<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-23239
UBICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1744587
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
333 TECHNOLOGY DRIVE, SUITE 210, CANONSBURG, PENNSYLVANIA 15317
(Address of Principal Executive Offices) (Zip Code)
(724) 746-6001
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of the voting and non-voting common equity
of the registrant held by non-affiliates of the registrant as of March 25, 1999
(based on the closing price of such stock on the Nasdaq National Market on such
date) was $12,230,245.
The number of shares of the registrant's Common Stock, par value $.01
per share, outstanding as of March 25, 1999 was 6,479,800.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the
indicated Part of this Form 10-K:
(1) Portions of the registrant's definitive proxy statement to be mailed to
stockholders on or about April 19, 1999 in connection with the registrant's
annual meeting of stockholders expected to be held on May 25, 1999 (Part III).
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UBICS, INC.
FORM 10-K
TABLE OF CONTENTS
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PART I Page
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Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements
Balance Sheets as of December 31, 1997 and December 31, 1998
Statements of Operations for the years ended December 31, 1996, 1997 and 1998
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998
Notes to Financial Statements
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
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PART I
ITEM 1. BUSINESS
SUMMARY
UBICS, Inc. ("UBICS" or the "Company") provides 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, e-commerce applications design and
development, applications maintenance programming and database and systems
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 $30.2 million for 1998. The Company attributes its growth in revenues
primarily to an increased focus on higher value-added services, particularly ERP
package implementation and customization services and an increase in the number
of IT professionals deployed at client sites.
During 1998, UBICS provided IT professional services to more than 235
clients in a range of industries and locations. The Company's clients include
Advanced Auto Parts, Caterpillar, El Paso Natural Gas, Fruit of the Loom, State
Farm 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 285 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 the Company has established a
recruiting and training center in India. The initial phase of the center was
placed in operation in the fall of 1998 and an expansion is expected to be
operational by the end of 1999. 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 Bangalore,
India with operations in Asia, the Far East, the Middle East, Africa, Europe and
the U.S. The UB Group consists of companies under the control of Vijay Mallya,
Chairman of the Company and the indirect beneficial owner of approximately 62%
of the outstanding shares of common stock of the Company. 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.
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) e-commerce
applications design and development; (iv) applications maintenance programming,
including Year 2000 conversion services; and (v) database and systems
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.
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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. Over one-fifth of the Company's IT professionals were placed in
ERP projects as of December 31, 1998. The Company is seeking to expand the
volume of ERP software services that it provides by developing relationships
with package software firms. In addition, the Company intends 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 are billed at higher rates and carry higher
margins. The Company also continually adjusts the scope of services which it
provides in order to meet the changing needs of its clients.
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The Company's services are described below:
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UBICS SERVICES METHODS/TOOLS DESCRIPTION
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Client/Server Design and o Tools/Languages: o System design
Development PowerBuilder, Visual Basic, o Requirements analysis and
Developer 2000, Delphi, SQL definition
Windows, Visual C++, Java, o Data modeling
Lotus Notes, Smalltalk o Prototyping
o Development
o Databases: Oracle, o Testing and
Informix, Sybase, SQL Server, implementation
Unify
o Network design
o CASE Tools: ER-Win, o Internet/intranet
Designer 2000, IEF solutions
o Legacy transformation/
data porting
-------------------------------------------------------------------------------------------------
ERP Package Implementation o ERP Packages: Baan, o Implementation of
and Customization PeopleSoft, Oracle, SAP packaged software
solutions
o Customization
o Integration
o Data modeling
o System support
o Database administration
o End-user training
-------------------------------------------------------------------------------------------------
E-Commerce / Internet o Tools/Languages: o Web development, Internet/
Java, Pearl, CGI, Java Beans, Intranet solutions,
HTML DHTML, ActiveX, ASP, Applet Developments, Workflow,
Domino, Oracle Webserver Firewalls (security)
-------------------------------------------------------------------------------------------------
Applications Maintenance o Programming environments: o System design
Programming COBOL, CICS, PL/1, o Development
RPG/400, COBOL/400 o Program conversion
o Data conversion
o Databases: DB2, IMS, IDMS o User interface conversion
o Testing and
o Y2K Tools: MicroFocus implementation
Revolve o Date conversion
-------------------------------------------------------------------------------------------------
Database and System o Databases: Oracle, o Database administration
Administration Informix, Sybase, SQL Server, o Datawarehousing
Unify
o Network administration
o Tools: HP OpenView, o Unix and Windows NT
CiscoWorks, Bytex Network System administration
Management System,
AT&T OneVision
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</TABLE>
SALES AND MARKETING
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 25 professionals. The Company serves
the U.S. market primarily through its headquarters in the Pittsburgh,
Pennsylvania area. 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.
The Company's sales force is organized primarily by geographic region and/or
practice lines. The Company's sales professionals are responsible for managing
client relationships and identifying new business opportunities within their
assigned regions and/or practice lines. 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 and/or practice lines.
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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 has expanded its international operations by opening its
recruiting and training center in India. In addition, UBICS expects to open a
sales and recruiting office in the United Kingdom within the next four months.
Because UBICS currently has a sufficient supply of IT professionals awaiting
deployment, the Company has deferred previously disclosed plans to establish
offshore recruiting offices in various other foreign locations.
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 1998,
the Company provided services to over 235 clients in a range of industries in
the U.S. During 1998, approximately 21% of the Company's revenues were derived
from its top five clients--El Paso Natural Gas, The Hartford, The Associates,
Cummins and ALE. El Paso Natural Gas accounted for approximately 14%, 10% and 8%
of the Company's revenues for 1996, 1997 and 1998, respectively.
4
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The following is a partial list of organizations to which the Company has
provided, or is providing, services:
TECHNOLOGY RETAIL INDUSTRIAL
---------- ------ ----------
Access Graphics Advance Auto Parts Caterpillar
AMP Blockbuster Cummins
Baan CompUSA El Paso Natural Gas
Computer Associates Home Shopping Network General Electric
Hughes Network Systems Long John Silver's Johnson Controls
NextLevel Systems Sears PPG
Oracle Zerox
CONSUMER PRODUCTS FINANCIAL
----------------- ---------
Fruit of the Loom Associates
McGraw-Hill Equitable
Paramount GE Capital
Philips Electronics State Farm
Ralston Purina The Hartford
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 December 31,
1998, the Company had 276 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. The
Company has also established a recruiting and training center in India and plans
to establish a sales and marketing office in the United Kingdom.
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 technical panel comprised of experts in the candidate's skill
areas. During the final step, the candidate is interviewed to assess the
candidate's client interaction skills and to verify the candidate's suitability
for assignment to a project in the U.S.
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 to
train UBICS IT professionals in ERP software packages and other higher
value-added technologies, and thereby enhance the skill base of such
professionals.
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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 December 31, 1998, the Company had 237 employees
comprised of 183 IT professionals, 32 sales and marketing personnel and 22
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.
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 December 31, 1998, 114 of its deployed IT professionals, or approximately
41%, 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.
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 Five" 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.
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.
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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, 1997, this limit was
reached in August and in the federal fiscal year ended September 30, 1998, this
limit was reached in May. The inability to obtain additional H-1B permits during
the federal fiscal year ended September 30, 1998 resulted in increased use of
subcontractor professionals by UBICS. If in future years the limit on H-1B
permits is reached, the Company may again 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. The U.S. government has increased the limit on
the number of new H-1B permits to 115,000 for each of fiscal years 1999 and
2000, and to 107,500 for fiscal year 2001 before reverting to existing limits
from fiscal year 2002 onwards. The U.S. Government, in addition to increasing
the limits, has also imposed a fee to be paid by companies for new approvals and
for renewals. However, in February 1999, the U.S. Immigration and Naturalization
Service announced that approximately 70,000 new H-1B permits had already been
issued for the 1999 federal fiscal year, so that the limit for the current
fiscal year could be reached as early as May or June.
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 result and financial condition.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in the Borough of
Canonsburg, Pennsylvania, approximately 22 miles south of Pittsburgh,
Pennsylvania. The Company's senior management, administrative personnel, human
resources and sales and marketing functions are housed in this 20,749 square
foot facility which is leased by the Company pursuant to a lease agreement which
expires on August 27, 2003. 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 subleases 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.
In the fall of 1998 the Company opened a recruiting and training center in
India. Currently the center is located in a facility in Bangalore, India owned
by the UB Group and used by the Company pursuant to a Services Agreement dated
October 27, 1997 among the Company, Vijay Mallya and United Breweries Limited, a
company in the UB Group. The Company reimburses the UB Group for the allocable
cost related to its use of such portion of the UB Group facility. The Company
plans to lease or build a permanent, expanded facility for its recruiting and
training center in a location to be determined. Such expanded facility is
expected to be operational by the end of 1999.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation that is expected to have a
material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of its stockholders
during the quarter ended December 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information:
------------------
The sole class of outstanding equity securities of the Company is its common
stock, par value $.01 per share (the "Common Stock"). The Common Stock is traded
on the Nasdaq National Market under the symbol "UBIX". The following table sets
forth, for the period indicated, the range of high and low closing sale prices
for the Common Stock on the Nasdaq National Market. The Common Stock commenced
trading on the Nasdaq National Market on October 31, 1997 at an initial public
offering price of $10.00 per share.
Quarter Ended High Low
------------- ---- ---
December 31, 1997 $ 16 3/8 $ 11 5/8
March 31, 1998 $ 10 3/8 $ 13 3/8
June 30, 1998 $ 22 1/4 $ 13 1/4
September 30, 1998 $ 13 5/8 $ 5
December 31, 1998 $ 7 3/8 $ 4 3/8
As of March 25, 1999 there were approximately 95 record holders of Common
Stock.
The Company has never paid dividends on its Common Stock. 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.
(b) Use of Proceeds of Initial Public Offering:
------------------------------------------
The following information relates to the Company's use of the net proceeds
of the Company's initial public offering (the "Offering"):
On October 27, 1997, the Company's registration statement on Form S-1, No.
333-35171, became effective. The Company sold a total of 1,500,000 shares of
common stock, par value $.01 per share at a price per share of $10.00 pursuant
to the Offering. The Offering, which was managed by Parker/Hunter Incorporated,
as lead underwriter, and Scott & Stringfellow, Inc., as co-manager, closed on
November 4, 1997.
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The following table summarizes the estimated expenses incurred for the
Company's account in connection with the Offering:
Underwriting discounts $1,050,000
Finder's fees --
Expenses paid to or for underwriters --
Other expenses 775,000*
----------
TOTAL $1,825,000
- ----------
*Estimated.
The following table summarized the amount of net offering proceeds to the
Company ($13,175,000) used for the purposes listed below:
Construction of plant, building $ 0
and facilities
Purchase and installation of
machinery and equipment 1,632,000
Acquisition of other business(es) 0
Repayment of indebtedness 775,000
Working capital 1,248,000
Temporary investments* 9,520,000
Other Purposes 0
-----------
Total $13,175,000
===========
- ----------
*Such amount is currently invested in a nine-month ready access certificate of
deposit with PNC Bank.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
INCOME STATEMENT DATA: 1994 1995 1996 1997 1998
- ---------------------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Revenues ............................................. $303 $1,454 $9,072 $20,549 $30,189
Cost of revenues ..................................... 178 994 6,208 13,695 20,771
----- ------ ------ ------- -------
Gross profit ......................................... 125 460 2,864 6,854 9,418
Selling, general and
administrative expense(1) .......................... 120 452 2,392 3,738 6,495
----- ------ ------ ------- -------
Income from operations ............................... 5 8 472 3,116 2,923
Interest income (expense), net ....................... -- -- (23) 71 611
----- ------ ------ ------- -------
Income before income taxes ........................... 5 8 449 3,187 3,534
Provision for income taxes ........................... 2 5 230 1,307 1,438
----- ------ ------ ------- -------
Net income ........................................... $ 3 $ 3 $ 219 $ 1,880 $ 2,096
===== ====== ====== ======= =======
Basic and diluted earnings
per share .......................................... $0.0 $ 0.0 $ 0.04 $ 0.36 $0.32
===== ====== ====== ======= =======
Weighted average shares .............................. 5,000 5,000 5,000 5,259 6,496
Diluted average shares ............................... 5,000 5,000 5,000 5,275 6,530
</TABLE>
DECEMBER 31,
-------------------------------------------------
BALANCE SHEET DATA: 1994 1995 1996 1997 1998
- ------------------------ ---- ----- ------ ------- -------
Working capital .......... $ 7 $(25) $ 179 $15,158 $15,459
Total assets ............. 120 619 2,601 18,132 21,218
Total debt ............... -- 78 300 -- --
Total stockholders'
equity.................. 7 10 229 15,284 17,280
- -------
(1) Includes expenses of $257 incurred on behalf of the UB Group for the ended
December 31, 1996. Beginning January 1, 1997, such expenses ceased to be
incurred by the Company.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the financial statements and notes thereto
included in Item 8 of this report.
The following Management's Discussion and Analysis of Results of
Operations and Financial Condition contains certain forward looking statements
that involve substantial risks and uncertainties. When used in this report, the
words "anticipate," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward looking statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward looking statements.
OVERVIEW
UBICS, founded in 1993, provides 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, e-commerce applications design and
development, applications maintenance programming and database and systems
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. UBICS is an affiliate of the
UB Group, a multinational group of companies headquartered in India.
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 December 31, 1998, 60 IT professionals, or approximately 22% of the
Company's deployed IT professionals, were placed on such projects.
UBICS attempts to minimize 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 41% of the Company's 1998 revenues were derived from IT
professionals deployed from subcontractors. As of December 31, 1998, IT
professionals deployed from subcontractors comprised 114 of the Company's 276
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.
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Since inception the Company has developed relationships with 313
clients in a range of industries and currently has IT professionals deployed at
nearly 170 of these clients. Although the Company's five largest clients
accounted for approximately 21% of revenues for 1998, this revenue concentration
has been declining 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.
On March 18, 1999, UBICS entered into definitive agreements to acquire
all of the issued and outstanding stock of R Systems, Inc. and its foreign
affiliates, R Systems (India) Private Limited and R Systems (Singapore) Pte
Limited (collectively, "R Systems"), in exchange for a total of 4,748,000 shares
of UBICS common stock. R Systems is a El Dorado Hills, California based provider
of IT professional services, with offices in India, Singapore and Japan. UBICS
expects to complete the acquisition in the second quarter of 1999.
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
------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Revenues............................. 100.0% 100.0% 100.0%
Cost of revenues..................... 68.4 66.7 68.8
----- ----- -----
Gross profit......................... 31.6 33.3 31.2
Selling, general and
administrative expense(1).......... 26.4 18.1 21.5
----- ----- -----
Income from operations............... 5.2 15.2 9.7
Interest income (expense), net....... (0.3) 0.3 2.0
----- ----- -----
Income before income taxes........... 4.9 15.5 11.7
Provision for income taxes........... 2.5 6.4 4.8
----- ----- -----
Net income........................... 2.4% 9.1% 6.9%
===== ===== =====
</TABLE>
- ----------
(1) Includes expenses incurred on behalf of the UB Group of 2.8% of total
revenue for the year ended December 31, 1996.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Revenues for the year ended December 31, 1998 were $30.2 million,
compared to $20.6 million for the year ended December 31, 1997, an increase of
$9.6 million, or 47%. 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 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 276
at December 31, 1998 from 190 at December 31, 1997, and the Company broadened
its client base since inception to 313 clients in 1998 from 175 clients in 1997.
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<PAGE> 15
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 1998 was $9.4 million, compared to $6.9 million for 1997, an increase of
$2.5 million, or 37%. Gross profit as a percentage of revenues decreased to
31.2% for 1998, compared to 33.3% for 1997. The decrease in gross profit as a
percentage of revenues resulted primarily from increase in the ratio of employee
consultants waiting to be deployed and from increase in rates by subcontractors.
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 1998 was $6.5
million, compared to $3.7 million for 1997, an increase of $2.8 million, or 74%.
Selling, general and administrative expense as a percentage of revenues
increased to 21.5% for 1998 from 18.1% for 1997. The increase in expense was
primarily due to increases in salaries, and other personnel and administrative
costs to support the Company's growth. The expenses include certain one-time
costs of $400,000 relating to design, relocation of the Company's principal
offices, early termination of the Company's prior office lease, recruitment fees
and appointment of an external consulting firm to advise on strategic planning.
Interest Income (Expense), Net
Interest income for 1998 was $611,000 compared to interest income of
$71,000 for 1997. The increase resulted from increased interest income for 1998
from the investment of the net proceeds of the Company's initial public offering
of 1,500,000 shares of common stock which was completed in November 1997 (the
"Offering"). Interest income in 1997 arising out of the net proceeds of the
Offering was partially offset by an increase in average borrowings under the
Line of Credit (as defined below).
Provision for Income Taxes
The Company's effective tax rate was 40.7% for 1998 compared to 41.0%
for 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues
Revenues for the year ended December 31, 1997 were $20.6 million, compared
to $9.1 million for the year ended December 31, 1996, an increase of $11.5
million, or 127%. Approximately 80% 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 20% 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 190
at December 31, 1997 from 110 at December 31, 1996, and the Company broadened
its client base since inception to 175 clients in 1997 from 79 clients in 1996.
Gross Profit
Gross profit for 1997 was $6.9 million, compared to $2.9 million for 1996,
an increase of $4.0 million, or 139%. Gross profit as a percentage of revenues
increased to 33.3% for 1997, compared to 31.6% for 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, and
an increase in the ratio of UBICS IT professionals to subcontractor
professionals deployed by UBICS.
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Selling, General and Administrative Expense
Selling, general and administrative expense for 1997 was $3.7 million,
compared to $2.4 million for 1996, an increase of $1.3 million, or 56%. Selling,
general and administrative expense as a percentage of revenues decreased to
18.1% for 1997 from 26.4% for 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 1997, which totaled approximately
$257,000 for 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.
Interest Income (Expense), Net
Interest income for 1997 was $71,000, compared to interest expense of
$23,000 for 1996. The increase resulted from increased interest income from the
investment of the net proceeds of the Offering, which was partially offset by an
increase in average borrowings under the Line of Credit (as defined below).
Provision for Income Taxes
The Company's effective tax rate was 41.0% for 1997 compared to 51.2% for
1996. The primary reason for the higher effective tax rate for 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.
LIQUIDITY AND CAPITAL RESOURCES
In November 1997, the Company generated net proceeds of approximately
$13.2 million from the Offering. Since that time the Company has used
approximately $775,000 of the net proceeds of the Offering to repay its
outstanding indebtedness under a $1,000,000 Committed Line of Credit from PNC
Bank, National Association (the "Line of Credit"). The Company also has used a
portion of the net proceeds of the Offering for general corporate purposes and
intends to use a portion of such net proceeds for the capital expenditures
described below.
The Company's principal uses of cash have been to fund receivables and
other working capital, reflecting the Company's growth. Prior to completion of
the Offering, the Company financed its working capital requirements through
internally generated funds, borrowings under the Line of Credit and loans and
advances from certain UB Group affiliates. 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 December 31, 1998, the annual interest rate under the Line of
Credit was 8.25%). As of December 31, 1998, no borrowings were outstanding under
the Line of Credit. Net cash generated by operating activities in 1998 was
$412,000 as against net cash used by operating activities of $83,000 in 1997.
Capital expenditures for 1998 and 1997 were $1,632,000 and $96,000
respectively. The Company intends to use approximately $2.0 million of the
remaining net proceeds of the Offering to expand its existing operations,
including approximately $1.2 million for the expansion of the Company's
recruiting and training center in India. The initial phase of the center was
placed in operation in the fall of 1998 and the expansion is expected to be
operational by the end of 1999 (including additional purchase of hardware and
software with respect thereto). Because the Company currently has a sufficient
supply of IT professionals awaiting deployment, as well as a shift in the
Company's strategic focus in favor of domestic sales growth, the Company has
deferred previously disclosed plans to establish offshore recruiting offices in
various foreign locations (except that the Company expects to establish a sales
and recruiting office in the United Kingdom within the next four months). Except
as set forth above, the Company currently has no material commitments for
capital expenditures.
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<PAGE> 17
The Company currently anticipates that the remaining 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 fiscal
1999
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that the changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999.
The Company has not yet quantified the impact of adopting SFAS No. 133
but does not believe that it will have a significant impact.
YEAR 2000 COMPLIANCE
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
use of computer programs which have been written using two digits, rather than
four, to define the applicable year of business transactions. The Company has
evaluated its principal staffing and financial systems, which are licensed from
and maintained by third party software development companies, and believes that
such systems are Year 2000 compliant. The Company is currently in the process of
selecting additional staffing and financial systems which management expects to
be Year 2000 compliant. The Company's total costs with respect to Year 2000
compliance as of December 31, 1998 have not been material. Management does not
anticipate that any remaining costs associated with assuring that its internal
systems will be Year 2000 compliant will be material to its business, operations
or financial condition.
The Company has initiated an assessment to determine the preparedness
level of its significant clients, vendors, and other service providers with
respect to Year 2000 issues and the subsequent impact on the Company. If a
significant client of the Company encounters Year 2000 problems, such client
could be forced to reduce its expenditures on IT projects involving the
Company's IT professionals, either because the client would have to divert
resources from such projects to address its Year 2000 problem or because of the
adverse financial effects of such problems on the client. In addition, clients
which incur significant costs in achieving Year 2000 compliance could be forced
or could elect to reallocate funds being used for projects involving the
Company's IT professionals to address Year 2000 compliance issues. The Company
does not believe its current projects will be adversely affected by problems its
clients may encounter resulting from lack of Year 2000 compliance because most
such projects will be completed before the Year 2000. However, reallocation of
IT-related expenditures by a client in connection with achieving Year 2000
compliance could affect the duration of the Company's existing projects with
such client or the availability to the Company of future IT projects.
In addition, a small number of the Company's IT professionals perform
Year 2000 work for certain clients as an adjunct to other projects performed for
such clients. The Company has a $5 million professional liability insurance
policy which covers, among other things, Year 2000 compliance work performed by
UBICS at client sites. Some of the Company's clients have requested the Company
to warrant that the services performed by the Company's IT professionals are
Year 2000 compliant. The Company is evaluating such requests from clients to
determine whether and the extent to which it is appropriate for UBICS to make
such certifications.
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<PAGE> 18
The Company's review of client and vendor readiness with respect to
Year 2000 is expected to be completed by the first half of 1999 and based upon
the results of the review, ongoing Year 2000 impact analysis and risk assessment
will continue as management deems appropriate. Such review also will involve the
development of an appropriate contingency plan to help limit the impact of any
failure of clients, vendors or other third parties with respect to Year 2000
compliance. The Company expects to incur internal staff costs as well as
consulting and other expenses related to the assessment project but is unable to
form an estimate of such costs at this time.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company currently does not invest excess funds in derivative
financial instruments or other market risk sensitive instruments for the purpose
of managing its foreign currency exchange rate risk or for any other purpose.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL DATA
The financial statements and supplemental financial data required by
this Item are set forth on the following pages.
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<PAGE> 19
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements of UBICS, Inc. have been prepared
by management, who are responsible for their integrity and objectivity. The
statements have been prepared in conformity with generally accepted accounting
principles and necessarily include amounts based on management's best estimates
and judgments.
Management has established and maintains a system of internal controls
designed to provide reasonable assurance that assets are safeguarded and that
the Company's financial records reflect authorized transactions of the Company.
The system of internal controls included widely communicated statements of
policies and business practices that are designed to require all employees to
maintain high ethical standards in the conduct of Company affairs. The internal
controls are augmented by organizational arrangements that provide for
appropriate delegation of authority and division of responsibility.
The Company's financial statements have been audited by Arthur Andersen
LLP, independent public accountants, whose report thereon appears on page 17 of
this Form 10-K. As part of its audit of the Company's financial statements,
Arthur Andersen LLP considered the Company's system of internal controls to the
extent it deemed necessary to determine the nature, timing and extent of its
audit tests. Management has made available to Arthur Andersen LLP the Company's
financial records and related data.
The Board of Directors will pursue its responsibility for the Company's
financial reporting and accounting practices through its Audit Committee, a
majority of the members of which are non-employee directors. The independent
public accountants will have direct access to the Audit Committee with and
without the presence of management representatives, to discuss the results of
their audit work and their comments on the adequacy of internal accounting
controls, and the quality of financial reporting.
/s/ DR. VIJAY MALLYA
- --------------------
Dr. Vijay Mallya
Chairman and Director
/s/ O'NEIL NALAVADI
- -------------------
O'Neil Nalavadi
Senior Vice President, Chief Financial Officer
and Director
March 19, 1999
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<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of UBICS, Inc.:
We have audited the accompanying consolidated balance sheets of UBICS, Inc.
(a Delaware corporation) as of December 31, 1997 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1997 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
February 18, 1999
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UBICS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
----------------------
1997 1998
------- -------
ASSETS
Current assets:
Cash and cash equivalents ................... $12,790 $11,470
Accounts receivable, net of allowance for
doubtful accounts of $185 and $305,
respectively.............................. 2,777 4,152
Unbilled receivables ........................ 1,966 2,973
Employee advances ........................... 170 164
Prepaids and other .......................... 169 258
Due from affiliates, net ...................... 33 174
Deferred tax asset .......................... 101 206
------- -------
Total current assets ..................... 18,006 19,397
------- -------
Property and equipment:
Leasehold improvements ...................... -- 40
Vehicles .................................... -- 72
Computer equipment and software ............. 110 1,026
Furniture and fixtures ...................... 45 623
Office and other equipment .................. 4 30
------- -------
Total property and equipment ............. 159 1,791
Accumulated depreciation .................... (33) (170)
------- -------
Net property and equipment ............... 126 1,621
------- -------
Other long-term assets ................... -- 200
------- -------
Total assets ........................ $18,132 $21,218
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 923 $ 2,034
Payroll liabilities ......................... 1,060 1,628
Accrued taxes ............................... 601 46
Other current liabilities ................... 264 230
------- -------
Total current liabilities ................ 2,848 3,938
Long-term liabilities ......................... -- --
Total liabilities ........................ 2,848 3,938
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value, 2,000,000
shares authorized, no shares issued and
outstanding .............................. -- --
Common stock, $0.01 par value, 20,000,000
shares authorized, 6,500,000 shares
issued.................................... 65 65
Additional paid-in capital .................. 13,160 13,160
Treasury stock - 0 and 20,200 shares,
respectively, at cost..................... -- (100)
Retained earnings ........................... 2,059 4,155
------- -------
Total stockholders' equity ............... 15,284 17,280
------- -------
Total liabilities and stockholders'
equity ............................ $18,132 $21,218
======= =======
The accompanying notes are an integral part of these financial statements.
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<PAGE> 22
UBICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
---------- ---------- ----------
Revenues ................. $ 9,072 $ 20,549 $ 30,189
Cost of revenues ......... 6,208 13,695 20,771
---------- ---------- ----------
Gross profit ........... 2,864 6,854 9,418
Selling, general and
administrative expense.. 2,392 3,738 6,495
---------- ---------- ----------
Income from operations ... 472 3,116 2,923
Interest income (expense),
net .................... (23) 71 611
---------- ---------- ----------
Income before income
taxes .................. 449 3,187 3,534
Provision for income
taxes .................. 230 1,307 1,438
---------- ---------- ----------
Net income ............. $ 219 $ 1,880 $ 2,096
========== ========== ==========
Basic and diluted earnings
per share .............. $ 0.04 $ 0.36 $ 0.32
========== ========== ==========
Weighted average shares
outstanding ............ 5,000,000 5,258,904 6,495,823
Diluted average shares
outstanding ........... 5,000,000 5,274,825 6,529,667
The accompanying notes are an integral part of these financial statements.
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<PAGE> 23
<TABLE>
<CAPTION>
UBICS, INC.
(DOLLARS IN THOUSANDS)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK
--------------------- ADDITIONAL TOTAL
PAID-IN TREASURY RETAINED STOCKHOLDERS
SHARES AMOUNT CAPITAL STOCK EARNINGS EQUITY
--------- ------ ------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995 ................... 5,000,000 $ 3 -- -- $ 7 $ 10
Net income ............. -- -- -- -- 219 219
--------- --- ------- ----- ------ -------
Balance, December 31,
1996 ................... 5,000,000 3 -- -- 226 229
Issuance of common
stock ................ 1,500,000 15 13,160 -- -- 13,175
Stock split in the form
of a dividend ........ -- 47 -- -- (47) --
Net income ............. -- -- -- -- 1,880 1,880
--------- --- ------- ----- ------ -------
Balance, December 31,
1997 ................... 6,500,000 65 13,160 -- 2,059 15,284
Treasury stock ......... -- -- -- (100) -- (100)
Net income ............. -- -- -- -- 2,096 2,096
--------- --- ------- ----- ------ -------
Balance, December 31,
1998 ................... 6,500,000 $65 $13,160 $(100) $4,155 $17,280
========= === ======= ===== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 24
UBICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998
------- ------- -------
Cash flows from operating
activities:
Net income ................... $ 219 $ 1,880 $ 2,096
Adjustments to reconcile net
income to net cash provided
by operating activities-- 9 20 137
Depreciation ..............
Changes in operating assets
and liabilities--
Accounts receivable,
net ..................... (1,062) (1,434) (1,375)
Unbilled receivables .... (670) (1,022) (1,007)
Employee advances ....... (73) (74) 6
Other long-term assets .. -- -- (200)
Due to affiliates, net .. 258 (516) (141)
Deferred tax asset ...... (57) (44) (105)
Prepaids and other ...... (11) (152) (89)
Bank overdraft .......... (78) -- --
Accounts payable ........ 342 405 1,111
Payroll liabilities ..... 619 370 568
Accrued taxes and other
current liabilities .. 323 484 (589)
------- ------- -------
Net cash (used) provided by
operating activities .... (181) (83) 412
------- ------- -------
Cash flows from investing
activities:
Purchases of property and
equipment ................. (25) (96) (1,632)
------- ------- -------
Net cash used by
investing activities .... (25) (96) (1,632)
------- ------- -------
Cash flows from financing
activities:
Net borrowings (payments)
under credit facility ........ 300 (300) --
Treasury stock purchased ..... -- -- (100)
Net proceeds from issuance of
common stock ................. -- 13,175 --
------- ------- -------
Net cash (provided) used by
financing activities .... 300 12,875 (100)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents ......... 94 12,696 (1,320)
Cash and cash equivalents, at
beginning of year ............ -- 94 12,790
------- ------- -------
Cash and cash equivalents, at
end of year .................. $ 94 $12,790 $11,470
======= ======= =======
Supplemental data:
Cash payments for interest ... $ 23 $ 39 $ --
Cash payments for income
taxes ........................ $ -- $ 775 $ 3,143
The accompanying notes are an integral part of these financial statements.
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<PAGE> 25
UBICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. OPERATIONS:
UBICS, Inc. ("UBICS" or "the Company"), a Delaware corporation, provides
information technology professional 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,
e-commerce applications design and development, applications maintenance
programming and database and systems administration.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements reflect the application of the
following significant accounting policies:
Principles of Consolidation
Consolidated Financial Statements include the accounts of the Company and
its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation.
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:
YEARS
-----
Computer equipment and software........... 5
Furniture and fixtures.................... 7
Office and other equipment................ 7
Leasehold improvements.................... 5
Vehicles.................................. 5
Disclosures about Fair Value of Financial Instruments
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.
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<PAGE> 26
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.
The majority of the Company's projects with customers, including those
related to year 2000 conversion, generally provide that the Company will supply
consultants to perform agreed-upon procedures under the customer's supervision.
The Company's responsibility under these agreements with respect to each
application is subject to satisfactory acceptance testing of such procedures
within a limited, specified period of time. At this time, the Company is unable
to quantify the potential risk to the Company from future claims in the event
that certain applications are not converted or do not perform in accordance with
mutually agreed-upon acceptance criteria in the year 2000, which is beyond the
limited, specific period of time set forth in the agreements. Nonetheless,
management does not believe that claims that may arise as a result of the above
will have a significant impact on either the financial position or the results
of operations of the Company.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
period presentation.
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 largest clients during each of
the years ended December 31, 1996, 1997 and 1998 and the approximate percentage
of revenue from each client for the respective periods:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997 1998
---- ---- ----
Client A.................................... 14% 10% 8%
Client B.................................... 8% 9% 6%
Client C.................................... 8% -- --
Client D.................................... 7% 5% --
Client E.................................... 6% -- --
Others, individually and collectively less
than 10% of revenue...................... -- 7% 7%
---- ----- -----
Total of Five Largest Clients.......... 43% 31% 21%
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 $1,000,000, bear interest at prime (8.50% and 7.75% at December 31,
1997 and 1998, respectively) as defined plus 0.5% and are payable upon demand.
The revolving credit facility is secured by the assets of the Company. The
revolving credit facility was personally guaranteed by the Company's chairman.
This personal guarantee terminated in connection with the Company's initial
public offering.
There were no borrowings outstanding as of December 31, 1997 and December
31, 1998, respectively.
23
<PAGE> 27
Average outstanding borrowings under this arrangement were $474,658 and $0
for the years ended December 31, 1997 and 1998, respectively. The maximum
borrowings under this arrangement were $775,000 (bearing weighted average
interest rate at 8.94%) and $0 for the years ended December 31, 1997 and 1998,
respectively.
5. LEASE OBLIGATIONS:
The Company leases real estate and facilities at several locations. Lease
expenses charged to operations were $126,448, $165,093 and $388,091
respectively, for the years ended December 31, 1996, 1997 and 1998.
Minimum future rental payments under non-cancelable operating leases for
each of the next five years are as follows as of December 31, 1998:
YEAR ENDING
DECEMBER 31,
------------
1999....... $523,934
2000....... 465,072
2001....... 389,281
2002....... 378,477
2003....... 259,560
----------
Totals..... $2,016,324
==========
6. RELATED PARTY TRANSACTIONS:
As of December 31, 1997 and December 31, 1998, the Company had a net
receivable from the UB Group totaling $33,499 and $ 174,423, respectively,
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 $256,818 are included in selling, general and administrative expenses in
the accompanying statements of operations for the year ended December 31, 1996,
and $0 for years ended December 31, 1997 and December 31, 1998.
7. STOCK-BASED COMPENSATION:
Effective September 2, 1997, the Company adopted the 1997 Stock Option Plan
(the "Plan") for directors, executive officers and other key employees. The
Compensation Committee of the Board of Directors is authorized to grant stock
options (with or without stock appreciation rights). The Plan provides for the
issuance of up to 750,000 stock options at no less than the market value of the
stock at the date of grant. The Company accounts for the Plan under Accounting
Principles Board Opinion No. 25, "Accounting for Stock issued to Employees". Had
compensation costs for the Plan been determined consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), net income for the years ended December 31, 1997
and December 31, 1998 would have been reduced by $71,000 and $860,000,
respectively, and basic and diluted earnings per share would have been reduced
by $0.01 and $0.13 per share, respectively, for the same period.
In 1997 and 1998, options covering a total of 437,500 and 173,000 shares,
respectively, of Common Stock were granted under the Plan. The right to purchase
shares upon exercise of these options expires 10 years from the date of grant or
earlier if an option holder ceases to be employed by the Company. A summary of
stock option activity follows:
24
<PAGE> 28
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
-------------------------------------------------------------------
Weighted Average Weighted Average
NUMBER OF SHARES Options Exercise Price Options Exercise Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period -- -- 437,500 $10.00
Granted 437,500 $10.00 173,000 $13.25
Exercised -- -- -- --
Lapsed and forfeited -- -- 192,500 $11.22
- -----------------------------------------------------------------------------------------------------------------------
Options outstanding, end of period 437,500 $10.00 418,000 $10.78
- -----------------------------------------------------------------------------------------------------------------------
Options exercisable, end of period -- -- 98,333 $10.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------------------------------------
Weighted Average
Range of Remaining Weighted Average Weighted Average
Exercise Price Options Contractual life (Yrs) Exercise Price Options Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.00 437,500 9.83 $10.00 -- --
===========================================================================================================================
</TABLE>
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------------------------------------
Weighted Average
Range of Remaining Weighted Average Options Weighted Average
Exercise Price Options Contractual life (Yrs) Exercise Price Exercise Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.00 2,000 9.90 $5.00
$5.19 12,500 9.88 $5.19
$5.50 4,000 9.69 $5.50
$10.00 295,000 8.83 $10.00 98,333 $10.00
$13.25 2,000 9.45 $13.25
$13.63 70,000 9.49 $13.63
$13.75 20,000 9.07 $13.75
$14.50 5,000 9.37 $14.50
$17.63 7,500 9.23 $17.63
- ------------------------------------------------------------------------------------------------------------------------
418,000 9.01 $10.78 98,333 $10.00
========================================================================================================================
Summary of stock options Stock Option Price
- ---------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of options granted during 1997* $2.93
===========================================================================================================================
Weighted average fair value of options granted during 1998* $4.26
===========================================================================================================================
</TABLE>
* The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions
25
<PAGE> 29
1997 1998
- --------------------------------------------------------------------------
Risk free interest rate 5.7% 5.6%
Expected dividend yield 0.0% 0.0%
Expected life of options 3 years 3 years
Expected volatility rate 32.9% 88.0%
- --------------------------------------------------------------------------
There were 332,000 shares reserved for future grants under the Plan at
December 31, 1997.
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.
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 years ended
December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Federal income taxes at the
statutory rate...................... $140,897 $1,127,292 $1,275,727
State income taxes at the statutory
rate, net of federal benefit........ 22,792 171,617 162,600
Penalties and interest................ 66,000 9,000 --
-------- ---------- ----------
Provision for income taxes............ $229,689 $1,307,909 $1,438,327
======== ========== ==========
</TABLE>
The provision for income taxes as shown in the accompanying statement of
operations for the years ended December 31, 1996, 1997 and 1998 included the
following components:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Current federal provision.......... $253,297 $1,217,292 $1,453,134
Current state provision............ 33,203 191,462 190,988
Deferred federal provision......... (48,900) (87,150) (176,984)
Deferred state provision........... (7,911) (13,695) (28,811)
-------- ---------- ----------
Provision for income taxes......... $229,689 $1,307,909 $1,438,327
======== ========== ==========
</TABLE>
The components of the deferred tax asset as of December 31, 1997 and 1998
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
Allowance for doubtful accounts.... $ 54,675 $120,475
Accrued liabilities................ 46,170 85,320
-------- --------
Deferred tax asset................. $100,845 $205,795
======== ========
</TABLE>
9. EARNINGS PER COMMON SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128),
which establishes new standards for computing and presenting earnings per share.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The Company adopted SFAS No.
128 during 1997. The earnings per share as previously reported were not impacted
by the adoption of SFAS No. 128.
26
<PAGE> 30
Basic earnings per share is calculated by dividing net income by the
weighted average number of shares outstanding during the year. Diluted earnings
per share is calculated by dividing net income by the weighted average number of
shares outstanding during the year adjusted for the assumed conversion of all
dilutive securities.
The following table sets forth the computation of earnings per share for the
periods indicated:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Year ended December 31,
---------------------------------------------
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per share
Net income $ 219 $ 1,880 $ 2,096
========= ========== ==========
Divided by:
Weighted average common shares 5,000,000 5,258,904 6,495,823
--------- --------- ---------
Basic earnings per share $0.04 $0.36 $0.32
Diluted earnings per share
Net income $219 $1,880 $2,096
---- ------ ------
Divided by:
Weighted average common shares 5,000,000 5,258,904 6,495,823
Dilutive effect of common stock
equivalents -- 15,921 33,844
Dilutive average common shares 5,000,000 5,274,825 6,529,667
--------- --------- ---------
Diluted earnings per share $0.04 $0.36 $0.32
</TABLE>
The exercise price of stock options to purchase an aggregate of 0, 0, and
104,500 shares in 1996, 1997 and 1998, respectively, is less than the average
stock price for the year and such options have been excluded from the
calculation of diluted earnings per share as the effect would be anti-dilutive.
10. INITIAL PUBLIC OFFERING:
On November 4, 1997, the Company closed the offering of 1,500,000 shares of
common stock at a price of $10.00 per share. Net proceeds to the Company from
the sale of the 1,500,000 shares, after deduction of underwriting discounts and
offering expenses, were approximately $13,175,000.
27
<PAGE> 31
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
Quarter Ended
-------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31,
1997 1997 1997 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Revenues................................ $3,633 $5,052 $5,828 $6,036
Cost of revenues........................ 2,578 3,319 3,824 3,974
------ ------ ------ ------
Gross profit............................ 1,055 1,733 2,004 2,062
Selling, general and
administrative expense................ 771 853 978 1,136
--- --- ------ ------
Income from operations.................. 284 880 1,026 926
Interest income (expense), net.......... (10) (11) (17) 109
------ ------ ------ ------
Income before income taxes.............. 274 869 1,009 1,035
Provision for income taxes.............. 111 354 403 439
------ ------ ------- ------
Net income.............................. $ 163 $ 515 $ 606 $ 596
====== ====== ====== ======
Basic and diluted earnings per share $ 0.03 $ 0.10 $ 0.12 $ 0.10
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
Quarter Ended
-------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31,
1998 1998 1998 1998
-------------------------------------------
<S> <C> <C> <C> <C>
Revenues................................ $6,215 $6,962 $8,451 $8,561
Cost of revenues........................ 4,096 4,762 5,774 6,139
------ ------ ------ ------
Gross profit............................ 2,119 2,200 2,677 2,422
Selling, general and
administrative expense................ 1,203 1,409 1,784 2,099
------ ------ ------ ------
Income from operations.................. 916 791 893 323
Interest income, net.................... 165 162 147 137
------ ------ ------ ------
Income before income taxes.............. 1,081 953 1,040 460
Provision for income taxes.............. 440 380 420 198
------ ------ ------ ------
Net income.............................. $ 641 $ 573 $ 620 $ 262
====== ====== ====== ======
Basic and diluted earnings per share $ 0.10 $ 0.09 $ 0.10 $ 0.04
====== ====== ====== ======
</TABLE>
28
<PAGE> 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the
information in the registrant's definitive proxy statement to be filed with the
Commission on or about April 19, 1999 in connection with its 1999 annual meeting
of stockholders (the "1999 Proxy Statement") under the captions "Election of
Directors" and "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
information in the registrant's 1999 Proxy Statement under the caption
"Executive Compensation" provided that the information in such Proxy Statement
under the captions "Stock Performance Graph" and "Report of the Compensation
Committee" are not incorporated by referenced herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
information in the registrant's 1999 Proxy Statement under the caption "Security
Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
information in the registrant's 1999 Proxy Statement under the caption
"Executive Compensation -- Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
--------------------
The following financial statements of the registrant are included on pages
18 to 28 of this Form 10-K and the report of independent public accountants is
included on page 17 of this Form 10-K:
Balance sheets as of December 31, 1997 and 1998
Statements of Operations for the years ended December 31, 1996, 1997 and
1998
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998
Statements of Cash Flows for the years ended December 31, 1996, 1997 and
1998
29
<PAGE> 33
2. Financial Statement Schedules
-----------------------------
The following financial statement schedules shown below should be read
in conjunction with the financial statements on pages 18 to 28 of this Form
10-K. All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or Notes thereto.
