<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION NO. 333-03751
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SIEBEL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 94-3187233
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
------------------------
4005 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 329-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
THOMAS M. SIEBEL
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SIEBEL SYSTEMS, INC.
4005 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 329-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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JAMES C. GAITHER, ESQ. WILLIAM D. SHERMAN, ESQ.
ERIC C. JENSEN, ESQ. C. PATRICK MACHADO, ESQ.
COOLEY GODWARD CASTRO C. JEFFREY CHAR, ESQ.
HUDDLESON & TATUM MORRISON & FOERSTER LLP
3000 SAND HILL ROAD, BLDG. 3, SUITE 230 755 PAGE MILL ROAD
MENLO PARK, CA 94025-7116 PALO ALTO, CA 94304
(415) 843-5000 (415) 813-5600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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Common Stock, $.001 par value.......... 2,300,000 $15.00 $34,500,000 $11,897 (3)
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</TABLE>
(1) Includes 300,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
(3) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SIEBEL SYSTEMS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
----------------------------------------------- -----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page and Outside Back Cover
Page
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges.................... Prospectus Summary; Risk Factors
4. Use of Proceeds................................ Use of Proceeds
5. Determination of Offering Price................ Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution....................................... Dilution
7. Selling Security Holders....................... Principal and Selling Stockholders
8. Plan of Distribution........................... Outside Front Cover Page and Inside Front Cover
Page; Underwriting
9. Description of Securities to be Registered..... Prospectus Summary; Capitalization; Description
of Capital Stock
10. Interests of Named Experts and Counsel......... Legal Matters; Experts
11. Information with Respect to
the Registration............................. Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 26, 1996
PROSPECTUS
1,963,000 SHARES
LOGO
COMMON STOCK
Of the 1,963,000 shares of Common Stock offered hereby, 1,800,000 shares
are being sold by the Company and 163,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
At the request of the Company, the number of shares of Common Stock
purchasable at the Per Share Price to Public for an aggregate purchase price of
$2,000,000 has been reserved for sale to The Dow Chemical Company (the "Dow
Shares"). The sale of such shares will reduce the number of shares offered
hereby. See "Underwriting."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $13.00 and $15.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for listing on the Nasdaq
National Market under the symbol SEBL. Upon completion of this offering, the
directors and officers of the Company and affiliated entities will exercise
voting control over approximately 67% of the outstanding Common Stock.
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
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Per Share..................... $ $ $ $
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Total(3)...................... $ $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $950,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 294,450 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount, and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE> 4
LOGO
A closed-loop sales and marketing information system allows organizations to
share and manage sales
opportunities and information from a marketing encyclopedia across multiple
distribution channels.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
[GATEFOLD]
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus.
THE COMPANY
Siebel Systems, Inc. ("Siebel," "Siebel Systems" or the "Company") is an
industry leading provider of enterprise-class sales and marketing information
software systems. The Company designs, develops, markets, and supports Siebel
Sales Enterprise, a leading Internet-enabled, object oriented client/server
application software product family designed to meet the sales and marketing
information system requirements of even the largest multi-national
organizations.
In today's increasingly competitive global markets, businesses must
continuously improve their operations. Having spent considerable effort and
resources in previous years automating finance, manufacturing, distribution,
human resources management and general office operations, many businesses are
now looking to apply the leverage of information technology to their sales and
marketing processes. Unlike previous automation projects which have focused on
decreasing expenses, sales and marketing information systems focus primarily on
increasing revenues.
The Siebel Sales Enterprise is comprised of a broad range of advanced
client/server application products designed to allow corporations to deploy
comprehensive customer information systems, product information systems,
competitive information systems, and decision support systems on a global basis.
The Company's products provide support for multiple languages and multiple
currencies with support for a number of frequently interdependent distribution
channels, including direct field sales, telesales, telemarketing, distribution,
retail, and Internet-based selling.
The Siebel Sales Enterprise is built upon a modern technology foundation
including intranet and Internet enablement, client/server, object oriented
programming, 32-bit processing, OLE 2 automation, relational database support
for Oracle, Sybase, and Informix, and system support for Windows 95, Windows NT,
and UNIX. The Siebel Sales Enterprise is designed to scale to meet the needs of
large organizations deploying thousands of sales and marketing professionals
with very large data storage and retrieval requirements. The Siebel Sales
Enterprise is designed to be comprehensive in its scope of functionality and
highly configurable, allowing for highly customized industry-specific and
company-specific system deployments.
The Company's objective is to establish and maintain a global market
leadership position in the sales and marketing information systems market. The
Company's strategy is to provide high-end enterprise client/server sales and
marketing applications in a broad range of industries, extend its advanced
technology position, achieve universally successful customer implementations of
Siebel Sales Enterprise, expand its global sales and support capacity, and
continue to leverage strategic alignment with leading third-party technology
providers, system integrators, and distributors. See "Business -- Strategy."
The Company markets and sells its software through its direct sales force,
telebusiness channels, and distributors in the Americas, Europe, and Asia. The
Siebel Sales Enterprise has been licensed by customers in a wide range of
industries, including transportation, financial services, securities brokerage,
manufacturing, computers, communications, chemicals, and computer software. The
Company's customers as of May 31, 1996 were American President Companies Ltd.,
AMP Incorporated, Andersen Consulting LLP, BMC Software, Inc., Charles Schwab &
Co., Inc, Cisco Systems, Inc., Digital Equipment Corporation, The Dial Corp, The
Dow Chemical Company, Frank Russell Company, Hewlett-Packard Japan, Ltd.,
Informix Software, Inc., LSI Logic Corporation, Montgomery Securities, Newbridge
Networks, Inc., Platinum Technology, Inc., Pure Software, Inc., The Quaker Oats
Company, Texas Commerce Bank National Association, Unisys Corporation and Viking
Freight System, Inc.
The Company's principal executive offices are located at 4005 Bohannon
Drive, Menlo Park, CA 94025. Its telephone number is (415) 329-6500. Its e-mail
address is [email protected]. The Company maintains an Internet home page.
3
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 1,800,000 shares
Common Stock offered by the Selling Stockholders...... 163,000 shares
Common Stock to be outstanding after the offering..... 15,530,770 shares(1)
Use of proceeds....................................... For general corporate purposes,
including working capital
Proposed Nasdaq National Market symbol................ SEBL
</TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
SEPTEMBER 13, 1993 DECEMBER 31,
(INCEPTION) TO -------------------
DECEMBER 31, 1993 1994 1995
------------------ ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................................... $ -- $ 50 $ 8,038
Operating income (loss)...................................... (114) (1,779) 372
Net income (loss)............................................ (114) (1,766) 317
Pro forma net income per share(2)............................ $ .02
Shares used in pro forma per share computation(2)............ 16,340
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues......................................... $ 30 $ 1,284 $ 2,564 $ 4,160 $ 4,709
Operating income (loss)................................ (1,208 ) 25 422 1,133 211
Net income (loss)...................................... (720 ) 42 287 708 198
Pro forma net income (loss) per share(2)............... $ (.05 ) $ -- $ .02 $ .04 $ .01
Shares used in pro forma per share computation(2)...... 14,642 16,777 16,856 16,803 16,859
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 9,757 $ 11,094 $ 33,580
Total assets.................................................... 15,609 16,946 39,432
Total stockholders' equity...................................... 10,314 11,651 34,137
</TABLE>
- ---------------
(1) Based on shares outstanding as of April 30, 1996. Excludes 3,760,450 shares
of Common Stock issuable upon exercise of stock options outstanding as of
April 30, 1996 at a weighted average exercise price of $3.35 per share. See
"Management -- Equity Incentive Plans" and Notes 4 and 7 of Notes to
Financial Statements.
(2) See Note 1 of Notes to Financial Statements for a description of the
calculation of pro forma net income (loss) per share.
(3) Pro forma reflects (i) the sale of 90,000 shares of Series D Preferred Stock
at $10.00 per share on April 30, 1996, (ii) the issuance of 75,000 shares of
Series C Preferred Stock upon the exercise of a warrant at $5.82 per share
in June 1996, and (iii) the conversion of all outstanding shares of
Preferred Stock into shares of Common Stock upon the closing of this
offering.
(4) Adjusted to reflect the sale of 1,800,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $14.00 per
share after deduction of the estimated underwriting discount and offering
expenses payable by the Company. See "Use of Proceeds."
------------------------
Except as otherwise indicated, the information contained in this Prospectus
assumes (i) no exercise of the Underwriters' over-allotment option and (ii) the
conversion of all outstanding shares of Preferred Stock into shares of Common
Stock upon the closing of this offering. See "Description of Capital Stock" and
"Underwriting."
4
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Prospectus.
Limited Operating History; History of Operating Losses. The Company
commenced operations in July 1993 and shipped version 1.0 of its product, Siebel
Sales Enterprise, in April 1995. As of May 31, 1996, only 21 entities have
licensed Siebel Sales Enterprise and each only on a trial or limited deployment
basis. Accordingly, the Company has only a limited operating history, and its
prospects must be evaluated in light of the risks and uncertainties encountered
by a company in its early stage of development. The new and evolving markets in
which the Company operates make these risks and uncertainties particularly
pronounced. To address these risks, the Company must, among other things,
successfully implement its sales and marketing strategy, respond to competitive
developments, attract, retain, and motivate qualified personnel, continue to
develop and upgrade its products and technologies more rapidly than its
competitors, and commercialize its products and services incorporating these
enhanced technologies. The Company incurred net losses in each quarter from
inception through the first quarter of 1995. The Company expects to continue to
devote substantial resources to its product development and sales and customer
support and, as a result, will need to generate significant quarterly revenues
to achieve and maintain profitability. The Company's limited operating history
makes it difficult to predict accurately future operating results. There can be
no assurance that any of the Company's business strategies will be successful or
the Company will be profitable in any future quarter or period. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results. Prior growth rates in the Company's revenue and net income
should not be considered indicative of future operating results. Future
operating results will depend upon many factors, including the demand for the
Company's products, the level of product and price competition, the length of
the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the Company's
success in expanding its customer support organization, direct sales force and
indirect distribution channels, the timing of new product introductions and
product enhancements, the mix of products and services sold, levels of
international sales, activities of and acquisitions by competitors, the timing
of new hires, changes in foreign currency exchange rates and the ability of the
Company to develop and market new products and control costs. In addition, the
decision to implement a sales and marketing information system is discretionary,
involves a significant commitment of customer resources and is subject to the
budget cycles of the Company's customers. The Company's sales generally reflect
a relatively high amount of revenue per order. The loss or delay of individual
orders, therefore, would have a significant impact on the revenue and quarterly
results of the Company. The timing of license revenue is difficult to predict
because of the length and variability of the Company's sales cycle, which has
ranged to date from two to eighteen months from initial contact to the execution
of a license agreement. The Company's operating expenses are based on
anticipated revenue trends and, because a high percentage of these expenses are
relatively fixed, a delay in the recognition of revenue from a limited number of
license transactions could cause significant variations in operating results
from quarter to quarter and could result in operating losses. To the extent such
expenses precede, or are not subsequently followed by, increased revenues, the
Company's operating results would be materially and adversely affected. To date,
the Company has not experienced significant seasonality of operating results.
The Company expects that future revenues for any period may be affected by the
fiscal or quarterly budget cycles of its customers. As a result of these and
other factors, revenues for any quarter are subject to significant variation,
and the Company
5
<PAGE> 9
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. It is likely that the Company's future quarterly operating results
from time to time will not meet the expectations of market analysts or
investors, which would likely have an adverse effect on the price of the
Company's Common Stock. In addition, fluctuations in operating results may also
result in volatility in the price of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business -- Marketing" and "-- Sales."
Reliance on Andersen Consulting and Other Relationships; Dependence on
System Integrators. The Company has established strategic relationships with a
number of organizations that it believes are important to its worldwide sales,
marketing and support activities and the implementation of its products. The
Company believes that its relationships with such organizations provide
marketing and sales opportunities for the Company's direct sales force and
expand the distribution of its products. These relationships also assist it in
keeping pace with the technological and marketing developments of major software
vendors, and, in certain instances, provide it with technical assistance for its
product development efforts. In particular, the Company has established a
non-exclusive strategic relationship with Andersen Consulting, a principal
stockholder of the Company. In 1995 and the first quarter of 1996, approximately
46% and 49%, respectively, of the revenues of the Company were derived from
customers for which Andersen Consulting had been engaged to provide system
integration services. Any deterioration of the Company's relationship with
Andersen Consulting could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company has relationships with Wilson Learning Corporation, Itochu Corporation
and Itochu Techno-Science Corporation ("Itochu"), among others. The failure by
the Company to maintain its existing relationships, or to establish new
relationships in the future, could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company's
customers and potential customers frequently rely on Andersen Consulting, as
well as other third-party system integrators to develop, deploy and/or manage
Siebel Sales Enterprise. If the Company is unable to train adequately a
sufficient number of system integrators or, if for any reason such integrators
do not have or devote the resources necessary to facilitate implementation of
the Company's products or if such integrators adopt a product or technology
other than Siebel Sales Enterprise, the Company's business, operating results
and financial condition could be materially and adversely affected. See
"Business -- Global Strategic Alignment" and "Principal and Selling
Stockholders."
Dependence on the Internet. The Siebel Sales Enterprise facilitates online
communication over public and private networks. The success of the Company's
products may depend, in part, on the Company's ability to introduce products
which are compatible with the Internet and on the broad acceptance of the
Internet and the World Wide Web as a viable commercial marketplace. It is
difficult to predict with any assurance whether the Internet will prove to be a
viable commercial marketplace or whether the demand for Internet related
products and services will increase or decrease in the future. The increased
commercial use of the Internet could require substantial modification and
customization of the Company's products and services and the introduction of new
products and services, and there can be no assurance that the Company would be
able to effectively migrate its products to the Internet or to successfully
compete in the market for Internet-related products and services.
The Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as a reliable
network backbone with the necessary speed, data capability, and security, or
timely development of complementary products, such as high speed modems. The
Internet has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. There can be no assurance
that the Internet infrastructure will continue to be able to support the demands
placed on it by this continued growth. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased levels of Internet activity or due to increased
governmen-
6
<PAGE> 10
tal regulation. Moreover, critical issues concerning the commercial use of the
Internet (including security, reliability, data corruption, cost, ease of use,
accessibility and quality of service) remain unresolved and may negatively
affect the attractiveness of commerce and communication on the Internet. Because
global commerce and online exchange of information on the Internet and other
similar open wide area networks are new and evolving, there can be no assurance
that the Internet will prove to be a viable commercial marketplace. If critical
issues concerning the commercial use of the Internet are not favorably resolved,
if the necessary infrastructure and complementary products are not developed, or
if the Internet does not become a viable commercial marketplace, the Company's
business, operating results and financial condition could be materially and
adversely affected. See "Business -- Products" and "-- Technology."
Risk Associated with Emerging Client/Server and Sales Information
Markets. The client/server application software market is a relatively new
market and is intensely competitive, highly fragmented and subject to rapid
change. The Company markets its products only to customers who have migrated or
are in the process of migrating their enterprise computing systems to
client/server computing environments. The Company does not market its products
to customers exclusively using legacy computer systems. The Company's future
financial performance will depend in large part on continued growth in the
number of organizations successfully adopting client/server computing
environments. There can be no assurance that the client/server market will
maintain its current level of growth or continue to grow at all. If the
client/server market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, operating results and financial
condition could be materially and adversely affected. Similarly, the market for
sales and marketing information software is intensely competitive, highly
fragmented and subject to rapid change. The Company's future financial
performance will depend primarily on growth in the number of sales information
applications developed for use in client/server environments. There can be no
assurance that the market for sales and marketing information software will
continue to grow. If the sales information software market fails to grow or
grows more slowly than the Company currently anticipates, the Company's
business, operating results and financial condition would be materially and
adversely affected. See "Business -- Industry Background," "-- Products,"
"-- Technology" and "-- Competition."
Limited Deployment. The Company first shipped Siebel Sales Enterprise
version 1.0 in April 1995. As of March 31, 1996, many of the Company's customers
were in the pilot phase of implementing the Company's software. None of the
Company's customers has completed the enterprise-wide development and deployment
of Siebel Sales Enterprise, and many have not yet commenced such deployment. As
a result, the Company's products are currently being used by only a limited
number of sales professionals. There can be no assurance that such
enterprise-wide deployments will be successful. The Company's customer licenses
frequently contemplate the deployment of the product commercially to large
numbers of sales and marketing personnel, many of whom have not previously used
application software systems, and there can be no assurance of such end-users'
acceptance of the product. The Company's product is expected to be deployed on a
variety of computer hardware platforms and to be used in connection with a
number of third-party software applications and programming tools. Such
deployment presents very significant technical challenges, particularly as large
numbers of sales personnel attempt to use the Company's products concurrently.
If any of the Company's customers are not able to customize and deploy Siebel
Sales Enterprise successfully and on a timely basis to the number of anticipated
users, the Company's reputation could be significantly damaged, which could have
a material adverse effect on the Company's business, operating results and
financial condition. In addition to revenues from new customers, the Company
expects that a significant percentage of any future revenues will be derived
from sales to existing customers. However, such customers are not contractually
committed in all cases to purchase additional licenses. If existing customers
have difficulty further deploying Siebel Sales Enterprise or for any other
reason are not satisfied with Siebel Sales Enterprise, the Company's business,
operating results and financial condition could be materially and adversely
affected. See "Business -- Products."
7
<PAGE> 11
Reliance on Single Product Family. Approximately 94% of the Company's
revenues to date have been attributable to sales of Siebel Sales Enterprise. The
remaining revenues were primarily attributable to maintenance and training
services related to such product family. The Company currently expects Siebel
Sales Enterprise and related maintenance and training services to continue to
account for a substantial majority of the Company's future revenues. As a
result, factors adversely affecting the pricing of or demand for Siebel Sales
Enterprise, such as competition or technological change, could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company's future financial performance will depend, in
significant part, on the successful deployment of current versions of Siebel
Sales Enterprise and the development, introduction and customer acceptance of
new and enhanced versions of Siebel Sales Enterprise and other products. There
can be no assurance that the Company will be successful in marketing Siebel
Sales Enterprise product or other products. In the event that the Company
continues to derive a substantial percentage of its revenues from perpetual
license fees for Siebel Sales Enterprise and is successful in licensing such
product to a very large portion of the customers in the markets targeted by the
Company, the Company's business, financial condition and results of operations
could be materially and adversely affected unless the Company is able to
establish additional sources of revenue. See "Business -- Products" and
"-- Marketing."
Lengthy Sales and Implementation Cycles. The license of the Company's
software products is often an enterprise-wide decision by prospective customers
and generally requires the Company to provide a significant level of education
to prospective customers regarding the use and benefits of the Company's
products. In addition, the implementation of the Company's products involves a
significant commitment of resources by prospective customers and is commonly
associated with substantial reengineering efforts which may be performed by the
customer or third-party system integrators. The cost to the customer of the
Company's product is typically only a portion of the related hardware, software,
development, training and integration costs of implementing a large-scale sales
and marketing information system. For these and other reasons, the period
between initial contact and the implementation of the Company's products is
often lengthy (ranging to date from between two and twenty-four months) and is
subject to a number of significant delays over which the Company has little or
no control. The Company's implementation cycle could be lengthened by increases
in the size and complexity of its license transactions and by delays in its
customers' implementation of client/server computing environments. Delay in the
sale or implementation of a limited number of license transactions could have a
material adverse effect on the Company's business and operations and cause the
Company's operating results to vary significantly from quarter to quarter.
Therefore, the Company believes that its quarterly operating results are likely
to vary significantly in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- Sales" and
" -- Marketing."
Risks Associated with Expanding Distribution. To date, the Company has
sold its products primarily through its direct sales force and has supported its
customers with its technical and customer support staff. The Company's ability
to achieve significant revenue growth in the future will depend in large part on
its success in recruiting and training sufficient direct sales, technical and
customer support personnel and establishing and maintaining relationships with
its strategic partners. Although the Company is currently investing, and plans
to continue to invest, significant resources to expand its direct sales force
and its technical and customer support staff, and to develop distribution
relationships with strategic partners, the Company has at times experienced and
continues to experience difficulty in recruiting qualified personnel and in
establishing necessary third-party relationships. There can be no assurance that
the Company will be able to expand successfully its direct sales force or other
distribution channels or that any such expansion will result in an increase in
revenues. The Company believes the complexity of its products and the
large-scale deployments anticipated by its customers will require a number of
highly trained customer support personnel. There can be no assurance that the
Company will successfully expand its technical and customer support staff to
meet customer demands. Any failure by the Company to expand its direct sales
force or other distribution channels, or to expand its technical and customer
support staff, could materially and adversely affect the Company's
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business, operating results and financial condition. See " -- Management of
Growth; Dependence upon Key Personnel," "Business -- Strategy," " -- Sales,"
" -- Marketing," and " -- Customer Support and Training."
Dependence on Large License Fee Contracts and Customer Concentration. A
relatively small number of customers have accounted for a significant percentage
of the Company's revenues. For 1995 and the first quarter of 1996, sales to the
Company's 10 largest customers accounted for 93% and 98% of total revenues,
respectively. For 1995, Charles Schwab & Co., Inc., Informix Software, Inc.,
Itochu and Unisys Corporation accounted for 23%, 20%, 12% and 10% of total
revenues, respectively. The Company expects that sales of its products to a
limited number of customers will continue to account for a significant
percentage of revenue for the foreseeable future. The loss of any major customer
or any reduction or delay in orders by any such customer, or the failure of the
Company to market successfully its products to new customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Customers and Markets."
Risk Associated with New Versions and New Products; Rapid Technological
Change. The software market in which the Company competes is characterized by
rapid technological change, frequent introductions of new products, changes in
customer demands and evolving industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. For example, the Company's
customers have adopted a wide variety of hardware, software, database and
networking platforms, and as a result, to gain broad market acceptance, the
Company must support Siebel Sales Enterprise on a variety of such platforms. The
Company's future success will depend upon its ability to address the
increasingly sophisticated needs of its customers by supporting existing and
emerging hardware, software, database and networking platforms and by developing
and introducing enhancements to Siebel Sales Enterprise and new products on a
timely basis that keep pace with technological developments, evolving industry
standards and changing customer requirements. The Company currently ships
production versions of its software running on MS Windows 3.1, MS Windows 95 and
Windows NT clients, as well as on NT application servers, and NT, Sun and HP
UNIX database server platforms. The Company plans, in the future, to support
subsequent versions of Microsoft's Windows client operating system, as well as
UNIX application servers and Digital Alpha and additional UNIX database server
platforms. There can be no assurance that the Company will be successful in
releasing Siebel Sales Enterprise for use on such platforms or in developing and
marketing enhancements, including Siebel Virtual Computing, that respond to
technological developments, evolving industry standards or changing customer
requirements, or that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and sale of such
enhancements or that such enhancements will adequately meet the requirements of
the marketplace and achieve any significant degree of market acceptance. If
release dates of any future Siebel Sales Enterprise enhancements or new products
are delayed or if these products or enhancements fail to achieve market
acceptance when released, the Company's business, operating results and
financial condition could be materially and adversely affected. In addition, the
introduction or announcement of new product offerings or enhancements by the
Company or the Company's competitors or major hardware, systems or software
vendors may cause customers to defer or forgo purchases of the Company's
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Technology" and
"-- Development Methodology."
Competition. The market for the Company's products is intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for sales and marketing
information systems, and the Company faces competition primarily from customers'
internal information technology departments and systems integrators, as well as
from other application software providers that offer a variety of products and
services to address this market. Many of the Company's customers and potential
customers have in the past attempted to develop sales and marketing
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<PAGE> 13
information systems in-house either alone or with the help of systems
integrators. The Company is able to compete successfully against these
customers' and potential customers' internal development efforts only to the
extent such development efforts fail.
The Company relies on a number of systems consulting and systems
integration firms for implementation and other customer support services, as
well as recommendations of its products during the evaluation stage of the
purchase process, particularly Andersen Consulting. Although the Company seeks
to maintain close relationships with these service providers, many of them have
similar, and often more established, relationships with the Company's
competitors. If the Company is unable to develop and retain effective, long-term
relationships with these third parties, the Company's competitive position could
be materially and adversely effected. Further, there can be no assurance that
these third parties, many of which have significantly greater resources than the
Company, will not market software products in competition with the Company in
the future or will not otherwise reduce or discontinue their relationships with
or support of the Company and its products.
