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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(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/A:
(1) Form 10-K for the fiscal year ended December 31, 1998, filed by the
registrant on March 31, 1999 (Parts I, II and IV).
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INTRODUCTORY STATEMENT
This Form 10-K/A is being filed by UBICS, Inc. ("UBICS" or the
"Company") as an amendment to the Annual Report on Form 10-K of UBICS for the
fiscal year ended December 31, 1998 (the "Form 10-K") for the purpose of
amending Part III of the Form 10-K to set forth the information required to be
included therein rather than incorporating such information by reference to the
Company's definitive proxy statement to be filed with the Commission. Such
amendment is necessary because the Company will not have filed its definitive
proxy statement with the Commission on or before the 120th day after the end of
its 1998 fiscal year. All information required to be set forth in Parts I, II
and IV is incorporated by reference to Part I, Part II and Part IV,
respectively, of the Form 10-K.
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<TABLE>
<CAPTION>
UBICS, INC.
FORM 10-K
TABLE OF CONTENTS
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PART I Page
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<S> <C> <C>
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
</TABLE>
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PART I
ITEM 1. BUSINESS
The information required by this Item is incorporated by reference to
Item 1 of the Form 10-K.
ITEM 2. PROPERTIES
The information required by this Item is incorporated by reference to
Item 2 of the Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
The information required by this Item is incorporated by reference to
Item 3 of the Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information required by this Item is incorporated by reference to
Item 4 of the Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to
Item 5 of the Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to
Item 6 of the Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this Item is incorporated by reference to
Item 7 of the Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is incorporated by reference to
Item 7A of the Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL DATA
The financial statements and supplemental financial data required by
this Item are incorporated by reference to Item 8 of the Form 10-K.
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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
Directors
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Set forth below is certain information with regard to the directors of
UBICS.
<TABLE>
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NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
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Vijay Mallya.............................. Chairman of the Company since its inception in July
Age 43 1993. Mr. Mallya has been chairman of the UB Group since
1983. Mr. Mallya also is Chairman of Mendocino Brewing
Company, Inc., United Breweries Limited, UB Engineering
Limited, Mangalore Chemicals and Fertilisers Ltd.,
Herbertsons Limited, McDowell & Co. Ltd. and other UB
Group companies. He also sits on boards of several
foreign companies and organizations including companies
comprising the UB Group, The Institute of Economic
Studies (India) and the Federation of the Indian Chamber
of Commerce and Industries.
Manohar B. Hira........................... President and a director of the Company since it was
Age 58 founded in 1993. Mr. Hira also served in various senior
management capacities for companies in the UB Group from
1981 to 1995, including Chief Operating Officer--U.S. IT
Operations, Export Manager, General Manager--Human
Resources and Vice President--Administration. Mr. Hira
is a mechanical engineer and has a Masters' degree in
management.
Scott R. Heldfond......................... Director of the Company since December 1998. Since
Age 53 February 1997 Mr. Heldfond has been President and Chief
Executive Officer of Frank Crystal & Co. of California,
Inc., an insurance brokerage company. Prior to joining
Frank Crystal & Co., from 1994 to February 1997 he was
Chairman of Hales Capital LLC, an investment banking
firm, and President of AOL Real Estate and Investments.
O'Neil Nalavadi........................... Senior Vice President, Chief Financial Officer and a
Age 39 director of the Company since August 1997. Mr. Nalavadi
also has served in various senior management capacities
for companies in the UB Group from 1984 to August 1997,
including Senior Vice President of the Corporate
Management Division--UB Group from 1995 to August 1997,
Chief Operating Officer and director of United Breweries
Plc. from December 1992 to January 1995 and General
Manager--Corporate Planning & Coordination of UB
International Ltd. from January 1989 to December 1992.
Mr. Nalavadi is a Chartered Accountant in India.
