-8 with the Commission registering
750,000 shares of Common Stock reserved for issuance under the 1997 Plan. Once
registered, shares issued under the 1997 Plan upon exercise of options generally
may be sold immediately in the public market subject to the lock-up restrictions
described above.
Prior to the Offering there has been no market for the Common Stock of the
Company. The Company can make no prediction as to the number of shares that will
be sold under Rule 144, or the effect, if any, that market sales of shares of
Common Stock or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant numbers
of shares of the Common Stock in the public market, or the perception that such
sales could occur, could adversely affect the market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities. See "Risk Factors--Shares Eligible for Future
Sale."
39
<PAGE> 41
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for whom
Parker/Hunter Incorporated and Scott & Stringfellow, Inc. are serving as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders the number of shares of Common Stock
set forth below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
----------------------------------------------------- ----------------
<S> <C>
Parker/Hunter Incorporated...........................
Scott & Stringfellow, Inc............................
Total...................................... 2,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the shares are such that if any of the shares are
purchased by the Underwriters pursuant to the Underwriting Agreement, all the
shares agreed to be purchased by the Underwriters must be purchased (other than
the shares covered by the over-allotment option described below).
The Principal Stockholder has granted to the Underwriters an option to
purchase up to an additional 300,000 shares of Common Stock exercisable solely
to cover over-allotments, if any, in the sale of the shares offered by this
Prospectus. Each Underwriter will be committed, subject to certain conditions,
to purchase the additional shares in approximately the same proportion as set
forth in the above table. The option is exercisable within 30 days after the
date of this Prospectus at a price per share equal to the public offering price,
less the underwriting discount.
The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the Common Stock to the public initially at the
initial public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow and such dealers may reallow a
discount not to exceed $ per share to certain other dealers. After the
initial public offering, the public offering price, concessions and discounts
may be changed by the Representatives.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments which the Underwriters may be
required to make in respect thereof.
The Company's executive officers and directors and the Selling Stockholders
have entered into a "lock-up" agreement with the Underwriter pursuant to which
they have agreed that for a period of 180 days following the date of this
Prospectus they will not, without the prior written consent of Parker/Hunter
Incorporated, on behalf of the Underwriters, directly or indirectly, sell,
offer, contract or grant an option to sell (including without limitation any
short sale), transfer, establish an open put equivalent position or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock held by them, or publicly announce the intention to do any of the
foregoing, except for the shares of Common Stock offered hereby. In addition,
the Company has entered into a similar "lock-up" agreement with the Underwriters
pursuant to which it has agreed that for a period of 180 days after the date of
this Prospectus it will not, without the consent of Parker/Hunter Incorporated,
on behalf of the Underwriters, directly or indirectly, sell, offer, contract or
grant an option to sell, transfer or otherwise dispose of, or announce the
offering of, or file any registration statement under the Securities Act in
respect of, any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities convertible into or exchangeable
40
<PAGE> 42
or exercisable for shares of Common Stock, or publicly announce the intention to
do any of the foregoing, except for shares of Common Stock offered hereby. See
"Shares Eligible for Future Sale."
The Representative has informed the Company that it does not expect
discretionary sales by Underwriters to exceed 5% of the shares of the Common
Stock offered hereby.
The Underwriters have reserved for sale, at the initial public offering
price in the Offering, shares of Common Stock for certain employees and
directors of the Company, and certain outside parties, who have expressed an
interest in purchasing such shares of Common Stock for investment purposes only.
Such employees, directors and outside parties are expected to purchase, in the
aggregate, not more than 1.0% of the Common Stock offered in the Offering. The
number of shares available for sale to the general public in the Offering will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered to the general public on the
same basis as other shares offered hereby.
Prior to the Offering, there has been no established public trading market
for the Common Stock. See "Risk Factors--No Prior Public Market; Possible
Volatility of Stock Price." Accordingly, the initial public offering price for
the Common Stock will be determined by negotiations among the Company, the
Selling Stockholder and the Representatives. Among the factors to be considered
in determining the initial public offering price will be prevailing market
conditions, the historical performance and future prospects of the Company and
its industry in general, the Company's position in its industry and certain
financial and operating information of companies engaged in activities similar
to those of the Company. The estimated initial public offering price set forth
on the cover page of this Preliminary Prospectus is subject to change as a
result of market conditions and other factors.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission (the "Commission") may limit the ability of
the Underwriters and certain selling group members, if any, to bid for and
purchase the Common Stock. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Common Stock. If the
Underwriters create a short position in the Common Stock in connection with the
Offering, i.e., if they sell more shares of Common Stock than are set forth on
the cover page of this Prospectus, the Underwriters may reduce that short
position by purchasing Common Stock in the open market. The Underwriters may
also elect to reduce any short position by exercising all or part of the
over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. Neither the Company nor the
Underwriters make any representations or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor the Underwriters
make any representation that the Underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
The Common Stock has been approved for quotation and trading on the Nasdaq
National Market under the symbol "UBIX."
41
<PAGE> 43
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby and certain
other legal matters in connection with the Offering will be passed upon for the
Company by Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania. Certain legal
matters in connection with the Offering will be passed upon for the Underwriters
by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania.
EXPERTS
The financial statements as of December 31, 1995 and 1996 and for each of
the three years ended December 31, 1996 and as of June 30, 1997 and for the six
months then ended included in this Prospectus and the financial statement
schedule included in this Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, to the extent and for the periods
as indicated in their reports with respect thereto, and are included therein in
reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a Registration Statement, of
which this Prospectus constitutes a part, on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
with respect to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part of the Registration Statement. Statements contained in this Prospectus
concerning the contents of any contract or any other document referred to are
not necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified by such reference to such exhibit.
The Registration Statement, including exhibits and schedules thereto, may
be inspected without charge at the Commission's public reference facilities
maintained at its principal office, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the following regional offices of the Commission: Seven World Trade
Center, Room 1400, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street N.W., Washington, D.C. 20549, Room 1024, at prescribed rates.
The Registration Statement, including the exhibits and schedules thereto, is
also available at the Commission's site on the World Wide Web at
http://www.sec.gov. Copies of reports, proxy and information statements and
other information regarding the Company are also available at the Commission's
web site.
Prior to the Offering, the Company has not been required to file reports
under the Exchange Act. However, following completion of the Offering, the
Company will be required to file reports, proxy statements and other information
with the Commission pursuant to the Exchange Act. Such reports, proxy statements
and other information can be inspected and copied at the addresses, and may be
accessed electronically at the web site, set forth above. The Company intends to
furnish to its stockholders annual reports containing audited financial
statements following the end of each fiscal year and to make available quarterly
reports containing unaudited summary financial information for the first three
fiscal quarters of each fiscal year.
42
<PAGE> 44
GLOSSARY
Set forth below are the definitions of certain terms used in this
Prospectus:
"Applications" are the computer software programs that perform a desired
task, such as inventory control analysis, cost analysis, accounts receivable and
payable, payroll, or shipping and scheduling.
"Client/server" describes the linking, or networking, of two or more
computers to allow multiple users to access and share information. Client/server
design is contrasted with "mainframe" design.
"Conversion" is the process of converting data and applications from one
format to another in connection with an organization's adoption of different,
usually more technologically advanced, hardware or software.
"Distributed computing environments" describes the use of multiple types of
hardware and software applications within an organization, often in multiple
locations.
"Enterprise resource planning" or "ERP" packages, such as Oracle, Baan,
PeopleSoft and SAP, are large, integrated applications packages used to manage
information on an enterprise-wide basis.
"Euro-currency conversion" refers to the modification of software
applications to reflect the adoption of a single currency by countries that are
members of the European Union.
"Hardware" is the physical computer system on which software applications
operate.
"Information technology" describes the use of computers and software
applications to manage information within an organization.
"Legacy" hardware and applications are information technology systems based
on older technologies.
"Mainframe" describes a large, centralized computer on which an
organization maintains information.
"Migration" is the process of moving applications and data from one
computing environment, such as a mainframe environment, to another, such as a
client/server environment.
"Object-oriented programming" is a type of software design in which various
independently developed software applications are linked together as needed to
achieve the desired programming result.
"Operating system" is the software that controls the allocation of computer
resources to various software applications in order to maximize the efficiency
of those resources.
"Software" is the code that directs computer hardware to manipulate other
software or data in a desired way.
"Year 2000" refers to the software problems resulting from the date change
on December 31, 1999 to the year 2000. Many software applications must be
modified in order to operate properly after this date.
43
<PAGE> 45
UBICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1995 and 1996, June 30, 1996 (unaudited) and June
30, 1997............................................................................ F-3
Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1996 (unaudited) and 1997............................. F-4
Statements of Changes in Stockholders' Equity for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1997................................ F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the
six months ended June 30, 1996 (unaudited) and 1997................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To UBICS, Inc.:
We have audited the accompanying balance sheets of UBICS, Inc. (a Delaware
corporation) as of December 31, 1995 and 1996 and June 30, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996 and for the six
months ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of UBICS, Inc. as of December
31, 1995 and 1996 and June 30, 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996 and
for the six months ended June 30, 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
September 5, 1997
(except for the matters discussed in
Note 9 for which the date is
September 8, 1997)
F-2
<PAGE> 47
UBICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------- ------------------------
1995 1996 1997
-------- ---------- 1996 ----------
----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 93,698 $ 219,427 $ 147,500
Accounts receivable, net of allowance for
doubtful accounts of $0, $50,000, $16,000
and
$125,000, respectively................... 281,175 1,343,245 710,388 2,342,259
Unbilled receivables........................ 274,004 943,818 819,223 1,725,722
Employee advances........................... 23,410 96,364 18,949 123,033
Due from principal stockholder.............. -- -- -- 383,371
Prepaids and other.......................... 6,397 16,802 13,050 18,115
Deferred tax asset.......................... -- 56,811 -- 67,940
-------- ---------- ---------- ----------
Total current assets..................... 584,986 2,550,738 1,781,037 4,807,940
-------- ---------- ---------- ----------
Property and equipment:
Computer equipment.......................... 26,376 44,227 38,578 67,386
Furniture and fixtures...................... 8,198 14,678 11,345 22,442
Office and other equipment.................. 3,666 4,316 3,997 4,551
-------- ---------- ---------- ----------
Total property and equipment............. 38,240 63,221 53,920 94,379
Accumulated depreciation.................... (3,766) (13,068) (8,004) (20,311)
-------- ---------- ---------- ----------
Net property and equipment............... 34,474 50,153 45,916 74,068
-------- ---------- ---------- ----------
Total assets........................ $619,460 $2,600,891 $1,826,953 $4,882,008
======== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft.............................. $ 78,294 $ -- $ -- $ --
Credit facility borrowings.................. -- 300,000 250,000 500,000
Accounts payable............................ 175,787 517,778 570,206 1,329,370
Payroll liabilities......................... 71,180 689,680 402,706 892,740
Due to affiliates, net...................... 225,056 483,483 491,132 313,483
Accrued taxes............................... 9,584 293,840 48,409 770,523
Other current liabilities................... 49,684 87,001 17,567 169,037
-------- ---------- ---------- ----------
Total current liabilities................ 609,585 2,371,782 1,780,020 3,975,153
Long-term liabilities......................... -- -- -- --
Total liabilities........................ 609,585 2,371,782 1,780,020 3,975,153
-------- ---------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued and
outstanding.............................. -- -- -- --
Common stock, no par value, 20,000,000
shares authorized, 5,000,000 shares
issued and outstanding................... 3,000 3,000 3,000 3,000
Retained earnings........................... 6,875 226,109 43,933 903,855
-------- ---------- ---------- ----------
Total stockholders' equity............... 9,875 229,109 46,933 906,855
-------- ---------- ---------- ----------
Total liabilities and stockholders'
equity............................ $619,460 $2,600,891 $1,826,953 $4,882,008
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 48
UBICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 302,906 $1,453,743 $9,072,307 $3,411,030 $8,685,255
Cost of revenues................. 178,224 993,404 6,373,759 2,454,860 5,983,152
---------- ---------- ---------- ---------- ----------
Gross profit................... 124,682 460,339 2,698,548 956,170 2,702,103
Selling, general and
administrative expense......... 119,568 452,392 2,226,926 871,130 1,537,612
---------- ---------- ---------- ---------- ----------
Income from operations........... 5,114 7,947 471,622 85,040 1,164,491
Interest expense................. -- -- 22,699 9,157 21,191
---------- ---------- ---------- ---------- ----------
Income before income taxes....... 5,114 7,947 448,923 75,883 1,143,300
Provision for income taxes....... 2,040 5,300 229,689 38,825 465,554
---------- ---------- ---------- ---------- ----------
Net income..................... $ 3,074 $ 2,647 $ 219,234 $ 37,058 $ 677,746
========== ========== ========== ========== ==========
Net income per share............. $ 0.00 $ 0.00 $ 0.04 $ 0.01 $ 0.14
========== ========== ========== ========== ==========
Weighted average shares
outstanding.................... 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 49
UBICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993..................... 5,000,000 $3,000 $ 1,154 $ 4,154
Net income................................... -- -- 3,074 3,074
--------- ------ -------- ---------
Balance, December 31, 1994..................... 5,000,000 3,000 4,228 7,228
Net income................................... -- -- 2,647 2,647
--------- ------ -------- ---------
Balance, December 31, 1995..................... 5,000,000 3,000 6,875 9,875
Net income................................... -- -- 219,234 219,234
--------- ------ -------- ---------
Balance, December 31, 1996..................... 5,000,000 3,000 226,109 229,109
Net income................................... -- -- 677,746 677,746
--------- ------ -------- ---------
Balance, June 30, 1997......................... 5,000,000 $3,000 $903,855 $ 906,855
========= ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 50
UBICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- ------------------------
1994 1995 1996 1997
-------- -------- ----------- 1996 ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 3,074 $ 2,647 $ 219,234 $ 37,058 $ 677,746
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation................... 136 3,573 9,302 4,238 7,243
Changes in operating assets and
liabilities--
Accounts receivable, net..... (26,586) (247,799) (1,062,070) (429,213) (999,014)
Unbilled receivables......... (36,642) (233,782) (669,814) (545,219) (781,904)
Employee advances............ (7,030) (16,380) (72,954) 4,461 (26,669)
Due from principal
stockholder............... -- -- -- -- (383,371)
Due to affiliates, net....... 89,425 137,852 258,427 266,076 (170,000)
Deferred tax asset........... -- -- (56,811) -- (11,129)
Prepaids and other........... (1,300) (5,097) (10,405) (6,653) (1,313)
Bank overdraft............... -- 78,294 (78,294) (78,294) --
Accounts payable............. 7,815 157,307 341,991 394,419 811,592
Payroll liabilities.......... -- 71,180 618,500 331,526 203,060
Accrued taxes and other
current liabilities....... 6,360 52,024 321,573 6,708 558,719
-------- -------- ----------- ----------- ---------
Net cash provided (used) by
operating activities......... 35,252 (181) (181,321) (14,893) (115,040)
-------- -------- ----------- ----------- ---------
Cash flows from investing
activities:
Purchases of property and
equipment...................... -- (37,560) (24,981) (15,680) (31,158)
-------- -------- ----------- ----------- ---------
Net cash used by
investing activities......... -- (37,560) (24,981) (15,680) (31,158)
-------- -------- ----------- ----------- ---------
Cash flows from financing
activities:
Proceeds from borrowings.......... -- -- 300,000 250,000 200,000
-------- -------- ----------- ----------- ---------
Net cash provided by
financing activities......... -- -- 300,000 250,000 200,000
-------- -------- ----------- ----------- ---------
Net increase (decrease) in cash and
cash equivalents.................. 35,252 (37,741) 93,698 219,427 53,802
Cash and cash equivalents, at
beginning of year................. 2,489 37,741 -- -- 93,698
-------- -------- ----------- ----------- ---------
Cash and cash equivalents, at
end of year....................... $ 37,741 $ -- $ 93,698 $ 219,427 $ 147,500
======== ======== ========== =========== =========
Supplemental data:
Cash payments for interest........ $ -- $ -- $ 22,699 $ 9,157 $ 21,191
Cash payments for income taxes.... $ -- $ 204 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 51
UBICS, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION RELATED TO JUNE 30, 1996 IS UNAUDITED)
1. OPERATIONS:
UBICS, Inc. ("UBICS" or "the Company"), a Delaware corporation, is a
rapidly growing provider of information technology services to large and
mid-sized organizations. The Company provides its clients with a wide range of
professional services in such areas as client/server design and development,
enterprise resource planning package implementation and customization,
applications maintenance programming and database administration.
The Company is indirectly beneficially owned by Vijay Mallya, the chairman
of the Company.
The Risk Factors on page 5 of the Prospectus entitled "Recruitment and
Retention of IT Professionals," "U.S. Regulation of Immigration" and
"Concentration of Revenues; Risk of Termination" are incorporated herein by
reference.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements reflect the application of the
following significant accounting policies:
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Revenue Recognition
The Company recognizes revenue on its time-and-materials contracts as the
services are performed for clients.
Unbilled Receivables
Unbilled receivables represent time and materials provided to customers in
the last month of each fiscal period which are billed early in the following
month.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the properties as
follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Computer equipment............................... 5
Furniture and fixtures........................... 7
Office and other equipment....................... 7
</TABLE>
Disclosures about Fair Value of Financial Instruments
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
during 1996.
The following methods and assumptions were used to estimate fair value of
each class of financial instrument for which it is practicable to estimate that
value:
Cash and Cash Equivalents--The carrying amount approximates fair value
because of the short maturity of those instruments.
F-7
<PAGE> 52
Long-Term Debt--The fair values and carrying amounts of the Company's
line of credit are deemed to be approximately equivalent as it bears
interest at a floating rate based upon current market rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:
The Company has derived a significant portion of its revenues from a
relatively limited number of clients.