A large number of personal, departmental and other products exist in the
sales automation market. Some of the Company's current and potential competitors
and their products include Symantec (ACT!), Brock International (Brock Activity
Manager), Early Cloud & Co. (CallFlow), IMA (EDGE), Marketrieve Company
(Marketrieve PLUS), Clarify, Inc. (ClearSales), Oracle Corporation (Oracle Sales
Manager), SaleSoft (PROCEED), SalesBook Systems (SalesBook), SalesKit Software
Corporation (SalesKit), Aurum (SalesTrak), Sales Technologies (SNAP for
Windows), Saratoga Systems (SPS for Windows) and The Vantive Corporation
(Vantive Sales). Many of these competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers
than the Company. In addition, many competitors have well-established
relationships with current and potential customers of the Company. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products, than can the
Company.
It is also possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. The Company also expects
that competition will increase as a result of consolidation in the software
industry. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely affect
the Company's business, operating results and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially and adversely affect its business, operating results
and financial condition. See "Business -- Competition."
Reliance on Third-Party Vendors. The Company incorporates into its
products certain software licensed to it by third-party software developers.
Although the Company believes there are other sources for these products, any
significant interruption in the supply of such products could have a material
adverse impact on the Company's sales unless and until the Company can replace
the functionality provided by these products. Because the Company's products
incorporate software developed and maintained by third parties, the Company is
to a certain extent dependent upon such third parties' abilities to enhance
their current products, to develop new products on a timely and cost-effective
basis and to respond to emerging industry standards and other technological
changes. There can be no assurance that the Company would be able to replace the
functionality provided by the third-party software currently offered in
conjunction with the Company's products in the event that such software becomes
obsolete or incompatible with future versions of the Company's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on the Company's sales. See "Business -- Products" and
"-- Development Methodology."
Risk of Product Defects. Software products as internally complex as those
offered by the Company frequently contain errors or failures, especially when
first introduced or when new versions
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<PAGE> 14
are released. Although the Company conducts extensive product testing during
product development, the Company has been forced to delay commercial release of
products until the correction of software problems and, in some cases, has
provided product enhancements to correct errors in released products. The
Company could, in the future, lose revenues as a result of software errors or
defects. The Company's products are intended for use in sales applications that
may be critical to a customer's business. As a result, the Company expects that
its customers and potential customers have a greater sensitivity to product
defects than the market for software products generally. There can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon the Company's business, operating results and
financial condition. See "Business -- Development Methodology."
Management of Growth; Dependence upon Key Personnel. In the event that the
significant growth of the Company's revenues continues, such growth may place a
significant strain upon the Company's management systems and resources. The
Company's ability to compete effectively and to manage future growth, if any,
will require the Company to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and expand, train
and manage its employee work force. There can be no assurance that the Company
will be able to do so successfully. The Company's failure to do so could have a
material adverse effect upon the Company's business, operating results and
financial condition. The Company's future performance depends in significant
part upon the continued service of its key technical, sales and senior
management personnel, particularly Thomas M. Siebel, the Company's Chairman and
Chief Executive Officer, none of whom has entered into an employment agreement
with the Company. The loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business, operating results and financial condition. The Company's future
success also depends on its continuing ability to attract and retain highly
qualified technical, customer support, sales and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to retain its key technical, sales and managerial
employees or that it can attract, assimilate or retain other highly qualified
technical, sales and managerial personnel in the future. See "--Risks Associated
with Expanding Distribution," "Business -- Sales," "-- Marketing" and
"Management."
Proprietary Rights; Risks of Infringement. The Company relies primarily on
a combination of patent, copyright, trade secret and trademark laws,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company also believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are essential to
establishing and maintaining a technology leadership position. The Company seeks
to protect its software, documentation and other written materials under patent,
trade secret and copyright laws, which afford only limited protection. The
Company currently has two patent applications pending in the United States.
There can be no assurance that any patents issued to the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications, whether or not being currently challenged
by applicable governmental patent examiners, will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technology or design around any patents issued to the Company.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary. Policing unauthorized
use of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as do
the laws
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<PAGE> 15
of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights in the United States or abroad will be
adequate or that the Company's competitors will not independently develop
similar technology. The Company has entered into agreements with substantially
all of its customers which require the Company to place Siebel Sales Enterprise
source code into escrow. Such agreements generally provide that such parties
will have a limited, non-exclusive right to use such code in the event that
there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business or if the Company fails to meet its support obligations.
Entering into such agreements may increase the likelihood of misappropriation by
third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Furthermore, there can be no assurance that former employers
of the Company's present and future employees will not assert claims that such
employees have improperly disclosed confidential or proprietary information to
the Company. Any such claims, with or without merit, could be time consuming to
defend, result in costly litigation, divert management's attention and
resources, cause product shipment delays or require the Company to pay money
damages or enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, if at all. In the event of a successful claim of product infringement
against the Company and failure or inability of the Company to license the
infringed or similar technology, the Company's business, operating results and
financial condition would be materially and adversely affected.
The Company relies upon certain software that it licenses from third
parties, including software that is integrated with the Company's internally
developed software and used in Siebel Sales Enterprise to perform key functions.
There can be no assurance that these third-party software licenses will continue
to be available to the Company on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in shipment
delays or reductions until equivalent software could be developed, identified,
licensed and integrated which would materially adversely affect the Company's
business, operating results and financial condition. See "Business --
Intellectual Property and Other Proprietary Rights."
International Operations. The Company's sales are primarily to large
multi-national companies. To service the needs of such companies, both
domestically and internationally, the Company must provide worldwide product
support services. As a result, the Company intends to expand its existing
international operations and enter additional international markets, which will
require significant management attention and financial resources and could
adversely affect the Company's operating margins and earnings, if any. Revenues
from export sales accounted for approximately 12% and 11% of the Company's total
revenues in 1995 and the first quarter of 1996, respectively. The Company
believes that in order to increase sales opportunities and profitability it will
be required to expand its international operations. The Company has committed
and continues to commit significant management time and financial resources to
developing direct and indirect international sales and support channels. There
can be no assurance, however, that the Company will be able to maintain or
increase international market demand for Siebel Sales Enterprise. To the extent
that the Company is unable to do so in a timely manner, the Company's
international sales will be limited, and the Company's business, operating
results and financial condition could be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
International operations are subject to inherent risks, including the
impact of possible recessionary environments in economies outside the United
States, costs of localizing products for foreign markets, longer receivables
collection periods and greater difficulty in accounts receivable collection,
unexpected changes in regulatory requirements, difficulties and costs of
staffing and managing foreign operations, reduced protection for intellectual
property rights in some countries, potentially adverse
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<PAGE> 16
tax consequences and political and economic instability. There can be no
assurance that the Company or its distributors or resellers will be able to
sustain or increase international revenues from licenses or from maintenance and
service, or that the foregoing factors will not have a material adverse effect
on the Company's future international revenues and, consequently, on the
Company's business, operating results and financial condition. The Company's
direct international revenues are generally denominated in local currencies. The
Company does not currently engage in hedging activities. Revenues generated by
the Company's distributors and resellers are generally paid to the Company in
United States dollars. Although exposure to currency fluctuations to date has
been insignificant, there can be no assurance that fluctuations in currency
exchange rates in the future will not have a material adverse impact on revenues
from international sales and thus the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Customers and Markets,"
" -- Sales" and "-- Marketing."
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
Legal Proceedings. The Company and Thomas M. Siebel have been served with
a complaint by Debra Christoffers, a former employee of the Company, alleging
various causes of action and seeking damages in connection with the termination
of her employment with the Company. The Company has also received a letter from
counsel to Terence Lenaghan, a former employee of the Company, seeking certain
compensation in connection with the termination of his employment with the
Company. The Company employed Mr. Lenaghan as Vice President Finance and
Administration of the Company for a period of approximately five weeks, ending
on March 1, 1996. On June 5, 1996, while the Company was in registration with
the Securities and Exchange Commission, the Company received a letter from
counsel representing Mr. Lenaghan raising claims against the Company and Mr.
Siebel and offering to settle such claims upon the receipt of $300,000 and
140,000 shares of the Company's Common Stock. The Company strongly believes that
the claims raised by Ms. Christoffers and Mr. Lenaghan are baseless and without
merit and intend to vigorously defend the complaint filed by Ms. Christoffers
and any action that Mr. Lenaghan may bring. There can be no assurance, however,
that the outcome of either such matter will not have an adverse effect on the
Company's operations or financial condition. See "Business -- Legal
Proceedings."
Control by Existing Stockholders. Upon completion of this offering, the
Company's officers, directors and affiliated entities together will beneficially
own approximately 67% of the outstanding shares of Common Stock (66% if the
Underwriters' over-allotment option is exercised in full). In particular, upon
completion of this offering Thomas M. Siebel, the Company's Chairman and Chief
Executive Officer, will own approximately 42% of the outstanding shares of
Common Stock (41% if the Underwriters' over-allotment option is exercised in
full). As a result, these stockholders will be able to exercise control over
matters requiring stockholder approval, including the election of directors, and
the approval of mergers, consolidations and sales of all or substantially all of
the assets of the Company. This may prevent or discourage tender offers for the
Company's Common Stock unless the terms are approved by such stockholders. See
"Principal and Selling Stockholders."
No Prior Public Market for Common Stock; Possible Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering. The initial public
offering price will be determined by negotiations between the Company, the
representatives of the Selling Stockholders and the representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the
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<PAGE> 17
Company's Common Stock could be subject to significant fluctuations in response
to variations in quarterly operating results, the gain or loss of significant
orders, changes in earning estimates by analysts, announcements of technological
innovations or new products by the Company or its competitors, general
conditions in the software and computer industries and other events or factors.
In addition, the stock market in general has experienced extreme price and
volume fluctuations which have affected the market price for many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of these companies. These market
fluctuations may adversely affect the market price of the Company's Common
Stock.
Effect of Certain Charter Provisions; Antitakeover Effects of Certificate
of Incorporation, Bylaws and Delaware Law. Following the completion of this
offering, the Company's Board of Directors will have the authority to issue up
to 2,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The Preferred
Stock could be issued with voting, liquidation, dividend and other rights
superior to those of the Common Stock. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. Further, certain provisions of the
Company's Certificate of Incorporation, including provisions that create a
classified board of directors and certain provisions of the Company's Bylaws and
of Delaware law, could delay or make more difficult a merger, tender offer or
proxy contest involving the Company. See "Description of Capital Stock."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
numbers of shares of Common Stock in the public market following this offering
could adversely affect the market price for the Common Stock. Upon completion of
the offering, the Company will have outstanding an aggregate of 15,530,770
shares of Common Stock, assuming no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options and based upon the number of
shares outstanding as of April 30, 1996. Of these shares, all of the shares sold
in this offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless such shares are purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), except that
the shares of Common Stock to be purchased by The Dow Chemical Company will be
subject to an agreement not to sell any of such shares until 180 days from the
date of this Prospectus without the consent of Hambrecht & Quist LLC. The
remaining 13,567,770 shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Restricted Shares"). Restricted Shares may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 under the Securities Act. As a result of contractual
restrictions and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus; (ii) 311,760
Restricted Shares (plus 204,775 shares of Common Stock issuable to employees and
consultants pursuant to stock options that are then vested, as well as the
shares purchased by The Dow Chemical Company in this offering) will be eligible
for sale upon expiration of the lock-up agreements 180 days after the date of
this Prospectus; and (iii) the remainder of the Restricted Shares will be
eligible for sale from time to time thereafter upon expiration of their
respective two-year holding periods commencing on January 3, 1997, subject to
the restrictions on such sales by Affiliates and certain vesting provisions. The
Securities and Exchange Commission has proposed amendments to Rules 144 and
144(k) which, if adopted, would substantially increase the number of Restricted
Shares available for sale in the public market beginning 180 days after the date
of this Prospectus. To the extent that a significant portion of the Restricted
Shares are sold by the holders thereof, such sales may adversely effect the
market price of the Company's Common Stock. A significant decline in the price
of the Company's Common Stock due to these or other factors would reduce the
ability of the Company
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<PAGE> 18
to obtain significant operating capital through the offering of additional
shares of such Common Stock. See "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale."
Discretion as to Use of Proceeds. The primary purposes of this offering
are to create a public market for the Company's Common Stock, to facilitate
future access to public markets and to obtain additional working capital. As of
the date of this Prospectus, the Company has no specific plans to use the net
proceeds from this offering other than for working capital and general corporate
purposes. Accordingly, the Company's management will retain broad discretion as
to the allocation of the net proceeds from this offering. Pending any such uses,
the Company plans to invest the net proceeds in investment-grade,
interest-bearing securities. See "Use of Proceeds."
Immediate and Substantial Dilution. Investors participating in this
offering will incur immediate and substantial dilution of $11.79 per share. To
the extent outstanding options to purchase the Company's Common Stock are
exercised, there will be further dilution. If the net proceeds of this offering,
together with available funds and cash generated from operations, are
insufficient to satisfy the Company's cash needs, the Company may be required to
sell additional equity or convertible debt securities. The sale of additional
equity or convertible debt securities could result in additional dilution to the
Company's stockholders. See "Dilution" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
THE COMPANY
The Company was incorporated under the laws of California in 1993 and
intends to reincorporate in Delaware prior to the completion of this offering.
The Company's principal executive offices are located at 4005 Bohannon Drive,
Menlo Park, CA 94025. Its telephone number is (415) 329-6500. Its e-mail address
is [email protected]. The Company maintains an Internet home page. Siebel and
Siebel Sales Enterprise are trademarks of the Company. All other trade names or
trademarks appearing in this Prospectus are the property of their respective
holders.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $14.00 per share, are estimated to be $22,486,000 ($26,320,000
if the Underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."
The principal purposes of this offering are to increase the Company's
equity capital and to create a public market for the Company's Common Stock,
which the Company believes will facilitate future access by the Company to
public equity markets and enhance the ability of the Company to use its Common
Stock as consideration for acquisitions and as a means for attracting and
retaining key employees.
The Company intends to use the net proceeds of this offering primarily for
working capital and other general corporate purposes, including expansion of
general sales and marketing and customer support activities to accommodate
anticipated growth in the Company's business and customer base. The amounts
actually expended by the Company for working capital purposes will vary
significantly depending upon a number of factors, including future revenue
growth, if any, the amount of cash generated by the Company's operations and the
progress of the Company's product development efforts and hence the Company's
management will retain broad discretion in the allocation of the net proceeds
from this offering. In addition, the Company may make one or more acquisitions
of complementary technologies, products or businesses which broaden or enhance
the Company's current product offerings. However, the Company has no specific
plans, agreements or commitments, oral or written, and is not currently engaged
in any negotiations for any such acquisition. Pending the uses described above,
the net proceeds will be invested in short-term, interest-bearing, investment-
grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future.
16
<PAGE> 20
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
March 31, 1996 after giving effect to the reincorporation of the Company in
Delaware, (ii) the pro forma capitalization of the Company after giving effect
to the sale of 90,000 shares of Series D Preferred Stock at $10.00 per share on
April 30, 1996, the issuance of 75,000 shares of Series C Preferred Stock upon
the exercise of a warrant at $5.82 per share in June 1996 and the conversion of
all outstanding shares of Preferred Stock into Common Stock upon the closing of
this offering and (iii) the capitalization as adjusted to reflect the sale by
the Company of 1,800,000 shares of the Common Stock offered hereby at an assumed
initial offering price of $14.00, the application of the net proceeds therefrom
and the subsequent restatement of the Company's Certificate of Incorporation.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock; $.001 par value; actual --
10,000,000 shares authorized, 4,907,655 shares issued
and outstanding; pro forma -- 10,000,000 shares
authorized, none issued and outstanding; as
adjusted -- 2,000,000 shares authorized, none issued
and outstanding........................................ $ 5 $ -- $ --
Common stock; $.001 par value; actual -- 35,000,000 shares
authorized, 8,572,760 shares issued and outstanding;
pro forma -- 35,000,000 shares authorized, 13,645,415
shares issued and outstanding; as
adjusted -- 40,000,000 shares authorized, 15,445,415
shares issued and outstanding(1)....................... 9 14 15
Additional paid-in capital................................ 11,063 12,400 34,885
Notes receivable from stockholders........................ (57) (57) (57)
Deferred compensation..................................... (1,220) (1,220) (1,220)
Retained earnings......................................... 514 514 514
------- ------- -------
Total stockholders' equity and capitalization..... $10,314 $ 11,651 $34,137
======= ======= =======
</TABLE>
- ---------------
(1) Excludes (i) 2,367,750 shares of Common Stock issuable upon the exercise of
options outstanding under the Company's 1996 Equity Incentive Plan (the
"Equity Incentive Plan") as of March 31, 1996 at a weighted average
exercise price of $1.84 per share and (ii) 350,000 shares of Common Stock
reserved for issuance under the Employee Stock Purchase Plan (the "Purchase
Plan"), none of which has been issued. As of April 30, 1996, there were
outstanding options to purchase a total of 3,760,450 shares of Common Stock
under the Equity Incentive Plan at a weighted average exercise price of
$3.35 per share and an additional 1,533,340 shares of Common Stock reserved
for grant thereunder. See "Management -- Equity Incentive Plans."
17
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996,
was approximately $11.7 million or $0.85 per share. Pro forma net tangible book
value per share is equal to the Company's total tangible assets less its total
liabilities, divided by the number of pro forma outstanding shares of Common
Stock, after giving effect to the issuance of 90,000 shares of Series D
Preferred Stock at $10.00 per share on April 30, 1996, the issuance of 75,000
shares of Series C Preferred Stock upon exercise of a warrant at $5.82 per share
in June 1996 and the conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of this offering. After giving effect to the
sale of the 1,800,000 shares of Common Stock offered by the Company hereby (at
an assumed initial public offering price of $14.00 per share), the pro forma net
tangible book value of the Company at March 31, 1996 would have been
approximately $34.1 million or $2.21 per share. This represents an immediate
increase in such net tangible book value of $1.36 per share to existing
stockholders and an immediate dilution of $11.79 per share to new investors
purchasing shares in this offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $14.00
Pro forma net tangible book value per share as of March 31, 1996...... $0.85
Increase per share attributable to new investors...................... 1.36
-----
Pro forma net tangible book value per share after this offering......... 2.21
-----
Dilution per share of Common Stock to new investors..................... $11.79
=====
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 1996,
the differences between the number of shares purchased from the Company, after
giving effect to the issuance of 90,000 shares of Series D Preferred Stock at
$10.00 per share on April 30, 1996, the issuance of 75,000 shares of Series C
Preferred Stock upon exercise of a warrant at $5.82 per share in June 1996 and
the conversion of all outstanding shares of Preferred Stock into Common Stock
upon the closing of this offering, the total consideration paid and the average
price paid per share by the existing holders of Common Stock and by the new
investors at an assumed initial public offering price of $14.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(1)........... 13,645,415 88.3% $11,636,000 31.6% $ 0.85
New Investors(1)................... 1,800,000 11.7 25,200,000 68.4 14.00
---------- --- ----------- ---
Total.................... 15,445,415 100.0% $36,836,000 100.0%
========== === =========== ===
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 13,482,415 shares or approximately
87.3% of the total shares of Common Stock outstanding after this offering
and will increase the number of shares held by new investors to 1,963,000
shares or approximately 12.7% of the total shares of Common Stock
outstanding after this offering.
The foregoing tables exclude 2,367,750 shares of Common Stock issuable upon
the exercise of options outstanding as of March 31, 1996 at a weighted average
exercise price of $1.84 per share. In addition, 350,000 shares of Common Stock
have been reserved for issuance under the Purchase Plan, none of which has been
issued. To the extent that options are exercised in the future, there will be
further dilution to new stockholders. As of April 30, 1996, there were
outstanding options to purchase a total of 3,760,450 shares of Common Stock
under the Equity Incentive Plan at a weighted average exercise price of $3.35
per share and an additional 1,533,340 shares of Common Stock reserved for grant
thereunder. See "Management -- Equity Incentive Plans."
18
<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the Notes related thereto included
elsewhere in this Prospectus. The statement of operations data from September
13, 1993 (inception) to December 31, 1993 and the years ended December 31, 1994
and 1995 and the balance sheet data at December 31, 1994 and 1995 are derived
from the financial statements of the Company included elsewhere in this
Prospectus which have been audited by KPMG Peat Marwick LLP, independent
auditors. The balance sheet data at December 31, 1993 are derived from audited
financial statements not included in this Prospectus. The balance sheet data at
March 31, 1996, and the statement of operations data for the three month periods
ended March 31, 1995 and 1996 are derived from unaudited financial statements
included elsewhere in this Prospectus. The unaudited financial statements
include all adjustments, consisting only of normal recurring adjustments, that
the Company considers necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
three months ended March 31, 1996 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1996. See "Risk
Factors -- Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results."
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13,
1993 THREE MONTHS ENDED
(INCEPTION) YEAR ENDED
TO DECEMBER 31, MARCH 31,
DECEMBER 31, ----------------- -------------------
1993 1994 1995 1995 1996
------------- ------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Software......................................... $ -- $ 50 $ 7,636 $ -- $ 4,402
Maintenance and other............................ -- -- 402 30 307
------ ------- ------- ------- ---------
Total revenues.............................. -- 50 8,038 30 4,709
Cost of revenues:
Software......................................... -- -- 41 -- 26
Maintenance and other............................ -- -- 385 9 343
------ ------- ------- ------- ---------
Total cost of revenues...................... -- -- 426 9 369
------ ------- ------- ------- ---------
Gross margin................................ -- 50 7,612 21 4,340
Operating expenses:
Product development.............................. 64 868 2,816 616 986
Sales and marketing.............................. 28 718 3,232 456 2,553
General and administrative....................... 22 243 1,192 157 590
------ ------- ------- ------- ---------
Total operating expenses.................... 114 1,829 7,240 1,229 4,129
------ ------- ------- ------- ---------
Operating income (loss)..................... (114) (1,779) 372 (1,208) 211
Other income, net.................................. -- 13 156 8 119
------ ------- ------- ------- ---------
Income (loss) before income taxes........... (114) (1,766) 528 (1,200) 330
Income tax expense (benefit)..................... -- -- 211 (480) 132
------ ------- ------- ------- ---------
Net income (loss)........................... $(114) $(1,766) $ 317 $ (720) $ 198
============= ======== ======== ======== =========
Pro forma net income (loss) per share(1)........... $ .02 $ (.05) $ .01
======== ======== =========
Shares used in pro forma per share
computation(1)................................... 16,340 14,642 16,859
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ MARCH 31,
1993 1994 1995 1996
------- ------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Cash and cash equivalents.......................... $ 703 $ 1,017 $11,391 $ 9,757
Total assets....................................... 750 1,203 16,091 15,609
Retained earnings (accumulated deficit)............ -- (1) 316 514
Stockholders' equity............................... 746 1,189 9,934 10,314
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the
calculation of pro forma net income (loss) per share.
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was engaged principally in product and market research and
development from commencement of operations (July 1993) through March 1995. The
Company shipped version 1.0 of Siebel Sales Enterprise in April 1995 and shipped
version 2.0 in November 1995. The Company did not record material license
revenues until the second quarter of 1995. License fees for Siebel Sales
Enterprise are generally based on the specific products licensed and are
determined on either a per site or per user basis. Approximately 94% of the
Company's revenues to date have been derived from non-recurring license fees of
the Siebel Sales Enterprise product family. The remaining revenues are primarily
attributable to lower margin maintenance and other revenues, including training
revenues. The Company does not intend to provide a material amount of
integration and other services related to its products. Accordingly, the Company
currently expects that license revenues from Siebel Sales Enterprise will
continue to account for a substantial majority of the Company's revenues for the
remainder of 1996 and for the foreseeable future. As a result, factors adversely
affecting the pricing of or demand for Siebel Sales Enterprise could have a
material adverse effect on the Company's business, operating results and
financial condition. Most of the Company's revenues to date have been derived
from one-time license fees from customers who have received a perpetual license
to the Company's products. The Company intends to also offer its customers the
ability to license its products on a monthly or other short-term basis. The
Company expects that these shorter term license fees could, in the future,
constitute an increasing portion of its software revenues. If these shorter term
fee payments increase as a percentage of total revenues, the Company believes it
will be able to alleviate somewhat the periodic revenue concentration from
one-time non-recurring licenses.