Kent D. Price............................. Director of the Company since July, 1998. Since August
Age 55 1998 Mr. Price has been President of Robert Kent &
Company, a financial advisory firm. Prior thereto, from
January 1994 to July 1994 he was Chairman of San
Francisco Company and Bank of San Francisco and from
August 1994 to July 1998 was General Manager of
Securities and Capital Markets for International
Business Machines Corporation (IBM). He is currently a
member of the board of directors of San Francisco
Company and Mendocino Brewing Company.
</TABLE>
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Craig A. Wolfanger........................ Director of the Company since October 30, 1997. Mr.
Age 40 Wolfanger has been Senior Managing Director of
Parker/Hunter Incorporated, an investment banking firm,
since 1995. Mr. Wolfanger also serves on the Management
Committee at Parker/Hunter Incorporated. From 1991 to
1995, Mr. Wolfanger was Senior Managing Director of the
Corporate Finance Division of PNC Securities Corp. Mr.
Wolfanger previously was employed in the investment
banking departments of Alex. Brown & Sons Incorporated
and Kidder, Peabody & Co. Incorporated.
</TABLE>
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 (such transaction is referred to hereinafter as the
"Exchange"). 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 Exchange in the second quarter of 1999.
Manohar Hira, currently President and a director of UBICS whose term
expires at the 1999 annual meeting of stockholders, is not a nominee for
election to the Board as a director at the annual meeting and has agreed to
resign as President of UBICS effective upon consummation of the Exchange so that
the number of directors will be reduced from six to five. Mr. Hira will continue
as an employee of UBICS until January 1, 2000. See "Employment Agreements."
Upon consummation of the Exchange O'Neil Nalavadi, currently a director of
UBICS, will resign as a director, the number of directors will be increased from
five to seven and the persons listed below will be appointed to the Board.
<TABLE>
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NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
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Satinder Singh Rekhi...................... President and Chief Executive Officer of R Systems since
Age 48 its inception in 1991. Prior to founding R Systems, Mr.
Rekhi was employed in the sales and marketing department
of Digital Information Systems Corporation. He received
his Bachelor's degree in Engineering from the Indian
Institute of Technology and a Masters of Business
Administration from California State University.
Gen. Baldev Singh......................... President and Chief Executive Officer of R Systems-India
Age 58 since July 1997. Prior to joining R Systems Gen. Singh
served for 37 years in various capacities in the Armed
Forces in India, including service as commander of the
Indian Army Corps from January 1994 to October 1995 and
administration of the Joint Defense Services Staff
College in Wellington, India from October 1995 to July
1997.
Deborah Colden............................ Marketing Section Manager, Channel Marketing, Computer
Age 43 Products for Hewlett-Packard Company since 1994.
</TABLE>
Gen. Baldev Singh is the brother-in-law of Satinder Singh Rekhi, who will
be President and Chief Executive Officer of UBICS and a director of UBICS
following consummation of the Exchange.
Executive Officers
- ------------------
The following table sets forth certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Vijay Mallya...................... 43 Chairman and Director
Manohar B. Hira................... 58 President and Director
O'Neil Nalavadi................... 39 Senior Vice President and Chief Financial
Officer
Babu Srinivas..................... 44 Vice President, Finance and Accounting and
Secretary
Vijay P. Reddy.................... 49 Vice President, Personnel and Administration
Patrick Ghilani................... 28 Vice President, Enterprise Solutions
</TABLE>
Information regarding Messrs. Mallya, Hira and Nalvadi is set forth above
in this Item under the caption "Directors."
Babu Srinivas has been Vice President--Finance and Accounting of the
Company since April 1996. Mr. Srinivas served in various senior management
capacities for companies in the UB Group, including senior manager--internal
audit, controller and general manager, from 1990 to March 1996. Mr. Srinivas is
a Chartered Accountant in India.
