** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K/A**

**(AmendmentNo. 2)**
| x          | **Annual Report pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934**     |
|------------|---------------------------------------------------------------------------------------------------------|
| ** ** | **For the fiscal year ended December 31, 2005**                                                         |
| o          | **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 000-50849**

**KANBAY INTERNATIONAL, INC.**

**(Exact Name of Registrant as Specifiedin its Charter)**

| **Delaware**                     | ** ** | **36-4387594**                        |
|----------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of |       | (I.R.S. Employer  Identification No.) |
| Incorporation of  Organization)  |       |                                  |

 

6400 Shafer Court, Suite100

Rosemont, Illinois 60018

Phone: (847) 384-6100

(Address,including zip code, and telephone number (including area code) of registrant’sprincipal executive office)

**Securitiesregistered pursuant to Section 12(b) of the Act:**

None.

**Securitiesregistered pursuant to Section 12(g) of the Act:**

| Title of each class                       |   | Name of each  exchange on which registered |
|-------------------------------------------|--------|--------------------------------------------|
| Common Stock,  par value $0.001 per share |   | Nasdaq National  Market                    |

 

Indicate by checkmark if the Registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities ActYes: o No: x

Indicate by checkmark if the Registrant is not required to file reports pursuant toSection 13 or 15(d) of the ActYes: o No: x

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the Registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.   Yes:  x  No: o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K  o

Indicate by check markwhether the Registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

Large acceleratedfiler  o                    Acceleratedfiler  x                    Non-acceleratedfiler  o

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).Yes: o No: x

The aggregatemarket value of the Registrant’s common stock held by non-affiliates of theRegistrant on June 30, 2005, based on the closing sale price of $23.11 pershare on such date on the Nasdaq National Market, was $574,738,096.81.  Shares of common stock beneficially owned byeach director and executive officer and by each person who beneficially owned5% or more of the outstanding common stock have been excluded because suchpersons may be deemed to be affiliates of the Registrant.  This determination of affiliate status is notnecessarily a conclusive determination for other purposes.

As ofMarch 10, 2006, the Registrant had 39,132,340 shares of common stock,$0.001 par value per share, outstanding.

DocumentsIncorporated By Reference

Certain sections of theRegistrant’s Notice of Annual Meeting of Stockholders and Proxy Statement forits Annual Meeting of Stockholders for the year ended December 31, 2005are to be filed with the Securities and Exchange Commission within120 days after the Registrant’s fiscal year ended December 31, 2005and are incorporated by reference into Part III of this Report.

 

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**EXPLANATORYNOTE**

This Amendment No. 2 on Form 10-K/A (this “AmendedFiling”) to our Annual Report on Form 10-K for the fiscal year ended December31, 2005, initially filed with the Securities and Exchange Commission (the “SEC”)on March 16, 2006 and as amended by Amendment No. 1 thereto filed with the SECon September 22, 2006 (each, a “Prior Filing”), is being filed to amend andrestate in its entirety Item 13 of each Prior Filing.  In addition, this Amended Filing includescertifications from our Chief Executive Officer and Chief Financial Officer, asrequired by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and therules of the SEC.

**Item 13. Certain Relationships and Related Transactions.**

Theinformation required by Item 13 is incorporated by reference from thedefinitive proxy statement for our 2006 Annual Meeting of Stockholders (the “2006Proxy Statement”).  The information incorporated by reference appears inthe 2006 Proxy Statement under “Certain Transactions.”  The informationset forth below amends and restates Item 13 in its entirety and is incorporatedby reference herein from the 2006 Proxy Statement:

Kenneth M. Harvey, one of our directors, is GroupChief Information Officer for HSBC Holdings plc.  As of February 14, 2005, Household InvestmentFunding, Inc., a subsidiary of HSBC Holdings plc, owned approximately 12.9% ofour outstanding common stock.  On April27, 2005, we entered into a consulting agreement and a rate schedule with HSBCHoldings plc.  The consulting agreementand the rate schedule provide the general terms and conditions under which ourvarious operating subsidiaries and affiliates deliver information technologyservices to HSBC Holdings plc and its affiliates (HSBC) around the world.

The consulting agreement provides that each project weperform for HSBC will be governed by a “statement of work,” which specifies theterm, services, rates and personnel requirements for the project.  Under the consulting agreement, we providecustomary limited warranties regarding the services that we provide to HSBC,and we are obligated to indemnify HSBC for any breach of these warranties.  Subject to certain customary exceptions, ourliability to HSBC for any specific claim (or series of related claims) islimited to the greater of $15.0 million or the amounts paid or payable underthe applicable statement of work, and in any event may not exceed $100.0million in the aggregate for all claims that arise in any calendar year.  The consulting agreement remains in effectuntil terminated by either party.  HSBCmay terminate the consulting agreement or any particular statement of work ifwe become insolvent, upon a change of control of us or if we fail to cure amaterial or persistent breach of the agreement within 30 days of a writtenrequest.  HSBC also may terminate anyparticular statement of work for any reason upon three (3) months prior writtennotice to us.

Our rates for the time-and-materials servicesdelivered to HSBC under any statement of work entered into on or after April 1,2005 are calculated based on the rate schedule, which establishes the billablerates and pricing formulas to be applied under the consulting agreement.  Under the rate schedule, HSBC has agreed topay us an annual management fee in the amount of $400,000 to cover the generalmanagement expenses we incur in connection with the consulting agreement.  The rate schedule also provides HSBC with atwo percent (2%) early payment discount option on fees for onsite time-and-materialsservices provided by us if invoices for these fees are paid by HSBC within 30days of the date of invoice.  The rateschedule expires on December 31, 2007, but may be terminated earlier by HSBC ifwe become insolvent, upon a change of control of us, if we fail to cure amaterial or persistent breach of the agreement within 30 days of a writtenrequest or for any other reason upon 180 days prior written notice to us.