The following table presents the Company's five largest clients during each
of the years ended December 31, 1994, 1995 and 1996 and the six months ended
June 30, 1996 and 1997 and the approximate percentage of revenue from each
client for the respective periods:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER ENDED JUNE
31, 30,
---------------------- -------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Client A........................................... 40% -- -- -- --
Client B........................................... 33% 12% -- -- --
Client C........................................... 17% -- -- -- --
Client D........................................... -- 18% 14% 16% 11%
Client E........................................... -- 13% -- -- --
Client F........................................... -- 10% -- -- --
Client G........................................... -- -- 8% 8% 9%
Client H........................................... -- -- 8% 7% 4%
Client I........................................... -- -- 7% -- 8%
Client J........................................... -- -- 6% 6% --
Others, individually and collectively less than 10%
of revenue....................................... 7% 7% -- 6% 5%
---- ---- ---- ---- ----
Total of Five Largest Clients................. 97% 60% 43% 43% 37%
</TABLE>
The Company grants credit to clients based upon management's assessment of
their creditworthiness. The Company's revenues and resulting accounts receivable
are derived primarily from large and mid-sized organizations in various
industries throughout the U.S.
4. REVOLVING CREDIT FACILITY:
The Company has available borrowings under a revolving credit facility with
PNC Bank, National Association ("PNC"). Borrowings under this arrangement are
limited to $600,000, bear interest at prime (8.50%, 8.25%, 8.25% and 8.50% at
December 31, 1995 and 1996 and June 30, 1996 and 1997, respectively) as defined
plus 0.5% and are payable upon demand. The revolving credit facility is secured
by the assets of the Company and personally guaranteed by the Company's
chairman.
There were no borrowings under this arrangement during the year ended
December 31, 1995. Borrowings of $250,000, $300,000 and $500,000 were
outstanding as of June 30, 1996, December 31, 1996 and June 30, 1997,
respectively.
Average outstanding borrowings under this arrangement were $250,438,
$236,264 and $475,138 for the year ended December 31, 1996 and the six months
ended June 30, 1996 and 1997, respectively.
On September 5, 1997, the maximum amount available under the Company's
revolving credit facility with PNC was increased to $1,000,000.
F-8
<PAGE> 53
5. LEASE OBLIGATIONS:
The Company leases real estate and facilities at several locations. Lease
expenses charged to operations were $9,450, $39,594, $126,448, $46,961 and
$55,505, respectively, for the years ended December 31, 1994, 1995 and 1996 and
the six months ended June 30, 1996 and 1997.
Minimum future rental payments under noncancelable operating leases for
each of the next five years are as follows as of June 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
- ------------
<S> <C> <C>
1998................................................... $ 111,010
1999................................................... 97,076
---------
Totals................................................. $ 208,086
=========
</TABLE>
6. RELATED PARTY TRANSACTIONS:
As of December 31, 1995 and 1996 and June 30, 1996 and 1997, the Company
had a net payable to the UB Group, including UB Information and Consultancy
Services Ltd. ("UB Services"), totaling $225,056, $483,483, $491,132 and
$313,483, respectively, resulting from the Company's collection of receivables
on behalf of UB Services and advances to or from the UB Group. The Company
ceased collection of receivables on behalf of UB Services and ceased all other
transactions with UB Services during the year ended December 31, 1996.
As of June 30, 1997 the Company has amounts due from the principal
stockholder totaling $383,371 resulting from expenses incurred by the Company on
behalf of the UB Group.
Certain expenses were incurred by the Company on behalf of the UB Group, of
which $0, $256,818, $124,913 and $0 are included in selling, general and
administrative expenses in the accompanying statements of operations for the
years ended December 31, 1995 and 1996 and the six months ended June 30, 1996
and 1997, respectively.
7. EARNINGS PER SHARE:
The earnings per share calculated in the accompanying financial statements
is based on a weighted average of 5,000,000 shares. The Company's stockholders'
equity accounts and the number of shares in the accompanying financial
statements have been retroactively restated to give effect to the stock split
and increase in authorized capital stock as described in Note 9 to the financial
statements.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement on Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 differs from current accounting guidance in that earnings
per share is classified as basic earnings per share and diluted earnings per
share, compared to primary earnings per share and fully diluted earnings per
share under current standards. Basic earnings per share differs from primary
earnings per share in that it includes only the weighted average common shares
outstanding and does not include any dilutive securities in the calculation.
Diluted earnings per share under the new standard differs in certain
calculations compared to fully diluted earnings per share under existing
standards. Adoption of SFAS No. 128 is required for interim and annual periods
ending after December 15, 1997. Had the Company applied the provisions of SFAS
No. 128, there would have been no impact compared to that which has been
reported.
8. INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes are
recognized for temporary differences between the tax and financial bases of the
Company's assets and liabilities, using the enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income.
F-9
<PAGE> 54
As of September 5, 1997, the Company had not filed either its 1995 or 1996
federal or state income tax returns. The tax provision includes estimated
penalties and interest arising from not paying such taxes when due. The filing
of such returns was delayed pending a review of the structure of the UB Group
companies in the U.S. The Company anticipates that by September 8, 1997 it will
have filed its 1995 and 1996 federal and state income tax returns and paid the
aforementioned taxes and estimated penalties and interest.
The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes was as follows for the year ended
December 31, 1995 and 1996 and the six months ended June 30, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Federal income taxes at the statutory rate..... $2,800 $140,897 $23,816 $392,122
State income taxes at the statutory rate, net
of federal benefit........................... 1,200 22,792 3,853 63,432
Penalties and interest......................... 1,300 66,000 11,156 10,000
------ -------- ------- --------
Provision for income taxes..................... $5,300 $229,689 $38,825 $465,554
====== ======== ======= ========
</TABLE>
The provision for income taxes as shown in the accompanying statement of
operations for the year ended December 31, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 included the following components:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Current federal provision...................... $4,050 $253,297 $34,325 $410,472
Current state provision........................ 1,250 33,203 4,500 66,481
Deferred federal provision..................... -- (48,900) -- (9,850)
Deferred state provision....................... -- (7,911) -- (1,549)
------ -------- ------- --------
Provision for income taxes..................... $5,300 $229,689 $38,825 $465,554
====== ======== ======= ========
</TABLE>
The components of the deferred tax asset as of December 31, 1995 and 1996
and June 30, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -------------------
1995 1996 1996 1997
------ -------- ------- --------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts................ $ -- $ 19,750 $ -- $ 49,375
Accrued liabilities............................ -- 37,061 -- 18,565
------ -------- ------- --------
Deferred tax asset............................. $ -- $ 56,811 $ -- $ 67,940
====== ======== ======= ========
</TABLE>
9. SUBSEQUENT EVENTS:
On September 8, 1997, the following transactions occurred: (i) a
5,000-for-1 stock split effected in the form of a dividend; (ii) an increase in
the authorized capital stock to 20,000,000 shares of common stock and 2,000,000
shares of preferred stock; (iii) a change in the par value of the common stock
from no par to $.01 per share; and (iv) the change in the name of the Company to
UBICS, Inc.
Accordingly, the Company's stockholders' equity accounts and the number of
shares in the accompanying financial statements have been retroactively restated
to give effect to the stock split and increase in authorized capital stock.
F-10
<PAGE> 55
LOGO
<PAGE> 56
======================================================
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 5
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Data.............. 13
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................ 14
Business............................. 20
Management........................... 29
Certain Transactions................. 35
Principal and Selling Stockholders... 36
Description of Capital Stock......... 37
Shares Eligible for Future Sale...... 39
Underwriting......................... 40
Legal Matters........................ 42
Experts.............................. 42
Additional Information............... 42
Glossary............................. 43
Index to Financial Statements........ F-1
</TABLE>
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES, OR AN OFFER
TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
======================================================
======================================================
2,000,000 SHARES
LOGO
COMMON STOCK
----------------
PROSPECTUS
----------------
PARKER/HUNTER
INCORPORATED
SCOTT &
STRINGFELLOW, INC.
, 1997
======================================================
<PAGE> 57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All fees and
expenses are estimated other than the Securities and Exchange Commission
registration fee, NASD filing fee and Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee....................... $ 7,667
NASD filing fee........................................................... 2,800
Blue Sky fees and expenses................................................ 6,000
Nasdaq National Market listing fee........................................ 33,750
Transfer agent fees....................................................... 3,750
Printing and engraving expenses........................................... 125,000
Legal fees and expenses................................................... 175,000
Accounting fees and expenses.............................................. 90,000
Miscellaneous expenses.................................................... 26,033
--------
Total................................................................ $470,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
provisions for mandatory and discretionary indemnification of a corporation's
directors, officers and other personnel, and related matters.
Under Section 145(a), subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed circumstances
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action,
suit or proceeding, whether civil, criminal, administrative or investigative, to
which any of them is a party by reason of his being a representative, director
or officer of the corporation or serving at the request of the corporation as a
representative of another corporation, partnership, joint venture, trust or
other enterprise, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Under Section 145(c), indemnification is
mandatory to the extent that the officer or director has been successful on the
merits or otherwise in defense of any action or proceeding if the appropriate
standards of conduct are met.
Section 145(b) provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 145(d) provides that, unless ordered by a court, any
indemnification under Section 145(a) or 145(b) shall be made by the corporation
only as authorized in the specific case upon a determination that the
representative met the applicable standard of conduct, and such determination
will be made by the board of directors (i) by a majority vote of a quorum of
directors not parties to the action, suit or proceeding; (ii) if a quorum is not
obtainable, or if obtainable and a majority of disinterested directors so
directs, by independent legal counsel; or (iii) the stockholders.
Section 145(e) provides that expenses incurred by an officer, director,
employee or agent in defending a civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such amount if it
shall ultimately be determined that he or she is not entitled to be indemnified
by the corporation.
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
II-1
<PAGE> 58
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding that office.
Section 145(g) also grants to a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him or her in his or her capacity as officer or director, whether or
not the corporation would have the power to indemnify him or her against the
liability under the provisions of Section 145 of the DGCL.
Sections 145(h) and 145(i) extend the indemnification and advancement of
expenses provisions contained in Section 145 of the DGCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 145(j) provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, Section 145 of the DGCL, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Reference is made to Article VII of the Registrant's Amended and Restated
Certificate of Incorporation, which provides in general for the indemnification
of the Registrant's officers and directors to the fullest extent authorized by
law. The Registrant also intends to enter into indemnification agreements with
its directors providing for such indemnification to the fullest extent permitted
by law. In addition, the Registrant intends to obtain officers' and directors'
liability insurance which will insure against liabilities that officers and
directors of the Registrant may incur in such capacities.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases, or (iv) for any transaction from which the
director derived an improper personal benefit. Article VI of the Registrant's
Amended and Restated Certificate of Incorporation contains such a provision
concerning the limitation of liability of directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has not issued or sold any unregistered securities during
the past three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement**
3.1 The Registrant's Amended and Restated Certificate of Incorporation**
3.2 The Registrant's Amended and Restated Bylaws**
4.1 Specimen Common Stock Certificate**
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding the
legality of the shares of Common Stock being registered**
10.1 UBICS, Inc. 1997 Stock Option Plan**
10.2 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB Information and Consultancy Services Ltd.
10.3 Employment Agreement between the Registrant and Vijay Mallya
10.4 Employment Agreement between the Registrant and Manohar B. Hira
10.5 Employment Agreement between the Registrant and O'Neil Nalavadi
10.6 Employment Agreement 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**
</TABLE>
II-2
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
10.9 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and
United Breweries Limited
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National Association and the
Registrant, and Amendment to Note and Letter Agreement dated November 1, 1996,
Second Amendment to Note and Letter Agreement dated April 1, 1997, Third Amendment
to Note and Letter Agreement dated August 29, 1997 and Fourth Amendment to Note and
Letter Agreement dated September 5, 1997**
10.11 Form of Director Indemnification Agreement**
10.12 Form of Sublease and Consent among the Company, Marin Executive Park and United
Breweries of America, Inc.**
10.13 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
United Breweries Limited
10.14 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB International Limited
10.15 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and UB
International Limited
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit 5.1)**
23.2 Consent of Arthur Andersen LLP, independent public accountants
23.3 Consent of Craig A. Wolfanger, nominee to the Company's Board of Directors**
23.4 Consent of Dennis S. Meteny, nominee to the Company's Board of Directors**
24.1 Power of Attorney**
</TABLE>
- ---------
** Previously filed.
(b) Index to Financial Statement Schedules
II. Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the DGCL, the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of the registrant, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Post-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania, on October
29, 1997.
UBICS, INC.
By: /s/ BABU SRINIVAS
--------------------------------------
Babu Srinivas
Vice President-Finance,
Accounting and Administration
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities indicated and on the date indicated
above.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ------------------------------------
<C> <S> <C>
* Chairman and Director
- -----------------------------------
Vijay Mallya
* President and Director
- -----------------------------------
Manohar B. Hira
* Senior Vice President, Chief
- ----------------------------------- Financial Officer and Director
O'Neil Nalavadi
/s/ BABU SRINIVAS Vice President-Finance, Accounting
- ----------------------------------- and Administration (Principal
Babu Srinivas Accounting Officer)
</TABLE>
* By: /s/ BABU SRINIVAS
- ------------------------------------
Babu Srinivas
Attorney-in-fact
II-4
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
We have audited in accordance with generally accepted auditing standards,
the financial statements of UBICS, Inc. and have issued our report thereon dated
September 5, 1997. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in the
accompanying index is presented for purposes of complying with the Securities
and Exchange Commission's rules and regulations and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
September 5, 1997
<PAGE> 62
SCHEDULE II
UBICS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS--
AMOUNTS
BALANCE AT CHARGED TO DEEMED BALANCE AT
BEGINNING COSTS AND TO BE END
PERIOD ENDED DESCRIPTION OF PERIOD EXPENSES UNCOLLECTIBLE OF PERIOD
- ------------------------ ---------------------------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1994....... Allowance for uncollectible
accounts $ -- $ -- $-- $ --
December 31, 1995....... Allowance for uncollectible
accounts -- -- -- --
December 31, 1996....... Allowance for uncollectible
accounts -- 50 -- 50
June 30, 1997........... Allowance for uncollectible
accounts 50 75 -- 125
</TABLE>
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement**
3.1 The Registrant's Amended and Restated Certificate of Incorporation**
3.2 The Registrant's Amended and Restated Bylaws, as amended**
4.1 Specimen Common Stock Certificate**
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding the
legality of the shares of Common Stock being registered**
10.1 UBICS, Inc. 1997 Stock Option Plan**
10.2 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB Information Consultancy Services Ltd.
10.3 Employment Agreement between the Registrant and Vijay Mallya
10.4 Employment Agreement between the Registrant and Manohar B. Hira
10.5 Employment Agreement between the Registrant and O'Neil Nalavadi
10.6 Employment Agreement 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 October 27, 1997 among the Company, Vijay Mallya and
United Breweries Limited
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National Association and the
Registrant, and Amendment to Note and Letter Agreement dated November 1, 1996,
Second Amendment to Note and Letter Agreement dated April 1, 1997, Third Amendment
to Note and Letter Agreement dated August 29, 1997 and Fourth Amendment to Note and
Letter Agreement dated September 5, 1997**
10.11 Form of Director Indemnification Agreement**
10.12 Form of Sublease and Consent among the Company, Marin Executive Park and United
Breweries of America, Inc.**
10.13 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
United Breweries Limited
10.14 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB International Limited
10.15 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and UB
International Limited
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit 5.1)**
23.2 Consent of Arthur Andersen LLP, independent public accountants
23.3 Consent of Craig A. Wolfanger, nominee to the Company's Board of Directors**
23.4 Consent of Dennis S. Meteny, nominee to the Company's Board of Directors**
24.1 Power of Attorney**
</TABLE>
- ---------
** Previously filed.
<PAGE> 1
Exhibit 10.2
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of
October 27, 1997 among UBICS, INC., a Delaware corporation ("UBICS"), VIJAY
MALLYA, an individual ("Mallya"), and UB INFORMATION AND CONSULTANCY SERVICES
LTD., a corporation organized under the laws of India ("UB Services" or the
"Company").
PREAMBLE
UBICS is engaged in the business of providing information technology
services and personnel to business organizations (the "IT Services Business").
Mallya owns a Controlling interest in or otherwise Controls (as those terms are
defined in Section 4) each of the companies comprising the UB Group
(collectively, the "UB Group Companies"). Certain of the UB Group Companies,
including UB Services, have engaged in the IT Services Business from time to
time or employ individuals who formerly were employed in the IT Services
Business.
Because of the experience of UB Services and other UB Group Companies
in the IT Services Business, Mallya and the UB Group Companies, including their
Affiliates (as defined in Section 4 below) have the ability to engage, directly
or indirectly, in competition with UBICS and thereby to adversely affect its
business. Accordingly, the parties, intending to be legally bound and in
consideration of their mutual promises set forth hereto, do hereby agree as
follows.
1. CONFIDENTIAL INFORMATION. Mallya and the Company each acknowledge
that in the course of their conduct of the IT Services Business they or their
Affiliates may have acquired or been a party to certain Confidential
Information relating to UBICS's IT Services Business (the "UBICS Business").
"Confidential Information" shall mean all information about the UBICS Business
and its products, methods, business, policies, practices, personnel, customers,
suppliers, distributors and sales representatives which is not in the public
domain, including without limitation all trade secrets, inventions,
discoveries, ideas, designs and know-how. Each of Mallya and the Company
agrees, and shall cause each of their affiliates, to (a) return to UBICS any
Confidential Information relating to the conduct by UBICS of the UBICS Business
in tangible form which is in their possession or control without retaining any
copies or extracts thereof, and (b) not, without the prior written consent of
UBICS, use for their own benefit or reveal to any third party any Confidential
Information (except to the extent required for performance by an Affiliate (as
defined in Section 4) of services for UBICS under a service or similar
agreement with UBICS.