Vijay P. Reddy was appointed Vice President, Personnel and Administration
in January 1998. Prior to joining the Company he served as a senior executive
for personnel administration for the UB Group from November 1996 to January
1998. Mr. Reddy is a graduate of the U.S. Army Command and General Staff
College, Ft. Leavenworth, Kansas, and holds a Master's Degree in management of
human resources. Mr. Reddy has 27 years of experience in personnel and
administration matters and served in various capacities for the Armed Forces in
India from 1971 to 1996.
Patrick Ghilani was appointed Vice President, Enterprise Solutions of UBICS
in June 1998. Prior to joining UBICS, from 1994 to July 1995 Mr. Ghilani was
production control manager for DECO-Grand, Inc., an automotive parts supplier.
From August 1995 to 1998 he was employed in various capacities with Ernst &
Young LLP, including senior consultant in business process reengineering and
package enabled reengineering projects and national sales coordinator and
manager focusing on the Baan ERP Service line.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors, officers,
and persons who are directly or indirectly the beneficial owners of more than
10% of the Common Stock of the Company are required to file with the Commission,
within specified monthly and annual due dates, a statement of their initial
beneficial ownership and all subsequent changes in ownership of Common Stock.
Rules of the Commission require such persons to furnish the Company with copies
of all Section 16(a) forms they file.
For the fiscal year ended December 31, 1998 all officers and directors of
the Company filed the required Section 16(a) forms on a timely basis to report
their ownership of and changes in beneficial ownership of Common Stock except as
follows: Forms 3 and 4 for Vijay Reddy, Kent Price and Scott Heldfond reporting
holdings and purchases of UBICS Common Stock were not timely filed; and Forms 5
for Kent Price, Vijay Reddy and Patrick Ghilani reporting grants of exempt stock
options were not timely filed.
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ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information regarding compensation paid to
Vijay Mallya, Chairman of the Company, and each other current or former
executive officer whose total compensation exceeded $100,000 for the fiscal year
ended December 31, 1998 (together, the "named executive officers"), for the
fiscal years ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Vijay Mallya............ 1998 $150,000 -- -- --
Chairman 1997 150,000 -- -- --
1996 125,000(1) -- -- --
Manohar B. Hira......... 1998 $120,000 -- $22,802(3) $18,000(4)
President 1997 109,000 $20,000(2) 19,000 --
1996 60,000 15,000 25,000 --
O'Neil Nalavadi......... 1998 $100,000 -- $30,171(6) $15,000(4)
Senior Vice President 1997 58,333 -- -- --
and CFO(5)
Scott Baxendell......... 1998 $166,333 -- -- --
Vice President, Sales 1997 348,602 -- -- --
and Marketing(7) 1996 333,002 -- -- --
</TABLE>
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(1) Amounts shown were paid in January 1997 for services rendered by Mr. Mallya
in 1996.
(2) Represents bonuses paid to Mr. Hira in 1998 but earned in 1997.
(3) Includes amounts paid by UBICS for use of an automobile ($15,746); and
payment of travel expenses by UBICS on behalf of Mr. Hira ($7,056).
(4) Represent payments for contributions to retirement accounts for Mr. Hira and
Mr. Nalavadi pursuant to their respective employment agreements.
(5) Mr. Nalavadi became employed by UBICS in August 1997.
(6) Includes payment of travel expenses by UBICS on behalf of Mr. Nalavadi
($21,168) and amounts paid by UBICS for use of an automobile ($9,003).
(7) Mr. Baxendell terminated his employment with UBICS in August 1998. Salary
information includes sales commissions.
STOCK OPTIONS
The Company currently maintains the UBICS, Inc. 1997 Stock Option Plan (the
"1997 Plan") under which stock option awards may be made to eligible employees
of the Company. A maximum of 750,000 shares of Common Stock may be issued
pursuant to exercise of options granted under the 1997 Plan which number may be
adjusted to prevent dilution or enlargement of rights in the event of any stock
dividend, reorganization, reclassification, recapitalization, stock split,
combination, merger, consolidation or other relevant capitalization change. As
of December 31, 1998, there were options to purchase an aggregate of 418,000
shares of UBICS Common Stock outstanding under the 1997 Plan. UBICS has agreed,
pursuant to the Exchange Agreement, to reserve options to purchase an aggregate
or 300,000 shares of UBICS Common Stock under the 1997 Plan for issuance to
employees of R Systems, R Systems-India and R Systems-Singapore.
