<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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)
PENNSYLVANIA 34-1744587
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
333 TECHNOLOGY DRIVE, SUITE 210 SOUTHPOINTE, CANONSBURG, PENNSYLVANIA 15317
(Address of Principal Executive Offices) (Zip Code)
(724) 746-6001
(Registrant's Telephone Number, Including Area Code)
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 the number of shares outstanding of each of the issuer's
classes of Common Stock as of the latest practicable date:
Class Outstanding at October 31, 1999
----- -------------------------------
Common Stock, $.01 par value 6,479,800
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UBICS, INC.
Form 10-Q
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of December 31, 1998 and September 30, 1999
Statements of Operations for the three months ended September 30, 1998
and 1999 and the nine months ended September 30, 1998 and 1999
Statements of Cash Flows for the nine months ended September 30, 1998
and 1999
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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UBICS, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,470 $ 12,053
Accounts receivable, net of allowance for
doubtful accounts of $305
and $750, respectively 4,152 4,783
Unbilled receivables 2,973 2,829
Employee advances 164 98
Prepaids and other 258 511
Due from affiliates, net 174 193
Deferred tax asset 206 259
-------- --------
Total current assets 19,397 20,726
-------- --------
Property and equipment:
Leasehold improvement 40 40
Motor car 72 72
Computer equipment 1,026 1,399
Furniture and fixtures 623 659
Office and other equipment 30 40
-------- --------
Total property and equipment 1,791 2,210
Accumulated depreciation 170) (374)
-------- --------
Net property and equipment 1,621 1,836
-------- --------
Other long term asset 200 250
======== ========
Total assets $ 21,218 $ 22,812
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,034 2,703
Payroll liabilities 1,628 2,042
Accrued taxes 46 --
Other current liabilities 230 314
-------- --------
Total liabilities 3,938 5,059
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued and
Outstanding -- --
Common stock, $.01 par value, 20,000,000
shares authorized, 6,491,400 shares
issued and outstanding 65 65
Additional paid-in capital 13,160 13,160
Retained earnings 4,155 4,628
Treasury stock (100) (100)
-------- --------
Total stockholders' equity 17,280 17,753
-------- --------
Total liabilities and stockholders' equity $ 21,218 $ 22,812
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
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UBICS, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------------------------------------
1998 1999 1998 1999
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 8,451 $ 9,603 $ 21,627 $ 28,320
Cost of revenues 5,774 6,893 14,632 20,486
---------- ---------- ---------- ----------
Gross profit 2,677 2,710 6,995 7,834
Selling, general and
administrative expense 1,784 2,254 4,395 6,530
Merger related expenses -- -- -- 869
---------- ---------- ---------- ----------
Income from operations 893 456 2,600 435
Interest income (expense), net 147 136 474 396
---------- ---------- ---------- ----------
Income before income taxes 1,040 592 3,074 831
Provision for income taxes 420 256 1,240 358
---------- ---------- ---------- ----------
Net income $ 620 $ 336 $ 1,834 $ 473
========== ========== ========== ==========
Basic and diluted earnings per
share $ 0.10 $ 0.05 $ 0.28 $ 0.07
========== ========== ========== ==========
Weighted average shares
outstanding 6,499,149 6,481,234 6,576,338 6,482,153
</TABLE>
The accompanying notes are an integral part of these financial statements
4
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UBICS, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-----------------------
1998 1999
(Unaudited) (Unaudited)
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,834 $ 473
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation 49 204
Changes in operating assets and
liabilities--
Accounts receivable, net (1,744) (631)
Unbilled receivables (894) 144
Employee advances (258) 66
Other long term asset -- (50)
Due to affiliates, net (120) (19)
Deferred tax asset -- (53)
Prepaids and other (195) (253)
Accounts payable 1,366 669
Payroll liabilities 412 414
Accrued taxes and other
Current liabilities (637) 38
-------- --------
Net cash (used) provided by
operating activities (187) 1,002
-------- --------
Cash flows from investing activities:
Purchases of property and
equipment (1,120) (419)
-------- --------
Net cash used by investing
activities (1,120) (419)
-------- --------
Cash flows from financing activities:
Treasury stock purchased (47) --
-------- --------
Net cash provided by financing
activities (47) --
-------- --------
Net increase (decrease) in cash
and cash equivalents (1,354) 583
Cash and cash equivalents, at
beginning of period 12,790 11,470
-------- --------
Cash and cash equivalents, at
end of period $ 11,436 $ 12,053
======== ========
Supplemental data:
Cash payments for income taxes $ 1,863 $ 750
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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UBICS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The financial statements of UBICS, Inc. ("UBICS" or "the Company") presented
herein are unaudited. Certain information and footnote disclosures normally
prepared in accordance with generally accepted accounting principles have been
either condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the Company believes that all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1998 filed on March 31, 1999, as amended by a Form 10-K/A
filed on April 30, 1999.