The following items appear immediately following the signature page:
Report of Independent Public Accountants on Supplemental Schedules
Financial Statement Schedules:
Valuation and Qualifying Accounts for the three years ended December
31, 1998.
30
<PAGE> 34
3. Exhibits:
--------
2.1 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems, Inc., Satinder Singh Rekhi,
Harpreet K. Rekhi and the shareholders of R Systems, Inc.
2.2 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems (India) Private Limited and the
shareholders of R Systems (India) Private Limited
2.3 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems (Singapore) Pte Limited and the
shareholders of R Systems (Singapore) Pte Limited
3(i) Amended and Restated Certificate of Incorporation of UBICS,
Inc.(1)
3(ii) Amended and Restated Bylaws of UBICS, Inc.(1)
10.1 UBICS, Inc. 1997 Stock Option Plan(1)
10.2 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB Information Consultancy Services
Ltd.(2)
10.3 Employment Agreement between the Company and Vijay Mallya(2)
10.4 Employment Agreement between the Company and Manohar B. Hira(2)
10.5 Employment Agreement between the Company and O'Neil Nalavadi(2)
10.6 Employment Agreement between the Company and Babu Srinivas(2)
10.7 Agreement of Severance, Waiver and Release dated March 18, 1999
between the Company and Manohar B. Hira
10.8 Lease dated May 28, 1996 between the Company and Marin
Executive Park, as amended(1)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(2)
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National
Association and the Company, 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(1)
10.11 Form of Director Indemnification Agreement(2)
10.12 Form of Sublease and Consent among the Company, Marin Executive
Park and United Breweries of America, Inc.(2)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and United Breweries Limited(2)
10.14 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited(2)
10.15 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(2)
10.16 Lease Agreement dated June 30, 1998 between the Company and
Stealth Technology Associates (3)
10.17 Amendment to Loan Documents dated December 18, 1998 between PNC
Bank, National Association and the Company
21 Subsidiaries of the Registrant
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(3) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the three months ended December 31,
1998.
31
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
UBICS, Inc.
(Registrant)
By: /s/ MANOHAR B. HIRA
-----------------------------------
Manohar B. Hira
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
the following persons have signed this report in the capacities indicated on
March 30, 1999.
/s/ VIJAY MALLYA
---------------------------------------
Vijay Mallya
Chairman and Director
/s/ MANOHAR B. HIRA
---------------------------------------
Manohar B. Hira
President and Director
/s/ O'NEIL NALAVADI
---------------------------------------
O'Neil Nalavadi
Senior Vice President and Chief
Financial Officer and Director
/s/ BABU SRINIVAS
---------------------------------------
Babu Srinivas
Vice President - Finance and Accounting
/s/ CRAIG A. WOLFANGER
---------------------------------------
Craig A. Wolfanger
Director
/s/ SCOTT HELDFOND
---------------------------------------
Scott Heldfond
Director
/s/ KENT D. PRICE
---------------------------------------
Kent D. Price
Director
33
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To the Board of Directors and Stockholders of UBICS, Inc.:
We have audited in accordance with generally accepted accounting
standards, the financial statements included in this Form 10-K and have issued
our report thereon dated February 18, 1999. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
schedule set forth below is the responsibility of the Company's management and
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
February 18, 1999
<PAGE> 37
<TABLE>
<CAPTION>
SCHEDULE II
UBICS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Charged Deductions-- Balance
Balance at to Costs Amounts at End
Beginning and Deemed to be of
Period Ended Description of Period Expenses Uncollectible Period
------------ ----------- --------- -------- ------------- ------
<S> <C> <C> <C> <C> <C>
December 31, 1996 Allowance for uncollectible $-- $50 $-- $50
accounts
December 31, 1997 Allowance for uncollectible 50 135 -- 185
accounts
December 31, 1998 Allowance for uncollectible 185 120 -- 305
accounts
</TABLE>
2
<PAGE> 38
EXHIBIT INDEX
No. Description Page
- --- ----------- ----
2.1 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems, Inc., Satinder Singh Rekhi,
Harpreet K. Rekhi and the shareholders of R Systems, Inc.
2.2 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems (India) Private Limited and the
shareholders of R Systems (India) Private Limited
2.3 Acquisition and Stock Exchange Agreement dated March 18, 1999
among the Company, R Systems (Singapore) Pte Limited and the
shareholders of R Systems (Singapore) Pte Limited
3(i) Amended and Restated Certificate of Incorporation of UBICS, Inc.(1)
3(ii) Amended and Restated Bylaws of UBICS, Inc.(1)
10.1 UBICS, Inc. 1997 Stock Option Plan(1)
10.2 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB Information Consultancy Services
Ltd.(2)
10.3 Employment Agreement between the Company and Vijay Mallya(2)
10.4 Employment Agreement between the Company and Manohar B. Hira(2)
10.5 Employment Agreement between the Company and O'Neil Nalavadi(2)
10.6 Employment Agreement between the Company and Babu Srinivas(2)
10.7 Agreement of Severance, Waiver and Release dated March 18, 1999
between the Company and Manohar B. Hira
10.8 Lease dated May 28, 1996 between the Company and Marin
Executive Park, as amended(1)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(2)
10.10 Letter Agreement dated July 26, 1996 between PNC Bank, National
Association and the Company, 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(1)
10.11 Form of Director Indemnification Agreement(2)
10.12 Form of Sublease and Consent among the Company, Marin Executive
Park and United Breweries of America, Inc.(2)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and United Breweries Limited(2)
10.14 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited(2)
10.15 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(2)
10.16 Lease Agreement dated June 30, 1998 between the Company and
Stealth Technology Associates (3)
10.17 Amendment to Loan Documents dated December 18, 1998 between PNC
Bank, National Association and the Company
21 Subsidiaries of the Registrant
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(3) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998.
3
<PAGE> 1
Exhibit 2.1
ACQUISITION AND STOCK EXCHANGE AGREEMENT
among
UBICS, INC.,
R SYSTEMS, INC.,
SATINDER SINGH REKHI,
HARPREET K. REKHI
and
THE SHAREHOLDERS OF R SYSTEMS, INC.
March 18, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I -- EXCHANGE................................................................... 2
1.01. Exchange.............................................................. 2
1.02. Exchange of Shares.................................................... 2
1.03 The Combined Companies After The Exchange............................. 2
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE R SYSTEMS PARTIES................... 3
2.01. Organization and Qualification........................................ 4
2.02. Authority and Authorization........................................... 4
2.03. Execution and Binding Effect.......................................... 4
2.04. No Breach, Default, Violation or Consent.............................. 4
2.05. Ownership and Control................................................. 5
2.06. Subsidiaries.......................................................... 5
2.07. Financial Statements; Liabilities..................................... 6
2.08. Tax Matters........................................................... 7
2.09. Litigation............................................................ 8
2.10. Absence of Certain Changes and Events................................. 9
2.11. Constituent Documents and Governmental Rules.......................... 9
2.12. Governmental Orders...................................................11
2.13. R Systems Business Permits............................................11
2.14. Environmental Matters.................................................11
2.15. R Systems Real Property...............................................12
2.16. R Systems Personal Property...........................................13
2.17. R Systems Intellectual Property.......................................14
2.18. Title to R Systems Assets.............................................14
2.19. R Systems Pension Plans...............................................14
2.20. R Systems Welfare Plans and Other Benefit Plans.......................16
2.21. R Systems Personnel Matters...........................................17
2.22. R Systems Insurance...................................................18
2.23. R Systems Indebtedness................................................18
2.24. Other Material R Systems Business Agreements..........................19
2.25. Status of R Systems Business Agreements...............................19
2.26. Transactions with R Systems Affiliates................................19
2.27. Customers and Suppliers...............................................20
2.28. Brokers...............................................................20
2.29. Bank Accounts.........................................................20
2.30. Year 2000.............................................................20
2.31. Pooling Matters.......................................................21
2.32. Delivery of Documents; Accurate Disclosure............................21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE R SYSTEMS SHAREHOLDERS.............22
3.01. Investor Status.......................................................22
3.02. Title to Capital Stock................................................22
3.03. Authorization of Transaction..........................................22
3.04. No Violation..........................................................23
3.05. Investment Intent.....................................................23
3.06. No Breach, Default, Violation or Consent..............................23
3.07. Pooling Matters.......................................................23
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF UBICS...................................24
4.01. Organization and Qualification........................................24
4.02. Authority and Authorization...........................................24
4.03. Execution and Binding Effect..........................................24
4.04. No Breach, Default, Violation or Consent..............................25
4.05. UBICS Common Stock....................................................25
4.06. UBICS Securities Matters and Financial Statements.....................26
4.07. Pooling Matters.......................................................26
4.08. Subsidiaries..........................................................27
4.09. Tax Matters...........................................................27
4.10. Litigation............................................................28
4.11. Absence of Certain Changes and Events.................................28
4.12. Constituent Documents and Governmental Rules..........................29
4.13. Governmental Orders...................................................29
4.14. UBICS Business Permits................................................30
4.15. Environmental Matters.................................................30
4.16. UBICS Real Property...................................................31
4.17. UBICS Personal Property...............................................31
4.18. UBICS Intellectual Property...........................................31
4.19. Title to UBICS Assets.................................................32
4.20. UBICS Pension Plans...................................................32
4.21. UBICS Personnel Matters...............................................32
4.22. UBICS Insurance.......................................................34
4.23. UBICS Indebtedness....................................................34
4.24. Other Material UBICS Business Agreements..............................34
4.25. Status of UBICS Business Agreements...................................35
4.26. Transactions with UBICS Affiliates....................................35
4.27. Customers and Suppliers...............................................35
4.28. Brokers...............................................................36
4.29. Bank Accounts.........................................................36
4.30. Year 2000.............................................................36
4.31. Accurate Disclosure...................................................36
</TABLE>
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ARTICLE V -- TRANSACTIONS PRIOR TO CLOSING..............................................37
5.01. Conduct of Business...................................................37
5.02. Access to Information.................................................40
5.03. No Solicitation.......................................................40
5.04. Publicity.............................................................41
5.05. HSR Act Compliance....................................................42
5.06. Stockholders Meeting..................................................42
5.07. Proxy Statement.......................................................43
5.08. Approvals and Consents; Cooperation; Notification.....................44
5.09. Tax-Free Reorganization...............................................45
5.10. Pooling of Interests Accounting Treatment.............................45
5.11. Confidentiality.......................................................45
5.12. Best Efforts..........................................................46
5.13. Combined Results......................................................46
5.14. Nasdaq Listing........................................................47
5.15. Voting Agreement......................................................47
ARTICLE VI -- CLOSING AND CLOSING CONDITIONS............................................47
6.01. Closing...............................................................47
6.02. Conditions Precedent to Obligations of UBICS..........................47
6.03. Conditions Precedent to Obligations of the R Systems Parties..........49
ARTICLE VII -- INDEMNIFICATION..........................................................52
7.01. Survival of Representations and Warranties............................52
7.02. Indemnification by the Rekhi..........................................52
7.03. Indemnification by UBICS..............................................52
7.04. Claims................................................................53
7.05. Notice of Third Party Claims; Assumption of Defense...................53
7.06. Settlement or Compromise..............................................53
7.07. Failure of Indemnifying Person to Act.................................54
7.08. Escrow................................................................54
7.09. Duration of Indemnification Obligations...............................54
7.10. Indemnification Threshold and Cap.....................................55
ARTICLE VIII -- MISCELLANEOUS PROVISIONS................................................55
8.01. Filing Fees...........................................................55
8.02. Amendments............................................................55
8.03. Assignment............................................................55
8.04. Counterparts; Telefacsimile Execution.................................55
8.05. Entire Agreement......................................................56
8.06. Expenses..............................................................56
8.07. Further Assurances....................................................56
8.08. Governing Law.........................................................56
8.09. Notices...............................................................56
8.10. Severability..........................................................57
</TABLE>
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8.11. Successors and Assigns................................................57
8.12. Termination...........................................................58
8.13. Waivers...............................................................58
8.14. Arbitration...........................................................59
</TABLE>
INDEX OF EXHIBITS AND ANNEXES
Exhibit A - Voting Agreement
Exhibit B - Escrow Agreement
Exhibit C - Intentionally Omitted
Exhibit D-1 - Rekhi Singh Employment Agreement
Exhibit D-2 - Vijay Mallya Employment Agreement
Exhibit D-3 - O'Neil Nalavadi Employment Agreement
Exhibit D-4 - Ralph Kenney Employment Agreement
Exhibit E - Form of Non-Competition Agreement
Exhibit F - Registration Rights Agreement
Exhibit G - Indemnification Agreement
Exhibit 6.02(h) - Form of Opinion of Counsel to R Systems [omitted]
Exhibit 6.03(h) - Form of Opinion of Counsel to UBICS [omitted]
Annex 1.02(a) - R Systems Shareholders
Annex 1.02(b) - Executive Officers and Directors as of the Closing
Annex 2.31 - Pooling Matters
Annex 6.02(m) - Employment Agreements
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<PAGE> 6
ACQUISITION AND STOCK EXCHANGE AGREEMENT
This Agreement is made as of March 18, 1999 among UBICS, INC., a
Delaware corporation ("UBICS"), R SYSTEMS, INC., a California corporation ("R
SYSTEMS") SATINDER SINGH REKHI and HARPREET K. REKHI, husband and wife, residing
in Rancho Cordova, California (together "REKHI") and the shareholders of R
Systems listed on the signature page hereof (the "R SYSTEMS SHAREHOLDERS"). R
Systems and Rekhi are collectively referred to herein as the "R SYSTEMS
PARTIES." Concurrently with the execution and delivery of this Agreement, the
parties are delivering a Disclosure Schedule containing certain disclosures
about the parties. References in this Agreement to any "SCHEDULE" are to the
various schedules contained in the Disclosure Schedule.
PREAMBLE
The Boards of Directors of UBICS and R Systems deem it advisable and in
the best interests of their respective stockholders to consummate (1) the
acquisition of R Systems by UBICS upon the terms and subject to the conditions
set forth herein and (2) the acquisition of R Systems (Singapore) Pte Limited, a
Singapore company ("R SYSTEMS-SINGAPORE"), and R Systems (India) Private
Limited, an Indian corporation ("R SYSTEMS-INDIA"), both of which are affiliated
with R Systems, by UBICS upon the terms and conditions set forth in separate
Acquisition and Stock Exchange Agreements to be executed of even date herewith
and in conjunction herewith (the "RELATED ACQUISITION AGREEMENTS").
The Boards of Directors of UBICS and R Systems have each, in light of
and subject to the terms and conditions set forth herein, (i) determined that
the Exchange (as defined below) is fair to and in the best interests of their
respective stockholders and corporations, and (ii) adopted resolutions approving
and adopting this Agreement and the transactions contemplated hereby and
recommending the approval and adoption by the stockholders of UBICS and R
Systems, respectively, of this Agreement and the Exchange.
The parties desire to structure the Exchange as a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (together with the rules and regulations
promulgated thereunder, the "CODE"), and desire that the Exchange be accounted
for as a pooling of interests pursuant to generally accepted accounting
principles ("GAAP").
UBICS would not be willing to enter into this Agreement unless the R
Systems Shareholders agreed to refrain from competing with UBICS, R Systems, R
Systems-Singapore and R Systems-India (collectively, the "COMBINED COMPANIES")
for a
<PAGE> 7
reasonable period of time, and accordingly each of the R Systems Shareholders
has agreed to execute and deliver to UBICS a noncompetition agreement.
In conjunction with the execution and delivery of this Agreement and as
an inducement to the R Systems Parties' willingness to enter into this
Agreement, United Breweries Information Consultancy Services Ltd., the owner of
approximately 62% of the outstanding shares of UBICS Common Stock (as defined
below), has agreed to enter into the Voting Agreement with R Systems attached
hereto as Exhibit A (the "VOTING AGREEMENT").
Therefore, in consideration of the premises and the mutual covenants,
agreements, representations, and warranties herein contained, the parties
hereto, intending to be legally bound, agree as follows.
ARTICLE I
EXCHANGE
1.01. Exchange. The parties desire to engage in a tax-free
stock-for-stock exchange under Section 368(a)(1)(B) of the Code, for the purpose
of developing and enhancing the parties' respective businesses. Therefore, on
the Closing Date (as defined below), the R Systems Shareholders, will exchange
all of their shares of R Systems Common Stock (as defined below) for shares of
UBICS Common Stock upon the terms and subject to the conditions set forth below
(the "EXCHANGE").
1.02. Exchange of Shares. At and as of the Closing Date:
(a) The R Systems Shareholders will transfer and deliver to
UBICS all of the shares of R Systems' common stock, no par value (the "R SYSTEMS
COMMON STOCK") issued and outstanding immediately prior to the Closing Date in
exchange for 4,718,000 shares (the "EXCHANGE SHARES") of UBICS' common stock,
par value $.01 per share (the "UBICS COMMON STOCK"), such Exchange Shares to be
apportioned among the R Systems Shareholders as set forth on Annex 1.02(a)
hereto;
(b) upon the surrender by the R Systems Shareholders of
certificates (or evidence of lost certificates reasonably acceptable to UBICS)
representing all of the outstanding shares of R Systems Common Stock to UBICS,
UBICS shall (i) deliver to the R Systems Shareholders certificates representing
4,246,200 of the Exchange Shares and (ii) deposit into the Escrow (as defined
below), certificates representing 471,800 of the Exchange Shares to secure the
obligations of Rekhi under Article VII below (the "HOLDBACK ESCROW SHARES"). The
Holdback Escrow Shares shall be held in and released from Escrow as and to the
extent provided in the Escrow Agreement among UBICS, Rekhi and Capital City
Escrow, Inc. as escrow agent (the "ESCROW AGENT"), in substantially the form
attached hereto as Exhibit B (the "ESCROW AGREEMENT");
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<PAGE> 8
(c) all of the shares of UBICS Common Stock previously issued
and outstanding shall remain issued and outstanding and shall not be affected by
the Exchange; and
(d) the Exchange Shares to be issued to the R Systems
Shareholders will not at the time of issuance be registered under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), on the ground that the issuance
thereof in the Exchange is exempt from registration pursuant to Section 4(2)
thereof and/or Regulation D thereunder. The parties understand that the
availability of such exemption is based in part upon the imposition of
restrictions on the transfer of the Exchange Shares, upon certain information
supplied to UBICS by R Systems, the R Systems Shareholders and upon the
representations of the R Systems Parties and the R Systems Shareholders set
forth in this Agreement. The Exchange Shares may not be transferred except
pursuant to an effective registration statement under the Securities Act or an
exemption from such registration requirements and compliance with applicable
state securities law. The following legend will be placed on the certificates
representing the Exchange Shares:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS, AND SUCH SHARES MAY NOT BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
UBICS may instruct its transfer agent to place stop transfer orders
against any transfer of the Exchange Shares in violation of this subsection (d).
1.03. The Combined Companies After The Exchange. Effective on the
Closing Date (as defined below):
(a) UBICS shall operate under the name RUBICS Solutions, shall
amend its certificate of incorporation to change its corporate name to "RUBICS
Solutions, Inc." and shall relocate its principal corporate offices to the
offices of R Systems in El Dorado Hills, California;
(b) the Board of Directors and corporate officers of UBICS and
R Systems will consist of the individuals listed on Annex 1.03(b); and
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<PAGE> 9
(c) all letterhead, brochures and other documents and printed
materials used by each of the Combined Companies shall initially state that such
company is a member of the UB Group.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE R SYSTEMS PARTIES
The R Systems Parties hereby jointly and severally represent and
warrant to UBICS as follows:
2.01. Organization and Qualification. Each of R Systems, R Systems
India, R Systems Singapore and their respective Subsidiaries (as defined below)
(collectively, the "R SYSTEMS COMPANIES") is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of the R Systems Companies is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership of its assets or the nature of its business
makes such qualification necessary, except in those jurisdictions where the
failure to be so qualified has not resulted in, and is not likely to result in,
a material adverse change in, or material adverse effect on, the assets,
business, operations, financial condition or prospects of the R Systems
Companies taken as a whole (a "R SYSTEMS MATERIAL ADVERSE CHANGE"). R Systems
has previously delivered or made available to UBICS a complete and correct copy
of the Articles of Incorporation and By-Laws or other charter and governing
documents of each of the R Systems Companies, as currently in effect.
2.02. Authority and Authorization. Each of the R Systems Companies has
the corporate power and authority to own, lease and operate its properties and
assets, to conduct its business as presently conducted and to execute, deliver
and perform this Agreement and the other Transaction Documents (as defined
below) to which it is a party.
2.03. Execution and Binding Effect. The Exchange, this Agreement, each
of the Related Acquisition Agreements, the other Transaction Documents and the
transactions contemplated hereby and thereby have been, and on the Closing Date
will be, duly authorized and approved by the Board of Directors or other
governing body and the shareholders of each of the R Systems Companies which is
a party thereto, and no other approvals or consents are required before such R
Systems Company may duly execute, deliver and perform its obligations under this
Agreement, the Related Acquisition Agreements and the other Transaction
Documents to which it is a party. This Agreement and the Related Acquisition
Agreements have been, and on the Closing Date the other Transaction Documents
will be, duly and validly executed and delivered by each of the R Systems
Companies and the R Systems Parties which is a party thereto and constitutes (or
upon such execution and delivery will constitute) legal, valid and
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<PAGE> 10
binding obligations of the R Systems Companies and the R Systems Parties
enforceable against the R Systems Companies and the R Systems Parties in
accordance with their respective terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and (b) applicable
equitable principles, whether considered in a proceeding at law or in equity.
2.04. No Breach, Default, Violation or Consent. Except as set forth on
Schedule 2.04, the execution, delivery and performance by the R Systems
Companies and the R Systems Shareholders of this Agreement, the Related
Acquisition Agreements and the other Transaction Documents do not and will not:
(a) violate the articles of incorporation or by-laws or other
charter or governing documents of any of the R Systems Companies;
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any R Systems
Business Agreement (as defined below) or R Systems Business Permit (as defined
below) or of any contract, agreement, instrument or document to which Rekhi is a
party or by which Rekhi or his assets are bound;
(c) breach or otherwise violate any order, writ, judgment,
injunction or decree issued by any governmental entity (each a "GOVERNMENTAL
ORDER") which names any R Systems Company or Rekhi, or is directed to any R
Systems Company or Rekhi any of their respective assets;
(d) result in the creation of a Lien (as defined below) held
by any third party on any of the R Systems Companies' respective assets;
(e) violate any law, rule, regulation, ordinance or code of
any governmental entity (each a "GOVERNMENTAL RULE") applicable to any of the R
Systems Companies or their respective businesses or assets; or
(f) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any person
or entity (each a "PERSON").
2.05. Ownership and Control.
(a) The authorized capitalization of R Systems consists of
10,000,000 shares of R Systems Common Stock. Schedule 2.05(a) sets forth a
correct and complete list of (i) the number of shares of R Systems Common Stock
issued and outstanding and
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<PAGE> 11
(ii) the names of the record and beneficial owners of each share of R Systems
Common Stock and the number and percentage of shares of R Systems Common Stock
owned by such persons.
(b) The authorized capitalization of R Systems-Singapore
consists of 100,000 shares (the "R SYSTEMS-SINGAPORE STOCK"). Schedule 2.05(b)
sets forth a correct and complete list of (i) the number of shares of R
Systems-Singapore Stock issued and outstanding and (ii) the names of the record
and beneficial owners of each share of R Systems-Singapore Stock and the number
and percentage of shares of R Systems-Singapore Stock owned by such persons.
(c) The authorized capitalization of R Systems-India consists
of Rs 5,00,000 (Rupees Five Lacs) divided into 50,000 Equity of shares Rs 10
(Rupees Ten) each (the "R SYSTEMS-INDIA STOCK"). Schedule 2.05(c) sets forth a
correct and complete list of (i) the number of shares of R Systems-India Common
Stock issued and outstanding and (ii) the names of the record and beneficial
owners of each share of R Systems-India Stock and the number and percentage of
shares of R Systems-India Stock owned by such persons.
(d) All of the issued and outstanding shares of the R Systems
Companies' capital stock have been duly authorized and validly issued in
compliance with applicable Governmental Rules relating to the issuance of
securities and are fully paid and non-assessable. Except as otherwise disclosed
on Schedule 2.05, there are no outstanding (i) options, warrants, agreements or
other rights for the acquisition of shares of any of the unissued shares of the
R Systems Companies' capital stock, (ii) securities or other obligations of any
of the R Systems Companies which are convertible into or exchangeable for such
shares or (iii) to the knowledge of the R Systems Parties, options, sale
agreements, shareholder agreements, pledges, proxies, voting trusts, powers of
attorney, restrictions on transfer or other agreements or instruments which are
binding on any of the shareholders of the R Systems Companies and which relate
to the ownership, voting or transfer of any of such shares.
2.06. Subsidiaries. Schedule 2.06 contains a complete and accurate list
of each Subsidiary (as defined below) of R Systems, R Systems India and R
Systems Singapore. Each Subsidiary of an R Systems Company listed on Schedule
2.06 (a) is duly organized, validly existing and in good standing in its
jurisdiction of organization and (b) is duly qualified to do business as a
foreign entity and is in good standing in all jurisdictions in which the
ownership or its assets or the nature of its business makes such qualification
necessary, except to the extent that the failure to be so qualified has not
resulted in, and is not likely to result in, a R Systems Material Adverse
Change. As used in this Agreement, a "SUBSIDIARY" of a party hereto means any
corporation, partnership, limited liability company, joint venture or other
business entity with respect to which such party or any Subsidiary of such party
is entitled, by reason of a direct or indirect ownership interest therein, to
(a) elect a majority of the directors thereof or otherwise
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<PAGE> 12
direct or cause the direction of the management and policies thereof or (b)
receive a majority of the dividends and other distributions made thereby, in
each case regardless of any contingency which does or may suspend or dilute such
rights. Except as disclosed on Schedule 2.06, all of the outstanding shares of
capital stock (or equivalent equity interests of entities other than
corporations) of each Subsidiary of an R Systems Company are owned of record and
beneficially, directly or indirectly, by the R Systems Company free and clear of
all liens, pledges, security interests, claims or other encumbrances
(collectively, "LIENS").
2.07. Financial Statements; Liabilities.
(a) R Systems. R Systems has previously delivered to UBICS
correct and complete copies of its audited consolidated balance sheets and
statements of income, retained earnings and cash flows as of and for its fiscal
years ended December 31, 1998, 1997 and 1996, including the footnotes thereto
(the "R SYSTEMS FINANCIAL STATEMENTS"). Except as disclosed on Schedule 2.07,
the R Systems Financial Statements present fairly the financial condition of R
Systems and its consolidated Subsidiaries (including R Systems India and R
Systems Singapore) as at the end of the periods covered thereby and the results
of its consolidated operations and the changes in its consolidated cash flows
for the periods covered thereby, and were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby. Except as
and to the extent otherwise disclosed in the R Systems Financial Statements or
on Schedule 2.07, R Systems and its consolidated Subsidiaries (including R
Systems India and R Systems Singapore) have no liabilities of any kind, whether
direct or indirect, fixed or contingent or otherwise, other than (y) liabilities
which are not required to be set forth on the R Systems Financial Statements in
accordance with GAAP, and (z) liabilities incurred in the ordinary course of
business since December 31, 1998 (the "R SYSTEMS FINANCIAL STATEMENT DATE").
(b) R Systems-India. R Systems has previously delivered to
UBICS correct and complete copies of its balance sheets, profit and loss
accounts, directors reports and available reports as of and for its fiscal years
ended March 31, 1996, 1997 and 1998 (the "R SYSTEMS-INDIA FINANCIAL
STATEMENTS"). Except as disclosed on Schedule 2.07, the R Systems-India
Financial Statements present fairly the financial condition of R Systems-India
as at the end of the periods covered thereby and the results of its operations
and the changes in its cash flows for the periods covered thereby. Except as and
to the extent otherwise disclosed in the R Systems-India Financial Statements or
on Schedule 2.07, R Systems-India has no liabilities of any kind, whether direct
or indirect, fixed or contingent or otherwise, other than liabilities incurred
in the ordinary course of business since March 31, 1998.
(c) R Systems-Singapore. R Systems has previously delivered to
UBICS correct and complete copies of its unaudited balance sheet for the fiscal
year ended December 31, 1998 (the "R SYSTEMS-SINGAPORE FINANCIAL STATEMENTS").
Except as
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disclosed on Schedule 2.07, the R Systems-Singapore Financial Statements present
fairly the financial condition of R Systems-Singapore as at the end of the
period covered thereby. Except as and to the extent otherwise disclosed in the R
Systems-Singapore Financial Statements or on Schedule 2.07, R Systems-Singapore
has no liabilities of any kind, whether direct or indirect, fixed or contingent
or otherwise, other than liabilities incurred in the ordinary course of business
since December 31, 1998.
2.08. Tax Matters. Except as otherwise disclosed on Schedule 2.08:
(a) all tax returns and reports required to be filed by the R
Systems Companies have been properly prepared and timely filed and were complete
and correct when filed;
(b) each of the R Systems Companies has paid, or has made
adequate reserves on its books for the payment of, all Taxes (as defined below),
interest, penalties, assessments and deficiencies shown to be due on such tax
returns and reports or which such R Systems Company is required to withhold on
behalf of any other Person;
(c) the reserves and provisions for Taxes on the books of each
of the R Systems Companies are adequate in all material respects for all open
years and for its current fiscal period and properly classify such Tax
obligations as either current or deferred;
(d) there are no assessments of any additional Taxes on any of
the R Systems Companies by any governmental entity (whether or not reserved
against);
(e) none of the R Systems Companies is currently being audited
by any governmental entity, and no such audit is pending or, to the best of the
R Systems Parties' knowledge, threatened;
(f) none of the R Systems Companies has made any tax elections
which (i) were in effect in any past year for which the time for audit has not
expired, (ii) are currently in effect or (iii) will be in effect at any future
time;
(g) none of the R Systems Companies has given any waiver or
extension of any period of limitation governing the time of assessment or
collection of any Tax;
(h) except as disclosed on Schedule 2.08, no R Systems Company
is a party to any agreement providing for the allocation or sharing of Taxes.
"TAXES" means any and all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, excise, real or personal
property, sales, withholding, social security, occupation, sue, service, value
added, license, net worth, payroll, franchise, transfer and recording taxes,
fees and charges imposed by a Tax Authority,
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<PAGE> 14
whether computed on a separate consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "TAX AUTHORITY" means the Internal Revenue
Service (the "IRS") and any other federal, state or local domestic or foreign
governmental authority responsible for the administration or collection of any
Taxes;
(i) the R Systems Companies have not paid, and do not expect
to pay, in any taxable year commencing on or after December 31, 1997,
remuneration that would result in a disallowance of any amount of tax deductions
under Section 162(m) of the Code;
(j) prior to January 1, 1998, R Systems was at all times an "S
Corporation" within the meaning of Section 1361(a) of the Code (an "S
CORPORATION"), and a valid election under Section 1362 of the Code has been in
effect with respect to R Systems at all times for such period; and
(k) effective as of January 1, 1998, R Systems elected to
revoke its election to be an S Corporation pursuant to Section 1361(d) of the
Code. Prior to January 1, 1998, R Systems completed all actions and obtained all
consents necessary to revoke its S Corporation election as well as S corporation
or similar elections in effect with respect to R Systems in all relevant state
and local jurisdictions in which R Systems is subject to Tax (the "S CORPORATION
REVOCATION"), including, but not limited to, filing all documents necessary to
effect the S Corporation Revocation, paying all fees, costs and taxes due in
connection with the S Corporation Revocation, and obtaining all necessary
approvals and consents from R Systems' Board of Directors and shareholders in
connection with the S Corporation Revocation. No other actions need to be taken
and no other consents need to be obtained to effect or maintain the S
Corporation Revocation which is effective as of January 1, 1998.
2.09. Litigation. Except as otherwise disclosed on Schedule 2.09 or in
the R Systems Financial Statements, there is no pending or, to the best of the R
Systems Parties' knowledge, threatened investigation, action or proceeding
("ACTION") against any of the R Systems Companies or any of their respective
assets by or before any court, governmental entity or arbitrator. Schedule 2.09
sets forth a correct and complete list of each Action described in the preceding
sentence, the parties thereto, the alleged basis therefor, the relief sought
therein and the current status thereof.
2.10. Absence of Certain Changes and Events. Except as otherwise
disclosed on Schedule 2.10 or in the R Systems Financial Statements, since the R
Systems Financial Statement Date:
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(a) none of the R Systems Companies has incurred any material
obligation or liability except for normal obligations incurred in the ordinary
course of business;
(b) no casualty, loss or damage has occurred with respect to
any of the assets of the R Systems Companies, whether or not the same is covered
by insurance, except for those casualties, losses or damages which would not,
individually or in the aggregate, be reasonably expected to exceed $50,000;
(c) none of the R Systems Companies has sold, transferred,
pledged, encumbered or otherwise disposed of any of its assets or any interest
therein, or agreed to do any of the foregoing, except for sales of assets for
aggregate proceeds not in excess of $25,000;
(d) none of the R Systems Companies has written off as
uncollectible any of its accounts receivable, or written down the value of any
of the assets, except in each case in the ordinary course of business consistent
with past practice;
(e) none of the R Systems Companies has waived or released any
of its rights with respect to its business or assets or permitted any of such
rights to lapse except to the extent that such actions are in the ordinary
course of business or, in the exercise of R Systems' reasonable business
judgment, are otherwise in the best interests of the R Systems Companies;
(f) no executive officer or other key employee of any of the R
Systems Companies has left his or her employment with the R Systems Companies;
(g) none of the R Systems Companies has granted, and is not
committed to grant, any salary or wage increases to any of its employees, except
for individual salary or wage increases which will not exceed $15,000 in the
twelve month period commencing on the date hereof;
(h) none of the R Systems Companies has made, or committed to
make, any capital expenditures in excess of $50,000 in the aggregate;
(i) there has been no payment, discharge or other satisfaction
of any liabilities of any of the R Systems Companies, whether direct or
indirect, fixed or contingent or otherwise, other than the satisfaction, in the
ordinary course of business, of liabilities reflected on the R Systems Current
Financial Statements or incurred in the ordinary course of business since the R
Systems Financial Statement Date;
(j) none of the R Systems Companies has introduced any
material change with respect to its business, including without limitation with
respect to
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the products or services it sells, the areas in which such products or services
are sold, its marketing techniques or its accounting methods;
(k) none of the R Systems Companies or Rekhi have taken any
actions which, if taken after the date hereof, would violate Section 5.01(a)
hereof; and
(l) no R Systems Material Adverse Change, and no event which
is likely to result in a R Systems Material Adverse Change, has occurred.
2.11. Constituent Documents and Governmental Rules. Each of the R
Systems Companies is in compliance, in all material respects, with (a) its
charter and by-laws or other governing documents and (b) to the best knowledge
of the R Systems Parties, all Governmental Rules applicable to it, or its
business or assets. The R Systems Companies have, at all times, been in
compliance in all material respects with all applicable export and reexport
requirements, including, but not limited to the U.S. Export Administration Act,
the U.S. Arms Export Control Act, the U.S. Trading with the Enemy Act and any
regulations, orders and licenses issued thereunder (collectively, the "U.S.
EXPORT LAWS"). None of the R Systems Companies have been, or are currently,
debarred, suspended, prohibited or impaired from exporting, reexporting,
receiving, purchasing, procuring or otherwise obtaining any product, commodity,
or technical data regulated by any agency of the government of the United
States. In particular, none of the R Systems Companies have provided products or
services, directly or indirectly, that are deemed to be of U.S. origin under the
U.S. Export Laws to foreign parties in contravention of the U.S. Export Laws or
any other applicable law and/or regulation.
2.12. Governmental Orders. Schedule 2.12 sets forth a correct and
complete list of all Governmental Orders which name any of the R Systems
Companies or are directed to or apply to any of the R Systems Companies or any
of their respective assets. Each of the R Systems Companies is in compliance
with all such Governmental Orders.
2.13. R Systems Business Permits. The R Systems Companies have all
permits, licenses, franchises, certificates, authorizations, consents and
approvals of governmental entities which are necessary for the ownership or
operation of the R Systems Companies' businesses or the ownership, operation or
use of any of their respective assets (collectively, "R SYSTEMS BUSINESS
PERMITS"). Such R Systems Business Permits are in full force and effect and
represent all governmental permits, licenses, franchises, certificates,
authorizations, consents and approvals necessary under applicable Governmental
Rules for the R Systems Companies to carry on their respective businesses as now
being conducted and to own, occupy or use their respective assets, except for
those that the failure to hold, either individually or in the aggregate, would
not result in an R Systems Material Adverse Change. None of the R Systems
Companies has received any notice from any governmental entity that it intends
to cancel, revoke, terminate, suspend or not renew any such R Systems Business
Permit.
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Each of the R Systems Companies is in compliance in all material respects, with
all R Systems Business Permits.
2.14. Environmental Matters. Except as otherwise disclosed on Schedule
2.14:
(a) Each of the R Systems Companies is in compliance in all
material respects with all applicable Environmental Rules (as defined below)
which compliance includes, without limitation, the possession by such R Systems
Company of permits and other governmental authorizations required under
applicable Environmental Rules, and compliance with the terms and conditions
thereof except where the failure to comply, either individually or in the
aggregate, would not result in an R Systems Material Adverse Change;
(b) none of the R Systems Companies has received written
notice of, or is the subject of, any actions, causes of action, claims,
investigations, demands, or notices by any person or entity alleging liability
under or noncompliance with any Environmental Rule ("ENVIRONMENTAL CLAIMS");
(c) no Hazardous Substances (defined below) are being or have
been generated, used, processed, treated, stored, released, transported or
disposed of by any of the R Systems Companies except in compliance with
applicable Environmental Rules;
(d) to the knowledge of the R Systems Parties, no Hazardous
Substances are present on or under any real property (including without
limitation in any body of water located thereon or adjacent thereto or any
groundwater located thereunder) now or previously owned, leased, occupied or
used by any of the R Systems Companies, or in any improvement located thereon,
in quantities or at levels which require reporting or remediation under any
applicable Environmental Rule; and
(e) no event has occurred and no condition exists with respect
to any of the R Systems Companies or their respective businesses or assets which
has resulted in, or is likely to result in, any material liability, cost or
expense to the R Systems Companies under any applicable Environmental Rule, and
none of the R Systems Companies has received any notice from any governmental
entity or other Person of its intention to impose any such liability, cost or
expense upon any R Systems Company.
As used in this Agreement the following terms have the following
meanings:
"ENVIRONMENTAL RULE" shall mean any Governmental Rule which
relates to Hazardous Substances, pollution or protection of the environment,
natural resources or public health or safety, including without limitation any
Governmental Rule relating to the generation, use, processing, treatment,
storage, release, transport or disposal of
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Hazardous Substances, together with all rules, regulations and orders issued
thereunder, as any of the same may be amended.
"HAZARDOUS SUBSTANCE" shall mean any substance which
constitutes, in whole or in part, a pollutant, contaminant or toxic or hazardous
substance or waste under, or the generation, use, processing, treatment,
storage, release, transport or disposal of which is regulated by, any
Governmental Rule, and shall specifically include, without limitation, any
substance which (i) constitutes a "hazardous substance" under the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., or a "hazardous waste" under the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., (ii) exhibits any of the hazardous
characteristics enumerated in 40 C.F.R. Sections 261.20-261.24, inclusive, (iii)
constitutes any of those extremely hazardous substances referred to in Section
302 of the Superfund Amendments and Reauthorization Act of 1986, Public Law
99-499, 100 Stat. 1613, at 42 U.S.C. Section 11002, (iv) constitutes a hazardous
material which, when transported, is subject to regulation by the United States
Department of Transportation at 49 C.F.R. Parts 171-199 or (v) constitutes
asbestos, urea formaldehyde, chlorinated biphenyls (polychlorinated or
monochlorinated) or petroleum products.
2.15. R Systems Real Property.
(a) The R Systems Companies have sufficient title, leaseholds
or rights to real property to conduct their respective businesses as currently
conducted.
(b) Schedule 2.15(b) sets forth a correct and complete list of
all real property currently owned by any of the R Systems Companies, including
without limitation any real property which any of the R Systems Companies has
the right to acquire pursuant to any land contract, option, right of first
refusal or any other arrangement. Except as otherwise disclosed on Schedule
2.15(b), all buildings and other improvements located on such property are in
good repair and operating condition.
(c) Schedule 2.15(c) sets forth a correct and complete list of
all leases, subleases and other agreements or rights pursuant to which any of
the R Systems Companies has the right to occupy or use any real property owned
by others.
2.16. R Systems Personal Property.
(a) Schedule 2.16 sets forth a correct and complete list of
all leases and other agreements providing for annual rental payments of more
than $15,000 and pursuant to which any of the R Systems Companies leases any
equipment, machinery, trade fixtures, tools, vehicles, computer hardware,
computer software or furniture (collectively, "EQUIPMENT").