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The following tables set forth certain information with respect to options
granted to the named executive officers during the fiscal year ended December
31, 1998 and the value of options held by the named executive officers on
December 31, 1998. None of the named executive officers exercised any options to
purchase common stock during the fiscal year ended December 31, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---- ------------ ---------------- ----------- ---------- -------- ----------
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Vijay Mallya...................... -- -- -- -- -- --
Manohar B. Hira................... -- -- -- -- -- --
O'Neil Nalavadi................... -- -- -- -- -- --
Scott Baxendell................... 35,000(1) 20.2% $13.75 1/28/09(1) $783,906 $1,248,239
</TABLE>
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(1) Options were granted subject to vesting in three equal installments on
1/25/99, 1/25/00 and 1/25/01. Options terminated after Mr. Baxendell
terminated his employment in August 1998.
(2) Based on the product of (a) the difference between (i) the per share market
price of the Common Stock on the date of the grant ($13.75 per share),
compounded annually over the term of the option (10 years) at the assumed
annual rate indicated, and (ii) the exercise price per share and (b) the
number of shares of UBICS Common Stock obtainable upon exercise of the
option. Amounts shown were calculated at the assumed 5% and 10% annual rates
required by the Securities and Exchange Commission and are not intended as a
forecast of future appreciation in the price of the UBICS Common Stock.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
HELD AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
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NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Vijay Mallya...................... 25,000 50,000 -- --
Manohar B. Hira................... 30,000 60,000 -- --
O'Neil Nalavadi................... 17,333 34,667 -- --
Scott Baxendell(2)................ -- 35,000 -- --
</TABLE>
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(1) All options listed were out of the money as of December 31, 1998.
(2) Mr. Baxendell terminated his employment with UBICS in August 1998, as a
result of which all options granted to Mr. Baxendell are no longer
exercisable.
EMPLOYMENT AGREEMENTS
UBICS has entered into substantially identical employment agreements with
Messrs. Mallya, Hira, Nalavadi and Srinivas pursuant to which each of them serve
as an executive officer of the Company. The initial terms of the employment
agreements are three years and the agreements provide for payment of an annual
base salary to Messrs. Mallya, Hira, Nalavadi and Srinivas of $150,000,
$120,000, $100,000 and $75,000, respectively, and an annual bonus as determined
by the Compensation Committee of the Board of Directors. The agreements with
Messrs. Mallya, Hira and Nalavadi automatically extend beginning on the second
anniversary of the agreements, so that the remaining term of each agreement is
always one year unless either party gives notice of their intention to terminate
the agreement at the end of the term. The agreements are terminable by UBICS
immediately for cause. The agreements prohibit the executive officers from
competing with UBICS during their employment with UBICS and for one year
thereafter, and from improperly disclosing or using UBICS's proprietary
information. The employment agreements also include the provisions relating to
severance described below.
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The employment agreements with each of Messrs. Mallya, Hira, Nalavadi and
Srinivas provide that if, on or after the date of a "Change in Control" (as
defined herein), UBICS, for any reason, terminates the employee's employment or
the employee resigns "for good reason" (as defined herein), then UBICS shall pay
to the employee within five days following the date of termination or date of
resignation, as applicable: (i) the employee's salary and benefits through the
termination date or resignation date, both as in effect on the date prior to the
date of the Change in Control; and (ii) the amount of any bonus payable to the
employee for the year in which the Change in Control occurred, pro rated to take
into account the number of days that have elapsed in such year prior to the
termination date or resignation date. In addition, during a period following the
termination or resignation date equal to the remaining term of the employee's
employment agreement as of the date immediately prior to such termination or
resignation date, UBICS shall continue to pay to the employee his annual salary,
as in effect on the day prior to the date of the Change in Control, on the dates
when such salary would have been payable had the employee remained employed by
UBICS and shall continue to provide to the employee during such specified
period, at no cost to the employee, the benefits the employee was receiving on
the day prior to the date of the Change in Control or benefits substantially
similar thereto.