Reclassifications
Certain prior balances have been reclassified to conform to the current
period presentation.
2. OPERATIONS:
UBICS, 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, applications maintenance programming and database and systems
administration.
3. REVOLVING CREDIT FACILITY:
The Company had a revolving credit facility with PNC Bank, National
Association ("PNC") at the end of December 31, 1998. Borrowings under this
arrangement are limited to $1,000, bear interest at prime rate as defined (7.75%
at December 31, 1998) plus 0.5% and are payable upon demand. The revolving
credit facility was secured by the assets of the Company. Because the Company
had no immediate plans to utilize this credit facility, the Company elected not
to renew the facility in August 1999.
There were no borrowings outstanding as of December 31, 1998.
4. RELATED PARTY TRANSACTIONS:
As of December 31, 1998 and September 30, 1999, the Company had a net
receivable from the UB Group, totaling $174 and $193, respectively, resulting
from expenses incurred by the Company on behalf of the UB Group.
5. EARNINGS PER SHARE:
Under Financial Accounting Standards Board Statement on Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," earnings per share are
classified as basic earnings per share and diluted earnings per share. Basic
earnings per share included only the weighted average common shares outstanding.
Diluted earnings per share included the weighted average common shares
outstanding and any dilutive common stock equivalent shares in the calculation.
All prior periods have been restated to reflect the Company's adoption of SFAS
No 128. Treasury shares are treated as retired for earnings per share purposes.
In 1999, stock options of 391,000 shares are not included in the diluted
earnings per share calculations as the Company's average market price for the
period was less than the exercise price.
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The following table reflects the calculation of earnings per share under
SFAS No. 128:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------------------------------------------
1998 1999 1998 1999
(unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------
<S> <C> <C> <C> <C>
(Dollars in thousands, except per
share data)
BASIC EARNINGS PER SHARE
Net income $ 620 $ 336 $ 1,834 $ 473
DIVIDED BY:
Weighted average common shares 6,498,738 6,479,800 6,499,575 6,479,800
Basic earnings per share 0.10 0.05 0.28 0.07
----------- ----------- ----------- -----------
DILUTED EARNINGS PER SHARE:
Net income 620 336 1,834 473
DIVIDED BY:
Weighted average common shares 6,498,738 6,479,800 6,499,575 6,479,800
Dilutive effect of options 411 1,434 76,764 2,353
----------- ----------- ----------- -----------
Dilutive average common shares 6,499,149 6,481,234 6,576,338 6,482,153
Diluted earnings per share $ 0.10 $ 0.05 $ 0.28 $ 0.07
</TABLE>
7
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ITEM 2. 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 1 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 section, 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, Inc. ("UBICS" or the "Company"), 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 "UB Group").
The Company's revenues are based on the hourly billing of its IT
professionals. Revenue is recognized as services are provided. The billing
rate for an IT professional varies for different service offerings and is
also dependent upon market demand, experience and competence level of the IT
professional. Generally, the rates for IT professionals placed on ERP package
implementation projects are higher. As of September 30, 1999, 68 IT
professionals, or over one-fifth 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 65 subcontractors located worldwide.
Approximately 41% of the Company's revenues were derived from IT professionals
deployed from subcontractors for the three months ended September 30, 1999. As
of September 30, 1999, IT professionals deployed from subcontractors comprised
111 of the Company's 286 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.
Since inception the Company has developed relationships with 403
clients in a range of industries and the Company rendered IT services to 167 of
these clients during the current quarter of 1999. Although the Company's five
largest clients accounted for approximately 19% of revenues for the third
quarter of 1999, this revenue concentration has been declining since the
Company's inception. 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.