2. NON-COMPETITION. From and after the date hereof until the date
which is the earlier of the fifth anniversary of the date hereof or the date of
occurrence of a Change in Control (as defined in Section 4 below) of UBICS,
neither Mallya nor the Company nor any of their respective Affiliates (as
defined in Section 4 below) shall, as proprietor, director, officer, partner,
shareholder, employee, consultant, agent, independent contractor or otherwise,
for itself or on behalf of any other person or entity, (a) engage in or carry
on, directly or indirectly, in any part of the world (the "Territory"), any
business similar to the UBICS Business (a "Competing Business"), (b) have any
direct or indirect interest in, or be affiliated with, or render any services
for, any person or entity engaged in or carrying on, directly or indirectly,
any Competing Business in the Territory, (c) induce or attempt to induce any
customer or supplier of the UBICS Business to reduce the business done by such
supplier or customer with the UBICS Business, (d) solicit any employee of the
UBICS Business to leave the employ of the
<PAGE> 2
UBICS Business or (e) engage in any practice the purpose or result of which is
to evade the provisions of this Agreement or to commit any act that is
detrimental to the successful continuation by UBICS of the UBICS Business.
Notwithstanding the foregoing, Mallya together with his Affiliates (as defined
in Section 4 below) may own in the aggregate up to 5% of the outstanding
capital stock of a publicly traded company which engages in a Competing
Business without violating this Section 2.
3. INJUNCTIVE RELIEF. Each of Mallya and the Company acknowledges and
agrees that the covenants and agreements set forth in Sections 1 and 2 are
necessary to protect the legitimate business interests of UBICS and that any
breach of such covenants and agreements will cause immediate and irreparable
harm to UBICS. Each of Mallya and the Company acknowledges that damages for the
violation of any such covenant or agreement will not give full and sufficient
relief to UBICS and agrees that, in the event of any violation of any such
covenant or agreement, UBICS shall be entitled to injunctive relief with
respect to any such breach, which remedy shall be in addition to any other
remedy which UBICS may have on account of such breach.
4. CERTAIN DEFINITIONS. As used herein, the following definitions
shall apply:
(a) An "Affiliate" of a person or entity shall have the meaning
ascribed to such term for purposes of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"), and includes any person or entity that
directly or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, the person or entity specified.
(b) "Change in Control" shall mean any of the following events:
(i) consummation of an agreement by UBICS to consolidate or
merge with any other entity that is not an Affiliate 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 the surviving corporation
immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately
after the merger;
(ii) consummation of an agreement of UBICS to sell, lease,
exchange or otherwise transfer to a third party that is not an
Affiliate in one transaction or a series of related transactions
substantially all the assets of UBICS; or
(iii) consummation of an agreement by Mallya (together with
his Affiliates) to sell more than 50% of the outstanding voting
securities of UBICS to a third party that is not an Affiliate in one
or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and
Exchange Commission.
(c) The term "Control" (including the terms "Controlling, "Controlled
by" and "under common Control with") shall have the meaning ascribed to such
term for purposes of Rule 405 under the Securities Act, and includes the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
-2-
<PAGE> 3
5. Mallya and the Company agree to use, and to cause each of their
respective Affiliates to use, their best efforts to cause each entity which he
or it Controls, including the UB Group Companies, to comply with the covenants
set forth in this Agreement.
6. AGREEMENTS OF UB SERVICES. UB Services acknowledges that it has
ceased all business activities relating to the IT Services Business and agrees
that it shall cease all active business operations within 90 days after the
date hereof or as soon as practicable thereafter. Mallya shall take all action,
and shall cause each of his Affiliates which Control UB Services to take all
action, as may be required to cause UB Services to comply with each of its
covenants set forth in this Agreement. In addition, UB Services hereby
transfers and assigns to UBICS its entire right, title and interest in and to
the trade name "UBICS" and any derivation thereof and disclaims any right to
use said trade name or any derivation thereof anywhere in the Territory.
7. MISCELLANEOUS.
(a) NOTICES. All notices or other communications which may be given
hereunder shall be in writing and shall be given to the addresses set forth
below:
If to UBICS:
UBICS, Inc.
100 Sainte Claire Plaza
1121 Boyce Road
Pittsburgh, PA 15241
Attn: President
If to Mallya or the Company:
c/o Vijay Mallya
Three Harbor Place, Suite 115
Sausalito, CA 94065
(b) SUCCESSORS AND ASSIGNS. This Agreement and all rights and powers
granted hereby shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
(c) GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) AMENDMENT. To be effective, any amendment or waiver to this
Agreement must be in writing and be signed by the party against whom
enforcement of the same is sought.
(f) SEVERABILITY. If any portion of this Agreement shall for any
reason be held by a court of competent jurisdiction to be invalid and
unenforceable, the valid and enforceable provisions will continue to be given
effect and bind the parties hereto. In addition, the covenants set forth in
Sections 1 and 2 are intended to be separate covenants for each county and
district and each country, state, province or other political subdivision
comprising a part of the Territory, and the invalidity of such clauses as to
-3-
<PAGE> 4
any country, county, state or political subdivision shall not affect their
validity as to any other country, county, state or political subdivision
comprising a part of the Territory.
(g) ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties hereto
with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date and year first written above.
UBICS, INC.
By: /s/ MANOHAR B. HIRA
------------------------------
President
/s/ VIJAY MALLYA
----------------------------------
Vijay Mallya
UB INFORMATION AND CONSULTANCY
SERVICES LTD.
By: /s/ JAY VALLABH
------------------------------
Authorized Officer
-5-
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of September 1, 1997, by and between UBICS,
INC., a Delaware corporation (the "Company"), and VIJAY MALLYA ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
information technology services to various organizations;
WHEREAS, Employee has been serving as Chairman of the Company, and the
Company and Employee desire to enter into a formalized Employment Agreement
containing, among other things, certain restrictive covenants and, in
connection therewith, the Company has agreed to provide certain additional
benefits to Employee;
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in consideration of Employee's employment by the Company and in
further consideration, among other things, of (i) the access Employee has had
and will continue to have to confidential or proprietary information of the
Company, (ii) the willingness of the Company to make valuable benefits
available hereafter to Employee, and (iii) Employee's receipt of compensation,
including valuable stock options, from time to time by the Company; and
WHEREAS, the Company desires to procure the services of Employee, and
Employee is willing to be employed by the Company, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, the Company agrees to
employ Employee, and Employee hereby agrees to be employed by the Company, upon
the following terms and conditions:
ARTICLE I
EMPLOYMENT
1.01 OFFICE. Employee is hereby employed as Chairman of the Company
and to perform such duties and responsibilities as the Company's By-laws and
its Board of Directors may from time to time designate.
<PAGE> 2
1.02 TERM. Subject to the terms and provisions of Article II hereof,
Employee's employment hereunder shall commence on the date hereof and shall
continue for an initial term of three years unless terminated earlier pursuant
to the provisions hereof. Beginning on the date which is two years after the
date hereof, and on each day thereafter this Agreement shall automatically
extend for an additional day, so that the remaining term of this Agreement
shall always be 12 months, unless either party gives the other written notice
of its intention to not so extend this Agreement, whereupon this Agreement
shall terminate on the date which is one year after the date of such notice.
1.03 SALARY. A salary shall be paid to Employee by the Company during
the term of this Agreement at the rate of $150,000 per annum, payable monthly
in accordance with the Company's normal payroll practices (the "Salary"). The
Salary may be increased from time to time, such increase, if any, to be
determined by the Compensation Committee of the Board of Directors, in its sole
discretion.
1.04 BONUS. The Company shall pay to Employee annually during the term
of this Agreement such bonus, if any, as may be determined by the Compensation
Committee of the Board of Directors.
1.05 OUT OF POCKET EXPENSES. Employee shall be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in performing
his duties in accordance with the general policy of Company, as it may change
from time to time, provided that Employee shall provide an itemized account
together with supporting receipts for such expenditures in accordance with the
requirements set forth in the Internal Revenue Code of 1986, as amended, and
related regulations, subject to the right of the Company at any time to place
reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
1.06 EMPLOYEE BENEFITS. Subject to any limitations imposed by
applicable law, Employee shall be covered by such major medical and health
insurance, disability, pension, profit-sharing or 401(k) plans as may be
available generally to employees of the Company and shall be entitled to
receive such other benefits and perquisites as may be determined by the Board
of Directors or the Compensation Committee thereof. Employee shall be entitled
to such vacation time as is consistent with the performance of his duties.
1.07. AUTOMOBILE. The Company shall furnish the Employee with an
automobile suitable to his status for business use in accordance with Company
policy, but in no event shall the automobile have a purchase price in excess of
$60,000. The automobile shall belong to the Company, and the Company shall be
responsible for all expenses relating to the automobile except that the
Employee shall be responsible for gasoline and oil expenses incurred in
-2-
<PAGE> 3
connection with his personal use of the automobile. The automobile is intended
for business use, and the Employee shall return it to the Company at the
request of the Company when his services are no longer used by the Company. The
Employee shall submit reports to the Company with respect to his use of the
automobile in sufficient detail to enable the Company to comply with all
relevant Federal and state income and employment tax laws.
1.08 OPTIONS. Employee shall be entitled to receive options to
purchase shares of the Company's Common Stock under the Company's 1997 Stock
Option Plan in accordance with the terms of a separate Stock Option Agreement.
ARTICLE II
TERMINATION
2.01 ILLNESS, INCAPACITY. Subject to the Company's compliance with
applicable laws, if during the term of Employee's employment hereunder Employee
shall be prevented, in the good faith judgment of the Board of Directors of the
Company, from effectively performing his duties hereunder, for a period of the
lesser of (a) 90 days or (b) the number of days after which benefits would
begin to accrue under the applicable disability insurance policy, by reason of
illness or disability, then the Company may, by written notice to Employee,
terminate Employee's employment hereunder. Upon delivery to Employee of such
notice, together with payment of any compensation set forth in Article I of
this Agreement and benefits accrued under this Agreement, Employee's employment
and all obligations of the Company under Article I hereof shall forthwith
terminate; provided, however, that the Company shall continue to pay Employee's
Salary for the remaining term of this Agreement as of the date of such notice.
Such termination is without prejudice to any rights Employee may thereafter
have against insurance carriers under the employee benefit plans or programs
referred to in Section 1.05. The obligations of Employee under Article IV
hereof shall continue notwithstanding termination of Employee's employment
pursuant to this Section 2.01.
2.02 DEATH. If Employee dies during the term of his employment
hereunder, Employee's employment hereunder shall terminate and all obligations
of the Company hereunder shall forthwith terminate; provided, however, the
Company shall continue to pay to Employee's estate Employee's Salary for a
period of six months following the date of Employee's death.
2.03 COMPANY TERMINATION.
(a) FOR CAUSE. Employee's employment hereunder may be
terminated at any time by the Company for cause. Termination shall be deemed
for cause if among the reasons therefor are Employee's dishonesty,
-3-
<PAGE> 4
disloyalty, willful misconduct, gross negligence or refusal or unwillingness to
perform his duties hereunder in good faith and to the best of his ability.
Payment of all compensation and provision of all benefits to Employee hereunder
shall cease effective as of the date of any such termination, except that
Employee will be entitled to all compensation and benefits accrued as of the
date of termination. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.03(a).
(b) WITHOUT CAUSE. Employee's employment hereunder may be
terminated at any time by the Company without cause, provided that upon any
such termination without cause the Company shall pay Employee, subject to
Employee's compliance with all of his obligations hereunder, his full Salary
plus employee benefits for the remainder of the term of this Agreement. The
obligations of Employee under Article IV hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.03(b).
2.04 EMPLOYEE TERMINATION. Employee agrees to give the Company two
months prior written notice of the termination of his employment with the
Company. Simultaneously with such notice, Employee shall inform the Company in
writing as to his employment plans following the termination of his employment
with the Company. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.04.
2.05 EFFECT OF TERMINATION ON OPTIONS. Notwithstanding anything to the
contrary set forth in any stock option plan of the Company or any Stock Option
Agreement between the Company and Employee, in the event of termination of
Employee's employment hereunder for any reason other than for cause due to
Employee's willful misconduct or gross negligence, all stock options held by
Employee shall immediately vest and shall remain exercisable by Employee or
Employee's estate for a period of one year following such termination.
ARTICLE III
EMPLOYEE'S ACKNOWLEDGMENTS
Employee acknowledges that: (a) in the course of Employee's
employment by the Company, Employee will acquire information concerning the
Company's sales, sales volume, sales methods, sales proposals, customers and
prospective customers, identity of key personnel in the employ of customers and
prospective customers, amount or kind of customer's purchases from the Company,
the Company's recruiting method and practices, computer programs, system
documentation, special hardware, product hardware, related software
development, manuals, formulae, processes, methods and other confidential or
proprietary information belonging to the Company relating to
-4-
<PAGE> 5
the Company's affairs (collectively referred to herein as the "Confidential
Information"); (b) the Confidential Information is the property of the Company;
(c) the use, misappropriation or disclosure of the Confidential Information
would constitute a breach of trust and could cause irreparable injury to the
Company; and (d) it is essential for the protection of the Company's goodwill
and to the maintenance of the Company's competitive position that the
Confidential Information be kept secret and that Employee not disclose the
Confidential Information to others or use the Confidential Information to
Employee's own advantage or the advantage of others.
Employee further acknowledges that it is essential for the
proper protection of the business of the Company that Employee be restrained
(a) from soliciting or inducing any employee of the Company to leave the employ
of the Company, (b) from soliciting the trade of or trading with the customers
of the Company for a competitive purpose and (c) from competing against the
Company for a reasonable period of time following termination of Employee's
employment by the Company.
ARTICLE IV
EMPLOYEE'S COVENANTS AND AGREEMENTS
4.01 NONDISCLOSURE OR UTILIZATION OF CONFIDENTIAL INFORMATION.
Employee agrees to hold and safeguard the Confidential Information in trust for
the Company and its successors and assigns and agrees that he shall not,
without the prior written consent of the Company, misappropriate, disclose or
use for any reason or purpose, or make available to anyone for use outside the
Company's organization at any time for any reason or purpose, either during his
employment by the Company or subsequent to the termination of his employment by
the Company for any reason, any of the Confidential Information, whether or not
developed by Employee, except as required in the performance of Employee's
duties to the Company.
4.02 DUTIES.
(a) GENERAL. Employee agrees to be a loyal employee of the
Company. Employee agrees to devote his best efforts to the performance of his
duties as Chairman, to give proper time and attention to furthering the
Company's business, and to comply with all rules, regulations and instructions
established or issued by the Company. Employee further agrees that during the
term of this Agreement, Employee shall not, directly or indirectly, engage in
any business which would detract from Employee's ability to apply his best
efforts to the performance of his duties hereunder. Employee also agrees that
he shall not usurp any corporate opportunities of the Company.
-5-
<PAGE> 6
(b) OTHER ACTIVITIES. The Company is affiliated with the UB
Group and understands that the Employee has responsibilities to and performs
services for other companies which are part of the UB Group, including acting
as director, officer or employee of such companies. The parties agree that the
Employee shall devote such time to the Company's business as he and the Board
of Directors jointly believe is reasonably appropriate and his performing
services for other companies within the UB Group as described above shall not
constitute a breach of this Agreement.
4.03 RETURN OF MATERIALS. Upon the termination of Employee's
employment by the Company for any reason, Employee shall promptly deliver to
the Company all correspondence, drawings, blueprints, manuals, letters, notes,
notebooks, reports, programs, proposals and any documents concerning the
Company's customers or concerning products or processes used by the Company
and, without limiting the foregoing, will promptly deliver to the Company any
and all other documents or materials containing or constituting Confidential
Information.
4.04 NONSOLICITATION OF CUSTOMERS. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, he shall not, directly
or indirectly, solicit the trade of, or trade with, any customer or prospective
customer of the Company in competition with the Company.
4.05 NONSOLICITATION OF EMPLOYEES. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, Employee shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever, or hire
any employee of the Company.
4.06 RESTRICTION ON COMPETITION. Employee covenants and agrees that
during the term of his employment with the Company and for a period of one (1)
year following the termination thereof for any reason, Employee shall not
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder, or otherwise, alone or in
association with any other person, corporation or other entity, in any
Competing Business, except as a shareholder of less than one percent of the
outstanding capital stock of a publicly held corporation. For purposes of this
Agreement, the term "Competing Business" shall mean any person, corporation or
other entity that maintains an office in the United States of America that
provides information technology services to organizations in competition with
the Company.
4.07 LIMITATION ON COVENANT. The covenant set forth in Section 4.06
above shall not be applicable in any of the following circumstances:
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<PAGE> 7
(1) If Employee terminates this Agreement because the Company
is in material violation of its obligations under this Agreement; or
(2) If any event should occur that gives rise to the
incurrence by the Company of a severance obligation to Employee under Article
VI of this Agreement.
ARTICLE V
EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
5.01 NO PRIOR AGREEMENTS. Employee represents and warrants that he is
not a party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions
similar in any manner to those contained in Article IV hereof.
5.02 REMEDIES. In the event of a breach by Employee of the terms of
this Agreement, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to
enforce the specific performance of this Agreement by Employee and to enjoin
Employee from any further violation of this Agreement and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by law. Employee acknowledges, however, that the remedies at law for
any breach by him of the provisions of this Agreement may be inadequate and
that the Company shall be entitled to injunctive relief against him in the
event of any breach.