For purposes of the employment agreements, a "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity (other than Mallya or an
affiliate of Mallya) becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities of UBICS representing 50% or more of the
combined voting power of UBICS' then outstanding voting securities; (ii) the
individuals who as of the date of the agreements are members of the Board of
Directors of UBICS (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of UBICS (provided, however, that if
the election, or nomination for election by UBICS' stockholders, of any new
director was approved by a vote of at least a majority of the Incumbent Board,
such new director will, for purposes of such agreements, be considered as a
member of the Incumbent Board); (iii) an agreement by UBICS to consolidate or
merge with any other entity pursuant to which UBICS will not be the continuing
or surviving corporation or pursuant to which shares of the Common Stock of
UBICS would be converted into cash, securities or other property, other than a
merger of UBICS in which holders of the Common Stock of UBICS immediately prior
to the merger would have the same proportion of ownership of Common Stock of the
surviving corporation immediately after the merger; (iv) an agreement of UBICS
to sell, lease, exchange or otherwise transfer in one transaction or a series of
related transactions substantially all of the assets of UBICS; (v) the adoption
of any plan or proposal for a complete or partial liquidation or dissolution of
UBICS; or (vi) an agreement to sell more than 50% of the outstanding voting
securities of UBICS in one or a series of related transactions other than an
initial public offering of voting securities registered with the Commission.
The term "good reason" means: (i) a material diminution by UBICS of the
employee's title or responsibilities, as that title and those responsibilities
existed on the day prior to the date of a Change in Control; or (ii) a material
diminution by UBICS in the employee's salary, benefits or incentive or other
forms of compensation, all as in effect on the day prior to the date of a Change
in Control.
UBICS and Manohar B. Hira, currently President and a director of UBICS,
have entered into an Agreement of Severance, Waiver and Release (the "Severance
Agreement") pursuant to which Mr. Hira has agreed to resign as President of
UBICS effective on the closing date of the Exchange. The Severance Agreement
also provides that Mr. Hira will not be nominated and will not stand for
reelection to the Board of Directors of UBICS at the Annual Meeting. Mr. Hira
will continue as an employee of UBICS until his retirement on January 1, 2000
and will assist in the integration of the respective businesses of UBICS and R
Systems and perform such other duties as may be designated from time to time by
the Board, the Chairman or the President of UBICS.
The Severance Agreement provides that UBICS will pay Mr. Hira a severance
payment of $450,000, payable in installments of $150,000 on January 1, 2000 (the
"Termination Date") and $100,000 on each of the first through third
anniversaries of the Termination Date. In addition, all stock options held by
Mr. Hira shall vest and be exercisable by Mr. Hira or his estate effective upon
consummation of the Exchange until the expiration date of such options. If UBICS
determines, in connection with the Exchange, to reduce the exercise price of its
outstanding stock options or to issue new options to replace the outstanding
options, Mr. Hira's options will also be repriced or replaced, as the case may
be, on the same basis. UBICS also agreed to amend a mortgage note dated June 24,
1998 from Mr. Hira to UBICS (the "Note") in the principal amount of $250,000 to
eliminate all scheduled installment payments and provide that the principal
amount and all accrued interest shall be due and payable on the fourth
anniversary of the Termination Date. Mr. Hira agreed to release UBICS and its
present and former officers, directors, employees, agents and attorneys from any
and all claims, suits, damages and expenses related to or arising out of Mr.
Hira's employment or termination of employment with UBICS.