License revenues are recognized upon execution of a license agreement by
the parties and shipment of the product if no significant obligations remain and
collection of the resulting receivable is probable. Maintenance revenues
primarily consist of fees for ongoing support and product updates, generally
determined as a percentage of the initial license fees, and are recognized
ratably over the term of the contract, which to date have typically ranged from
12 to 36 months. For all periods presented, the Company has recognized revenues
in accordance with Statement of Position 91-1, "Software Revenue Recognition."
See Note 1 of Notes to Financial Statements.
A relatively small number of customers account for a significant percentage
of the Company's license revenues. For 1995 and the first quarter of 1996, sales
to the Company's ten largest customers accounted for 93% and 98% of total
revenues, respectively. For 1995, Charles Schwab & Co., Inc., Informix Software,
Inc., Itochu and Unisys Corporation accounted for 23%, 20%, 12% and 10% of total
revenues, respectively. The Company expects that licenses of its products to a
limited number of customers will continue to account for a large percentage of
revenue for the foreseeable future. The license of the Company's software
products is often an enterprise-wide decision by prospective customers and
generally requires the Company to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
In addition, the implementation of the Company's products involves a significant
commitment of resources by prospective customers and is commonly associated with
substantial reengineering efforts which may be performed by the customer or
third-party system integrators. The cost to the customer of the Company's
product is typically only a portion of the related hardware, software,
development, training and integration costs of implementing a large-scale sales
and marketing information system. For these and other reasons, the sales and
implementation cycles associated with the license of the Company's products is
often lengthy (ranging to date from between two and twenty-four months from
initial
20
<PAGE> 24
contact to product implementation) and is subject to a number of significant
delays over which the Company has little or no control. Given these factors and
the expected customer concentration, the loss of a major customer or any
reduction or delay in sales to or implementations by such customers could have a
material adverse effect on the Company's business, operating results, and
financial condition.
As of March 31, 1996, many of the Company's customers were in the pilot
phase of implementation of Siebel Sales Enterprise. None of the Company's
customers has completed the enterprise-wide development and deployment of Siebel
Sales Enterprise, and many have not yet commenced such deployment. As a result,
the Company's products are currently being used by only a limited number of
sales professionals. If any of the Company's customers are not able to customize
and deploy Siebel Sales Enterprise successfully and on a timely basis to the
number of anticipated users, the Company's reputation could be significantly
damaged, which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company markets its products in the United States through its direct
sales force and internationally through its sales force and a distributor in
Japan. International revenues accounted for 12% and 11% of total revenues in
1995 and the first quarter of 1996, respectively. The Company is increasing its
international sales force and seeking to establish distribution relationships
with appropriate strategic partners and expects international revenues will
account for an increasing portion of total revenues in the future. As a result,
failure to cost-effectively maintain or increase international sales could have
a material adverse effect on the Company's business, operating results and
financial condition.
The Company's revenues have increased in each of the last five quarters,
and the Company had net income in each of the last four quarters. The Company's
limited operating history, however, makes the prediction of future operating
results difficult. Prior growth rates in the Company's revenue and net income
should not be considered indicative of future operating results. Future
operating results will depend upon many factors, including the demand for the
Company's products, the level of product and price competition, the length of
the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the Company's
relationships with systems integrators, the Company's success in expanding its
direct sales force, indirect distribution channels and customer support
organization, the timing of new product introductions and product enhancements,
the mix of products and services sold, levels of international sales, activities
of and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates, the ability of the Company to develop and market new
products and control costs and the ability to attract and retain key personnel.
There can be no assurance that any of the Company's business or strategies will
be successful or that the Company will be able to sustain profitability on a
quarterly or annual basis.
The Company's sales generally reflect a relatively high amount of revenues
per order. The loss or delay of individual orders, therefore, can have a
significant impact on the revenues and quarterly results of the Company. The
timing of license revenue is difficult to predict because of the length of the
Company's sales cycle, which to date has ranged from two to eighteen months from
initial contact to the execution of a license agreement. Because the Company's
operating expenses are based on anticipated revenue trends and because a high
percentage of the Company's expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in losses. To the extent such expenses precede, or are not subsequently
followed by, increased revenues, the Company's operating results would be
materially adversely affected. As a result of these and other factors, revenues
for any quarter are subject to significant variation, and the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied
21
<PAGE> 25
upon as indications of future performance. It is likely that in some future
quarter the Company's operating results will be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock would likely be adversely affected.
To date, the Company has not experienced significant seasonality of
operating results. The Company expects that future revenues for any period may
be affected by the fiscal or quarterly budget cycles of its customers.
RESULTS OF OPERATIONS
The Company first generated significant software license revenues in the
second quarter of 1995 when the Company shipped version 1.0 of Siebel Sales
Enterprise. As a result, the Company believes that period-to-period comparisons
solely of annual operating results are less meaningful than an analysis of
recent quarterly operations. Accordingly, the Company is providing a discussion
and analysis of the Company's operating results primarily focused upon the five
quarters ended March 31, 1996.
22
<PAGE> 26
The following tables set forth the quarterly statement of operations for
the five quarters ended March 31, 1996, including such amounts expressed as a
percentage of total revenues. This quarterly information is unaudited, but has
been prepared on the same basis as the annual financial statements and, in the
opinion of the Company's management, reflects all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
information for the periods presented. Such statement of operations should be
read in conjunction with the Company's audited financial statements and notes
thereto included elsewhere herein. Operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995(1) 1995 1995 1995 1996
---------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Software............................................... $ -- $1,186 $ 2,400 $4,050 $4,402
Maintenance and other.................................. 30 98 164 110 307
------- ------ ------ ------ ------
Total revenues.................................... 30 1,284 2,564 4,160 4,709
Cost of revenues:
Software............................................... -- 4 8 29 26
Maintenance and other.................................. 9 47 117 212 343
------- ------ ------ ------ ------
Total cost of revenues............................ 9 51 125 241 369
------- ------ ------ ------ ------
Gross margin...................................... 21 1,233 2,439 3,919 4,340
Operating expenses:
Product development.................................... 616 621 822 757 986
Sales and marketing.................................... 456 406 903 1,467 2,553
General and administrative............................. 157 181 292 562 590
------- ------ ------ ------ ------
Total operating expenses.......................... 1,229 1,208 2,017 2,786 4,129
------- ------ ------ ------ ------
Operating income (loss)........................... (1,208) 25 422 1,133 211
Other income, net........................................ 8 45 56 47 119
------- ------ ------ ------ ------
Income (loss) before income taxes................. (1,200) 70 478 1,180 330
Income tax expense (benefit)........................... (480) 28 191 472 132
------- ------ ------ ------ ------
Net income (loss)................................. $ (720) $ 42 $ 287 $ 708 $ 198
======= ====== ====== ====== ======
Pro forma net income (loss) per share.................... $ (.05) $ -- $ .02 $ .04 $ .01
======= ====== ====== ====== ======
Shares used in pro forma per share computation........... 14,642 16,777 16,856 16,803 16,859
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software................................................. 92.4% 93.6% 97.4% 93.5%
Maintenance and other.................................... 7.6 6.4 2.6 6.5
----- ----- ----- -----
Total revenues...................................... 100.0 100.0 100.0 100.0
Cost of revenues:
Software................................................. 0.3 0.3 0.7 0.6
Maintenance and other.................................... 3.7 4.6 5.1 7.2
----- ----- ----- -----
Total cost of revenues.............................. 4.0 4.9 5.8 7.8
----- ----- ----- -----
Gross margin........................................ 96.0 95.1 94.2 92.2
Operating expenses:
Product development...................................... 48.4 32.1 18.2 21.0
Sales and marketing...................................... 31.6 35.2 35.3 54.2
General and administrative............................... 14.1 11.4 13.5 12.5
----- ----- ----- -----
Total operating expenses............................ 94.1 78.7 67.0 87.7
----- ----- ----- -----
Operating income.................................... 1.9 16.4 27.2 4.5
Other income, net.......................................... 3.5 2.2 1.1 2.5
----- ----- ----- -----
Income before income taxes.......................... 5.4 18.6 28.3 7.0
Income tax expense....................................... 2.2 7.4 11.3 2.8
----- ----- ----- -----
Net income.......................................... 3.2% 11.2% 17.0% 4.2%
===== ===== ===== =====
</TABLE>
- ---------------
(1) Due to insignificant revenues, presentation as a percentage of revenues is
not meaningful.
23
<PAGE> 27
REVENUES
Software. License revenues increased from $50,000 in 1994 to $7.6 million
in 1995. License revenues increased from $1.2 million in the second quarter of
1995 to $4.4 million in the first quarter of 1996. License revenues increased
during each quarter of 1995 due to an increase in the number of licenses of
version 1.0 of Siebel Sales Enterprise, commencing in April 1995, and of version
2.0, commencing in November 1995. The increase in license revenues during the
first quarter of 1996 was due to an increase in the number of licenses of
version 2.0 of Siebel Sales Enterprise. This increase in the number of licenses
was primarily due to increased market and customer awareness of Siebel Sales
Enterprise product family, and, to a lesser degree, an expansion of the
Company's direct sales organization over the past five quarters.
Maintenance and Other. Maintenance and other revenues increased from less
than $100,000 in each of the first two quarters of 1995 to $307,000 in the first
quarter of 1996. Such increase was due to the more widespread licensing of
products to customers pursuant to agreements with a maintenance component.
Earlier licenses typically involved pilot installations which did not include
maintenance.
COST OF REVENUES
Software. Cost of software license revenues includes product packaging,
documentation and production. Cost of license revenues through March 31, 1996
have averaged less than 1% of software license revenues. All costs incurred in
the research and development of software products and enhancements to existing
products have been expensed as incurred, and, as a result, cost of license
revenues includes no amortization of capitalized software development costs. See
Note 1 of Notes to Financial Statements.
Maintenance and Other. Cost of maintenance and other revenues consists
primarily of personnel, facility and systems costs incurred in providing
customer support. Cost of maintenance and other revenues aggregated $385,000 in
1995 and $343,000 in the first quarter of 1996. These costs increased
significantly in the last two quarters of 1995 and the first quarter of 1996,
and exceeded maintenance and other revenues in the fourth quarter of 1995 and
the first quarter of 1996. Such increases reflect the effect of fixed costs
resulting from the Company's investment during 1995 and the first quarter of
1996 in a larger maintenance and support organization in anticipation of
entering into an increasing number of licenses with a maintenance component. The
Company expects that maintenance and other costs will continue to increase in
absolute dollar amounts as the Company expands its customer support organization
to meet anticipated customer demands in connection with product implementation.
OPERATING EXPENSES
Product Development. Product development expenses include expenses
associated with the development of new products, enhancements of existing
products and quality assurance activities, and consist primarily of employee
salaries, benefits, consulting costs and the cost of software development tools.
Product development expenses increased from $64,000 in 1993 to $2.8 million in
1995 and were $1.0 million for the first quarter of 1996. These expenses
generally decreased, as a percentage of total revenues, from approximately 48%
in the second quarter of 1995 to approximately 21% for the first quarter of
1996. The increases in the dollar amount of product development expenses were
primarily attributable to costs of additional personnel in the Company's product
development operations. The Company anticipates that it will continue to devote
substantial resources to product development and that product development
expenses will increase in absolute dollar amount but are expected to decline
somewhat as a percentage of total revenues from the level of the first quarter
of 1996.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, field
office expenses, travel and entertainment and promotional expenses. Sales and
marketing expenses increased from $28,000 in 1993 to $3.2 million in 1995 and
were $2.6 million for the first quarter of 1996. These expenses increased as a
percentage of total revenues from approximately 32% in the second quarter of
1995 to approximately 54% in the first
24
<PAGE> 28
quarter of 1996. The increases in the dollar amount of expenditures on sales and
marketing and the increase in these expenses as a percentage of total revenues
reflects primarily the hiring of additional sales and marketing personnel and,
to a lesser degree, costs associated with expanded promotional activities. The
Company expects that sales and marketing expenses will continue to increase in
absolute dollar amount as the Company continues to expand its sales and
marketing efforts, establishes additional sales offices and increases
promotional activities. These expenses are expected to remain at approximately
the same percentage of total revenues as the first quarter of 1996.
General and Administrative. General and administrative expenses consist
primarily of salaries and occupancy costs for administrative, executive and
finance personnel. These expenses increased from $22,000 in 1993 to $1.2 million
in 1995 and were $590,000 for the first quarter of 1996. These expenses
generally decreased as a percentage of total revenues from approximately 14% in
the second quarter of 1995 to approximately 13% in the first quarter of 1996.
The increases in the absolute dollar amount of general and administrative
expenses were primarily due to increased staffing and associated expenses
necessary to manage and support the Company's increased scale of operations. The
Company believes that its general and administrative expenses will continue to
increase in absolute dollar amount as a result of the anticipated expansion of
the Company's administrative staff to support growing operations and the
expenses associated with being a public company. The Company anticipates that
its general and administrative expenses as a percentage of total revenues should
decrease somewhat in the future from the level of the first quarter of 1996.
OTHER INCOME, NET
Other income, net is primarily comprised of interest income earned on the
Company's cash and cash equivalents and reflects earnings on increasing cash
balances during 1995 and the first quarter of 1996.
PROVISION FOR INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
Company elected to be treated as an S corporation for 1993 and 1994. As an S
corporation, any loss allocated to the Company passed through to its
shareholder. Accordingly, the Company is not entitled to utilize the net
operating losses of the business incurred prior to that date. The Company
terminated the S corporation election effective January 1, 1995. Income taxes
for 1995 and the first quarter of 1995 and 1996 have been provided at an
effective rate of 40%, which is comprised primarily of federal and state taxes.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31, 1996, the Company funded its operations
primarily through cash flows from operations, the private sale of equity
securities totaling $11.6 million and, to a limited extent, bank indebtedness.
As of March 31, 1996, the Company had $9.8 million in cash and cash equivalents,
and no outstanding bank indebtedness.
Net cash used in operating activities was $119,000, $1.7 million and
$505,000 in 1993, 1994 and for the first quarter of 1996, respectively, and net
cash provided by operating activities was $2.8 million in 1995. In 1995, the
$2.8 million of net cash provided by operating activities was primarily
attributable to net income of $317,000 and increases in accounts payable of
$479,000, accrued expenses of $1.1 million and deferred revenue of $4.2 million,
offset by an increase in accounts receivable of $3.1 million and prepaid and
other assets of $411,000. For the first quarter of 1996, net cash used by
operating activities of $505,000 was primarily attributable to net income of
$198,000 and increases in accounts payable of $313,000, offset by a decrease in
deferred revenue of $692,000.
Deferred revenues consist primarily of the unrecognized portion of revenues
under maintenance and support contracts (which revenues are deferred and
recognized ratably over the term of such contracts) and advance payment of
software license fees. Capital expenditures were primarily for
25
<PAGE> 29
computer workstations used for product development, product demonstrations,
customer benchmarks and customer support. See Notes 2 and 3 of Notes to
Financial Statements.
To date, the Company's investing activities have consisted primarily of
purchases of property and equipment, primarily for computer workstations used
for product development, product demonstrations and customer support. The
Company's capital expenditures were $38,000, $176,000, $872,000 and $1.3 million
in 1993, 1994, 1995 and the first quarter of 1996, respectively. This increase
in capital expenditures during 1995 and the first quarter of 1996 was primarily
due to additional purchases of computer equipment including workstations and
servers to support larger product development, sales and marketing and customer
support groups. The Company expects that its capital expenditures will increase
as the Company's employee base grows. As of March 31, 1996, the Company did not
have any material commitments for capital expenditures.
The Company believes that the net proceeds from the offering, together with
the anticipated cash flows from operations, cash, cash equivalents and
short-term investments, will be adequate to meet its cash needs for working
capital and capital expenditures for at least the next twelve months.
Thereafter, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity financings or from other sources. There
can be no assurance that such additional financing will be available at all, or
that such financing, if available, will be obtainable on terms favorable to the
Company and will not be dilutive to the Company's then current stockholders.
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BUSINESS
Siebel Systems, Inc. ("Siebel," or "Siebel Systems" or the "Company") is an
industry leading provider of enterprise-class sales and marketing information
software systems. The Company designs, develops, markets, and supports Siebel
Sales Enterprise, a leading Internet-enabled, object oriented client/server
application software product family designed to meet the sales and marketing
information system requirements of even the largest multi-national
organizations.
In today's increasingly competitive global markets, businesses must
continuously improve their operations. Having spent considerable effort and
resources in previous years automating finance, manufacturing, distribution,
human resources management, and general office operations, many businesses are
now looking to apply the leverage of information technology to their sales and
marketing processes. Unlike previous automation efforts which have focused on
decreasing expenses, sales and marketing information systems focus primarily on
increasing revenues.
The Siebel Sales Enterprise is comprised of a broad range of advanced
client/server application products designed to allow corporations to deploy
comprehensive customer information systems, product information systems,
competitive information systems, and decision support systems on a global basis.
The Company's products provide support for multiple languages and multiple
currencies with support for a number of frequently interdependent distribution
channels, including direct field sales, telesales, telemarketing, distribution,
retail and Internet-based selling.
INDUSTRY BACKGROUND
Business Need for Sales and Marketing Information Systems
While the automation of finance, manufacturing, distribution, human
resources management, and general office operations has brought significant
improvements in efficiency and cost control to most large organizations, sales
and marketing remain largely unautomated. The Company believes that the need to
deploy closed-loop sales and marketing information systems is growing as
organizations expand their distribution channels and increasingly face stronger
competitive market pressures. The business demand to deploy sales and marketing
information systems is driven typically both by the goal of increasing sales
productivity as well as the concern that unless the organization applies
information technology to this largely unautomated process, it will rapidly
become uncompetitive.
Closed-Loop Sales and Marketing
LOGO
A closed-loop sales and marketing information system allows organizations to
share and manage sales
opportunities and information from a marketing encyclopedia across multiple
distribution channels.
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The market for sales and marketing information systems is large and rapidly
growing. META Group, Inc., an independent market research firm, estimates the
market size as $750 million in 1995, growing to more than a $3 billion market in
the 1998 timeframe.
Availability of Enabling Technologies
The Company believes the adoption of sales and marketing information
systems is being further fueled by the recent availability of enabling
technologies which allow, perhaps for the first time, the successful deployment
of highly distributed, mobile sales and marketing applications. Some of these
enabling technologies include: object oriented programming technologies
including Visual C++ and ActiveX from Microsoft, 32-bit PC operating systems
offering exceptionally accessible user-interface technologies like Windows 95
and Windows NT, rapid acceptance of intranets and the Internet, high bandwidth
communications capability, rich data manipulation technologies such as Adobe
Acrobat, SQL data replication services from Oracle, Sybase and Informix, as well
as continued advances in microprocessor central processing unit (CPU) capacity
from companies such as Intel.
The Challenges of Developing Sales and Marketing Information Systems
Enterprise-class application software includes categories such as financial
information systems, manufacturing systems, human resource management systems
and sales and marketing information systems. From a software engineering
perspective, these applications are considered to be quite complex, requiring
very large resource requirements and posing significant technical barriers.
Some organizations have succeeded in internally developing enterprise-class
applications on a timely and cost-effective basis. However, in other cases,
completion of such projects has required resources substantially in excess of
those originally budgeted or the project has been terminated due to lack of
success. In some instances, companies undertaking such custom development have
encountered delays in implementation of and, in certain cases, have canceled
such projects prior to reaching production.
To overcome the costs and risks associated with internally developed
enterprise-class applications software, many organizations are seeking to
purchase commercially designed, developed, tested, and supported application
software solutions.
Market Opportunity
The Company believes that the commercial availability of a high-end,
enterprise-class sales and marketing information software system will enable
companies to be successful in automating their sales processes. The Company
believes such an application should include the following characteristics:
- Complete Functionality -- Comprehensive customer information
systems, product information systems, competitive information systems and
decision support.
- Modern Technology Foundation -- Internet and intranet enabled,
client/server, object oriented, 32-bit, Windows 95 and Windows NT,
distributed relational database support, and OLE 2 automation support.
- Scalability -- Support for thousands of concurrent users deployed
globally, in multiple languages and multiple currencies with very large
relational datastores.
- Configurability -- Configurable business objects providing a high
level of application customization and modification.
The Company believes that an enterprise-class application which exhibits
these characteristics will enable organizations to deploy sales and marketing
information systems at lower cost, with lower risk, and more rapidly than
internally developed, custom project developments.
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THE SIEBEL SOLUTION
The Company is a leading provider of Internet-enabled, object oriented,
enterprise-class sales and marketing information systems designed to meet the
needs of the largest and often multi-national corporations. Siebel's position as
a market leader has been acknowledged by recognized industry experts, including
AberdeenGroup and GartnerGroup, each an independent research organization.
The Siebel Sales Enterprise is designed to offer users a sales information
solution that is functionally comprehensive, is built upon a modern technology
foundation, and scales to meet the requirements of global organizations with
thousands of concurrent users and very large data stores. The Siebel solution is
designed to be easily and extensively configured to meet industry-specific and
company-specific data processing and data presentation requirements.
Functionally Complete
The Siebel Sales Enterprise is designed to provide comprehensive
functionality for sales and marketing information systems. The product is
intended to enable the organization to deploy enterprise-wide customer
information systems, product information systems, competitive information
systems, and decision support systems. Specific functionality includes
opportunity and account management, product and revenue forecasting, quote
generation, on-line sales tools, contact and activity management,
correspondence, and fulfillment. The Siebel Sales Enterprise fully supports team
selling across multiple distribution channels, including field sales, telesales,
telemarketing, and resellers. The Siebel products are designed to improve
internal and external communications by integrating with e-mail, Intranet, and
Internet services.
Modern Technology Foundation
The Siebel solution takes advantage of advanced developments in technology
and computing trends, including Internet and intranet interoperability,
client/server architecture, configurable business object technology
(BusObjects), 32-bit processing capability, modern client operating systems
(Microsoft Windows 95 and Windows NT), relational database servers, modern
development environments (Microsoft Visual C++ and Microsoft Foundation Class
Libraries (MFC)), inter-application communications technologies (Microsoft OLE 2
automation), and database synchronization and replication.
The Company believes that the use of these modern and industry-standard
development tools and technologies has allowed Siebel Systems to rapidly develop
a comprehensive, configurable, scalable, enterprise-wide sales and marketing
information solution. The Company has found that sales of the Siebel Sales
Enterprise have been facilitated by the fact that its customers and prospects
have often adopted as their MIS standards these same technologies used by the
Company to build its products.
The Company believes that the technologies utilized to build Siebel Sales
Enterprise -- many of which became commercially available in the
mid-1990s -- are required to build an application of this nature and scope.
Prior to the advent of these technologies, it was technically difficult to build
an application robust enough to solve the information requirements of global
sales and marketing organizations. The Company believes that its use of these
technologies provides the Company with a significant market advantage.
Internet-Enabled
The Siebel Sales Enterprise is designed to allow organizations to harness
the power of the Internet to facilitate the sales and marketing process. The
Siebel Sales Enterprise enables organizations to use the Internet today for
collecting leads, for accessing product, company, and competitive information
through the World Wide Web, for communicating with prospects and customers via
Internet-based electronic mail, and for synchronizing and replicating data for
remote computing.
Many companies are using their home page to collect sales leads. The
information that prospects enter on these web-based forms, (e.g., name, address,
etc.) can be automatically loaded into Siebel Sales Enterprise using a standard
CGI (Common Gateway Interface) interface to the Siebel Open
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Interface product. These leads can then be automatically processed by the Siebel
Sales Enterprise Territory Manager, assigned, and distributed to the appropriate
sales representatives for follow up.
Siebel customers can also integrate Siebel Sales Enterprise and the Siebel
Encyclopedia with a web browser, such as Netscape Navigator, to allow their
sales and marketing professionals to automatically access remotely stored and
managed sales and marketing information using the World Wide Web. In this
fashion, sales and marketing personnel can readily gain remote access to a broad
range of product marketing materials including product catalogues, data sheets,
and annual reports.
Using Siebel Sales Enterprise, sales professionals can send correspondence
and quotes to their prospects and customers via Internet-based electronic mail.