8
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RECENT DEVELOPMENTS
On July 1, 1999, UBICS announced that it would not complete its
previously announced acquisition of privately held California-based R Systems,
Inc. The acquisition was to be completed by June 30, 1999 following a
stockholder vote during UBICS's Annual Meeting. Because of delays in receiving
Securities and Exchange Commission clearance of UBICS's proxy materials, the
annual meeting could not be held and the acquisition could not be closed by the
June 30 transaction deadline. The parties were unable to agree on an extension
of the acquisition agreement and therefore the transaction was terminated.
Expenses related to the transaction of approximately $900,000 were recorded
during the quarter ended June 30, 1999 ( See "Merger Related Expenses" below).
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
----------------------
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ..................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ............. 68.3 71.8 67.7 72.3
----- ----- ----- -----
Gross profit ................. 1.7 28.2 32.3 27.7
Selling, general and
administrative expense ..... 21.1 23.4 20.3 23.0
Merger related expenses ...... -- -- -- 3.1
----- ----- ----- -----
Income from operations ....... 10.6 4.8 12.0 1.6
Interest income (expense), net 1.7 1.4 2.2 1.4
----- ----- ----- -----
Income before income taxes ... 12.3 6.2 14.2 3.0
Provision for income taxes ... 5.0 2.7 5.7 1.3
----- ----- ----- -----
Net income ................... 7.3 3.5 8.5 1.7
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998.
Revenues
Revenues for the quarter ended September 30, 1999 were $9.6 million,
compared to $8.5 million for the quarter ended September 30, 1997, an increase
of $1.1 million, or 14%. Approximately 98% 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 2% of the increase in revenues was
due to higher average hourly billing rates resulting in increased demand for IT
professionals.
Gross Profit
Gross profit for the third quarter of 1999 was $2.7 million, the same
as the third quarter of 1998. Gross profit as a percentage of revenues decreased
to 28.2% for the third quarter of 1998, compared to 31.7% for the third quarter
of 1997. Approximately 5% of the decrease in gross profits as a percentage of
revenues resulted
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from increases in the rates paid for subcontractor professionals and
approximately 95% of such decrease resulted from an increase in the number of
employee professionals waiting to be deployed.
Selling, General and Administrative Expense
Selling, general and administrative expense for the quarter ended
September 30, 1999 was $2.3 million, compared to $1.8 million for the same
quarter of 1997, an increase of $0.5 million or 26%. Selling, general and
administrative expense as a percentage of revenues increased to 23.4% for the
third quarter of 1998 from 21.1% for the third quarter of 1998. The increase in
expense was primarily due to increases in costs to support the Company's growth,
including a $150,000 increase in salaries and commissions paid to employees and
a $40,000 increase in rental payments resulting from the relocation of the
Company's principal offices in 1998. In addition, the Company incurred
approximately $ 87,000 in fees and travel costs in connection with its
recruitment of additional sales personnel and other executive officers.
Interest Income (Expense) Net
Interest income for the third quarter of 1999 was $136,000, compared to
interest income of $147,000 for the third quarter of 1998. The decrease resulted
from a reduction in the amount of net proceeds of the Company's 1997 initial
public offering available for investment.
Provision for Income Taxes
The Company's effective tax rate was 43.2% for the quarter ended
September 30, 1999 compared to 40.4% for the quarter ended September 30, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998.
Revenues
Revenues for the nine months ended September 30, 1999 were $26.3
million, compared to $21.6 million for the nine months ended September 30, 1998,
an increase of $4.7 million, or 22%. 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.
Gross Profit
Gross profit for the first nine months of 1999 was $7.8 million,
compared to $7.0 million for the first nine months of 1998, an increase of $0.8
million, or 12%. Gross profit as a percentage of revenues decreased to 27.7% for
the nine months ended September 30 1999, compared to 32.3% for the same period
of 1998. Approximately 15% of the decrease in gross profits as a percentage of
revenues resulted from increases in the rates paid for subcontractor
professionals and approximately 85% of such decrease resulted from an increase
in the number of employee professionals waiting to be deployed.