ARTICLE VI
SEVERANCE AGREEMENT
6.01 SEVERANCE OBLIGATIONS. If on or after the date of a "Change in
Control" (as defined below), the Company, for any reason, terminates Employee's
employment or Employee resigns "for good reason" (as defined below), then the
Company shall pay to Employee within five days following the date of
termination or date of resignation: (i) 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 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 the resignation date. In addition, during the period
equal to the remaining term of this Agreement as in effect on the day prior to
the termination or resignation date, the Company shall continue to pay
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to 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
Employee remained employed by the Company and shall continue to provide to
Employee during such period, at no cost to Employee, the benefits Employee was
receiving on the day prior to the date of the Change in Control or benefits
substantially similar thereto.
6.02 DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Employee or an
affiliate of Employee) becomes the beneficial owner (as defined in Rule
13(d)(3) under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding voting securities; (ii) the individuals who
as of the date of this Agreement are members of the Board of Directors of the
Company (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board of Directors of the Company (provided, however, that if
the election, or nomination for election by the Company's shareholders, of any
new director was approved by a vote of a least a majority of the Incumbent
Board, such new director will be considered to be a member of the Incumbent
Board); (iii) an agreement by the Company to consolidate or merge with any
other entity pursuant to which the Company will not be the continuing or
surviving corporation or pursuant to which shares of the Common Stock of the
Company would be converted into cash, securities or other property, other than
a merger of the Company in which holders of the Common Stock of the Company
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 the Company to sell, lease, exchange or otherwise transfer in one
transaction or a series of related transactions substantially all the assets of
the Company; (v) the adoption of any plan or proposal for a complete or partial
liquidation or dissolution of the Company; or (vi) an agreement to sell more
than 50% of the outstanding voting securities of the Company in one or a series
of related transactions other than an initial public offering of voting
securities registered with the Securities and Exchange Commission.
6.03 DEFINITION OF "GOOD REASON". The term "good reason" means: (i) a
material diminution by the Company of 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 the Company in 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.
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ARTICLE VII
MISCELLANEOUS
7.01 AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention of the
parties that the provisions of Article IV hereof shall be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof. If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall be deemed amended to delete or
modify, as necessary, the offending provision or provisions and to alter the
bounds thereof in order to render it valid and enforceable.
7.02 ENTIRE AGREEMENT. This Agreement represents the entire agreement
of the parties and may be amended only by a writing signed by each of them.
7.03 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
7.04 AGREEMENT BINDING. The obligations of Employee under this
Agreement shall continue after the termination of his employment with the
Company for any reason, with or without cause, and shall be binding on his
heirs, executors, legal representatives and assigns and shall be binding on and
inure to the benefit of any successors and assigns of the Company.
7.05 COUNTERPARTS, SECTION HEADINGS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. The
section headings of this Agreement are for convenience for reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.
7.06 BINDING ARBITRATION. The parties agree that all claims, disputes
and other matters in question between them, arising out of or related to this
Agreement, and the rights, duties and obligations arising thereunder or the
breach thereof, shall be decided by common-law arbitration in Pittsburgh,
Pennsylvania, in accordance with the Rules of the American Arbitration
Association then prevailing, unless the parties mutually agree otherwise;
provided however, the Company shall have the right to obtain preliminary or
permanent injunctive relief from a court of appropriate jurisdiction while the
arbitration process is continuing, and/or after the Board of Arbitrators
renders its decision on the merits; provided further, if either party would be
entitled to join a third party if the proceeding were brought before a court of
applicable jurisdiction, then in the interests of judicial economy, either
party may litigate all disputes against the other party and any third party in
one action before a
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court of appropriate jurisdiction. The parties agree that with regard to all
claims, disputes and remedies arising out of this Agreement, the American
Arbitration Association, and the Federal and State Courts in Pittsburgh,
Pennsylvania and applicable appellate courts, shall have jurisdiction over
their persons. This provision shall not be deemed to confer exclusive subject
matter jurisdiction over such courts. This Agreement shall not be construed as
a consent to arbitrate any dispute with any person who is not party to this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first above
written.
WITNESS:
/s/ K.V. SREENATH /s/ VIJAY MALLYA
- ----------------------- --------------------------
K.V. Sreenath Vijay Mallya
WITNESS: UBICS, INC.
/s/ JEROME G. MERCHANT By: /s/ O'NEIL NALAVADI
- ----------------------- --------------------------
Jerome G. Merchant O'Neil Nalavadi
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<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of October 1, 1997, by and between UBICS,
INC., a Delaware corporation (the "Company"), and MANOHAR B. HIRA ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
information technology services to various organizations;
WHEREAS, Employee has been serving as President of the Company, and
the Company and Employee desire to enter into a formalized Employment Agreement
containing, among other things, certain restrictive covenants and, in
connection therewith, the Company has agreed to provide certain additional
benefits to Employee;
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in consideration of Employee's employment by the Company and in
further consideration, among other things, of (i) the access Employee has had
and will continue to have to confidential or proprietary information of the
Company, (ii) the willingness of the Company to make valuable benefits
available hereafter to Employee, and (iii) Employee's receipt of compensation,
including valuable stock options, from time to time by the Company; and
WHEREAS, the Company desires to procure the services of Employee, and
Employee is willing to be employed by the Company, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, the Company agrees to
employ Employee, and Employee hereby agrees to be employed by the Company, upon
the following terms and conditions:
ARTICLE I
EMPLOYMENT
1.01 OFFICE. Employee is hereby employed as President of the Company
and to perform such duties and responsibilities as the Company's By-laws and
its Board of Directors or Chairman may from time to time designate.
<PAGE> 2
1.02 TERM. Subject to the terms and provisions of Article II hereof,
Employee's employment hereunder shall commence on the date hereof and shall
continue for an initial term of three years unless terminated earlier pursuant
to the provisions hereof. Beginning on the date which is two years after the
date hereof, and on each day thereafter this Agreement shall automatically
extend for an additional day, so that the remaining term of this Agreement
shall always be 12 months, unless either party gives the other written notice
of its intention to not so extend this Agreement, whereupon this Agreement
shall terminate on the date which is one year after the date of such notice.
1.03 SALARY. A salary shall be paid to Employee by the Company during
the term of this Agreement at the rate of $120,000 per annum, payable monthly
in accordance with the Company's normal payroll practices (the "Salary"). The
Salary may be increased from time to time, such increase, if any, to be
determined by the Compensation Committee of the Board of Directors, in its sole
discretion.
1.04 BONUS. The Company shall pay to Employee annually during the term
of this Agreement such bonus, if any, as may be determined by the Compensation
Committee of the Board of Directors.
1.05 OUT OF POCKET EXPENSES. Employee shall be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in performing
his duties in accordance with the general policy of Company, as it may change
from time to time, provided that Employee shall provide an itemized account
together with supporting receipts for such expenditures in accordance with the
requirements set forth in the Internal Revenue Code of 1986, as amended, and
related regulations, subject to the right of the Company at any time to place
reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
1.06 EMPLOYEE BENEFITS. Subject to any limitations imposed by
applicable law, Employee shall be covered by such major medical and health
insurance, disability, pension, profit-sharing or 401(k) plans as may be
available generally to employees of the Company and shall be entitled to
receive such other benefits and perquisites as may be determined by the Board
of Directors or the Compensation Committee thereof. Employee shall be entitled
to such vacation time as is consistent with the performance of his duties.
1.07. AUTOMOBILE. The Company shall furnish the Employee with an
automobile suitable to his status for business use in accordance with Company
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policy, but in no event shall the automobile have a purchase price in excess of
$60,000. The automobile shall belong to the Company, and the Company shall be
responsible for all expenses relating to the automobile except that the
Employee shall be responsible for gasoline and oil expenses incurred in
connection with his personal use of the automobile. The automobile is intended
for business use, and the Employee shall return it to the Company at the
request of the Company when his services are no longer used by the Company. The
Employee shall submit reports to the Company with respect to his use of the
automobile in sufficient detail to enable the Company to comply with all
relevant Federal and state income and employment tax laws.
1.08 OPTIONS. Employee shall be entitled to receive options to
purchase shares of the Company's Common Stock under the Company's 1997 Stock
Option Plan in accordance with the terms of a separate Stock Option Agreement.
ARTICLE II
TERMINATION
2.01 ILLNESS, INCAPACITY. Subject to the Company's compliance with
applicable laws, if during the term of Employee's employment hereunder Employee
shall be prevented, in the good faith judgment of the Board of Directors of the
Company, from effectively performing his duties hereunder, for a period of the
lesser of (a) 90 days or (b) the number of days after which benefits would
begin to accrue under the applicable disability insurance policy, by reason of
illness or disability, then the Company may, by written notice to Employee,
terminate Employee's employment hereunder. Upon delivery to Employee of such
notice, together with payment of any compensation set forth in Article I of
this Agreement and benefits accrued under this Agreement, Employee's employment
and all obligations of the Company under Article I hereof shall forthwith
terminate; provided, however, that the Company shall continue to pay Employee's
Salary for the remaining term of this Agreement as of the date of such notice.
Such termination is without prejudice to any rights Employee may thereafter
have against insurance carriers under the employee benefit plans or programs
referred to in Section 1.05. The obligations of Employee under Article IV
hereof shall continue notwithstanding termination of Employee's employment
pursuant to this Section 2.01.
2.02 DEATH. If Employee dies during the term of his employment
hereunder, Employee's employment hereunder shall terminate and all obligations
of the Company hereunder shall forthwith terminate; provided, however, the
Company shall continue to pay to Employee's estate Employee's Salary for a
period of six months following the date of Employee's death.
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<PAGE> 4
2.03 COMPANY TERMINATION.
(a) FOR CAUSE. Employee's employment hereunder may be
terminated at any time by the Company for cause. Termination shall be deemed
for cause if among the reasons therefor are Employee's dishonesty, disloyalty,
willful misconduct, gross negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability. Payment of all
compensation and provision of all benefits to Employee hereunder shall cease
effective as of the date of any such termination, except that Employee will be
entitled to all compensation and benefits accrued as of the date of
termination. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.03(a).
(b) WITHOUT CAUSE. Employee's employment hereunder may be
terminated at any time by the Company without cause, provided that upon any
such termination without cause the Company shall pay Employee, subject to
Employee's compliance with all of his obligations hereunder, his full Salary
plus employee benefits for the remainder of the term of this Agreement. The
obligations of Employee under Article IV hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.03(b).
2.04 EMPLOYEE TERMINATION.
(a) Employee agrees to give the Company two months prior
written notice of the termination of his employment with the Company.
Simultaneously with such notice, Employee shall inform the Company in writing
as to his employment plans following the termination of his employment with the
Company. The obligations of Employee under Article IV hereof shall continue
notwithstanding termination of Employee's employment pursuant to this Section
2.04.
(b) In the event that there is (i) a material diminution by
the Company of Employee's title or responsibilities or (ii) a material change
in the Employee's reporting relationship to the Chairman of the Company, Mr.
Vijay Mallya, Employee may immediately terminate his employment with the
Company. Upon such termination, Employee will be entitled to all compensation
and benefits accrued as of the date of termination and the Company shall pay
Employee his full salary plus employee benefits for the remainder of the term
of this Agreement as in effect immediately prior to such termination. The
obligations of Employee under Article IV hereof shall
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<PAGE> 5
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.04(b).
2.05 EFFECT OF TERMINATION ON OPTIONS. Notwithstanding anything to the
contrary set forth in any stock option plan of the Company or any Stock Option
Agreement between the Company and Employee, in the event of termination of
Employee's employment hereunder for any reason other than for cause due to
Employee's willful misconduct or gross negligence, all stock options held by
Employee shall immediately vest and shall remain exercisable by Employee or
Employee's estate for a period of one year following such termination.
ARTICLE III
EMPLOYEE'S ACKNOWLEDGMENTS
Employee acknowledges that: (a) in the course of Employee's
employment by the Company, Employee will acquire information concerning the
Company's sales, sales volume, sales methods, sales proposals, customers and
prospective customers, identity of key personnel in the employ of customers and
prospective customers, amount or kind of customer's purchases from the Company,
the Company's recruiting method and practices, computer programs, system
documentation, special hardware, product hardware, related software
development, manuals, formulae, processes, methods and other confidential or
proprietary information belonging to the Company relating to the Company's
affairs (collectively referred to herein as the "Confidential Information");
(b) the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential for the protection of the Company's goodwill and to the
maintenance of the Company's competitive position that the Confidential
Information be kept secret and that Employee not disclose the Confidential
Information to others or use the Confidential Information to Employee's own
advantage or the advantage of others.
Employee further acknowledges that it is essential for the
proper protection of the business of the Company that Employee be restrained
(a) from soliciting or inducing any employee of the Company to leave the employ
of the Company, (b) from soliciting the trade of or trading with the customers
of the Company for a competitive purpose and (c) from competing against the
Company for a reasonable period of time following termination of Employee's
employment by the Company.
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ARTICLE IV
EMPLOYEE'S COVENANTS AND AGREEMENTS
4.01 NONDISCLOSURE OR UTILIZATION OF CONFIDENTIAL INFORMATION.
Employee agrees to hold and safeguard the Confidential Information in trust for
the Company and its successors and assigns and agrees that he shall not,
without the prior written consent of the Company, misappropriate, disclose or
use for any reason or purpose, or make available to anyone for use outside the
Company's organization at any time for any reason or purpose, either during his
employment by the Company or subsequent to the termination of his employment by
the Company for any reason, any of the Confidential Information, whether or not
developed by Employee, except as required in the performance of Employee's
duties to the Company.
4.02 DUTIES. Employee agrees to be a loyal employee of the Company.
Employee agrees to devote his full working time and best efforts to the
performance of his duties for the Company, to give proper time and attention to
furthering the Company's business, and to comply with all rules, regulations
and instructions established or issued by the Company. Employee further agrees
that during the term of this Agreement, Employee shall not, directly or
indirectly, engage in any business which would detract from Employee's ability
to apply his full working time and best efforts to the performance of his
duties hereunder. Employee shall not perform services for other companies
without the approval of the independent members of the Company's Board of
Directors. Employee also agrees that he shall not usurp any corporate
opportunities of the Company.
4.03 RETURN OF MATERIALS. Upon the termination of Employee's
employment by the Company for any reason, Employee shall promptly deliver to
the Company all correspondence, drawings, blueprints, manuals, letters, notes,
notebooks, reports, programs, proposals and any documents concerning the
Company's customers or concerning products or processes used by the Company
and, without limiting the foregoing, will promptly deliver to the Company any
and all other documents or materials containing or constituting Confidential
Information.
4.04 NONSOLICITATION OF CUSTOMERS. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, he shall not, directly
or indirectly, solicit the trade of, or trade with, any customer or prospective
customer of the Company in competition with the Company.
4.05 NONSOLICITATION OF EMPLOYEES. Employee agrees that during his
employment by the Company and for three (3) years following termination of
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<PAGE> 7
Employee's employment with the Company for any reason, Employee shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever, or hire
any employee of the Company.
4.06 RESTRICTION ON COMPETITION. Employee covenants and agrees that
during the term of his employment with the Company and for a period of one (1)
year following the termination thereof for any reason, Employee shall not
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder, or otherwise, alone or in
association with any other person, corporation or other entity, in any
Competing Business, except as a shareholder of less than one percent of the
outstanding capital stock of a publicly held corporation. For purposes of this
Agreement, the term "Competing Business" shall mean any person, corporation or
other entity that maintains an office in the United States of America that
provides information technology services to organizations in competition with
the Company.
4.07 LIMITATION ON COVENANT. The covenant set forth in Section 4.06
above shall not be applicable in any of the following circumstances:
(1) If Employee terminates this Agreement because the Company
is in material violation of its obligations under this Agreement; or
(2) If any event should occur that gives rise to the
incurrence by the Company of a severance obligation to Employee under Article
VI of this Agreement.
ARTICLE V
EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
5.01 NO PRIOR AGREEMENTS. Employee represents and warrants that he is
not a party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions
similar in any manner to those contained in Article IV hereof.
5.02 REMEDIES. In the event of a breach by Employee of the terms of
this Agreement, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to
enforce the specific performance of this Agreement by Employee and to enjoin
Employee from any further violation of this Agreement and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by
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<PAGE> 8
law. Employee acknowledges, however, that the remedies at law for any breach by
him of the provisions of this Agreement may be inadequate and that the Company
shall be entitled to injunctive relief against him in the event of any breach.
ARTICLE VI
SEVERANCE AGREEMENT
6.01 SEVERANCE OBLIGATIONS. If on or after the date of a "Change in
Control" (as defined below), the Company, for any reason, terminates Employee's
employment or Employee resigns "for good reason" (as defined below), then the
Company shall pay to Employee within five days following the date of
termination or date of resignation: (i) 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 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 the resignation date. In addition, during the period
equal to the remaining term of this Agreement as in effect on the day prior to
the termination or resignation date, the Company shall continue to pay to
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
Employee remained employed by the Company and shall continue to provide to
Employee during such period, at no cost to Employee, the benefits Employee was
receiving on the day prior to the date of the Change in Control or benefits
substantially similar thereto.
6.02 DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Vijay Mallya or an
affiliate of Mallya) becomes the beneficial owner (as defined in Rule 13(d)(3)
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding voting securities; (ii) the individuals who
as of the date of this Agreement are members of the Board of Directors of the
Company (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board of Directors of the Company (provided, however, that if
the election, or nomination for election by the Company's shareholders, of any
new director was approved by a vote of a least a majority of the Incumbent
Board, such new director will be considered to be a member of the Incumbent
Board); (iii) an agreement by the Company to consolidate or merge with any
other entity pursuant to which the Company will not be the continuing or
surviving
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corporation or pursuant to which shares of the Common Stock of the Company
would be converted into cash, securities or other property, other than a merger
of the Company in which holders of the Common Stock of the Company 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
the Company to sell, lease, exchange or otherwise transfer in one transaction
or a series of related transactions substantially all the assets of the
Company; (v) the adoption of any plan or proposal for a complete or partial
liquidation or dissolution of the Company; or (vi) an agreement to sell more
than 50% of the outstanding voting securities of the Company in one or a series
of related transactions other than an initial public offering of voting
securities registered with the Securities and Exchange Commission.