Siebel Remote offers support for sales representatives using the Internet
to synchronize their remote laptop computers with the corporate databases. Users
can employ a local Internet access point to communicate "directly" with the
corporate headquarters to exchange account information, access new leads, and
transfer new orders. The Company believes the ability to use the Internet for
data synchronization or "docking" offers significant communications cost savings
to Siebel users and allows easy, local, and lower cost computer access globally.
Enterprise Scalability
The Siebel solution is designed to scale to meet the needs of organizations
whose sales forces range in size from fifty to thousands, including even the
largest global organizations. Many of the Company's customers have purchased
Siebel Sales Enterprise with the goal of automating thousands of sales
professionals, accessing multiple gigabyte data repositories. Virtually all of
the Company's customers are currently in the early stages of enterprise-wide
deployment. The largest production deployments of Siebel Sales Enterprise to
date are measured in hundreds of sales professionals. See "Risk
Factors -- Limited Deployment."
BusObject Configurability
Siebel Systems employs the use of BusObjects, highly configurable object
oriented business objects, as the basic building blocks of Siebel Sales
Enterprise. Included in the family of Siebel BusObjects are Opportunity,
Account, Customer, Product, Competitor, and Campaign. The BusObjects contain
semantic information about the sales and marketing entities as well as
presentation and navigation logic. BusObjects control the physical access of
information from data sources, organize and inter-relate that information, and
present the information to the user. The Siebel Sales Enterprise is comprised of
a collection of these BusObjects. Highly configurable at the object code level,
Siebel BusObjects are designed to allow organizations to rapidly configure the
application to meet their business requirements while ensuring a clear and
consistent upgrade path for future releases. This flexibility is expected to
substantially reduce the long term maintenance costs associated with deploying a
highly configured application.
STRATEGY
The Company's objective is to establish and maintain a clear market
leadership position in the sales and marketing information systems market. The
Company's strategy incorporates the following key elements:
Target Large Multi-National Customers in a Broad Range of Industries
The Company has designed Siebel Sales Enterprise to satisfy the most
rigorous sales and marketing information requirements of multi-national
corporations that frequently employ multi-tiered distribution strategies. Siebel
Sales Enterprise is intended to be deployed on a global basis, and provide
shared, up-to-date information for field sales, telemarketing, telesales,
marketing, as well as
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third party reseller sales organizations. The Company intends to leverage its
experience and continue to target product development, sales and marketing
activities to expand worldwide market acceptance of Siebel Sales Enterprise.
Maintain and Extend Advanced Technology Position
The Siebel Sales Enterprise utilizes advanced information technology. The
Company employs the use of configurable business objects (BusObjects) designed
to allow organizations to configure the Siebel application to fit their unique
needs while ensuring a clear and consistent upgrade path for future releases.
The Company has developed sophisticated database synchronization capabilities
intended to allow large numbers of mobile users to intermittently connect and
synchronize their local database with a server database. The Company has made
extensive use of object oriented technology to develop a multi-tiered
architecture that supports Internet-enabled client/server, three-tiered, and
N-tiered deployment strategies. The Company intends to continue to commit
substantial resources to maintain and extend its advanced technology position.
Global Strategic Alignment
The Company seeks to promote widespread adoption of Siebel Sales Enterprise
through the establishment of strategic relationships with leading systems
integrators, technology providers, and distributors.
Siebel Systems has formalized a global strategic business alliance with
Andersen Consulting to maximize the growth and establish the market leadership
position of both companies in the sales and marketing information systems
marketplace. Under this worldwide alliance agreement, Andersen Consulting
provides Siebel-related professional services including sales force
reengineering, change management, systems integration, configuration,
installation, project management, and training. This relationship provides
Siebel and Siebel's customers immediate access to a highly trained global
professional service organization to customize, integrate and deploy medium- and
large-scale Siebel implementations.
The Company has technology and marketing relationships with other leading
companies such as Itochu, Microsoft Corporation, and Adobe Systems, Inc. and
intends to establish additional relationships.
These relationships allow the Company to focus on its core areas of
expertise of developing and marketing sales and marketing information systems
software, while leveraging the strength and influence of complementary
information technology leaders in their respective domains.
Fully Exploit Intranets and the Internet
The Siebel Sales Enterprise has been designed to expand the accessibility
of comprehensive sales and marketing information to sales representatives
through the use of intranets and the Internet as a global, low-cost, virtual
private network. The Company believes that the Internet will enable the entire
corporate sales and marketing information base, currently only available to
users connected over a LAN (local area network) or WAN (wide area network), to
be available without geographic limitation for the low cost of a local Internet
connection. This capability will allow organizations to deploy targeted,
fully-informed sales professionals wherever needed without the expense and
overhead of physical offices or private leased lines. The Company plans to
continue to exploit the Internet and believes that in the future it will allow
customers to access comprehensive information systems which recommend and
deliver customized products, goods, and services directly to customers
worldwide.
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Promote Successful Customer Implementations
The Company's success is dependent upon its customers' successful
implementation of Siebel Sales Enterprise. As a result, the Company actively
supports the customer's deployment efforts by providing Internet and telephone
technical support, providing comprehensive instructor-led training, and
assigning an account management team that consists of a sales representative,
technical account manager, and an executive sponsor. To objectively measure
customer satisfaction, Siebel Systems employs an independent third-party
organization to perform periodic customer satisfaction audits.
Expand Global Sales Capabilities
The Company intends to expand its global sales capabilities by increasing
the size of its direct sales organization in major markets and continuing to
leverage distributors in other selected markets. In particular, the Company
plans to expand its direct sales and marketing activities in North America,
Europe, Asia, and Latin America. The Company has operations in North America,
the United Kingdom, and Japan and has recently introduced with Itochu localized
versions of the Siebel Sales Enterprise for the Japanese market. The Company is
developing localized versions for major European markets.
PRODUCTS
The Siebel Sales Enterprise is a client/server application software product
family designed to meet the sales and marketing information system requirements
of large, frequently multi-national, organizations. The Siebel Sales Enterprise
is comprised of a broad range of advanced client/server application products
designed to allow corporations to deploy comprehensive customer information
systems, product information systems, competitive information systems and
decision support systems on a global basis. The Company shipped Siebel Sales
Enterprise version 1.0 in April 1995 and subsequently shipped version 2.0 in
November 1995.
The Siebel Sales Enterprise supports Windows for Workgroups, Windows 95 and
Windows NT Workstation clients. The Siebel application server operates on
Windows NT and can work with Oracle, Sybase and Informix relational databases
operating on a variety of leading UNIX servers and Windows NT database server
platforms.
The Company generally licenses its software based on the number of users.
The core system, Siebel Sales Enterprise, has a U.S. list price of $1,750 per
user. Additional product options range from $250 to $500 per module, resulting
in a total list price of $5,500 per user for an end-user system that includes
all software options. The Siebel application server products are priced and
licensed separately. Initial direct sales to an end-user customer have typically
ranged from $500,000 to $2,000,000, with certain transactions that have been
considerably greater than $2,000,000. The Company also provides software
maintenance service, training, and associated professional services. The Siebel
Sales Enterprise is usually licensed to customers who intend to automate the
sales organization of an entire corporation or of a large division. Licenses to
date of the Company's products range from 50 to 5,000 users.
Siebel Sales Enterprise
The Siebel Sales Enterprise is designed to allow teams of sales and
marketing professionals to manage sales information throughout the entire sales
cycle. This core application includes the Opportunity Management, Account
Management, Contact Management, Activity Tracking, and Calendar Systems. The
Siebel Sales Enterprise product family includes the following products:
Siebel Sales Enterprise Product Options
Siebel Encyclopedia
Siebel Encyclopedia provides sales professionals with access to a
repository of their organization's sales-related information, including complete
product information, competitive information,
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decision support, and on-line literature. This information is published by
marketing and made available to all end users of the system. Built-in
communications capabilities are designed to allow users to immediately send
information to prospects, customers, and other sales team members via intranet,
Internet, electronic mail, fax, or automated correspondence and fulfillment.
Siebel Office
Siebel Office automates the process of sending sales-related letters to
customers. Correspondence includes integration with Microsoft Word, pre-built
correspondence templates, and automatic mail-merge capabilities. Fulfillment
center support is provided for internal and third-party fulfillment centers to
ensure timely completion of fulfillment requests.
Siebel Quotes
Siebel Quotes allows sales professionals to develop, verify, submit and
revise quotes tailored to meet customer requirements. Siebel Quotes is designed
to permit the generation of quotes from the opportunity information, verify that
quotes are complete and accurate, print quotes using a variety of formats, or
use electronic mail integration to send quotes to customers over the Internet.
Siebel Revenue Forecasting
Siebel Revenue Forecasting allows sales professionals to estimate and
submit forecasts based on opportunity revenues over time. Revenue Forecasting
includes opportunity-driven forecasts, forecast revisions, forecast histories,
forecast roll-up capabilities, and forecast reports. Forecasting for managers
based on direct report forecasts is included.
Siebel Product Forecasting
Siebel Product Forecasting allows sales professionals to estimate and
submit forecasts based on unit volume and price estimates over time. Siebel
Product Forecasting includes opportunity product-driven forecasts, forecast
revisions, forecast histories, forecast roll-up capabilities, and forecast
reports. Forecasting for managers based on direct report forecasts is included.
Siebel Reports
With Siebel Reports, users have access to the full power of Query by
Example to generate ad-hoc reports on-line, or view reports in graphical format.
Siebel Reports integrates with multiple report writers and delivers more than
forty-five pre-built reports.
Siebel EIS
Siebel EIS (Executive Information System) allows sales and marketing
professionals and executives to dynamically visualize information in a variety
of on-line graphical formats. The Siebel EIS system comes with more than
thirty-five pre-defined graphical charts, as well as the ability to configure
new graphics that are uniquely tailored to user requirements.
Siebel Tele-Business
Siebel Tele-Business enables lead generation and lead qualification by
equipping Telesales and Telemarketing professionals with powerful Campaign, Call
Scripting, and Campaign Administrator functionality, as well as automated call
distributor (ACD) integration.
Siebel Remote
Siebel Remote enables mobile computing by allowing the exchange and
synchronization of information between the sales professional's mobile computer
and the corporate server. Mobile users can access the full functionality of
Siebel Sales Enterprise on a laptop, and later "dock" to upload local
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changes to the server, initiate requests for information, and download any new
information from the corporate server. Siebel Remote is Internet-enabled to
support database synchronization and replication over the Internet.
Siebel Anywhere
LOGO
Organizations can unite their connected Siebel users and their mobile Siebel
users in a common sales information system. Siebel provides two-way data
synchronization between mobile users and the central database
repository, using LAN, WAN, dial-up, as well as intranet and
Internet connections.
Siebel Systems Administration and Management Software
Siebel Systems Administration and Management Software is separately priced
and licensed and includes the following components:
Siebel BusObject Configurator
For application configuration, Siebel Sales Enterprise provides business
object definitions to allow systems administrators, systems integrators, and
application developers to configure the look, feel, data content, and layout of
Siebel business objects without changing source code.
Siebel Marketing Manager
The Siebel Sales Enterprise provides a suite of marketing administration
screens to define and manage marketing information such as product information,
product lines, price lists, competitive information, and decision issues.
Siebel Sales Manager
The Siebel Sales Enterprise provides a suite of systems administration
screens to define and manage key system information such as employees, sales
territories, available views, user responsibility profiles, and system
preferences.
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Siebel Anywhere
The Siebel Sales Enterprise provides a server component of Siebel Remote
to manage all information exchanges with mobile users. Siebel Anywhere monitors
this two-way exchange, and provides comprehensive conflict detection and
resolution facilities designed to ensure the integrity and synchronization of
both server and client databases.
Siebel Enterprise Integration Manager
The Siebel Enterprise Integration Manager allows Siebel customers to
exchange information with other enterprise applications such as manufacturing,
accounting, human resource, and customer service applications.
Siebel Database Extension Manager
For application configuration, the Siebel Database Extension Manager is
designed to allow Siebel customers to capture the information most appropriate
for their business. Siebel Database Extension Manager provides an intuitive
graphical user interface for systems administrators to extend the Siebel Sales
Enterprise database schema while maintaining a clear and consistent upgrade path
to future releases.
Siebel Product Advantages
Application Configuration
The Company's customers each have unique business needs requiring
varying levels of application configuration. For instance, different
organizations may use a combination of direct sales, field sales, telesales or
third-party sales. The Company believes it has anticipated these needs and
provides configurable business objects to allow organizations to configure the
application to fit their unique requirements. Each business object defines the
look and feel, the information displayed, and the workflow of the application to
address major areas of business functionality. For example, a business object
may contain the business logic and rules that describe how leads and prospects
are shared across multiple sales channels. The Company provides a range of
business objects that address the sales and marketing process.
The Siebel Sales Enterprise is designed to allow organizations to
configure and modify the properties and attributes of the business objects
without needing to change application source code. The Company believes this
approach to configuration provides several key benefits:
- Reduces cost of configuration and maintenance,
- Permits a clear and consistent upgrade path for future releases of
Siebel software, and
- Allows the Company to maintain and support a single source code base
that addresses the varied needs of its customers.
Application configuration is typically performed by a Siebel systems
integration partner or the customer's MIS department. The software may be
configured in a number of manners including:
- User Preferences
- System Administration Preferences
- Server Preferences
- Database Extensibility
- Object Definitions
This combination of configuration options offers customers extensive
configurability without having to write or modify source code.
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Data Synchronization and Replication
Typically, field sales, telesales, and order administration personnel
all have contact with the same customers. Sharing information about customers
across often geographically dispersed sales teams can be difficult. The
challenge is to provide every member of the sales team with up-to-date
information on the account or prospect. Siebel Remote, the Company's
asynchronous replication technology, addresses the data synchronization and
distribution needs of these sales teams. Siebel has applied for a patent on its
proprietary data synchronization and replication technology. See
"-- Intellectual Property and Other Proprietary Rights." Siebel considers this
technology a major source of competitive market advantage.
Siebel Global Processing Architecture
LOGO
The Siebel global processing architecture supports a multi-tiered sales
organization with stationary Siebel users who are permanently connected to the
central database server and mobile Siebel users who are intermittently connected
to the central database server.
Mobile users can utilize Siebel Remote to synchronize their laptop or
hand-held computer with the central data repository. Adhering to preestablished
visibility rules, Siebel users can share overlapping subsets of data to support
team selling. Traditional data synchronization approaches are typically limited,
allowing only the primary user to update shared data. With such limited
approaches, other synchronized users only have read access to information
entered by the primary owner. Siebel Remote is designed to allow any designated
member of the sales team to update records, and to automatically synchronize the
updates with all other users.
Giving multiple users update rights can create conflicts, particularly when
some users operate in a mobile environment and are not permanently connected to
the central data repository. The Siebel application supports an extensive set of
configurable business rules that detect and resolve conflicts at the database
field level.
Siebel uses a sophisticated "net change" architecture with highly
compressed transaction instructions designed to minimize network traffic, reduce
data synchronization time, and limit network expense. Siebel's architecture is
network independent, allowing data synchronization to occur over LAN, WAN,
dial-up, as well as intranet and Internet connections.
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Siebel Global Distributed Architecture
LOGO
The Siebel de-centralized data distribution architecture is designed to support
multiple, de-centralized data servers which can be geographically located in the
sales region they support.
User Interface
The Siebel Sales Enterprise has been ergonomically designed by human
factors experts to be easy to use and easy to learn. The use of Microsoft
Windows and Microsoft Office compliant user interface technology is intended to
ensure that users are immediately familiar with buttons, menus, and
industry-standard commands. A tab metaphor allows users to click a mouse and
view the key components of their sales and marketing information system.
Siebel's patent-pending Thread Manager technology displays, records, and
restores the user's screen-by-screen navigation. System-wide, context sensitive
help provides immediate answers to questions.
Scalability and Performance
Scalability and performance are key considerations in enterprise-wide
deployments of sales information systems. For large deployments, thousands of
users need to access a common data repository that may contain tens of gigabytes
of information. Scalability and performance are impacted by design and
implementation of both the client and server side of the application. The Siebel
Sales Enterprise is designed to address the performance and usability issues
that arise in large-scale deployments.
Efficient Use of Network Bandwidth to Optimize Performance
The Siebel client/server architecture is designed to minimize network
traffic to optimize performance. The client is designed to intelligently cache
data and group database queries and updates, thereby minimizing the number of
transactions over the network. This feature is intended to allow large numbers
of users to be simultaneously connected over a LAN or WAN to a single
centralized database while exhibiting acceptable performance characteristics.
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High Performance Application Server
The Siebel Application Server has been designed to permit high throughput.
Multiple application servers can run in parallel with a single database server.
The number of users each Siebel Application Server can support varies depending
on the type and frequency of data updates, as well as the particular server
hardware.
High Performance Computer Hardware and Database Support
The Siebel products are designed to support scalability for large user
communities by taking advantage of leading, high-performance databases and
computer hardware. The Company supports industry-standard approaches to
high-performance such as symmetric multi-processing hardware which allows
multiple processors within one server machine.
Support for Global Enterprises
Built for multi-national customers, Siebel software supports international
standards in several ways, including support for:
- Local language support for non-English application deployment
- Multiple currencies, exchange rates and automatic currency conversions
- International time, date, and phone number conventions
- Double-byte Asian character sets
The Company recently introduced with Itochu a localized version of Siebel
Sales Enterprise for the Japanese market. The Company is currently developing
French and Spanish language versions which it currently expects to release in
Europe in 1996. Other localized versions will be developed and released as
market conditions warrant.
TECHNOLOGY
The Siebel Sales Enterprise exploits an advanced information technology
platform. The Siebel products embrace and incorporate the utility and power of
the Internet. The application is built on a multi-tiered client/server
architecture supporting Microsoft Windows clients and a variety of Windows NT
and UNIX servers running Informix, Oracle, and Sybase relational databases. The
technology foundation includes object oriented application development,
Microsoft Visual C++, MFC Libraries, OLE 2 automation, 32- or 16-bit processing,
and Microsoft Windows and Microsoft Office user interface compliance. The Siebel
application is a modern, scalable and customizable enterprise-wide client/server
sales and marketing information system. The application uses a multi-tiered
architecture with separate client, application server and database server layers
connected together over a LAN or a WAN.
The Siebel N-Tiered Architecture
The Company has developed an advanced, N-tiered object oriented software
architecture. The software architecture is designed to provide Siebel customers
with robust flexibility in application deployment to meet the unique needs of
the organization. Using Siebel's N-tiered architecture, customers have the
flexibility of deploying their applications on remote pen-based and laptop
computers, on standalone desktop workstations, on client/server systems, on
highly distributed replicated "mainframe" server environments, and in the
future, on the Internet, or any combination thereof.
The Company believes that the utility offered by this flexible architecture
provides a major source of competitive market advantage.
Siebel's N-tiered architecture separates the information presentation,
application logic, database access, and interprocess communications layers into
separate tiers in order to partition and distribute the application components
to run where necessary.
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Siebel's N-tiered architecture currently supports the following application
deployments: Personal Computing for mobile sales professionals and Client/Server
for connected sales professionals. The Company expects that this architecture
can be further exploited to support additional Internet-enabled application
deployment configurations in future Siebel product releases, including the
Virtual Computing for Internet-connected sales professionals, resellers,
partners, and individual buyers.
Siebel N-Tiered Architecture
LOGO
The Siebel N-tiered architecture separates the information presentation,
application logic, database access, and interprocess communications
layers into separate tiers in order to partition and
distribute the application components to
run where necessary.
Personal Computing
Siebel Personal Computing supports mobile sales professionals who typically
use either laptop or hand-held portable computers. These users are not
permanently connected to their organization's network and usually run the client
disconnected from the central database. Mobile clients have a local SQL database
that contains a subset of the information in the server database. While the
field sales representative is disconnected from the LAN or WAN, the local
database is used for information access and updates. This gives mobile users the
complete range of functionality available to connected users anywhere their
business takes them. The Company's patent-pending technology allows for exchange
and synchronization of information between the mobile and server databases,
using LANs, WANs, dial-up, or the Internet.
Client/Server
The Siebel Client/Server software connects the client to the server
database via a LAN or WAN. Connected clients access and update information
directly against the server database. A typical use for a connected client is a
telesales representative based in the headquarters office, or possibly in a
regional office connected to headquarters through a WAN.
Virtual Computing
Siebel Virtual Computing is being designed to expand the accessibility of
comprehensive sales and marketing information to sales representatives through
use of the Internet as a global, low-cost, virtual private network. The Company
believes that the Internet will enable the entire corporate sales and marketing
information base, previously available only to users connected over a LAN or
WAN, to be available without geographic limitation for the cost of a local
Internet connection. The Company
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believes that this capability will allow organizations to deploy targeted,
fully-informed sales professionals wherever needed without the expense and
overhead of private leased lines or physical offices.
Siebel Virtual Computing is being designed to deliver one-to-one sales and
marketing on a global basis. The Company believes this may well re-define the
concept of "selling on the Internet." Today, buyers can order anything from
consumer goods to automobiles using the Internet to browse home pages and tour
virtual shopping malls. This passive approach to selling can be characterized as
using the Internet simply as an inexpensive way to deliver an electronic
catalog. Electronic catalogs do not currently lead customers through the product
evaluation and selection phase, do not up-sell or cross-sell, only offer limited
customized alternatives, and add no incremental value to the selling process.
The Company believes that such electronic catalogs are not a replacement for a
true sales professional who can identify the specific product configuration that
best suits the customers' needs and requirements.
The Company believes that its N-tiered architecture will, in the future, be
able to provide organizations with the technology foundation to deliver a
powerful new generation of selling applications over the Internet. For example,
through a web page, buyers may have access to a virtual sales consultant, fully
knowledgeable about the buyer's demographics, interests, and buying patterns.
The Company believes that this virtual sales approach will allow organizations
to dynamically target marketing programs, tailor solutions, and deliver
customized products, goods and services worldwide, directly to customers based
on their needs. The Company believes that this use of the Internet may
fundamentally change the economics of selling by permitting organizations to
reduce distribution and selling costs, while simultaneously increasing revenues,
and growing new markets through disintermediation. See "Risk Factors -- Risk
Associated with New Versions and New Products; Rapid Technological Change."
Siebel Virtual Computing
LOGO
The Siebel N-tiered architecture is designed to allow organizations to flexibly
deploy their Siebel applications in multiple configurations, including
Siebel Personal Computing, Siebel Client/Server
Computing, and in the future, Siebel
Virtual Computing.
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CUSTOMERS AND MARKETS
Siebel has targeted large organizations operating globally and conducting
business through multiple sales channels. The Company believes this market has
been underserved by existing vendors and offers substantial opportunities to the
Company. The following were the customers of the Company as of May 31, 1996.
<TABLE>
<S> <C>
FINANCIAL SERVICES
- Charles Schwab & Co., Inc.
- Frank Russell Company
- Montgomery Securities
- Texas Commerce Bank National
Association
SERVICE
- Andersen Consulting LLP
SOFTWARE
- BMC Software, Inc.
- Informix Software, Inc.
- Platinum Technology, Inc.
- Pure Software, Inc.
TRANSPORTATION
- American President Companies Ltd.
- Viking Freight System, Inc.
CONSUMER PACKAGED GOODS
- The Dial Corp
- The Quaker Oats Company
MANUFACTURING
- Cisco Systems, Inc.
- Newbridge Networks, Inc.
- The Dow Chemical Company
- AMP Incorporated
- LSI Logic Corporation
- Hewlett-Packard Japan, Ltd.
- Digital Equipment Corporation
- Unisys Corporation
</TABLE>
The Siebel Sales Enterprise has been selected for use by a wide variety of
industries as illustrated by the following customer examples:
Financial Services
In December 1995, Charles Schwab & Co., Inc. licensed the Siebel Sales
Enterprise software as an important sales system to be used by more than 4,000
brokers. After reviewing multiple products in the areas of configurability,
scalability, and functionality, the firm chose the Siebel Sales Enterprise. The
Siebel Sales Enterprise is designed to allow shared access to updated customer
profiles and histories to improve the organization's responsiveness to its
nearly 3.5 million active customer accounts and prospects.
Transportation
American President Companies Ltd. was challenged with providing their sales
representatives with the tools necessary to compete in a global marketplace.