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(b) Except as otherwise disclosed on Schedule 2.16, all
Equipment owned or leased by any of the R Systems Companies, is in good repair
and operating condition, reasonable wear and tear excepted, and is suitable for
the purposes for which it is used.
(c) Except as otherwise disclosed on Schedule 2.16, as of
January 31, 1999 all accounts receivable of the R Systems Companies (i)
represent amounts receivable for goods actually delivered or services actually
provided (or, in the case of non-trade receivables, represent amounts receivable
in respect of other bona fide business transactions); (ii) to the best knowledge
of the R Systems Parties, are not subject to any material defenses,
counterclaims or rights of setoff, (iii) have been billed and are generally due
and payable within 60 days after billing, and (iv) are expected to be fully
collectible in the ordinary course of business except, in the case of
receivables arising prior to December 31, 1998, to the extent of the reserves
set forth in the R Systems Current Financial Statements.
2.17. R Systems Intellectual Property. Except as set forth in Schedule
2.17, each of the R Systems Companies has the lawful right to use all patents,
registered trademarks, service marks, logos, corporate and trade names and
registered copyrights, and all applications therefor, proprietary computer
software and/or hardware which are owned by or licensed to any of the R Systems
Companies, or are otherwise used by any of the R Systems Companies in their
respective businesses (collectively, "R SYSTEMS INTELLECTUAL PROPERTY"),
including without limitation, valid and sufficient licenses for all computer
software used by any of the R Systems Companies, and no such use infringes upon
the lawful rights of any other Person. To the R Systems Parties' knowledge, no
Person is using any R Systems Intellectual Property in a manner which infringes
upon the lawful rights of the R Systems Companies. There are no pending or
threatened claims of which the R Systems Companies have been given written
notice, by any person against their use of any R Systems Intellectual Property.
The R Systems Companies have such ownership of or such rights by license, lease
or other agreement to the R Systems Intellectual Property as are necessary to
permit them to conduct their respective operations as currently conducted.
2.18. Title to R Systems Assets. Except as otherwise disclosed on
Schedule 2.18, each of the R Systems Companies has (a) good and marketable title
to all assets purported to be owned by it and (b) good leasehold title to all
assets purported to be leased by it, in each case free and clear of all Liens,
except inchoate Liens for taxes not yet due and payable and Liens on assets in
connection with indebtedness reflected on the R Systems Financial Statements and
except for any defects in title or Liens which, individually or in the
aggregate, would not result in an R Systems Material Adverse Change.
2.19. R Systems Pension Plans. Schedule 2.19 sets forth a true, correct
and complete list of all R Systems Pension Plans (as defined below), none of
which are
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Multiemployer Plans (as defined below). Except as otherwise disclosed on
Schedule 2.19:
(a) the IRS has issued favorable determination letters to the
effect that each R Systems Pension Plan is qualified within the meaning of
Section 401 of the Code, and that each related trust is exempt under Section 501
of the Code, correct and complete copies of which have been delivered to UBICS,
and R Systems has no knowledge of any fact which may adversely affect the
qualified status of any R Systems Pension Plan or related trust;
(b) each R Systems Pension Plan and each related trust has
been established, maintained and administered in all material respects in
compliance with ERISA (defined below), the Code and all other applicable
Governmental Rules;
(c) none of the transactions described in Section 406 of ERISA
or Section 4975 of the Code, and none of the events described in Section 4043 of
ERISA, have occurred with respect to any R Systems Pension Plan;
(d) no R Systems Company maintains, nor has it previously
maintained, any Pension Plan subject to Title IV of ERISA or subject to the
minimum funding requirements of Section 4001(a)(16) of ERISA or Section 412(a)
of the Code;
(e) R Systems (i) will deliver to UBICS correct and complete
copies of IRS Form 5500 most recently filed with respect to each Pension Plan
and (ii) has delivered to UBICS the summary plan description for each R Systems
Pension Plan;
(f) there are no actions, suits, investigations or other
proceedings pending or, to the best of the R Systems Parties' knowledge,
threatened against any R Systems Pension Plan or related trust or any fiduciary
thereof, and the R Systems Parties have no knowledge of any basis for the
commencement of any such proceeding;
(g) there are no outstanding Governmental Orders which name
any R Systems Pension Plan or its fiduciaries or are directed to any Pension
Plan or its fiduciaries or assets; and
(h) all payments which any of the R Systems Companies or their
Subsidiaries are required to make in respect of any R Systems Pension Plan on or
prior to the date hereof have been made.
As used in this Agreement, the following terms have the
following meanings:
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"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and all rules, regulations and orders issued thereunder, as any of the
same may be amended.
"R SYSTEMS ERISA AFFILIATE" shall mean any trade or business
which, together with R Systems Companies, is treated as a single employer under
Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
"PENSION PLAN" shall mean any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (i) which is maintained for past or present
employees of any of the R Systems Companies, their Subsidiaries or any of their
respective R Systems ERISA Affiliates or (ii) to which R Systems, its
Subsidiaries or any of their respective R Systems ERISA Affiliates made, or was
required to make, contributions within the preceding five years, as any of the
same may be amended.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
2.20. R Systems Welfare Plans and Other Benefit Plans.
(a) Except as set forth on Schedule 2.20(a), none of the R
Systems Companies maintains any Welfare Plans (defined below). As used in this
Section, "WELFARE PLAN" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA (i) which is maintained for past or present employees of R
Systems, its Subsidiaries or any of their respective R Systems ERISA Affiliates
or (ii) to which R Systems, its Subsidiaries or any of their respective R
Systems ERISA Affiliates made, or was required to make, contributions within the
preceding five years, as any of the same may be amended.
(b) Schedule 2.20(b) sets forth, and R Systems has delivered
or made available to UBICS copies or summaries of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, and arrangements, and all other employee benefit plans or
fringe benefit plans, currently adopted, maintained by, sponsored in whole or in
part by, or contributed to by any of the R Systems Companies for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries (collectively, the "R SYSTEMS BENEFIT PLANS"). Except as
disclosed in Schedule 2.20(b), all R Systems Benefit Plans are in compliance in
all material respects with applicable Governmental Rules and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee under any R Systems
Benefit Plan, (ii) increase any
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benefits otherwise payable under any R Systems Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
2.21. R Systems Personnel Matters.
(a) Schedule 2.21 sets forth a correct and complete list of
(i) all directors and executive officers of each of the R Systems Companies,
(ii) all other employees of or consultants to any of the R Systems Companies
whose annual compensation (including bonuses and commissions) during the fiscal
year ended December 31, 1998 was $100,000 or more, (iii) the current job title
or relationship to the R Systems Company of each such Person described in
clauses (i) and (ii) above, (iv) the amount of compensation (including bonuses
and commissions) paid to each such Person during the year ended December 31,
1998 and which each of them is expected to receive in the year ending December
31, 1999 and (v) any employee benefits or perquisites available to any such
Person that are not generally available to employees of the R Systems Companies.
(b) Except as otherwise disclosed on Schedule 2.21, none of
the R Systems Companies is a party to any written employment, consulting,
noncompete or similar agreement with any Person.
(c) Except as otherwise disclosed on Schedule 2.21, (i) no
employees of any of the R Systems Companies are represented by any labor union
or similar organization, (ii) none of the R Systems Companies is party to any
collective bargaining or similar agreement covering any of its employees and
(iii) no labor union or similar organization or group of employees has made a
demand for recognition, to the knowledge of the R Systems Parties filed a
petition seeking a representation proceeding, or given any R Systems Company
notice of any intention to hold an election of a collective bargaining
representative at any time during the past three years.
(d) Except as otherwise disclosed on Schedule 2.21, (i) no
strike, work stoppage, contract dispute or other labor disturbance involving any
employees of any of the R Systems Companies currently exists or, to the best of
the R Systems Parties' knowledge, is threatened and (ii) no investigation,
action or proceeding by or before any governmental entity which relates to
allegedly unfair or discriminatory employment or labor practices or the
violation of any Governmental Rule relating to employment or labor practices is
pending against any of the R Systems Companies or, to the best of the R Systems
Parties' knowledge, threatened against any of the R Systems Companies.
(e) Except as set forth on Schedule 2.21, each of the R
Systems Companies has complied in all material respects with all Governmental
Rules pertaining to the employment and terminating of employees, the hiring and
terminating of contractors and sub-contractors, and the immigration and
employment
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of foreign nationals, including, without limitation all such Governmental Rules
relating to labor relations, equal employment practices, fair employment
practices, entitlements, prohibited discrimination, terms and conditions of
employment, wages and hours, independent contractor classification, withholding
requirements, worker's compensation or other similar employment or hiring
practices or acts, and none of the R Systems Companies is engaged in any unfair
labor practices or is a party to any Action involving a violation or alleged
violation of any of the foregoing Governmental Rules. Without limiting the
generality of the foregoing, R Systems has complied in all material respects
with the WARN Act, COBRA, the Immigration and Nationality Act, as amended, and
the Immigration Reform and Control Act of 1986, including, without limitation,
completing a Form I-9 for every employee of R Systems, and maintaining all such
Form I-9(s) and related information in accordance with such acts. Except as set
forth on Schedule 2.21, there are no Actions pending or, to the knowledge of the
R Systems Parties, threatened against any of the R Systems Companies with
respect to any matter arising out of, relating to or in connection with an
employee's or contractor's employment by an R Systems Company.
2.22. R Systems Insurance.
(a) Schedule 2.22 sets forth a correct and complete list of
all insurance policies of which any of the R Systems Companies is the owner,
insured or beneficiary (the "INSURANCE POLICIES") and indicates for each such
policy any pending claims thereunder. R Systems has provided to UBICS complete
and correct copies of all Insurance Policies and all other general liability and
product liability insurance policies covering the R Systems Companies since
January 1, 1993. There is no default with respect to any material provision
contained in any of the Insurance Policies, nor has there been any failure to
give any notice or present any material claim under any such policy in a timely
fashion or as otherwise required by any such policy.
(b) Except as otherwise disclosed on Schedule 2.22: (i) all
premiums under the Insurance Policies which were due and payable on or prior to
the date hereof have been paid in full; and (ii) none of the R Systems Companies
has received notice of any material increase in the premium under, cancellation
or non-renewal of or disallowance of any claim under any such policy.
2.23. R Systems Indebtedness.
(a) Schedule 2.23 sets forth a complete list of all
agreements, documents, instruments and securities which are currently in effect
and which create, evidence or secure any indebtedness of any of the R Systems
Companies (exclusive of trade payables) or pursuant to which any of the R
Systems Companies has guaranteed any indebtedness or other obligations of any
other Person or has any other contingent liability.
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(b) Schedule 2.23 sets forth a correct and complete list of
all outstanding trade payables as of January 31, 1999 of any of the R Systems
Companies owed to any single vendor which, individually or in the aggregate,
exceed $30,000 and payment of which is more than 60 days overdue and, with
respect to any trade payables which have not been paid due to a dispute with a
vendor, identifies the nature of such dispute.
2.24. Other Material R Systems Business Agreements. All written
agreements and contracts to which any of the R Systems Companies is a party or
by which any of the R Systems Companies or any of their respective assets are
bound are set forth on Schedule 2.24 other than (a) agreements listed on any of
Schedule 2.04 through Schedule 2.23, (b) agreements involving the payment by or
to any of the R Systems Companies, or creating any liability of the R Systems
Companies (whether direct or indirect, fixed or contingent), of less than
$25,000 over the term thereof, and (c) agreements which are cancelable by any of
the R Systems Companies on 30 days' notice or less without any material
liability to the R Systems Company. The agreements and contracts to which any of
the R Systems Companies are a party listed on Schedules 2.04 through 2.24 are
referred to herein as the "R SYSTEMS BUSINESS AGREEMENTS".
2.25. Status of R Systems Business Agreements. Each R Systems Business
Agreement is in full force and effect and is enforceable against the R Systems
Company which is party thereto and, to the best of the R Systems Parties'
knowledge, the other parties thereto, in accordance with its terms, except as
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (b) applicable equitable principles, whether considered in a
proceeding at law or in equity. R Systems and, to the best knowledge of the R
Systems Parties, each other R Systems Company, is in compliance with each R
Systems Business Agreement to which it is a party, except, in each case, for
such non-compliance as does not (x) constitute a breach or default (or an event
which, with the giving of notice or the passage of time, or both, would
constitute a default) thereunder, (y) give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment thereof or (z)
cause, either individually or in the aggregate, an R Systems Material Adverse
Change. To the best of the R Systems Parties' knowledge, all other parties to
such R Systems Business Agreements are in material compliance with the terms
thereof. Except as otherwise disclosed on Schedule 2.04 or 2.25, no consent of
any other Person party to such R Systems Business Agreements is required in
connection with the Transaction.
2.26. Transactions with R Systems Affiliates. Except as otherwise
disclosed on Schedule 2.26: (a) none of the customers, suppliers, or contractors
of any of the R Systems Companies are Affiliates (defined below) of any of the R
Systems Companies or any of their respective officers, directors or
shareholders; (b) none of the assets of the R Systems Companies are owned or
used by or leased to any Affiliates of any of the R Systems Companies or any of
their respective officers, directors or shareholders; (c) no
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Affiliate of any of the R Systems Companies or any of their respective officers,
directors or shareholders is a party to any R Systems Business Agreement; and
(d) no Affiliate of any of the R Systems Companies or any of their respective
officers, directors or shareholders provides any legal, accounting or other
services to any of the R Systems Companies. As used in this Agreement the term
"AFFILIATE" means, with respect to any Person, (i) any director, officer,
partner or principal of such Person, (ii) any other Person of which such Person
is a director, officer, partner or principal, (iii) any Person who directly or
indirectly controls or is controlled by, or is under common control with, such
Person and (iv) with respect to any Person described above who is a natural
person, any spouse, parent, grandparent, child or grandchild of such Person, and
the term "control" shall mean, with respect to any Person, the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
2.27. Customers and Suppliers. Schedule 2.27 sets forth a correct and
complete list of each of the customers and suppliers of the R System Companies
whose purchases from or sales to the R Systems Companies constituted five
percent or more of the R Systems Companies' net sales or net purchases,
respectively, during the fiscal year ended December 31, 1997 or during the nine
months ended September 30, 1998, (collectively "MATERIAL CUSTOMERS AND
SUPPLIERS") and indicates with respect to each the name of the party and the
respective dollar volume. None of the R Systems Parties nor any of R Systems
Companies are required to provide any material bonding or other financial
security arrangements in connection with any transactions with any of the
Material Customers and Suppliers. Since September 30, 1998, none of the Material
Customers and Suppliers has terminated its relationship with, or materially
reduced its purchases from or sales to, any of the R Systems Companies, and none
of the R Systems Parties have any knowledge that any of the Material Customers
and Suppliers intends to terminate its relationship with, or materially reduce
its purchases from or sales to, any of the R Systems Companies.
2.28. Brokers. None of the R Systems Parties have employed or retained,
or have any liability to, any broker, agent or finder on account of this
Agreement or any of the other Transaction Documents or the transactions
contemplated hereby or thereby.
2.29. Bank Accounts. Schedule 2.29 sets forth a correct and complete
list of the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which each of the R Systems
Companies maintains accounts of any nature, the type and number of all such
accounts and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
2.30. Year 2000. Except as set forth on Schedule 2.30, to the knowledge
of the R Systems Parties, the R Systems Companies and their respective
Management and Production Systems (each as defined below, together the
"SYSTEMS") are, or will be prior to January 1, 2000, each Year 2000 Compliant.
Notwithstanding the foregoing, the
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Systems provided by third parties to the R Systems Companies are each, to the
best knowledge of the R Systems Parties after reasonable investigation, Year
2000 Complaint. The R Systems Parties make no representation or warranty
respecting user defined fields that contain dates, or in circumstances where
data received from any third-party system are invalid, incorrect or otherwise
corrupt. R Systems has defined, and will continue to define, date data formats
compatible with its Systems which formats are consistent with prevalent industry
standards and are compatible with a broad range of third party systems.
"YEAR 2000 COMPLIANT" means that neither the year change from
1999 to 2000 (the arrival of the date "January 1, 2000") nor leap year dates
thereafter will result in material errors or corruption in processing data or
otherwise have an abnormal or material adverse effect on the operations or
functionality of a company or its Systems, all of which will continue to operate
substantially as intended prior to, during and after January 1, 2000 provided
that (i) all date data received from any third party for use by the company are
accurate and in formats defined by the company from time to time, and (ii) all
date data generated by the company are accepted in formats defined by any third
party using such data from time to time.
"MANAGEMENT SYSTEMS" include, without limitation, all computer
hardware (including integrated circuit/chip and firmware) and software
applications that a company uses for managing and operating such company and its
businesses, including without limitation, functions such as accounting and
billing, invoicing/accounts receivable and accounts payable, inventory tracking
and maintenance, and vendor and supplier sourcing.
"PRODUCTION SYSTEMS" include, without limitation, all computer
hardware (including integrated circuit/chip and firmware) and software
applications, and all automated or electronic equipment, controls and other
systems used by a company in providing goods and services to customers.
2.31. Pooling Matters. To the best knowledge of the R Systems Parties,
none of the R Systems Companies or the R Systems Shareholders have taken, nor
have they allowed any of their Affiliates to take, nor will any of the R Systems
Companies or the R Systems Shareholders take, nor will they allow any of their
Affiliates to take, any action which would violate the pooling criteria set
forth in APB Opinion No. 16, thereby affecting the ability of the R Systems
Companies and UBICS to account for the business combination to be effected
pursuant to the Transaction Documents as a pooling of interests. R Systems
hereby affirms and agrees to the matters set forth in Annex 2.31.
2.32. Delivery of Documents; Accurate Disclosure. R Systems has
previously delivered to UBICS correct and complete copies or forms of each R
Systems Business Agreement. None of the information furnished or to be furnished
by the R Systems Parties to UBICS or any of its representatives in connection
with this Agreement and
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the other Transaction Documents, and none of the representations and warranties
of the R Systems Parties set forth herein, in any other Transaction Document or
in any certificate delivered in connection herewith or therewith, (a) is or will
be false or misleading in any material respect, (b) contains or will contain any
untrue statement of a material fact or (c) omits or will omit any statement of
material fact necessary to make the same not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE R SYSTEMS
SHAREHOLDERS
Each R Systems Shareholder, severally and not jointly, hereby
represents and warrants to UBICS as follows:
3.01. Investor Status. The R Systems Shareholder resides at the address
shown on Annex 1.02(a). The R Systems Shareholder, if a resident of California,
either (i) has a preexisting business or personal relationship with UBICS or any
of its officers or directors or (ii) has such business or financial experience
as to have the capacity to protect his or her own interests in connection with
the transactions pursuant to this Agreement.
3.02. Title to Capital Stock. The R Systems Shareholder has good and
marketable title to the shares of R Systems Common Stock shown on Schedule
2.05(c) as owned by the R Systems Shareholder, free and clear of any and all
Liens. Except as set forth on Schedule 3.02, the R Systems Shareholder is not a
party to or bound by any option, sale agreement, shareholder agreement, pledge,
proxy, voting trust, power of attorney, restriction on transfer or other
agreement or instrument which relates to the ownership, voting or transfer of
any shares of R Systems Common Stock owned by the R Systems Shareholder. The
Shareholder has the sole and absolute right, power and authority to sell, assign
and transfer such R Systems Common Stock as provided in this Agreement. UBICS
will acquire good and unencumbered title to such R Systems Common Stock, free
and clear of all liens, and not subsequent to any adverse claim when acquired by
UBICS pursuant to this Agreement.
3.03. Authorization of Transaction. Subject to the need to make certain
governmental filings as described on Schedule 2.04 of the R Systems Disclosure
Schedule, the R Systems Shareholder has the full right, power and authority (i)
to execute and deliver this Agreement and each of the other Transaction
Documents to which he is a party, and (ii) to perform the R Systems
Shareholder's obligations hereunder and thereunder. This Agreement and the other
Transaction Documents to which the R Systems Shareholder is a party constitute
the valid and legally binding obligations of the R Systems Shareholder,
enforceable against him in accordance with their respective terms, except as the
same may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium or other laws relating to or affecting
the enforcement of creditors' rights generally, now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies.
3.04. No Violation. The R Systems Shareholder is not a party to,
subject to or bound by any agreement or any judgment, order, writ, prohibition,
injunction or decree of any court or other Governmental Agency which would
prevent the execution, delivery or performance of this Agreement or any other
Transaction Document by him.
3.05. Investment Intent. The R Systems Shareholder (i) is acquiring the
UBICS Common Stock pursuant to the Exchange solely for his own account for
investment purposes and not with a view to the distribution thereof within the
meaning of the Securities Act; and (ii) has had access to all UBICS SEC
Documents (as defined below), and has had the opportunity to obtain such
additional information as he deemed necessary in order to evaluate the merits
and risks inherent in acquiring and holding the UBICS Common Stock.
3.06. No Breach, Default, Violation or Consent. Except as set forth on
Schedule 2.04 of the R Systems Disclosure Schedule, the execution, delivery and
performance by the R Systems Shareholder of this Agreement, the Related
Acquisition Agreements and the other Transaction Documents to which he is a
party do not and will not:
(a) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any contract,
agreement, instrument or document to which the R Systems Shareholder is a party
or by which the R Systems Shareholder or his assets are bound;
(b) breach or otherwise violate any Governmental Order which
names the R Systems Shareholder, or is directed to the R Systems Shareholder or
any of his assets;
(c) result in the creation of a Lien held by any third party
on any of his shares of R Systems Common Stock;
(d) violate any Governmental Rule applicable to the R Systems
Shareholder; or
(e) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any Person.
3.07. Pooling Matters. The R Systems Shareholder affirms and agrees to
the matters set forth in Annex 2.31.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UBICS
UBICS hereby represents and warrants to the R Systems Parties
as follows:
4.01. Organization and Qualification. Each of UBICS and its
Subsidiaries (collectively, the "UBICS COMPANIES") is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the UBICS Companies is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions in which the ownership of its assets or the nature of its
business makes such qualification necessary, except in those jurisdictions where
the failure to be so qualified has not resulted in, and is not likely to result
in, a material adverse change in, or material adverse effect on, the assets,
business, operations, financial condition or prospects of UBICS taken as a whole
(a "UBICS MATERIAL ADVERSE CHANGE"). UBICS has previously delivered or made
available to the R Systems Parties a complete and correct copy of the
certificate of incorporation and bylaws or other charter and governing documents
of each of the UBICS Companies as currently in effect.
4.02. Authority and Authorization. Each of the UBICS Companies has the
corporate power and authority to own, lease and operate its properties and
assets, to conduct its business as presently conducted and to execute, deliver
and perform this Agreement and the other Transaction Documents to which it is a
party, subject only to, with respect to the Exchange, the approval and adoption
of this Agreement and the transactions contemplated hereby by the holders of at
least a majority of the outstanding Shares of UBICS Common Stock entitled to
vote in accordance with the Delaware General Corporation Law (the "DGCL") and
UBICS' Certificate of Incorporation and by-laws.
4.03. Execution and Binding Effect. The Exchange, this Agreement, each
of the Related Acquisition Agreements, the other Transaction Documents and the
transactions contemplated hereby and thereby, have been, and on the Closing Date
will be, duly authorized and approved by UBICS' Board of Directors, and, except
for obtaining the approval of its stockholders, no other approvals are required
before UBICS may duly execute, deliver and perform its obligations under this
Agreement and each of the Related Acquisition Agreements and the other
Transaction Documents. This Agreement and each of the Related Acquisition
Agreements have been, and on the Closing Date the other Transaction Documents
will be, duly and validly executed and delivered by UBICS and, subject to
approval and adoption of this Agreement by UBICS stockholders, constitutes (or
upon such execution and delivery will constitute) legal, valid and binding
obligations of UBICS enforceable against UBICS in accordance with their
respective terms, except as such enforceability may be limited by (a) applicable
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bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles,
whether considered in a proceeding at law or in equity.
4.04. No Breach, Default, Violation or Consent. Except as set forth on
Schedule 4.04, the execution, delivery and performance by UBICS of this
Agreement and the other Transaction Documents do not and will not:
(a) violate the Certificate of Incorporation or by-laws of
UBICS;
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any material
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which UBICS or any of its Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound;
(c) breach or otherwise violate any Governmental Order which
names any UBICS Company or is directed to any UBICS Company or any of their
respective assets;
(d) result in the creation of a Lien held by any third party
on any of UBICS Companies' respective assets;
(e) violate any Governmental Rule applicable to any of the
UBICS Companies or their respective businesses or assets; or
(f) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any Person.
4.05. UBICS Common Stock. The authorized capitalization of UBICS
consists of (i) 20,000,000 shares of UBICS Common Stock, of which 6,500,000
shares are issued and outstanding and (ii) 2,000,000 shares of preferred stock,
par value $.01 per share, none of which are issued and outstanding. All of the
issued and outstanding shares of UBICS Common Stock have been duly authorized
and validly issued in compliance with applicable Governmental Rules relating to
the issuance of securities and are fully paid and non-assessable. The shares of
UBICS Common Stock to be issued in the Exchange, when issued in accordance with
the terms of this Agreement, will be duly authorized and validly issued in
compliance with applicable United States federal and state Governmental Rules
relating to the issuance of securities, fully paid and nonassessable, and the
issuance of all such shares is not subject to any preemptive rights.
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4.06. UBICS Securities Matters and Financial Statements.
(a) UBICS has filed with the SEC, and has heretofore made
available to the R Systems Parties true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
and its Subsidiaries since September 1, 1997 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "UBICS SEC DOCUMENTS"), which are all the documents
(other than preliminary material) that UBICS, or any present or former
Subsidiary of UBICS, was required to file with the SEC since such date. As of
their respective filing dates, the UBICS SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
the UBICS SEC Documents. As of their respective dates or, if amended, as of the
date of the last such amendment, the UBICS SEC Documents, including, without
limitation, any financial statements or schedules included therein did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The financial statements (including the related notes) of
UBICS included in the UBICS SEC Documents (the "UBICS FINANCIAL STATEMENTS")
comply as to form in all material respects with all applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, present fairly the financial condition of UBICS and its
consolidated Subsidiaries as at the end of the periods covered thereby and the
results of its consolidated operations and the changes in its consolidated cash
flows for the periods covered thereby, and were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby subject, in
the case of the unaudited interim statements, to year-end audit adjustments
(which are not expected to be material except as otherwise disclosed on Schedule
4.06) and the lack of footnotes and other presentation items. Except as and to
the extent otherwise disclosed in the UBICS Financial Statements or on Schedule
4.06, UBICS and its consolidated Subsidiaries have no liabilities of any kind,
whether direct or indirect, fixed or contingent or otherwise, other than (y)
liabilities which are not required to be set forth on the UBICS Financial
Statements in accordance with GAAP, and (z) liabilities incurred in the ordinary
course of business since September 30, 1998 (the "UBICS FINANCIAL STATEMENT
DATE").
4.07. Pooling Matters. To UBICS' best knowledge, UBICS has not taken,
nor has it permitted any of its Affiliates to take, nor will it take or allow
any of its Affiliates to take, any action which would violate the pooling
criteria set forth in APB Opinion No. 16, thereby affecting the ability of the R
Systems Companies and UBICS to account for the business combination to be
effected pursuant to the Transaction Documents as a pooling of interests.
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4.08. Subsidiaries. Schedule 4.08 contains a complete and accurate list
of each Subsidiary of UBICS. Each Subsidiary of UBICS listed on Schedule 4.08
(a) is duly organized, validly existing and in good standing in its jurisdiction
of organization and (b) is duly qualified to do business as a foreign entity and
is in good standing in all jurisdictions in which the ownership of its assets or
the nature of its business makes such qualification necessary, except to the
extent that the failure to be so qualified has not resulted in, and is not
likely to result in, UBICS Material Adverse Change. Except as disclosed on
Schedule 4.08, all of the outstanding shares of capital stock (or equivalent
equity interests of entities other than corporations) of each Subsidiary of
UBICS are owned of record and beneficially, directly or indirectly, by UBICS or
a Subsidiary of UBICS free and clear of all Liens.
4.09. Tax Matters. Except as otherwise disclosed on Schedule 4.09:
(a) all tax returns and reports required to be filed by the
UBICS Companies have been properly prepared and timely filed and were complete
and correct when filed;
(b) each of the UBICS Companies has paid, or has made adequate
reserves on its books for the payment of, all Taxes, interest, penalties,
assessments and deficiencies shown to be due on such tax returns and reports or
which such UBICS Company is required to withhold on behalf of any other Person;
(c) the reserves and provisions for Taxes on the books of each
of the UBICS Companies are adequate in all material respects for all open years
and for its current fiscal period and properly classify such Tax obligations as
either current or deferred;
(d) there are no assessments of any additional Taxes on any of
the UBICS Companies by any governmental entity (whether or not reserved
against);
(e) none of the UBICS Companies is currently being audited by
any governmental entity, and no such audit is pending or, to the best of UBICS'
knowledge, threatened;
(f) none of the UBICS Companies has made any tax elections
which (i) were in effect in any past year for which the time for audit has not
expired, (ii) are currently in effect or (iii) will be in effect at any future
time;
(g) none of the UBICS Companies has given any waiver or
extension of any period of limitation governing the time of assessment or
collection of any Tax;
(h) except as disclosed on Schedule 4.09, no UBICS Company is
a party to any agreement providing for the allocation or sharing of Taxes; and
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(i) the UBICS Companies have not paid, and do not expect to
pay, in any taxable year commencing on or after December 31, 1997, remuneration
that would result in a disallowance of any amount of tax deductions under
Section 162(m) of the Code.
4.10. Litigation. Except as otherwise disclosed on Schedule 4.10 or in
the UBICS SEC Documents, there is no pending or, to the best of UBICS'
knowledge, threatened Action against any of UBICS Companies or any of their
respective assets by or before any court, governmental entity or arbitrator.
Schedule 4.10 sets forth a correct and complete list of each Action described in
the preceding sentence, the parties thereto, the alleged basis therefor, the
relief sought therein and the current status thereof.
4.11. Absence of Certain Changes and Events. Except as otherwise
disclosed on Schedule 4.11 or in the UBICS Financial Statements, since the UBICS
Financial Statement Date:
(a) none of the UBICS Companies has incurred any material
obligation or liability except for normal obligations incurred in the ordinary
course of business;
(b) no casualty, loss or damage has occurred with respect to
any of the assets of the UBICS Companies, whether or not the same is covered by
insurance, except for those casualties, losses or damages which would not,
individually or in the aggregate, be reasonably expected to exceed $50,000;
(c) none of the UBICS Companies has sold, transferred,
pledged, encumbered or otherwise disposed of any of its assets or any interest
therein, or agreed to do any of the foregoing, except for sales of assets for
aggregate proceeds not in excess of $25,000;
(d) none of the UBICS Companies has written off as
uncollectible any of its accounts receivable, or written down the value of any
of its assets, except in each case in the ordinary course of business consistent
with past practice;
(e) none of the UBICS Companies has waived or released any of
its rights with respect to its business or assets or permitted any of such
rights to lapse except to the extent that such actions are in the ordinary
course of business or, in the exercise of UBICS' reasonable business judgment,
are otherwise in the best interests of the UBICS Companies;
(f) no executive officer or other key employee of any of the
UBICS Companies has left his or her employment with the UBICS Companies;
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(g) none of the UBICS Companies has granted, and is not
committed to grant, any salary or wage increases to any of its employees, except
for individual salary or wage increases which will not exceed $15,000 in the
twelve month period commencing on the date hereof;
(h) none of the UBICS Companies has made, or committed to
make, any capital expenditures in excess of $50,000 in the aggregate;
(i) there has been no payment, discharge or other satisfaction
of any liabilities of any of the UBICS Companies, whether direct or indirect,
fixed or contingent or otherwise, other than the satisfaction, in the ordinary
course of business, of liabilities reflected on the UBICS Financial Statements
or incurred in the ordinary course of business since the UBICS Financial
Statement Date;
(j) none of the UBICS Companies has introduced any material
change with respect to its business, including without limitation with respect
to the products or services it sells, the areas in which such products or
services are sold, its marketing techniques or its accounting methods;
(k) none of the UBICS Companies have taken any actions which,
if taken after the date hereof, would violate Section 5.01(b) hereof; and
(l) no UBICS Material Adverse Change, and no event which is
likely to result in a UBICS Material Adverse Change, has occurred.
4.12. Constituent Documents and Governmental Rules. Each of the UBICS
Companies is in compliance, in all material respects, with (a) its charter and
by-laws or other governing documents and (b) to the best knowledge of UBICS, all
Governmental Rules applicable to it, or its business or assets. The UBICS
Companies have, at all times, been in compliance in all material respects with
all applicable export and reexport requirements, including, but not limited to
the U.S. Export Laws. None of the UBICS Companies have been, or are currently,
debarred, suspended, prohibited or impaired from exporting, reexporting,
receiving, purchasing, procuring or otherwise obtaining any product, commodity,
or technical data regulated by any agency of the government of the United
States. In particular, none of the UBICS Companies have provided products or
services, directly or indirectly, that are deemed to be of U.S. origin under the
U.S. Export Laws to foreign parties in contravention of the U.S. Export Laws or
any other applicable law and/or regulation.
4.13. Governmental Orders. Schedule 4.13 sets forth a correct and
complete list of all Governmental Orders which name any of the UBICS Companies
or are directed to or apply to any of the UBICS Companies or any of their
respective assets. Each of the UBICS Companies is in compliance with all such
Governmental Orders.
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4.14. UBICS Business Permits. The UBICS Companies have all permits,
licenses, franchises, certificates, authorizations, consents and approvals of
governmental entities which are necessary for the ownership or operation of the
UBICS Companies' businesses or the ownership, operation or use of any of their
respective assets (collectively, "UBICS BUSINESS PERMITS"), all of which are in
full force and effect and represent all governmental permits, licenses,
franchises, certificates, authorizations, consents and approvals necessary under
applicable Governmental Rules for the UBICS Companies to carry on their
respective businesses as now being conducted and to own, occupy or use their
respective assets, except for those that the failure to hold, either
individually or in the aggregate, would not result in a UBICS Material Adverse
Change. None of the UBICS Companies has received any notice from any
governmental entity that it intends to cancel, revoke, terminate, suspend or not
renew any such UBICS Business Permit. Each of the UBICS Companies is in
compliance in all material respects, with all UBICS Business Permits.
4.15. Environmental Matters. Except as otherwise disclosed on Schedule
4.15:
(a) Each of the UBICS Companies is in compliance in all
material respects with all applicable Environmental Rules which compliance
includes, without limitation, the possession by such UBICS Company of permits
and other governmental authorizations required under applicable Environmental
Rules, and compliance with the terms and conditions thereof, except where the
failure to comply, either individually or in the aggregate, would not result in
a UBICS Material Adverse Change;
(b) none of the UBICS Companies has received written notice
of, or is the subject of, any Environmental Claims;
(c) no Hazardous Substances are being or have been generated,
used, processed, treated, stored, released, transported or disposed of by any of
the UBICS Companies except in compliance with applicable Environmental Rules;
(d) to UBICS' knowledge, no Hazardous Substances are present
on or under any real property (including without limitation in any body of water
located thereon or adjacent thereto or any groundwater located thereunder) now
or previously owned, leased, occupied or used by any of the UBICS Companies, or
in any improvement located thereon, in quantities or at levels which require
reporting or remediation under any applicable Environmental Rule; and
(e) no event has occurred and no condition exists with respect
to any of the UBICS Companies or their respective businesses or assets which has
resulted in, or is likely to result in, any material liability, cost or expense
to UBICS under any applicable Environmental Rule, and none of the UBICS
Companies has received any notice from any governmental entity or other Person
of its intention to impose any such liability, cost or expense upon any UBICS
Company.
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4.16. UBICS Real Property.
(a) The UBICS Companies have sufficient title, leaseholds or
rights to real property to conduct their respective businesses as currently
conducted.
(b) None of the UBICS Companies owns any real property or has
the right to acquire any real property pursuant to any land contract, option,
right of first refusal or any other arrangement.
(c) Schedule 4.16(c) sets forth a correct and complete list of
all leases, subleases and other agreements or rights pursuant to which any of
the UBICS Companies has the right to occupy or use any real property owned by
others.
4.17. UBICS Personal Property.
(a) Schedule 4.17 sets forth a correct and complete list of
all leases and other agreements providing for annual rental payments of more
than $15,000 and pursuant to which any of the UBICS Companies leases any
Equipment.
(b) Except as otherwise disclosed on Schedule 4.17, all
Equipment owned or leased by any of the UBICS Companies, is in good repair and
operating condition, reasonable wear and tear excepted, and is suitable for the
purposes for which it is used.
(c) Except as otherwise disclosed on Schedule 4.17, all
accounts receivable of the UBICS Companies (i) represent amounts receivable for
goods actually delivered or services actually provided (or, in the case of
non-trade receivables, represent amounts receivable in respect of other bona
fide business transactions); (ii) to the best knowledge of UBICS, are not
subject to any material defenses, counterclaims or rights of setoff, (iii) have
been billed and are generally due and payable within 60 days after billing, and
(iv) are expected to be fully collectible in the ordinary course of business
except, in the case of receivables arising prior to September 30, 1998, to the
extent of the reserves set forth in the UBICS Financial Statements.
4.18. UBICS Intellectual Property. Except as set forth in Schedule
4.18, each of the UBICS Companies has the lawful right to use all patents,
registered trademarks, service marks, logos, corporate and trade names and
registered copyrights, and all applications therefor, proprietary computer
software and/or hardware which are owned by or licensed to any of the UBICS
Companies, or are otherwise used by any of the UBICS Companies in their
respective businesses (collectively, "UBICS INTELLECTUAL PROPERTY"), including,
without limitation, valid and sufficient licenses for all computer software used
by any of the UBICS Companies, and no such use infringes upon the lawful rights
of any other Person. To UBICS' knowledge, no Person is using any UBICS
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Intellectual Property in a manner which infringes upon the lawful rights of the
UBICS Companies. There are no pending or threatened claims of which the UBICS
Companies have been given written notice, by any person against their use of any
UBICS Intellectual Property. The UBICS Companies have such ownership of or such
rights by license, lease or other agreement to the UBICS Intellectual Property
as are necessary to permit them to conduct their respective operations as
currently conducted.
4.19. Title to UBICS Assets. Except as otherwise disclosed on Schedule
4.19, each of the UBICS Companies has (a) good and marketable title to all
assets purported to be owned by it and (b) good leasehold title to all assets
purported to be leased by it, in each case free and clear of all Liens, except
inchoate Liens for taxes not yet due and payable and Liens on assets in
connection with indebtedness reflected on the UBICS Financial Statements and
except for any defects in title or Liens which, individually or in the
aggregate, would not result in a UBICS Material Adverse Change.
4.20. UBICS Benefit Plans. None of the UBICS Companies maintains any
Pension Plans or Welfare Plans. Schedule 4.20 sets forth a list, and UBICS has
delivered or made available to R Systems copies or summaries, of all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plans, all other
written employee programs, and arrangements, and all other employee benefit
plans or fringe benefit plans, currently adopted, maintained by, sponsored in
whole or in part by, or contributed to by any of the UBICS Companies for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries (collectively, the "UBICS BENEFIT PLANS").
Except as disclosed in Schedule 4.20, all UBICS Benefit Plans are in compliance
in all material respects with applicable Governmental Rules and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee under any UBICS Benefit
Plan, (ii) increase any benefits otherwise payable under any UBICS Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting of any
such benefit.
4.21. UBICS Personnel Matters.
(a) Schedule 4.21 sets forth a correct and complete list of
(i) all directors and executive officers of each of the UBICS Companies, (ii)
all other employees of or consultants to any of the UBICS Companies whose annual
compensation (including bonuses and commissions) during the fiscal year ended
December 31, 1998 was $100,000 or more, (iii) the current job title or
relationship to the UBICS Company of each such Person described in clauses (i)
and (ii) above, (iv) the amount of compensation (including bonuses and
commissions) paid to each such Person during the year ended December 31, 1998
and which each of them is expected to receive in the year ending December 31,
1999 and (v) any employee benefits or
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perquisites available to any such Person that are not generally available to
employees of the UBICS Companies.
(b) Except as otherwise disclosed on Schedule 4.21, none of
the UBICS Companies is a party to any employment, consulting, noncompete or
similar agreement, written or oral, with any Person.
(c) Except as otherwise disclosed on Schedule 4.21, (i) no
employees of any of the UBICS Companies are represented by any labor union or
similar organization, (ii) none of the UBICS Companies is party to any
collective bargaining or similar agreement covering any of its employees and
(iii) no labor union or similar organization or group of employees has made a
demand for recognition, to the knowledge of UBICS filed a petition seeking a
representation proceeding, or given any UBICS Company notice of any intention to
hold an election of a collective bargaining representative at any time during
the past three years.
(d) Except as otherwise disclosed on Schedule 4.21, (i) no
strike, work stoppage, contract dispute or other labor disturbance involving any
employees of any of the UBICS Companies currently exists or, to the best of
UBICS' knowledge, is threatened and (ii) no investigation, action or proceeding
by or before any governmental entity which relates to allegedly unfair or
discriminatory employment or labor practices or the violation of any
Governmental Rule relating to employment or labor practices is pending against
any of the UBICS Companies or, to the best of UBICS' knowledge, threatened
against any of the UBICS Companies.