As a general matter, our agreements with unrelatedparties limit our liability to them, but do not contain an early payment discountoption.  As of December 31, 2005, none ofour agreements with unrelated parties provided for an annual management feepayable to us.  The remaining provisionsof the consulting agreement and the rate schedule with HSBC are comparable tothose prevailing with unrelated parties.

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In 2005, our revenues were approximately $230.5million.  Of these revenues,approximately $122.3 million, or 53.1%, were from HSBC, and $108.2 million, or46.9%, were from clients other than HSBC. As of December 31, 2005, our accounts receivable were approximately$51.8 million.  Of these accountsreceivable, approximately $24.8 million, or 48.0%, were from HSBC, andapproximately $27.0 million, or 52.0%, were from clients other than HSBC.

We typically charge our clients different rates basedon whether our services are performed at a client’s location, which we refer toas onsite services, or at one of our delivery centers in India, which we referto as offshore services.  In 2005, wecharged HSBC an average hourly rate for offshore services performed that wasapproximately 3.3% less than the average hourly rate we charged clients otherthan HSBC, and we charged HSBC an average hourly rate for onsite servicesperformed that was approximately 4.4% more than the average hourly rate wecharged clients other than HSBC.  Anumber of factors affect the billable rates that we charge a client (includingHSBC) for a particular project.  Thesefactors impacted the average hourly rates for the onsite and offshore serviceswe performed for our clients during 2005. For example, a software design project that requires senior personnelwho have experience with a particular software system will result in a higherbillable rate than a software maintenance project that is largely staffed withmore junior personnel in India. Additional factors that affect our billable rates include the durationand size of the project and whether the project is billed on atime-and-materials basis or a fixed price basis.  A combination of these factors contributed tothe differences in the average hourly rates we charged our clients for servicesperformed in 2005.

In 2005, our revenues from HSBC for offshore servicesperformed were approximately $73.4 million, or approximately $26.7 million morethan the approximately $46.8 million of revenues we generated from offshoreservices performed for clients other than HSBC, and our revenues from HSBC foronsite services performed were approximately $49.0 million, or approximately$8.2 million less than the approximately $57.1 million of revenues we generatedfrom onsite services performed for clients other than HSBC.  (These amounts exclude the revenues from ourformer Australian security and connectivity business, which we sold on May 31,2005.)  Assuming we charged HSBC theaverage hourly offshore and onsite billable rates that we charged clients otherthan HSBC during 2005, which rates are different than those that we chargedHSBC during 2005 as a result of the factors described above, HSBC paid usapproximately $434,000 less for the services we provided to it than a clientother than HSBC would have paid us for these services.

In June 2005, our Indian subsidiary, Kanbay Software(India) Private Limited, entered into a foreign exchange master agreement withthe Hongkong and Shanghai Banking Corporation Limited in India to provide aforeign exchange facility of approximately $11.1 million (500 millionrupees) to hedge our trade related foreign exchange exposure. In September2005, the Hongkong and Shanghai Banking Corporation Limited in India agreed toprovide certain letters of credit and guarantees to Kanbay Software (India)Private Limited of up to approximately $885,000 (40 million rupees) toassist in the facilitation of imports. The Hongkong and Shanghai Banking CorporationLimited is an affiliate of HSBC Holdings plc, which together with its otheraffiliates, made payments to us and our subsidiaries for services representingapproximately 53.1% of our gross revenues for 2005. We believe that the rates,terms and provisions contained in these agreements are comparable to those thatwe could have obtained through negotiations with an unrelated party.

In April 2006, we entered into an amendment to ourcredit agreement with certain financial institutions, as lenders, and LaSalleBank National Association, as administrative agent for such lenders. Inconnection with the amendment, HSBC Bank USA, National Association became alender and the syndication agent under the terms of the credit agreement. HSBCBank USA, National Association is an affiliate of HSBC Holdings plc, whichtogether with its other affiliates, made payments to us and our subsidiariesfor services representing approximately 53.1% of our gross revenue for 2005. Webelieve the rates, terms and provisions contained in the credit agreement, asamended, are comparable to those that we could have obtained throughnegotiations with an unrelated party.

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Daryl Spencer, the brother of Raymond J. Spencer, ourChairman and Chief Executive Officer, was hired by one of our subsidiaries onJanuary 3, 2005. Daryl Spencer has an annual salary of approximately$73,000 and was granted options to purchase 3,500 shares of common stock withan exercise price of $30.23 per share in connection with his employment.

Harry C. Gambill, one of our directors, is thePresident and Chief Executive Officer of TransUnion LLC. On December 28,2004, we entered into a services agreement with TransUnion, pursuant to whichTransUnion made payments to us totaling approximately $1,546,401 for certainconsulting services provided in 2005. We believe the rates, terms andprovisions contained in the services agreement are comparable to those that wecould have obtained through negotiations with other third parties.

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this Amendment No. 2 to annual report to be signed on its behalf bythe undersigned thereunto duly authorized.
|                          | KANBAY INTERNATIONAL, INC. |
|--------------------------|----------------------------|
|                     |                       |
|                     |                       |   |
| Date: November  28, 2006 |                       | By: /s/ Raymond J. Spencer |
|                     |                       | Raymond J. Spencer |
|                     |                       | Chairman of the Board and Chief Executive Officer |

 

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**EXHIBITINDEX**
| Number | ** ** | **Description**                                                                                           |
|--------|------------|-----------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                      |
| 31.1   |       | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                      |
| 31.2   |       | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                      |
| 32.1   |       | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.      |
|   |       |                                                                                                      |
| 32.2   |       | Certification of Chief Financial Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.      |

 

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