6.03 DEFINITION OF "GOOD REASON". The term "good reason" means: (i) a
material diminution by the Company of 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 the Company in 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.
ARTICLE VII
MISCELLANEOUS
7.01 AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention of the
parties that the provisions of Article IV hereof shall be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof. If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall be deemed amended to delete or
modify, as necessary, the offending provision or provisions and to alter the
bounds thereof in order to render it valid and enforceable.
7.02 ENTIRE AGREEMENT. This Agreement represents the entire agreement
of the parties and may be amended only by a writing signed by each of them.
7.03 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
7.04 AGREEMENT BINDING. The obligations of Employee under this
Agreement shall continue after the termination of his employment with the
Company for any reason, with or without cause, and shall be binding on his
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heirs, executors, legal representatives and assigns and shall be binding on and
inure to the benefit of any successors and assigns of the Company.
7.05 COUNTERPARTS, SECTION HEADINGS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. The
section headings of this Agreement are for convenience for reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.
7.06 BINDING ARBITRATION. The parties agree that all claims, disputes
and other matters in question between them, arising out of or related to this
Agreement, and the rights, duties and obligations arising thereunder or the
breach thereof, shall be decided by common-law arbitration in Pittsburgh,
Pennsylvania, in accordance with the Rules of the American Arbitration
Association then prevailing, unless the parties mutually agree otherwise;
provided however, the Company shall have the right to obtain preliminary or
permanent injunctive relief from a court of appropriate jurisdiction while the
arbitration process is continuing, and/or after the Board of Arbitrators
renders its decision on the merits; provided further, if either party would be
entitled to join a third party if the proceeding were brought before a court of
applicable jurisdiction, then in the interests of judicial economy, either
party may litigate all disputes against the other party and any third party in
one action before a court of appropriate jurisdiction. The parties agree that
with regard to all claims, disputes and remedies arising out of this Agreement,
the American Arbitration Association, and the Federal and State Courts in
Pittsburgh, Pennsylvania and applicable appellate courts, shall have
jurisdiction over their persons. This provision shall not be deemed to confer
exclusive subject matter jurisdiction over such courts. This Agreement shall
not be construed as a consent to arbitrate any dispute with any person who is
not party to this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first above
written.
WITNESS:
/s/ K.V. SREENATH /s/ MANOHAR B. HIRA
- ---------------------- -----------------------
K.V. Sreenath Manohar B. Hira
WITNESS: UBICS, INC.
/s/ JEROME G. MERCHANT By: /s/ VIJAY MALLYA
- ---------------------- -----------------------
Jerome G. Merchant Vijay Mallya
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<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of September 1, 1997, by and between UBICS,
INC., a Delaware corporation (the "Company"), and O'NEIL NALAVADI ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
information technology services to various organizations;
WHEREAS, Employee has been serving as Senior Vice President and Chief
Financial Officer of the Company, and the Company and Employee desire to enter
into a formalized Employment Agreement containing, among other things, certain
restrictive covenants and, in connection therewith, the Company has agreed to
provide certain additional benefits to Employee;
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in consideration of Employee's employment by the Company and in
further consideration, among other things, of (i) the access Employee has had
and will continue to have to confidential or proprietary information of the
Company, (ii) the willingness of the Company to make valuable benefits
available hereafter to Employee, and (iii) Employee's receipt of compensation,
including valuable stock options, from time to time by the Company; and
WHEREAS, the Company desires to procure the services of Employee, and
Employee is willing to be employed by the Company, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, the Company agrees to
employ Employee, and Employee hereby agrees to be employed by the Company, upon
the following terms and conditions:
ARTICLE I
EMPLOYMENT
1.01 OFFICE. Employee is hereby employed as Senior Vice President and
Chief Financial Officer of the Company and to perform such duties and
responsibilities as the Company's By-laws and its Board of Directors, Chairman
or President may from time to time designate.
<PAGE> 2
1.02 TERM. Subject to the terms and provisions of Article II hereof,
Employee's employment hereunder shall commence on the date hereof and shall
continue for an initial term of three years unless terminated earlier pursuant
to the provisions hereof. Beginning on the date which is two years after the
date hereof, and on each day thereafter this Agreement shall automatically
extend for an additional day, so that the remaining term of this Agreement
shall always be 12 months, unless either party gives the other written notice
of its intention to not so extend this Agreement, whereupon this Agreement
shall terminate on the date which is one year after the date of such notice.
1.03 SALARY. A salary shall be paid to Employee by the Company during
the term of this Agreement at the rate of $100,000 per annum, payable monthly
in accordance with the Company's normal payroll practices (the "Salary"). The
Salary may be increased from time to time, such increase, if any, to be
determined by the Compensation Committee of the Board of Directors, in its sole
discretion.
1.04 BONUS. The Company shall pay to Employee annually during the term
of this Agreement such bonus, if any, as may be determined by the Compensation
Committee of the Board of Directors.
1.05 OUT OF POCKET EXPENSES. Employee shall be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in performing
his duties in accordance with the general policy of Company, as it may change
from time to time, provided that Employee shall provide an itemized account
together with supporting receipts for such expenditures in accordance with the
requirements set forth in the Internal Revenue Code of 1986, as amended, and
related regulations, subject to the right of the Company at any time to place
reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
1.06 EMPLOYEE BENEFITS. Subject to any limitations imposed by
applicable law, Employee shall be covered by such major medical and health
insurance, disability, pension, profit-sharing or 401(k) plans as may be
available generally to employees of the Company and shall be entitled to
receive such other benefits and perquisites as may be determined by the Board
of Directors or the Compensation Committee thereof. Employee shall be entitled
to such vacation time as is consistent with the performance of his duties.
1.07. AUTOMOBILE. The Company shall furnish the Employee with an
automobile suitable to his status for business use in accordance with Company
policy, but in no event shall the automobile have a purchase price in excess of
$60,000. The automobile shall belong to the Company, and the Company shall be
responsible for all expenses relating to the automobile except that the
Employee shall be responsible for gasoline and oil expenses incurred in
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connection with his personal use of the automobile. The automobile is intended
for business use, and the Employee shall return it to the Company at the
request of the Company when his services are no longer used by the Company. The
Employee shall submit reports to the Company with respect to his use of the
automobile in sufficient detail to enable the Company to comply with all
relevant Federal and state income and employment tax laws.
1.08 OPTIONS. Employee shall be entitled to receive options to
purchase shares of the Company's Common Stock under the Company's 1997 Stock
Option Plan in accordance with the terms of a separate Stock Option Agreement.
1.09 RELOCATION EXPENSES. The Company shall pay or reimburse Employee
for his reasonable relocation expenses and shall provide Employee with a
reasonable settlement allowance, each in such amounts as may be agreed by the
parties, in connection with any relocation of Employee requested by the
Company.
1.10 PENSION CONTRIBUTION. The Company shall make an annual
contribution in an amount equal to 15% of Employee's Salary to such pension,
401(k) or other retirement plan or account as is designated by Employee.
Each annual contribution shall be made in four quarterly installments.
1.11 TRAVEL ALLOWANCE. The Company shall pay or reimburse Employee for
his and his immediate family's reasonable expenses in travelling, via business
class, to India one time during each year of the term of this Agreement.
ARTICLE II
TERMINATION
2.01 ILLNESS, INCAPACITY. Subject to the Company's compliance with
applicable laws, if during the term of Employee's employment hereunder Employee
shall be prevented, in the good faith judgment of the Board of Directors of the
Company, from effectively performing his duties hereunder, for a period of the
lesser of (a) 90 days or (b) the number of days after which benefits would
begin to accrue under the applicable disability insurance policy, by reason of
illness or disability, then the Company may, by written notice to Employee,
terminate Employee's employment hereunder. Upon delivery to Employee of such
notice, together with payment of any compensation set forth in Article I of
this Agreement and benefits accrued under this Agreement, Employee's employment
and all obligations of the Company under Article I hereof shall forthwith
terminate; provided, however, that the Company shall continue to pay Employee's
Salary for the remaining term of this Agreement as of the date of such notice.
Such termination is without prejudice to any rights
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Employee may thereafter have against insurance carriers under the employee
benefit plans or programs referred to in Section 1.05. The obligations of
Employee under Article IV hereof shall continue notwithstanding termination of
Employee's employment pursuant to this Section 2.01.
2.02 DEATH. If Employee dies during the term of his employment
hereunder, Employee's employment hereunder shall terminate and all obligations
of the Company hereunder shall forthwith terminate; provided, however, the
Company shall continue to pay to Employee's estate Employee's Salary for a
period of six months following the date of Employee's death.
2.03 COMPANY TERMINATION.
(a) FOR CAUSE. Employee's employment hereunder may be
terminated at any time by the Company for cause. Termination shall be deemed
for cause if among the reasons therefor are Employee's dishonesty, disloyalty,
willful misconduct, gross negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability. Payment of all
compensation and provision of all benefits to Employee hereunder shall cease
effective as of the date of any such termination, except that Employee will be
entitled to all compensation and benefits accrued as of the date of
termination. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.03(a).
(b) WITHOUT CAUSE. Employee's employment hereunder may be
terminated at any time by the Company without cause, provided that upon any
such termination without cause the Company shall pay Employee, subject to
Employee's compliance with all of his obligations hereunder, his full Salary
plus employee benefits for the remainder of the term of this Agreement. The
obligations of Employee under Article IV hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.03(b).
2.04 EMPLOYEE TERMINATION. Employee agrees to give the Company two
months prior written notice of the termination of his employment with the
Company. Simultaneously with such notice, Employee shall inform the Company in
writing as to his employment plans following the termination of his employment
with the Company. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.04.
2.05 EFFECT OF TERMINATION ON OPTIONS. Notwithstanding anything to the
contrary set forth in any stock option plan of the Company or any Stock Option
Agreement between the Company and Employee, in the event of termination of
Employee's employment hereunder for any reason other than for cause due to
Employee's willful misconduct or gross negligence, all stock options held by
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Employee shall immediately vest and shall remain exercisable by Employee or
Employee's estate for a period of one year following such termination.
ARTICLE III
EMPLOYEE'S ACKNOWLEDGMENTS
Employee acknowledges that: (a) in the course of Employee's
employment by the Company, Employee will acquire information concerning the
Company's sales, sales volume, sales methods, sales proposals, customers and
prospective customers, identity of key personnel in the employ of customers and
prospective customers, amount or kind of customer's purchases from the Company,
the Company's recruiting method and practices, computer programs, system
documentation, special hardware, product hardware, related software
development, manuals, formulae, processes, methods and other confidential or
proprietary information belonging to the Company relating to the Company's
affairs (collectively referred to herein as the "Confidential Information");
(b) the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential for the protection of the Company's goodwill and to the
maintenance of the Company's competitive position that the Confidential
Information be kept secret and that Employee not disclose the Confidential
Information to others or use the Confidential Information to Employee's own
advantage or the advantage of others.
Employee further acknowledges that it is essential for the
proper protection of the business of the Company that Employee be restrained
(a) from soliciting or inducing any employee of the Company to leave the employ
of the Company, (b) from soliciting the trade of or trading with the customers
of the Company for a competitive purpose and (c) from competing against the
Company for a reasonable period of time following termination of Employee's
employment by the Company.
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<PAGE> 6
ARTICLE IV
EMPLOYEE'S COVENANTS AND AGREEMENTS
4.01 NONDISCLOSURE OR UTILIZATION OF CONFIDENTIAL INFORMATION.
Employee agrees to hold and safeguard the Confidential Information in trust for
the Company and its successors and assigns and agrees that he shall not,
without the prior written consent of the Company, misappropriate, disclose or
use for any reason or purpose, or make available to anyone for use outside the
Company's organization at any time for any reason or purpose, either during his
employment by the Company or subsequent to the termination of his employment by
the Company for any reason, any of the Confidential Information, whether or not
developed by Employee, except as required in the performance of Employee's
duties to the Company.
4.02 DUTIES.
(a) GENERAL. Employee agrees to be a loyal employee of the
Company. Employee agrees to devote his full working time and best efforts to
the performance of his duties for the Company, to give proper time and
attention to furthering the Company's business, and to comply with all rules,
regulations and instructions established or issued by the Company. Employee
further agrees that during the term of this Agreement, Employee shall not,
directly or indirectly, engage in any business which would detract from
Employee's ability to apply his full working time and best efforts to the
performance of his duties hereunder. Employee also agrees that he shall not
usurp any corporate opportunities of the Company.
(b) OTHER ACTIVITIES. The Company is affiliated with the UB
Group and understands that the Employee may serve as director of Mendocino
Brewing Company and United Breweries of America, Inc., and such other U.S.
companies within the UB Group as may be approved by a majority of the
independent members of the Board of Directors. The parties agree that the
Employee shall devote such time to the Company's business as is necessary to
fulfill his duties as Chief Financial Officer of the Company, and his serving
as director of other companies as described above shall not constitute a breach
of this Agreement.
4.03 RETURN OF MATERIALS. Upon the termination of Employee's
employment by the Company for any reason, Employee shall promptly deliver to
the Company all correspondence, drawings, blueprints, manuals, letters, notes,
notebooks, reports, programs, proposals and any documents concerning the
Company's customers or concerning products or processes used by the Company
and, without limiting the foregoing, will promptly deliver to the Company any
and all other documents or materials containing or constituting Confidential
Information.
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<PAGE> 7
4.04 NONSOLICITATION OF CUSTOMERS. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, he shall not, directly
or indirectly, solicit the trade of, or trade with, any customer or prospective
customer of the Company in competition with the Company.
4.05 NONSOLICITATION OF EMPLOYEES. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, Employee shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever, or hire
any employee of the Company.
4.06 RESTRICTION ON COMPETITION. Employee covenants and agrees that
during the term of his employment with the Company and for a period of one (1)
year following the termination thereof for any reason, Employee shall not
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder, or otherwise, alone or in
association with any other person, corporation or other entity, in any
Competing Business, except as a shareholder of less than one percent of the
outstanding capital stock of a publicly held corporation. For purposes of this
Agreement, the term "Competing Business" shall mean any person, corporation or
other entity that maintains an office in the United States of America that
provides information technology services to organizations in competition with
the Company.
4.07 LIMITATION ON COVENANT. The covenant set forth in Section 4.06
above shall not be applicable in any of the following circumstances:
(1) If Employee terminates this Agreement because the Company
is in material violation of its obligations under this Agreement; or
(2) If any event should occur that gives rise to the
incurrence by the Company of a severance obligation to Employee under Article
VI of this Agreement.
ARTICLE V
EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
5.01 NO PRIOR AGREEMENTS. Employee represents and warrants that he is
not a party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions
similar in any manner to those contained in Article IV hereof.
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<PAGE> 8
5.02 REMEDIES. In the event of a breach by Employee of the terms of
this Agreement, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to
enforce the specific performance of this Agreement by Employee and to enjoin
Employee from any further violation of this Agreement and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by law. Employee acknowledges, however, that the remedies at law for
any breach by him of the provisions of this Agreement may be inadequate and
that the Company shall be entitled to injunctive relief against him in the
event of any breach.
ARTICLE VI
SEVERANCE AGREEMENT
6.01 SEVERANCE OBLIGATIONS. If on or after the date of a "Change in
Control" (as defined below), the Company, for any reason, terminates Employee's
employment or Employee resigns "for good reason" (as defined below), then the
Company shall pay to Employee within five days following the date of
termination or date of resignation: (i) 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 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 the resignation date. In addition, during the period
equal to the remaining term of this Agreement as in effect on the day prior to
the termination or resignation date, the Company shall continue to pay to
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
Employee remained employed by the Company and shall continue to provide to
Employee during such period, at no cost to Employee, the benefits Employee was
receiving on the day prior to the date of the Change in Control or benefits
substantially similar thereto.
6.02 DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Vijay Mallya or an
affiliate of Mallya) becomes the beneficial owner (as defined in Rule 13(d)(3)
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding voting securities; (ii) the individuals who
as of the date of this Agreement are members of the Board of Directors of the
Company (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board of Directors of the Company (provided, however, that if
the election, or nomination for election by the Company's shareholders, of any
new
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<PAGE> 9
director was approved by a vote of a least a majority of the Incumbent Board,
such new director will be considered to be a member of the Incumbent Board);
(iii) an agreement by the Company to consolidate or merge with any other entity
pursuant to which the Company will not be the continuing or surviving
corporation or pursuant to which shares of the Common Stock of the Company
would be converted into cash, securities or other property, other than a merger
of the Company in which holders of the Common Stock of the Company 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
the Company to sell, lease, exchange or otherwise transfer in one transaction
or a series of related transactions substantially all the assets of the
Company; (v) the adoption of any plan or proposal for a complete or partial
liquidation or dissolution of the Company; or (vi) an agreement to sell more
than 50% of the outstanding voting securities of the Company in one or a series
of related transactions other than an initial public offering of voting
securities registered with the Securities and Exchange Commission.
6.03 DEFINITION OF "GOOD REASON". The term "good reason" means: (i) a
material diminution by the Company of 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 the Company in 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.
ARTICLE VII
MISCELLANEOUS
7.01 AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention of the
parties that the provisions of Article IV hereof shall be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof. If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall be deemed amended to delete or
modify, as necessary, the offending provision or provisions and to alter the
bounds thereof in order to render it valid and enforceable.
7.02 ENTIRE AGREEMENT. This Agreement represents the entire agreement
of the parties and may be amended only by a writing signed by each of them.
7.03 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
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7.04 AGREEMENT BINDING. The obligations of Employee under this
Agreement shall continue after the termination of his employment with the
Company for any reason, with or without cause, and shall be binding on his
heirs, executors, legal representatives and assigns and shall be binding on and
inure to the benefit of any successors and assigns of the Company.