(e) Each of the UBICS Companies has complied in all material
respects with all Governmental Rules pertaining to the employment and
terminating of employees, the hiring and terminating of contractors and
sub-contractors, and the immigration and employment of foreign nationals,
including, without limitation all such Governmental Rules relating to labor
relations, equal employment practices, fair employment practices, entitlements,
prohibited discrimination, terms and conditions of employment, wages and hours,
independent contractor classification, withholding requirements, worker's
compensation or other similar employment or hiring practices or acts, and none
of the UBICS Companies is engaged in any unfair labor practices or is a party to
any Action involving a violation or alleged violation of any of the foregoing
Governmental Rules. Without limiting the generality of the foregoing, UBICS has
complied in all material respects with the WARN Act, COBRA, the Immigration and
Nationality Act, as amended, and the Immigration Reform and Control Act of 1986,
including, without limitation, completing a Form I-9 for every employee of
UBICS, and maintaining all such Form I-9(s) and related information in
accordance with such acts. Except as set forth on Schedule 4.21, there are no
Actions pending or, to the knowledge of UBICS, threatened against any of the
UBICS Companies with respect to any matter arising out of, relating to or in
connection with an employee's or contractor's employment by a UBICS Company.
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4.22. UBICS Insurance.
(a) Schedule 4.22 sets forth a correct and complete list of
all insurance policies of which any of the UBICS Companies is the owner, insured
or beneficiary (the "UBICS INSURANCE POLICIES") and indicates for each such
policy any pending claims thereunder. UBICS has provided to R Systems complete
and correct copies of all Insurance Policies and all other general liability and
product liability insurance policies covering the UBICS Companies since January
1, 1993. There is no default with respect to any material provision contained in
any of the UBICS Insurance Policies, nor has there been any failure to give any
notice or present any material claim under any such policy in a timely fashion
or as otherwise required by any such policy.
(b) Except as otherwise disclosed on Schedule 2.22: (i) all
premiums under the UBICS Insurance Policies which were due and payable on or
prior to the date hereof have been paid in full; and (ii) none of the UBICS
Companies has received notice of any material increase in the premium under,
cancellation or non-renewal of or disallowance of any claim under any such
policy
4.23. UBICS Indebtedness.
(a) Schedule 4.23 sets forth a complete list of all
agreements, documents, instruments and securities which are currently in effect
and which create, evidence or secure any indebtedness of any of the UBICS
Companies (exclusive of trade payables) or pursuant to which any of the UBICS
Companies has guaranteed any indebtedness or other obligations of any other
Person or has any other contingent liability.
(b) Schedule 4.23 sets forth a correct and complete list of
all outstanding trade payables of any of the UBICS Companies owed to any single
vendor which, individually or in the aggregate, exceed $30,000 and payment of
which is more than 60 days overdue and, with respect to any trade payables which
have not been paid due to a dispute with a vendor, identifies the nature of such
dispute.
4.24. Other Material UBICS Business Agreements. All written agreements
and contracts to which any of the UBICS Companies is a party or by which any of
the UBICS Companies or any of their respective assets are bound are listed on
Schedule 4.24, other than (a) agreements listed on any of Schedule 4.16 through
Schedule 4.23, (b) agreements involving the payment by or to any of the UBICS
Companies, or creating any liability of the UBICS Companies (whether direct or
indirect, fixed or contingent), of less than $25,000 over the term thereof, and
(c) agreements which are cancelable by any of the UBICS Companies on 30 days'
notice or less without any material liability to the UBICS Company. The
agreements and contracts to which any
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of the UBICS Companies are a party listed on Schedules 4.16 through 4.24 are
referred to herein as the "UBICS BUSINESS AGREEMENTS."
4.25. Status of UBICS Business Agreements. Each UBICS Business
Agreement is in full force and effect and is enforceable against the R Systems
Company which is party thereto and, to the best of UBICS' knowledge, the other
parties thereto, in accordance with its terms, except as such enforceability may
be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and (b) applicable
equitable principles, whether considered in a proceeding at law or in equity.
The applicable UBICS Company is in compliance with each such UBICS Business
Agreement, except, in each case, for such non-compliance as does not (x)
constitute a breach or default (or an event which, with the giving of notice or
the passage of time, or both, would constitute a default) thereunder, (y) give
to others any rights of termination, acceleration, suspension, revocation,
cancellation or amendment thereof or (z) cause, either individually or in the
aggregate, a UBICS Material Adverse Change. To the best of UBICS' knowledge, all
other parties to such UBICS Business Agreements are in material compliance with
the terms thereof. Except as otherwise disclosed on Schedule 4.25, no consent of
any other Person party to such UBICS Business Agreements is required in
connection with the Transaction.
4.26. Transactions with UBICS Affiliates. Except as otherwise disclosed
on Schedule 4.26 or in the UBICS SEC Documents: (a) none of the customers,
suppliers, or contractors of any of the UBICS Companies are Affiliates of any of
the UBICS Companies or any of their respective officers, directors or
shareholders; (b) none of the assets of the UBICS Companies are owned or used by
or leased to any Affiliates of any of the R Systems Companies or any of their
respective officers, directors or shareholders; (c) no Affiliate of any of the
UBICS Companies or any of their respective officers, directors or shareholders
is a party to any UBICS Business Agreement; and (d) no Affiliate of any of the
UBICS Companies or any of their respective officers, directors or shareholders
provides any legal, accounting or other services to any of the UBICS Companies.
4.27. Customers and Suppliers. Schedule 4.27 sets forth a correct and
complete list of each of the customers and suppliers of the UBICS Companies
whose purchases from or sales to the UBICS Companies constituted five percent or
more of the UBICS Companies' net sales or net purchases, respectively, during
the fiscal year ended December 31, 1997 or during the nine months ended
September 30, 1998 (collectively "UBICS MATERIAL CUSTOMERS AND SUPPLIERS"), and
indicates with respect to each the name of the party and the respective dollar
volume. None of the UBICS Companies are required to provide any material bonding
or other financial security arrangements in connection with any transactions
with any of the UBICS Material Customers and Suppliers. Since September 30,
1998, none of the UBICS Material Customers and Suppliers has terminated its
relationship with, or materially reduced its purchases from or sales to, any of
the UBICS Companies, and UBICS has no knowledge that any of the
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UBICS Material Customers and Suppliers intends to terminate its relationship
with, or materially reduce its purchases from or sales to, any of the UBICS
Companies.
4.28. Brokers. UBICS has not employed or retained, or has any liability
to, any broker, agent or finder on account of this Agreement or any of the other
Transaction Documents or the transactions contemplated hereby or thereby.
4.29. Bank Accounts. Schedule 4.29 sets forth a correct and complete
list of the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which each of the UBICS
Companies maintains accounts of any nature, the type and number of all such
accounts and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
4.30. Year 2000. Except as set forth on Schedule 4.30, to the knowledge
of UBICS, the UBICS Companies and their respective Systems are, or will be prior
to January 1, 2000, each Year 2000 Compliant. Notwithstanding the foregoing, the
Systems provided by third parties to the UBICS Companies are each, to the best
knowledge of UBICS after reasonable investigation, Year 2000 Complaint. UBICS
makes no representation or warranty respecting user defined fields that contain
dates, or in circumstances where data received from any third-party system are
invalid, incorrect or otherwise corrupt.
4.31. Accurate Disclosure. UBICS has previously delivered to R Systems
correct and complete copies of each UBICS Business Agreement listed on Schedule
4.16 through Schedule 4.24. None of the information furnished or to be furnished
by UBICS to R Systems, the R Systems Shareholders or any of their
representatives in connection with this Agreement and the other Transaction
Documents, and none of the representations and warranties of UBICS set forth
herein, in any other Transaction Document or in any certificate delivered in
connection herewith or therewith, when taken together with the UBICS SEC
Documents, (a) is or will be false or misleading in any material respect, (b)
contains or will contain any untrue statement of a material fact or (c) omits or
will omit any statement of material fact necessary to make the same not
misleading.
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ARTICLE V
TRANSACTIONS PRIOR TO CLOSING
5.01. Conduct of Business.
(a) Conduct of R Systems Business Prior to Closing. Except
with the prior written consent of UBICS (which shall not be unreasonably
withheld or delayed), at all times prior to the Closing Date, each of the R
Systems Companies shall, and Rekhi shall cause each of the R Systems Companies
to:
(i) operate its business only in the ordinary course
and consistent with past practice and will not amend its Articles of
Incorporation or By-Laws or charter or other governing documents;
(ii) use its best efforts to preserve its business
organization intact, to keep available the services of its present officers and
employees and to preserve the good will of customers, subcontractors, suppliers
and others having business relations with it;
(iii) maintain, in the exercise of its reasonable
business judgment, all assets consisting of real or personal property in good
repair and operating condition, ordinary wear and tear excepted;
(iv) maintain in full force and effect, in the
exercise of its reasonable business judgment, all R Systems Business Permits and
insurance policies;
(v) not enter into any contract or commitment except
those made in the ordinary course of business the terms of which are consistent
with past practice and reasonable in light of current conditions, it being
understood that R Systems enters into employment and consulting agreements in
the ordinary course of its business;
(vi) not terminate, cause the termination of, amend,
renew or extend any R Systems Business Agreement, unless in each case such
action is in the best interest of the R Systems Companies;
(vii) not waive, release or compromise any of its
rights or permit any of such rights to lapse, unless in each case such action is
in the best interest of the R Systems Companies;
(viii) not sell, transfer, encumber, pledge or
otherwise dispose of any of its assets or any interest therein or agree to do
any of the foregoing, except in the ordinary course of business;
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(ix) not incur, make, assume or suffer to exist any
Lien, tenancy or other matter affecting title to any of its assets, except in
the ordinary course of business;
(x) not make, change or revoke any tax election or
make any agreement or settlement with any taxing authority, unless in each case
such action is in the best interest of the R Systems Companies;
(xi) not merge or consolidate any of the R Systems
Companies with or into any other entity or agree or enter into negotiations to
do any of the foregoing;
(xii) comply to the best of their or its knowledge
with applicable Governmental Rules in all material respects;
(xiii) take no action, and use its best efforts to
prevent the occurrence of any event or the existence of any condition, which
would result in any of the R Systems Parties' representations and warranties
herein not being true and correct;
(xiv) promptly inform UBICS of the occurrence of any
event or the existence of any condition which constitutes or, with the giving of
notice or the passage of time, or both, is likely to constitute, a R Systems
Material Adverse Change;
(xv) not issue any debt securities or equity
securities; and
(xvi) not declare, set aside or pay dividends on
equity securities.
(b) Conduct of UBICS Business Prior to Closing. Except with
the prior written consent of R Systems (which shall not be unreasonably withheld
or delayed), at all times prior to the Closing Date, UBICS shall:
(i) operate its business only in the ordinary course
and consistent with past practice and will not amend its Certificate of
Incorporation or By-Laws in a manner adverse to the R Systems Shareholders;
(ii) use its best efforts to preserve its business
organization intact, to keep available the services of its present officers and
employees and to preserve the good will of customers, subcontractors, suppliers
and others having business relations with it;
(iii) maintain, in the exercise of its reasonable
business judgment, all assets consisting of real or personal property in good
repair and operating condition, ordinary wear and tear excepted;
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(iv) maintain in full force and effect, in the
exercise of its reasonable business judgment, all UBICS Business Permits and
insurance policies;
(v) not enter into any contract or commitment except
those made in the ordinary course of business the terms of which are consistent
with past practice and reasonable in light of current conditions, it being
understood that UBICS enters into employment and consulting agreements in the
ordinary course of its business;
(vi) not terminate, cause the termination of, amend,
renew or extend any UBICS Business Agreement, unless in each case such action is
in the best interest of UBICS;
(vii) not waive, release or compromise any of its
rights or permit any of such rights to lapse, unless in each case such action is
in the best interest of UBICS;
(viii) not sell, transfer, encumber, pledge or
otherwise dispose of any material portion of its assets or any interest therein
or agree to do any of the foregoing, except in the ordinary course of business;
(ix) not incur, make, assume or suffer to exist any
Lien, tenancy or other matter affecting title to any of its assets, except in
the ordinary course of business;
(x) not make, change or revoke any tax election or
make any agreement or settlement with any taxing authority, unless in each case
such action is in the best interest of UBICS;
(xi) subject to the provisions of Section 5.03(b),
not merge or consolidate with or into any other entity or agree or enter into
negotiations to do any of the foregoing;
(xii) comply to the best of its knowledge with
applicable Governmental Rules in all material respects;
(xiii) take no action, and use its best efforts to
prevent the occurrence of any event or the existence of any condition, which
would result in any of UBICS' representations and warranties herein not being
true and correct;
(xiv) promptly inform R Systems of the occurrence of
any event or the existence of any condition which constitutes or, with the
giving of notice or the passage of time, or both, is likely to constitute, a
UBICS Material Adverse Change;
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(xv) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the date of
this Agreement, and options granted after the date of this Agreement pursuant to
the UBICS 1997 Stock Option Plan, not issue any debt securities or equity
securities; and
(xvi) not declare, set aside or pay dividends on
equity securities.
5.02. Access to Information. At all times prior to the Closing Date
each party shall furnish to the other party and its employees, counsel,
accountants and other authorized representatives (a) full access during normal
business hours to the properties, books and records and personnel of such party
and (b) upon reasonable advance notice, to such party's plants, properties,
contracts, commitments, books and records (including, without limitation, tax
returns) and any report, schedule or other document filed or received by such
party during such period pursuant to the requirements of federal or state
securities laws and such party shall use its reasonable best efforts to cause
its representatives to furnish promptly to the other party such additional
financial and operating data and other information as to such party's respective
businesses and properties as the other party or its duly authorized
representatives may from time to time reasonably request.
5.03. No Solicitation.
(a) For so long as this Agreement is in effect, the R Systems
Parties will not, and will use their best reasonable efforts to cause their
respective officers, directors, employees and investment bankers, attorneys or
other agents retained by or acting on behalf of them or any of the R Systems
Companies not to, (i) initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal that constitutes or is reasonably
likely to lead to any Acquisition Proposal (as defined below), (ii) engage in
negotiations or discussions with, or furnish any information or data to any
third party relating to an R Systems Acquisition Proposal, or (iii) enter into
any agreement with respect to any R Systems Acquisition Proposal or approve any
R Systems Acquisition Proposal.
"R SYSTEMS ACQUISITION PROPOSAL," shall mean any bona fide
proposal, whether in writing or otherwise, made by a third party to acquire
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of all or
a material portion of the assets of, or any material equity interest in, any of
the R Systems Companies pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer or
exchange offer or similar transaction involving any of the R Systems Companies
including, without limitation, any single or multi-step transaction or series of
related transactions which is structured to permit such third party to acquire
beneficial ownership of any material portion of the assets of, or any material
portion of the equity interest in, any of the R Systems Companies (other than
the transactions contemplated by this Agreement).
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(b) For so long as this Agreement is in effect, UBICS will
not, and will use its best reasonable efforts to cause its officers, directors,
employees and investment bankers, attorneys or other agents retained by or
acting on behalf of UBICS not to, (i) initiate, solicit or encourage, directly
or indirectly, any inquiries or the making of any proposal that constitutes or
is reasonably likely to lead to any UBICS Acquisition Proposal (as defined
below), (ii) engage in negotiations or discussions with, or furnish any
information or data to any third party relating to a UBICS Acquisition Proposal,
or (iii) enter into any agreement with respect to any UBICS Acquisition Proposal
or approve any UBICS Acquisition Proposal. Notwithstanding anything to the
contrary contained in this Section 5.03(b) or in any other provision of this
Agreement, UBICS and its Board of Directors may participate in discussions or
negotiations (including, as a part thereof, making any counterproposal) with or
furnish information to any third party making a UBICS Acquisition Proposal or
approve or enter into a UBICS Acquisition Proposal if (A) the Board determines
in good faith, based upon advice of its outside legal counsel, that any such
action described in this sentence is reasonably necessary in order to comply
with such Board's fiduciary duties or other legal obligations, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such other party, UBICS provides written notice to R Systems to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such other party, and (C) subject to any confidentiality
agreement with such other party (which UBICS determines in good faith, after
consultation with outside counsel, is required to be executed in order for the
Board of Directors to act in accordance with its fiduciary duties to
stockholders imposed by law), UBICS keeps R Systems informed of the status (not
the terms) of any such discussions or negotiations.
"UBICS ACQUISITION PROPOSAL," shall mean any bona fide
proposal, whether in writing or otherwise, made by a third party to acquire
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of all or
a material portion of the assets of, or any material equity interest in, UBICS
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving UBICS including, without limitation, any single or
multi-step transaction or series of related transactions which is structured to
permit such third party to acquire beneficial ownership of any material portion
of the assets of, or any material portion of the equity interest in, UBICS
(other than the transactions contemplated by this Agreement).
5.04. Publicity. The initial press releases with respect to the
execution of this Agreement shall be acceptable to UBICS and R Systems.
Thereafter, neither UBICS, R Systems nor any of their respective Affiliates
shall issue or cause the publication of any press release or other public
announcement with respect to the Exchange, this Agreement or the other
transactions contemplated hereby (including, without limitation, the failure to
execute this Agreement or the failure to consummate the transactions
contemplated hereby) without the prior agreement of the other party
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(which shall not be unreasonably withheld or delayed), except as may be required
by law or by the NASDAQ National Market ("NASDAQ"), in which case each party
will use reasonable efforts to consult with the other parties prior to any such
issuance.
5.05. HSR Act Compliance. Promptly following the execution of this
Agreement, the parties to this Agreement shall, if required to do so, file with
the United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby and any supplemental information requested
in connection therewith pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"). Any such notification and report form
and supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of the parties to this Agreement shall
cooperate fully with the other parties and furnish to the other parties such
necessary information and reasonable assistance as the other parties may request
in connection with the preparation of any filing or submission which is
necessary under the HSR Act. Each of the parties to this Agreement shall keep
each other party apprised of the status of any communications with, and
inquiries or requests for additional information addressed to the entity that
filed a notification and report form as an acquired or acquiring person from,
the FTC and DOJ, and shall comply or cause its respective filing person to
comply promptly with any such inquiry or request. Each of the parties to this
Agreement shall use commercially reasonable efforts to obtain any clearance
required under the HSR Act for the transactions contemplated herein.
5.06. Stockholders Meeting. As soon as practicable after the date
hereof, UBICS, acting through its Board of Directors, shall, in accordance with
applicable Governmental Rules, the rules and regulations of Nasdaq, and its
by-laws, duly call, give notice of, convene and hold a Stockholders Meeting of
UBICS' stockholders (the "STOCKHOLDERS MEETING") for the purpose of considering
and taking action upon this Agreement and the Transactions contemplated hereby.
The Board of Directors of UBICS will recommend to the stockholders of UBICS the
approval of this Agreement and the Transactions contemplated hereby, unless such
Board determines, in good faith, in connection with an Acquisition Proposal,
after consultation with outside counsel, that such action would be inconsistent
with its fiduciary duties to stockholders as required by law and, if such
determination is made, will give written notice to R Systems of such
determination within two business days of the making of such determination. Upon
the issuance of such written notice to R Systems, and upon the written election
of R Systems, UBICS will negotiate in good faith with R Systems for a period of
two business days regarding such adjustments in the terms of the Exchange as
would enable the Board of Directors of UBICS, consistent with its fiduciary
duties to the stockholders, to proceed to recommend the Exchange to the
stockholders of UBICS as contemplated in this Agreement, provided, that there
shall be no obligation, express or implied, on the part of R Systems to agree to
any terms or conditions which may be different from those set forth in this
Agreement.
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5.07. Proxy Statement.
(a) As promptly as practicable after the date hereof, UBICS
shall prepare and file with the SEC a proxy statement and any other documents
required by the Exchange Act in connection with the Stockholders Meeting
(together with all amendments, schedules, and exhibits thereto, the "PROXY
STATEMENT"). The Proxy Statement will comply as to form in all material respects
with the provisions of all applicable Governmental Rules including the
provisions of the Exchange Act and the rules and regulations of the SEC
thereunder. UBICS shall furnish all information concerning it, R Systems shall
furnish all information concerning the R Systems Companies and the R Systems
Shareholders shall furnish all information concerning them that is required to
be included in the Proxy Statement. UBICS shall include in the Proxy Statement
only such information about the R Systems Companies and the R Systems
Shareholders as is approved by R Systems or required by applicable Governmental
Rules, including the rules and regulations of the SEC and Nasdaq.
(b) UBICS agrees that the Proxy Statement and each amendment
or supplement thereto, at the time it is mailed to the stockholders of UBICS,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by UBICS in reliance upon and in conformity with written
information concerning the R Systems Companies or the R Systems Shareholders
furnished to UBICS by R Systems or the R Systems Shareholders specifically for
use in the Proxy Statement. The R Systems Parties agree that the written
information provided by them specifically for inclusion in the Proxy Statement
and each amendment or supplement thereto, at the time it is mailed to the
stockholders of UBICS, will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Incident to any information furnished or disclosed by
UBICS in connection with the Proxy Statement, and subject to applicable
Governmental Rules, UBICS shall indemnify, defend, and hold harmless the R
Systems Shareholders against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, penalties, losses, claims, damages,
liabilities, and amounts paid in settlement in connection with any civil,
criminal, administrative or investigative Action, arising out of or under any
Federal or state blue sky or securities law based in whole or in part on (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Proxy Statement (including any amendment or supplement to the Proxy Statement),
(ii) any omission or alleged omission to state in the Proxy Statement a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (iii) any
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violation by UBICS of any federal or state blue sky or securities law in
connection with such documents; provided, however, that UBICS will not be liable
in any such case to the extent that any such Action is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Proxy Statement or any amendment thereto in reliance upon and in conformity
with information furnished in writing to UBICS by R Systems or any R System
Shareholder specifically for use therein.
(d) Incident to any information furnished or disclosed by the
R Systems Shareholders or by R Systems in connection with the Proxy Statement,
and subject to applicable Governmental Rules, the R Systems Shareholders,
jointly and severally, shall indemnify and hold harmless UBICS and each of its
directors, officers, employees and agents, and each person who controls UBICS,
against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, penalties, losses, claims, damages, liabilities, and amounts paid in
settlement in connection with any civil, criminal, administrative or
investigative Action, arising out of or under any federal or state blue sky or
securities law based in whole or in part on (i) any untrue statement or alleged
untrue statement of a material fact contained in the Proxy Statement (including
any amendment or supplement to such document); or (ii) any omission or alleged
omission to state in such documents material facts required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that the R Systems Shareholders will not be liable in any such case unless any
such Action is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Proxy Statement or any amendment
thereto in reliance upon and conformity with information furnished in writing to
UBICS by R Systems or any R Systems Shareholder specifically for use therein.
5.08. Approvals and Consents; Cooperation; Notification.
(a) The parties hereto shall use their respective best
efforts, and cooperate with each other, to obtain as promptly as practicable all
governmental and third party authorizations, approvals, consents or waivers
required in order to consummate the transactions contemplated by this Agreement,
including, without limitation, the Exchange.
(b) The parties hereto shall take all actions necessary to
file as soon as practicable all notifications, filings and other documents
required to obtain all governmental authorizations, approvals, consents or
waivers, including, without limitation, under the HSR Act.
(c) R Systems shall give prompt notice to UBICS of the
occurrence of any R System Material Adverse Effect, and UBICS shall give prompt
notice to R Systems of the occurrence of any UBICS Material Adverse Effect. Each
of R Systems and UBICS shall give prompt notice to the other of the occurrence
or failure to occur of
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an event that would, or with the lapse of time would, reasonably be expected to
cause any condition to the consummation of the Exchange not to be satisfied.
5.09. Tax-Free Reorganization. Each of the parties to this Agreement
shall use its best efforts to cause the Exchange to be treated as a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Code.
5.10. Pooling of Interests Accounting Treatment.
(a) Each of the parties to the Agreement shall use its best
efforts (both before and after the Closing) to cause the business combination to
be effected by the Exchange to be accounted for as a pooling of interests.
(b) The R Systems Shareholders shall not sell any of the UBICS
Common Stock received in the Exchange until after post-Exchange consolidated
financial statements of the Combined Companies are published which show a period
of at least 30 calendar days of combined results of operations of the Combined
Companies.
5.11. Confidentiality.
(a) As used in this Section, the "CONFIDENTIAL INFORMATION" of
a party shall mean all information concerning or related to the business,
operations, financial condition or prospects of such party or any of its
Affiliates, regardless of the form in which such information appears and whether
or not such information has been reduced to a tangible form, and shall
specifically include (i) all information regarding the officers, directors,
employees, equity holders, customers, suppliers, distributors, sales
representatives and licensees of such party and its Affiliates, in each case
whether present or prospective, (ii) all inventions, discoveries, trade secrets,
processes, techniques, methods, formulae, ideas and know-how of such party and
its Affiliates and (iii) all financial statements, audit reports, budgets and
business plans or forecasts of such party and its Affiliates; provided, that the
Confidential Information of a party shall not include (A) information which is
or becomes generally known to the public through no act or omission of the other
party or which is required to be contained in the Proxy Statement and (B)
information which has been or hereafter is lawfully obtained by the other party
from a source other than the party to whom such Confidential Information belongs
(or any of its Affiliates or their respective officers, directors, employees,
equity holders or agents) so long as, in the case of information obtained from a
third party, such third party was or is not, directly or indirectly, subject to
an obligation of confidentiality owed to the party to whom such Confidential
Information belongs or any of its Affiliates at the time such Confidential
Information was or is disclosed to the other party.
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(b) Except as otherwise permitted by subsection (c) below,
each party agrees that it will not, without the prior written consent of the
other party, disclose or use for its own benefit any Confidential Information of
the other party.
(c) Notwithstanding subsection (b) above, each of the parties
shall be permitted to:
(i) disclose Confidential Information of the other
party to its officers, directors, employees, equity holders, lenders, agents,
accountants, attorneys and Affiliates, but only to the extent reasonably
necessary in order for such party to perform its obligations and exercise its
rights and remedies under this Agreement, and such party shall take all such
action as shall be necessary or desirable in order to ensure that each of such
Persons maintains the confidentiality of any Confidential Information that is so
disclosed;
(ii) make additional disclosures of or use for its
own benefit Confidential Information of the other party, but only if and to the
extent that such disclosures or use are specifically contemplated by this
Agreement; and
(iii) disclose Confidential Information of the other
party to the extent, but only to the extent, required by Governmental Rules;
provided, that prior to making any disclosure pursuant to this subparagraph, the
party required to make such disclosure (the "DISCLOSING PARTY") shall notify the
other party (the "AFFECTED PARTY") of the same, and the Affected Party shall
have the right to participate with the Disclosing Party in determining the
amount and type of Confidential Information of the Affected Party, if any, which
must be disclosed in order to comply with Governmental Rules.
5.12. Best Efforts. The parties agree to use their reasonable best
efforts to take or cause to be taken and to do or cause to be done all such
actions and things as shall be necessary or advisable, or as shall be reasonably
requested by the other party, in order to consummate the transactions
contemplated hereby and by the other Transaction Documents. Without limiting the
generality of the foregoing, the parties agree to take all reasonable actions
necessary in order to (a) obtain any consent or approval of any third party,
including without limitation any governmental entity, which is required in
connection with this Agreement or the other Transaction Documents or any of the
transactions contemplated hereby or thereby, (b) prepare, file and obtain SEC
clearance of the Proxy Statement and (c) comply with the requirements of federal
and state securities and Blue Sky laws with respect to the securities to be
issued pursuant to this Agreement.
5.13. Combined Results. UBICS shall cause the Combined Companies to
publish interim financial information within 30 days following the conclusion of
the first month of combined operations following the closing of the Transaction.
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5.14. Nasdaq Listing. UBICS shall, prior to the Closing, prepare and
file with the National Association of Securities Dealers the required documents
and make payment of the required fees for the listing on Nasdaq of the shares of
UBICS Common Stock to be issued to the R Systems Shareholders pursuant to the
Exchange.
5.15. Voting Agreement. As soon as reasonably possible and in any event
prior to the date the Proxy Statement is first filed with the SEC, UBICS shall
deliver to R Systems the Voting Agreement in the form attached hereto as Exhibit
A executed by United Breweries Information Consultancy Services Ltd.
ARTICLE VI
CLOSING AND CLOSING CONDITIONS
6.01. Closing. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at 10:00 a.m., local time, on a date
to be specified by the parties, which shall be no later than two business days
after satisfaction or waiver of all of the conditions set forth in this Article
VI (the "CLOSING DATE"), at the offices of Cohen & Grigsby, P.C., 11 Stanwix
Street, 15th Floor, Pittsburgh, Pennsylvania 15222, unless another time, date or
place is agreed to in writing by the parties hereto.
6.02. Conditions Precedent to Obligations of UBICS. The obligations of
UBICS hereunder to proceed with the Closing shall be subject to the satisfaction
on or prior to the Closing Date of each of the following conditions precedent
(unless otherwise waived by UBICS):
(a) Accuracy of Representations and Warranties. The
representations and warranties of the R Systems Parties set forth herein shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of such date.
(b) Performance and Compliance. The R Systems Parties shall
have performed or complied in all material respects with each covenant and
agreement to be performed or complied with by them hereunder on or prior to the
Closing Date.
(c) Consents and Approvals. All authorizations, approvals or
consents required to permit the consummation of the Exchange and the other
transactions contemplated hereby shall have been obtained and be in full force
and effect.
(d) Litigation. There shall be no pending or threatened action
by or before any governmental entity or arbitrator seeking to restrain, prohibit
or invalidate any of the transactions contemplated hereby or by any of the other
Transaction Documents or seeking monetary relief against UBICS by reason of the
consummation of
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such transactions, and there shall not be in effect any Governmental Order which
has such effect.
(e) R Systems Material Adverse Change. No event shall have
occurred and no condition shall exist which constitutes or, with the giving of
notice or the passage of time, or both, is likely to constitute, an R Systems
Material Adverse Change.
(f) Officer's Certificate. R Systems shall have delivered to
UBICS a certificate of its President dated the Closing Date and certifying that
each of the conditions specified in subsections (a), (b), (c), (d) and (e) above
have been met.
(g) Secretary's Certificate. R Systems shall have delivered to
UBICS a certificate of its Secretary dated the Closing Date and certifying (i)
that correct and complete copies of its charter and by-laws are attached
thereto, (ii) that correct and complete copies of each resolution of its board
of directors and shareholders approving this Agreement and the other Transaction
Documents to which it is a party and authorizing the execution hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
are attached thereto and (iii) the incumbency and signatures of the officers of
R Systems authorized to execute and deliver this Agreement and the other
Transaction Documents to which R Systems is a party on behalf of R Systems.
(h) Opinion of Counsel. R Systems shall have delivered to
UBICS an opinion of Graham & James LLP dated the Closing Date and in
substantially the form attached hereto as Exhibit 6.02(h).
(i) Opinion of Financial Advisor. The opinion of UBICS'
financial advisor, Salomon Smith Barney, dated the date of this Agreement to the
effect that the consideration to be paid by UBICS pursuant to the Exchange is
fair to UBICS and its stockholders from a financial point of view, shall not
have been withdrawn prior to the mailing of the Proxy Statement.
(j) Other Transaction Documents. R Systems and any other
parties thereto (other than UBICS) shall have executed and delivered to UBICS
the Escrow Agreement (together with this Agreement, the Related Acquisition
Agreements, and the agreements referred to in Sections 6.02(m) and (o) and
6.03(i), (j), and (k), (the "TRANSACTION DOCUMENTS").
(k) Stockholder Approval. This Agreement and the Exchange
shall have been approved by the stockholders of UBICS as required by Delaware
law and the rules of Nasdaq.
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(l) No Registration of Securities. The issuance of the
Exchange Shares shall be exempt from the registration requirements of the
Securities Act and applicable state securities laws.
(m) Employment Agreements. Employment agreements between UBICS
and the persons listed on Annex 6.02(m), each dated as of the Closing Date and
in substantially the forms of Exhibits D-1, D-2, D-3 and D-4, shall have been
executed and delivered by the parties thereto (the "EMPLOYMENT AGREEMENTS").
(n) Pooling of Interests Opinion Letter. UBICS shall have
received an opinion of Arthur Andersen, its independent auditors, dated the
Closing Date and in form and substance reasonably satisfactory to UBICS and its
counsel stating that the Exchange qualifies for pooling of interests accounting
treatment in accordance with GAAP.
(o) Non-Competition Agreements. The shareholders of R Systems
shall have each entered into a non-competition agreement with UBICS and R
Systems in the form of Exhibit E.
(p) Consummation of Related Transactions. The acquisition by
UBICS of R Systems-Singapore and R Systems-India pursuant to the Related
Acquisition Agreements shall have been consummated on and as of the Closing
Date.
(q) Tax Matters. UBICS shall have received a written opinion
from Cohen & Grigsby, P.C. (the "TAX OPINION"), to the effect that (i) the
Exchange will constitute a reorganization within the meaning of Section 368(b)
of the Code, (ii) the exchange in the Exchange of R Systems Common Stock for
UBICS Common Stock will not give rise to gain or loss to the R Systems
Shareholders with respect to such exchange, and (iii) the federal income tax
basis of shares of UBICS Common Stock received in exchange for R Systems Common
Stock will be equal to the holder's basis of the R Systems Common Stock
surrendered in exchange therefor, and the holding period of such UBICS Common
Stock will include the holding period of the R Systems Common Stock surrendered
in exchange therefor. In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of the R Systems Shareholders and officers
of R Systems and UBICS reasonably satisfactory in form and substance to such
counsel.
6.03. Conditions Precedent to Obligations of the R Systems Parties. The
obligations of the R Systems Parties hereunder to proceed with the Closing shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions precedent (unless otherwise waived by the R Systems
Parties):
(a) Accuracy of Representations and Warranties. The
representations and warranties of UBICS set forth herein shall be true and
correct in all material
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respects on and as of the Closing Date with the same force and effect as though
made on and as of such date.
(b) Performance and Compliance. UBICS shall have performed or
complied in all material respects with each covenant and agreement to be
performed or complied with by it hereunder on or prior to the Closing Date.
(c) Consents and Approvals. All authorizations, approvals or
consents required to permit the consummation of the Exchange and the other
transactions contemplated hereby shall have been obtained and be in full force
and effect.
(d) Litigation. There shall be no pending or threatened action
by or before any governmental entity or arbitrator seeking to restrain, prohibit
or invalidate any of the transactions contemplated hereby or by any of the other
Transaction Documents or seeking monetary relief against R Systems by reason of
the consummation of such transactions, and there shall not be in effect any
Governmental Order which has such effect.
(e) UBICS Material Adverse Change. No event shall have
occurred and no condition shall exist which constitutes or, with the giving of
notice or the passage of time, or both, is likely to constitute, an UBICS
Material Adverse Change.
(f) Officer's Certificate. UBICS shall have delivered to R
Systems a certificate of its President dated the Closing Date and certifying
that each of the conditions specified in subsections (a), (b), (c), (d) and (e)
above have been met.
(g) Secretary's Certificate. UBICS shall have delivered to R
Systems a certificate of its Secretary dated the Closing Date and certifying (i)
that correct and complete copies of its certificate of incorporation and by-laws
are attached thereto, (ii) that correct and complete copies of each resolution
of its board of directors and stockholders approving this Agreement and the
other Transaction Documents to which it is a party and authorizing the execution
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby are attached thereto and (iii) the incumbency and signatures of the
officers of UBICS authorized to execute and deliver this Agreement and the other
Transaction Documents to which UBICS is a party on behalf of UBICS.
(h) Opinion of Counsel. UBICS shall have delivered to R
Systems an opinion of Cohen & Grigsby, P.C. dated the Closing Date and in
substantially the form attached as Exhibit 6.03(h) hereto.
(i) Other Transaction Documents. UBICS and any other parties
thereto (other than the R Systems Parties or the R Systems Companies) shall have
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executed and delivered to R Systems the Escrow Agreement and the other
Transaction Documents to which they are parties.
(j) Employment Agreements. UBICS shall have executed and
delivered the Employment Agreements.
(k) Registration Rights Agreement. UBICS and the R Systems
Shareholders and the respective stockholders of R Systems - Singapore and R
Systems - India shall have executed and delivered a Registration Rights
Agreement in the form of Exhibit F hereto.
(l) Pooling of Interests Opinion Letter. R Systems shall have
received an opinion of Arthur Andersen, its independent auditors, dated the
Closing Date and in form and substance reasonably satisfactory to R Systems and
its counsel stating that the Exchange qualifies for pooling of interests
accounting treatment in accordance with GAAP.
(m) Officers and Directors of UBICS. On or prior to the
Closing Date, the Board of Directors of UBICS shall have taken such action as
may be necessary to cause the persons listed on Annex 1.03(b) to be appointed to
the Board of Directors and/or to the executive officer positions shown on such
schedule.
(n) Nasdaq Listing. The shares of UBICS Common Stock to be
issued to the R Systems Shareholders in the Exchange shall have been approved
for listing on Nasdaq upon issuance.
(o) Tax Opinion. The R Systems Shareholders shall have
received the Tax Opinion.
(p) Stock Options. The Board of Directors of UBICS shall have
taken action to reserve for issuance to employees of the R Systems Companies
under the UBICS 1997 Stock Option Plan, options to purchase 300,000 shares of
UBICS Common Stock.
(q) Indemnification Agreement. UBICS and Rekhi shall have
executed and delivered an Indemnification Agreement in the form of Exhibit G.
(r) Bylaw Amendment. The Bylaws of UBICS shall have been
amended to provide that the President is also the Chief Executive Officer.
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ARTICLE VII
INDEMNIFICATION
7.01. Survival of Representations and Warranties. The representations
and warranties of the parties contained in Articles II, III and IV shall survive
the Closing until the Escrow Termination Date (as defined below).
7.02. Indemnification by Rekhi. Rekhi shall indemnify UBICS and its
Affiliates and their respective officers, directors, employees, agents, and
representatives (the "UBICS INDEMNIFIED PARTIES") against, and agree to hold the
UBICS Indemnified Parties harmless from, any and all liabilities, losses, costs,
claims, damages (including consequential damages), penalties and expenses
(including attorneys' fees and expenses and costs of investigation and
litigation) ("LOSSES") incurred or suffered by them relating to or arising out
of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by any R Systems Company, Rekhi or any R Systems Shareholder in
this Agreement, the Related Acquisition Agreements, the Transaction Documents or
any other document delivered at the Closing; or
(b) any breach of or failure by any R Systems Company, Rekhi
or any R Systems Shareholder to perform any covenant or obligation of such
parties set out or contemplated in this Agreement, the Related Acquisition
Agreements, the other Transaction Documents or any other document delivered at
the Closing.
7.03. Indemnification by UBICS. UBICS shall indemnify Rekhi and each of
his respective heirs, representatives, administrators and assigns (the "R
SYSTEMS INDEMNIFIED PARTIES") against, and agrees to hold each of them harmless
from, any and all Losses incurred or suffered by them relating to or arising out
of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by UBICS in this Agreement, the Related Acquisition Agreements,
the other Transaction Documents or any other document delivered at the Closing;
(b) any breach of or failure by UBICS to perform any covenant
or obligation of UBICS set forth or contemplated in this Agreement, the Related
Acquisition Agreements, the other Transaction Documents or any other document
delivered at the Closing; or
(c) any tax liabilities of R Systems (but not of any of the
personal tax liabilities of the R Systems Shareholders) (i) set forth in the R
Systems Financial Statements or otherwise previously disclosed by R Systems to
UBICS, (ii) known by UBICS or (iii) that arise or arise in the ordinary course
of business of R Systems.
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7.04. Claims. The provisions of this Section shall be subject to
Section 7.05. As soon as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement, the party claiming
indemnification from the other party (the "INDEMNIFIED PERSON") shall promptly
give notice to the party from whom indemnification is requested (the
"INDEMNIFYING PERSON") (and, if a UBICS Indemnified Party is the Indemnified
Person, the Escrow Agent) of such claim and the amount the Indemnified Person
will be entitled to receive hereunder from the Indemnifying Person; provided,
however that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Person of its obligations under this Article VII,
except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. If the Indemnifying Person does not object in writing to
such indemnification claim within 30 calendar days of receiving notice thereof,
the Indemnified Person shall be entitled to recover from the Indemnifying Person
(and, if a UBICS Indemnified Party is the Indemnified Person, the Escrow Agent)
within five Business Days after such 30 day period, the amount of such claim
(but such recovery shall not limit the amount of any additional indemnification
to which the Indemnified Person may be entitled pursuant to Section 7.02 or
7.03). If the Indemnifying Person agrees that it has an indemnification
obligation, but objects in writing that it is obligated to pay only a lesser
amount, the Indemnified Person shall nevertheless be entitled to recover from
the Indemnifying Person (and, if a UBICS Indemnified Party is the Indemnified
Person, the Escrow Agent) within five Business Days of the receipt of such
objection, the lesser amount, without prejudice to the Indemnified Person's
claim for the difference.
7.05. Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person (and, if the Indemnified Person is a UBICS Indemnified
Party and the Escrow continues to be held by the Escrow Agent, the Escrow Agent)
of the assertion of any claim, or the commencement of any suit, action or
proceeding, by any person not a party hereto in respect of which indemnity may
be sought under this Agreement; provided, however that the failure of the
Indemnified Person to give notice shall not relieve the Indemnifying Person of
its obligations under this Article VII, except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person
may, at its own expense participate in the defense of any claim, suit, action or
proceeding, provided, however that (i) the Indemnifying Person's counsel is
reasonably satisfactory to the Indemnified Person, and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the
obligation) to participate as counsel of record in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Person. If, however, the Indemnified Person reasonably determines
in its judgment that representation by the Indemnifying Person's counsel of both
the Indemnifying Person and the Indemnified Person would
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present such counsel with a conflict of interest, then such Indemnified Person
may employ separate counsel to represent or defend it in any such claim, action,
suit or proceeding, and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person
chooses to defend or prosecute any such claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.
7.06. Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 7.05 shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, however that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result of
such settlement without its prior written consent. The party defending the claim
shall give the other party at least 30 calendar days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time the other party may reject such proposed settlement
or compromise; provided, however that from and after such rejection, the other
party shall be obligated to assume the defense of and full and complete
liability and responsibility for such claim, suit, action or proceeding and
shall be responsible for any and all Losses in connection therewith in excess of
the amount of the proposed settlement amount.
7.07. Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
7.08. Escrow. If during the duration of the Escrow Agreement, a UBICS
Indemnified Party is entitled to receive an indemnification amount from Rekhi
pursuant to this Agreement, such amount shall be satisfied to the extent
possible by a transfer to the UBICS Indemnified Party by the Escrow Agent of a
portion of the Holdback Escrow Shares, pursuant to the Escrow Agreement.