Selling, General and Administrative Expense
Selling, general and administrative expense for the nine months ended
September 30, 1999 was $6.5 million, compared to $4.4 million for the same
period of 1998, an increase of $2.1 million or 49%. Selling, general and
administrative expense as a percentage of revenues increased to 23.0% for the
nine months ended September 30, 1999 from 20.3% for the nine months ended
September 30, 1998. The increase in expense was
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primarily due to increases in costs to support the Company's growth, including a
$850,000 increase in salaries and commissions paid to employees and a $175,000
increase in rental payments resulting from the relocation of the Company's
principal offices in 1998. In addition, the Company incurred approximately
$119,000 in fees and travel costs in connection with its recruitment of
additional sales personnel and other executive officers.
Merger-Related Expenses
Merger-related expenses for the nine months ended September 30, 1999
were $0.9 million or 3.1% as a percentage of revenues. These expenses relate
to the termination of the Company's proposed acquisition of R Systems, Inc.
described above and are non-recurring in nature.
Interest Income (Expense) Net
Interest income for the first nine months of 1999 was $396,000,
compared to interest income of $474,000 for the first nine months of 1998. The
decrease resulted from a reduction in the amount of net proceeds of the
Company's 1997 initial public offering available for investment.
Provision for Income Taxes
The Company's effective tax rate was 43.2% for the nine months ended
September 30, 1999 compared to 40.3% for the nine months ended September 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
In November 1997, the Company generated net proceeds of approximately
$13.2 million from its underwritten initial public offering of 1,500,000 shares
of Common Stock (the "Offering"). The Company 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. Net cash provided by
operating activities was $1,002,000 for the first nine months of 1999 compared
to net cash used by operating activities of $187,000 for the same period in
1998. Because the Company had no immediate plans to utilize its Line of Credit,
the Company elected not to renew the facility in August 1999.
Capital expenditures for the first nine months of 1999 and 1998 were
$419,000 and $1,120,000 respectively. The Company intends to use approximately
$2.0 million of its available cash to expand its existing operations, including
approximately $1.2 million for the eventual 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 (including the 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 as set forth above, the Company currently has
no material commitments for capital expenditures.
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
the next twelve months.
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RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 136, "Transfers of Assets to a
Not-for-Profit Organization or Charitable Trust That Raises or Holds
Contributions for Others" (SFAS No. 136). SFAS No. 136 establishes reporting
standards for transactions in which an entity - the donor - makes a contribution
by transferring assets to a not-for-profit organization or charitable trust -
the recipient organization- that accepts and agrees to use those assets on
behalf of or transfer those assets, the return on investment of those assets or
both to another entity- the beneficiary- that is specified by the donor. SFAS No
136 requires that a specified beneficiary recognize its rights to the assets
held by a recipient organization as an asset unless the donor has explicitly
granted the recipient organization variance power. If the beneficiary and the
recipient organization are financially interrelated organizations, the
beneficiary is required to recognize its interest in the net assets of the
recipient organization and adjust that interest in its share of the change in
net assets of the recipient organization. SFAS No. 136 is effective for fiscal
years beginning after December 15, 1999.
The Company will adopt SFAS No 136 in the year 2000.
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
implementing additional and new staffing and financial systems which management
expects to be Year 2000 compliant. Management expects to achieve year 2000
compliance by upgrading the software licensed from third parties, internal
testing and recording and applying year 2000 patches as may be relevant before
December 1, 1999. The Company's telephone, voice mail and e-mail systems, which
are its principal non-IT systems, have also been determined to be Year 2000
compliant. The Company's total costs with respect to Year 2000 compliance as of
September 30, 1999 have not been material. Because UBICS has determined that all
of its principal internal systems are Year 2000 compliant, 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.
UBICS believes that the reasonably likely worst case scenario involving
Year 2000 with respect to each material IT and non-IT system involves a failure
resulting from Year 2000 problems affecting service providers such as utilities,
which could render UBICS's own internal systems and those of all other
businesses served by such providers inoperable for an extended period of time.
If utilities or other service providers encounter such problems, the ability of
UBICS to conduct business may be materially adversely affected until such
problems are resolved. Further, if UBICS's clients experience similar disruption
in utilities and other essential services, they may elect to postpone and cancel
IT projects involving UBICS until such disruptions are resolved, which could
materially adversely affect UBICS's results of operations or financial
condition. UBICS currently does not have contingency plans with respect to such
failures but will continue to evaluate whether such plans might be necessary
with respect to particular third party providers based on the status of its
assessment of third party readiness described below.