7.05 COUNTERPARTS, SECTION HEADINGS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. The
section headings of this Agreement are for convenience for reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.
7.06 BINDING ARBITRATION. The parties agree that all claims, disputes
and other matters in question between them, arising out of or related to this
Agreement, and the rights, duties and obligations arising thereunder or the
breach thereof, shall be decided by common-law arbitration in Pittsburgh,
Pennsylvania, in accordance with the Rules of the American Arbitration
Association then prevailing, unless the parties mutually agree otherwise;
provided however, the Company shall have the right to obtain preliminary or
permanent injunctive relief from a court of appropriate jurisdiction while the
arbitration process is continuing, and/or after the Board of Arbitrators
renders its decision on the merits; provided further, if either party would be
entitled to join a third party if the proceeding were brought before a court of
applicable jurisdiction, then in the interests of judicial economy, either
party may litigate all disputes against the other party and any third party in
one action before a court of appropriate jurisdiction. The parties agree that
with regard to all claims, disputes and remedies arising out of this Agreement,
the American Arbitration Association, and the Federal and State Courts in
Pittsburgh, Pennsylvania and applicable appellate courts, shall have
jurisdiction over their persons. This provision shall not be deemed to confer
exclusive subject matter jurisdiction over such courts. This Agreement shall
not be construed as a consent to arbitrate any dispute with any person who is
not party to this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first above
written.
WITNESS:
/s/ JEROME G. MERCHANT /s/ O'NEIL NALAVADI
- ------------------------- -----------------------
O'Neil Nalavadi
WITNESS: UBICS, INC.
/s/ K.V. SREENATH By: /s/ VIJAY MALLYA
- ------------------------- -----------------------
K.V. Sreenath Vijay Mallya
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of September 1, 1997, by and between UBICS,
INC., a Delaware corporation (the "Company"), and BABU SRINIVAS ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
information technology services to various organizations;
WHEREAS, Employee has been serving as Vice President-Finance,
Accounting and Administration of the Company, and the Company and Employee
desire to enter into a formalized Employment Agreement containing, among other
things, certain restrictive covenants and, in connection therewith, the Company
has agreed to provide certain additional benefits to Employee;
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in consideration of Employee's employment by the Company and in
further consideration, among other things, of (i) the access Employee has had
and will continue to have to confidential or proprietary information of the
Company, (ii) the willingness of the Company to make valuable benefits
available hereafter to Employee, and (iii) Employee's receipt of compensation,
including valuable stock options, from time to time by the Company; and
WHEREAS, the Company desires to procure the services of Employee, and
Employee is willing to be employed by the Company, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, the Company agrees to
employ Employee, and Employee hereby agrees to be employed by the Company, upon
the following terms and conditions:
ARTICLE I
EMPLOYMENT
1.01 OFFICE. Employee is hereby employed as Vice President-Finance,
Accounting and Administration of the Company and to perform such duties and
responsibilities as the Company's By-laws and its Board of Directors, Chairman,
President or Chief Financial Officer may from time to time designate.
<PAGE> 2
1.02 TERM. Subject to the terms and provisions of Article II hereof,
Employee's employment hereunder shall commence on the date hereof and shall
continue for an initial term of three years unless terminated earlier pursuant
to the provisions hereof.
1.03 SALARY. A salary shall be paid to Employee by the Company during
the term of this Agreement at the rate of $75,000 per annum, payable monthly in
accordance with the Company's normal payroll practices (the "Salary"). The
Salary may be increased from time to time, such increase, if any, to be
determined by the Compensation Committee of the Board of Directors, in its sole
discretion.
1.04 BONUS. The Company shall pay to Employee annually during the term
of this Agreement such bonus, if any, as may be determined by the Compensation
Committee of the Board of Directors.
1.05 OUT OF POCKET EXPENSES. Employee shall be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in performing
his duties in accordance with the general policy of Company, as it may change
from time to time, provided that Employee shall provide an itemized account
together with supporting receipts for such expenditures in accordance with the
requirements set forth in the Internal Revenue Code of 1986, as amended, and
related regulations, subject to the right of the Company at any time to place
reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
1.06 EMPLOYEE BENEFITS. Subject to any limitations imposed by
applicable law, Employee shall be covered by such major medical and health
insurance, disability, pension, profit-sharing or 401(k) plans as may be
available generally to employees of the Company and shall be entitled to
receive such other benefits and perquisites as may be determined by the Board
of Directors or the Compensation Committee thereof. Employee shall be entitled
to such vacation time as is consistent with the performance of his duties.
1.07. AUTOMOBILE. The Company shall furnish the Employee with an
automobile suitable to his status for business use in accordance with Company
policy. The automobile shall belong to the Company, and the Company shall be
responsible for all expenses relating to the automobile except that the
Employee shall be responsible for gasoline and oil expenses incurred in
connection with his personal use of the automobile. The automobile is intended
for business use, and the Employee shall return it to the Company at the
request of the Company when his services are no longer used by the Company. The
Employee shall submit reports to the Company with respect to his use of the
automobile in sufficient detail to enable the Company to comply with all
relevant Federal and state income and employment tax laws.
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1.08 OPTIONS. Employee shall be entitled to receive options to
purchase shares of the Company's Common Stock under the Company's 1997 Stock
Option Plan in accordance with the terms of a separate Stock Option Agreement.
ARTICLE II
TERMINATION
2.01 ILLNESS, INCAPACITY. Subject to the Company's compliance with
applicable laws, if during the term of Employee's employment hereunder Employee
shall be prevented, in the good faith judgment of the Board of Directors of the
Company, from effectively performing his duties hereunder, for a period of the
lesser of (a) 90 days or (b) the number of days after which benefits would
begin to accrue under the applicable disability insurance policy, by reason of
illness or disability, then the Company may, by written notice to Employee,
terminate Employee's employment hereunder. Upon delivery to Employee of such
notice, together with payment of any compensation set forth in Article I of
this Agreement and benefits accrued under this Agreement, Employee's employment
and all obligations of the Company under Article I hereof shall forthwith
terminate; provided, however, that the Company shall continue to pay Employee's
Salary for the remaining term of this Agreement as of the date of such notice.
Such termination is without prejudice to any rights Employee may thereafter
have against insurance carriers under the employee benefit plans or programs
referred to in Section 1.05. The obligations of Employee under Article IV
hereof shall continue notwithstanding termination of Employee's employment
pursuant to this Section 2.01.
2.02 DEATH. If Employee dies during the term of his employment
hereunder, Employee's employment hereunder shall terminate and all obligations
of the Company hereunder shall forthwith terminate; provided, however, the
Company shall continue to pay to Employee's estate Employee's Salary for a
period of six months following the date of Employee's death.
2.03 COMPANY TERMINATION.
(a) FOR CAUSE. Employee's employment hereunder may be
terminated at any time by the Company for cause. Termination shall be deemed
for cause if among the reasons therefor are Employee's dishonesty, disloyalty,
willful misconduct, gross negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability. Payment of all
compensation and provision of all benefits to Employee hereunder shall cease
effective as of the date of any such termination, except that Employee will be
entitled to all compensation and benefits accrued as of the date of
termination. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.03(a).
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(b) WITHOUT CAUSE. Employee's employment hereunder may be
terminated at any time by the Company without cause, provided that upon any
such termination without cause the Company shall pay Employee, subject to
Employee's compliance with all of his obligations hereunder, his full Salary
plus employee benefits for the remainder of the term of this Agreement. The
obligations of Employee under Article IV hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.03(b).
2.04 EMPLOYEE TERMINATION. Employee agrees to give the Company two
months prior written notice of the termination of his employment with the
Company. Simultaneously with such notice, Employee shall inform the Company in
writing as to his employment plans following the termination of his employment
with the Company. The obligations of Employee under Article IV hereof shall
continue notwithstanding termination of Employee's employment pursuant to this
Section 2.04.
2.05 EFFECT OF TERMINATION ON OPTIONS. Notwithstanding anything to the
contrary set forth in any stock option plan of the Company or any Stock Option
Agreement between the Company and Employee, in the event of termination of
Employee's employment hereunder for any reason other than for cause due to
Employee's willful misconduct or gross negligence, all stock options held by
Employee shall immediately vest and shall remain exercisable by Employee or
Employee's estate for a period of one year following such termination.
ARTICLE III
EMPLOYEE'S ACKNOWLEDGMENTS
Employee acknowledges that: (a) in the course of Employee's
employment by the Company, Employee will acquire information concerning the
Company's sales, sales volume, sales methods, sales proposals, customers and
prospective customers, identity of key personnel in the employ of customers and
prospective customers, amount or kind of customer's purchases from the Company,
the Company's recruiting method and practices, computer programs, system
documentation, special hardware, product hardware, related software
development, manuals, formulae, processes, methods and other confidential or
proprietary information belonging to the Company relating to the Company's
affairs (collectively referred to herein as the "Confidential Information");
(b) the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential for the protection of the Company's goodwill and to the
maintenance of the Company's competitive position that the Confidential
Information be kept secret and that Employee not disclose the Confidential
Information to others or use the Confidential Information to Employee's own
advantage or the advantage of others.
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Employee further acknowledges that it is essential for the
proper protection of the business of the Company that Employee be restrained
(a) from soliciting or inducing any employee of the Company to leave the employ
of the Company, (b) from soliciting the trade of or trading with the customers
of the Company for a competitive purpose and (c) from competing against the
Company for a reasonable period of time following termination of Employee's
employment by the Company.
ARTICLE IV
EMPLOYEE'S COVENANTS AND AGREEMENTS
4.01 NONDISCLOSURE OR UTILIZATION OF CONFIDENTIAL INFORMATION.
Employee agrees to hold and safeguard the Confidential Information in trust for
the Company and its successors and assigns and agrees that he shall not,
without the prior written consent of the Company, misappropriate, disclose or
use for any reason or purpose, or make available to anyone for use outside the
Company's organization at any time for any reason or purpose, either during his
employment by the Company or subsequent to the termination of his employment by
the Company for any reason, any of the Confidential Information, whether or not
developed by Employee, except as required in the performance of Employee's
duties to the Company.
4.02 DUTIES. Employee agrees to be a loyal employee of the Company.
Employee agrees to devote his full working time and best efforts to the
performance of his duties for the Company, to give proper time and attention to
furthering the Company's business, and to comply with all rules, regulations
and instructions established or issued by the Company. Employee further agrees
that during the term of this Agreement, Employee shall not, directly or
indirectly, engage in any business which would detract from Employee's ability
to apply his full working time and best efforts to the performance of his
duties hereunder. Employee shall not perform services for other companies
without the approval of the independent members of the Company's Board of
Directors. Employee also agrees that he shall not usurp any corporate
opportunities of the Company.
4.03 RETURN OF MATERIALS. Upon the termination of Employee's
employment by the Company for any reason, Employee shall promptly deliver to
the Company all correspondence, drawings, blueprints, manuals, letters, notes,
notebooks, reports, programs, proposals and any documents concerning the
Company's customers or concerning products or processes used by the Company
and, without limiting the foregoing, will promptly deliver to the Company any
and all other documents or materials containing or constituting Confidential
Information.
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4.04 NONSOLICITATION OF CUSTOMERS. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, he shall not, directly
or indirectly, solicit the trade of, or trade with, any customer or prospective
customer of the Company in competition with the Company.
4.05 NONSOLICITATION OF EMPLOYEES. Employee agrees that during his
employment by the Company and for three (3) years following termination of
Employee's employment with the Company for any reason, Employee shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever, or hire
any employee of the Company.
4.06 RESTRICTION ON COMPETITION. Employee covenants and agrees that
during the term of his employment with the Company and for a period of one (1)
year following the termination thereof for any reason, Employee shall not
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder, or otherwise, alone or in
association with any other person, corporation or other entity, in any
Competing Business, except as a shareholder of less than one percent of the
outstanding capital stock of a publicly held corporation. For purposes of this
Agreement, the term "Competing Business" shall mean any person, corporation or
other entity that maintains an office in the United States of America that
provides information technology services to organizations in competition with
the Company.
4.07 LIMITATION ON COVENANT. The covenant set forth in Section 4.06
above shall not be applicable in any of the following circumstances:
(1) If Employee terminates this Agreement because the Company
is in material violation of its obligations under this Agreement; or
(2) If any event should occur that gives rise to the
incurrence by the Company of a severance obligation to Employee under Article
VI of this Agreement.
ARTICLE V
EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
5.01 NO PRIOR AGREEMENTS. Employee represents and warrants that he is
not a party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions
similar in any manner to those contained in Article IV hereof.
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<PAGE> 7
5.02 REMEDIES. In the event of a breach by Employee of the terms of
this Agreement, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to
enforce the specific performance of this Agreement by Employee and to enjoin
Employee from any further violation of this Agreement and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by law. Employee acknowledges, however, that the remedies at law for
any breach by him of the provisions of this Agreement may be inadequate and
that the Company shall be entitled to injunctive relief against him in the
event of any breach.
ARTICLE VI
SEVERANCE AGREEMENT
6.01 SEVERANCE OBLIGATIONS. If on or after the date of a "Change in
Control" (as defined below), the Company, for any reason, terminates Employee's
employment or Employee resigns "for good reason" (as defined below), then the
Company shall pay to Employee within five days following the date of
termination or date of resignation: (i) 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 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 the resignation date. In addition, during the period
equal to the remaining term of this Agreement as in effect on the day prior to
the termination or resignation date, the Company shall continue to pay to
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
Employee remained employed by the Company and shall continue to provide to
Employee during such period, at no cost to Employee, the benefits Employee was
receiving on the day prior to the date of the Change in Control or benefits
substantially similar thereto.
6.02 DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Vijay Mallya or an
affiliate of Mallya) becomes the beneficial owner (as defined in Rule 13(d)(3)
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding voting securities; (ii) the individuals who
as of the date of this Agreement are members of the Board of Directors of the
Company (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board of Directors of the Company (provided, however, that if
the election, or nomination for election by the Company's shareholders, of any
new director was approved by a vote of a least a majority of the Incumbent
Board,
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<PAGE> 8
such new director will be considered to be a member of the Incumbent Board);
(iii) an agreement by the Company to consolidate or merge with any other entity
pursuant to which the Company will not be the continuing or surviving
corporation or pursuant to which shares of the Common Stock of the Company
would be converted into cash, securities or other property, other than a merger
of the Company in which holders of the Common Stock of the Company 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
the Company to sell, lease, exchange or otherwise transfer in one transaction
or a series of related transactions substantially all the assets of the
Company; (v) the adoption of any plan or proposal for a complete or partial
liquidation or dissolution of the Company; or (vi) an agreement to sell more
than 50% of the outstanding voting securities of the Company in one or a series
of related transactions other than an initial public offering of voting
securities registered with the Securities and Exchange Commission.
6.03 DEFINITION OF "GOOD REASON". The term "good reason" means: (i) a
material diminution by the Company of 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 the Company in 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.
ARTICLE VII
MISCELLANEOUS
7.01 AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention of the
parties that the provisions of Article IV hereof shall be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof. If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall be deemed amended to delete or
modify, as necessary, the offending provision or provisions and to alter the
bounds thereof in order to render it valid and enforceable.
7.02 ENTIRE AGREEMENT. This Agreement represents the entire agreement
of the parties and may be amended only by a writing signed by each of them.
7.03 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
7.04 AGREEMENT BINDING. The obligations of Employee under this
Agreement shall continue after the termination of his employment with the
Company for any reason, with or without cause, and shall be binding on his
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<PAGE> 9
heirs, executors, legal representatives and assigns and shall be binding on and
inure to the benefit of any successors and assigns of the Company.
7.05 COUNTERPARTS, SECTION HEADINGS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. The
section headings of this Agreement are for convenience for reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.
7.06 BINDING ARBITRATION. The parties agree that all claims, disputes
and other matters in question between them, arising out of or related to this
Agreement, and the rights, duties and obligations arising thereunder or the
breach thereof, shall be decided by common-law arbitration in Pittsburgh,
Pennsylvania, in accordance with the Rules of the American Arbitration
Association then prevailing, unless the parties mutually agree otherwise;
provided however, the Company shall have the right to obtain preliminary or
permanent injunctive relief from a court of appropriate jurisdiction while the
arbitration process is continuing, and/or after the Board of Arbitrators
renders its decision on the merits; provided further, if either party would be
entitled to join a third party if the proceeding were brought before a court of
applicable jurisdiction, then in the interests of judicial economy, either
party may litigate all disputes against the other party and any third party in
one action before a court of appropriate jurisdiction. The parties agree that
with regard to all claims, disputes and remedies arising out of this Agreement,
the American Arbitration Association, and the Federal and State Courts in
Pittsburgh, Pennsylvania and applicable appellate courts, shall have
jurisdiction over their persons. This provision shall not be deemed to confer
exclusive subject matter jurisdiction over such courts. This Agreement shall
not be construed as a consent to arbitrate any dispute with any person who is
not party to this Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first above
written.
WITNESS:
/s/ MANOHAR B. HIRA /s/ BABU SRINIVAS
- ---------------------- -----------------------
Manohar B. Hira Babu Srinivas
WITNESS: UBICS, INC.
/s/ K.V. SREENATH By: /s/ VIJAY MALLYA
- ---------------------- -----------------------
K.V. Sreenath Vijay Mallya
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<PAGE> 1
Exhibit 10.9
SERVICES AGREEMENT
This Agreement is made as of October 27, 1997 (this "Agreement") among
VIJAY MALLYA, an individual ("Mallya"), UNITED BREWERIES LIMITED, a corporation
organized under the laws of India ("UBL" or "Provider"), and UBICS, INC., a
Delaware corporation ("UBICS" or the "Company").