Likewise, if during the duration of the Escrow Agreement, Rekhi is entitled to
receive any indemnification amount pursuant to this Agreement, such amount shall
be satisfied by the issuance by UBICS of shares of UBICS Common Stock. The
number of shares of UBICS Common Stock to be transferred by the Escrow Agent to
the UBICS Indemnified Party, or by UBICS to Rekhi, shall be based on a value of
per share equal to the closing sales price of the shares of UBICS Common Stock
as reported on Nasdaq on the Closing Date (the "CLOSING PRICE"). Pursuant to the
Escrow Agreement, the remaining balance of the Holdback Escrow Shares shall be
released to Rekhi on the earlier of the close of business on (i) the first
anniversary of the Closing Date or (ii) the date that the first post-Closing
audit of the Combined Companies is completed (the "ESCROW TERMINATION DATE"),
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except if and to the extent claims have been asserted by UBICS against Rekhi, in
which case an appropriate portion of the Holdback Escrow Shares shall remain in
Escrow until such claims are finally resolved.
7.09. Duration of Indemnification Obligations. Claims for
indemnification under this Article may only be asserted until the Escrow
Termination Date.
7.10. Indemnification Threshold and Cap.
(a) Notwithstanding any other provision hereof, neither UBICS,
on one hand, nor Rekhi, on the other hand, shall have any indemnification
obligations under this Article unless and until the claims asserted against such
party exceed $175,000 in the aggregate (the "THRESHOLD AMOUNT"); thereafter,
such party shall be liable for all indemnification claims properly asserted
against it, including those comprising the Threshold Amount.
(b) The maximum aggregate indemnification obligations of Rekhi
under Section 7.02 and of UBICS under Section 7.03, shall in each case, not
exceed 30% of the product of (i) the total number of Exchange Shares times (ii)
the Closing Price.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Filing Fees. UBICS and R Systems shall share equally the HSR
filing fee. All other fees shall be borne by the party responsible therefor.
8.02. Amendments. This Agreement may be amended only by a writing
signed by each of the parties, and any such amendment shall be effective only to
the extent specifically set forth in such writing.
8.03. Assignment. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned, pledged or otherwise transferred by any
party, whether by operation of law or otherwise, without the prior consent of
the other party or parties.
8.04. Counterparts; Telefacsimile Execution. This Agreement and all
agreements, certificates and documents to be delivered in connection herewith
(each an "INSTRUMENT") may be executed in any number of counterparts, and by
each of the parties on separate counterparts, each of which, when so executed,
shall be deemed an original, but all of which shall constitute but one and the
same instrument. Delivery of an executed counterpart of an Instrument by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of an Instrument. Any party delivering an executed counterpart of an
Instrument by telefacsimile also shall deliver a manually executed counterpart
of such Instrument, but the failure to deliver a manually executed
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counterpart shall not affect the validity, enforceability or binding effect of
such Instrument.
8.05. Entire Agreement. This Agreement, together with the other
agreements referred to herein and the schedules and exhibits attached hereto,
contains the entire agreement of the parties with respect to the transactions
contemplated hereby and supersedes all prior written and oral agreements, and
all contemporaneous oral agreements, relating to such transactions.
8.06. Expenses. Except as otherwise specifically provided herein or in
any other Transaction Document, each party shall be responsible for such
expenses as it may incur in connection with the negotiation, preparation,
execution, delivery, performance and enforcement of this Agreement and the other
Transaction Documents.
8.07. Further Assurances. The parties shall from time to time do and
perform such additional acts and execute and deliver such additional documents
and instruments as may be required by applicable Governmental Rules or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this Agreement and the
other Transaction Documents. Without limiting the generality of the foregoing,
each party agrees to endorse (if necessary) and deliver to the other, promptly
after its receipt thereof, any payment or document which it receives after the
Closing Date and which is the property of the other.
8.08. Governing Law. This Agreement shall be a contract under the laws
of the State of Delaware and for all purposes shall be governed by and construed
and enforced in accordance with the laws of said State without giving effect to
the principles of conflicts of law thereof or of any other jurisdiction.
8.09. Notices. Unless otherwise specifically provided herein, all
notices, consents, requests, demands and other communications required or
permitted hereunder:
(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S.
mail, a reliable express delivery service or telecopier (with a copy sent by one
of the foregoing means), charges prepaid as applicable, to the appropriate
address(es) or number(s) set forth below; and
(c) shall be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a business day, on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the Person delivering such
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communication or a notice to the effect that such addressee refused to claim or
accept such communication, if sent by messenger, U.S. mail or express delivery
service, or (ii) a receipt generated by the sender's telecopier showing that
such communication was sent to the appropriate number on a specified date, if
sent by telecopier.
All such communications shall be sent to the following
addresses or numbers, or to such other addresses or numbers as any party may
inform the others by giving five business days' prior notice:
If to R Systems: With a copy to:
R Systems, Inc. Graham & James LLP
5000 Windplay Drive, Suite 5 400 Capitol Mall, 24th Floor
El Dorado Hills, CA 95762 Sacramento, CA 95814-4411
Attn: Rekhi Singh Attn: Kevin A. Coyle
Telecopier No.: (916) 939-9697 Telecopier No.: (916) 441-6700
If to R Systems Shareholders: With a copy to:
c/o Rekhi Singh Graham & James LLP
R Systems, Inc. 400 Capital Mall, 24th Floor
5000 Windplay Drive, Suite 5 Sacramento, CA 95814-4411
El Dorado Hills, CA 95762 Attn: Kevin A. Coyle
Telecopier No.: (916) 939-9697 Telecopier No.: (916) 441-6700
If to UBICS: With a copy to:
UBICS, Inc. Cohen & Grigsby, P.C.
333 Technology Drive, Suite #210 11 Stanwix Street
Canonsburg, PA 15317 15th Floor
Attn: Dr. Vijay Mallya Pittsburgh, PA 15222
Telecopier No.: (724) 746-9597 Attn: David J. Lowe
Telecopier No.: (412) 209-0672
8.10. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
8.11. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties and their respective legal
representatives, heirs, successors and permitted assigns.
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8.12. Termination.
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual agreement of UBICS, R Systems and the R
Systems Shareholder;
(ii) by UBICS if there has been a material
misrepresentation by the R Systems Parties hereunder or a material breach by the
R Systems Parties of any of their warranties set forth herein, a material breach
by the R Systems Parties of any of their covenants set forth herein or if any of
the conditions specified in Section 6.02 shall not have been fulfilled within
the time required and shall not have been waived by UBICS;
(iii) by R Systems if there has been a material
misrepresentation by UBICS hereunder or a material breach by UBICS of any of its
warranties set forth herein, a material breach by UBICS of any of its covenants
set forth herein or if any of the conditions specified in Section 6.03 shall not
have been fulfilled within the time required and shall not have been waived by R
Systems; or
(iv) by UBICS or R Systems if the Closing shall not
have occurred prior to June 30, 1999; provided, that UBICS or R Systems may
terminate this Agreement pursuant to this subparagraph only if the Closing shall
not have occurred on or prior to such date for a reason other than a failure by
such party to satisfy the conditions to Closing of the other party set forth in
Section 6.02 or 6.03.
(b) If this Agreement is terminated by either R Systems or
UBICS as provided above, then neither party shall have any further obligations
or liabilities hereunder except for obligations or liabilities arising from a
breach of this Agreement prior to such termination or which survive such
termination by their own terms and except for obligations under confidentiality
agreements between UBICS and R Systems. Notwithstanding the foregoing, the
maximum amount of damages that may be recovered with respect to any breach of
this Agreement which results in termination of this Agreement prior to closing
is an aggregate of $500,000, which amount, the parties agree, shall constitute
liquidated damages for such breach.
8.13. Waivers. The due performance or observance by the parties of
their respective obligations hereunder and under the other Transaction Documents
shall not be waived, and the rights and remedies of the parties hereunder and
under the other Transaction Documents shall not be affected, by any course of
dealing or performance or by any delay or failure of any party in exercising any
such right or remedy. The due performance or observance by a party of any of its
obligations hereunder or under any other Transaction Document may be waived only
by a writing signed by the party
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against whom enforcement of such waiver is sought, and any such waiver shall be
effective only to the extent specifically set forth in such writing.
8.14 Arbitration. Any claim, controversy or dispute arising between the
parties with respect to this Agreement (a "DISPUTE"), to the maximum extent
allowed by applicable law, shall be submitted to and finally resolved by binding
arbitration. Either party may file a written Demand for Arbitration with the
American Arbitration Association's Sacramento, California Regional Office, and
shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an Affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
parties under this Section shall be specifically enforceable and shall survive
any termination of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-59-
<PAGE> 65
SIGNATURE PAGE TO ACQUISITION AND STOCK EXCHANGE AGREEMENT
R SYSTEMS, INC.
By: /s/ Satinder Singh Rekhi
---------------------------------------
Satinder Singh Rekhi, President & CEO
/s/ Satinder Singh Rekhi
------------------------------------
Satinder Singh Rekhi
/s/ Harpreet K. Rekhi
------------------------------------
Harpreet K. Rekhi
UBICS, INC.
By: /s/ Dr. Vijay Mallya
----------------------------------------
Dr. Vijay Mallya, Chairman
R SYSTEMS SHAREHOLDERS
/s/ Satinder S. Rekhi
-------------------------------------------
Satinder S. Rekhi, Trustee of the Satinder
and Harpreet Rekhi Family Trust u/t/a
dated August 22, 1997
/s/ Harpreet K. Rekhi
-------------------------------------------
Harpreet K. Rekhi, Trustee of the Satinder
and Harpreet Rekhi Family Trust u/t/a
dated August 22, 1997
-60-
<PAGE> 66
/s/ Mandeep Sodhi
-------------------------------------------
Mandeep Sodhi, Trustee of the Reena Baldev
Singh Irrevocable Trust u/t/a dated
January 1, 1998
/s/ Mandeep Singh Sodhi
-------------------------------------------
Mandeep Singh Sodhi, Trustee of the Guru
Harkrishnan Irrevocable Trust u/t/a dated
January 1, 1998
/s/ Mandeep Singh Sodhi
-------------------------------------------
Mandeep Singh Sodhi, Trustee of the Guru
Tegh Bahodur Irrevocable Trust u/t/a dated
January 1, 1998
/s/ Baljit Kaur Dhaliwal
-------------------------------------------
Baljit Kaur Dhaliwal
<PAGE> 67
DEFINITIONS
<TABLE>
<CAPTION>
A
<S> <C>
Action........................................................9
Affected Party...............................................46
Affiliate....................................................20
C
Closing......................................................47
Closing Date.................................................47
Closing Price................................................54
Code..........................................................1
Combined Companies............................................1
Confidential Information.....................................45
D
DGCL.........................................................24
Disclosing Party.............................................46
Dispute......................................................59
DOJ..........................................................42
E
Employment Agreements........................................49
Environmental Claims.........................................12
Environmental Rule...........................................12
Equipment....................................................13
ERISA........................................................16
Escrow Agent..................................................2
Escrow Agreement..............................................2
Escrow Termination Date......................................54
Exchange......................................................2
Exchange Shares...............................................2
F
FTC..........................................................42
G
GAAP..........................................................1
Governmental Order............................................5
Governmental Rule.............................................5
H
Hazardous Substance..........................................13
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
<S> <C>
Holdback Escrow Shares........................................2
HSR Act......................................................42
I
Indemnified Person...........................................53
Indemnifying Person..........................................53
Instrument...................................................55
Insurance Policies...........................................18
IRS...........................................................9
L
Liens.........................................................7
Losses.......................................................52
M
Management Systems...........................................21
Material Customers and Suppliers.............................20
Multiemployer Plan...........................................16
N
Nasdaq.......................................................42
P
PBGC.........................................................15
Pension Plan.................................................16
Person........................................................5
Production Systems...........................................21
Proxy Statement..............................................43
R
R Systems.....................................................1
R Systems Acquisition Proposal...............................40
R Systems Benefit Plans......................................16
R Systems Business Agreements................................19
R Systems Business Permits...................................11
R Systems Common Stock........................................2
R Systems Companies...........................................4
R Systems ERISA Affiliate....................................16
R Systems Financial Statement Date............................7
R Systems Financial Statements................................7
R Systems Indemnified Parties................................52
R Systems Intellectual Property..............................14
R Systems Material Adverse Change.............................4
R Systems Parties.............................................1
R Systems Shareholders........................................1
R Systems-India...............................................1
</TABLE>
-2-
<PAGE> 69
<TABLE>
<CAPTION>
<S> <C>
R Systems-India Financial Statements..........................7
R Systems-India Stock.........................................6
R Systems-Singapore...........................................1
R Systems-Singapore Financial Statements......................7
R Systems-Singapore Stock.....................................6
Rekhi.........................................................1
Related Acquisition Agreements................................1
S
S Corporation.................................................9
S Corporation Revocation......................................9
Schedule......................................................1
Securities Act................................................3
Stockholders Meeting.........................................42
Subsidiary....................................................6
Systems......................................................20
T
Tax Authority.................................................9
Tax Opinion..................................................49
Taxes.........................................................8
Threshold Amount.............................................55
Transaction Documents........................................48
U
U.S. Export Laws.............................................11
UBICS.........................................................1
UBICS Acquisition Proposal...................................41
UBICS Benefit Plans..........................................32
UBICS Business Agreements....................................35
UBICS Business Permits.......................................30
UBICS Common Stock............................................2
UBICS Companies..............................................24
UBICS Financial Statement Date...............................26
UBICS Financial Statements...................................26
UBICS Indemnified Parties....................................52
UBICS Insurance Policies.....................................34
UBICS Intellectual Property..................................31
UBICS Material Adverse Change................................24
UBICS Material Customers and Suppliers.......................35
UBICS SEC Documents..........................................26
V
Voting Agreement..............................................2
</TABLE>
-3-
<PAGE> 70
<TABLE>
<CAPTION>
<S> <C>
W
Welfare Plan.................................................16
Y
Year 2000 Compliant..........................................21
</TABLE>
-4-
<PAGE> 71
Annex 1.02(a)
R SYSTEMS SHAREHOLDERS
<TABLE>
<CAPTION>
Shares of R Shares of UBICS
Systems Common Common Stock
Stock Percentage to be Received
Name and Address Owned Ownership in the Exchange
- ---------------- ----- --------- ---------------
<S> <C> <C> <C>
Satinder S. Rekhi or Harpreet K.
Rekhi or their successor(s),
co-trustees of the Satinder and
Harpreet Rekhi Family Trust
u/t/a dated August 22, 1997
2051 Last Chance Court
Gold River, CA 95670 3,900,000 78% 3,680,040
Mandeep Sodhi or his successor,
Trustee of the Reena Baldev
Singh Irrevocable Trust u/t/a
dated January 1, 1998
8960 Carlisle Avenue
Sacramento, CA 95829 50,000 1% 47,180
Mandeep Sodhi or his successor,
trustee of the Guru Harkrishan
Irrevocable Trust u/t/a dated
January 1, 1998
8960 Carlisle Avenue
Sacramento, CA 95829 500,000 10% 471,800
Mandeep Sodhi or his successor,
trustee of the Guru Tegh Bahadur
Irrevocable Trust u/t/a dated
January 1, 1998
8960 Carlisle Avenue
Sacramento, CA 95829 500,000 10% 471,800
Baljit Kaur Dhaliwal
2067 Red Star Court
Gold River, CA 95670 50,000 1% 47,180
----------- -- ------------
Totals 5,000,000 100% 4,718,000
</TABLE>
<PAGE> 72
Annex 1.03(b)
EXECUTIVE OFFICERS AND DIRECTORS
OF UBICS AS OF THE CLOSING
Executive Officers
------------------
Vijay Mallya Chairman of the Board
Rekhi Singh President and Chief Executive Officer
O'Neil Nalavadi Senior Vice President and
Chief Financial Officer
Ralph Kenney Executive Vice President and
Chief Operating Officer
Directors
---------
Vijay Mallya Gen. Baldev Singh
Rekhi Singh Deborah Colden
Kent Price Scott Heldfond
Craig Wolfanger
<PAGE> 73
Annex 2.31
POOLING MATTERS
In accordance with Accounting Principles Board Opinion (APB) No. 16,
Business Combinations, R Systems and the R Systems Shareholders have complied
with or agreed to comply with the following pooling requirements:
1. R Systems is autonomous and has not been a subsidiary or division of
another corporation within two years before the acquisition pursuant to
the Agreement (the "Acquisition") with UBICS was initiated.
2. R Systems is independent of UBICS and holds less than 10% of the
outstanding voting common stock of UBICS.
3. Neither R Systems nor any of the R Systems Shareholders has taken or
agreed to take any action which will result in the Acquisition being
effected other than by the exchange of R Systems Common Stock for UBICS
Common Stock.
4. The R Systems Shareholders will exchange all of the outstanding capital
stock of R Systems for UBICS Common Stock upon consummation of the
Acquisition.
5. Except for R Systems S corporation distributions to its shareholders in
the amounts and on the dates listed below, and a 20-for-one stock split
effectuated on July 15, 1998, the R Systems Shareholders have not
within two years before the date of this Agreement (a) taken or agreed
to take any action to effect or otherwise made (i) distributions or
dividends in cash, stock or any form of consideration to shareholders,
(ii) additional issuances, exchanges and retirements of common,
preferred, restricted or convertible stock or securities, (iii) changes
in the voting rights or other rights of outstanding common stock, (iv)
changes in the terms of any existing equity securities, (v) grants or
issuance of other classes of common stock with different voting rights
or other rights, (vi) stock splits or dividends paid, declared or
planned, (vii) issuance of debt or debentures convertible into an
equity interest and (viii) any disproportionate distribution of stock
or any form of consideration from an agreement among shareholders and,
(b) have not otherwise changed the equity interest of the Company's
voting capital stock:
<PAGE> 74
Shareholder Name Date of Distribution Amount of Distribution
---------------- -------------------- ----------------------
6. R Systems has not reacquired any shares of voting capital stock within
the two years before the date of this Agreement.
7. The Acquisition will be consummated at the Closing and no provisions of
the Agreement relating to the issue of securities or other
consideration will be pending (it being understood that the provisions
of the Registration Rights Agreement and the provisions of the Escrow
Agreement are considered to be resolved and not pending for this
purpose).
8. Neither R Systems nor any of the R Systems Shareholders, has entered
into or intends to enter into any agreement or arrangement pursuant to
which R Systems or UBICS has agreed or will agree directly or
indirectly to retire or reacquire all or any part of the UBICS Common
Stock issued pursuant to the Agreement, except as contemplated by the
Agreement and transactions contemplated thereby.
9. Neither R Systems nor any of the R Systems Shareholders has entered
into or intends to enter into any agreement or arrangement pursuant to
which R Systems or UBICS has agreed or will agree to provide any
financial arrangements for the benefit of former shareholders of R
Systems, other than Satinder Singh Rekhi who will become party to an
employment agreement with UBICS.
10. The R Systems Shareholders have not and do not intend to reduce their
risk relative to any shares of UBICS Common Stock received in the
Acquisition until publication of financial results covering at least 30
days of post-Acquisition combined operations.
-2-
<PAGE> 75
Annex 6.02(m)
EMPLOYMENT AGREEMENTS
Vijay Mallya
Rekhi Singh
O'Neil Nalavadi
Ralph Kenney
<PAGE> 76
EXHIBIT A
VOTING AGREEMENT
This Agreement is made as of March 18, 1999 by and among UBICS, INC., a
Delaware corporation ("UBICS"), R SYSTEMS, INC., a California corporation ("R
SYSTEMS") and UNITED BREWERIES INFORMATION CONSULTANCY SERVICES LTD., a British
Virgin Islands corporation (the "STOCKHOLDER").
PREAMBLE
UBICS has entered into separate Acquisition and Stock Exchange
Agreements dated as of the date hereof (as the same may be amended or
supplemented, the "ACQUISITION AGREEMENTS"; capitalized terms used but not
defined herein shall have the meanings set forth in the Acquisition Agreements)
providing for the acquisition of all of the outstanding stock of R Systems, Inc.
and its related companies, R Systems (India) Private Limited and R Systems
(Singapore), (collectively, the "R SYSTEMS COMPANIES"), by UBICS (the
"ACQUISITIONS"), upon the terms and subject to the conditions set forth in the
Acquisition Agreements.
The Stockholder owns 4,033,751 shares of UBICS Common Stock (such
shares of UBICS Common Stock, together with any other shares of capital stock of
UBICS acquired by the Stockholder after the date hereof and during the term of
this Agreement as set forth below, being collectively referred to herein as the
"SUBJECT SHARES").
As a condition to their willingness to enter into the Acquisition
Agreements, the R Systems Companies and their shareholders have requested that
the Stockholder enter into this Agreement.
Therefore, to induce the R Systems Companies and their shareholders to
enter into, and in consideration of their entering into, the Acquisition
Agreements, and intending to be legally bound, the parties agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Stockholder and constitutes a legal, valid and
binding obligation of the Stockholder enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies). The
execution, delivery and performance of this Agreement do not, and the
<PAGE> 77
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, breach, or result in any violation of, or
default (with or without notice or lapse of time or both) under any provision
of, any trust agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license, judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's property or
assets.
(b) The Subject Shares. The Stockholder is the record and
beneficial owner of, and has good and marketable title to, the Subject Shares,
free and clear of any claims, liens, options, charges, or other encumbrances and
security interests except as set forth on Schedule 1(b) hereto. As of the date
hereof, the Stockholder does not own, of record or beneficially, any shares of
capital stock of UBICS other than the Subject Shares. The Stockholder has the
sole right to vote such Subject Shares, and none of the Subject Shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of the Subject Shares, except as contemplated by this
Agreement.
2. Agreement to Vote Shares. Until the termination of this Agreement in
accordance with Section 7, at every meeting of stockholders of UBICS called to
vote upon the Acquisitions and the Acquisition Agreements or at any adjournment
thereof or in every other circumstance upon which a vote, consent or other
approval (including by written consent) with respect to the Acquisitions and the
Acquisition Agreements is sought, the Stockholder shall, including by executing
a written consent if requested by UBICS, vote (or cause to be voted) the Subject
Shares in favor of the Acquisitions, the adoption by UBICS of the Acquisition
Agreements, the approval of the terms thereof and each of the other transactions
contemplated by the Acquisition Agreements and any matter that could reasonably
be expected to facilitate the Acquisitions. The Stockholder agrees to refrain
from (a) voting at any annual or special meeting of the stockholders of UBICS in
any manner inconsistent with the terms of this Agreement, (b) executing any
written consent in lieu of a meeting of the stockholders of UBICS in any manner
inconsistent with the terms of this Agreement, (c) granting any proxy or
authorization to any person with respect to the voting of the Subject Shares, or
taking any action contrary to or in any manner inconsistent with the terms of
this Agreement. Until after the Acquisitions are consummated or the Acquisition
Agreements are terminated, the Stockholder shall use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Acquisitions and the other transactions contemplated by
the Acquisition Agreements.
3. Additional Share Purchases. The Stockholder agrees that any shares
of capital stock of UBICS that the Stockholder purchases or with respect to
which the Stockholder otherwise acquires beneficial ownership after the
execution of this
2
<PAGE> 78
Agreement and prior to termination of this Agreement under Section 7 shall be
subject to the terms and conditions of this Agreement to the same extent as if
they constituted Subject Shares.
4. Irrevocable Proxy. Concurrently with the execution of this
Agreement, the Stockholder agrees to deliver to the R Systems Companies a proxy
in the form attached hereto as Exhibit A (the "PROXY"), which shall be
irrevocable, with the total number of shares of capital stock of UBICS
beneficially owned by the Stockholder set forth therein.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as R Systems may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement.
6. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and permitted assigns.
7. Termination. This Agreement shall terminate upon the Closing Date;
provided, however, that if UBICS is not in breach of its obligations under the
Acquisition Agreements and the Stockholder is not in breach of its obligations
under Section 2 of this Agreement, this Agreement shall terminate automatically
if the Acquisition Agreements are terminated pursuant to the terms thereof.
8. General Provisions.
(a) Amendments. This Agreement may not be amended, modified,
altered or supplemented except by an instrument in writing signed by each of the
parties hereto.
(b) Notice. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to UBICS and R Systems in
accordance with the Acquisition Agreements and to the Stockholder at 3 Harbor
Drive, Suite 115, Sausalito, California 94965 (or at such other address for a
party as shall be specified by like notice).
(c) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each of the
3
<PAGE> 79
parties and delivered to the other party, it being understood that each party
need not sign the same counterpart.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior negotiations,
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
(f) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court.
4
<PAGE> 80
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
UBICS, INC.
By:________________________________
Name:
Title:
R SYSTEMS, INC.
By:________________________________
Name:
Title:
UNITED BREWERIES INFORMATION
CONSULTANCY SERVICES LTD.
By:________________________________
Name:
Title:
5
<PAGE> 81
IRREVOCABLE PROXY
The undersigned stockholder of UBICS, Inc., a Delaware corporation (the
"COMPANY"), hereby irrevocably appoints Satinder Singh Rekhi, the President and
Chief Executive Officer of R Systems, Inc., a California corporation ("R
SYSTEMS"), as the sole and exclusive attorney and proxy of the undersigned, with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of the Company
beneficially owned by the undersigned as of the date hereof, and any shares of
capital stock of the Company that the undersigned stockholder purchases or with
respect to which the undersigned stockholder otherwise acquires beneficial
ownership after the execution of this proxy and prior to termination of the
Voting Agreement between the Company, R Systems and the undersigned of even date
herewith (the "VOTING AGREEMENT"), which shares are listed on the final page of
this Proxy (the "SHARES"), and any and all shares or securities issued or
issuable in respect thereof on or after the date hereof, until such time as that
certain Voting Agreement shall be terminated in accordance with its terms. Upon
the execution hereof, all prior proxies given by the undersigned with respect to
the Shares and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof are hereby revoked and no subsequent
proxies will be given.
This proxy is irrevocable, is granted pursuant to the Voting Agreement,
and is granted in consideration of R Systems entering into the Acquisition and
Stock Exchange Agreement between the Company, R Systems, Satinder Singh Rekhi
and Harpreet K. Rekhi, husband and wife, and the stockholders of R Systems of
even date herewith (the "ACQUISITION AGREEMENT"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Acquisition Agreement.
The attorneys and proxies named above will be empowered at any time prior to
termination of the Voting Agreement to exercise all voting and other rights
(including, without limitation, the power to execute and deliver written
consents with respect to the Shares) of the undersigned at every annual, special
or adjourned meeting of the stockholders of the Company, and in every written
consent in lieu of such a meeting, or otherwise, in favor of approval of the
Acquisition and the Acquisition Agreement and any matter that could reasonably
be expected to facilitate the Acquisition.
The attorney and proxy named above may only exercise this proxy to vote
the shares subject hereto at any time prior to termination of the Voting
Agreement at every annual, special or adjourned meeting of the stockholders of
the Company and in every written consent in lieu of such meeting, in favor of
approval of the Acquisition and the Acquisition Agreement and any matter that
could reasonably be expected to facilitate the Acquisition. The undersigned
stockholder may vote the Shares on all other matters.
[SIGNATURE PAGE TO THIS PROXY FOLLOWS]
<PAGE> 82
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned. THIS PROXY IS IRREVOCABLE.
Dated: March 18, 1999
UNITED BREWERIES INFORMATION
CONSULTANCY SERVICES LTD.
By:
-----------------------------------------------
4,033,751 Shares of Common Stock Beneficially Owned
2
<PAGE> 83
EXHIBIT B
ESCROW AGREEMENT
This Agreement is made as of _______________, 1999, among UBICS, INC.,
a Delaware corporation ("UBICS"), SATINDER SINGH REKHI and HARPREET K. REKHI,
individuals residing in Rancho Cordova, California (collectively, the
"SHAREHOLDER"), and CAPITAL CITY ESCROW, INC., as escrow agent (the "ESCROW
AGENT").
PREAMBLE
UBICS, R Systems, Inc., a California corporation ("R SYSTEMS"), and the
shareholders of R Systems, including the Shareholder, have entered into an
Acquisition and Stock Exchange Agreement dated as of March 18, 1999 (the
"ACQUISITION AGREEMENT"), pursuant to which UBICS is acquiring all of the
outstanding shares of common stock of R Systems in exchange for shares of UBICS
common stock. Section 1.02(b) of the Acquisition Agreement provides for certain
of the Exchange Shares to be placed in an escrow account to secure certain
indemnification obligations of the Shareholder to UBICS under Section 7.02 of
the Acquisition Agreement, on the terms and subject to the conditions set forth
herein (the "ESCROW"). All capitalized terms used but not defined herein shall
have the meanings given to them in the Acquisition Agreement.
Therefore, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, agree as follows:
1. Establishment of Escrow.
(a) UBICS and the Shareholder hereby appoint Escrow Agent to
serve as the escrow agent under and to administer the terms of this Agreement
and Escrow Agent hereby accepts such appointment and agrees to hold the Holdback
Shares subject to the terms and conditions of this Agreement.
(b) UBICS and the Shareholder have caused to be deposited with
Escrow Agent the Holdback Escrow Shares, which shall be held by Escrow Agent in
trust for the benefit of UBICS and the Shareholder, and shall be released and
disbursed by Escrow Agent only in accordance with the terms of this Agreement.
2. Delivery of Holdback Escrow Shares. Simultaneously with the
execution hereof by UBICS, the Shareholder and Escrow Agent, certificates
evidencing the Holdback Escrow Shares shall have been delivered by UBICS to
Escrow Agent along with stock powers duly executed in blank by the Shareholder,
substantially in the form set forth as Attachment A hereto. Escrow Agent hereby
acknowledges receipt of the Holdback Escrow Shares and the executed stock
powers.
<PAGE> 84
3. Rights in Holdback Escrow Shares. Except as provided herein, all
legal and beneficial ownership rights to the Holdback Escrow Shares shall remain
with the Shareholder during such time as the Holdback Escrow Shares are held by
Escrow Agent, including, but not limited to, any right to vote or to receive
distributions thereon. Notwithstanding the foregoing, certificates evidencing
any shares of UBICS capital stock that are payable with respect to the Holdback
Escrow Shares that have not been released from escrow pursuant to the terms of
this Agreement as a result of any stock dividend, reclassification, stock split,
subdivision or combination of shares, recapitalization or other events generally
made with respect to the UBICS common stock ("ADDITIONAL SHARES") shall be
delivered to Escrow Agent and shall be held in the Escrow. Unless otherwise
indicated, as used in this Agreement, the term "Holdback Escrow Shares" includes
any Additional Shares. Unless and until the Escrow Agent has received such
Additional Shares, it may assume without inquiry that none have been or are
required to be issued.
Additional Shares issued in respect of Holdback Escrow Shares which
have been released from the Escrow pursuant to the terms of this Agreement shall
not be added to the Escrow but shall be distributed to the record holders of
such released Holdback Escrow Shares, Cash dividends paid with respect to
Holdback Escrow Shares shall not be added to the Escrow but shall be distributed
upon receipt by the Escrow Agent to the Shareholder at his address set forth in
the Acquisition Agreement.
The Shareholder shall have voting rights with respect to the
Additional Shares. The Escrow Agent need not furnish proxy materials or other
information received by it with respect to the Holdback Escrow Shares to the
Shareholder, it being understood that UBICS will deliver such proxy materials
and other information to the Shareholder.
4. Release of Holdback Escrow Shares. Escrow Agent agrees to disburse
the Holdback Escrow Shares as follows:
(a) Set-Off Shares. Upon receipt by Escrow Agent at any time
on or before the Escrow Termination Date (as hereinafter defined), of a
certificate signed by the Chairman or the chief financial officer of UBICS (a
"CLAIM NOTICE"), (1) stating that Losses exist or are asserted, (2) specifying
in reasonable detail the individual items of such Losses, the date each such
item was paid or incurred (if already paid or incurred) and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
(3) stating the dollar amount of such Losses, paid or incurred by UBICS, or if
the amount of Losses has not yet been determined, UBICS' good faith estimate of
the maximum amount of Losses it expects to incur with respect to such item,
which estimate shall not be binding on UBICS, and (4) the number of Holdback
Escrow Shares to be retained, assuming no objections, by Escrow Agent to satisfy
such Losses, Escrow Agent shall, subject to the provisions of this Section 4,
and upon expiration of the 30-day period specified in Section 4(a)(i) hereof and
provided Escrow Agent has not
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received notice of a Disputed Claim (as defined in Section 4(a)(i), deliver to
UBICS out of the Escrow, as promptly as practicable, Holdback Escrow Shares
having a value (determined in accordance with Section 4(a)(ii) below) equal to
the full amount of such Losses (the "SET-OFF SHARES"). Except as otherwise
provided herein, any claim by UBICS against the Escrow made in a Claim Notice
pursuant to this Section 4 shall be referred to herein as a "CLAIM" or, if
multiple, "CLAIMS." Any delivery of the Set-Off Shares by Escrow Agent is
subject to the following terms and conditions:
(i) At the time of delivery of any Claim Notice to
Escrow Agent, UBICS shall cause to be delivered to the Shareholder a duplicate
copy of such notice and for a period of thirty (30) days after receipt by Escrow
Agent of such Claim Notice, Escrow Agent shall make no delivery to UBICS of any
Holdback Escrow Shares pursuant to Section 4(a) unless Escrow Agent shall have
received written authorization from the Shareholder to make such delivery.
Within thirty (30) calendar days of receipt of the Claim Notice from UBICS, the
Shareholder shall either (A) direct Escrow Agent in writing to disburse the
Set-Off Shares to UBICS, or (B) notify UBICS, with contemporaneous delivery to
Escrow Agent, in writing of an intention to dispute the Claim and the basis of
such dispute (a "DISPUTED CLAIM"), including, but not limited to, a dispute on
matters relating to Losses. If the Shareholder fails to make any of the
foregoing elections within such thirty (30) day period, UBICS shall send written
notice of such failure to Escrow Agent, who shall disburse the Set-Off Shares to
UBICS on the next Business Day following the receipt of such written notice. If
the Shareholder elects to dispute the Claim, UBICS and the Shareholder shall
attempt in good faith until thirty (30) calendar days after receipt of the
Disputed Claim to agree upon the rights of the respective parties with respect
to each Claim. If UBICS and the Shareholder should so agree, a memorandum
setting forth such agreement shall be prepared and signed jointly by the
Shareholder and by the Chairman or the chief financial officer of UBICS and
shall be delivered to Escrow Agent. Escrow Agent shall be entitled to rely on
any such memorandum and shall distribute the Set-Off Shares from the Escrow in
accordance with the terms thereof. If UBICS and the Shareholder are unable to
agree, then, subject to Sections 4(b) and 4(c) below, such Holdback Escrow
Shares shall remain subject to the Escrow until such dispute shall be resolved
in accordance with the terms of the Acquisition Agreement. If such resolution is
determined by arbitration under the terms of the Acquisition Agreement, the
decision of a majority of the three arbitrators as to the validity and amount of
any Loss in such officer's certificate and any other matter related to the
Disputed Claim shall be binding and conclusive upon UBICS and the Shareholder
involved in the Disputed Claim, notwithstanding anything in Section 4 hereof.
The arbitrators shall provide a copy of the written decision to Escrow Agent and
Escrow Agent shall be entitled to act in accordance with such written decision
of the arbitrators and to make or withhold distributions of Set-Off Shares in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrators. If such resolution is not
determined by arbitration and is
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determined by mutual agreement of UBICS and the Shareholder, promptly after such
resolution, UBICS (by either its Chairman or chief financial officer) and the
Shareholder shall jointly execute a written memorandum which sets forth such
resolution and deliver such memorandum to Escrow Agent. Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute the Set-Off Shares
in accordance with the terms thereof.
(ii) For purposes of determining the number of
Holdback Escrow Shares equivalent to the dollar value of payments to which
either UBICS or the Shareholder are entitled under this Agreement, the Holdback
Escrow Shares shall be valued at $_______ per share [CLOSING PRICE ON CLOSING
DATE](the "UBICS PRICE PER SHARE").
(iii) As a condition to the delivery of the Set-Off
Shares, UBICS shall deliver to Escrow Agent certificates representing the
remaining balance of the Holdback Escrow Shares.
(iv) Fractional shares of UBICS Common Stock need not
be issued. Nor shall payments be made in lieu of fractional interests.
Accordingly, each Claim Notice and each officer's certificate delivered to
Escrow Agent pursuant to Section 4(a)(i) shall round up Losses so that an even
number of shares, valued at the UBICS Price Per Share, may be allocated to such
Losses.
(b) Release of Escrow. Subject to this Section 4(b), on the
earlier of (i) the first anniversary of the Closing Date or (ii) the date of the
first post-Closing audit of the Combined Companies, both of which will be
certified to Escrow Agent in a certificate jointly signed by the Shareholder and
the Chairman or the Chief Executive Officer of UBICS (the "ESCROW TERMINATION
DATE"), Escrow Agent shall release to the Shareholder all of the Holdback Escrow
Shares deposited in Escrow, less the sum of (i) that number of Holdback Escrow
Shares that shall have been released prior to such date pursuant to the terms
hereof, and (ii) that number of Retained Shares (defined below) together with
corresponding stock powers. In the event that there are any Claims specified in
any Claim Notice previously delivered to Escrow Agent which are unresolved or
are the subject of a Disputed Claim on the Escrow Termination Date, subject to
the objection of the Shareholder as provided herein, Escrow Agent shall retain
in the Escrow that number of Holdback Escrow Shares which are necessary based on
the UBICS Price Per Share, to satisfy any such unsatisfied Claims until such
Claims have been fully and finally resolved (the "RETAINED SHARES"). If the
Shareholder disputes the retention of all or a portion of the Retained Shares,
UBICS and the Shareholder shall attempt in good faith within thirty (30)
calendar days after the Escrow Termination Date (the "RETENTION RESOLUTION
PERIOD") to agree upon the number of Retained Shares. If UBICS and the
Shareholder should so agree, a memorandum setting forth such agreement shall be
prepared and signed by the Shareholder and by the Chairman
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or chief financial officer of UBICS and shall be delivered to Escrow Agent.
Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute and/or retain such Holdback Escrow Shares in accordance with the
terms thereof. If UBICS and the Shareholder cannot agree within the Retention
Resolution Period, the number of Retained Shares (if any) shall be determined
pursuant to Section 4(c) below.
(c) Arbitration. If UBICS and the Shareholder cannot agree
within the Retention Resolution Period, the number of Retained Shares (if any)
shall be determined by arbitration as set forth in Section 21 below. The
decision of a majority of the three arbitrators as to the validity and amount of
Retained Shares to be held in the Escrow shall be binding and conclusive upon
UBICS and the Shareholder involved in the disputed Retained Shares, and
notwithstanding anything in Section 4 hereof. The arbitrators shall provide a
copy of the written decision to Escrow Agent and Escrow Agent shall be entitled
to act in accordance with such written decision of the arbitrators, so long as
such decision shall no longer be or shall not be subject to appeal or review by
lapse of time or otherwise, and to make or withhold distributions of Retained
Shares in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators. If such resolution
is not determined by arbitration and is determined by mutual agreement of UBICS
and the Shareholder, UBICS (on the one hand) and the Shareholder (on the other
hand) shall each be responsible for one half of all fees and costs of the
arbitrators.
(d) Joint Release. Notwithstanding the foregoing, Escrow Agent
shall promptly release and disburse the Holdback Escrow Shares pursuant to a
mutual written express agreement to release such shares as directed in any
certificate jointly executed by the Shareholder and the Chairman or chief
financial officer of UBICS.
5. Transfer of Escrow Shares. UBICS, upon receipt of any Holdback
Escrow Shares (together with corresponding stock powers) shall have full legal
and beneficial ownership of such Holdback Escrow Shares, and may either cancel
such shares, hold them in treasury or reissue them as it deems appropriate.
6. Termination of Escrow. This Escrow Agreement and the escrow account
created hereby shall terminate upon delivery of all of the Holdback Escrow
Shares pursuant to the terms of Section 4 herein.
7. Escrow Agent Fees and Expenses. Escrow Agent's fee for serving as
Escrow Agent hereunder shall consist of a $_______ initial fee and a $_______
annual fee for each year of this Agreement, payable on each anniversary of the
date hereof. If for any reason Escrow Agent resigns, Escrow Agent shall refund a
pro rata part of the annual fee based on the number of days in the year that
Escrow Agent has served as such. UBICS (on the one hand) and the Shareholder (on
the other hand)
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shall each be responsible for one-half of all of Escrow Agent's fees. Further,
Escrow Agent shall be reimbursed equally by UBICS (on one hand) and the
Shareholder (on the other hand) for all reasonable expenses incurred by Escrow
Agent in the performance of its duties hereunder.
8. Escrow Agent's Duties and Responsibilities.
(a) Scope of Undertaking. Escrow Agent's duties and
responsibilities in connection with this Agreement shall be purely ministerial
and shall be limited to those expressly set forth in this Agreement. Escrow
Agent is not a principal, participant or beneficiary in any transaction
underlying this Agreement and shall have no duty to inquire beyond the terms and
provisions hereof. Escrow Agent shall have no responsibility or obligation of
any kind in connection with this Agreement and shall not be required to deliver
the property held in the Escrow or any part thereof or take any action with
respect to any matters that might arise in connection therewith, other than to
hold and deliver the property as herein provided. Escrow Agent shall not be
liable for any error in judgment, any act or omission, any mistake of law or
fact, or for anything it may do or refrain from doing in connection herewith,
except for, subject to Section 9 below, its own willful misconduct or gross
negligence. It is the intention of the parties hereto that Escrow Agent shall
never be required to use, advance or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder. Notwithstanding anything herein to the
contrary, Escrow Agent shall have no obligation to file or prepare any tax
returns or to prepare any other reports for any taxing authorities concerning
the matters covered by this Agreement.