After conducting an extensive review of sales and marketing information systems,
they selected Siebel Sales Enterprise. This implementation is being designed to
integrate internal customer information and government trade data, to optimize
work loads and to provide increased customer service. Utilizing Siebel's work
flow capabilities, these sales representatives are expected to be able to
balance multiple customer inquiries and increase their revenue generating
capacity.
Manufacturing
Unisys Corporation has adopted Siebel Sales Enterprise for use in selling
complex high-technology products and services. After a multi-year internal
development effort and many millions of dollars in expense, they canceled their
project and selected Siebel as their sales and marketing information solution.
They have employed a multi-tiered distribution strategy and plan to use Siebel
to manage many elements of the sales process. The customer intends to use Siebel
to help consolidate formerly
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disparate customer databases and prospect lists. Operating over a worldwide WAN,
telesales representatives are expected to be able to access sales history,
product information, create quotations, take orders, share information and route
leads to field representatives.
MARKETING
The Company's marketing efforts are directed at establishing a market
leadership position for Siebel Systems. Targeted at sales, marketing and
information technology executives within large, multi-national organizations,
Siebel's marketing programs are focused on creating awareness and generating
interest in the Siebel solution.
Siebel Systems is an active participant in the Digital Consulting Inc.
(DCI) Field and Sales Automation and Internet EXPO, a leading international
conference and trade show in the sales and marketing information systems
marketplace. In 1996, the DCI Field and Sales Automation/Internet Conferences
are being held in San Jose, Chicago, Toronto, Boston and Atlanta. These
week-long conferences will feature Thomas M. Siebel, Chairman and Chief
Executive Officer of the Company, delivering the plenary Keynote Address. In
addition, Siebel Systems will demonstrate its products and showcase its
partners' solutions.
Thomas Siebel is a frequent speaker at many software industry events,
including the Sales Automation Association and Insight Technology Group's Chief
Sales Officer Conferences, as well as the Andersen Global Consulting Seminar.
Mr. Siebel joined others in the delivery of the Keynote Address at WindowsWorld
95 in Atlanta, showcasing the Siebel Sales Enterprise.
Supporting its worldwide direct and indirect sales channels, the Company's
co-marketing efforts include conducting global Sales and Marketing Executive
Briefings including the following:
<TABLE>
<S> <C> <C> <C> <C> <C>
- Sales Automation Executive Briefings with Microsoft and Andersen Consulting
Chicago Los Angeles New York Irvine Philadelphia
Toronto Detroit Hartford Houston Boston
- Mobile Computing for Sales Executives with Hewlett-Packard
Tampa St. Louis Ft. Lauderdale Atlanta
Dallas Minneapolis New York Houston
Fullerton Denver Seattle San Francisco
Cincinnati Van Nuys Boston Chicago
- Increasing Revenue for Sales Executives with Informix
Phoenix Boston Chicago New York
Denver San Francisco Irvine Dallas
Atlanta Detroit Minneapolis
- The Impact of Sales and Marketing Information Systems in Japan with Itochu
Tokyo Osaka
</TABLE>
Thomas Siebel and Michael Malone, co-author of The Virtual Corporation,
have written Virtual Selling, Going Beyond the Automated Sales Force to Achieve
Total Sales Quality ("Virtual Selling"). Published by The Free Press, a division
of Simon & Schuster, in February 1996, Virtual Selling describes the business
benefits of applying information technology to the sales and marketing process.
Siebel's marketing personnel engage in a variety of marketing activities,
including managing and maintaining the Siebel web site, issuing newsletters,
making direct mailings, placing advertisements, conducting public relations and
establishing and maintaining close relationships with recognized industry
analysts.
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SALES
Siebel sells its software primarily through its direct sales organization.
As of April 30, 1996 the Company's direct sales force consisted of 18 sales
professionals located in eight domestic offices (Boston, New York, McLean,
Atlanta, Chicago, Dallas, Los Angeles, and Menlo Park) and two international
offices (London and Tokyo). The field sales force is complemented by two
telemarketing representatives situated in the Company's Menlo Park, California
headquarters. Technical sales support is provided by 11 sales consultants
co-located in the field offices. Sales in the Asia/Pacific market are leveraged
through a co-exclusive distribution agreement with Itochu. The Company currently
intends to add sales representatives and sales consultants in the United States,
Germany, France, the United Kingdom, Spain, Japan, Australia and Singapore.
The Company deploys sales teams consisting of both sales and technical
professionals who work with strategic systems integration partners to create
industry specific proposals, presentations and demonstrations which address the
exact requirements of the customer. The decision makers within Siebel's
prospective customers for the Siebel products are their executive management
teams, frequently consisting of the Chief Information Officer, VP Sales, VP
Marketing, the Chief Financial Officer and the Chief Executive Officer.
The Company manages its business using Siebel Sales Enterprise, running on
the Company's intranet. The Siebel product is used to manage all aspects of the
sales process and to share information among members of the sales team and
Siebel management.
The Company believes that the deployment of an integrated sales and
marketing information system offers a distinct competitive advantage, and that
focusing corporate resources on revenue generating systems offers greater return
than automation efforts focused on cost reduction in areas such as human
resources and accounting. The Company believes its customers' understanding of
this fact establishes the value of the Siebel Sales Enterprise and shortens the
sales cycle.
The Company's sales process consists of several phases: lead generation,
initial contact, lead qualification, needs assessment, company overview, product
demonstration, proposal generation and contract negotiations. In a number of
instances the Company believes that its relationships with strategic partners,
including systems integrators, has substantially shortened the Company's sales
cycle. Partners have generated and qualified sales leads, made initial customer
contacts and assessed needs prior to Siebel's introduction. Additionally,
systems integration partners have assisted the Company in the creation of
customized presentations and demonstrations which the Company believes enhance
the competitive position. While the sales cycle varies substantially from
customer to customer, for initial sales it has ranged to date from two to
eighteen months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
GLOBAL STRATEGIC ALIGNMENT
An important element of the Company's sales and marketing strategy is to
continue to enhance and expand its strategic partnerships with key industry
leaders in order to increase market awareness and acceptance of Siebel Systems.
The Company believes these relationships with industry leaders help to ensure
that Siebel Systems delivers a comprehensive solution to its customers for their
sales and marketing information system needs. The Company has established
relationships with organizations in three general categories: systems
integrators, development and distribution partners and educational services
providers.
System Integrators
Andersen Consulting -- Strategic Business Alliance
Siebel Systems and Andersen Consulting have formalized a strategic business
alliance designed to maximize the growth and establish the market leadership
position of both organizations in the sales and marketing information systems
marketplace. Worldwide in scope, the parties' agreement includes
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cooperative specification and development of products and solutions, technology
transfer and training, and joint marketing and sales programs. Under this
agreement, Siebel promotes Andersen as its preferred systems integration
partner, and Andersen promotes Siebel as its preferred software solution for
sales and marketing information systems. In connection with the strategic
alignment, Andersen Consulting has made an equity investment in Siebel Systems
and George Shaheen, the Managing Partner of Andersen Consulting, serves on the
Company's Board of Directors. See "Management" and "Principal and Selling
Stockholders."
Andersen Consulting provides Siebel-related professional services including
sales force reengineering, change management, system integration, configuration,
installation, project management and training. Andersen Consulting operates
Siebel Configuration Centers in Menlo Park, London, and Tokyo. Siebel believes
that this relationship provides Siebel and Siebel's customers immediate access
to a highly trained global professional service organization to customize,
integrate and deploy medium-and large-scale Siebel deployments. Andersen
Consulting has provided system integration services in connection with a
majority of the Company's customers to date. See "Risk Factors -- Reliance on
Andersen Consulting and Other Relationships; Dependence on Other Relationships."
Siebel Systems and Andersen Consulting conduct joint market development and
promotional activities, including joint advertising, joint public relations,
jointly developed brochures and market-specific product demonstrations, and
collateral. The two companies jointly participate in industry events and conduct
Executive Briefings both in worldwide seminar programs as well as in DCI Field
and Sales Automation tradeshows. Siebel and Andersen Consulting have created a
global joint selling model targeted at specific vertical markets and major
accounts.
Other Systems Integrators
The relationship between Siebel Systems and Andersen Consulting is
non-exclusive. As requested by its customers, Siebel Systems frequently
collaborates with other systems integrators, including KPMG Peat Marwick LLP and
Deloitte & Touche LLP to provide Siebel-related professional services.
Technology and Distribution Partners
Itochu Techno-Science Corporation -- Strategic Business Alliance
Siebel and Itochu Techno-Science Corporation have entered into a strategic
alliance agreement under which the two companies have agreed to jointly develop,
promote, market, sell and support the Company's products in Japan. The companies
are working together to localize the Siebel products for the Japanese market and
jointly promote and support these products in Japan. In connection with the
alliance, Itochu Techno-Science Corporation and related entities made an equity
investment in the Company. See "Principal and Selling Stockholders." Itochu
Techno-Science Corporation is a large technology provider to the Japanese
market, representing many leading companies including Sun Microsystems, Inc.,
Compaq Computer Corporation and Sybase, Inc. Itochu Techno-Science Corporation
is a subsidiary of Itochu Corporation, which is one of the largest companies in
the world with revenues in excess of $140 billion per annum.
Under the agreement, Itochu Techno-Science Corporation has agreed to
prepare Japanese localized versions of the Company's products, including the
software, on-line help and training materials. Acting as the co-exclusive
distributor of the Siebel products in Japan, Itochu Techno-Science Corporation
promotes and markets the Siebel software to Japanese end-user organizations. A
dedicated, full-time marketing team within Itochu Techno-Science Corporation
coordinates the marketing, promotion and distribution efforts for the Siebel
products. This marketing team promotes the Siebel products through marketing
programs including seminars, trade shows and conferences. In addition, Itochu
Techno-Science Corporation produces Japanese versions of Siebel sales tools and
collateral.
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Itochu Techno-Science Corporation provides the installation, training,
technical support and maintenance to Siebel end-users. To promote customer
satisfaction in the Japanese market, Itochu provides technical support and
administers maintenance and software upgrade programs.
Other Strategic Relationships
Microsoft Corporation
The Company and Microsoft have a strategic technology and marketing
relationship. As a member of the Microsoft Developer Network and Microsoft
Solution Provider programs, the Company receives frequent briefings on
Microsoft's strategic and technical product direction, as well as early access
to new software releases.
The Company uses Microsoft development tools extensively, including
Microsoft Visual C++, MFC, and OLE 2. The Siebel applications run under Windows
for Workgroups in 16-bit, and Windows 95 and Windows NT in a native 32-bit
environment. Microsoft has promoted Siebel's extensive use of its technology in
a Siebel Systems Solutions Datasheet, a Siebel Systems focus brochure, and has
featured the Siebel Sales Enterprise in multiple Microsoft product launches.
Siebel and Microsoft have collaborated in numerous joint marketing programs
targeted at Microsoft's key customers and prospects. The two companies have
conducted a nationwide series of Executive Sales Information Systems Briefings
and jointly participated with each other in trade shows and industry events.
Thomas Siebel joined others in the delivery of the keynote address at
WindowsWorld 95 in Atlanta to more than 5,000 conference attendees, and
demonstrated Siebel Sales Enterprise as a Windows 95-compliant client/server
application that takes advantage of the Microsoft application development and
enterprise software.
Adobe Systems, Inc.
Siebel Systems and Adobe have a joint technology and marketing
relationship. The Siebel Sales Enterprise utilizes Adobe Acrobat technology
which is designed to allow sales people to more quickly access sales information
and enable sales professionals to have immediate, on-line access to all of their
sales tools including annual reports, brochures, customer stories and
presentations.
The companies have jointly promoted the integrated solution through a
number of joint marketing programs, including collaboration in product
announcements, tradeshows and joint sales collateral.
In connection with the strategic relationship, Adobe Ventures L.P., a
venture partnership associated with Adobe, has made an equity investment in the
Company. See "Principal and Selling Stockholders."
Mobile and Hand-Held Computer Providers
Siebel Systems has relationships with Norand and Telxon Corporation,
leading providers of mobile hand-held devices used by field sales personnel.
Telxon and Norand's line of hand-held information workstations integrate
point-and-touch pen-based computing devices with barcode data capture and
wireless communications. Siebel's products will run on these hand-held devices
for use in industries such as consumer packaged goods where hand-held devices
enable sales representatives to implement more effective in-store promotions.
Siebel collaborates with Norand and Telxon in numerous marketing
activities, including joint trade shows and industry events, joint participation
in user groups, and targeted joint customer calls.
Educational Service Provider -- Wilson Learning Corporation
Siebel Systems has a relationship with Wilson Learning Corporation, a
worldwide sales training company. As part of the relationship, Wilson Learning
has agreed to develop and deliver a wide range
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of end-user training courses for Siebel end-users. Wilson Learning will offer
instructor-led classroom training and self-paced computer-based training
modules. As a part of the Siebel implementation project team, Wilson Learning's
professional course developers and sales training experts will design training
that reflects the customer's unique Siebel configuration and specific business
processes.
This strategic relationship is designed to address end-user training, the
last critical step that an organization must take to successfully deploy its
Siebel-based sales and marketing information system.
CUSTOMER SUPPORT AND TRAINING
The Company has implemented a multi-tiered strategy designed to provide
comprehensive customer support programs to ensure successful implementation and
customer satisfaction. This multi-tiered approach includes on-line support via
the Internet, toll-free telephone technical support and direct support from a
customer satisfaction team.
Through on-line support, a suite of Internet-based User Groups for specific
topics is available to Siebel customers. Internet support also includes a
knowledge repository to address customers' questions. The Company's Internet
service programs provide links to selective Siebel product documentation,
technical notes and frequently asked questions (FAQs). Customers can directly
check the status of their technical support requests over the Internet.
Separately, a toll-free 800 phone number provides customers with direct access
to technical service professionals.
Another facet of Siebel's customer support is provided by the customer
satisfaction team. Each Siebel customer is assigned a team which consists of a
sales representative, a technical account manager and an executive sponsor. The
goal of this team is to ensure the success and satisfaction of the customer by
facilitating open communications to quickly identify, analyze and solve
problems. Through a combination of regularly scheduled conference calls, on-site
visits, and project team planning meetings, Siebel personnel participate in
every phase of the customer implementation from planning to project management
to system test and organizational design. Customer satisfaction is tracked on an
account-by-account basis and reported weekly to the Company's executive
management. Customer satisfaction is also audited periodically by an
independent, objective third-party organization.
The Company and Wilson Learning offer a wide range of training courses in
the configuration, administration and use of the Siebel products. Training is
available at the Company's Learning Center or at the customer site. Andersen
Consulting also offers training services in connection with implementation of
Siebel Sales Enterprise.
DEVELOPMENT METHODOLOGY
The Company's success is dependent in part upon its ability to continually
release robust, reliable products with functionality that meets customers' needs
in a timely manner. To achieve this goal, the Company's software engineering
organization utilizes a number of advanced, proven methodologies in the
development of its products. The Company believes that it has developed a robust
product specification, development and quality assurance process which
facilitates the delivery of high quality, high performance production software
that has been demonstrated to meet both the product specification and the
customer expectations. The Company intends to continue to invest in development
to respond to customer requirements, extend its current product functionality,
and introduce new products.
Release Content Definition
Each product development cycle begins with a formal process of determining
the feature content of the upcoming release after extensive consultation with
customers and analysis of industry trends. The product marketing group produces
for the engineering group formal Marketing Requirements Documents and Feature
Specifications. All engineering development requires input from the product
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marketing group. During the development process, the product marketing group
continues to test its decisions by reviewing early prototypes with customers and
third-party human factors experts, modifying specifications as appropriate.
Formalized Data Modeling
Recognizing the importance of building a sound data representation
foundation, the Company employs a formalized data modeling process which
consists of a dedicated group using data modeling CASE tools. The data modeling
process begins as soon as input is received from Product Marketing, before code
development begins, as the Company believes that the data modeling process is a
critical, central part of the development process.
Project Planning
After receiving input from the product marketing, the Company's development
methodology requires clear assignment and ownership of each development task, an
analysis of each task, a breakdown of each task into manageable subtasks, entry
of all tasks into centralized project tracking software and continual monitoring
of development progress against plan with load balancing as necessary.
Development Tools
The Company utilizes advanced object-oriented development tools and
technologies in the development of its products, including Microsoft Visual C++
(to create 16-bit and native 32-bit Windows client software), Microsoft App
Studio, Microsoft Foundation Classes, Microsoft OLE 2 automation, Microsoft
Project, Pure Software Purify, Nu-Mega Bounds Checker, and Oracle Designer 2000
CASE tools.
Coding Standards
In order to ensure maintainability and readability of source code, all
Siebel engineers follow formal, written coding standards that cover coding style
issues such as naming conventions, indentation, common utilization of standard
utility functions and consistent use of operating system calls. In order to
minimize the effort involved in localizing the product to other languages,
formal, written coding standards are followed to help ensure that the base
product is built in a language-neutral way. This language-neutral approach has
been adopted so that as the product is localized (translated) into other
languages, the effort can be focused on the translation itself, rather that the
difficult and time consuming process of finding and correcting code constructs
which assume an English user interface. This approach aids in issues such as
alternate character sets, double-byte character encoding, sort order, multiple
currency support, and date/number formatting.
Source Code Control
Source code for every release (as well as for development in progress) is
formally checked into a central source code control system (Microsoft Source
Safe), which is regularly backed up. This system is designed to help ensure that
code is not lost, avoid confusion over identifying the latest version of a
software module, and help ensure that only one engineer is editing a piece of
code at any given time. All releases of software to customers are made through a
formal, repeatable build process on dedicated central machines.
Code Ownership
The Company employs a code "ownership" policy to ensure that every piece of
code in a product is assigned to a specific engineer. The Company believes this
contributes to efficient task distribution as well as to ensuring that all code
is reviewed and integrated.
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Quality Assurance
The Quality Assurance department creates test plans for each of the product
features. These test plans, driven directly from the same Marketing Requirements
Documents used by Engineering to develop features, drive the testing efforts of
the Quality Assurance department. The test plans are designed to ensure a
repeatable, understandable and measurable method of testing the software. Also
included in the test suites are a number of methods to measure the performance
and scalability of the product. The Company has developed a set of Key
Performance Indicators (KPI's) which it believes are a collection of
representative user activities whose performance is key to ensuring customer
satisfaction. The quality assurance tests include timing each of these KPI's for
compliance with stated performance goals. These KPI's are generally run
simulating a single user on a small database as well as simulating multiple,
simultaneous users on a large database. A number of technologies are employed to
execute the test plans, including automated testing software, system load
simulation tools, and performance monitoring software.
Error Tracking
The Company maintains a central tracking system into which software errors
are entered and tracked. The system allows the status of such errors to be
maintained as they are routed through the organization to their eventual
resolution. Management reports can be generated on demand that indicate the rate
of error discovery, the rate of error correction, the areas of instability in
the product and the engineering work load. Enhancement requests, user
misunderstandings and customer requests are also entered into this system as
well.
As of March 31, 1996, there were 27 employees on the Company's product
development staff. The Company's product development expenditures in 1994, 1995
and the first quarter of 1996 were $868,000, $2.8 million and $1.0 million,
respectively. The Company expects that it will continue to commit substantial
resources to product development in the future.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company also believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable product maintenance are essential to establishing and maintaining a
technology leadership position. The Company seeks to protect its software,
documentation and other written materials under patent, trade secret, and
copyright laws, which afford only limited protection. The Company currently has
two patent applications pending in the United States. There can be no assurance
that any patents issued to the Company will not subsequently be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications, whether or not being currently challenged by
applicable governmental patent examiners, will be issued with the scope of the
claims sought by the Company, if at all. Furthermore, there can be no assurance
that others will not develop technologies that are similar or superior to the
Company's technology or design around any patents owned by the Company. Despite
the Company's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as do
the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competition will not independently develop similar
technology. The Company has entered into agreements with substantially all of
its customers which require the Company to place Siebel Sales Enterprise source
code into escrow. Such agreements generally provide that such parties
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will have a limited, non-exclusive right to use such code in the event that
there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business or if the Company fails to meet its support obligations.
Entering into such agreements may increase the likelihood of misappropriation by
third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Furthermore, there can be no assurance that former employers
of the Company's present and future employees will not assert claims that such
employees have improperly disclosed confidential or proprietary information to
the Company. Any such claims, with or without merit, could be time consuming to
defend, result in costly litigation, divert management's attention and
resources, cause product shipment delays or require the Company to pay money
damages or enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, if at all. In the event of a successful claim of product infringement
against the Company and failure or inability of the Company to license the
infringed or similar technology, the Company's business, operating results and
financial condition would be materially and adversely affected.
The Company relies upon certain software that it licenses from third
parties, including software that is integrated with the Company's internally
developed software and used in Siebel Sales Enterprise to perform key functions.
There can be no assurance that these third-party software licenses will continue
to be available to the Company on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in shipment
delays or reductions until equivalent software could be developed, identified,
licensed and integrated which could materially and adversely affect the
Company's business, operating results and financial condition.
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are targeted
at the emerging market for sales and marketing information systems, and the
Company faces competition from customers' internal development efforts, custom
system integration products, as well as other application software providers
that offer a variety of products and services designed to address this market.
The Company believes that the market for global sales and marketing information
systems has historically not been well served by the application software
industry. The Company believes that most customer deployments have been the
result of large internal development projects, custom solutions from systems
integrators or the application of personal and departmental productivity tools
to the global enterprise.
Internal Development
The Company's major competition continues to come from its customers' and
potential customers' internal development efforts. Internal Information
Technology departments have staffed projects to build their own systems
utilizing a variety of tools. In some cases, such internal development projects
have been successful in satisfying the needs of an organization. However, since
software development, support and maintenance are not core competencies of these
organizations in some cases such projects are unsuccessful. The competitive
factors in this area require that the Company produce a product that conforms to
the customer's information technology standards, scales to meet the needs of
large enterprises, operates globally and costs less than the result of an
internal development effort.
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<PAGE> 53
Custom System Integration Projects
A second source of competition results from system integrators engaged to
build a custom development application. The introduction of a system integrator
typically increases the likelihood of success for the customer. However, this
approach can be expensive as compared to the purchase of third party products
and typically results in a product that has not been designed to be supported,
maintained and enhanced by a focused software development company. Maintenance
and support for the custom code can become burdensome in future years, with
enhancements and modifications being cost-prohibitive. The competitive factors
in this area require that the Company demonstrate to the customer the cost
savings and advantages of a configurable, upgradeable and commercially-supported
product developed by a dedicated professional software organization.
The Company relies on Andersen Consulting and other system consulting and
system integration firms for implementation and other customer support services,
as well as recommendations of its products during the evaluation stage of the
purchase process. Although the Company seeks to maintain close relationships
with these service providers, many of these third parties have similar, and
often more established, relationships with the Company's competitors. If the
Company is unable to develop and retain effective, long-term relationships with
Andersen Consulting or other such third parties, the Company's competitive
position would be materially and adversely effected. Further, there can be no
assurance that these third parties, many of which have significantly greater
resources than the Company, will not market software products in competition
with the Company in the future or will not otherwise reduce or discontinue their
relationships with or support of the Company and its products.
Other Competitors
A large number of personal, departmental and other products exist in the
sales automation market. Companies (Products) such as Symantec (ACT!), Brock
International (Brock Activity Manager), Early Cloud & Co. (CallFlow), IMA
(EDGE), Marketrieve Company (Marketrieve PLUS), Clarify Inc. (ClearSales),
Oracle Corporation (Oracle Sales Manager), SaleSoft (PROCEED), SalesBook Systems
(SalesBook), SalesKit Software Corporation (SalesKit), Aurum (SalesTrak), Sales
Technologies (SNAP for Windows), and Saratoga Systems (SPS for Windows) and
Vantive Corporation (Vantive Sales) are among the many firms in this market
segment. Many of these competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers
than the Company. In addition, many competitors have well-established
relationships with current and potential customers of the Company. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale or their products, than can the
Company. The Company believes it competes favorably in this marketplace based on
the following competitive advantages: breadth and depth of functionality,
configurable business objects, Internet and intranet enablement, strategic
alignments with industry leaders, support for the global enterprise, scalability
allowing support for large user communities and a modern and enduring product
architecture. In general, the Company has priced its products at or above those
of its competitors, which pricing the Company believes is justified by the scope
of functionality delivered and the performance characteristics afforded by the
Company's products.