PREAMBLE
Provider, directly or through its affiliates (as defined in Section
12), engages in various business operations in various countries, and employs
skilled individuals involved in the provision of administrative, support and
other similar services ("Services"). UBICS wishes to utilize the offices and
facilities of the Provider (and its affiliates) from time to time and to
utilize the services of the Provider's employees (and its affiliates) from time
to time upon the terms and conditions set forth herein. Therefore, the parties,
intending to be legally bound hereby, agree as follows.
AGREEMENT
1. SERVICES; USE OF FACILITIES.
(a) Mallya and Provider agrees, and to cause each of their respective
affiliates, to provide Services to UBICS on a non-exclusive basis upon request
of UBICS from time to time, and UBICS agrees to accept such Services.
(b) In the event that UBICS should require a materially different
level of Services from Provider or any of its affiliates than that being
provided under this Agreement, or in the event that UBICS should require
Provider or any of its affiliates to undertake special, limited duration
projects that are outside the scope of the Services, UBICS shall consult with
Provider as to the required changes; provided, however, that in no event shall
Provider or any of its affiliates be required to undertake projects that would
materially interfere with the conduct by Provider or any of its affiliates of
their normal business. Provider will use, and agrees to cause each of its
affiliates to use, its best efforts to allocate or acquire the personnel
required to provide any additional Services, provided that UBICS gives to
Provider reasonable written notice (which generally should not be less than 30
days) that an increase in Services will be required and specifying the type and
level of such Services.
(c) In the event of any material reduction in the level of Services
required from Provider or its affiliates, UBICS agrees to give reasonable
written notice (which generally should be at least 30 days notice) to Provider
or any of its affiliates of such proposed reduction, and to continue to pay for
Services (whether or not utilized) in general conformity with historic levels
until the end of such 30 day period. This 30 day period prior to any slowdown
or reduction is intended to enable Provider or any of its affiliates to adjust
its roster of employees, and to give any notice to any employees who must be
terminated as a result of Provider or any of its affiliates ceasing to provide
such Services to UBICS as required by law, industry, or custom. Any change to
the scope or level of the Services shall be reflected by a corresponding change
to the compensation for the Services.
(d) From time to time upon reasonable prior written notice to Provider
or any of its affiliates, Provider agrees to provide and to cause each of its
affiliates to provide UBICS and its officers, employees, agents and
representatives with access to and the use of a designated portion of any
offices or other facilities of Provider and any of its affiliates
(collectively, the "Provider Facilities"). Provider shall
<PAGE> 2
permit and shall cause each of its affiliates to permit UBICS and its officers,
employees, agents and representatives with access to its Provider Facilities on
the same terms and conditions as Provider, its affiliates and their employees.
UBICS agrees that it shall, and shall use its best efforts to cause its
employees, agents and representatives to, perform and observe all terms and
conditions of any lease, or sublease or other contractual arrangement to which
Provider or its affiliates is a party with respect to the Provider Facilities.
(e) UBICS, Mallya and Provider agree that they each shall use their
best efforts to comply with all applicable laws and regulations in performing
this Agreement.
2. COMPENSATION.
(a) Payment for Services provided to UBICS and for Provider Facilities
used by UBICS during a given calendar month shall be made by UBICS to Provider
or its affiliates against invoices delivered to UBICS on or before the 15th day
of the following month. Any delay in the delivery of such invoices shall
entitle UBICS to defer, on a day-by-day basis, the due date of its payments
hereunder. All payments not made within the time specified on the invoice
shall bear interest at the Prime Rate of interest announced from time to time
by PNC Bank, National Association, Pittsburgh, Pennsylvania. The terms of all
such invoices shall require payment within 30 days of the date that the invoice
is received by UBICS, unless otherwise agreed to by the parties.
(b) Compensation for Services shall be based upon rates to be agreed
upon by UBICS and Provider or any of its affiliates at the time Services are to
be provided, which compensation shall in each case be fair and reasonable on
terms no less favorable to UBICS than those which would be made to
non-affiliated parties and based on the estimated costs, including a reasonable
allocation of direct and indirect overhead costs, incurred by Provider or any
of its affiliates in providing the Services. The parties hereto agree to review
periodically (but in any event at least every six months during the term of
this Agreement) such compensation and negotiate in good faith to adjust such
compensation to reflect any changes in the amount or nature of such Services
required by UBICS, as provided above, and any changes in the cost to Provider
or any of its affiliates of providing such Services.
(c) Compensation for the use of Provider Facilities shall be an amount
equal to a pro rata share of the Provider's or any of its affiliates' aggregate
costs (including rental, taxes, utilities and other similar operating expenses
and costs) with respect to the portion of the Facility assigned to or used by
UBICS, with such proration reflecting the number of days each month such
portion of the Provider Facility is actually used by UBICS and its employees,
agents and representatives.
3. INDEPENDENT CONTRACTOR. The parties agree that the personnel of
Provider or any of its affiliates whose services are provided to UBICS under
this Agreement are not, and shall not be, employees of UBICS. Provider or any
of its affiliates is an independent contractor, and its personnel are employees
of Provider and its affiliates.
4. REPORTS. Provider and its affiliates shall report to UBICS in the
manner, at the times, and in the detail as may be agreed upon by Provider, its
affiliates and UBICS with respect to the Services and the Facilities.
5. STANDARDS. Each Provider agrees and to cause each of its affiliates
to use its best efforts to provide UBICS with effective and quality Services.
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<PAGE> 3
6. FURTHER AGREEMENTS. Mallya and the Provider each agree that they
shall use their best efforts to cause each entity which they control, including
their respective affiliates, to perform their obligations under this Agreement.
7. UB GROUP NAME. Provider agrees, and to cause each of its
affiliates, to grant UBICS the right to use the name "UB Group" in all
countries and subdivisions thereof in which any Provider Facilities are located
to the same extent as Provider and any of its affiliates has such right, and
Provider hereby grants and agrees to cause each of its affiliates, to grant
UBICS a non-exclusive license to use the name "UB Group" to such extent. UBICS
agrees that it will exercise reasonable care in its use of the name "UB Group."
8. BOOKS AND RECORDS. Provider shall, and shall cause each of its
affiliates, to maintain the books and records of its activities in connection
with this Agreement at its principal place of business, and such books and
records shall be available for inspection by UBICS during regular business
hours for the sole purpose of determining the reasonableness and accuracy of
all invoices submitted by each Provider and any of its affiliates to UBICS for
the Services and the use of the Provider Facilities. UBICS acknowledges that
such books and records are the confidential and private property of Provider
and any of its affiliates and all information contained therein shall be
maintained as such by UBICS, its accountants, agents, and employees, or any
other person receiving such information through UBICS.
9. INDEMNIFICATION. UBICS shall indemnify and hold harmless Provider,
any of its affiliates and their respective officers and directors, from and
against any and all claims, demands, expenses (including reasonable attorneys'
fees), actions, losses, costs, and any and all other liability ("Claims")
arising from Provider's or any of its affiliates' performance of the Services
or use of Provider's or any of its affiliates' facilities by UBICS or its
officers, employees, agents or representatives under this Agreement or from a
violation by UBICS of its covenant in Section 7 with respect to use of the UB
Group name except Claims which result from the negligence, reckless or
intentional misconduct of Provider or any of its affiliates.
10. TERM. This Agreement shall become effective on the date hereof and
shall continue until terminated pursuant to Paragraph 11 hereof.
11. TERMINATION. Any party may terminate this Agreement upon thirty
days' written notice to the other parties on or after the fifth anniversary of
the effective date hereof; provided, however, that the Provider and Mallya
shall have the right to terminate the provisions of Section 7 upon the
occurrence of a Change in Control (as defined in Section 12) of the Company.
12. CERTAIN DEFINITIONS. As used herein, the following definitions
shall apply:
(a) An "affiliate" of a person or entity shall have the meaning
ascribed to such term for purposes of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act") and includes any person or entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common Control with, the person or entity specified.
(b) The term "control" (including the terms "controlling, "controlled
by" and "under common control with") shall have the meaning ascribed to such
term for purposes of Rule 405 under the Securities Act, and includes the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
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<PAGE> 4
(c) "Change in Control" shall mean any of the following events:
(i) consummation of an agreement by UBICS to consolidate or merge
with any other entity that is not an Affiliate 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
the surviving corporation immediately prior to the merger would have the same
proportion of ownership of common stock of the surviving corporation immediately
after the merger;
(ii) consummation of an agreement of UBICS to sell, lease, exchange
or otherwise transfer to a third party that is not an Affiliate in one
transaction or a series of related transactions substantially all the assets of
UBICS; or
(iii) consummation of an agreement by Mallya (together with his
Affiliates) to sell more than 50% of the outstanding voting securities of UBICS
to a third party that is not an Affiliate in one or a series of related
transactions other than an initial public offering of voting securities
registered with the Securities and Exchange Commission.
13. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, and their respective successors and assigns.
(b) If any term of this Agreement or any application thereof shall be
invalid or unenforceable, the remainder of this Agreement and any other
application of such term shall not be affected thereby.
(c) This Agreement shall not be waived, changed or discharged, except
by written agreement signed by the party against which enforcement is sought.
(d) This Agreement is executed in and shall be construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.
(e) No failure or delay by any party in exercising any right, power,
or privilege under this Agreement shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
(f) This Agreement may be executed in any number of counterparts all
of which shall be considered one and the same Agreement.
(g) This Agreement embodies the entire Agreement between the parties
hereto with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous, oral or written, understandings, negotiations, or
communications by or on behalf of the parties.
(h) This Agreement may not be assigned by either party without the
prior written consent of the other party.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
executed as of the date first written above.
PROVIDER:
UNITED BREWERIES LIMITED
By /s/ VIJAY MALLYA
---------------------
Name Vijay Mallya
Title Chairman
/s/ VIJAY MALLYA
---------------------
Vijay Mallya
COMPANY:
UBICS, INC.
By /s/ MANOHAR B. HIRA
---------------------
Name Manohar B. Hira
Title President
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Exhibit 10.13
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of
October 27, 1997 among UBICS, INC., a Delaware corporation ("UBICS"), VIJAY
MALLYA, an individual ("Mallya"), and UNITED BREWERIES LIMITED, a corporation
organized under the laws of India ("UBL" or the "Company").
PREAMBLE
UBICS is engaged in the business of providing information technology
services and personnel to business organizations (the "IT Services Business").
Mallya owns a Controlling interest in or otherwise Controls (as those terms are
defined in Section 4) each of the companies comprising the UB Group
(collectively, the "UB Group Companies"). Certain of the UB Group Companies,
including UB Information and Consultancy Services Ltd. ("UB Services"), have
engaged in the IT Services Business from time to time or employ individuals who
formerly were employed in the IT Services Business.
Because of the experience of UB Services and other UB Group Companies
in the IT Services Business, Mallya and the UB Group Companies, including their
Affiliates (as defined in Section 4 below) have the ability to engage, directly
or indirectly, in competition with UBICS and thereby to adversely affect its
business. Accordingly, the parties, intending to be legally bound and in
consideration of their mutual promises set forth hereto, do hereby agree as
follows.
1. CONFIDENTIAL INFORMATION. Mallya and the Company each acknowledge
that in the course of their conduct of the IT Services Business they or their
Affiliates may have acquired or been a party to certain Confidential
Information relating to UBICS's IT Services Business (the "UBICS Business").
"Confidential Information" shall mean all information about the UBICS Business
and its products, methods, business, policies, practices, personnel, customers,
suppliers, distributors and sales representatives which is not in the public
domain, including without limitation all trade secrets, inventions,
discoveries, ideas, designs and know-how. Each of Mallya and the Company
agrees, and shall cause each of their affiliates, to (a) return to UBICS any
Confidential Information relating to the conduct by UBICS of the UBICS Business
in tangible form which is in their possession or control without retaining any
copies or extracts thereof, and (b) not, without the prior written consent of
UBICS, use for their own benefit or reveal to any third party any Confidential
Information (except to the extent required for performance by an Affiliate (as
defined in Section 4) of services for UBICS under a service or similar
agreement with UBICS.
2. NON-COMPETITION. From and after the date hereof until the date
which is the earlier of the fifth anniversary of the date hereof or the date of
occurrence of a Change in Control (as defined in Section 4 below) of UBICS,
neither Mallya nor the Company nor any of their respective Affiliates (as
defined in Section 4 below) shall, as proprietor, director, officer, partner,
shareholder, employee, consultant, agent, independent contractor or otherwise,
for itself or on behalf of any other person or entity, (a) engage in or carry
on, directly or indirectly, in any part of the world (the "Territory"), any
business similar to the UBICS Business (a "Competing Business"), (b) have any
direct or indirect interest in, or be affiliated with, or render any services
for, any person or entity engaged in or carrying on, directly or indirectly,
any Competing Business in the Territory, (c) induce or attempt to induce any
customer or supplier of the UBICS Business to reduce the business done by such
supplier or customer with the UBICS Business, (d) solicit any employee of the
UBICS Business to leave the employ of the UBICS Business or (e) engage in any
practice the purpose or result of which is to evade the provisions of this
Agreement or to commit any act that is detrimental to the successful
continuation by UBICS of the UBICS Business. Notwithstanding the foregoing,
Mallya together with his Affiliates (as defined in Section 4 below) may own in
the
<PAGE> 2
aggregate up to 5% of the outstanding capital stock of a publicly traded
company which engages in a Competing Business without violating this Section 2.
3. INJUNCTIVE RELIEF. Each of Mallya and the Company acknowledges and
agrees that the covenants and agreements set forth in Sections 1 and 2 are
necessary to protect the legitimate business interests of UBICS and that any
breach of such covenants and agreements will cause immediate and irreparable
harm to UBICS. Each of Mallya and the Company acknowledges that damages for the
violation of any such covenant or agreement will not give full and sufficient
relief to UBICS and agrees that, in the event of any violation of any such
covenant or agreement, UBICS shall be entitled to injunctive relief with
respect to any such breach, which remedy shall be in addition to any other
remedy which UBICS may have on account of such breach.
4. CERTAIN DEFINITIONS. As used herein, the following definitions
shall apply:
(a) An "Affiliate" of a person or entity shall have the meaning
ascribed to such term for purposes of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"), and includes any person or entity that
directly or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, the person or entity specified.
(b) "Change in Control" shall mean any of the following events:
(i) consummation of an agreement by UBICS to consolidate or
merge with any other entity that is not an Affiliate 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 the surviving corporation
immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately
after the merger;
(ii) consummation of an agreement of UBICS to sell, lease,
exchange or otherwise transfer to a third party that is not an
Affiliate in one transaction or a series of related transactions
substantially all the assets of UBICS; or
(iii) consummation of an agreement by Mallya (together with
his Affiliates) to sell more than 50% of the outstanding voting
securities of UBICS to a third party that is not an Affiliate in one
or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and
Exchange Commission.
(c) The term "Control" (including the terms "Controlling, "Controlled
by" and "under common Control with") shall have the meaning ascribed to such
term for purposes of Rule 405 under the Securities Act, and includes the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
5. Mallya and the Company agree to use, and to cause each of their
respective Affiliates to use, their best efforts to cause each entity which he
or it Controls, including the UB Group Companies, to comply with the covenants
set forth in this Agreement.
6. AGREEMENTS OF UB SERVICES. Pursuant to a separate Noncompetition
Agreement dated the date hereof with UBICS (the "UB Services Agreement"), UB
Services acknowledges that it has
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<PAGE> 3
ceased all business activities relating to the IT Services Business and agrees
that it shall cease all active business operations within 90 days after the
date hereof or as soon as practicable thereafter. Mallya and the Company shall
take all action, and shall cause each of his or its Affiliates which Control UB
Services to take all action, as may be required to cause UB Services to comply
with each of its covenants set forth in the UB Services Agreement.
7. MISCELLANEOUS.
(a) NOTICES. All notices or other communications which may be given
hereunder shall be in writing and shall be given to the addresses set forth
below:
If to UBICS:
UBICS, Inc.
100 Sainte Claire Plaza
1121 Boyce Road
Pittsburgh, PA 15241
Attn: President
If to Mallya or the Company:
c/o Vijay Mallya
Three Harbor Place, Suite 115
Sausalito, CA 94065
(b) SUCCESSORS AND ASSIGNS. This Agreement and all rights and powers
granted hereby shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
(c) GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) AMENDMENT. To be effective, any amendment or waiver to this
Agreement must be in writing and be signed by the party against whom
enforcement of the same is sought.
(f) SEVERABILITY. If any portion of this Agreement shall for any
reason be held by a court of competent jurisdiction to be invalid and
unenforceable, the valid and enforceable provisions will continue to be given
effect and bind the parties hereto. In addition, the covenants set forth in
Sections 1 and 2 are intended to be separate covenants for each county and
district and each country, state, province or other political subdivision
comprising a part of the Territory, and the invalidity of such clauses as to
any country, county, state or political subdivision shall not affect their
validity as to any other country, county, state or political subdivision
comprising a part of the Territory.
(g) ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties hereto
with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
-3-
<PAGE> 4
(h) CERTAIN APPROVALS. Notwithstanding any contrary provision of this
Agreement, this Agreement (other than this Section 7(h)) shall not be effective
as against the Company until the Agreement has been approved by the Reserve
Bank of India as required by Indian law. Mallya and the Company agree to use,
and to cause their respective Affiliates to use, all reasonable efforts to
obtain such approval as promptly as practicable after the date hereof.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 5
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date and year first written above.
UBICS, INC.
By: /s/ MANOHAR B. HIRA
----------------------------
President
/S/ VIJAY MALLYA
--------------------------------
Vijay Mallya
UNITED BREWERIES LIMITED
By: /s/ VIJAY MALLYA
----------------------------
Authorized Officer
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<PAGE> 1
Exhibit 10.14
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of
October 27, 1997 among UBICS, INC., a Delaware corporation ("UBICS"), VIJAY
MALLYA, an individual ("Mallya"), and UB INTERNATIONAL LIMITED, a corporation
organized under the laws of the United Kingdom ("UB International" or the
"Company").