(b) Protection of Holdback Escrow Shares. Escrow Agent shall
hold and safeguard the Holdback Escrow Shares during the term of the Escrow, and
shall treat such shares as a trust fund in accordance with the terms of this
Agreement and not as the property of UBICS and shall hold and dispose of the
Holdback Escrow Shares only in accordance with the terms hereof.
9. Reliance; Liability. Escrow Agent may rely on, and shall not be
liable for acting or refraining from acting upon, any written notice,
instruction or request or other paper furnished to it hereunder or pursuant
hereto and believed by it, in the absence of manifest evidence to the contrary,
to be genuine and what it purports to be and to have been signed or presented by
the proper party or parties. Escrow Agent shall be responsible for holding and
disbursing the property held in the Escrow pursuant to this Agreement; provided
that in no event shall Escrow Agent be liable for any lost profits, lost
savings, or other special, exemplary, consequential or incidental damages in
excess of Escrow Agent's fee hereunder, except to the extent such losses or
damages are attributable to the gross negligence or willful misconduct of Escrow
Agent; and
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provided further that Escrow Agent shall have no liability for any loss or
damage arising from any cause beyond its control, including, but not limited to,
the following:
(a) acts of God, force majeure, including, without limitation,
war (whether or not declared or existing), revolution, insurrection, riot, civil
commotion, accident, fire, explosion, stoppage of labor, strikes and other
differences with employees;
(b) the act, failure or neglect of any other party or any
agent or correspondent or any other person reasonably selected by Escrow Agent;
(c) any delay, error, omission or default of any mail,
courier, telegraph, cable or wireless agency or operator; or
(d) the acts or edicts of any government or governmental
agency or other group or entity exercising governmental powers.
In addition, Escrow Agent is not responsible or liable in any manner whatsoever
for the sufficiency, correctness, genuineness or validity of the subject matter
of this Agreement or any part hereof or for the transaction or transactions
requiring or underlying the execution of this Agreement, the form or execution
hereof or for the identity or authority of any person executing this Agreement
or any part hereof.
10. Right of Interpleader. Should any controversy arise involving the
parties hereto or any of them or any other person, firm or entity with respect
to this Agreement, or should a substitute escrow agent fail to be designated as
provided below, or if Escrow Agent receives conflicting demands or claims, or if
Escrow Agent should be in doubt as to what action to take under the terms of
this Agreement, Escrow Agent shall have the right, but not the obligation,
either to (a) withhold delivery of the property until the controversy is
resolved, a substitute escrow agent is properly appointed, the conflicting
demands or claims are withdrawn, or its doubt is resolved or (b) institute a
petition for interpleader in any court of competent jurisdiction to determine
the rights of the parties hereto.
11. Indemnification. UBICS and the Shareholder hereby jointly and
severally indemnify Escrow Agent, its officers, directors, employees and agents
(each herein called an "INDEMNIFIED PARTY") against, and hold each Indemnified
Party harmless from, any and all expenses, losses, costs and damages, including,
without limitation, attorneys' fees, and claims, including, but not limited to,
costs of investigation, litigation, arbitration, tax liability or loss on
investments, suffered or incurred by any Indemnified Party in connection with or
arising from or out of this Agreement, except such acts or omissions as may
result from the willful misconduct or gross negligence of such Indemnified
Party.
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12. Resignation and Removal. Escrow Agent may resign hereunder at any
time upon thirty (30) calendar days' prior written notice of resignation to all
of the other parties to this Agreement. Upon the effective date of such
resignation, Escrow Agent shall deliver the Holdback Escrow Shares remaining in
the Escrow at the time of such resignation to any substitute escrow agent
designated by the other parties in writing. The other parties shall designate,
in a writing signed by the Shareholder and the Chairman or Chief Financial
Officer of UBICS and delivered to Escrow Agent, a replacement Escrow Agent
within thirty (30) calendar days of the giving of such notice. If the other
parties fail to designate a substitute escrow agent in a writing signed by both
parties within thirty (30) calendar days after the giving of such notice, Escrow
Agent may institute a petition for interpleader in a court of competent
jurisdiction. Escrow Agent's sole responsibility after such thirty (30) day
notice period expires shall be to hold such Holdback Escrow Shares in safe
keeping and to deliver the same to a designated substitute escrow agent, if any,
or in accordance with the directions of a final order or judgment of a court of
competent jurisdiction, all of which, by lapse of time or otherwise, shall no
longer be or shall not be subject to appeal or review, at which time of delivery
Escrow Agent's obligations hereunder shall cease and terminate. The other
parties may remove and replace Escrow Agent by a writing signed by the Chairman
or chief financial officer of UBICS and the Shareholder designating a
replacement Escrow Agent and delivered to Escrow Agent, and Escrow Agent shall
deliver the Holdback Escrow Shares remaining in the Escrow at the time of such
removal to any designated replacement Escrow Agent selected by the other
parties.
13. Amendment. This Agreement may be amended, modified or supplemented,
but only in writing signed by Escrow Agent, UBICS (by its Chairman or chief
financial officer) and the Shareholder.
14. Notices. Unless otherwise specifically provided herein, all
notices, consents, and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered by hand or by Federal Express or a similar nationally recognized
overnight courier to, (b) five days after being deposited in any United States
Post Office enclosed in a postage prepaid, registered or certified envelope
addressed to, or (c) when successfully transmitted by telecopier or facsimile
(with a confirming copy of such communication to be sent as provided in clauses
(a) or (b) above) to, the party for whom intended, at the address or telecopier
or facsimile number for such party set forth below (or at such other address or
telecopier or facsimile number for a party as shall be specified by like notice,
provided, however, that any notice of change of address or telecopier or
facsimile number shall be effective only upon receipt):
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(i) if to UBICS:
UBICS, Inc.
333 Technology Drive
Suite 210, Southpointe
Canonsburg, PA 15317
Telephone No.: (724) 746-6001
Telecopy No.: (724) 746-9597
Attention: O'Neil Nalavadi
with a copy to:
Cohen & Grigsby, P.C.
11 Stanwix Street, 15th Floor
Pittsburgh, PA 15222
Telephone No.: (412) 297-4900
Telecopy No.: (412) 209-0672
Attention: David J. Lowe, Esq.
(ii) if to the Shareholder, to:
Satinder Singh Rekhi
c/o R Systems, Inc.
5000 Windplay Drive, Suite 5
El Dorado Hills, CA 95762
Telephone No.: (916) 939-9696
Telecopy No.: (916) 939-9697
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, CA 95814
Telephone No.: (916) 558-6700
Telecopy No.: (916) 441-6700
Attention: Kevin Coyle, Esq.
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(iii) If to the Escrow Agent:
Capital City Escrow
3838 Watt Avenue, Suite F610
Sacramento, CA 95821
Telephone No.: (916) 487-4950
Telecopy No.: (916) 487-4959
Attention: Donna Grady, President
15. Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
16. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns; provided that no assignment of any rights or obligations shall be made
by any party without the written consent of the other parties.
17. Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
18. Remedies Cumulative. The remedies provided in this Agreement shall
be cumulative and shall not preclude the assertion or exercise of any other
rights or remedies available by law, in equity or otherwise.
19. Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes any and all prior agreements, arrangements
and understandings among the parties relating to the subject matter hereof.
20. Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware of
without giving effect to the principles of conflicts of law thereof.
21. Arbitration. In the event of any dispute between UBICS and the
Shareholder with respect to any matter set forth herein, either party may demand
that
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the dispute be submitted to binding arbitration. The demand for arbitration by
any party (the "DEMANDING PARTY") shall (i) be in writing, (ii) be served on the
other party (the "NON-DEMANDING PARTY") in the manner prescribed in Section 14
for giving notices, and (iii) set forth the matter or matters to be arbitrated.
Within five (5) business days after providing notice to the Non-Demanding Party,
the Demanding Party shall apply to the American Arbitration Association (the
"AAA") located in either Sacramento, California for the appointment of a panel
of three (3) arbitrators. Any arbitration pursuant hereto shall be in accordance
with the Commercial Arbitration Rules of the AAA (in accordance with majority
rule) as then in effect, except to the extent that such rules are in conflict
with the provisions of this Section 21; provided, however, if the AAA is not
then functioning or such rules are not then in effect, arbitration proceedings
shall be conducted in accordance with the requirements of the Uniform
Arbitration Act. All such arbitration proceedings shall take place in
Sacramento, California at the election of the Demanding Party. The arbitrators
shall meet as soon as practicable after the arbitration panel is appointed. Both
the foregoing agreement of the parties to arbitrate any and all claims, and the
results, determination, finding, judgment and/or award rendered pursuant to such
arbitration, shall be final and binding on the parties hereto and may be
specifically enforced by legal proceedings in any court having jurisdiction over
such action.
22. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
UBICS, INC.
By:
----------------------------------
Vijay Mallya, Chairman
-------------------------------------
Satinder Singh Rekhi
-------------------------------------
Harpreet K. Rekhi
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CAPITOL CITY ESCROW, INC.
By:
----------------------------------
Title:
-------------------------------
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Attachment A
STOCK TRANSFER POWER
FOR VALUE RECEIVED, the undersigned, _______________, hereby assigns,
transfers and conveys unto UBICS, Inc., a Delaware corporation (the "COMPANY"),
_______ shares of common stock, $.01 par value, of the Company consisting of the
_______ shares represented by Certificate No. _______ of the Company registered
in the name of Satinder Singh Rekhi and Harpreet K. Rekhi, Trustees of the
Satinder and Harpreet Rekhi Family Trust u/t/a dated August 22, 1997, on the
books of said Company, and does hereby irrevocably constitute and appoint
____________________ attorney to transfer the foregoing on the books of said
Company, with full power of substitution in the premises, hereby ratifying and
confirming all that said attorney shall lawfully do by virtue hereof.
Dated: _______________, 1999
----------------------------
Satinder Singh Rekhi
----------------------------
Harpreet K. Rekhi
<PAGE> 96
EXHIBIT D-1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of ___________________, 1999, by and between
RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and SATINDER
SINGH REKHI ("Employee").
WITNESSETH:
WHEREAS, the Company, as of the date hereof, has acquired all of the
issued and outstanding shares of stock of R Systems, Inc., a California
corporation ("R Systems");
WHEREAS, the Company and R Systems are each engaged in the business of
providing information technology services to various organizations;
WHEREAS, Employee possesses valuable knowledge and skills that will
contribute to the successful operation of the Company's business;
WHEREAS, Employee shall serve as President and Chief Executive Officer
of the Company;
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) execution and delivery of, and
the closing of the transactions contemplated by, the Acquisition and Stock
Exchange Agreement dated March 18, 1999 (the "Acquisition Agreement") among the
Company, R Systems, Employee and the other shareholders of R Systems, (ii) the
access Employee has had and will continue to have to confidential or proprietary
information of the Company and/or R Systems and their affiliates, (iii) the
willingness of the Company to make valuable benefits available hereafter to
Employee, and (iv) 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:
<PAGE> 97
ARTICLE I
EMPLOYMENT
1.01 Office. Employee is hereby employed as President and Chief
Executive Officer 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. Employee, as President and Chief Executive Officer, shall have
authority and responsibility for the day to day operations of the Company and
shall report to the Company's Board of Directors; provided, however, that
Employee shall consult and agree with the Chairman of the Board of the Company
on all strategic and corporate policy issues.
1.02 Term.
(a) 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 five years ("Initial Term"). At the end of the
Initial Term and each Successor Term (as defined below), this Agreement shall be
automatically renewed for an additional term of one year (a "Successor Term"),
unless either party gives written notice to the other at least 90 days prior to
the end of the Initial Term or any Successor Term of its intent not to renew
this Agreement.
(b) In the event that the Company elects not to renew
Employee's employment at the conclusion of the Initial Term or any Successor
Term pursuant to Section 1.02(a), the Company and Employee shall enter into a
consulting agreement in the form of Exhibit A hereto, pursuant to which Employee
shall serve as a consultant to the Company for a period of five years and
receive a consulting fee of not less than $150,000 per annum payable in equal
monthly installments.
1.03 Salary. The Company shall pay to Employee during the term of this
Agreement a salary at the rate of $375,000 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 a bonus determined in accordance with the Company's Executive
Incentive Compensation Plan.
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
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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 paid 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 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
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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 to
be 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.
(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. In addition, the
Company shall, at Employee's option either (i) pay Employee the full amount
Employee would have received under the terms of the Consulting Agreement or (ii)
enter into the Consulting Agreement with Employee and Employee shall serve as a
consultant pursuant to the terms thereof. 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 may terminate his employment
hereunder by giving the Company two months prior written notice of such
termination. 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. Payment of all compensation and provision of all
benefits to Employee hereunder shall cease to be effective as of the date of any
such termination, except that Employee will be
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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
2.04.
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.
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
pursuant to Section 4.06 below following termination of Employee's employment by
the Company. For purposes of Articles III and IV hereof, the term "Company"
shall also include R Systems and all other subsidiaries of the Company and R
Systems.
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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 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
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, other than relatives or family members of Employee.
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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 four 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
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.
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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 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
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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 State of Delaware.
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.
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7.06 Binding Arbitration. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "DISPUTE"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
parties under this Section shall be specifically enforceable and shall survive
any termination of 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:
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Satinder Singh Rekhi
ATTEST: RUBICS SOLUTIONS, INC.
By:
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EXHIBIT A
CONSULTING AGREEMENT
This Consulting Agreement is made as of __________________, by
and between RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and
SATINDER SINGH REKHI (the "Consultant").
PREAMBLE
The Consultant is the former President and Chief Executive
Officer of the Company. The Company desires to procure the services of
Consultant as an independent contractor to provide certain consulting services,
advice and assistance on behalf of the Company and the Consultant is willing to
provide such services, advice and assistance for the Company, upon the terms and
subject to the conditions of this Agreement.
NOW, THEREFORE, the Company and the Consultant, each intending
to be legally bound hereby, do mutually covenant and agree as follows:
1. ENGAGEMENT. The Company hereby engages the Consultant to
[describe consulting services to be provided]. The Consultant accepts such
engagement and covenants that he will devote such time, attention, skill, and
best efforts as are necessary for the performance of such services.
2. CONSULTING FEE. The Company agrees to pay the Consultant
for his services an annual consulting fee of $150,000, payable in equal monthly
installments, on the last day of each month during the term of this Agreement.
3. EXPENSES. The Consultant shall be reimbursed for his
necessary and reasonable business expenses directly incurred on behalf of the
Company upon presentation of properly documented expense reports to the Company.
4. REPORTS. The Consultant shall report to the Company's
President and shall submit such written reports to the Company as may be
reasonably required by the Company from time to time.
5. TERM AND TERMINATION.
(a) Term. Except as provided herein to the contrary,
the term of this Agreement shall be for a term of five years, unless earlier
terminated as provided herein.
(b) Death. The Agreement shall terminate upon the
Consultant's death and all obligations of the Company hereunder shall forthwith
terminate; provided, however, that the Company shall continue to pay
<PAGE> 108
to the Consultant's estate the consulting fee for a period of six months
following the date of the Consultant's death.
(c) Termination by the Company. The Company may
terminate this Agreement for cause in the event of the Consultant's deliberate
and intentional continuing refusal to substantially perform his duties and
obligations under this Agreement, if he shall have either failed to remedy such
alleged breach within 45 days after his receipt of written notice from the
Company demanding that he remedy such alleged breach, or shall have failed to
take reasonable steps in good faith to that end during such 45 day period and
shall continue diligently to take such steps.
(d) Termination Payment in Event of Termination for
Cause. In the event of termination of this Agreement by the Company under
Section 5(b) or (c), the Consultant (or his estate) shall only be entitled to
receive the compensation due hereunder, computed on a pro rata basis, up to the
effective date of such termination.
(e) Termination by the Consultant. The Consultant
shall have the right at any time, by giving written notice to the Company, to
terminate this Agreement effective 45 days after the date on which such notice
is given by the Consultant. In the event the Consultant shall make such election
under this Section 5(e) the Consultant shall be entitled to receive all fees,
reimbursements, payments or other allowances required to be paid under this
Agreement through the effective date of termination. Thereupon, this Agreement
shall terminate and the Consultant shall have no further rights under or be
entitled to any other benefits of this Agreement.
6. CONSULTANT'S ACKNOWLEDGEMENTS. The Consultant acknowledges
that: (a) in the course of his prior employment by the Company and during the
term of this Agreement, Employee has acquired and 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 the Consultant not disclose the Confidential Information to
others or use the Confidential Information to the Consultant's own advantage or
the advantage of others.
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The Consultant further acknowledges that it is essential for
the proper protection of the business of the Company that the Consultant 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
this Agreement. For purposes of Sections 6 and 7 hereof, the term "Company"
shall also include R Systems, Inc. and all other subsidiaries of the Company and
R Systems, Inc.
7. THE CONSULTANT'S COVENANTS AND AGREEMENTS
(a) Nondisclosure or Utilization of Confidential
Information. The Consultant 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 the term of this Agreement or subsequent to its
termination for any reason, any of the Confidential Information, whether or not
developed by the Consultant, except as required in the performance of the
Consultant's duties to the Company.
(b) Return of Materials. Upon the termination of this
Agreement for any reason, the Consultant 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.
(c) Nonsolicitation of Customers. The Consultant
agrees that during the term of this Agreement and for three (3) years following
termination of this Agreement 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.
(d) Nonsolicitation of Employees. The Consultant
agrees that during his employment by the Company and for three (3) years
following termination of this Agreement 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 other than relatives or family members of the
Consultant.
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(e) Restriction on Competition. The Consultant
covenants and agrees that during the term of this Agreement and for a period of
one (1) year following the termination thereof for any reason, the Consultant
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 four 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.
(f) Limitation on Covenant. The covenant set forth in
Section 7(e) above shall not be applicable if the Consultant terminates this
Agreement because the Company is in material violation of its obligations under
this Agreement.
8. REMEDIES. In the event of a breach by the Consultant 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 the Consultant and to enjoin the
Consultant 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. The Consultant 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 seek injunctive relief against him in the
event of any breach.
9. AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention
of the parties that the provisions of Section 7 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.
10. BINDING ARBITRATION. Any claim, controversy or dispute
arising between the parties with respect to this Agreement (a "Dispute"), to the
maximum extent allowed by applicable law, shall be submitted to and finally
resolved by binding arbitration. Either party may file a written Demand for
Arbitration with the American Arbitration Association's Sacramento, California
Regional Office, and shall send a copy of the Demand for Arbitration to the
other party. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association, except that discovery may be had in accordance with the
Federal Rules of Civil Procedure. The venue for the arbitration
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shall be the Sacramento, California office of the American Arbitration
Association. The arbitration shall be conducted before a panel of three
arbitrators selected as follows:. Within 15 business days after a Demand for
Arbitration is filed, each party shall select an arbitrator and, within 10
business days after the end of such 15-day period, such two arbitrators shall
select a third arbitrator. Each arbitrator must either have professional
experience relating to the business or legal aspects of the subject of the
arbitration or be a retired judge. No arbitrator shall (i) have any material
interest in the result of the arbitration or (ii) be, or shall ever have been,
an affiliate, equity holder or creditor of, or an attorney, accountant, agent or
consultant for, any party to such arbitration proceeding. The arbitrators shall
meet promptly, fix the time, date and place of the hearing and notify the
parties. The parties shall stipulate that the arbitration hearing shall last no
longer than five business days. A majority of the panel shall render a decision
within 10 days of the completion of the hearing, which decision may include an
award of legal fees, costs of arbitration and interest. The panel of arbitrators
shall promptly transmit an executed copy of its decision to the parties. The
decision of the arbitrators shall be final, binding and conclusive upon the
parties. Each party shall have the right to have the decision enforced by any
court of competent jurisdiction. Notwithstanding any other provision of this
Section, any Dispute in which a party seeks equitable relief may be brought in
any court having jurisdiction. The obligations of the parties under this Section
shall be specifically enforceable and shall survive any termination of this
Agreement.
11. CONSULTANT'S ACKNOWLEDGMENTS. It is expressly understood
and agreed between the Company and the Consultant that the Consultant, in
entering into this Agreement and carrying out its obligations hereunder, is an
independent contractor, is not and shall not be deemed to be an agent or
employee of the Company, and shall have no power to bind the Company to any
contract or warranty or in any respect whatever, whether by written or oral
statements or by any course of dealing or in any other manner, without the
express written consent of the Company. Consultant agrees not to represent to
any person or corporation or other entity that the relationship of Consultant to
the Company is other than that of independent contractor.
12. MISCELLANEOUS. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision. 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 on behalf of such parties. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The waiver by any
party of any breach or violation of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach or violation
hereof. This Agreement is executed in and shall be governed by and construed in
accordance with the laws of the State of Delaware. This Agreement may
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be amended only by written agreement of all parties hereto. This Agreement shall
be binding on and inure to the benefit of the Company, the Consultant and their
respective heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first written above.
-------------------------------
Satinder Singh Rekhi
RUBICS SOLUTIONS, INC.
By:
----------------------------
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EXHIBIT D-2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of ___________________, 1999, by and between
RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and VIJAY MALLYA
("Employee").
WITNESSETH:
WHEREAS, the Company, as of the date hereof, has acquired all of the
issued and outstanding shares of stock of R Systems, Inc., a California
corporation ("R Systems");
WHEREAS, the Company and R Systems are each engaged in the business of
providing information technology services to various organizations;
WHEREAS, Employee possesses valuable knowledge and skills that will
contribute to the successful operation of the Company's business;
WHEREAS, Employee has been serving as Chairman of the company pursuant
to the terms of an Employment Agreement dated September 1, 1997 (the "Prior
Agreement");
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in connection with the Company's acquisition of R Systems, which
Agreement, from and after the date hereof, shall supercede the Prior Agreement.
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 Board of
Directors 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.
Without expanding such duties in the previous sentence and pursuant to the terms
of the Employment Agreement between the Company and its President, Employee
shall consult and agree with the President on all strategic and corporate policy
issues.
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1.02 Term.
(a) 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 five years ("Initial Term"). At the end of the
Initial Term and each Successor Term (as defined below), this Agreement shall be
automatically renewed for an additional term of one year (a "Successor Term"),
unless either party gives written notice to the other at least 90 days prior to
the end of the Initial Term or any Successor Term of its intent not to renew
this Agreement.
(b) In the event that the Company elects not to renew
Employee's employment at the conclusion of the Initial Term or any Successor
Term pursuant to Section 1.02(a), the Company and Employee shall enter into a
consulting agreement in the form of Exhibit A hereto, pursuant to which Employee
shall serve as a consultant to the Company for a period of five years and
receive a consulting fee of not less than $150,000 per annum payable in equal
monthly installments.
1.03 Salary. The Company shall pay to Employee during the term of this
Agreement a salary at the rate of $200,000 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 a bonus determined in accordance with the Company's Executive
Incentive Compensation Plan.
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 paid vacation time as is consistent with the performance of his duties.
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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 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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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 to
be 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.
(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. In addition, the
Company shall, at its option either (i) pay Employee the full amount Employee
would have received under the terms of the Consulting Agreement or (ii) enter
into the Consulting Agreement with Employee and Employee shall serve as a
consultant pursuant to the terms thereof. 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 may terminate his employment
hereunder by giving the Company two months prior written notice of such
termination. 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. Payment of all compensation and provision of all
benefits to Employee hereunder shall cease to be 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 2.04.
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.
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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
pursuant to Section 4.06 below following termination of Employee's employment by
the Company. For purposes of Articles III and IV hereof, the term "Company"
shall also include R Systems and all other subsidiaries of the Company and R
Systems.
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.
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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.
(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, other than relatives or family members of Employee.
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
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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 four 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
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.
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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 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
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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 State of Delaware.
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.
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7.06 Binding Arbitration. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "Dispute"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
parties under this Section shall be specifically enforceable and shall survive
any termination of 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:
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Vijay Mallya
ATTEST: RUBICS SOLUTIONS, INC.
By:
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EXHIBIT A
CONSULTING AGREEMENT
This Consulting Agreement is made as of __________________, by
and between RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and
VIJAY MALLYA (the "Consultant").
PREAMBLE
The Consultant is the former Chairman of the Company. The
Company desires to procure the services of Consultant as an independent
contractor to provide certain consulting services, advice and assistance on
behalf of the Company and the Consultant is willing to provide such services,
advice and assistance for the Company, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, the Company and the Consultant, each intending
to be legally bound hereby, do mutually covenant and agree as follows:
1. ENGAGEMENT. The Company hereby engages the Consultant to
[describe consulting services to be provided]. The Consultant accepts such
engagement and covenants that he will devote such time, attention, skill, and
best efforts as are necessary for the performance of such services.
2. CONSULTING FEE. The Company agrees to pay the Consultant
for his services an annual consulting fee of $150,000, payable in equal monthly
installments, on the last day of each month during the term of this Agreement.
3. EXPENSES. The Consultant shall be reimbursed for his
necessary and reasonable business expenses directly incurred on behalf of the
Company upon presentation of properly documented expense reports to the Company.
4. REPORTS. The Consultant shall report to the Company's
President and shall submit such written reports to the Company as may be
reasonably required by the Company from time to time.
5. TERM AND TERMINATION.
(a) Term. Except as provided herein to the contrary,
the term of this Agreement shall be for a term of five years, unless earlier
terminated as provided herein.
(b) Death. The Agreement shall terminate upon the
Consultant's death and all obligations of the Company hereunder shall forthwith
terminate; provided, however, that the Company shall continue to pay to the
Consultant's estate the consulting fee for a period of six months following the
date of the Consultant's death.
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(c) Termination by the Company. The Company may
terminate this Agreement for cause in the event of the Consultant's deliberate
and intentional continuing refusal to substantially perform his duties and
obligations under this Agreement, if he shall have either failed to remedy such
alleged breach within 45 days after his receipt of written notice from the
Company demanding that he remedy such alleged breach, or shall have failed to
take reasonable steps in good faith to that end during such 45 day period and
shall continue diligently to take such steps.
(d) Termination Payment in Event of Termination for
Cause. In the event of termination of this Agreement by the Company under
Section 5(b) or (c), the Consultant (or his estate) shall only be entitled to
receive the compensation due hereunder, computed on a pro rata basis, up to the
effective date of such termination.
(e) Termination by the Consultant. The Consultant
shall have the right at any time, by giving written notice to the Company, to
terminate this Agreement effective 45 days after the date on which such notice
is given by the Consultant. In the event the Consultant shall make such election
under this Section 5(e) the Consultant shall be entitled to receive all fees,
reimbursements, payments or other allowances required to be paid under this
Agreement through the effective date of termination. Thereupon, this Agreement
shall terminate and the Consultant shall have no further rights under or be
entitled to any other benefits of this Agreement.
6. CONSULTANT'S ACKNOWLEDGEMENTS. The Consultant acknowledges
that: (a) in the course of his prior employment by the Company and during the
term of this Agreement, Employee has acquired and 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 the Consultant not disclose the Confidential Information to
others or use the Confidential Information to the Consultant's own advantage or
the advantage of others.
The Consultant further acknowledges that it is essential for
the proper protection of the business of the Company that the Consultant be
restrained (a) from
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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 this Agreement. For
purposes of Sections 6 and 7 hereof, the term "Company" shall also include R
Systems, Inc. and all other subsidiaries of the Company and R Systems, Inc.
7. THE CONSULTANT'S COVENANTS AND AGREEMENTS
(a) Nondisclosure or Utilization of Confidential
Information. The Consultant 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 the term of this Agreement or subsequent to its
termination for any reason, any of the Confidential Information, whether or not
developed by the Consultant, except as required in the performance of the
Consultant's duties to the Company.
(b) Return of Materials. Upon the termination of this
Agreement for any reason, the Consultant 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.
(c) Nonsolicitation of Customers. The Consultant
agrees that during the term of this Agreement and for three (3) years following
termination of this Agreement 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.
(d) Nonsolicitation of Employees. The Consultant
agrees that during his employment by the Company and for three (3) years
following termination of this Agreement 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 other than relatives or family members of the
Consultant.
(e) Restriction on Competition. The Consultant
covenants and agrees that during the term of this Agreement and for a period of
one (1) year following the termination thereof for any reason, the Consultant
shall not engage, directly or
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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 four 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.
(f) Limitation on Covenant. The covenant set forth in
Section 7(e) above shall not be applicable if the Consultant terminates this
Agreement because the Company is in material violation of its obligations under
this Agreement.
8. REMEDIES. In the event of a breach by the Consultant 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 the Consultant and to enjoin the
Consultant 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. The Consultant 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 seek injunctive relief against him in the
event of any breach.
9. AUTHORIZATION TO MODIFY RESTRICTIONS. It is the intention
of the parties that the provisions of Section 7 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.
10. BINDING ARBITRATION. Any claim, controversy or dispute
arising between the parties with respect to this Agreement (a "Dispute"), to the
maximum extent allowed by applicable law, shall be submitted to and finally
resolved by binding arbitration. Either party may file a written Demand for
Arbitration with the American Arbitration Association's Sacramento, California
Regional Office, and shall send a copy of the Demand for Arbitration to the
other party. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association, except that discovery may be had in accordance with the
Federal Rules of Civil Procedure. The venue for the arbitration shall be the
Sacramento, California office of the American Arbitration Association. The
arbitration shall be conducted before a panel of three arbitrators selected as
follows:. Within 15 business days after a Demand for Arbitration is filed, each
party shall select
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an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
parties under this Section shall be specifically enforceable and shall survive
any termination of this Agreement.
11. CONSULTANT'S ACKNOWLEDGMENTS. It is expressly understood
and agreed between the Company and the Consultant that the Consultant, in
entering into this Agreement and carrying out its obligations hereunder, is an
independent contractor, is not and shall not be deemed to be an agent or
employee of the Company, and shall have no power to bind the Company to any
contract or warranty or in any respect whatever, whether by written or oral
statements or by any course of dealing or in any other manner, without the
express written consent of the Company. Consultant agrees not to represent to
any person or corporation or other entity that the relationship of Consultant to
the Company is other than that of independent contractor.
12. MISCELLANEOUS. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision. 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 on behalf of such parties. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The waiver by any
party of any breach or violation of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach or violation
hereof. This Agreement is executed in and shall be governed by and construed in
accordance with the laws of the State of Delaware. This Agreement may be amended
only by written agreement of all parties hereto. This Agreement shall be binding
on and inure to the benefit of the Company, the Consultant and their respective
heirs, personal representatives, successors and assigns.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first written above.
-----------------------------------
Vijay Mallya
RUBICS SOLUTIONS, INC.
By:
--------------------------------
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EXHIBIT D-3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of ___________________, 1999, by and between
RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and O'NEIL
NALAVADI ("Employee").
WITNESSETH:
WHEREAS, the Company, as of the date hereof, has acquired all of the
issued and outstanding shares of stock of R Systems, Inc., a California
corporation ("R Systems");
WHEREAS, the Company and R Systems are each engaged in the business of
providing information technology services to various organizations;
WHEREAS, Employee possesses valuable knowledge and skills that will
contribute to the successful operation of the Company's business;
WHEREAS, Employee has been serving as Senior Vice President and Chief
Financial Officer of the Company pursuant to the terms of an Employment
Agreement dated September 1, 1997 (the "Prior Agreement");
WHEREAS, the Company and Employee have agreed to execute and deliver
this Agreement in connection with the Company's acquisition of R Systems, which
Agreement, from and after the date hereof, shall supercede the Prior Agreement.
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. Employee shall report directly to
the President.
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
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initial term of three years ("Initial Term"). At the end of the Initial Term and
each Successor Term (as defined below), this Agreement shall be automatically
renewed for an additional term of one year (a "Successor Term"), unless either
party gives written notice to the other at least 90 days prior to the end of the
Initial Term or any Successor Term of its intent not to renew this Agreement.
1.03 Salary. The Company shall pay to Employee during the term of this
Agreement a salary 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 a bonus determined in accordance with the Company's Executive
Incentive Compensation Plan.
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 paid 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 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
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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, but not to exceed $25,000 in the aggregate, 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. The provisions
of this Section shall terminate and be of no further force and effect from and
after September 1, 1999.
1.11 Travel Allowance. The Company shall pay Employee an allowance
equal to the amount he and his immediate family would reasonably expend in
travelling, via business class, to India one time during each year of the term
of this Agreement. The provisions of this Section shall terminate and be of no
further force and effect from and after September 1, 1999.
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
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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 to
be 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 may terminate his employment
hereunder by giving the Company two months prior written notice of such
termination. 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. Payment of all compensation and provision of all
benefits to Employee hereunder shall cease to be 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 2.04.
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
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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
pursuant to Section 4.06 below following termination of Employee's employment by
the Company. For purposes of Articles III and IV hereof, the term "Company"
shall also include R Systems and all other subsidiaries of the Company and R
Systems.
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
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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) 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.
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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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
law. Employee acknowledges, however, that the remedies at law for any breach by
him of the
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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 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
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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 State of Delaware.
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
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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. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "Dispute"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
parties under this Section shall be specifically enforceable and shall survive
any termination of 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:
- --------------------- ---------------------------------
O'Neil Nalavadi
ATTEST: RUBICS SOLUTIONS, INC.
By:
- --------------------- ------------------------------
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EXHIBIT D-4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of ___________________, 1999, by and between
RUBICS SOLUTIONS, INC., a Delaware corporation (the "Company"), and RALPH KENNEY
("Employee").
WITNESSETH:
WHEREAS, the Company, as of the date hereof, has acquired all of the
issued and outstanding shares of stock of R Systems, Inc., a California
corporation ("R Systems");
WHEREAS, the Company and R Systems are each engaged in the business of
providing information technology services to various organizations;
WHEREAS, Employee possesses valuable knowledge and skills that will
contribute to the successful operation of the Company's business;
WHEREAS, Employee has been serving as Chief Operating Officer of R
Systems and shall serve as Vice President and Chief Operating Officer of the
Company;
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 and/or R Systems and their affiliates, (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:
<PAGE> 142
ARTICLE I
EMPLOYMENT
1.01 Office. Employee is hereby employed as Senior Vice President and
Chief Operating 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. Employee shall report directly to
the President.
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 ("Initial Term"). At the end of the
Initial Term and each Successor Term (as defined below), this Agreement shall be
automatically renewed for an additional term of one year (a "Successor Term"),
unless either party gives written notice to the other at least 90 days prior to
the end of the Initial Term or any Successor Term of its intent not to renew
this Agreement.
1.03 Salary. The Company shall pay to Employee during the term of this
Agreement a salary at the rate of $167,000 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 a bonus determined in accordance with the Company's Executive
Incentive Compensation Plan.
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 paid vacation time as is consistent with the performance of his duties.
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1.07 Options. Employee shall be entitled to receive options to purchase
[50,000] 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 to
be 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 may terminate his employment
hereunder by giving the Company two months prior written notice of such
termination. 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. Payment of all compensation and provision of all
benefits to Employee hereunder shall cease to be 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 2.04.
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
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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
pursuant to Section 4.06 below following termination of Employee's employment by
the Company. For purposes of Articles III and IV hereof, the term "Company"
shall also include R Systems and all other subsidiaries of the Company and R
Systems.
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
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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:
(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
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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 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 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
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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.
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.
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7.03 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
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. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "Dispute"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction. Notwithstanding any
other provision of this Section, any Dispute in which a party seeks equitable
relief may be brought in any court having jurisdiction. The obligations of the
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parties under this Section shall be specifically enforceable and shall survive
any termination of 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:
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Ralph Kenney
ATTEST: RUBICS SOLUTIONS, INC.
By:
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EXHIBIT E
FORM OF
NONCOMPETITION AGREEMENT
This Agreement is made as of ____________ ___, 1999 between RUBICS
SOLUTIONS, INC., a Delaware corporation ("RUBICS"), and ____________________, an
individual residing in _________________ (the "SHAREHOLDER").
PREAMBLE
RUBICS (formerly, UBICS, Inc.) is party to separate Acquisition and
Stock Exchange Agreements (the "ACQUISITION AGREEMENTS") with R Systems, Inc.
("R SYSTEMS"), R Systems (India) Private Limited, an Indian corporation, and R
Systems (Singapore) Pte Limited, a Singapore company, each an affiliated company
of R Systems (together with R Systems, the "R SYSTEMS COMPANIES"), and their
respective shareholders, each dated as of even date herewith.
The Shareholder owns shares of capital stock in one or more of the R
Systems Companies. To induce RUBICS to enter into the Acquisition Agreements,
the Selling Shareholder has agreed to refrain from competing with RUBICS, the R
Systems Companies and their Affiliates (as defined below) (collectively, the
"RUBICS GROUP"), upon the terms and conditions as set forth below.
Therefore, in consideration of the mutual promises of the parties set
forth herein, and intending to be legally bound hereby, the parties agree as
follows:
AGREEMENT
1. Noncompetition and Nonsolicitation. During the period commencing on
the date hereof and ending on the earlier of the expiration of five years
following the date hereof or six months following a Change in Control (as
defined below) (the "TERM"), the Shareholder shall not, directly or indirectly,
as a partner, investor, stockholder, creditor, guarantor, advisor, officer,
director, employee or consultant, (i) own, manage, operate, join, advise,
control, or otherwise engage or participate in the business of providing
information technology services that are similar to or would be competitive with
the services provided by the RUBICS Group as currently being conducted on the
date hereof (the "BUSINESS") within the United States, India, Japan or
Singapore, (ii) induce or attempt to induce any customer or supplier of any
member of the RUBICS Group to reduce the business done by such supplier or
customer with the RUBICS Group, or (iii) solicit any employee of any member of
the RUBICS Group to leave the employ of the RUBICS Group other than family
members or relatives of the Shareholders. Notwithstanding the foregoing, this
Agreement does not prohibit the Shareholder from acquiring or holding the
outstanding shares of capital stock of any
<PAGE> 153
entity engaged in the Business if such shares are publicly traded and the
Shareholder's ownership is less than four percent (4%) of such outstanding
shares. As used herein, an "AFFILIATE" of RUBICS or any R Systems Company means
any person or entity which controls, is controlled by or is under common control
with RUBICS or any R Systems Company.
(b) A "CHANGE IN CONTROL" is deemed to occur upon any of the
following events: (i) any individual, corporation, partnership, association,
trust or other entity becomes the beneficial owner (as defined in Rule 13(d)(3)
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of RUBICS representing 50% or more of the combined voting power of
RUBICS's then outstanding voting securities; (ii) the individuals who as of the
date of this Agreement are members of the Board of Directors of RUBICS (the
"INCUMBENT BOARD"), cease for any reason to constitute at least a majority of
the Board of Directors of RUBICS (provided, however, that if the election, or
nomination for election by RUBICS'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 RUBICS to consolidate or merge with any other entity pursuant to
which RUBICS will not be the continuing or surviving corporation or pursuant to
which shares of the Common Stock of RUBICS would be converted into cash,
securities or other property, other than a merger of RUBICS in which holders of
the Common Stock of RUBICS 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 RUBICS to sell, lease, exchange or
otherwise transfer in one transaction or a series of related transactions
substantially all the assets of RUBICS; (v) the adoption of any plan or proposal
for a complete or partial liquidation or dissolution of RUBICS; or (vi) an
agreement to sell more than 50% of the outstanding voting securities of RUBICS
in one or a series of related transactions other than an initial public offering
of voting securities registered with the Securities and Exchange Commission.
2. Confidentiality.
(a) The Shareholder shall not, during the Term, without the
prior written consent of RUBICS, use for his own benefit or reveal to any third
party, any confidential, proprietary or trade secret information and material of
the RUBICS Group including, without limitation, technical details and know-how
relating to the services of the RUBICS Group, sales, sales volume, sales
methods, customers, customer purchases, marketing ideas (i.e. advertising and
selling techniques), suppliers, supplier information, and other confidential or
proprietary information belonging to the RUBICS Group or relating to the affairs
of the RUBICS Group (hereinafter collectively referred to as "PROPRIETARY
INFORMATION") (except to the extent required for performance by the Shareholder
of services for a member of the RUBICS Group under a service or similar
agreement). The Shareholder acknowledges that it is vital to the protection of
the
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RUBICS Group's goodwill and to the maintenance of the RUBICS Group's competitive
position that the Shareholder be restrained from disclosing to others, or using
for the Shareholder's own advantage, any Proprietary Information.
(b) Proprietary Information that is or was (i) already
publicly available or otherwise in the public domain prior, (ii) lawfully
obtained by the Shareholder from a source other than a member of the RUBICS
Group (or their officers, directors, employees, equity holders or agents) so
long as, in the case of information obtained from a third party, such third
party was not known to the Shareholder to be subject to an obligation of
confidentiality owed to a member of the RUBICS Group at the time such
Proprietary Information was or is disclosed to the Shareholder, or (iii) becomes
publicly available or otherwise comes into the public domain by means other than
a wrongful act of the Shareholder, shall not be considered Proprietary
Information for purposes of this Agreement.
3. Injunctive Relief. The Shareholder acknowledges and agrees that the
covenants and agreements set forth in Sections 1 and 2 are necessary to protect
the legitimate business interests of RUBICS and that any breach of such
covenants and agreements will cause immediate and irreparable harm to RUBICS.
The Shareholder acknowledges that damages for the violation of any such covenant
or agreement will not give full and sufficient relief to RUBICS and agrees that,
in the event of any violation of any such covenant or agreement, RUBICS shall be
entitled to seek injunctive relief with respect to any such breach, which remedy
shall be in addition to any other remedy which RUBICS may have on account of
such breach, including, without limitation, the recovery of damages from the
Shareholder. None of these remedies shall be mutually exclusive, and all of them
may be pursued concurrently and cumulatively.
4. Material Covenants. The Shareholder acknowledges that without his
covenants set forth in this Agreement, RUBICS would not be willing to consummate
the transactions contemplated by the Acquisition Agreements. The Shareholder
expressly agrees that the character, duration and geographical scope of this
Agreement are reasonable in light of the circumstances as they exist on the date
of this Agreement and are necessary to protect the legitimate business interests
of RUBICS because of the geographic scope of the RUBICS Group's business.