It is also possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. The Company also expects
that competition will increase as a result of consolidation in the software
industry. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely affect
the Company's business, operating results and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially and adversely affect its business, operating results
and financial condition. See "Risk Factors -- Competition."
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<PAGE> 54
EMPLOYEES
As of April 30, 1996, the Company had a total of 103 employees, of which 98
were based in the United States, 4 in the United Kingdom and 1 in Japan. Of the
total, 41 were engaged in sales and marketing, 27 were in product development,
21 were in customer support and 14 were in finance, administration and
operations. The Company's future performance depends in significant part upon
the continued service of its key technical, sales and senior management
personnel, particularly Thomas M. Siebel, the Company's Chairman and Chief
Executive Officer, none of whom is bound by an employment agreement. The loss of
the services of one or more of the Company's key employees could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company's future success also depends on its continuing ability
to attract, train and retain highly qualified technical, sales and managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company can retain its key technical, sales and managerial
personnel in the future. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be good. See "Risk Factors -- Management of
Growth; Dependence upon Key Personnel."
FACILITIES
The Company's principal administrative, sales, marketing, support and
research and development facilities are located in two sites of approximately
7,200 square feet and 12,000 square feet of space in Menlo Park, California. The
leases on these office spaces expire in July 1997 and December 1996,
respectively. In June 1996, the Company entered into a lease for approximately
66,000 square feet of space in San Mateo, California which expires in June 2006.
The Company intends to move all of its Menlo Park operations to such facility
prior to the end of 1996. The Company currently leases other domestic sales and
support offices in Georgia, Illinois, New York, Texas, and Virginia. The Company
also maintains international offices in the United Kingdom and Japan.
LEGAL PROCEEDINGS
The Company employed Debra Christoffers as a sales person for approximately
ten months, ending in December 1995. On April 30, 1996, the Company received a
letter from counsel for Ms. Christoffers asserting various claims against the
Company relating to the termination of her employment and offering to settle
such claims for a specified sum. The Company responded with a letter stating
that such claims were baseless and without merit. On June 10, 1996, Ms.
Christoffers filed a complaint for wrongful termination against the Company and
Thomas Siebel, in the Superior Court of California, County of San Mateo. The
complaint alleges tortious and contractual causes of action and seeks
compensatory damages in excess of $1 million, punitive damages of an unspecified
amount, unpaid wages and penalties in the amount of approximately $9,000, unpaid
commissions in an amount exceeding $500,000, costs of suit and reasonable
attorney's fees. The Company and Mr. Siebel strongly believe that the
allegations in the complaint are baseless and without merit and intend to
vigorously defend the action and pursue all applicable counterclaims. There can
be no assurance, however, as to the outcome of such litigation or that such
outcome will not have an adverse effect on the Company's operations or financial
condition.
The Company employed Terence Lenaghan as Chief Financial Officer of the
Company for approximately five weeks, ending in March 1996. On June 5, 1996, the
Company received a letter from counsel representing Mr. Lenaghan raising claims
against the Company and Mr. Siebel relating to the termination of Mr. Lenaghan's
employment and offering to settle such claims upon the receipt of $300,000 and
140,000 shares of the Company's Common Stock. The Company and Mr. Siebel
strongly believe that the claims raised by Mr. Lenaghan are baseless and without
merit. The Company and Mr. Siebel intend to vigorously defend any action that
Mr. Lenaghan may bring and to pursue all applicable claims against Mr. Lenaghan.
There can be no assurance, however, that legal action will not be commenced or
that the outcome of any such action will not have an adverse effect on the
Company's operations or financial condition.
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<PAGE> 55
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
April 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Thomas M. Siebel.................. 43 Chairman, Chief Executive Officer and President
Patricia A. House................. 42 Executive Vice President and Chief Operating Officer
Justin R. Dooley.................. 32 Vice President Finance and Administration
Ronald M. McElhaney, Ph.D. ....... 53 Vice President and Chief Technical Officer
Kevin A. Johnson.................. 40 Vice President Legal Affairs
Craig D. Ramsey................... 49 Senior Vice President Worldwide Operations
William B. Edwards................ 41 Vice President Engineering
Bruce A. Cleveland................ 37 Vice President Marketing
Pehong Chen, Ph.D. ............... 38 Director
James C. Gaither(1)............... 58 Director
Eric E. Schmidt, Ph.D. ........... 41 Director
Charles R. Schwab(1).............. 58 Director
George T. Shaheen(2).............. 51 Director
A. Michael Spence, Ph.D.(2)....... 52 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
THOMAS M. SIEBEL has served as Chairman, Chief Executive Officer, and
President of the Company since its inception in July 1993. From July 1991 until
December 1992, he served as Chief Executive Officer of Gain Technology, a
multimedia software company which merged with Sybase in December 1992. Mr.
Siebel served as President and Chief Operating Officer of Gain Technology from
May 1991 to July 1991. From January 1984 until September 1990, Mr. Siebel worked
at Oracle Corporation where he held a number of executive management positions
including Vice President Product Line Marketing, Group Vice President Industry
Marketing, Group Vice President and General Manager Direct Marketing Division,
and most recently Group Vice President Oracle USA. Mr. Siebel is a graduate of
the University of Illinois at Urbana-Champaign from which he holds a B.A. in
History, an M.B.A. and an M.S. in Computer Science.
PATRICIA A. HOUSE has been with the Company since its inception in July
1993. From February 1996 to the present, she has served as the Company's
Executive Vice President and Chief Operating Officer, and from July 1993 to
February 1996, she served as Senior Vice President of Marketing. From September
1989 to June 1993, Ms. House served in various senior management positions
including Executive Vice President of Frame Technology Corporation, a document
authoring software company. Ms. House received a B.A. in Education from Western
Michigan University.
JUSTIN R. DOOLEY has served as the Company's Vice President Finance and
Administration since March 1996. From October 1995 to March 1996, Mr. Dooley
served as Vice President Quality Programs at Siebel Systems. From May 1993 to
September 1995, Mr. Dooley served as Vice President and General Manager of the
Hayward Division of Davis Wire Corporation. From October 1989 to August 1991, he
served as Operating Department Manager, Tin Coating and Manager of the Acid
Regeneration Unit for USS/POSCO, a joint venture between US Steel and Pohang
Iron and Steel. Mr. Dooley received a B.S. in Chemical Engineering from the
University of Illinois of Urbana-Champaign and an M.B.A. from the Graduate
School of Business at Stanford University.
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<PAGE> 56
RONALD M. MCELHANEY, PH.D. has served as the Company's Vice President and
Chief Technical Officer since February 1996. From July 1995 to November 1995,
Dr. McElhaney served as Vice President/General Manager of the Multimedia
Business Unit for Asymetrix Corporation, a multimedia software company. From
July 1993 to September 1994, Dr. McElhaney was Vice President/General Manager
for the Advanced Products Group for Computervision Corporation, a CAD/CAM/CAE
software company. Dr. McElhaney served from February 1990 to July 1992 as Vice
President Core Technology at PRIME Computer. From September 1988 to September
1989 Dr. McElhaney served as Vice President, Engineering at Autodesk, a
multimedia and design software development company. Dr. McElhaney received a
B.S. in Physics from San Jose State University and a Ph.D. in Theoretical
Physics from the University of Hawaii.
KEVIN A. JOHNSON has served as the Company's Vice President Legal Affairs
since November 1995. From August 1993 to October 1995, Mr. Johnson served as
Assistant General Counsel to Gupta Corporation, a client/server software
company. From March 1989 to July 1993, Mr. Johnson served as Vice President,
Corporate Affairs, General Counsel and Assistant Secretary of NETG, a multimedia
training company. Mr. Johnson received a B.S. in Business Management from the
University of California at Davis and a J.D. from Santa Clara Law School.
CRAIG D. RAMSEY has served as the Company's Senior Vice President Worldwide
Operations since March 1996. From March 1994 to March 1996, Mr. Ramsey served as
Senior Vice President of Worldwide Sales, Marketing and Support for nCUBE, a
leader in distribution of digitized media. From February 1986 to March 1994, Mr.
Ramsey was employed by Oracle Corporation and held a variety of executive
positions, including Vice President of U.S. Commercial Sales and Vice President
of OEM Strategic Accounts. Mr. Ramsey received a B.A. in Economics from Denison
University.
WILLIAM B. EDWARDS has served as the Company's Vice President Engineering
since March 1994. From June 1993 to March 1994, Mr. Edwards served as Director
of Graphical Authoring Systems at Macromedia, Inc., a multimedia software
development company. From July 1989 to June 1993, Mr. Edwards served as Senior
Vice President, Engineering, Research and Development of Frame Technology, a
document authoring software company. Mr. Edwards received a B.S. in Computer
Science from Louisiana State University, and an M.S. in Computer Science from
Rutgers University.
BRUCE A. CLEVELAND has served as the Company's Vice President Marketing
since May 1996. From January 1992 to April 1996, Mr. Cleveland served as a
Senior Director in the Object Technologies Business Unit at Apple Computer, a
computer company. From April 1990 to January 1992, Mr. Cleveland served as a
Vice President of Siren Software Corporation, a systems software company. From
August 1985 through April 1989, Mr. Cleveland was Senior Director, Unix Product
Line Division at Oracle Corporation, a relational database company. Mr.
Cleveland received a B.S. in Business Administration from California State
University at Sacramento.
PEHONG CHEN, PH.D. has served as a Director of the Company since February
1994. From May 1993 to the present, Dr. Chen has served as President, Chairman
and Chief Executive Officer of BroadVision, Inc., an electronic commerce
software developer. From October 1992 to May 1993, Dr. Chen served as Vice
President of Multimedia Technology at Sybase, Inc., a software company. From
June 1989 to September 1992, he served as President of Gain Technology, a
multimedia software company. Dr. Chen received a B.S. from National Taiwan
University, an M.S. from Indiana University and a Ph.D. from the University of
California at Berkeley, all in Computer Science.
JAMES C. GAITHER has served as a Director of the Company since February
1994. From 1971 to the present, Mr. Gaither has been a Partner of the law firm
of Cooley Godward Castro Huddleson & Tatum and was the managing partner of the
firm from 1984 to 1990. Prior to beginning his law practice with the firm, he
served in a variety of positions, including law clerk to The Honorable Earl
Warren, Chief Justice of the United States; Special Assistant to the Assistant
Attorney General in the U.S. Department of Justice; and Staff Assistant to the
President of the United States, Lyndon Johnson. Mr. Gaither is the former
president of the Board of Trustees at Stanford University and is a member of the
Board of Trustees of the Carnegie Endowment for International Peace, RAND, The
William and Flora Hewlett
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<PAGE> 57
Foundation and The James Irvine Foundation. Mr. Gaither is currently a Director
of Amylin Pharmaceuticals, Inc., Basic American, Inc. and Levi Strauss &
Company. Mr. Gaither received a B.A. in Economics from Princeton University, and
a J.D. from Stanford University.
ERIC E. SCHMIDT, PH.D. has served as a Director of the Company since May
1996. From 1994 to the present, Dr. Schmidt has been the Chief Technical Officer
of Sun Microsystems, Inc., a producer of workstations, servers, and computer
software. From 1983 to 1994, Dr. Schmidt held various other positions at Sun
Microsystems, Inc., including President, Sun Technology Enterprises; Vice
President, General Systems Group; and Vice President and General Manager,
Software Products division. Dr. Schmidt is currently a Director of Geoworks, a
developer of application software for consumer computing devices. Dr. Schmidt
received a B.S. in Electrical Engineering from Princeton University, an M.S. in
Electrical Engineering and a Ph.D. in Computer Science from the University of
California at Berkeley.
CHARLES R. SCHWAB has served as a Director of the Company since October
1994. From 1987 to the present, he has been the Chairman and Chief Executive
Officer of The Charles Schwab Corporation, a discount brokerage firm founded in
1971 by Mr. Schwab. Mr. Schwab also serves as a director of The Gap, Inc.,
Transamerica Corporation and AirTouch Communications. Mr. Schwab is a member of
the Board of Trustees of Stanford University and a member of the Board of
Directors of the National Park Foundation. Mr. Schwab received a B.A. in
Economics from Stanford University, and an M.B.A. from the Graduate School of
Business at Stanford University.
GEORGE T. SHAHEEN has served as a Director of the Company since October
1995. From 1989 to the present, Mr. Shaheen has been the Managing Partner of
Andersen Consulting. Mr. Shaheen has been a partner at Andersen Consulting since
1977 and he held various other positions at Andersen Consulting from 1967 to
1977. Mr. Shaheen is on the Board of Trustees at Bradley University and is a
member of the Board of Advisors for the Northwestern University J.L. Kellogg
Graduate School of Business. Mr. Shaheen received a B.S. in Marketing and an
M.B.A. from Bradley University.
A. MICHAEL SPENCE, PH.D. has served as a Director of the Company since
October 1995. From 1990 to the present, Dr. Spence has served as Dean of the
Graduate School of Business at Stanford University. From 1984 to 1990, Dr.
Spence served as Dean of Faculty of Arts and Sciences at Harvard University. Dr.
Spence also serves as a director of BankAmerica Corporation, General Mills,
Inc., Nike, Inc., Sun Microsystems, Inc. and Verifone, Inc. Dr. Spence received
a B.A. in Philosophy from Princeton University, a B.A. and an M.A. in
Mathematics from Oxford University, and a Ph.D. in Economics from Harvard
University.
The Company currently has authorized seven directors. In May 1996, the
Board of Directors approved, subject to stockholder approval, the Company's
Certificate of Incorporation in connection with the Company's reincorporation in
Delaware. The Certificate of Incorporation provides, among other things, for a
classified Board of Directors. In accordance with the terms of such Certificate
of Incorporation the terms of office of the Board of Directors will be divided
into three classes: Class I will expire at the annual meeting of stockholders to
be held in 1997; Class II will expire at the annual meeting of stockholders to
be held in 1998; and Class III will expire at the annual meeting of stockholders
to be held in 1999. At each annual meeting of stockholders beginning with the
1997 annual meeting, the successors to directors whose terms will then expire
will be elected to serve from the time of election and qualification until the
third annual meeting following election and until their successors have been
duly elected and qualified.
COMMITTEES
The Audit Committee consists of A. Michael Spence, Ph.D. and George T.
Shaheen. The Audit Committee makes recommendations to the Board of Directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by the Company's independent auditors
and reviews and evaluates the Company's audit and control functions.
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<PAGE> 58
The Compensation Committee consists of James C. Gaither and Charles R.
Schwab. The Compensation Committee makes recommendations regarding the Company's
Equity Incentive Plan and the Purchase Plan and makes decisions concerning
salaries and incentive compensation for employees and consultants of the
Company.
DIRECTORS' COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings. In May 1996, Dr. Schmidt received an option to purchase 110,000 shares
of the Company's Common Stock at an exercise price per share of $11.50; in April
1996, Drs. Chen and Spence and Messrs. Gaither, Shaheen and Schwab each received
an option to purchase 22,000 shares of the Company's Common Stock at an exercise
price per share of $6.50; in April 1996, Mr. Siebel received an option to
purchase 1,000,000 shares of the Company's Common Stock at an exercise price per
share of $5.50; in February 1996, Mr. Shaheen received an option to purchase
88,000 shares of the Company's Common Stock at an exercise price per share of
$1.75; in October 1995, Dr. Spence received an option to purchase 88,000 shares
of the Company's Common Stock at an exercise price per share of $0.50; and, in
January 1995, Mr. Schwab received an option to purchase 90,000 shares of the
Company's Common Stock at an exercise price per share of $.05 per share. Each
such grant was made pursuant to the Equity Incentive Plan.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the three other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended December 31, 1995 were in excess of $100,000 for
services rendered in all capacities to the Company for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL AWARDS
COMPENSATION ---------------------
------------------ SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS COMPENSATION($)(1)
- ------------------------------------------ ------- ------ --------------------- ------------------
<S> <C> <C> <C> <C>
Thomas M. Siebel.......................... 180,000 50,000 -- --
Chairman and Chief Executive Officer
Patricia A. House......................... 120,000 30,000 -- --
Executive Vice President and Chief
Operating Officer
William B. Edwards........................ 100,833 20,000 -- --
Vice President Engineering
Daniel A. Turano(2)....................... 39,000 -- 180,000 71,196
Vice President Worldwide Sales
</TABLE>
- ---------------
(1) Includes commissions in the amount of $71,196 accrued in fiscal 1995 but
paid in fiscal 1996.
(2) In March 1996, Craig Ramsey joined the Company as Senior Vice President
Worldwide Operations. Since March 1996, Mr. Turano has served as Vice
President Eastern Americas.
EQUITY INCENTIVE PLANS
1996 Equity Incentive Plan. The Company's 1996 Equity Incentive Plan (the
"Equity Incentive Plan") is an amendment and restatement of the Company's 1994
Stock Option Plan and 1996 Supplemental Stock Option Plan. The Company has
reserved a total of 6,000,000 shares of Common
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<PAGE> 59
Stock for issuance under the Equity Incentive Plan. The Equity Incentive Plan
provides for grants of incentive stock options to employees (including officers
and employee directors) and nonstatutory stock options, restricted stock
purchase awards, stock bonuses and stock appreciation rights to employees
(including officers and employee directors), directors and consultants of the
Company. The Equity Incentive Plan is presently administered by the Board of
Directors, which determines recipients and types of awards to be granted and the
terms of such grants, including the exercise price, number of shares subject to
the award and the exercisability thereof.
The term of a stock option granted under the Equity Incentive Plan
generally may not exceed 10 years (5 years in the case of an incentive stock
option granted to a holder of more than 10% of the Company's capital stock). The
exercise price of options granted under the Equity Incentive Plan is determined
by the Board of Directors, but, in the case of an incentive stock option, cannot
be less than 100% of the fair market value of the Common Stock on the date of
grant or, in the case of holders of more than 10% of the Company's voting stock,
not less than 110% of the fair market value of the Common Stock on the date of
grant. Options granted under the Equity Incentive Plan to new employees and
consultants generally vest at the rate of 20% of the shares subject to option on
the first annual anniversary of the date of hire and 5% of such shares at the
end of each quarter thereafter. No option may be transferred by the optionee
other than by will or the laws of descent or distribution or, in certain limited
instances, pursuant to a qualified domestic relations order. An optionee whose
relationship with the Company or any related corporation ceases for any reason
(other than by death or permanent and total disability) generally may exercise
options in the three month period following such cessation (unless such options
terminate or expire sooner by their terms) or in such longer period as may be
determined by the Board of Directors.
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Equity Incentive Plan. Furthermore, the
Board of Directors may offer to exchange new options for existing options, with
the shares subject to the existing options again becoming available for grant
under the Equity Incentive Plan. In the event of a decline in the value of the
Company's Common Stock, the Board of Directors has the authority to offer
optionees the opportunity to replace outstanding higher priced options with new
lower price options. Upon any merger or consolidation in which the Company is
not the surviving corporation, all outstanding awards under the Equity Incentive
Plan shall either be assumed or substituted by the surviving entity. If the
surviving entity determines not to assume or substitute such awards, the time
during which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to the merger or consolidation.
Restricted stock purchase awards granted under the Equity Incentive Plan
may be granted pursuant to a repurchase option in favor of the Company in
accordance with a service vesting schedule determined by the Board. The purchase
price of such awards will be at least 85% of the fair market value of the Common
Stock on the date of grant. Stock bonuses may be awarded in consideration for
past services without a purchase payment. Stock appreciation rights authorized
for issuance under the Incentive Plan may be tandem stock appreciation rights,
concurrent stock appreciation rights or independent stock appreciation rights.
As of April 30, 1996, 706,210 shares of Common Stock have been issued upon
the exercise of options granted under the Equity Incentive Plan, options to
purchase 3,760,450 shares of Common Stock at a weighted average exercise price
of $3.35 per share were outstanding and 1,533,340 shares remained available for
future option grants. The Equity Incentive Plan will terminate in May 2006,
unless terminated sooner by the Board of Directors. See Notes 4 and 7 of Notes
to Financial Statements.
Employee Stock Purchase Plan. In May 1996, the Board adopted the Employee
Stock Purchase Plan (the "Purchase Plan") covering an aggregate of 350,000
shares of Common Stock. The Purchase Plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Internal Revenue
Code. Under the Purchase Plan, the Board of Directors may authorize
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<PAGE> 60
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering may be no more than 27 months.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, for at
least 20 hours per week and are employed by the Company or a subsidiary of the
Company designated by the Board for at least five months per calendar year.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld will then be used to
purchase shares of the Common Stock on specified dates determined by the Board
of Directors. The price of Common Stock purchased under the Purchase Plan will
be equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or the specified purchase date.
Employees may end their participation in the offering at any time during the
offering period. Participation ends automatically on termination of employment
with the Company.
In the event of a merger, reorganization, consolidation or liquidation to
involving the Company in which the Company is not a surviving corporation, the
Board of Directors has discretion to provide that each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, or the Board may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The Purchase Plan will terminate at
the Board's direction. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock. See Note 7 of Notes to
Financial Statements.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
PERCENTAGE STOCK PRICE
NUMBER OF OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM
UNDERLYING GRANTED IN EXERCISE MARKET ($)(5)
OPTIONS FISCAL PRICE PRICE EXPIRATION ---------------------------------
NAME(1) GRANTED(2) 1995(3) ($/SH) ($/SH)(4) DATE 0% 5% 10%
- ------------------------------- ----------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Siebel..... -- -- -- -- -- -- --
Patricia A. House.... -- -- -- -- -- -- --
William B. Edwards... -- -- -- -- -- -- --
Daniel A. Turano..... 180,000 13.5% 0.50 14.00 10/02/2005 2,430,000 4,015,000 6,446,000
</TABLE>
- ---------------
(1) Since the end of fiscal 1995, the Company has granted options to Ms. House
and Messrs. Siebel and Edwards. The grants were for the following number
shares and at the following exercise prices: Ms. House received options to
purchase an aggregate of 100,000 shares at an exercise price of $2.90 per
share in March 1996 and 100,000 shares at an exercise price of $5.50 in
April 1996, Mr. Siebel received an option to purchase 1,000,000 shares at an
exercise price of $5.50 per share in April 1996 and Mr. Edwards received an
option to purchase 50,000 shares at an exercise price of $5.50 per share in
April 1996.
(2) Options generally become exercisable at a rate of 20% on the first
anniversary of the vesting commencement date and 5% each quarter thereafter
and have a term of 10 years. Options may be exercised prior to vesting,
subject to the Company's right to repurchase in the event service is
terminated.
(3) Based on an aggregate of 1,331,885 shares subject to options granted to
employees of the Company in the fiscal year ended December 31, 1995,
including the Named Executive Officers.
(4) Based on an assumed initial public offering price of $14.00 per share.
(5) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Stock price appreciation of 0%, 5% and 10%
is assumed pursuant to rules promulgated by the Securities and Exchange
Commission and
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<PAGE> 61
does not represent the Company's prediction of its stock price performance.
The potential realizable value is calculated by assuming that the assumed
initial public offering price of $14.00 per share appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day of its term at the
appreciated price.
AGGREGATED OPTIONS EXERCISED IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(2)
ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Turano......... -- -- 180,000 0 2,430,000 0
</TABLE>
- ---------------
(1) Options are immediately exercisable; however, the shares purchasable under
such options are subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior
to the vesting of such shares.
(2) Based on the difference between an assumed initial public offering price of
$14.00 per share and the exercise price.