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<PAGE> 13
The Company is conducting 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. Management
has identified the following potentially significant risks relating to the Year
2000:
o 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. UBICS is attempting to determine its potential
exposure to such risk through its assessment of third party
preparedness, however it may not be successful in fully evaluating such
risks.
o 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. In addition, as a result of uncertainties relating
to the completion of Year 2000 compliance work as companies achieve
such compliance, there may be changes in normal buying patterns for IT
services by companies, which could make it difficult to forecast demand
for IT services. 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.
o If UBICS's service providers, such as utilities and courier delivery
service providers, encounter Year 2000 problems, UBICS's ability to
conduct business could experience short-term disruptions which could
have a material adverse impact on results of operations.
o 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.
The Company's review of client and vendor readiness with respect to
Year 2000 has been completed. As of September 30, 1999, approximately 10% of the
third parties contacted by UBICS had certified as to Year 2000 compliance,
approximately 35% had indicated that they expected to be compliant by a date
prior to the end of 1999, and approximately 55% either had not responded or had
indicated that they would not certify as to their Year 2000 status. The Company
currently does not believe that a contingency plan to help limit the impact of
potentially significant failures of clients, vendors or other third parties with
respect to Year 2000 compliance will be needed since most of its key clients and
vendors have indicated that they expect to be compliant. The Company will
continue to monitor the situation, however, and may incur internal staff costs
and related expenses if the need arises but is unable to form an estimate of
such costs at this time.
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
13
<PAGE> 14
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.
During 1998 the U.S. government increased the limit on the number of
new H-1B permits to 115,000 for each of the 1999 and 2000 federal fiscal years,
and to 107,500 for fiscal year 2001 before reverting to existing limits from
fiscal year 2002 onwards. Despite the increase in the limit, in the federal
fiscal year ended September 30, 1999, this limit was reached in June 1999. The
U.S. government, in October 1999, announced that the Immigration and
Naturalization Service granted between 10,000 and 20,000 more H-1B permits than
the previously stated limit for the 1999 federal fiscal year. If this excess
number of permits is applied towards the limit for the 2000 federal fiscal year,
then such limit may be reached earlier than in prior years.
If in the current federal fiscal year or 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 in connection with its increase in the limit on
H-1B permits, also imposed a fee to be paid by companies for new approvals and
for renewals. UBICS does not anticipate that the imposition of such fees will
have a material adverse impact on its results of operations.
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 3. QUANTITIVE AND QUALITATIVE DISCLOSURE 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.
14
<PAGE> 15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings -- Not Applicable
Item 2. Changes in Securities and Use of Proceeds -- Not applicable
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) 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.
The following table summarizes the expenses incurred for the
Company's account in connection with the Offering:
<TABLE>
<CAPTION>
<S> <C>
Underwriting discounts $1,050,000
Finder's fees --
Expenses paid to or for underwriters --
Other expenses 775,000
----------
TOTAL $1,825,000
</TABLE>
The following table summarizes the amount of net offering
proceeds to the Company ($13,175,000) used for the purposes
listed below:
<TABLE>
<CAPTION>
<S> <C>
Construction of plant, building $ 0
and facilities
Purchase and installation of machinery 1,768,000
and equipment
Acquisition of other business(es) 0
Repayment of indebtedness 775,000
Working capital 772,000
Temporary investments* 9,860,000
Other purposes 0
----------
Total $13,175,000
</TABLE>
- ------------------
*Approximately $5,000,000 of such amount is currently invested in a Prudential
money market mutual fund with the balance invested in certificates of deposit
with PNC Bank.
15
<PAGE> 16
Item 3. Defaults Upon Senior Securities -- Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders -- Not Applicable
Item 5. Other Information -- Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of UBICS,
Inc. (1)
3.2 Amended and Restated By-Laws 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 dated September 1, 1997 between the
Company and Vijay Mallya(2)
10.4 Employment Agreement dated October 1, 1997 between the Company
and Manohar B. Hira(2)
10.5 Employment Agreement dated September 1, 1997 between the
Company and O'Neil Nalavadi(2)
10.6 Employment Agreement dated September 1, 1997 between the
Company and Babu Srinivas(2)
10.7 Employment Agreement dated September 1, 1999 between the
Company and Dennis M. Stocker
10.8 Agreement of Severance, Waiver and Release dated March 18,
1999 between the Company and Manohar B. Hira (3)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(2)
10.10 Form of Director Indemnification Agreement(2)
10.11 Form of Sublease and Consent among the Company, Marin
Executive Park and United Breweries of America, Inc.(2)
10.12 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and United Breweries Limited(2)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited(2)
10.14 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(2)
10.15 Lease Agreement dated June 30, 1998 between the Company and
Stealth Technology Associates (4)
27 Financial Data Schedule
- -------------------
(1) Incorporated by reference to the Company'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
Company's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
16
<PAGE> 17
(4) Incorporated by reference to the Company'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 September
30, 1999.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
UBICS, Inc.