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INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors pursuant to which the Company has agreed to indemnify such party to
the full extent permitted by law, subject to certain exceptions, if such party
becomes subject to an action because such party is a director, officer,
employee, agent or fiduciary of the Company. Upon consummation of the Exchange
UBICS will enter into a similar indemnification agreement with Satinder Singh
Rekhi, Gen. Baldev Singh and Deborah Colden upon their appointment as directors
of UBICS.
COMPENSATION OF DIRECTORS
The Company pays each director who is not an executive officer an annual
retainer of $20,000, and all directors are reimbursed for travel expenses
incurred in connection with attending board and committee meetings. Directors
are not entitled to additional fees for serving on committees of the Board of
Directors. In addition, under the 1997 Plan, Mr. Price was granted options to
purchase 20,000 shares of Common Stock at an exercise price of $13.63 per share
upon his appointment as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Mallya, Chairman and the beneficial owner of approximately 62% of the
outstanding shares of Common Stock of the Company, may also deemed to be in
"control" (within the meaning of the Securities Act) of each company that is a
member of the UB Group. The UB Group is a multinational group of companies
headquartered in India, and Mr. Mallya is Chairman and a significant shareholder
of such companies. Any transaction between the Company, on the one hand, and a
company in the UB Group, on the other hand, may be deemed to be a transaction
between "affiliates" (within the meaning of the Securities Act). In addition,
Mr. Hira, currently President and a director of the Company, was employed in
various senior management capacities with the UB Group and its affiliate, UB
Information Consultancy Services Ltd., an Indian corporation ("UB Services")
from 1981 to 1995, and Mr. Nalavadi, Senior Vice President, Chief Financial
Officer and currently a director of the Company, was employed in various senior
management capacities with the UB Group from 1984 to 1997. See "ELECTION OF
DIRECTORS."
From time to time, the UB Group has provided certain services to the
Company, primarily involving the provision of administrative services to the
Company by UB Group employees and allowing the Company the use of certain office
space and facilities in locations where the UB Group has an office. Prior to
1997, such services were provided on an informal basis and not under a written
contractual arrangement, although the Company reimbursed the UB Group for any
out-of-pocket cost of the services provided.
The aggregate annual value of the services provided by the UB Group to the
Company was less than $10,000 in 1998. In October 1997 the Company entered into
Services Agreements with Mr. Mallya and certain UB Group companies (the
"Services Agreements") pursuant to which the UB Group will provide services and
accommodations to the Company, including the right to use the "UB Group" name,
both in India and in other countries where the UB Group has an office or
location, from time to time on an as needed basis. The Services Agreements,
which have an initial term of five years, require the Company to pay the UB
Group company providing the services or accommodations compensation on terms no
less favorable to the Company than those which would be made to non-affiliated
parties. Compensation for services will be based on the estimated costs,
including a reasonable allocation of direct and indirect overhead costs,
incurred by the UB Group company providing the services. Compensation for use of
facilities of a UB Group company will be based on the provider's costs
(including rent, taxes, utilities and other operating expenses) for the portion
of the facility used by the Company, prorated based on the number of days of
each month the Company actually uses the facility. The costs incurred by the
Company in the future pursuant to these agreements are expected to be comparable
to the costs incurred for such services for prior fiscal years.
The Company also has entered into non-competition agreements with Mr.
Mallya and certain UB Group companies pursuant to which the UB Group (including
UB Services) and Mr. Mallya have agreed not, and to cause their respective
affiliates not, to compete with the Company or use the name "UBICS" and to cause
UB Services to cease business operations. Each non-competition agreement has a
term of five years subject to earlier termination upon certain events involving
a change in control of the Company.