5. Severability. It is the intent of the parties that each provision of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies of each jurisdiction in which enforcement hereof is sought. In
furtherance of the foregoing, each provision hereof shall be severable from each
other provision. If any provision of this Agreement is adjudicated by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement that can be given full force and effect without the invalid provision
shall continue in full force and effect and shall in no way be impaired or
invalidated.
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6. Waivers and Amendments. No breach of any term of this Agreement
shall be deemed waived unless it is expressly waived in writing by the party who
might assert such breach. No waiver of any right hereunder shall operate as a
waiver of any other right or of the same or a similar right on another occasion.
To be effective, any amendment to this Agreement must be in writing and signed
by the party against whom enforcement of the same is sought.
7. Entire Agreement. This Agreement, together with the Acquisition
Agreements, contains the entire understanding of the parties with regard to the
subject matter hereof, supersedes all prior agreements and understandings
relating to the subject matter hereof, and shall not be amended except by a
written instrument signed by all of the parties hereto.
8. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof or of any other jurisdiction.
9. Jurisdiction. Each of the parties hereto hereby expressly and
irrevocably submits to the non-exclusive personal jurisdiction of the United
States District Court for Delaware and to the jurisdiction of any other
competent court of the State of Delaware (collectively, the "DELAWARE COURTS"),
preserving, however, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of or in connection
with this Agreement and agrees not to commence any litigation relating thereto
except in such courts. If the aforementioned courts do not have subject matter
jurisdiction, then the proceeding shall be brought in any other state or federal
court located in the State of Delaware, preserving, however, all rights of
removal to such federal court under 28 U.S.C. Section 1441. Each party hereby
waives the right to any other jurisdiction or venue for any litigation arising
out of or in connection with this Agreement to which any of them may be entitled
by reason of its present or future domicile. Notwithstanding the foregoing, each
of the parties hereto agrees that each of the other parties shall have the right
to bring any action or proceeding for enforcement of a judgment entered by the
Delaware Courts in any other court or jurisdiction.
10. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
11. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties and their respective heirs,
personal representatives, successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SHAREHOLDER:
------------------------------------------
RUBICS SOLUTIONS, INC.
By:
---------------------------------------
Name:
Title:
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of the
________ day of __________, 1999, by and between UBICS, Inc., a Delaware
corporation (the "Company"), and the stockholders of R Systems, Inc., a
California corporation, R Systems (Singapore) Pte Limited, a Singapore company,
and R Systems (India) Private Limited, an India corporation (collectively, the
"Stockholders").
R E C I T A L S:
WHEREAS, the Company, R Systems, Inc. ("R Systems") and the
stockholders of R Systems have entered into that certain Acquisition and Stock
Exchange Agreement, dated as of March 18, 1999 (the "R Systems Acquisition
Agreement"), which provides for, among other things, the acquisition of R
Systems by the Company. Pursuant to the terms of the Acquisition Agreement, all
of the shares of common stock of R Systems will be exchanged for shares of
unregistered common stock of the Company ("Company Common Stock") in accordance
with the R Systems Acquisition Agreement;
WHEREAS, the Company, R Systems (Singapore) Pte Limited, ("R Systems -
Singapore") and the stockholders of R Systems Singapore have entered into that
certain Acquisition and Stock Exchange Agreement, dated as of March 18, 1999
(the "Singapore Acquisition Agreement"), which provides for, among other things,
the acquisition of R Systems Singapore, by the Company. Pursuant to the terms of
the Singapore Acquisition Agreement, all of the shares of common stock of R
Systems Singapore, will be exchanged for shares of unregistered Company Common
Stock in accordance with the Singapore Acquisition Agreement;
WHEREAS, the Company, R Systems (India) Private Limited ("R Systems -
India") and the stockholders of R Systems India have entered into that certain
Acquisition and Stock Exchange Agreement, dated as of March 18, 1999 (the "India
Acquisition Agreement" and, together with the R Systems Acquisition Agreement
and the Singapore Acquisition Agreement, the "Acquisition Agreements"), which
provides for, among other things, the acquisition of R Systems India by the
Company. Pursuant to the terms of the India Acquisition Agreement, all of the
shares of common stock of R Systems India will be exchanged for shares of
unregistered Company Common Stock in accordance with the India Acquisition
Agreement;
WHEREAS, as a material inducement for R Systems, R Systems Singapore
and R Systems India (together, the "R Systems Companies") and their respective
Stockholders to enter into their respective Acquisition Agreements, the Company
is willing to grant each Stockholder the registration rights set forth in this
<PAGE> 158
Agreement, with respect to the Company Common Stock to be received by the
Stockholders in the acquisitions; and
WHEREAS, the Company's obligation to consummate the acquisitions and
the transactions contemplated by the Acquisition Agreements is subject to the
condition, among others, that the Company shall have entered into this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Company and each of the Stockholders,
intending to be legally bound, hereby agree as follows:
1. AMENDMENT. This Agreement and the rights and obligations
included herein may hereafter be amended by the written consent of the Company
and the Stockholders.
2. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
2.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Securities Act" shall mean the
Securities Act of 1933, as amended, or any similar federal statute and the rules
and regulations of the Securities and Exchange Commission (the "SEC")
promulgated thereunder, all as the same may be in effect at that time;
(b) The terms "Register", "Registered" and
"Registration" refer to a registration effected by preparing and filing a
registration statement or similar document in accordance with the Securities Act
and the declaration or ordering of effectiveness of such registration statement
or document by the SEC;
(c) "Registrable Securities" means the
shares of Company Common Stock issued or issuable to each Stockholder pursuant
to the Acquisition Agreements, together with all other shares of Company Common
Stock issued in respect thereof (by way of stock split, dividend, or otherwise).
Registrable Securities shall include any shares of Company Common Stock
transferred by a Stockholder in accordance with Section 2.11;
(d) "Holder" shall mean: (i) a Stockholder
to whom shares of Registrable Securities are issued pursuant to any Acquisition
Agreement, for so long as such Holder continues to hold such shares, or (ii) any
transferee of Registrable Securities to whom registration rights under this
Agreement are assigned pursuant to Section 2.11 of this Agreement;
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(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with Section 2.2 hereof,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company).
(f) "Selling Expenses" shall mean all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the securities registered by the Holders.
(g) "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any similar registration form
under the Securities Act subsequently adopted by the SEC which permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC; and
(h) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, or any similar federal statute and the rules
and regulations of the SEC thereunder, all as the same may be in effect at that
time.
2.2 PIGGY-BACK REGISTRATION. If at any time after the
date hereof the Company elects, in its sole discretion, to register (including
for this purpose a registration effected by the Company for shareholders other
than the Holders) any of its Common Stock under the Securities Act in connection
with the public offering of Common Stock solely for cash (other than a
registration relating solely to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan, or a
registration relating to a Rule 145 transaction or a registration on Form S-4 or
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities) the Company shall, each such time, promptly
give each Holder written notice of such registration. Upon the written request
of each Holder given within thirty (30) days after mailing of such notice by the
Company, the Company shall, subject to the provisions of Sections 2.4, 2.6 and
2.7, use its best efforts to cause to be registered under the Securities Act all
of the Registrable Securities that each such Holder has requested to be
registered.
2.3 FORM S-3 REGISTRATION. Any Holder or group of
Holders holding at least $2,500,000 of Registrable Securities may, at any time
during the five-year period beginning on the date of this Agreement, demand that
the Company effect a registration on Form S-3 with respect to at most $2,500,000
of Registrable Securities. The Company shall be obligated to effect such
registration only once during each calendar year. Any such registration shall
also trigger the piggy-back registration rights of any Holder that does not
participate in the demand registration. The value of the Registrable Securities
for purposes of this Section 2.3 shall be determined by the
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closing price of the Company's Common Stock as reported by NASDAQ or any
securities exchange or market on which the Company's Common Stock is listed on
the date the demand for registration is received by the Company. Upon receipt of
a demand as set forth herein that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the
proposed registration, and any related qualification or compliance, to all other
Holders, and
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within fifteen (15) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification, or compliance pursuant
to this Section 2.3: (i) if the Company shall furnish to the holders a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 2.3; or (ii) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required
under this Section 2 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective and keep
such registration statement effective until the earlier of (i) the date on which
all Registrable Securities covered by the registration statement are sold or
(ii) 180 days from the effective date of the registration statement.
(b) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
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(c) Furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdiction.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
2.5 FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 2 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
2.6 EXPENSES OF REGISTRATION. All Registration
Expenses incurred in connection with any registration, filing, qualification or
compliance pursuant to Sections 2.2 or 2.3 shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered by the
Holders shall be borne by the holders of such securities pro rata on the basis
of the number of shares so registered.
2.7 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares, the Company shall not be required
under Sections 2.2 or 2.3 to include any of the Holders' Registrable Securities
in such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity as will not, in the opinion of the underwriters, jeopardize the
success of the offering by the Company or the Company's shareholders demanding
such registration. If the total amount of Registrable Securities that all
selling Holders of the Company request to be included in such offering exceeds
(when combined with the securities being offered by the Company or its
shareholders demanding such registration) the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such Registrable Securities which the underwriters believe will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling Holders according to the total amount of
Registrable Securities owned by each selling
5
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Holder or in such other proportions as shall mutually be agreed to by such
selling Holders).
2.8 DELAY OF REGISTRATION. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.9 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, the officers and directors
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any who controls such Holder or underwriter within
the meaning of the Securities Act or Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will
reimburse each such Holder, officer or director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action, provided, however, that the indemnity agreement contained in this
Section 2.9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter (within the meaning of the Securities Act) for the Company
or such other Holders, any person who controls such underwriter, and any other
Holder selling securities in such registration statement
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or any of its directors or officers or any person who controls such Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, or underwriter or
controlling person, or other such Holder or director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act or other
federal or state law insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration, and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or
controlling person, other Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim damage,
liability, or action, provided, however, that the indemnity agreement contained
in this Section 2.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld,
and, provided further that in no event shall any selling Holder's liability
hereunder exceed the gross proceeds actually received by such Holder in respect
of the sale of such Holder's shares in such offering.
(c) Promptly after receipt by an indemnified
party under this Section 2.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2.9, notify the indemnifying party in writing of the commencement thereof and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.9, but the omission so to notify the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.9.
2.10 REPORTS UNDER EXCHANGE ACT. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information
available as those terms are understood and defined in Rule 144, at all times
until all of the Registrable Securities are sold;
(b) take such action as is necessary to
enable the Holders to utilize Form S-3 for the sale of their Registrable
Securities, and to continue to maintain Form S-3 eligibility. In the event that
the Company fails to be eligible to use Form S-3, the Company shall satisfy the
Holders' demand registration rights by using whatever form may be available to
effect such registration;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(d) furnish to any Holder, so long as the
Holder owns any Registrable Securities, forthwith upon request: (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies); (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company; and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
(e) For so long as any Registrable
Securities remain unsold, use its best efforts to continue to list the Common
Stock on NASDAQ or a national securities exchange.
2.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register Registrable Securities pursuant to this Section 2
may be assigned by a Holder to a transferee or assignee of such Registrable
Securities, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
2.12 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby
agrees that it shall not, to the extent requested by the Company and an
underwriter of Common Stock (or other securities) of the Company sell or
otherwise transfer or dispose of any Registrable Securities during the one
hundred and eighty (180) day period following the effective date of a
registration statement except for Registrable Securities which are included in
such registration statement of the Company filed under the Securities Act;
provided, however, that all officers and directors of the
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Company and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of each Holder (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such one hundred and
eighty (180) day period.
2.3 Termination of Registration Rights. The Company
shall not be obligated under this Section 2 to register or include in any
registration Registrable Securities held by any Holder from and after such time
as all Registrable Securities that such Holder holds may be publicly offered,
sold and distributed without registration under the Act pursuant to Rule 144.
3. MISCELLANEOUS.
3.1 This Agreement constitutes the entire agreement
between the Company and the Stockholders with respect to the subject matter
hereof. Any previous agreement between the Company and the Stockholders is
superseded by this Agreement. Subject to the exceptions specifically set forth
in this Agreement, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective heirs, successors, administrators,
executors and assigns of the parties hereto.
3.2 Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery or facsimile to the party to be
notified or five (5) days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified as follows: if to the Company, to the Company's President and Chief
Financial Officer at the Company's principal executive office, and if to a
Holder, at the address indicated for such Holder on the signature pages hereto,
or at such other address as such party may designate by ten (10) days advance
written notice to the other parties.
3.3 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 This Agreement shall be governed in all respects
by the laws of the State of Delaware applicable to contracts entered into and
wholly to be performed within the State of Delaware by Delaware residents. Any
disputes arising hereunder shall be subject to the dispute resolution provisions
set forth in the applicable Acquisition Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have set their hands as of the date set
forth above.
"THE COMPANY"
UBICS, INC.
---------------------------------------------
Dr. Vijay Mallya, Chairman
"R SYSTEMS, INC."
---------------------------------------------
Satinder Singh Rekhi, President & CEO
"THE STOCKHOLDERS"
---------------------------------------------
Satinder Singh Rekhi
---------------------------------------------
Satinder S. Rekhi, Trustee of the Satinder
and Harpreet Rekhi Family Trust u/t/a dated
August 22, 1997
---------------------------------------------
Harpreet K. Rekhi
---------------------------------------------
Harpreet K. Rekhi, Trustee of the Satinder
and Harpreet Rekhi Family Trust u/t/a dated
August 22, 1997
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---------------------------------------------
Mandeep Sodhi, Trustee of the Reena
Baldev Singh Irrevocable Trust u/t/a dated
January 1, 1998
---------------------------------------------
Mandeep Singh Sodhi, Trustee of the
Guru Harkrishnan Irrevocable Trust u/t/a
dated January 1, 1998
---------------------------------------------
Mandeep Singh Sodhi, Trustee of the
Guru Tegh Bahodur Irrevocable Trust u/t/a
dated January 1, 1998
---------------------------------------------
Baljit Kaur Dhaliwal
---------------------------------------------
Seow Siang Eng Anne
---------------------------------------------
Maninder Singh Uberoi
---------------------------------------------
Gurjot Singh Uberoi
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<PAGE> 168
EXHIBIT G
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of ________________, 1999 by
and between RUBICS SOLUTIONS, Inc., a Delaware corporation (the "Corporation"),
and the undersigned director of the Corporation (the "Indemnitee").
WITNESSETH:
WHEREAS, Indemnitee is a member of the Corporation's Board of Directors
and in that capacity is performing a valuable service for the Corporation and
its stockholders and the Corporation desires to retain the continued service of
Indemnitee in that capacity; and
WHEREAS, pursuant to Article VII of the Corporation's Amended and
Restated Certificate of Incorporation ("Certificate of Incorporation") and
Article III, Section 10 of the Corporation's Amended Bylaws ("Bylaws"),
Indemnitee is entitled to be indemnified by the Corporation to the full extent
permitted by law or a court, whichever is greater, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred by
him in connection with any threatened, pending, or completed action, suit or
proceeding to which the Indemnitee was, is or is threatened to be made a party
by reason of the fact that he is or was a director, officer, incorporator,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, incorporator, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise (the
"Indemnification Provisions"); and
WHEREAS, consistent with the Indemnification Provisions of the
Corporation's Certificate of Incorporation and Bylaws, and as permitted by
Section 145(e) of the Delaware General Corporation Law, as amended ("DGCL"), and
in order to retain the continued service of the Indemnitee as a director of the
Corporation, the Corporation desires to agree to pay the expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in defending any civil, criminal,
administrative or investigative action, suit or proceeding for which he may be
indemnified pursuant to the Indemnification Provisions in advance of the final
disposition of such action, suit or proceeding; and
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director after the date of this Agreement, and intending to be legally bound,
the parties agree as follows:
1. Maintenance of Insurance.
(a) Subject only to the provisions of Subsection 1(b) hereof,
so long as the Indemnitee shall continue to serve as a director, officer,
incorporator, employee or agent of the Corporation (or shall continue, at the
request of the Corporation, to serve
<PAGE> 169
as a director, officer, incorporator, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and thereafter so long as
the Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that the Indemnitee was a director of the
Corporation or served in any of the above-described capacities, the Corporation
will purchase and maintain in effect for the benefit of the Indemnitee, one or
more valid, binding and enforceable policies of directors' and officers'
insurance ("D&O Insurance").
(b) The Corporation shall not be required to maintain D&O
Insurance in effect if such insurance is not reasonably available or if, in the
reasonable business judgment of the then directors of the Corporation, either
(i) the premium cost for such insurance is substantially disproportionate to the
amount of coverage or (ii) the coverage provided by such insurance is so limited
by exclusions that there is insufficient benefit from such insurance.
(c) In the event the Corporation does not purchase and
maintain in effect D&O Insurance pursuant to the provisions of Subsection 1(b)
hereof, the Corporation shall hold harmless and indemnify the Indemnitee to the
full extent of the coverage which would otherwise have been provided for the
benefit of the Indemnitee pursuant to such D&O Insurance.
2. Indemnification.
Notwithstanding Subsection 1(a) hereof, the Corporation shall
indemnify the Indemnitee to the fullest extent permitted by law and the
Certificate of Incorporation, whichever is greater, in effect on the date hereof
or as such laws or the Certificate of Incorporation may from time to time be
amended. The right to indemnification conferred in the Certificate of
Incorporation and the Bylaws shall be presumed to have been relied on by
Indemnitee in serving or continuing to serve the Corporation (or if the
Indemnitee shall continue, at the request of the Corporation, to serve as a
director, officer, incorporator, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and shall be enforceable
as a contract right.
3. Advancement of Expenses.
(a) The Corporation shall pay the expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred or estimated to be incurred by Indemnitee in connection with
any civil, criminal, administrative or investigative action, suit or proceeding
for which he would be entitled to be indemnified pursuant to the Indemnification
Provisions, the D&O Insurance, the DGCL or otherwise (in any capacity) in
advance of the final disposition thereof promptly after receipt by the
Corporation of a request therefor stating in reasonable
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<PAGE> 170
detail the expenses incurred or to be incurred by him. No security shall be
required in connection with any advancement of expenses to Indemnitee hereunder
and such a request shall be accepted without reference to the Indemnitee's
ability to make a repayment.
(b) If a claim under Subsection 3(a) hereof is not paid in
full by the Corporation within thirty (30) days after a written claim has been
received by the Corporation, the Indemnitee may, at any time thereafter, bring
suit against the Corporation to recover the unpaid amount of the claim. The
burden of proving that advancement of expenses is not appropriate shall be on
the Corporation. The Corporation shall pay such fees and expenses in advance of
the final disposition of such action upon receipt of a written request therefor.
4. Undertaking to Repay Expenses.
(a) In the event it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified for the expenses paid by the
Corporation pursuant to the provisions of this Agreement or otherwise or was not
entitled to be fully indemnified, the Indemnitee shall repay to the Corporation
such amount of the expenses or the appropriate portion thereof, so paid or
advanced. This provision shall constitute the undertaking contemplated by
Section 145(e) of the DGCL and no further assurances shall be required of
Indemnitee before any expenses are advanced.
(b) Notwithstanding Subsection 4(a) hereof, the Corporation's
Board of Directors shall be deemed to have determined that the Indemnitee is
entitled to indemnification unless, within twenty (20) days after submission of
Indemnitee's request pursuant to Subsection 3(a) hereof, the Corporation's Board
of Directors shall have notified the Indemnitee in writing that it has
determined, by a majority vote of directors, based on clear and convincing
evidence, that the Indemnitee is not entitled to indemnification under this
Agreement. The evidence shall be disclosed to the Indemnitee in such notice
which shall be sworn to by all directors who participated in the determination
and voted to deny indemnification.
5. Notice.
Any notice to the Corporation shall be directed to RUBICS,
Inc., 333 Technology Drive, Suite 210, Canonsburg, Pennsylvania 15317,
Attention: President (or such other address as the Corporation shall designate
in writing to the Indemnitee).
6. Indemnification Under this Agreement Not Exclusive.
The rights provided to Indemnitee by this Agreement shall not
be exclusive of any other rights to which Indemnitee may be entitled under the
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<PAGE> 171
Corporation's Certificate of Incorporation, its Bylaws, any other agreement, any
vote of stockholders or directors, or otherwise, as to action in any capacity.
7. Miscellaneous.
(a) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
(b) This Agreement shall be binding upon Indemnitee and upon
the Corporation, its successors and assigns, and shall inure to the benefit of
Indemnitee, his heirs, executors, personal representatives and assigns and to
the benefit of the Corporation, its successors and assigns. If the Corporation
shall merge or consolidate with another corporation or shall sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to one
or more persons or groups (in one transaction or series of transactions), (i)
the Corporation shall cause the successor in the merger or consolidation or the
transferee of the assets that is receiving the greatest portion of the assets or
earning power transferred pursuant to the transfer of the assets, by agreement
in form and substance satisfactory to the Indemnitee, to expressly assume all of
the Corporation's obligations under and agree to perform this Agreement, and
(ii) the term "Corporation" whenever used in this Agreement shall mean and
include any such successor or transferee.
(c) No amendment, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by both of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RUBICS SOLUTIONS, INC.
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Satinder Singh Rekhi, Indemnitee
-4-
<PAGE> 1
Exhibit 2.2
ACQUISITION AND STOCK EXCHANGE AGREEMENT
This AGREEMENT is made as of March 18, 1999, among UBICS, INC., a
Delaware corporation ("UBICS"), R SYSTEMS (INDIA) PRIVATE LIMITED, an Indian
corporation (the "COMPANY") and the individuals listed as shareholders on the
signature page hereof (each such person a "SHAREHOLDER" and collectively the
"SHAREHOLDERS").
PREAMBLE
The Shareholders collectively own all of the issued and outstanding
shares of capital stock of the Company. A full and complete list setting forth
the names of the Shareholders and their respective holdings in the Company is
attached hereto as Exhibit A.
The Boards of Directors of UBICS and the Company deem it advisable and
in the best interests of their respective stockholders to consummate (1) the
acquisition of the Company by UBICS upon the terms and subject to the conditions
set forth herein and (2) the acquisition of R Systems (Singapore) Pte Limited, a
Singapore company ("R SYSTEMS-SINGAPORE"), and R Systems, Inc., a California
corporation ("R SYSTEMS"), both of which are affiliated with the Company, by
UBICS upon the terms and conditions set forth in separate Acquisition and Stock
Exchange Agreements to be executed of even date herewith and in conjunction
herewith (the "RELATED ACQUISITION AGREEMENTS").
The parties desire to structure the Exchange as a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (together with the rules and regulations
promulgated thereunder, the "CODE"), and desire that the Exchange be accounted
for as a pooling of interests pursuant to generally accepted accounting
principles ("GAAP").
UBICS would not be willing to enter into this Agreement unless the
Shareholders agreed to refrain from competing with UBICS, R Systems, R
Systems-Singapore and the Company (collectively, the "COMBINED COMPANIES") for a
reasonable period of time, and accordingly each of the Shareholders has agreed
to execute and deliver to UBICS a noncompetition agreement.
Therefore, in consideration of the premises and the mutual covenants,
agreements, representations, and warranties herein contained, the parties
hereto, intending to be legally bound, agree as follows.
<PAGE> 2
ARTICLE I
EXCHANGE
1.01. Exchange. The parties desire to engage in a tax-free
stock-for-stock exchange under Section 368(a)(1)(B) of the Code, for the purpose
of developing and enhancing the parties' respective businesses. Therefore, on
the Closing Date (as defined below), the Shareholders will exchange all of their
shares of the Company Stock (as defined below) for shares of UBICS Common Stock
(as defined below) upon the terms and subject to the conditions set forth below
(the "EXCHANGE").
1.02. Exchange of Shares. At and as of the Closing Date:
(a) The Shareholders will transfer and deliver to UBICS all of
the shares of the Company's capital stock consisting of 50,000 equity shares of
Rupees Ten (Rs. 10/-) each (the "COMPANY STOCK") issued and outstanding
immediately prior to the Closing Date in exchange for 20,000 shares (the
"EXCHANGE SHARES") of UBICS' common stock, par value $.01 per share (the "UBICS
COMMON STOCK"), such Exchange Shares to be apportioned among the Shareholders as
set forth on Exhibit A hereto;
(b) upon the surrender by the Shareholders of certificates (or
evidence of lost certificates reasonably acceptable to UBICS) representing all
of the outstanding shares of the Company Stock to UBICS, UBICS shall deliver to
the Shareholders certificates representing the Exchange Shares;
(c) all of the shares of UBICS Common Stock previously issued
and outstanding shall remain issued and outstanding and shall not be affected by
the Exchange; and
(d) the Exchange Shares to be issued to the Shareholders will
not at the time of issuance be registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), on the ground that the issuance thereof in the
Exchange is exempt from registration pursuant to Section 4(2) thereof and/or
Regulation D thereunder. The parties understand that the availability of such
exemption is based in part upon the imposition of restrictions on the transfer
of the Exchange Shares, upon certain information supplied to UBICS by the
Company and the Shareholders and upon the representations of the Company and the
Shareholders set forth in this Agreement. The Exchange Shares may not be
transferred except pursuant to an effective registration statement under the
Securities Act or an exemption from such registration requirements and
compliance with applicable state securities law. The following legend will be
placed on the certificates representing the Exchange Shares:
-2-
<PAGE> 3
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS, AND SUCH SHARES MAY NOT BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
UBICS may instruct its transfer agent to place stop transfer orders against any
transfer of the Exchange Shares in violation of this subsection (d).
1.03. Pooling Matters. The Company and each of the Shareholders hereby
affirms and agrees to the matters set forth in Schedule 1.03 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, hereby represents and
warrants to UBICS as follows:
2.01. Investor Status and Investment Interest. The Shareholder, if a
resident of the United States, either (a) is an "accredited investor" as such
term is defined in Rule 501 promulgated under the Securities Act or (b) has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of acquiring the UBICS Common Stock pursuant
to this Agreement. The Shareholder (i) is acquiring the UBICS Common Stock
pursuant to the Exchange solely for his own account for investment purposes and
not with a view to the distribution thereof within the meaning of the Securities
Act; and (ii) has had access to all forms, reports, schedules, statements and
other documents required to be filed by UBICS since September 1, 1997 under the
Securities Exchange Act of 1934, as amended, or the Securities Act and has had
the opportunity to obtain such additional information as he deemed necessary in
order to evaluate the merits and risks inherent in acquiring and holding the
UBICS Common Stock. The Shareholder resides at the address set forth below the
Shareholder's name on Exhibit A hereto. The Shareholder, if a resident of the
United States, either (i) has a preexisting business or personal relationship
with UBICS or any of its officers or directors or (ii) has such business or
financial experience as to have the capacity to protect his or her own interests
in connection with the transactions pursuant to this Agreement.
-3-
<PAGE> 4
2.02. Title to Capital Stock. The Shareholder is the sole legal and
beneficial owner of the Company Stock shown on Exhibit A as owned by
Shareholder, has good and marketable title to such Company Stock, and there
exist no liens, claims, pledges, options, proxies, voting agreements, charges or
encumbrances of any kind affecting such Company Stock. The Shareholder has the
sole and absolute right, power and authority to sell, assign and transfer such
Company Stock as provided in this Agreement. UBICS will acquire good and
unencumbered title to such Company Stock, free and clear of all liens, claims,
restrictions, charges and encumbrances ("LIENS") and not subject to any adverse
claim when acquired by UBICS pursuant to this Agreement.
2.03. Authorization of Transaction. Subject to the need to make certain
governmental filings described in Schedule 2.04 to the R Systems Disclosure
Schedule delivered with the Related Acquisition Agreement for R Systems, the
Shareholder has the full right, power and authority (i) to execute and deliver
this Agreement, and (ii) to perform the Shareholder's obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally, now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies.
2.04. No Violation. The Shareholder is not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental entity (a "GOVERNMENTAL ORDER") which
would prevent the execution, delivery or performance of this Agreement by the
Shareholder.
2.05. No Breach, Default, Violation or Consent. Except as set forth on
Schedule 2.04 to the R Systems Disclosure Schedule delivered pursuant to the
Related Acquisition Agreement for R Systems, the execution, delivery and
performance by the Shareholder of this Agreement do not and will not:
(a) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any contract,
agreement, instrument or document to which the Shareholder is a party or by
which the Shareholder or his assets are bound;
(b) breach or otherwise violate any Governmental Order which
names the Shareholder, or is directed to the Shareholder or any of his assets;
-4-
<PAGE> 5
(c) result in the creation of a Lien held by any third party
on any of his shares of Company Stock;
(d) violate any law, rule, regulation, ordinance or code of
any governmental entity (each a "GOVERNMENTAL RULE") applicable to the
Shareholder; or
(e) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any person
or entity (each a "PERSON").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UBICS
UBICS hereby delivers to the Company and the Shareholder a copy of the
Related Acquisition Agreement with respect to R Systems, and makes, to and for
the benefit of the Company and the Shareholders, each of the representations and
warranties set forth in Article IV of such Related Acquisition Agreement. In
addition, UBICS hereby represents and warrants to the Company and the
Shareholders as follows:
3.01. UBICS Common Stock. The shares of UBICS Common Stock to be issued
in the Exchange, when issued in accordance with the terms of this Agreement,
will be duly authorized and validly issued in compliance with applicable United
States federal and state Governmental Rules relating to the issuance of
securities, fully paid and nonassessable, and the issuance of all such shares is
not subject to any preemptive rights.
ARTICLE IV
CLOSING
4.01. Closing. The closing of the transactions contemplated by
this Agreement will take place at 10:00 a.m., local time, on the date (the
"CLOSING DATE") that UBICS acquires all of the outstanding stock of R Systems
and R Systems-Singapore, pursuant to the Related Acquisition Agreements, at the
offices of Cohen & Grigsby, P.C., 11 Stanwix Street, 15th Floor, Pittsburgh,
Pennsylvania 15222, unless another time, date or place is agreed to in writing
by the parties hereto. The closing shall be subject to the condition that the
Company and the Shareholders shall have obtained the approval of the Reserve
Bank of India/Government of India to the Exchange.
-5-
<PAGE> 6
ARTICLE V
MISCELLANEOUS
5.01. Amendments. This Agreement may be amended only by a
writing signed by each of the parties, and any such amendment shall be effective
only to the extent specifically set forth in such writing.
5.02. Assignment. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned, pledged or otherwise
transferred by any party, whether by operation of law or otherwise, without the
prior consent of the other party or parties.
5.03. Counterparts; Telefacsimile Execution. This Agreement
may be executed in any number of counterparts, and by each of the parties on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all of which shall constitute but one and the same instrument.
Delivery of an executed counterpart of this Agreement by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart. Any party
delivering an executed counterpart of this Agreement by telefacsimile also shall
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.
5.04. Entire Agreement. This Agreement, together with the
other agreements referred to herein and the schedules and exhibits attached
hereto, contains the entire agreement of the parties with respect to the
transactions contemplated hereby and supersedes all prior written and oral
agreements, and all contemporaneous oral agreements, relating to such
transactions.
5.05. Further Assurances. The parties shall from time to time
do and perform such additional acts and execute and deliver such additional
documents and instruments as may be required by applicable Governmental Rules or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this Agreement.
5.06. Governing Law. This Agreement shall be a contract under
the laws of the State of Delaware and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State without giving
effect to the principles of conflicts of law thereof or of any other
jurisdiction.
5.07. Notices. Unless otherwise specifically provided herein,
all notices, consents, requests, demands and other communications required or
permitted hereunder:
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<PAGE> 7
(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S.
mail or air mail, a reliable express delivery service or telecopier (with a copy
sent by one of the foregoing means), charges prepaid as applicable, to the
appropriate address(es) or number(s) set forth below; and
(c) shall be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a business day, on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the Person delivering such communication or a notice to the effect that such
addressee refused to claim or accept such communication, if sent by messenger,
U.S. mail or express delivery service, or (ii) a receipt generated by the
sender's telecopier showing that such communication was sent to the appropriate
number on a specified date, if sent by telecopier.
All such communications shall be sent to the following addresses or numbers, or
to such other addresses or numbers as any party may inform the others by giving
five business days' prior notice:
If to the Company: With a copy to:
R Systems (India) Private Limited Graham & James LLP
5000 Windplay Drive, Suite 5 400 Capitol Mall, 24th Floor
El Dorado Hills, CA 95762 Sacramento, CA 95814-4411
Attn: Rekhi Singh Attn: Kevin Coyle
Telecopier No.: (916) 939-9697 Telecopier No.: (916) 441-6700
If to UBICS : With a copy to:
UBICS, Inc. Cohen & Grigsby, P.C.
333 Technology Drive, Suite #210 11 Stanwix Street
Canonsburg, PA 15317 15th Floor
Attn: Dr. Vijay Mallya Pittsburgh, PA 15222
Telecopier No.: (724) 746-9597 Attn: David J. Lowe
Telecopier No.: (412) 209-0672
5.08. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
-7-
<PAGE> 8
5.09. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of each of the parties and their respective
legal representatives, heirs, successors and permitted assigns.
5.10. Termination. This Agreement may be terminated at any
time prior to the Closing (i) by mutual agreement of UBICS, the Company and the
Shareholders; or (ii) automatically if either of the Related Acquisition
Agreements is terminated. If this Agreement is terminated as provided above,
then neither party shall have any further obligations or liabilities hereunder
except for obligations or liabilities arising from a breach of this Agreement
prior to such termination or which survive such termination by their own terms
and except for obligations under confidentiality agreements between UBICS and
the Company. Notwithstanding the foregoing, the maximum amount of damages that
may be recovered with respect to any breach of this Agreement or either of the
Related Acquisition Agreements which results in termination of this Agreement
prior to closing shall not exceed the amount set forth in the Related
Acquisition Agreement with respect to R Systems.
5.11 Arbitration. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "DISPUTE"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an Affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include an award of legal fees, costs of arbitration and interest.
The panel of arbitrators shall promptly transmit an executed copy of its
decision to the parties. The decision of the arbitrators shall be final, binding
and conclusive upon the parties. Each party shall have the right to have the
decision enforced by any court of competent jurisdiction.
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<PAGE> 9
Notwithstanding any other provision of this Section, any Dispute in which a
party seeks equitable relief may be brought in any court having jurisdiction.
The obligations of the parties under this Section shall be specifically
enforceable and shall survive any termination of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 10
SIGNATURE PAGE TO ACQUISITION AND STOCK EXCHANGE AGREEMENT
R SYSTEMS (INDIA) PRIVATE LIMITED
By: /s/ Satinder Singh Rekhi
-------------------------------------
UBICS, INC.
By: /s/ Dr. Vijay Mallya, Chairman
-------------------------------------
Dr. Vijay Mallya, Chairman
SHAREHOLDERS:
/s/ Satinder Singh Rekhi
----------------------------------------
Satinder Singh Rekhi
/s/ Maninder Singh Uberoi
----------------------------------------
Maninder Singh Uberoi
/s/ Gurjot Singh Uberoi
----------------------------------------
Gurjot Singh Uberoi
-10-
<PAGE> 11
EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NAME AND ADDRESS SHARES OF COMPANY SHARES OF UBICS COMMON
STOCK OWNED STOCK TO BE RECEIVED
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Satinder Singh Rekhi 49,980 19,992
2051 Last Chance Court
Gold River, CA 95670
- -----------------------------------------------------------------------------------------------------
Maninder Singh Uberoi 10 4
P104A Greater Kailash 1
New Delhi, India 110048
- -----------------------------------------------------------------------------------------------------
Gurjot Singh Uberoi 10 4
P104A Greater Kailash 1
New Delhi, India 110048
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
TOTAL 50,000 20,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
Schedule 1.03
POOLING MATTERS
In accordance with Accounting Principles Board Opinion (APB) No. 16, Business
Combinations, the Company and the Shareholders have complied with or agreed to
comply with the following pooling requirements:
1. The Company is autonomous and has not been a subsidiary or division of
another corporation within two years before the acquisition pursuant to
the Agreement (the "Acquisition") with UBICS was initiated.
2. The Company is independent of UBICS and holds less than 10% of the
outstanding voting common stock of UBICS.
3. Neither the Company nor any of the Shareholders has taken or agreed to
take any action which will result in the Acquisition being effected
other than by the exchange of Company Stock for UBICS Common Stock.
4. The Shareholders will exchange all of the outstanding capital stock of
the Company for UBICS Common Stock upon consummation of the
Acquisition.
5. The Shareholders have not within two years before the date of this
Agreement (a) taken or agreed to take any action to effect or otherwise
made (i) distributions or dividends in cash, stock or any form of
consideration to shareholders, (ii) additional issuances, exchanges and
retirements of common, preferred, restricted or convertible stock or
securities, (iii) changes in the voting rights or other rights of
outstanding common stock, (iv) changes in the terms of any existing
equity securities, (v) grants or issuance of other classes of common
stock with different voting rights or other rights, (vi) stock splits
or dividends paid, declared or planned, (vii) issuance of debt or
debentures convertible into an equity interest and (viii) any
disproportionate distribution of stock or any form of consideration
from an agreement among shareholders and, (b) have not otherwise
changed the equity interest of the Company's voting capital stock.
6. The Company has not reacquired any shares of voting capital stock
within the two years before the date of this Agreement.
7. The Acquisition will be consummated at the Closing and no provisions of
the Agreement relating to the issue of securities or other
consideration will be pending.
8. Neither the Company nor any of the Shareholders, has entered into or
intends to enter into any agreement or arrangement pursuant to which
the Company or
<PAGE> 13
UBICS has agreed or will agree directly or indirectly to retire or
reacquire all or any part of the UBICS Common Stock issued pursuant to
the Agreement, except as contemplated by the Agreement and transactions
contemplated thereby.
9. Neither the Company nor any of the Shareholders has entered into or
intends to enter into any agreement or arrangement pursuant to which
the Company or UBICS has agreed or will agree to provide any financial
arrangements for the benefit of former shareholders of R Systems, other
than Satinder Singh Rekhi who will become party to an employment
agreement with UBICS.
10. The Shareholders have not and do not intend to reduce their risk
relative to any shares of UBICS Common Stock received in the
Acquisition until publication of financial results covering at least 30
days of post-Acquisition combined operations.
-2-
<PAGE> 1
Exhibit 2.3
ACQUISITION AND STOCK EXCHANGE AGREEMENT
This Agreement is made as of March 18, 1999, among UBICS, INC., a
Delaware corporation ("UBICS"), R sYSTEMS (SINGAPORE) pte limited, a Singapore
limited exempt private company (the "COMPANY") and the individuals listed as
shareholders on the signature page hereof (each such person a "SHAREHOLDER" and
collectively the "SHAREHOLDERS").
PREAMBLE
The Shareholders collectively own all of the issued and outstanding
shares of capital stock of the Company. A full and complete list setting forth
the names of the Shareholders and their respective holdings in the Company is
attached hereto as Exhibit A.
The Boards of Directors of UBICS and the Company deem it advisable and
in the best interests of their respective stockholders to consummate (1) the
acquisition of the Company by UBICS upon the terms and subject to the conditions
set forth herein and (2) the acquisition of R Systems (India) Private Limited,
an Indian corporation ("R SYSTEMS-INDIA"), and R Systems, Inc., a California
corporation ("R SYSTEMS"), both of which are affiliated with the Company, by
UBICS upon the terms and conditions set forth in separate Acquisition and Stock
Exchange Agreements to be executed of even date herewith and in conjunction
herewith (the "RELATED ACQUISITION AGREEMENTS").
The parties desire to structure the Exchange as a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (together with the rules and regulations
promulgated thereunder, the "CODE"), and desire that the Exchange be accounted
for as a pooling of interests pursuant to generally accepted accounting
principles ("GAAP").
UBICS would not be willing to enter into this Agreement unless Satinder
Singh Rekhi and Harpreet Rekhi agreed to refrain from competing with UBICS, R
Systems, R Systems-India and the Company (collectively, the "COMBINED
COMPANIES") for a reasonable period of time, and accordingly each of Satinder
Singh Rekhi and Harpreet Rekhi has agreed to execute and deliver to UBICS a
noncompetition agreement.
Therefore, in consideration of the premises and the mutual covenants,
agreements, representations, and warranties herein contained, the parties
hereto, intending to be legally bound, agree as follows.
<PAGE> 2
ARTICLE I
EXCHANGE
1.01. Exchange. The parties desire to engage in a tax-free
stock-for-stock exchange under Section 368(a)(1)(B) of the Code, for the purpose
of developing and enhancing the parties' respective businesses. Therefore, on
the Closing Date (as defined below), the Shareholders will exchange all of their
shares of the Company Stock (as defined below) for shares of UBICS Common Stock
(as defined below) upon the terms and subject to the conditions set forth below
(the "EXCHANGE").
1.02. Exchange of Shares. At and as of the Closing Date:
(a) The Shareholders will transfer and deliver to UBICS all of
the 70,000 ordinary shares, par value one (1.00) Singapore dollar, of the
Company (the "COMPANY STOCK") issued and outstanding immediately prior to the
Closing Date in exchange for 10,000 shares (the "EXCHANGE SHARES") of UBICS'
common stock, par value $.01 per share (the "UBICS COMMON STOCK"), such Exchange
Shares to be apportioned among the Shareholders as set forth on Exhibit A
hereto;
(b) upon the surrender by the Shareholders of certificates (or
evidence of lost certificates reasonably acceptable to UBICS) representing all
of the outstanding shares of the Company Stock to UBICS, together with the
relevant share transfer forms duly executed by the respective shareholders and
all other documents and instruments required to be presented to the Singapore
Stamp Office to obtain the necessary stamping of the share transfer forms for
the Company Stock, UBICS shall deliver to the Shareholders certificates
representing the Exchange Shares;
(c) all of the shares of UBICS Common Stock previously issued
and outstanding shall remain issued and outstanding and shall not be affected by
the Exchange; and
(d) the Exchange Shares to be issued to the Shareholders will
not at the time of issuance be registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), on the ground that the issuance thereof in the
Exchange is exempt from registration pursuant to Section 4(2) thereof and/or
Regulation D thereunder. The parties understand that the availability of such
exemption is based in part upon the imposition of restrictions on the transfer
of the Exchange Shares, upon certain information supplied to UBICS by the
Company and the Shareholders and upon the representations of the Company and the
Shareholders set forth in this Agreement. The Exchange Shares may not be
transferred except pursuant to an effective registration statement under the
Securities Act or an exemption from such registration requirements and
compliance with applicable state securities law. The following legend will be
placed on the certificates representing the Exchange Shares:
-2-
<PAGE> 3
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS, AND SUCH SHARES MAY NOT BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
UBICS may instruct its transfer agent to place stop transfer orders against any
transfer of the Exchange Shares in violation of this subsection (d).