(Registrant)
Date: November 15, 1999
By: /s/ Manohar B. Hira
------------------------
Manohar B. Hira
President
By: /s/ O'Neil Nalavadi
------------------------
O'Neil Nalavadi
Senior Vice President and Chief
Financial Officer
18
<PAGE> 19
EXHIBIT INDEX
No. Description Page
3.1 Amended and Restated Certificate of Incorporation of UBICS, Inc. (1)
3.2 Amended and Restated By-Laws 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 dated September 1, 1997 between the Company and
Vijay Mallya(2)
10.4 Employment Agreement dated October 1, 1997 between the Company and
Manohar B. Hira(2)
10.5 Employment Agreement dated September 1, 1997 between the Company and
O'Neil Nalavadi(2)
10.6 Employment Agreement dated September 1, 1997 between the Company and
Babu Srinivas(2)
10.7 Employment Agreement dated September 1, 1999 between the Company and
Dennis M. Stocker
10.8 Agreement of Severance, Waiver and Release dated March 18, 1999 between
the Company and Manohar B. Hira (3)
10.9 Services Agreement dated October 27, 1997 among the Company, Vijay
Mallya and United Breweries Limited(2)
10.10 Form of Director Indemnification Agreement(2)
10.11 Form of Sublease and Consent among the Company, Marin Executive Park
and United Breweries of America, Inc.(2)
10.12 Noncompetition Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(2)
10.13 Noncompetition Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB International Limited(2)
10.14 Services Agreement dated October 27, 1997 among the Company, Vijay
Mallya and UB International Limited(2)
10.15 Lease Agreement dated June 30, 1998 between the Company and Stealth
Technology Associates(4)
27 Financial Data Schedule
- ------------------
(1) Incorporated by reference to the Company'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
Company's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
(4) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 20, 1998.
19
<PAGE> 1
Exhibit 10.7
September 1, 1999
REF.NO.UBICS:GEN:501.99
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective September 1, 1999, is between UBICS, INC., a Delaware
Corporation (the "Company"), and DENNIS M. STOCKER (the "Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the business of providing information
technology services to various organizations:
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:
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 Marketing &
Sales of the Company and to perform such duties and responsibilities as the
Company's By-laws and its management may from time to time designate.
1.02 Term. Subject to the terms and provisions of Article II hereof, Employee's
employment hereunder shall commence on September 1, 1999 at UBICS, Inc.
Canonsburg Home Office and continuing until such time as the employment is
terminated as set forth in this agreement, and subject to such other terms and
conditions as set forth in this Agreement.
1.03 Salary. A salary shall be paid to Employee by the Company during the term
of this Agreement at the rate of $165,000.00 (One-Hundred Sixty-Five Thousand
Dollars) gross, per annum, payable monthly in accordance with the Company's
normal payroll practices.
1.04 Bonus. Employee will be eligible for the payment of an annual bonus
pursuant to the terms and conditions of the Company's Executive Incentive
Compensation Plan, up to a maximum annual bonus payment equal to 100 percent of
his gross annual salary.
In order to be eligible for an annual bonus, Employee must be an Employee in
good standing with the Company. Employee will not be eligible for the payment of
an annual bonus in the event (i) he is terminated for cause due to Employee's
willful misconduct, (ii) he is terminated for cause for gross negligence, or
(iii) he resigns from the Company without Good Reason (as defined in P. 5.03
hereof). Except as otherwise provided herein, Employee is not entitled to any
bonus or other payments from the Company following any termination of his
employment hereunder.