PREAMBLE
UBICS is engaged in the business of providing information technology
services and personnel to business organizations (the "IT Services Business").
Mallya owns a Controlling interest in or otherwise Controls (as those terms are
defined in Section 4) each of the companies comprising the UB Group
(collectively, the "UB Group Companies"). Certain of the UB Group Companies,
including UB Information and Consultancy Services Ltd. ("UB Services"), have
engaged in the IT Services Business from time to time or employ individuals who
formerly were employed in the IT Services Business.
Because of the experience of UB Services and other UB Group Companies
in the IT Services Business, Mallya and the UB Group Companies, including their
Affiliates (as defined in Section 4 below) have the ability to engage, directly
or indirectly, in competition with UBICS and thereby to adversely affect its
business. Accordingly, the parties, intending to be legally bound and in
consideration of their mutual promises set forth hereto, do hereby agree as
follows.
1. CONFIDENTIAL INFORMATION. Mallya and the Company each acknowledge
that in the course of their conduct of the IT Services Business they or their
Affiliates may have acquired or been a party to certain Confidential
Information relating to UBICS's IT Services Business (the "UBICS Business").
"Confidential Information" shall mean all information about the UBICS Business
and its products, methods, business, policies, practices, personnel, customers,
suppliers, distributors and sales representatives which is not in the public
domain, including without limitation all trade secrets, inventions,
discoveries, ideas, designs and know-how. Each of Mallya and the Company
agrees, and shall cause each of their affiliates, to (a) return to UBICS any
Confidential Information relating to the conduct by UBICS of the UBICS Business
in tangible form which is in their possession or control without retaining any
copies or extracts thereof, and (b) not, without the prior written consent of
UBICS, use for their own benefit or reveal to any third party any Confidential
Information (except to the extent required for performance by an Affiliate (as
defined in Section 4) of services for UBICS under a service or similar
agreement with UBICS.
2. NON-COMPETITION. From and after the date hereof until the date
which is the earlier of the fifth anniversary of the date hereof or the date of
occurrence of a Change in Control (as defined in Section 4 below) of UBICS,
neither Mallya nor the Company nor any of their respective Affiliates (as
defined in Section 4 below) shall, as proprietor, director, officer, partner,
shareholder, employee, consultant, agent, independent contractor or otherwise,
for itself or on behalf of any other person or entity, (a) engage in or carry
on, directly or indirectly, in any part of the world (the "Territory"), any
business similar to the UBICS Business (a "Competing Business"), (b) have any
direct or indirect interest in, or be affiliated with, or render any services
for, any person or entity engaged in or carrying on, directly or indirectly,
any Competing Business in the Territory, (c) induce or attempt to induce any
customer or supplier of the UBICS Business to reduce the business done by such
supplier or customer with the UBICS Business, (d) solicit any employee of the
UBICS Business to leave the employ of the UBICS Business or (e) engage in any
practice the purpose or result of which is to evade the provisions of this
Agreement or to commit any act that is detrimental to the successful
continuation by UBICS of the UBICS Business. Notwithstanding the foregoing,
Mallya together with his Affiliates (as defined in Section 4 below) may own in
the
<PAGE> 2
aggregate up to 5% of the outstanding capital stock of a publicly traded
company which engages in a Competing Business without violating this Section 2.
3. INJUNCTIVE RELIEF. Each of Mallya and the Company acknowledges and
agrees that the covenants and agreements set forth in Sections 1 and 2 are
necessary to protect the legitimate business interests of UBICS and that any
breach of such covenants and agreements will cause immediate and irreparable
harm to UBICS. Each of Mallya and the Company acknowledges that damages for the
violation of any such covenant or agreement will not give full and sufficient
relief to UBICS and agrees that, in the event of any violation of any such
covenant or agreement, UBICS shall be entitled to injunctive relief with
respect to any such breach, which remedy shall be in addition to any other
remedy which UBICS may have on account of such breach.
4. CERTAIN DEFINITIONS. As used herein, the following definitions
shall apply:
(a) An "Affiliate" of a person or entity shall have the meaning
ascribed to such term for purposes of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"), and includes any person or entity that
directly or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, the person or entity specified.
(b) "Change in Control" shall mean any of the following events:
(i) consummation of an agreement by UBICS to consolidate or
merge with any other entity that is not an Affiliate 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 the surviving corporation
immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately
after the merger;
(ii) consummation of an agreement of UBICS to sell, lease,
exchange or otherwise transfer to a third party that is not an
Affiliate in one transaction or a series of related transactions
substantially all the assets of UBICS; or
(iii) consummation of an agreement by Mallya (together with
his Affiliates) to sell more than 50% of the outstanding voting
securities of UBICS to a third party that is not an Affiliate in one
or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and
Exchange Commission.
(c) The term "Control" (including the terms "Controlling, "Controlled
by" and "under common Control with") shall have the meaning ascribed to such
term for purposes of Rule 405 under the Securities Act, and includes the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
5. Mallya and the Company agree to use, and to cause each of their
respective Affiliates to use, their best efforts to cause each entity which he
or it Controls, including the UB Group Companies, to comply with the covenants
set forth in this Agreement.
6. AGREEMENTS OF UB SERVICES. Pursuant to a separate Noncompetition
Agreement dated the date hereof with UBICS (the "UB Services Agreement"), UB
Services acknowledges that it has
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<PAGE> 3
ceased all business activities relating to the IT Services Business and agrees
that it shall cease all active business operations within 90 days after the
date hereof or as soon as practicable thereafter. Mallya and the Company shall
take all action, and shall cause each of his or its Affiliates which Control UB
Services to take all action, as may be required to cause UB Services to comply
with each of its covenants set forth in the UB Services Agreement.
7. MISCELLANEOUS.
(a) NOTICES. All notices or other communications which may be given
hereunder shall be in writing and shall be given to the addresses set forth
below:
If to UBICS:
UBICS, Inc.
100 Sainte Claire Plaza
1121 Boyce Road
Pittsburgh, PA 15241
Attn: President
If to Mallya or the Company:
c/o Vijay Mallya
Three Harbor Place, Suite 115
Sausalito, CA 94065
(b) SUCCESSORS AND ASSIGNS. This Agreement and all rights and powers
granted hereby shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
(c) GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) AMENDMENT. To be effective, any amendment or waiver to this
Agreement must be in writing and be signed by the party against whom
enforcement of the same is sought.
(f) SEVERABILITY. If any portion of this Agreement shall for any
reason be held by a court of competent jurisdiction to be invalid and
unenforceable, the valid and enforceable provisions will continue to be given
effect and bind the parties hereto. In addition, the covenants set forth in
Sections 1 and 2 are intended to be separate covenants for each county and
district and each country, state, province or other political subdivision
comprising a part of the Territory, and the invalidity of such clauses as to
any country, county, state or political subdivision shall not affect their
validity as to any other country, county, state or political subdivision
comprising a part of the Territory.
(g) ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties hereto
with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 4
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date and year first written above.
UBICS, INC.
By: /s/ MANOHAR B. HIRA
-------------------------
President
/s/ VIJAY MALLYA
----------------------------
Vijay Mallya
UB INTERNATIONAL LIMITED
By: /s/ VIJAY MALLYA
-------------------------
Authorized Officer
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<PAGE> 1
Exhibit 10.15
SERVICES AGREEMENT
This Agreement is made as of October 27, 1997 (this "Agreement") among
VIJAY MALLYA, an individual ("Mallya"), UB INTERNATIONAL LIMITED, a corporation
organized under the laws of the United Kingdom ("UBL" or "Provider"), and
UBICS, INC., a Delaware corporation ("UBICS" or the "Company").
PREAMBLE
Provider, directly or through its affiliates (as defined in Section
12), engages in various business operations in various countries, and employs
skilled individuals involved in the provision of administrative, support and
other similar services ("Services"). UBICS wishes to utilize the offices and
facilities of the Provider (and its affiliates) from time to time and to
utilize the services of the Provider's employees (and its affiliates) from time
to time upon the terms and conditions set forth herein. Therefore, the parties,
intending to be legally bound hereby, agree as follows.
AGREEMENT
1. SERVICES; USE OF FACILITIES.
(a) Mallya and Provider agrees, and to cause each of their respective
affiliates, to provide Services to UBICS on a non-exclusive basis upon request
of UBICS from time to time, and UBICS agrees to accept such Services.
(b) In the event that UBICS should require a materially different
level of Services from Provider or any of its affiliates than that being
provided under this Agreement, or in the event that UBICS should require
Provider or any of its affiliates to undertake special, limited duration
projects that are outside the scope of the Services, UBICS shall consult with
Provider as to the required changes; provided, however, that in no event shall
Provider or any of its affiliates be required to undertake projects that would
materially interfere with the conduct by Provider or any of its affiliates of
their normal business. Provider will use, and agrees to cause each of its
affiliates to use, its best efforts to allocate or acquire the personnel
required to provide any additional Services, provided that UBICS gives to
Provider reasonable written notice (which generally should not be less than 30
days) that an increase in Services will be required and specifying the type and
level of such Services.
(c) In the event of any material reduction in the level of Services
required from Provider or its affiliates, UBICS agrees to give reasonable
written notice (which generally should be at least 30 days notice) to Provider
or any of its affiliates of such proposed reduction, and to continue to pay for
Services (whether or not utilized) in general conformity with historic levels
until the end of such 30 day period. This 30 day period prior to any slowdown
or reduction is intended to enable Provider or any of its affiliates to adjust
its roster of employees, and to give any notice to any employees who must be
terminated as a result of Provider or any of its affiliates ceasing to provide
such Services to UBICS as required by law, industry, or custom. Any change to
the scope or level of the Services shall be reflected by a corresponding change
to the compensation for the Services.
(d) From time to time upon reasonable prior written notice to Provider
or any of its affiliates, Provider agrees to provide and to cause each of its
affiliates to provide UBICS and its officers, employees, agents and
representatives with access to and the use of a designated portion of any
offices or other facilities of Provider and any of its affiliates
(collectively, the "Provider Facilities"). Provider shall
<PAGE> 2
permit and shall cause each of its affiliates to permit UBICS and its officers,
employees, agents and representatives with access to its Provider Facilities on
the same terms and conditions as Provider, its affiliates and their employees.
UBICS agrees that it shall, and shall use its best efforts to cause its
employees, agents and representatives to, perform and observe all terms and
conditions of any lease, or sublease or other contractual arrangement to which
Provider or its affiliates is a party with respect to the Provider Facilities.
(e) UBICS, Mallya and Provider agree that they each shall use their
best efforts to comply with all applicable laws and regulations in performing
this Agreement.
2. COMPENSATION.
(a) Payment for Services provided to UBICS and for Provider Facilities
used by UBICS during a given calendar month shall be made by UBICS to Provider
or its affiliates against invoices delivered to UBICS on or before the 15th day
of the following month. Any delay in the delivery of such invoices shall
entitle UBICS to defer, on a day-by-day basis, the due date of its payments
hereunder. All payments not made within the time specified on the invoice
shall bear interest at the Prime Rate of interest announced from time to time
by PNC Bank, National Association, Pittsburgh, Pennsylvania. The terms of all
such invoices shall require payment within 30 days of the date that the invoice
is received by UBICS, unless otherwise agreed to by the parties.
(b) Compensation for Services shall be based upon rates to be agreed
upon by UBICS and Provider or any of its affiliates at the time Services are to
be provided, which compensation shall in each case be fair and reasonable on
terms no less favorable to UBICS than those which would be made to
non-affiliated parties and based on the estimated costs, including a reasonable
allocation of direct and indirect overhead costs, incurred by Provider or any
of its affiliates in providing the Services. The parties hereto agree to review
periodically (but in any event at least every six months during the term of
this Agreement) such compensation and negotiate in good faith to adjust such
compensation to reflect any changes in the amount or nature of such Services
required by UBICS, as provided above, and any changes in the cost to Provider
or any of its affiliates of providing such Services.
(c) Compensation for the use of Provider Facilities shall be an amount
equal to a pro rata share of the Provider's or any of its affiliates' aggregate
costs (including rental, taxes, utilities and other similar operating expenses
and costs) with respect to the portion of the Facility assigned to or used by
UBICS, with such proration reflecting the number of days each month such
portion of the Provider Facility is actually used by UBICS and its employees,
agents and representatives.
3. INDEPENDENT CONTRACTOR. The parties agree that the personnel of
Provider or any of its affiliates whose services are provided to UBICS under
this Agreement are not, and shall not be, employees of UBICS. Provider or any
of its affiliates is an independent contractor, and its personnel are employees
of Provider and its affiliates.
4. REPORTS. Provider and its affiliates shall report to UBICS in the
manner, at the times, and in the detail as may be agreed upon by Provider, its
affiliates and UBICS with respect to the Services and the Facilities.
5. STANDARDS. Each Provider agrees and to cause each of its affiliates
to use its best efforts to provide UBICS with effective and quality Services.
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<PAGE> 3
6. FURTHER AGREEMENTS. Mallya and the Provider each agree that they
shall use their best efforts to cause each entity which they control, including
their respective affiliates, to perform their obligations under this Agreement.
7. UB GROUP NAME. Provider agrees, and to cause each of its
affiliates, to grant UBICS the right to use the name "UB Group" in all
countries and subdivisions thereof in which any Provider Facilities are located
to the same extent as Provider and any of its affiliates has such right, and
Provider hereby grants and agrees to cause each of its affiliates, to grant
UBICS a non-exclusive license to use the name "UB Group" to such extent. UBICS
agrees that it will exercise reasonable care in its use of the name "UB Group."
8. BOOKS AND RECORDS. Provider shall, and shall cause each of its
affiliates, to maintain the books and records of its activities in connection
with this Agreement at its principal place of business, and such books and
records shall be available for inspection by UBICS during regular business
hours for the sole purpose of determining the reasonableness and accuracy of
all invoices submitted by each Provider and any of its affiliates to UBICS for
the Services and the use of the Provider Facilities. UBICS acknowledges that
such books and records are the confidential and private property of Provider
and any of its affiliates and all information contained therein shall be
maintained as such by UBICS, its accountants, agents, and employees, or any
other person receiving such information through UBICS.
9. INDEMNIFICATION. UBICS shall indemnify and hold harmless Provider,
any of its affiliates and their respective officers and directors, from and
against any and all claims, demands, expenses (including reasonable attorneys'
fees), actions, losses, costs, and any and all other liability ("Claims")
arising from Provider's or any of its affiliates' performance of the Services
or use of Provider's or any of its affiliates' facilities by UBICS or its
officers, employees, agents or representatives under this Agreement or from a
violation by UBICS of its covenant in Section 7 with respect to use of the UB
Group name except Claims which result from the negligence, reckless or
intentional misconduct of Provider or any of its affiliates.
10. TERM. This Agreement shall become effective on the date hereof and
shall continue until terminated pursuant to Paragraph 11 hereof.
11. TERMINATION. Any party may terminate this Agreement upon thirty
days' written notice to the other parties on or after the fifth anniversary of
the effective date hereof; provided, however, that the Provider and Mallya
shall have the right to terminate the provisions of Section 7 upon the
occurrence of a Change in Control (as defined in Section 12) of the Company.
12. CERTAIN DEFINITIONS. As used herein, the following definitions
shall apply:
(a) An "affiliate" of a person or entity shall have the meaning
ascribed to such term for purposes of Rule 405 under the Securities Act of
1933, as amended (the "Securities Act") and includes any person or entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common Control with, the person or entity specified.
(b) The term "control" (including the terms "controlling, "controlled
by" and "under common control with") shall have the meaning ascribed to such
term for purposes of Rule 405 under the Securities Act, and includes the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity, whether through the
ownership of voting securities, by contract, or otherwise.
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<PAGE> 4
(c) "Change in Control" shall mean any of the following events:
(i) consummation of an agreement by UBICS to consolidate or merge
with any other entity that is not an Affiliate 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
the surviving corporation immediately prior to the merger would have the same
proportion of ownership of common stock of the surviving corporation immediately
after the merger;
(ii) consummation of an agreement of UBICS to sell, lease, exchange
or otherwise transfer to a third party that is not an Affiliate in one
transaction or a series of related transactions substantially all the assets of
UBICS; or
(iii) consummation of an agreement by Mallya (together with his
Affiliates) to sell more than 50% of the outstanding voting securities of UBICS
to a third party that is not an Affiliate in one or a series of related
transactions other than an initial public offering of voting securities
registered with the Securities and Exchange Commission.
13. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, and their respective successors and assigns.
(b) If any term of this Agreement or any application thereof shall be
invalid or unenforceable, the remainder of this Agreement and any other
application of such term shall not be affected thereby.
(c) This Agreement shall not be waived, changed or discharged, except
by written agreement signed by the party against which enforcement is sought.
(d) This Agreement is executed in and shall be construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.
(e) No failure or delay by any party in exercising any right, power,
or privilege under this Agreement shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
(f) This Agreement may be executed in any number of counterparts all
of which shall be considered one and the same Agreement.
(g) This Agreement embodies the entire Agreement between the parties
hereto with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous, oral or written, understandings, negotiations, or
communications by or on behalf of the parties.
(h) This Agreement may not be assigned by either party without the
prior written consent of the other party.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
executed as of the date first written above.
PROVIDER:
UB INTERNATIONAL LIMITED
By /s/ VIJAY MALLYA
--------------------
Name: Vijay Mallya
Title: Chairman
/s/ VIJAY MALLYA
--------------------
Vijay Mallya
COMPANY:
UBICS, INC.
By /s/ MANOHAR B. HIRA
--------------------
Name: Manohar B. Hira
Title: President
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<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 28, 1997