9
<PAGE> 12
In addition, the Company has entered into a sublease agreement with the UB
Group pursuant to which the Company subleases a portion of its office space in
Sausalito, California to the UB Group. Pursuant to the sublease, which expires
on June 2, 1999, the UB Group agreed to pay its pro rata share of the rent and
operating expenses payable by the Company under its lease. The UB Group's annual
rental and operating expense payment under the sublease currently is
approximately $83,000. Currently the UB Group owes an aggregate of $174,423 in
rent and expenses to UBICS under the sublease.
Upon consummation of the Exchange, UBICS will enter into a registration
rights agreement with United Breweries Information Consultancy Services Ltd., a
British Virgin Islands corporation beneficially owned by Mr. Mallya
("UBICS-BVI"), which is the record owner of approximately 62% of the outstanding
shares of UBICS common stock. UBICS-BVI granting UBICS-BVI the right to demand
that UBICS register its shares of UBICS Common Stock or to cause its shares to
be included in a registration commenced by UBICS, in each case subject to the
limitations set forth in such agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the UBICS Common Stock as of March 31, 1999 by (1) each person who
is known by the Company to have been the beneficial owner of more than five
percent of the UBICS Common Stock on such date, (2) each director and named
executive officer of UBICS and (3) all directors and executive officers of UBICS
as a group as of such date (based on 6,479,800 shares of UBICS Common Stock
outstanding as of March 31, 1999).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ --------- -------
<S> <C> <C>
United Breweries Information Consultancy Services Ltd.(2)... 4,033,751 62.2%
Vijay Mallya(3)(4)(5)....................................... 4,058,751 62.4
Manohar B. Hira(4)(5)....................................... 30,700 *
Scott Heldfond(4)(5)........................................ 2,000 *
O'Neil Nalavadi(4)(5)....................................... 17,333 *
Kent Price(4)(5)............................................ 21,000 *
Craig A. Wolfanger(4)(5).................................... 21,000 *
All directors and executive officers as a group (9
persons)(3)(5)............................................ 4,164,117(5) 63.0
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission"), and includes shares
as to which the listed person has or shares voting and/or investment power.
Shares of UBICS Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days after the date of this Proxy
Statement are deemed outstanding for computing the percentage ownership of
the person holding such options or warrants, but are not deemed outstanding
for computing the percentage of any other person.
(2) United Breweries Information Consultancy Services Ltd. ("UBICS-BVI"), is a
corporation organized under the laws of the British Virgin Islands. The
Principal Stockholder's address is P.O. Box 3149, Pasea Estate, Road Town,
BVI. Vijay Mallya (directly and through other entities owned and controlled
by Mr. Mallya) owns all of the outstanding equity interests in the Principal
Stockholder and therefore is the indirect beneficial owner of such shares.
(3) Includes shares owned by the Principal Stockholder, which shares are
indirectly beneficially owned by Mr. Mallya as set forth in footnote 2.
(4) The address of Mr. Mallya, Mr. Hira, Mr. Heldfond, Mr. Nalavadi, Mr. Price
and Mr. Wolfanger is c/o UBICS, Inc., 333 Technology Drive, Suite 210,
Southpointe, Canonsburg, Pennsylvania 15317.
(5) Includes shares of UBICS Common Stock that may be acquired by the following
directors and officers pursuant to the exercise of options granted pursuant
to the 1997 Plan: Mr. Mallya, 25,000; Mr. Hira, 30,000; Mr. Nalavadi,
17,333; Mr. Heldfond, 0; Mr. Price, 20,000; Mr. Wolfanger, 20,000; all
directors and executive officers as a group, 125,666 (95,666 following the
Exchange).
10
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered and intends to enter into certain arrangements and
agreements with companies in the UB Group. See "Executive Officers and
Directors" and "Compensation Committee Interlocks and Insider Participation."