1.03. Waiver of Preemptive Rights. Each of the Shareholders hereby
waives any and all preemptive rights which such Shareholder may have pursuant to
the Company's Articles of Association or otherwise in connection with any of the
Company Stock or the Exchange pursuant to this Agreement.
1.04. Pooling Matters. The Company and each of the Shareholders hereby
affirms and agrees to the matters set forth in Schedule 1.04 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, hereby represents and
warrants to UBICS as follows:
2.01. Investor Status and Investment Interest. The Shareholder, if a
resident of the United States, either (a) is an "accredited investor" as such
term is defined in Rule 501 promulgated under the Securities Act or (b) has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of acquiring the UBICS Common Stock pursuant
to this Agreement. The Shareholder (i) is acquiring the UBICS Common Stock
pursuant to the Exchange solely for his own account for investment purposes and
not with a view to the distribution thereof within the meaning of the Securities
Act; and (ii) has had access to all forms, reports, schedules, statements and
other documents required to be filed by UBICS since September 1, 1997 under the
Securities Exchange Act of 1934, as amended, or the Securities Act and has had
the opportunity to obtain such additional information as he deemed necessary in
order to evaluate the merits and risks inherent in acquiring and holding the
UBICS
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<PAGE> 4
Common Stock. The Shareholder resides at the address set forth below the
Shareholder's name on Exhibit A hereto. The Shareholder, if a resident of
California, either (i) has a preexisting business or personal relationship with
UBICS or any of its officers or directors or (ii) has such business or financial
experience as to have the capacity to protect his or her own interests in
connection with the transactions pursuant to this Agreement.
2.02. Title to Capital Stock. The Shareholder is the sole legal and
beneficial owner of the Company Stock shown on Exhibit A as owned by the
Shareholder, has good and marketable title to such Company Stock, and there
exist no liens, claims, pledges, options, proxies, voting agreements, charges or
encumbrances of any kind affecting such Company Stock. The Shareholder has the
sole and absolute right, power and authority to sell, assign and transfer such
Company Stock as provided in this Agreement. UBICS will acquire good and
unencumbered title to such Company Stock, free and clear of all liens, claims,
restrictions, charges and encumbrances ("Liens") and not subject to any adverse
claim when acquired by UBICS pursuant to this Agreement.
2.03. Authorization of Transaction. Subject to the need to make
certain governmental filings described in Schedule 2.04 to the R Systems
Disclosure Schedule delivered with the Related Acquisition Agreement for R
Systems the Shareholder has the full right, power and authority (i) to execute
and deliver this Agreement, and (ii) to perform the Shareholder's obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Shareholder, enforceable against the Shareholder in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally, now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies.
2.04. No Violation. The Shareholder is not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental entity (a "GOVERNMENTAL ORDER") which
would prevent the execution, delivery or performance of this Agreement by the
Shareholder.
2.05. No Breach, Default, Violation or Consent. Except as set forth
on Schedule 2.04 to the R Systems Disclosure Schedule delivered with the Related
Acquisition Agreement for R Systems, the execution, delivery and performance by
the Shareholder of this Agreement do not and will not:
(a) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any contract,
agreement, instrument or
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<PAGE> 5
document to which the Shareholder is a party or by which the Shareholder or his
assets are bound;
(b) breach or otherwise violate any Governmental Order which
names the Shareholder, or is directed to the Shareholder or any of his assets;
(c) result in the creation of a Lien held by any third party
on any of his shares of Company Stock;
(d) violate any law, rule, regulation, ordinance or code of
any governmental entity (each a "GOVERNMENTAL RULE") applicable to the
Shareholder; or
(e) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any person
or entity (each a "PERSON").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UBICS
UBICS hereby delivers to the Company and the Shareholder a copy of the
Related Acquisition Agreement with respect to R Systems, and makes, to and for
the benefit of the Company and the Shareholders, each of the representations and
warranties set forth in Article IV of such Related Acquisition Agreement. In
addition, UBICS hereby represents and warrants to the Company and the
Shareholders as follows:
3.01. UBICS Common Stock. The shares of UBICS Common Stock to be
issued in the Exchange, when issued in accordance with the terms of this
Agreement, will be duly authorized and validly issued in compliance with
applicable United States federal and state Governmental Rules relating to the
issuance of securities, fully paid and nonassessable, and the issuance of all
such shares is not subject to any preemptive rights.
ARTICLE IV
CLOSING
4.01. Closing. The closing of the transactions contemplated by
this Agreement will take place at 10:00 a.m., local time, on the date (the
"CLOSING DATE") that UBICS acquires all of the outstanding stock of R Systems
and R Systems-India, pursuant to the Related Acquisition Agreements, at the
offices of Cohen & Grigsby, P.C., 11 Stanwix Street, 15th Floor, Pittsburgh,
Pennsylvania 15222, unless another time, date or place is agreed to in writing
by the parties hereto.
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ARTICLE V
MISCELLANEOUS
5.01. Amendments. This Agreement may be amended only by a
writing signed by each of the parties, and any such amendment shall be effective
only to the extent specifically set forth in such writing.
5.02. Assignment. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned, pledged or otherwise
transferred by any party, whether by operation of law or otherwise, without the
prior consent of the other party or parties.
5.03. Counterparts; Telefacsimile Execution. This Agreement
may be executed in any number of counterparts, and by each of the parties on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all of which shall constitute but one and the same instrument.
Delivery of an executed counterpart of this Agreement by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart. Any party
delivering an executed counterpart of this Agreement by telefacsimile also shall
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.
5.04. Entire Agreement. This Agreement, together with the
other agreements referred to herein and the schedules and exhibits attached
hereto, contains the entire agreement of the parties with respect to the
transactions contemplated hereby and supersedes all prior written and oral
agreements, and all contemporaneous oral agreements, relating to such
transactions.
5.05. Further Assurances. The parties shall from time to time
do and perform such additional acts and execute and deliver such additional
documents and instruments as may be required by applicable Governmental Rules or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this Agreement.
5.06. Governing Law. This Agreement shall be a contract under
the laws of the State of Delaware and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State without giving
effect to the principles of conflicts of law thereof or of any other
jurisdiction.
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<PAGE> 7
5.07. Notices. Unless otherwise specifically provided herein,
all notices, consents, requests, demands and other communications required or
permitted hereunder:
(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S.
mail or air mail, a reliable express delivery service or telecopier (with a copy
sent by one of the foregoing means), charges prepaid as applicable, to the
appropriate address(es) or number(s) set forth below; and
(c) shall be deemed to have been given on the date of
receipt by the addressee (or, if the date of receipt is not a business day, on
the first business day after the date of receipt), as evidenced by (i) a receipt
executed by the addressee (or a responsible person in his or her office), the
records of the Person delivering such communication or a notice to the effect
that such addressee refused to claim or accept such communication, if sent by
messenger, U.S. mail or express delivery service, or (ii) a receipt generated by
the sender's telecopier showing that such communication was sent to the
appropriate number on a specified date, if sent by telecopier.
All such communications shall be sent to the following addresses or numbers, or
to such other addresses or numbers as any party may inform the others by giving
five business days' prior notice:
If to the Company: With a copy to:
R Systems (Singapore) Pte Limited Graham & James LLP
5000 Windplay Drive, Suite 5 400 Capitol Mall, 24th Floor
El Dorado Hills, CA 95762 Sacramento, CA 95814-4411
Attn: Rekhi Singh Attn: Kevin Coyle
Telecopier No.: (916) 939-9697 Telecopier No.: (916) 441-6700
If to UBICS : With a copy to:
UBICS, Inc. Cohen & Grigsby, P.C.
333 Technology Drive, Suite #210 11 Stanwix Street
Canonsburg, PA 15317 15th Floor
Attn: Dr. Vijay Mallya Pittsburgh, PA 15222
Telecopier No.: (724) 746-9597 Attn: David J. Lowe
Telecopier No.: (412) 209-0672
5.08. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the
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extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
5.09. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of each of the parties and their respective
legal representatives, heirs, successors and permitted assigns.
5.10. Termination. This Agreement may be terminated at any
time prior to the Closing (i) by mutual agreement of UBICS, the Company and the
Shareholders; or (ii) automatically if either of the Related Acquisition
Agreements is terminated. If this Agreement is terminated as provided above,
then neither party shall have any further obligations or liabilities hereunder
except for obligations or liabilities arising from a breach of this Agreement
prior to such termination or which survive such termination by their own terms
and except for obligations under confidentiality agreements between UBICS and
the Company. Notwithstanding the foregoing, the maximum amount of damages that
may be recovered with respect to any breach of this Agreement or either of the
Related Acquisition Agreements which results in termination of this Agreement
prior to closing shall not exceed the amount set forth in the Related
Acquisition Agreement with respect to R Systems.
5.11 Arbitration. Any claim, controversy or dispute arising
between the parties with respect to this Agreement (a "DISPUTE"), to the maximum
extent allowed by applicable law, shall be submitted to and finally resolved by
binding arbitration. Either party may file a written Demand for Arbitration with
the American Arbitration Association's Sacramento, California Regional Office,
and shall send a copy of the Demand for Arbitration to the other party. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act and the Commercial Arbitration Rules of the American Arbitration
Association, except that discovery may be had in accordance with the Federal
Rules of Civil Procedure. The venue for the arbitration shall be the Sacramento,
California office of the American Arbitration Association. The arbitration shall
be conducted before a panel of three arbitrators selected as follows:. Within 15
business days after a Demand for Arbitration is filed, each party shall select
an arbitrator and, within 10 business days after the end of such 15-day period,
such two arbitrators shall select a third arbitrator. Each arbitrator must
either have professional experience relating to the business or legal aspects of
the subject of the arbitration or be a retired judge. No arbitrator shall (i)
have any material interest in the result of the arbitration or (ii) be, or shall
ever have been, an Affiliate, equity holder or creditor of, or an attorney,
accountant, agent or consultant for, any party to such arbitration proceeding.
The arbitrators shall meet promptly, fix the time, date and place of the hearing
and notify the parties. The parties shall stipulate that the arbitration hearing
shall last no longer than five business days. A majority of the panel shall
render a decision within 10 days of the completion of the hearing, which
decision may include
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<PAGE> 9
an award of legal fees, costs of arbitration and interest. The panel of
arbitrators shall promptly transmit an executed copy of its decision to the
parties. The decision of the arbitrators shall be final, binding and conclusive
upon the parties. Each party shall have the right to have the decision enforced
by any court of competent jurisdiction. Notwithstanding any other provision of
this Section, any Dispute in which a party seeks equitable relief may be brought
in any court having jurisdiction. The obligations of the parties under this
Section shall be specifically enforceable and shall survive any termination of
this Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 10
SIGNATURE PAGE TO ACQUISITION AND STOCK EXCHANGE AGREEMENT
R SYSTEMS (SINGAPORE) PTE LIMITED
By: /s/ Satinder Singh Rekhi
--------------------------------
UBICS, INC.
By: /s/ Dr. Vijay Mallya
--------------------------------
Dr. Vijay Mallya, Chairman
SHAREHOLDERS:
/s/ Satinder Singh Rekhi
-----------------------------------
Satinder Singh Rekhi
/s/ Harpreet Rekhi
-----------------------------------
Harpreet Rekhi
/s/ Seow Siang Eng Anne
-----------------------------------
Seow Siang Eng Anne
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<PAGE> 11
EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
- -------------------------------- -------------------------------- ---------------------------
NAME AND ADDRESS SHARES OF COMPANY SHARES OF UBICS COMMON
STOCK OWNED STOCK TO BE RECEIVED
- -------------------------------- -------------------------------- ---------------------------
<S> <C> <C>
Satinder Singh Rekhi 69,800 9,972
2051 Last Chance Court
Gold River, CA 95670
- -------------------------------- -------------------------------- ---------------------------
Harpreet Rekhi 100 14
2051 Last Chance Court
Gold River, CA 95670
- -------------------------------- -------------------------------- ---------------------------
Seow Siang Eng Anne 100 14
43 Lucky View
Singapore 1646
- -------------------------------- -------------------------------- ---------------------------
Total 70,000 10,000
- -------------------------------- -------------------------------- ---------------------------
</TABLE>
<PAGE> 12
Schedule 1.04
POOLING MATTERS
In accordance with Accounting Principles Board Opinion (APB) No. 16, Business
Combinations, the Company and the Shareholders have complied with or agreed to
comply with the following pooling requirements:
1. The Company is autonomous and has not been a subsidiary or division of
another corporation within two years before the acquisition pursuant to
the Agreement (the "Acquisition") with UBICS was initiated.
2. The Company is independent of UBICS and holds less than 10% of the
outstanding voting common stock of UBICS.
3. Neither the Company nor any of the Shareholders has taken or agreed to
take any action which will result in the Acquisition being effected
other than by the exchange of Company Stock for UBICS Common Stock.
4. The Shareholders will exchange all of the outstanding capital stock of
the Company for UBICS Common Stock upon consummation of the
Acquisition.
5. The Shareholders have not within two years before the date of this
Agreement (a) taken or agreed to take any action to effect or otherwise
made (i) distributions or dividends in cash, stock or any form of
consideration to shareholders, (ii) additional issuances, exchanges and
retirements of common, preferred, restricted or convertible stock or
securities, (iii) changes in the voting rights or other rights of
outstanding common stock, (iv) changes in the terms of any existing
equity securities, (v) grants or issuance of other classes of common
stock with different voting rights or other rights, (vi) stock splits
or dividends paid, declared or planned, (vii) issuance of debt or
debentures convertible into an equity interest and (viii) any
disproportionate distribution of stock or any form of consideration
from an agreement among shareholders and, (b) have not otherwise
changed the equity interest of the Company's voting capital stock.
6. The Company has not reacquired any shares of voting capital stock
within the two years before the date of this Agreement.
7. The Acquisition will be consummated at the Closing and no provisions of
the Agreement relating to the issue of securities or other
consideration will be pending.
<PAGE> 13
8. Neither the Company nor any of the Shareholders, has entered into or
intends to enter into any agreement or arrangement pursuant to which
the Company or UBICS has agreed or will agree directly or indirectly to
retire or reacquire all or any part of the UBICS Common Stock issued
pursuant to the Agreement, except as contemplated by the Agreement and
transactions contemplated thereby.
9. Neither the Company nor any of the Shareholders has entered into or
intends to enter into any agreement or arrangement pursuant to which
the Company or UBICS has agreed or will agree to provide any financial
arrangements for the benefit of former shareholders of R Systems, other
than Satinder Singh Rekhi who will become party to an employment
agreement with UBICS.
10. The Shareholders have not and do not intend to reduce their risk
relative to any shares of UBICS Common Stock received in the
Acquisition until publication of financial results covering at
least 30 days of post-Acquisition combined operations.
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EXHIBIT 10.7
AGREEMENT OF SEVERANCE, WAIVER AND RELEASE
This Agreement is made this 18th day of March, 1999, between UBICS,
INC., a Delaware corporation ("UBICS") and MANOHAR B. HIRA ("Hira") and will
become effective eight (8) days after it is executed unless it is revoked on or
before the seventh (7th) day after execution pursuant to Section 19.
PREAMBLE
UBICS and Hira are parties to an Employment Agreement dated October 1,
1997, as amended (the "Employment Agreement"), pursuant to which Hira is
employed by and serves as President of UBICS. Hira is also a director of UBICS
and has loyally served UBICS as an officer, director and employee since its
incorporation in 1993.
UBICS has entered into an Acquisition and Stock Exchange Agreement
dated March 18, 1999 pursuant to which, inter alia, UBICS will acquire R
Systems, Inc. ("R Systems") and the President of R Systems will become the
President and Chief Executive Officer of UBICS.
In light of the pending acquisition of R Systems and of Hira's valuable
knowledge of UBICS' business, operations and personnel, UBICS and Hira have
agreed that Hira's services as President and director until the closing of the R
Systems acquisition, as an employee and adviser for a transition period
thereafter, are needed by and will be beneficial to UBICS. UBICS and Hira have
further agreed that at the end of such transition period, Hira will retire from
his employment with UBICS upon the terms and conditions of this Agreement, and
will waive all possible claims against UBICS in return for the benefits provided
below.
Therefore, UBICS and Hira, intending to be legally bound, agree as
follows:
<PAGE> 2
AGREEMENT
1. Retirement and Termination of Employment. Hira shall retire
and his employment with UBICS will terminate on January 1, 2000 (the
"Termination Date"). On the Termination Date, except as otherwise provided
herein, the Employment Agreement shall terminate and be of no further force and
effect and the parties shall be released from all of their obligations under the
Employment Agreement. From the date hereof until the Termination Date, Hira
shall continue to be employed by UBICS under, shall receive compensation and
benefits pursuant to, and shall be bound by the other terms of, the Employment
Agreement, except as otherwise provided herein.
2. Resignation as President and Director. Hira hereby resigns
from (i) the office of President of UBICS effective on the date of the closing
of UBICS' acquisition of R Systems (the "Closing"), and (ii) from the Board of
Directors of UBICS, effective on the date of the Closing, or, if earlier, on the
date of the 1999 Annual Meeting of Stockholders of UBICS. Hira shall not be
nominated, and he shall not stand, for reelection to the Board of Directors of
UBICS at the 1999 Annual Meeting of Stockholders of UBICS. During the period
from the Closing until the Termination Date, Hira shall assist in the
integration of the respective businesses of UBICS and R Systems and shall
perform such other duties and responsibilities as the Board of Directors,
Chairman or President of UBICS may from time to time designate.
3. Severance Payment. Provided Hira continues to perform his
duties as employee of UBICS through the Termination Date, UBICS shall pay Hira a
severance payment of $450,000 in cash as follows: $150,000 on the Termination
Date, and $100,000 on each of the first three anniversaries of the Termination
Date, in each case minus applicable deductions, as a severance. In the event
that Hira should die before all such
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payments are made, UBICS shall make all remaining payments to Hira's estate or a
beneficiary selected by Hira.
4. Healthcare Benefits. For a period of four years following
the Termination Date (the "Severance Period"), Hira shall be entitled to
continued participation in the medical insurance plans maintained by UBICS for
its employees. participation by Hira in any such plans is not permitted due to
the requirements for eligibility contained therein, UBICS shall pay Hira an
amount each month equal to the monthly cost of a medical insurance plan covering
Hira having coverage comparable to that provided at such time by UBICS to its
employees. In addition, during the Severance Period, UBICS shall reimburse Hira
for all deductible, co-pay and other amounts expended by Hira for healthcare
which are not paid by such insurance plan, up to a maximum of $5,000 per year.
5. 401(k) Plan. Any vested benefit that Hira has in any 401(k)
plan or other retirement plan to which UBICS has made or will make contributions
for the benefit of Hira will be available to Hira according to the terms of the
plan for rollover or distribution as the law requires. UBICS will send, or cause
to be sent, to Hira documentation regarding rollovers and distributions as
required by law.
6. Automobile. Hira shall continue to have use of the
automobile currently provided to him by UBICS until the Termination Date, and
will surrender such automobile to UBICS on or prior to the Termination Date
7. Other Benefits. All other benefits and incidents of Hira's
employment will terminate as the Termination Date.
8. Stock Options. Upon the earlier of the Closing or the
Termination Date, all options to purchase common stock of UBICS held by Hira
shall immediately
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<PAGE> 4
vest and be exercisable by Hira or his estate until the expiration date of such
options, which is on the tenth anniversary of the date of grant, which was
October 30, 1997. In the event that the Board of Directors determines, in
connection with UBICS' acquisition of R Systems, to reduce the exercise price of
its outstanding options to or issue new options to replace such outstanding
options, Hira's options win also be repriced or replaced, as the case may be, on
the same basis, provided that any such new options shall be fully vested and
exercisable upon issuance.
9. Transfer of Assets. UBICS hereby assigns, transfers and
delivers to Hira, effective as of the Termination Date, the personal property
listed on Exhibit A, hereto, free and clear of all liens, claims, charges and
encumbrances.
10. Note. The Mortgage Note dated June 24,1998 from Hira to
UBICS in the principal amount of $250,000 (the "Note") shall be, and hereby is,
amended (a) to eliminate all required installment payments pursuant to paragraph
2 of the Note, (b) to provide that the principal amount of the Note, and all
accrued interest, shall be due and payable in full on the fourth anniversary of
the Termination Date and (c) to provide that Hira may set-off against the Note
any amounts due to him under this Agreement which remain unpaid on the due date
of the Note. In all other respects, the Note, and the related Second Mortgage
dated June 24, 1998 from Hira to UBICS, shall remain unchanged and in full force
and effect. Upon the request of Hira, and upon the agreement of UBICS, in lieu
of payments on the Note pursuant to Section 4 thereof, any amounts payable to
Hira under Section 3 hereof which remain to be paid may be off-set against the
amounts due under the Note.
11. Acknowledgment. Hira acknowledges that the payments and
benefits provided by this agreement constitute consideration over and above
anything of value that Hira would be entitled to but for this Agreement and that
the payments
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<PAGE> 5
exceed any wage or benefit claims that he could make against UBICS pursuant to
Pennsylvania's Wage Payment and Collection Law, or the Fair Labor Standards Act.
12. Waiver and Release. In return for the benefits fisted in
Sections 3, 4, 6, 8, 9 and 10 above, Hira absolutely and unconditionally
releases and forever discharges UBICS and its representatives, successors and
assigns, and its present and former directors, officers, employees, agents and
attorneys from all claims, demands, actions, suits, damages and expenses of any
nature whatsoever, known and unknown, whether under federal, state or municipal
law (including any common law claims related to employment) and including all
statutes and ordinances concerning employment discrimination on account of, but
not limited to, sex, race, age, religion, national origin, familial status,
military status and disability. This waiver and release includes, without
limitation, any claims under the Pennsylvania Human Relations Act; Title VII of
the Civil Rights Act of 1964, as amended; the 1991 Civil Rights Act; the Older
Workers Benefit and Protection Act; the Age Discrimination in Employment Act, as
amended; the Americans with Disabilities Act; the Employee Retirement Income
Security Act; local employment ordinances, and the law of contract and tort,
that Hira may have related to or arising out of Hira's employment or termination
of employment with UBICS, including but not limited to claims based on breach of
contract, promissory estoppel, detrimental reliance, intentional infliction of
emotional distress, and negligent infliction of emotional distress. Hira
additionally specifically releases UBICS, its successors and assigns, and its
present and former directors, officers, employees, agents and attorneys, from
any and all claims or causes of action for the fees, costs and expenses of any
and all attorneys who have at any time represented him in connection with any
matter released in this Agreement.
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<PAGE> 6
13. Recovery of Payments. This Agreement may be raised as a
complete defense and bar to any claims Hira may bring against UBICS arising in
any way from his employment with or retirement from UBICS. If a court of
competent jurisdiction or an Arbitrator appointed pursuant to this Agreement
determines that Hira has breached any obligations of this Agreement, UBICS may
recover the severance pay and all other benefits paid under this Agreement, with
attorneys fees, and obtain all other relief provided by law or equity.
14. Non-Disclosure and Non-Competition. Notwithstanding (a)
anything to the contrary set forth in this Agreement, and (b) the time periods
set forth in the sections of the Employment Agreement hereinafter referenced,
during the Severance Period, Hira shall be bound by the provisions of Sections
4.01, 4.04, 4.05 and 4.06 of the Employment Agreement.
15. Non-Disparagement. Hira will not disparage or make
negative comments about UBICS, its directors, officers, employees, agents,
attorneys or consultants. UBICS, its directors, officers., agents, attorneys and
consultants will not disparage or make negative comments regarding Hira.
16. Consultancy. Hira will make reasonable efforts to be
available to consult with UBICS at any reasonable times during the Severance
Period to answer questions and give advice regarding matters that Hira has been
involved in.
17. No Effect Until Executed. The presentation of this offer
to Hira is an attempt to resolve all matters and potential matters between the
parties amicably and shall have no force and effect until it is executed and
delivered by Hira to UBICS and executed by all other parties.
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<PAGE> 7
18. No Admission of Liability This Agreement is not and will
not be construed as an admission by UBICS of discrimination of any kind
whatsoever against Hira; of any breach of any obligation of any kind whatsoever,
express or implied, to Hira; or an admission by UBICS of any impropriety or
wrongdoing. This Agreement is not and will not be construed as an admission by
Hira of any impropriety or wrongdoing.
19. OLDER WORKERS BENEFIT PROTECTION ACT. AS PROVIDED IN THE
OLDER WORKERS BENEFIT PROTECTION ACT, HIRA ACKNOWLEDGES AND UNDERSTANDS THAT HE
HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF HIS CHOICE PRIOR TO SIGNING THIS
AGREEMENT. HIRA FURTHER UNDERSTANDS AND AGREES THAT HE HAS BEEN GIVEN A PERIOD
OF TWENTY-ONE (21) DAYS IN WHICH TO REVIEW AND TO CONSIDER WHETHER TO SIGN THIS
AGREEMENT.
IT IS FURTHER UNDERSTOOD THAT HIRA SHALL BE ENTITLED TO REVOKE
OR CANCEL HIS ACCEPTANCE OF THIS AGREEMENT DURING THE SEVEN DAY (7) DAY PERIOD
FOLLOWING HIS DELIVERY OF A SIGNED COPY OF THIS AGREEMENT TO COUNSEL FOR UBICS.
HIRA AGREES TO COMMUNICATE ANY SUCH NOTICE OF REVOCATION OR CANCELLATION BY
WRITTEN NOTICE, SENT BY HIM OR HIS LEGAL COUNSEL TO UBICS OR ITS COUNSEL.
BY EXECUTING THIS AGREEMENT, HIRA ACKNOWLEDGES THAT BE HAS
CAREFULLY READ THE FOREGOING AGREEMENT AND ALL OF ITS PROVISIONS AND HAS HAD THE
BENEFIT OF COUNSEL WITH RESPECT TO THIS AGREEMENT OF SEVERANCE, WAIVER AND
RELEASE AND ITS CONTENTS, HAS HAD THE OPPORTUNITY TO CONSIDER THIS AGREEMENT,
UNDERSTANDS THIS AGREEMENT, DISCUSS THIS AGREEMENT WITH LEGAL
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COUNSEL, AND RELY UPON COUNSEL'S ADVICE, AND REVIEW ALL OF ITS TERMS WHICH HAVE
BEEN FULLY EXPLAINED AND MADE KNOWN TO HIM, AND THAT HE IS SIGNING THIS
AGREEMENT AS HIS FREE ACT AND DEED, AND THAT HE IS ACCEPTING VOLUNTARILY ALL
TERMS OF THIS AGREEMENT OF SEVERANCE, WAIVER AND RELEASE.
20. Confidentiality of Agreement. The existence and terms of
this Agreement, together with the negotiations, discussions, and proceedings
leading up to this Agreement, are confidential and neither Hira, his attorney,
nor any individual acting on his behalf shall disclose any of these matters to
any person or entity, except as expressly required by law or by an order of a
court or Government agency of competent jurisdiction. Prior to any disclosure
required by law, Hira will notify UBICS.
21. Breach of Agreement. Hira further agrees that if he brings
any claim against UBICS or otherwise breaches this Agreement, Hira will become
immediately liable to UBICS for return of all payments made and benefits paid
under this Agreement, as well as any costs, including attorney's fees, incurred
by UBICS in collecting that amount from Hira, in addition to any other remedies
available to UBICS.
22. Acknowledgment of Physical and Emotional Condition. Hira
at the time of signing this Agreement knows of no injury or medical condition
which has occurred to him during his employment with UBICS. Accordingly, Hira
knows of nothing that would give rise to his filing a claim for workmen's
compensation benefits. Furthermore, Hira expressly acknowledges that he has no
physical or emotional impairment of any kind which has interfered with his
ability to read and understand the import of this Agreement or of its terms, and
that he is of sound mind and not acting under the influence of any medication or
mind-altering chemical of any type in entering into this Agreement.
-8-
<PAGE> 9
23. Judicial Enforcement. Ten (10) days before any party
hereto institutes any action to enforce the rights set forth in this Agreement,
written notice of the intention to sue shall be given by certified mail by said
party to the other party. During the above-mentioned ten (10) day period, the
parties hereto will make a reasonable effort to amicably resolve any
disagreement which may have arisen between them.
24. Governing Law. This Agreement is entered into in the
Commonwealth of Pennsylvania and shall be governed by and be interpreted under
the laws of the Commonwealth of Pennsylvania.
25. Attorneys' Fees. Each party shall pay its own legal fees
and expenses m connection with this Agreement.
26. Cooperation. Hira will make reasonable efforts to assist
and cooperate with UBICS in any defense or prosecution of a claim that may be
made by or against UBICS or in connection with any ongoing or future
investigation, dispute or claim involving UBICS including proceedings before any
arbitral, administrative, judicial, legislative body or agency. Cooperation will
include preparation and testimony in any such proceedings where UBICS believes
that Hira could be helpful. In the event that Hira's time expended in such
assistance and cooperation will be more than nominal, the parties shall discuss
and agree upon appropriate compensation to be paid to Hira for such time.
27. Entire Agreement. This Agreement, together with the
Employment Agreement., the Note and the Second Mortgage, each as modified
herein, contains the entire agreement of the parties. There are no other written
or oral agreements between the parties. UBICS, its employees, representatives
and attorneys have made no representations or promises concerning the terms or
effects of this Agreement that are
-9-
<PAGE> 10
not contained in it. This Agreement may be amended only in writing signed by
both parties.
28. Arbitration. Any controversy, claim or dispute between the
Parities concurring this Agreement or the breach thereof shall be finally
settled by arbitration in Pittsburgh, Pennsylvania pursuant to the rules of the
American Arbitration Association regarding employment disputes. In such
instances, it is agreed that the dispute shall be submitted to final and binding
arbitration by one arbitrator; provided, however, that either Party may request
that there be three arbitrators, in which case each Party shall select one
arbitrator, and the two arbitrators so selected shall select a third. All costs
of arbitration (other than the costs of a Party's own witnesses and professional
advisors) shall be split equally between the Parties.
29. Equitable Relief. Notwithstanding Section 28
"Arbitration", the parties acknowledge and agree that each would be irreparably
damaged if any of the provisions of this Agreement are not performed by the
other in accordance with their specific terms or are otherwise breached.
Accordingly, it is agreed that the non-breaching party shall be entitled to
injunctions to prevent breaches of this Agreement by the other party and shall
have the right to specifically enforce this Agreement and the terms and
provisions hereof against the breaching party in addition to any other remedy to
which the non-breaching party may be entitled at law or in equity. The parties
further agree that Section 28 "Arbitration" is not intended to be a bar to
either party seeking injunctive relief by filing an action in an appropriate
court.
-10-
<PAGE> 11
30. Severability. Should any provision of this Agreement be
declared or be determined by any court of competent jurisdiction or by any
administrative body to be illegal or invalid, the validity of the remaining
parts, terms, or provisions of it shall not be effected thereby and said illegal
or invalid part, term or provision shall be deemed not to be a part of this
Agreement.
Hira affirms that by entering into this Agreement he is not
relying upon any oral or written promise or statement made by anyone at any time
on behalf of UBICS that is not contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement intending to be legally bound hereby.
Dated: 3/18/99 /s/ Manohar B. Hira
---------- -------------------------------
Manohar B. Hira
UBICS, INC.
By: /s/Vijay Mallya
----------------------------
Date:
--------------------------
-11-
<PAGE> 1
EXHIBIT 10.17
AMENDMENT TO LOAN DOCUMENTS
THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is made as of
December 18, 1998, by and between UBICS, INC. (the "Borrower"), and PNC BANK,
NATIONAL ASSOCIATION (the "Bank").
WITNESSETH:
WHEREAS, the Borrower, under its previous name of UB Information &
Consultancy Services, Inc., has executed and delivered to the Bank (or a
predecessor which is now known by the Bank's name as set forth above), one or
more promissory notes, letter agreements, loan agreements, security agreements,
mortgages, pledge agreements, assignments and other agreements, instruments,
certificates and documents more fully described on Exhibit A attached hereto and
made a part hereof (collectively, the "Loan Documents") which evidence or secure
some or all of the Borrower's obligations to the Bank for one or more loans or
other extension of credit (the "Obligations"); and
WHEREAS, the Borrower and the Bank desire to amend the Loan Documents as
provided for below, in order to reflect the change of the Borrower's name to
UBICS, Inc., and for the other purposes set forth below, all on the terms and
conditions set forth in this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Each of the Loan Documents is amended as set forth in Exhibit A. Any
and all references to any Loan Document in any other Loan Document shall be
deemed to refer to such Loan Document as amended hereby. Any initially
capitalized terms used in this Amendment without definition shall have the
meanings assigned to those terms in the Loan Documents.
2. This Amendment is deemed incorporated into each of the Loan
Documents. To the extent that any term or provision of this Amendment is or may
be deemed expressly inconsistent with any term or provision in any Loan
Document, the terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under any Loan Document, and (c) this
Amendment has been duly authorized, executed and delivered and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
4. The Borrower hereby confirms that any collateral for the
Obligations, including but not limited to liens, security interests, mortgages,
and pledges granted by the Borrower or third parties (if applicable), shall
continue unimpaired and in full force and effect.
5. This Amendment may be signed in any number of counterpart copies and
by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
<PAGE> 2
6. This Amendment will be binding upon and inure to the benefit of the
New Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
7. Except as amended hereby, the terms and provisions of the Loan
Documents remain unchanged and in full force and effect. Except as expressly
provided herein, this Amendment shall not constitute an amendment, waiver,
consent or release with respect to any provision of any Loan Document, a waiver
of any default or Event of Default thereunder, or a waiver or release of any of
the Bank's rights and remedies (all of which are hereby reserved). THE BORROWER
EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF JUDGMENT AND WAIVER OF JURY
TRIAL PROVISIONS (IF APPLICABLE).
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: UBICS, INC.
/s/ Manohar B. Hira By:/s/ O'Neil Nalavadi
- ---------------------------- ---------------------------
Print Name: M. B. Hira Print Name: O'Neil Nalavadi
----------------- -------------------
Title: Sr. V.P. & CFO
------------------------
/s/ O'Neil Nalavadi By:/s/ Manohar B. Hira
- ---------------------------- ---------------------------
Print Name: O'Neil Nalavadi Print Name: M. B. Hira
----------------- -------------------
Title: President
------------------------
PNC BANK, NATIONAL ASSOCIATION
/s/ O'Neil Nalavadi /s/ James P. Nickel
- ---------------------------- ---------------------------
Print Name: O'Neil Nalavadi James P. Nickel, Vice President
-----------------
-2-
<PAGE> 3
321025
AMENDMENT TO LOAN DOCUMENTS
EXHIBIT A
A. The "Loan Documents" that are the subject of this Amendment include the
following (as any of the foregoing have previously been amended, modified or
otherwise supplemented):
1. Letter Agreement dated July 26, 1996 (the "Agreement");
2. Committed Line of Credit Note in the amount of $500,000.00 dated July 31,
1996 (the "Note");
3. Disclosure for Confession of Judgment dated July 31, 1996;
and
4. Security Agreement dated July 31, 1996.
B. The Loan Documents are hereby amended as follows:
1. The name "UB Information & Consultancy Services, Inc." is hereby
deleted from the Loan Documents and the name "UBICS, Inc." is hereby inserted in
lieu thereof wherever it appears.
2. This Amendment shall be effective upon the fulfillment of the
following conditions precedent, including receipt by the Bank of the following
documents, which in all cases shall be in form and substance satisfactory to the
Bank:
(a) This Amendment, duly executed by the Borrower and the Bank.
(b) UCC-3 Financing Statements executed and delivered to the Bank
reflecting the Borrower's name change..
(c) A certified copy of the documents filed by the Borrower with the
Delaware Secretary of State to effect the Borrower's name change.
(d) Such other documents and instruments as the Bank reasonably deems
necessary to carry out the intent and purpose of this Amendment.
3. The Borrower agrees to reimburse the Bank for all costs and expenses
incurred by the Bank in connection with this Amendment and the other agreements,
instruments and documents described herein, including but not limited to filing
and recording fees.
4. Extension of Expiration Date. The Agreement and Note are hereby
amended by extending the Expiration Date from August 30, 1998, to August 30,
1999, on which date the entire principal balance and any accrued but unpaid
interest shall be due and payable. This extension is effective as of August 31,
1998.
<PAGE> 4
5. Section (1) of the Agreement entitled "Type of Facility and Use of
Proceeds" is hereby amended and restated to read in its entirety as follows:
"1. Type of Facility and Use of Proceeds. This is a committed revolving
line of credit under which the Borrower may request and the Bank,
subject to the terms and conditions of this letter, will make advances
to the Borrower from time to time until the Expiration Date, in an
amount in the aggregate at any time outstanding not to exceed
$1,000,000.00 (the "Line of Credit"). The availability of advances
under the Line of Credit will be subject to a borrowing base formula.
At no time shall outstanding indebtedness under the Line of Credit
exceed the Borrowing Base, defined to mean the lesser of (a) the
maximum principal amount of the Line of Credit, and (b) 70% of accounts
less than 90 days past due. The Borrower will be required to deliver
periodic Borrowing Base Certificates as set forth on Exhibit "A",
reporting on its accounts, in order to demonstrate the availability of
advances under the borrowing base formula. The "Expiration Date" means
August 30, 1999, or such later date as may be designated by the Bank by
written notice to the Borrower. Advances may be used for working
capital or other general business purposes of the Borrower."
6. Section 5(a) of the Agreement under the heading entitled "Security"
wherein the Bank required Vijay Mallya to guarantee all indebtedness of the
Borrower to the Bank is hereby deleted in its entirety. The Bank, for valuable
consideration, the receipt of which is hereby acknowledged, and intending to be
legally bound, hereby releases and dissolves such guaranty agreement and the
provisions thereof shall be of no force and effect. The Guarantor is forever
freed, exonerated and discharged of and from the guaranty agreement, and every
part thereof.
7. Section (B) under the heading entitled "Financial Reporting
Covenants" on Exhibit "A" of the Agreement is hereby amended and restated to
read in its entirety as follows:
"(B) When there are outstandings under the Line of Credit, the Borrower
will deliver to the Bank within 45 days following the close of each
fiscal month, the Borrower's detailed schedule of accounts receivable
analysis and a borrowing base certificate."
8. Sections (A) and (B) under the heading entitled "Financial
Covenants" on Exhibit "A" of the Agreement are hereby amended and restated to
read in its entirety as follows:
"(A) The Borrower will maintain at all times a minimum total
stockholder's equity of $14,750,000.00, to be reset annually.
(B) The Borrower will maintain a ratio of Funds from Operations
coverage to Uses of at least 1.0 to 1. "Funds from Operations" means
net income plus other non-cash items. "Uses" means Current Maturities
plus Unfunded Capital Expenditures plus distributions. "Current
Maturities" the current principal maturities of all indebtedness for
borrowed money (including but not limited to amortization of
capitalized lease obligations) having an original term of one year or
more, as well as any prepayments of such indebtedness prior to
scheduled maturity. "Unfunded Capital Expenditures" means capital
expenditures made from the Borrower's funds other than borrowed funds."
-2-
<PAGE> 5
9. The Section on Exhibit "A" entitled "Financial Covenants" is
hereby amended by adding subsection (D) to read in its entirety as follows:
"(D) The Borrower will maintain at all times a minimum of
$1,000,000.00 in unrestricted and unencumbered liquid assets."
10. Fees. Beginning on the last day of the quarter after the date
of this Amendment and continuing on the last day of each quarter thereafter
until the Expiration Date, the Borrower shall pay a commitment fee to the Bank,
in arrears, at the rate of one-quarter of one percent (1/4%) per annum on the
average daily balance of the Line of Credit which is undisbursed and uncancelled
during the preceding quarter. The commitment fee shall be computed on the basis
of a year of 360 days and paid on the actual number of days elapsed.
11. Our willingness to grant this amendment is subject to your
representing, by your execution of this amendment in the space above and with as
a condition to each advance under the Note, that you have reviewed the areas
within your business and operations which could be adversely affected by, and
have developed or are developing a program to address on a timely basis the risk
that certain computer applications used by you may be unable to recognize and
perform properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not
result, and is not reasonably expected to result, in any material adverse effect
on your business, properties, assets, financial condition, results of operations
or prospects, or your ability to duly and punctually pay or perform your
obligations under the Agreement and the Note.
-3-
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
1. UBICS Holding Company, a Delaware corporation
2. UBIX Computer Services Limited, a Mauritius corporation
3. UBICS India Private Limited, an Indian corporation
4. UBICS UK Limited, a British limited company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF UBICS, INC. AS OF 12/31/98 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS OF UBICS, INC. FOR THE FISCAL YEAR ENDED 12/31/98
INCLUDED IN THE ANNUAL REPORT OF UBICS, INC. FOR THE FISCAL YEAR ENDED 12/31/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,470
<SECURITIES> 0
<RECEIVABLES> 4,457
<ALLOWANCES> 305
<INVENTORY> 0
<CURRENT-ASSETS> 19,397
<PP&E> 1,791
<DEPRECIATION> (170)
<TOTAL-ASSETS> 21,218
<CURRENT-LIABILITIES> 3,938
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 17,215
<TOTAL-LIABILITY-AND-EQUITY> 21,218
<SALES> 0
<TOTAL-REVENUES> 30,189
<CGS> 0
<TOTAL-COSTS> 20,771
<OTHER-EXPENSES> 6,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 611
<INCOME-PRETAX> 3,534
<INCOME-TAX> 1,438
<INCOME-CONTINUING> 2,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,096
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