<PAGE> 2
For the period from September 1, 1999 through December 31, 2000, Employee will
be eligible to receive a total minimum bonus payment of $135,000.00 (One Hundred
Thirty-Five Thousand Dollars) provided that he remains an Employee in good
standing with the Company during that period of time; provided, however, that
regardless of the reason for Employee's termination at any time prior to
December 31, 2000, Employee will be paid all monthly bonus payments he has
accrued or earned for services rendered through the date of termination on the
condition that (i) he is not terminated for cause due to Employee's willful
misconduct, (ii) he is not terminated for cause for gross negligence, or (iii)
he does not resign from the Company without Good Reason. For each full month of
service completed at the Company, Employee will receive one-sixteenth of that
amount, or $8,437.50. The bonus payments will effectively be earned and paid
pursuant to a) and b) below, based upon each additional month of service
provided on behalf of the Company.
a) For the period from September 1, 1999 through December 31, 1999, payment of
$8,437.50 for each month of service completed, up to a total of $33,000.00 for a
total of four months of completed service, will be made to Employee during the
first week of January 2000.
b) For the period from January 1, 2000 through December 31, 2000, payment of
$8,437.50 for each additional month of service completed, up to a total of
$102,000.00 for a total of 12 (twelve) additional months of completed service,
will be made to Employee during the first week of January 2001.
1.05 Automobile: The Company will pay the Employee an automobile allowance of
$1,000.00 (One Thousand Dollars) per month for business use of the Employee's
vehicle. The Employee shall be personally responsible for all expenses related
to his personal vehicle.
1.06 Out of Pocket Expenses. Employee shall be entitled to reimbursement for
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 expenditure 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.
1.07 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
Compensation Committee.
1.08 Options. Employee shall be entitled to receive options to purchase 50,000
(Fifty Thousand) 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. The cost per share made available to you will be the rate existing on
the day of the very next meeting of the Board of Directors after September 1,
1999, when this option will be ratified.
2
<PAGE> 3
1.09 Vacation. You will be entitled to six Company paid holidays: New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. In addition, you will be entitled to 4 (four) weeks paid vacation annually,
which is vested for utilization in the first year.
1.10 Taxes. UBICS will withhold any applicable federal, state or local taxes for
compensation paid to Employee.
1.11 Compliance with Company Policies and Laws. In performing the duties and
responsibilities set forth in this Agreement, Employee shall use his best
efforts to comply with federal, state and local laws, and shall abide by all
policies, procedures and programs of UBICS.
1.12 Work Product. All work or services rendered under this Agreement, including
reports, papers, and other information ("Work Product"), are the exclusive
property of UBICS and all right, title and interest in such Work Product shall
vest in UBICS and shall be deemed to be work rendered under this agreement.
Employee agrees to assign all his right, title and interest in such Work Product
to UBICS and will otherwise cooperate as may be necessary to secure such rights
for UBICS. All files, lists, reports and other property relating to the business
of UBICS, whether prepared by the Employee or otherwise, shall remain the
exclusive property of UBICS and shall not be removed from the premises of UBICS
or UBICS's clients under any circumstances whatsoever without the prior written
consent of UBICS.
ARTICLE II
EMPLOYMENT AT WILL
2.01 Employment at Will: The parties agree and acknowledge that the employment
relationship created by this Agreement is at will and that either party may
terminate this agreement with or without cause. The party terminating the
agreement shall provide the other party with two (2) months notice of the
party's intent to terminate or, in lieu of notice, two months compensation.
However, any such notice shall not in any way alter or modify the at will
employment relationship established by this agreement. All payments due to
Employee under this agreement and all outstanding advances due to UBICS by the
Employee shall be settled in full within 30 days of the date of termination.
2.02 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, gross negligence or resignation without Good Reason, all
unexercised stock options granted to 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
3
<PAGE> 4
of key personnel in the employment of the Company, 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 damage 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 from: (a) soliciting or
inducing any employee of the Company to leave the employment of the Company, (b)
from soliciting the trade of or trading with the customers of the Company for a
competitive purpose pursuant to P. 4.04 and 4.05 hereof.
ARTICLE IV
EMPLOYEE'S CONVENANTS 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. Employees 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
management. 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
<PAGE> 5
4.04 Nonsolicitation of Customers. Employee agrees that during his employment by
the Company and for one (1) year 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, unless any such customers are current customers
of the new company the Employee may join. Nonsolicitation will not apply to the
Company's customers if the Employee solicits them for business unrelated to
Company's products/services.