The Company has a policy requiring all future transactions, including any
loans from the Company to its officers, directors, principal stockholders or
affiliates, to be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested directors or, if required by law,
a majority of the disinterested stockholders, and requiring such transactions to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
Manohar B. Hira, president and a director of UBICS, executed and delivered
to UBICS a Mortgage Note dated June 24, 1998 in the principal amount of $250,000
(the "Note") evidencing a loan in such amount by UBICS to Mr. Hira to finance a
portion of the purchase price of a personal residence. The Note is secured by a
second mortgage on such property in favor of UBICS. The terms of the Note were
amended pursuant to the Severance Agreement which is described in Item 11 above
under "Employment Agreements."
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 incorporated by
reference to pages 18 to 28 of the Form 10-K and the report of independent
public accountants is incorporated by reference to page 17 of the 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
11
<PAGE> 14
2. Financial Statement Schedules
-----------------------------
The following financial statement schedules shown below should be read
in conjunction with the financial statements incorporated by reference to pages
18 to 28 of the 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.
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.(1)
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(1)
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(1)
3(i) Amended and Restated Certificate of Incorporation of UBICS,
Inc.(2)
3(ii) Amended and Restated Bylaws of UBICS, Inc.(2)
10.1 UBICS, Inc. 1997 Stock Option Plan(2)
10.2 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB Information Consultancy Services
Ltd.(3)
10.3 Employment Agreement between the Company and Vijay Mallya(3)
10.4 Employment Agreement between the Company and Manohar B. Hira(3)
10.5 Employment Agreement between the Company and O'Neil Nalavadi(3)
10.6 Employment Agreement between the Company and Babu Srinivas(3)
10.7 Agreement of Severance, Waiver and Release dated March 18, 1999
between the Company and Manohar B. Hira(1)
10.8 Lease dated May 28, 1996 between the Company and Marin
Executive Park, as amended(2)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(3)
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(2)
10.11 Form of Director Indemnification Agreement(3)
10.12 Form of Sublease and Consent among the Company, Marin Executive
Park and United Breweries of America, Inc.(3)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and United Breweries Limited(3)
10.14 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited(3)
10.15 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(3)
10.16 Lease Agreement dated June 30, 1998 between the Company and
Stealth Technology Associates(4)
10.17 Amendment to Loan Documents dated December 18, 1998 between PNC
Bank, National Association and the Company(1)
21 Subsidiaries of the Registrant(1)
27 Financial Data Schedule(1)
- ----------
(1) Incorporated by reference to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed on March 31, 1999.
(2) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(3) 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.
(4) 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.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused the amendment 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 amendment in the capacities indicated on
April 29, 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
13
<PAGE> 16
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.(1)
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(1)
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(1)
3(i) Amended and Restated Certificate of Incorporation of UBICS, Inc.(2)
3(ii) Amended and Restated Bylaws of UBICS, Inc.(2)
10.1 UBICS, Inc. 1997 Stock Option Plan(2)
10.2 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB Information Consultancy Services
Ltd.(3)
10.3 Employment Agreement between the Company and Vijay Mallya(3)
10.4 Employment Agreement between the Company and Manohar B. Hira(3)
10.5 Employment Agreement between the Company and O'Neil Nalavadi(3)
10.6 Employment Agreement between the Company and Babu Srinivas(3)
10.7 Agreement of Severance, Waiver and Release dated March 18, 1999
between the Company and Manohar B. Hira(1)
10.8 Lease dated May 28, 1996 between the Company and Marin
Executive Park, as amended(2)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(3)
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(2)
10.11 Form of Director Indemnification Agreement(3)
10.12 Form of Sublease and Consent among the Company, Marin Executive
Park and United Breweries of America, Inc.(3)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and United Breweries Limited(3)
10.14 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited(3)
10.15 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(3)
10.16 Lease Agreement dated June 30, 1998 between the Company and
Stealth Technology Associates (4)
10.17 Amendment to Loan Documents dated December 18, 1998 between PNC
Bank, National Association and the Company(1)
21 Subsidiaries of the Registrant(1)
27 Financial Data Schedule(1)
- ----------
(1) Incorporated by reference to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed on March 31, 1999.
(2) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(3) 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.
(4) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998.
14