401(K) PLAN
In October 1995, the Board adopted an employee savings and retirement plan
(the "401(k) Plan") covering certain of the Company's employees who have at
least one month of service with the Company and have attained the age of 21.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of such compensation or the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of such
reduction contributed to the 401(k) Plan. The Company may make contributions to
the 401(k) Plan on behalf of eligible employees. Employees become 20% vested in
these Company contributions after one year of service, and increase their vested
percentages by an additional 20% for each year of service thereafter. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code of
1986, as amended, so that contributions by employees or by the Company to the
401(k) Plan, and income earned on the 401(k) Plan contributions, are not taxable
to employees until withdrawn from the 401(k) Plan, and so that contributions by
the Company, if any, will be deductible by the Company when made. The trustee
under the 401(k) Plan, at the direction of each participant, invests the 401(k)
Plan employee salary deferrals in selected investment options. The Company made
no contributions to the 401(k) Plan in 1995, or in the first quarter of fiscal
1996. The Company does not presently expect to make any contributions to the
401(k) Plan during fiscal 1996.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person it is
required or permitted to indemnify. Pursuant to this provision, the Company has
entered into indemnity agreements with each of its directors and executive
officers.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances
58
<PAGE> 62
equitable remedies such as an injunction or other forms of non-monetary relief
would remain available under Delaware law. Each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, for improper transactions between
the director and the Company and for improper distributions to stockholders and
loans to directors and officers. This provision also does not affect a
director's responsibilities under any other laws, such as the federal securities
laws or state or federal environmental laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
CERTAIN TRANSACTIONS
In September 1993, Siebel Systems, L.P., a California limited partnership
(the "Partnership") was formed and Siebel Systems, Inc., a California
corporation and the predecessor of the Company, became the general partner of
the Partnership. In September 1993, Mr. Siebel purchased an aggregate of 50,000
shares of Common Stock of the Company for an aggregate consideration of $50,000.
In January 1995, all limited partners of the Partnership voluntarily exchanged
their limited partnership units on a one-for-one basis for an aggregate of
8,080,683 shares of Common Stock and 2,344,500 shares of Series A Preferred
Stock (the "Series A Stock") of the Company. In connection with the exchange,
the Company issued (i) 6,250,000 shares of Common Stock and 280,000 shares of
Series A Stock to Thomas M. Siebel, an officer, director and principal
stockholder of the Company, (ii) 600,000 shares of Common Stock to Patricia A.
House, an officer of the Company, (iii) 295,000 shares of Common Stock to
William B. Edwards, an officer of the Company, (iv) 50,000 shares of Common
Stock and 740,000 shares of Series A Stock to Pehong Chen, a director and
principal stockholder of the Company, (v) 88,000 shares of Common Stock to James
C. Gaither, a director of the Company and (vi) 310,000 shares of Series A Stock
to Charles R. Schwab, a director of the Company. Mr. Siebel, Ms. House, Mr.
Edwards, Dr. Chen, Mr. Gaither, and Mr. Schwab purchased their partnership units
for an aggregate consideration of $602,500, $6,000, $14,750, $802,500, $4,400,
and $387,500, respectively.
In March and July 1995, the Company issued 1,900,000 shares of Series B
Preferred Stock (the "Series B Stock") for an aggregate consideration
$4,560,000. In connection with such financing, the Company issued 1,250,000
shares of Series B Stock to Andersen Consulting LLP, a principal stockholder of
the Company. In April 1996, the Company issued 90,000 shares of Series D
Preferred Stock (the "Series D Stock") for an aggregate consideration of
$900,000. In connection with such financing, the Company issued 50,000 shares of
Series D Stock to Andersen Consulting LLP, 20,000 shares of Series D Stock to
Charles R. Schwab and 20,000 shares of Series D Stock to Pehong Chen. The
Company and Andersen Consulting LLP have entered into a Master Alliance
Agreement, dated March 17, 1995, and a Software License and Services Agreement,
dated January 1, 1995. See "Business -- Global Strategic Alignment." George T.
Shaheen, the Managing Partner of Andersen Consulting, is a director of the
Company.
In September 1995, the Company and Thomas M. Siebel entered into an
assignment agreement pursuant to which Mr. Siebel assigned certain rights and
the Company assumed certain obligations under a publishing agreement between Mr.
Siebel, Michael S. Malone and Simon & Schuster, Inc., dated December 13, 1994,
relating to the publication of the book entitled Virtual Selling, Going Beyond
the Automated Sales Force to Achieve Total Sales Quality.
In May 1996, Craig D. Ramsey, an officer of the Company, exercised an
option to purchase 160,000 shares of Common Stock and paid the exercise price by
issuing a promissory note to the Company in the amount of $464,000. The note is
secured by the shares of Common Stock issued upon exercise. The note accrues
interest at the rate of 7% per annum and is due in May 2000.
James C. Gaither, a director of the Company, is a partner of Cooley Godward
Castro Huddleson & Tatum, which has provided legal services to the Company since
its inception.
59
<PAGE> 63
The Company and Charles Schwab & Co., Inc. have entered into a Software
License and Services Agreement pursuant to which Charles Schwab & Co., Inc. made
payments to the Company of approximately $1,836,000 in fiscal 1995 in connection
with the license of Siebel Sales Enterprise. Charles R. Schwab, a director of
the Company, is the founder, Chairman and Chief Executive Officer of The Charles
Schwab Corporation, the parent of Charles Schwab & Co, Inc. Such transaction was
negotiated on an arms-length basis between the parties, with the agreement to
purchase the Company's products entered into in December 1995, subsequent to the
acquisition by Mr. Schwab of Series A Stock in January 1995 and his appointment
to the Company's Board of Directors in October 1994.
The Company believes that the foregoing transactions were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
60
<PAGE> 64
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of April 30,
1996, and as adjusted to reflect the sale of the Common Stock being offered
hereby by (i) each person (or group of affiliated persons) who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) other
principal stockholders who are known by the Company to own beneficially more
than 2% of the Common Stock, (iii) each of the Company's directors, (iv) each of
the Named Executive Officers, (v) all directors and executive officers of the
Company as a group, and (vi) the Selling Stockholders. The table assumes the
conversion of all outstanding Preferred Stock into Common Stock upon the
completion of this offering. Unless otherwise specified, the address of
stockholders owning more than 5% of the Company's Common Stock is the address of
the Company set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) NUMBER OF OFFERING(1)(2)
PRINCIPAL STOCKHOLDERS, DIRECTORS ---------------------- SHARES ----------------------
AND OFFICERS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ---------------------------------- ---------- ------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Thomas M. Siebel(3)............... 6,580,000 47.9% 50,000 6,530,000 42.0%
Andersen Consulting LLP(4)........ 1,388,000 10.0 -- 1,388,000 8.9
1661 Page Mill Road
Palo Alto, CA 94304
Pehong Chen and Adele Chi,
Trustees of the Chen Family
Trust(5)........................ 810,000 5.9 -- 810,000 5.2
Patricia A. House(6).............. 600,000 4.4 -- 600,000 3.9
Adobe Ventures L.P.(7)............ 588,488 4.3 -- 588,488 3.8
Itochu Corporation(8)............. 343,642 2.5 92,783 250,859 1.6
William B. Edwards(9)............. 295,000 2.1 10,217 284,783 1.8
Daniel A. Turano(10).............. 180,000 1.3 -- 180,000 1.1
James C. Gaither(11).............. 116,000 * -- 116,000 *
Pehong Chen, Ph.D.(12)............ 810,000 5.9 -- 810,000 5.2
Eric E. Schmidt, Ph.D. ........... 0 -- -- 0 --
A. Michael Spence, Ph.D.(13)...... 88,000 * -- 88,000 *
George T. Shaheen(14)............. 1,388,000 10.0 -- 1,388,000 8.9
Charles R. Schwab(15)............. 414,000 3.0 -- 414,000 2.7
All directors and executive
officers as a group (14
persons)(16).................... 10,956,000 75.7 60,217 10,895,783 67.0
OTHER SELLING STOCKHOLDERS
LSI Logic Corporation............. 75,000 * 10,000 65,000 *
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 13,730,770 shares of Common
Stock outstanding as of April 30, 1996 and 15,530,770 shares of Common
Stock outstanding after completion of this offering.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 294,450 shares of Common Stock from the Company.
(3) Includes 120,000 shares held by Mr. Siebel's minor children, for which Mr.
Siebel has sole voting power.
(4) Mr. Shaheen, a director of the Company, is the Managing Partner of Andersen
Consulting. Mr. Shaheen disclaims beneficial ownership of such shares held
by Andersen Consulting LLP except to the extent of his partnership interest
therein. Also includes 88,000 shares issuable to Mr. Shaheen upon exercise
of options subject to vesting through February 2001.
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<PAGE> 65
(5) Dr. Chen, a director of the Company, is the co-trustee of the Chen Family
Trust. Includes 50,000 shares which are subject to a right of repurchase in
favor of the Company which expires ratably through March 1998.
(6) Includes 400,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through February 1998.
(7) Adobe Ventures, L.P. is a venture fund managed by Hambrecht & Quist LLC
which is one of the Representatives. See "Underwriting."
(8) Includes 171,821 shares held by Itochu Techno-Science Corporation and
34,364 shares held by Itochu Technology, Inc., affiliates of Itochu
Corporation. 51,546 of the shares are being offered by Itochu Techno-
Science Corporation and 41,237 of the shares are being offered by Itochu
Corporation.
(9) Includes 240,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through March 1998.
(10) Includes 180,000 shares issuable upon exercise of options subject to
vesting through March 2001.
(11) Includes 28,000 shares held by GC&H Investments. Mr. Gaither, a partner of
GC&H Investments, disclaims beneficial ownership of such shares, except to
the extent of his partnership interest therein. Also includes 88,000 shares
which are subject to a right of repurchase in favor of the Company which
expires ratably through March 1998.
(12) Includes shares held by the Chen Family Trust, of which Dr. Chen is a
co-trustee. Also includes 50,000 shares which are subject to a right of
repurchase in favor of the Company which expires ratably through March
1998.
(13) Includes 88,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 2000.
(14) Includes 1,300,000 shares held by Andersen Consulting LLP. Mr. Shaheen, the
Managing Partner of Andersen Consulting, disclaims beneficial ownership of
such shares, except to the extent of his pecuniary interest therein. Also
includes 88,000 shares issuable upon exercise of options subject to vesting
through February 2001.
(15) Includes 90,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 1999. Also includes
4,000 shares held by Mr. Schwab's children.
(16) Includes 1,300,000 shares held by Andersen Consulting LLP. See footnote (4)
above. Also includes 733,000 shares issuable upon exercise of options held
by all officers and directors subject to vesting on various dates through
March 2002. See footnotes (3), (6) and (9) through (15) above.
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<PAGE> 66
DESCRIPTION OF CAPITAL STOCK
Following the closing of this offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock, will consist of 40,000,000 shares of Common Stock,
$.001 par value and 2,000,000 shares of Preferred Stock, $.001 par value. As of
April 30, 1996 there were approximately 100 holders of record of the Company's
Common and Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock (including 31,430 shares of Series B Preferred Stock issued in April 1996)
will be converted into 5,104,085 shares of Common Stock. See Note 4 of Notes to
Financial Statements for a description of the currently outstanding Preferred
Stock. Following the closing of this offering, the Company's Certificate of
Incorporation will be restated to delete all references to the prior series of
Preferred Stock, and the Board of Directors will have the authority, without
further action by the stockholders, to issue up to 2,000,000 shares of Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such series,
without any further vote or action by stockholders. The issuance of Preferred
Stock could adversely affect the voting power of holders of Common Stock and the
likelihood that such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plan to issue any
shares of Preferred Stock.
REGISTRATION RIGHTS
After this offering, the holders of 11,047,090 shares of Common Stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act, pursuant to the Restated Investor Rights Agreement
among such holders and the Company, dated December 1, 1995, as amended through
June 14, 1996 (the "Investor Rights Agreement"). Under the terms of the Investor
Rights Agreement, if the Company proposes to register any of its securities
under the Securities Act, either for its own account or for the account of other
security holders exercising registration rights, such holders are entitled to
notice of such registration and are entitled, subject to certain limitations, to
include shares therein. The holders may also require the Company to file a
registration statement under the Securities Act with respect to their shares,
and the Company is required to use its best efforts to effect two such
registrations. Furthermore, the holders may require the Company to register
their shares on Form S-3 when such form becomes available to the Company.
Generally, the Company is required to bear all registration and selling expenses
incurred in connection with any such
63
<PAGE> 67
registrations. These rights are subject to certain conditions and limitations,
among them the right of the underwriters of an offering to limit the number of
shares included in such registration. Such registration rights terminate five
years from the date of this offering.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
The Company's Certificate of Incorporation also requires that, effective
upon the closing of this offering, (a) any action required or permitted to be
taken by stockholders of the Company must be effected at a duly called annual or
special meeting of the stockholders and may not be effected by a consent in
writing and (b) the stockholders may amend the Company's Bylaws or adopt new
Bylaws, only by the affirmative vote of 2/3 of the outstanding voting
securities. In addition, special meetings of the stockholders of the Company may
be called only by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer. These provisions may have the effect of delaying, deferring
or preventing a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services L.L.C. has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its telephone number is
(415) 954-9512.
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<PAGE> 68
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of 15,530,770 shares of Common Stock, assuming no exercise of
outstanding options and based upon the number of shares outstanding as of April
30, 1996. Of these shares, the 1,963,000 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless such shares are purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), except that
the shares to be sold to The Dow Chemical Company will be subject to an
agreement not to sell any of such shares for a period of 180 days from the date
of this Prospectus without the consent of Hambrecht & Quist LLC. The remaining
13,567,770 shares of Common Stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act (the
"Restricted Shares"). Restricted Shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below
and the provisions of Rules 144 and 701, additional shares will be available for
sale in the public market as follows: (i) no Restricted Shares will be eligible
for immediate sale on the date of this Prospectus; (ii) 311,760 Restricted
Shares (plus 212,875 shares of Common Stock issuable to employees and
consultants pursuant to stock options that are then vested) will be eligible for
sale upon expiration of the lock-up agreements 180 days after the date of this
Prospectus (plus the shares to be purchased by The Dow Chemical Company in this
offering); and (iii) the remainder of the Restricted Shares will be eligible for
sale from time to time thereafter upon expiration of their respective two-year
holding periods beginning January 3, 1997, subject to restrictions on such sales
by Affiliates and certain vesting provisions on certain units. See "Certain
Transactions."
Upon completion of this offering, the holders of 11,047,090 shares of
Common Stock, or their transferees, will be entitled to certain rights with
respect to the registration of such shares under the Securities Act.
Registration of such shares under the Securities Act would result in such shares
becoming freely tradeable without restriction under the Securities Act (except
for shares purchased by Affiliates) immediately upon the effectiveness of such
registration. See "Description of Capital Stock -- Registration Rights."
The Company and its officers, directors and certain stockholders holding an
aggregate of approximately 13,364,663 shares of Common Stock after this offering
have agreed that they will not, without the prior written consent of Hambrecht &
Quist LLC, directly or indirectly, offer, sell, contract to sell, transfer the
economic risk of ownership in, make any short sale, pledge or otherwise dispose
of any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any other right to purchase or acquire shares of Common
Stock owned by them during the 180-day period commencing on the date of this
Prospectus. The Dow Chemical Company has entered into a similar agreement with
respect to the shares it is purchasing in this offering.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Company's Common Stock or (ii) the average weekly
trading volume of the Company's Common Stock in the Nasdaq National Market
during the four calendar weeks immediately preceding
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<PAGE> 69
the date on which notice of the sale is filed with the Securities and Exchange
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about the Company. A person (or person whose shares are aggregated)
who is not deemed to have been an Affiliate of the Company at any time during
the 90 days immediately preceding the sale and who has beneficially owned
Restricted Shares for at least three years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
The Securities and Exchange Commission has proposed revisions to Rule 144,
the effect of which would be to shorten the holding periods under Rule 144 from
two years to one year and to shorten the holding period under Rule 144(k) from
three years to two years. If enacted, these proposed revisions would increase
substantially the number of shares that would be available for sale in the
public market 180 days after the date of this Prospectus.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Company's
Equity Incentive Plan and Purchase Plan. Based on the number of options
outstanding and options and shares reserved for issuance at April 30, 1996, such
registration statement would cover approximately 5,643,790 shares. Such
registration statement is expected to be filed and to become effective as soon
as practicable after the date hereof. Shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to Affiliates,
be available for sale in the open market, unless such shares are subject to
vesting restrictions with the Company or the lock-up agreements described above.
See "Management."
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<PAGE> 70
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
Montgomery Securities, and Robertson, Stephens & Company LLC, have severally
agreed to purchase from the Company and the Selling Stockholders the following
respective number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------------ ---------
<S> <C>
Hambrecht & Quist LLC...................................................
Montgomery Securities...................................................
Robertson, Stephens & Company LLC.......................................
--------
Total......................................................... 1,963,000
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 294,450 additional shares of Common Stock at the initial public offering
price, less the underwriting discount, set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise this option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares of Common Stock
offered hereby. The Company will be obligated, pursuant to the option, to sell
shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of Common Stock offered hereby.
At the request of the Company, the number of shares of Common Stock
purchasable at the per share price to the public set forth on the cover of this
Prospectus for an aggregate purchase price of $2,000,000 has been reserved for
sale to The Dow Chemical Company. The sale of such shares shall reduce the
number of shares offered hereby. The Dow Chemical Company is a customer of the
Company. See "Business -- Customers and Markets."
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
67
<PAGE> 71
The Selling Stockholders, and certain other stockholders of the Company,
including the officers and directors, who will own in the aggregate
approximately 13,278,000 shares of Common Stock after this offering, have agreed
that they will not, without the prior written consent of Hambrecht & Quist LLC
("H&Q"), offer, sell, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them during the 180-day
period following the date of this Prospectus. The Company has agreed, subject to
certain exceptions, that it will not, without the prior written consent of H&Q,
offer, sell or otherwise dispose of any share of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
In March 1995 and December 1995, Adobe Ventures L.P., a venture capital
fund managed by H&Q, Hambrecht & Quist L.P., an affiliate of H&Q, and certain
employees and directors of H&Q and of entities affiliated with H&Q purchased
from the Company an aggregate of 525,002 shares of Series B Preferred Stock and
an aggregate of 205,878 shares of Series C Preferred Stock for aggregate cash
purchase prices of approximately $1,260,000 and $1,198,000, respectively. On the
closing of this offering, the Series B and Series C Preferred Stock will be
converted into an aggregate of 730,880 shares of Common Stock, representing
approximately 4.7% of the outstanding Common Stock, assuming no exercise of the
Underwriters' over-allotment option.
The Company and Montgomery Securities have entered into a Software License
and Services Agreement dated March 29, 1996, pursuant to which Montgomery
Securities received a license to use Siebel Sales Enterprise. The terms of such
agreement were negotiated by the parties at arms-length prior to the Company's
selection of Montgomery Securities as an underwriter of this offering.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market conditions, revenues and earnings of the Company, market valuations of
other companies engaged in activities similar to those of the Company, estimates
of the business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Cooley Godward Castro
Huddleson & Tatum, Menlo Park, California ("Cooley Godward"). As of the date of
this Prospectus, certain members of Cooley Godward own through an investment
partnership an aggregate of 28,000 shares of Common Stock and James C. Gaither,
a director of the Company and a partner of Cooley Godward, owns 88,000 shares of
Common Stock and has an option to purchase 22,000 shares of Common Stock.
Certain legal matters will be passed upon for the Underwriters by Morrison &
Foerster LLP, Palo Alto, California.
68
<PAGE> 72
EXPERTS
The financial statements of Siebel Systems, Inc. as of December 31, 1994
and 1995, for the period from September 13, 1993 (inception) to December 31,
1993, and for each of the years in the two-year period ended December 31, 1995
have been included in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and copies
of all or any part thereof may be obtained from the Commission upon the payment
of certain fees prescribed by the Commission.
69
<PAGE> 73
SIEBEL SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors................................. F-2
Balance Sheets........................................................................ F-3
Statements of Operations.............................................................. F-4
Statements of Stockholders' Equity.................................................... F-5
Statements of Cash Flows.............................................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 74
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Siebel Systems, Inc.:
We have audited the accompanying balance sheets of Siebel Systems, Inc. as
of December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for the period from September 13, 1993
(inception) to December 31, 1993, and for the years ended December 31, 1994 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Siebel Systems, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the period from September 13, 1993 (inception) to December 31, 1993, and for
the years ended December 31, 1994 and 1995, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
San Jose, California
April 26, 1996, except as
to Note 7, which is as
of May 14, 1996
F-2
<PAGE> 75
SIEBEL SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
----------------- -------------------
1994 1995 ACTUAL PRO
------ ------ ------ FORMA
--------
(NOTE 7)
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................ $1,017 11,391 9,757 11,094
Accounts receivable.................................. -- 3,066 3,112 3,112
Deferred income taxes................................ -- 314 314 314
Prepaids and other................................... 29 440 398 398
------ ------ ----- ------
Total current assets......................... 1,046 15,211 13,581 14,918
Property and equipment, net............................ 133 863 2,006 2,006
Other assets........................................... 24 17 22 22
------ ------ ----- ------
Total assets................................. $1,203 16,091 15,609 16,946
====== ====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 14 493 806 806
Accrued expenses..................................... -- 1,075 895 895
Income taxes payable................................. -- 395 92 92
Deferred revenue..................................... -- 4,166 3,474 3,474
------ ------ ----- ------
Total current liabilities.................... 14 6,129 5,267 5,267
Deferred income taxes.................................. -- 28 28 28
------ ------ ----- ------
Total liabilities............................ 14 6,157 5,295 5,295
Commitments and contingencies
Stockholders' equity:
Partners' capital.................................... 1,153 -- -- --
Convertible preferred stock; $.001 par value; 10,000
shares authorized; actual -- no shares issued and
outstanding in 1994, 4,906 and 4,908 shares issued
and outstanding in 1995 and 1996, respectively;
pro forma -- no shares issued and outstanding..... -- 5 5 --
Common stock; $.001 par value; 35,000 shares
authorized; actual -- 50, 8,249, and 8,573 shares
issued and outstanding in 1994, 1995, and 1996,
respectively; pro forma -- 13,646 shares issued
and outstanding................................... 1 8 9 14
Additional paid-in capital........................... 49 9,999 11,063 12,400
Notes receivable from stockholders................... (13) (13) (57) (57)
Deferred compensation................................ -- (381) (1,220) (1,220)
Retained earnings (accumulated deficit).............. (1) 316 514 514
------ ------ ----- ------
Total stockholders' equity................... 1,189 9,934 10,314 11,651
------ ------ ----- ------
Total liabilities and stockholders' equity... $1,203 16,091 15,609 16,946
====== ====== ===== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 76
SIEBEL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13, 1993 YEAR ENDED THREE MONTHS
(INCEPTION) DECEMBER 31, ENDED MARCH 31,
TO DECEMBER 31, ----------------- ----------------
1993 1994 1995 1995 1996
------------------ ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software................................. $ -- 50 7,636 -- 4,402
Maintenance and other.................... -- -- 402 30 307
----- ------- ------ ------- -------
Total revenues................... -- 50 8,038 30 4,709
Cost of revenues:
Software................................. -- -- 41 -- 26
Maintenance and other.................... -- -- 385 9 343
----- ------- ------ ------- -------
Total cost of revenues........... -- -- 426 9 369
----- ------- ------ ------- -------
Gross margin..................... -- 50 7,612 21 4,340
Operating expenses:
Product development...................... 64 868 2,816 616 986
Sales and marketing...................... 28 718 3,232 456 2,553
General and administrative............... 22 243 1,192 157 590
----- ------- ------ ------- -------
Total operating expenses......... 114 1,829 7,240 1,229 4,129
----- ------- ------ ------- -------
Operating income (loss).......... (114) (1,779) 372 (1,208) 211
Other income, net.......................... -- 13 156 8 119
----- ------- ------ ------- -------
Income (loss) before income
taxes.......................... (114) (1,766) 528 (1,200) 330
Income tax expense (benefit)............... -- -- 211 (480) 132
----- ------- ------ ------- -------
Net income (loss)................ $ (114) (1,766) 317 (720) 198
===== ======= ====== ======= =======
Pro forma net income (loss) per share...... $ 0.02 (0.05) 0.01
====== ======= =======
Shares used in pro forma net income (loss)
per share computation.................... 16,340 14,642 16,859
====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 77
SIEBEL SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES RETAINED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DEFERRED EARNINGS TOTAL
PARTNERS' --------------- --------------- PAID-IN FROM STOCK (ACCUMULATED STOCKHOLDERS'
CAPITAL SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT) EQUITY
-------- ------ ------ ------ ------ ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Partners'
initial
capital
contribution... $ 810 -- $ -- -- $-- -- -- -- -- 810
Issuance
of common
stock.... -- -- -- 50 1 49 -- -- -- 50
Net
loss..... (114 ) -- -- -- -- -- -- -- -- (114)
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1993..... 696 -- -- 50 1 49 -- -- -- 746
Partners'
capital
contributions... 2,222 -- -- -- -- -- (13) -- -- 2,209
Net
loss..... (1,765 ) -- -- -- -- -- -- -- (1) (1,766)
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1994..... 1,153 -- -- 50 1 49 (13) -- (1) 1,189
Conversion
of
partners'
capital... (1,153 ) 2,344 2 8,081 7 1,144 -- -- -- --
Compensation
related to
stock
options... -- -- -- -- -- 381 -- (381) -- --
Issuance
of common
stock.... -- -- -- 328 -- 83 -- -- -- 83
Repurchase
of common
stock.... -- -- -- (210 ) -- (9) -- -- -- (9)
Issuance
of Series
B
preferred
stock.... -- 1,967 2 -- -- 4,892 -- -- -- 4,894
Issuance
of Series
C
preferred
stock.... -- 595 1 -- -- 3,459 -- -- -- 3,460
Net
income... -- -- -- -- -- -- -- -- 317 317
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1995..... -- 4,906 5 8,249 8 9,999 (13) (381) 316 9,934
Issuance
of common
stock
(unaudited)... -- -- -- 324 1 170 (44) -- -- 127
Issuance
of Series
B
preferred
stock
(unaudited)... -- 2 -- -- -- 12 -- -- -- 12
Compensation
related to
stock
options
(unaudited)... -- -- -- -- -- 882 -- (882) -- --
Amortization
of deferred
stock
compensation
(unaudited)... -- -- -- -- -- -- -- 43 -- 43
Net income
(unaudited)... -- -- -- -- -- -- -- -- 198 198
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
March 31,
1996
(unaudited)... $ -- 4,908 $ 5 8,573 $9 11,063 (57) (1,220) 514 10,314
======= ===== ====== ===== == === === ===== === ======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 78
SIEBEL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13, 1993 YEAR ENDED THREE MONTHS
(INCEPTION) DECEMBER 31, ENDED MARCH 31,
TO DECEMBER 31, ----------------- ----------------
1993 1994 1995 1995 1996
------------------ ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (114) (1,766) 317 (720) 198
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Compensation related to stock options.......... -- -- -- -- 43
Depreciation and amortization.................. 6 75 142 28 125
Deferred income taxes.......................... -- -- (286) -- --
Changes in operating assets and liabilities:
Accounts receivable.......................... -- -- (3,066) (392) (46)
Prepaids and other........................... (6) (23) (411) (651) 42
Other assets................................. (9) (15) 7 (10) (5)
Accounts payable............................. 4 10 479 209 313
Accrued expenses............................. -- -- 1,075 103 (180)
Income taxes payable......................... -- -- 395 -- (303)
Deferred revenue............................. -- -- 4,166 787 (692)
----- ------- ------- ------ -------
Net cash provided by (used in) operating
activities.............................. (119) (1,719) 2,818 (646) (505)
----- ------- ------- ------ -------
Cash used in investing activities -- purchases of
property and equipment............................ (38) (176) (872) (147) (1,268)
----- ------- ------- ------ -------
Cash flows from financing activities:
Partners' capital contributions................... 810 2,209 -- -- --
Proceeds from issuance of common stock............ 50 -- 83 -- 127
Repurchases of common stock....................... -- -- (9) -- --
Proceeds from issuance of preferred stock......... -- -- 8,354 4,482 12
----- ------- ------- ------ -------
Net cash provided by financing
activities.............................. 860 2,209 8,428 4,482 139
----- ------- ------- ------ -------
Change in cash and cash equivalents................. 703 314 10,374 3,689 (1,634)
Cash and cash equivalents, beginning of period...... -- 703 1,017 1,017 11,391
----- ------- ------- ------ -------
Cash and cash equivalents, end of period............ $ 703 1,017 11,391 4,706 9,757
===== ======= ======= ====== =======
Supplemental disclosures of cash flows information:
Cash paid:
Taxes.......................................... $ -- -- 100 -- 385
===== ======= ======= ====== =======
Noncash investing and financing activities:
Conversion of partnership units into common
stock and Series A preferred stock........... $ -- -- 1,153 1,153 --
===== ======= ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 79
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(1) SUMMARY OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Siebel Systems, Inc. (the "Company") is a provider of enterprise-class
sales and marketing information software systems. The Company designs, develops,
markets, and supports Siebel Sales Enterprise, an Internet-enabled, object
oriented client/server application software product family designed to meet the
sales and marketing information system requirements of large multi-national
organizations.