4.05 Nonsolicitation of Employees. Employee agrees that during his employment by
the Company and for one (1) year 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 an employee of the
Company.
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 seek injunctive relief against him in the event of any
breach.
5.03 Definition of "Good Reason": The term "Good Reason" means: (i) a material
diminution by the Company of Employee's title or responsibilities, or (ii) a
material diminution by the Company in Employee's salary, benefits or incentive
or other forms of compensation, or (iii) a material change in title,
responsibilities or compensation as a result of change in contract.
ARTICLE VI
SEVERABILITY
Severability. In the event that one or more of the provisions of the agreement
shall for any reason be held to be invalid, illegal or unenforceable, the
remaining provisions of this agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced by a mutually acceptable
provision which being valid, legal and enforceable, comes closest to the
intention of the parties underlying the invalid, illegal or unenforceable
provision.
5
<PAGE> 6
ARTICLE VII
MISCELLANEOUS
7.01 Authorization to Modify Restrictions. It is the intention of the parties
that the provisions of Article IV hereof shall be enforceable to the fullest
extent permissible under applicable law, but that the unenforceability (or
modification to conform to such law) of any provision or provisions hereof shall
not render unenforceable, or impair, the remainder thereof. If any provision or
provisions hereof shall be deemed invalid or unenforceable, either in whole or
in part, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
in order to render it valid and enforceable.
7.02 Entire Agreement. This Agreement represents the entire agreement of the
parties and may be amended only by a writing signed by each of them.
7.03 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
7.04 Agreement Binding. The obligation of Employee and Employer under this
Agreement shall continue after the termination of Employee's employment with the
Company for any reason, with or without cause, and shall be binding on and inure
to the benefit of their respective heirs, executors, legal representatives,
successors and assigns.
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 Arbitration/Litigation: The parties agree that except as otherwise
provided, all claims, disputes and other matters in question between them which
arise out of this Agreement or their employment relationship shall be determined
in Pittsburgh, Pennsylvania in accordance with the Rules of the American
Arbitration Association. However, the parties expressly agree that
notwithstanding the foregoing provision, the Company and the Employee shall have
the right to seek injunctive or related legal or equitable relief under this
Agreement in the Allegheny County Court of Common Pleas or the U.S. District
Court for the Western District of Pennsylvania without the need to resort to
arbitration. The parties agree that this Agreement shall be governed by,
construed under, and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, the place where this Agreement is deemed to have been made, and
Pennsylvania law shall be applied without regard to the principles or provisions
of conflict of laws. Each of the parties hereto hereby submits to the exclusive
jurisdiction of any federal or state court situated in Allegheny County,
Pennsylvania with respect to the interpretation and enforcement of the
provisions of this Agreement or any litigation arising hereunder and hereby
waives as a defense that he or it is not subject thereto or that such action may
not be brought in said courts or that the venue of the lawsuit is improper.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed
this agreement on the day and year set forth below.
WITNESS:
/s/ VIJAY P. REDDY /s/ DENNIS M. STOCKER
- ------------------------------ ------------------------------
Dennis M. Stocker
9-1-99
------------------------------
Date
ATTEST: UBICS, Inc.
/s/ BABU SRINIVAS /s/ MANOHAR B. HIRA
- ------------------------------ ------------------------------
M. B. Hira
President
9-1-99
------------------------------
Date
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET OF UBICS, INC. AS OF SEPTEMBER 30, 1999 AND THE
UNAUDITED INCOME STATEMENT OF UBICS, INC. FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999, INCLUDED IN THE QUARTERLY REPORT OF UBICS, INC. ON FORM 10-Q FOR THE
FISCAL QUARTER ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,053
<SECURITIES> 0
<RECEIVABLES> 8,362
<ALLOWANCES> 750
<INVENTORY> 0
<CURRENT-ASSETS> 20,726
<PP&E> 2,210
<DEPRECIATION> (374)
<TOTAL-ASSETS> 22,812
<CURRENT-LIABILITIES> 5,059
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 17,688
<TOTAL-LIABILITY-AND-EQUITY> 22,812
<SALES> 0
<TOTAL-REVENUES> 28,320
<CGS> 0
<TOTAL-COSTS> 20,486
<OTHER-EXPENSES> 7,399
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 831
<INCOME-TAX> (358)
<INCOME-CONTINUING> 473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