The Company was incorporated in the state of California on September 13,
1993 and elected to be treated as an S corporation effective on that date. Its
principal activity prior to January 1995 was serving as the general partner of
Siebel Systems, L.P. (the Partnership), a limited partnership. Accordingly, the
financial statements for the period from September 13, 1993 (inception) to
December 31, 1993, and as of and for the year ended December 31, 1994, reflect
the combined financial position and operating results of the Company and the
Partnership. The Company terminated its S corporation election on January 1,
1995. On January 3, 1995, under provisions of the Partnership agreement, all
partners elected to dissolve the Partnership and convert their partnership units
into common stock and preferred stock of the Company.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position No.
91-1, Software Revenue Recognition. Software license revenue is recognized when
all of the following criteria have been met: there is an executed license
agreement, software has been shipped to the customer, no significant vendor
obligations remain, and collection is deemed probable. Maintenance and other
revenues consist primarily of maintenance and are recognized ratably over the
term of the maintenance contract, typically 12 to 36 months.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents are
classified as "available-for-sale," and are carried at fair value with any
unrealized gains or losses reported as a separate component of stockholders'
equity. Gross unrealized gains and losses to date have not been material.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis over their estimated useful lives, generally three to seven
years.
F-7
<PAGE> 80
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
CAPITALIZED SOFTWARE
Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility in the form of a working model has been
established. To date, the Company's software development has been completed
concurrent with the establishment of technological feasibility, and,
accordingly, no costs have been capitalized.
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled.
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per share is computed using net income (loss)
and is based on the weighted average number of shares of common stock
outstanding, convertible preferred stock, on an "as if converted" basis, using
the exchange rate in effect at the initial public offering date, and dilutive
common equivalent shares from stock options and warrants outstanding using the
treasury stock method. In accordance with certain Securities and Exchange
Commission (SEC) Staff Accounting Bulletins, such computations include all
common and common equivalent shares issued within 12 months of the offering date
as if they were outstanding for all periods presented using the treasury stock
method and the anticipated initial public offering price.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 will be effective for fiscal years beginning after
December 15, 1995, and will require that the Company either recognize in its
financial statements costs related to its employee stock-based compensation
plans, such as stock option and stock purchase plans, or make pro forma
disclosures of such costs in a footnote to the financial statements.
The Company expects to continue to use the intrinsic value-based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its financial statements for fiscal 1996, the Company will make the required pro
forma disclosures in a footnote to the financial statements. SFAS No. 123 is not
expected to have a material effect on the Company's results of operations or
financial position.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral on accounts receivable, as the majority of the
Company's customers are large, well established companies. The Company maintains
reserves for potential credit losses, but historically has not experienced any
significant losses related to individual customers or groups of customers in any
particular industry or geographic area.
F-8
<PAGE> 81
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1996, and
for the three months ended March 31, 1995 and 1996, have been prepared on
substantially the same basis as the audited financial statements, and in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information set forth therein.
(2) FINANCIAL STATEMENT DETAILS
PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
----- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment.................................... $183 666 1,353
Furniture and fixtures................................ 31 46 113
Computer software..................................... -- 374 888
---- --- -----
214 1,086 2,354
Less accumulated depreciation......................... 81 223 348
---- --- -----
$133 863 2,006
==== === =====
</TABLE>
ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
---- ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Bonuses................................................ $-- 133 167
Commissions............................................ -- 152 238
Vacation............................................... -- 79 125
Sales tax.............................................. -- 486 118
Other.................................................. -- 225 247
--- ----- ---
$-- 1,075 895
=== ===== ===
</TABLE>
OTHER INCOME, NET
Other income, net consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C>
Interest income......................................... $15 163 124
Interest expense........................................ (2 ) (7 ) (5)
--- --- ---
$13 156 119
=== === ===
</TABLE>
F-9
<PAGE> 82
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
(3) COMMITMENTS AND CONTINGENCIES
BANK BORROWINGS
In October 1995, the Company entered into a $500,000 equipment line of
credit with a bank. Borrowings under the agreement bear interest at the bank's
prime rate plus 1% (9.75% as of December 31, 1995). In October 1995, the Company
borrowed $231,000 on the line of credit, which was subsequently repaid in
December 1995. The line of credit expired on April 15, 1996.
LEASE OBLIGATIONS
As of December 31, 1995, the Company leased facilities under noncancelable
leases expiring between 1996 and 2001. Future minimum lease payments are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------------------------------------------------------------
<S> <C>
1996................................................................ $ 383
1997................................................................ 228
1998................................................................ 157
1999................................................................ 157
2000................................................................ 157
Thereafter.......................................................... 26
------
$ 1,108
======
</TABLE>
Rent expense for the period from September 13, 1993 (inception) to December
31, 1993, and for the years ended December 31, 1994 and 1995, was $18,000,
$86,000, and $191,000, respectively.
EMPLOYEE BENEFIT PLAN
During 1995, the Company adopted a 401(k) plan that allows eligible
employees to contribute up to 20% of their compensation, limited to $9,500 in
1995. Employee contributions and earnings thereon vest immediately. Although,
the Company may make discretionary contributions to the 401(k) plan, none have
been made to date.
LEGAL ACTIONS
The Company is engaged in certain legal actions arising in the ordinary
course of business. The Company believes it has adequate legal defenses and
believes that the ultimate outcome of these actions will not have a material
effect on the Company's financial position or results of operations.
(4) STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The rights, preferences, and privileges of the Series A, B, and C
convertible preferred stock are as follows:
- Each share of Series A, B, and C preferred stock may be converted into
common stock at the option of the holder on a one-for-one basis.
Automatic conversion will occur upon an affirmative vote of a majority of
the holders of preferred stock or upon the closing of an initial public
offering of common stock in which the per share price is at least $7.00,
and gross proceeds to the Company are at least $7,500,000. The conversion
rate is subject to certain antidilution provisions.
F-10
<PAGE> 83
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
- Holders of preferred stock are entitled to noncumulative annual
dividends, when and if declared by the Board of Directors, of $.08, $.19,
and $.47 per share for Series A, B, and C, respectively.
- Holders of Series A, B, and C preferred stock have the right to one vote
for each share of common stock into which such shares could be converted.
- Holders of Series A, B, and C preferred stock have a liquidation
preference of $1.00, $2.40, and $5.82 per share, respectively, plus all
declared but unpaid dividends.
In January 1995, the Company issued 2,344,000 shares of Series A preferred
stock in exchange for the Partnership's Class C and D partnership units, on a
one-for-one basis.
Convertible preferred stock issued and outstanding as of December 31, 1995,
is as follows (in thousands):
<TABLE>
<CAPTION>
ISSUED AND CARRYING LIQUIDATION
SERIES AUTHORIZED OUTSTANDING AMOUNT PREFERENCE
------------------------------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
A.............................. 2,400 2,344 $1,139 $ 2,344
B.............................. 2,500 1,967 4,894 4,721
C.............................. 601 595 3,460 3,463
----- ----- ------ -------
5,501 4,906 $9,493 $10,528
===== ===== ====== =======
</TABLE>
In December 1995, the Company issued to a customer a warrant to purchase
75,000 shares of Series C preferred stock at $5.82 per share. The warrant had
nominal value on the date of issuance. The warrant expires upon the earlier of
December 15, 1996, or the closing of an initial public offering of the Company's
common stock (see Note 7).
COMMON STOCK
In January 1995, the Company issued 8,081,000 shares of common stock in
exchange for the Partnership's Class A and B partnership units, on a one-for-one
basis.
During 1995, the Company repurchased approximately 210,000 shares of common
stock from employees who had terminated employment with the Company. These
repurchases were at each employee's original purchase price.
1994 STOCK OPTION PLAN
In December 1994, the Board of Directors approved the 1994 Stock Option
Plan (the Plan) which provides for the issuance of up to 3,000,000 shares of
common stock to employees, directors, and consultants. The Plan provides for the
issuance of incentive and nonstatutory stock options.
Under the Plan, the exercise price for incentive options is at least 100%
of the fair market value on the date of the grant. The exercise price for
nonstatutory stock options is at least 85% of the fair market value on the date
of grant. The exercise price for incentive stock options is at least 110% of the
fair market value on the date of the grant for persons with greater than 10% of
the voting power of all classes of stock.
Under the Plan, options generally expire in 10 years; however, incentive
stock options may expire in 5 years if the optionee owns stock representing more
than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Board of Directors and generally provide for shares to vest
ratably over 5 years.
F-11
<PAGE> 84
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
Plan activity is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS
AVAILABLE NUMBER EXERCISE PRICE
FOR GRANT OF SHARES PER SHARE
---------- --------- --------------
<S> <C> <C> <C>
Authorized........................................ 3,000,000 -- $ --
Options granted................................... (92,000) 92,000 .05 -- .10
---------- ----------
Balances, December 31, 1994......................... 2,908,000 92,000 .05 -- .10
Options granted................................... (1,440,785) 1,440,785 .10 -- .50
Options exercised................................. -- (328,285) .10 -- .50
Options canceled.................................. 245,500 (245,500) .10 -- .50
---------- ----------
Balances, December 31, 1995......................... 1,712,715 959,000 .05 -- .50
Additional shares authorized (unaudited).......... 3,000,000 -- --
Options granted (unaudited)....................... (1,784,750) 1,784,750 1.75 -- 2.90
Options exercised (unaudited)..................... -- (324,000) .05 -- 2.90
Options canceled (unaudited)...................... 52,000 (52,000) .10 -- 1.75
---------- ----------
Balances, March 31, 1996 (unaudited)................ 2,979,965 2,367,750 .10 -- 2.90
========== ==========
</TABLE>
As of December 31, 1995, 41,900 options were vested.
The Plan also allows for the exercise of otherwise unvested options, which
are subject to repurchase by the Company, at a rate equivalent to the current
vesting schedule of each option. As of December 31, 1995, 252,500 unvested
options had been exercised which were subject to repurchase.
During the period from October 1995 through April 1996, the Company granted
options to purchase an aggregate of 4,076,250 shares of common stock at exercise
prices ranging from $0.50 to $6.50 per share. Based in part on an independent
appraisal obtained by the Company's Board of Directors, and other factors, the
Company recorded $381,000 of deferred compensation expense in 1995 and an
additional $882,000 deferred compensation expense (unaudited) for the three
months ended March 31, 1996 relating to these options. These amounts are being
amortized over the vesting period of the individual options, generally five
years.
(5) INCOME TAXES
As discussed in Note 1, the Company was an S corporation and the general
partner in the Partnership prior to January 3, 1995. For tax purposes, losses
incurred through December 31, 1994 were allocated to the Partners in accordance
with the Partnership loss sharing agreement. The portion of losses allocated to
the Company as general partner was passed through to its stockholder. Therefore,
the Company is not entitled to any net operating loss carryforwards from periods
prior to January 1995. The S corporation election was terminated on January 1,
1995. Accordingly, income tax expense has been provided only for operations
during the year ended December 31, 1995.
F-12
<PAGE> 85
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
The components of income tax expense for the year ended December 31, 1995
are as follows (in thousands):
<TABLE>
<S> <C>
Current:
Federal........................................................... $ 289
State............................................................. 108
Foreign........................................................... 100
-----
Total current............................................. 497
Deferred:
Federal........................................................... (228)
State............................................................. (58)
-----
Total deferred............................................ (286)
-----
Total income taxes........................................ $ 211
=====
</TABLE>
The difference between the "expected" income tax expense computed at the
federal statutory rate of 34% and the Company's actual income tax expense for
the year ended December 31, 1995, is as follows (in thousands):
<TABLE>
<S> <C>
Expected income tax expense......................................... $ 180
State income taxes, net of federal tax benefit...................... 33
Other, net.......................................................... (2)
----
Total income taxes........................................ $ 211
====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1995, are as
follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Deferred state taxes.............................................. $ 17
Accruals and reserves, not currently taken for tax purposes....... 297
----
Net deferred assets............................................ 314
Deferred tax liability:
Depreciation...................................................... (28)
----
Net deferred liability......................................... (28)
----
Net deferred assets............................................ $ 286
====
</TABLE>
(6) RELATED PARTIES, SIGNIFICANT CUSTOMERS, AND GEOGRAPHIC INFORMATION
In 1995, the Company had revenues of $1.0 million and $1.8 million (12% and
23% of total revenues, respectively) from each of two related parties, both of
which are holders of preferred stock. Accounts receivable from these parties at
December 31, 1995 were $900,000 and $200,000, respectively. The Company also had
revenues in 1995 of $1.6 million and $823,000, or approximately 20% and 10% of
total revenues, respectively, from each of two customers.
The Company has a royalty arrangement with a party affiliated with a holder
of preferred stock relating to the licensing of certain products. To date,
royalty obligations under this arrangement have not been material.
The Company's export sales in 1995 were comprised of the $1.0 million sale
to the related party, which is located in Japan.
F-13
<PAGE> 86
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
(7) SUBSEQUENT EVENTS AND PRO FORMA INFORMATION
REINCORPORATION
In May 1996, the Board of Directors approved the reincorporation of the
Company as a Delaware corporation. The Certificate of Incorporation provides for
35,000,000 authorized shares of common stock with a $.001 par value per share
and 10,000,000 authorized shares of preferred stock with a $.001 par value per
share. The financial statements have been retroactively restated to give effect
to the reincorporation.
SERIES B PREFERRED STOCK
In April 1996, the Company closed the sale of 31,430 shares of Series B
preferred stock for proceeds of $183,000.
SERIES D PREFERRED STOCK
On April 30, 1996, the Company closed the sale of 90,000 shares of Series D
preferred stock for proceeds of $900,000. The rights, preferences, and
privileges of the Series D preferred stock are similar to those of the Series A,
B and C preferred stock.
REGISTRATION STATEMENT
In May 1996, the Board of Directors approved a proposed filing of a
registration statement with the SEC to sell up to 2,000,000 shares of the
Company's common stock to the public, plus any over-allotment option. If the
offering is consummated under the proposed terms, the Company's outstanding
shares of A, B, C, and D convertible preferred stock will automatically convert
into shares of its common stock upon the closing of the offering. The issuance
of the Series D preferred stock, the exercise of the Series C preferred stock
warrant described in Note 4, and this conversion have been reflected in the
accompanying pro forma balance sheet as of March 31, 1996.
1996 EMPLOYEE STOCK PURCHASE PLAN
In May 1996, the Company adopted the 1996 Employee Stock Purchase Plan (the
Purchase Plan) and reserved 350,000 shares for issuance thereunder. The Purchase
Plan will become effective upon the completion of the Company's proposed initial
public offering. The Purchase Plan permits eligible employees to purchase common
stock, through payroll deductions of up to 10% of the employee's compensation,
at a price equal to 85% of the fair market value of the common stock at either
the beginning or the end of each offering period, whichever is lower.
1996 EQUITY INCENTIVE PLAN
In May 1996, the Board of Directors approved the 1996 Equity Incentive Plan
(Equity Incentive Plan) which amended and restated the Plan (see Note 4) and
reserved a total of 6,000,000 shares of common stock for issuance under the
Equity Incentive Plan. The Equity Incentive Plan provides for the issuance of
incentive and nonstatutory stock options.
F-14
<PAGE> 87
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 5
The Company............................... 15
Use of Proceeds........................... 16
Dividend Policy........................... 16
Capitalization............................ 17
Dilution.................................. 18
Selected Financial Data................... 19
Management's Discussion And Analysis
of Financial Condition And Results
of Operations........................... 20
Business.................................. 27
Management................................ 52
Certain Transactions...................... 59
Principal and Selling Stockholders........ 61
Description Of Capital Stock.............. 63
Shares Eligible For Future Sale........... 65
Underwriting.............................. 67
Legal Matters............................. 68
Experts................................... 69
Additional Information.................... 69
Index To Financial Statements............. F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER AS PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
1,963,000 SHARES
LOGO
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 88
APPENDIX -- (DESCRIPTION OF GRAPHICS)
INSIDE FRONT COVER
[Graphic: Closed-Loop Sales and Marketing. This graphic depicts a closed-loop
sales and marketing information system in which sales opportunities and
information from a marketing encyclopedia are shared and managed across multiple
distribution channels.]
Graphic Caption: A closed-loop sales and marketing information system allows
organizations to share and manage sales opportunities and information from a
marketing encyclopedia across multiple distribution channels.
GATEFOLD FOLLOWING INSIDE FRONT COVER
[Graphic: Siebel N-Tiered Architecture. This graphic depicts Siebel's N-tiered
architecture and illustrates several tiers including Siebel Applet Objects,
Siebel Universal Applet Manager, Siebel Business Object Manager, Siebel Data
Manager, Siebel Universal Data Exchange, and Siebel Data Repository.]
PAGE 27
[Graphic: Closed-Loop Sales and Marketing. This graphic depicts a closed-loop
sales and marketing information system in which sales opportunities and
information from a marketing encyclopedia are shared and managed across multiple
distribution channels.]
Graphic Caption: A closed-loop sales and marketing information system allows
organizations to share and manage sales opportunities and information from a
marketing encyclopedia across multiple distribution channels.
PAGE 34
[Graphic: SIEBEL ANYWHERE: This graphic depicts Siebel connected clients, Siebel
mobile clients, and the two-way database synchronization between mobile Siebel
users and the central database repository.]
Graphic Caption: Organizations can unite their connected Siebel users and their
mobile Siebel users in a common sales information system. Siebel provides
two-way data synchronization between mobile users and the central database
repository, using LAN, WAN, dial-up, as well as intranet and Internet
connections.
PAGE 36
[Graphic: Siebel Global Processing Architecture. This graphic depicts a typical
configuration of a multi-channel sales organization with stationary Siebel users
who are permanently connected to the central database server and mobile Siebel
users who are intermittently connected to the central database server.]
Graphic Caption: The Siebel global processing architecture supports a
multi-tiered sales organization with stationary Siebel users who are
permanently connected to the central database server and mobile Siebel users
who are intermittently connected to the central database server.
<PAGE> 89
PAGE 37
[Graphic: Siebel Global Distributed Architecture. This graphic depicts
the Siebel application running in an environment in which multiple database
servers provide support for different connected and mobile subsets of the sales
organization.]
Graphic Caption: The Siebel de-centralized data distribution architecture is
designed to support multiple, de-centralized data servers which can be
geographically located in the sales region they support.
PAGE 39
[Graphic: Siebel N-Tiered Architecture. This graphic depicts Siebel's N-tiered
architecture, separating the information presentation, application logic,
database access, and interprocess communications layers into separate tiers.]
Graphic Caption: The Siebel N-tiered architecture separates the information
presentation, application logic, database access, and interprocess
communications layers into separate tiers in order to partition and distribute
the application components to run where necessary.
PAGE 39
[Graphic: Siebel Virtual Computing. This graphic depicts how Siebel's N-tiered
architecture can support the Personal Computer, Client/Server, and the Virtual
Computer.]
Graphic Caption: The Siebel N-tiered architecture is designed to allow
organizations to flexibly deploy their Siebel applications in multiple
configurations including Siebel Personal Computing, Siebel Client/Server
Computing, and in the future, Siebel Virtual Computing.
INSIDE BACK COVER
[Graphic: Siebel Sales Enterprise. The Siebel Sales Enterprise provides a list
of all sales opportunities and allows users to graphically visualize a Pipeline
Analysis and a Pipeline Revenue Analysis.]
Graphic Caption: Opportunity and Account Management. Enables sales professionals
to track and manage an opportunity with shared information about accounts,
contracts, product interest, and historical activity
Graphic Caption: Siebel Encyclopedia. Provides a repository of the
organization's sales-related information, including Product Information,
Competitive Information, Decision Support, and On-Line Literature.
Graphic Caption: Siebel Forecasting. Allows sales professionals to estimate and
submit forecasts based on revenue or products.
Graphic Caption: Siebel EIS (Executive Information System). Allows sales and
marketing professionals and executives to dynamically visualize information in a
variety of graphical on-line formats.
Graphic Caption: Siebel Reports. Provides users with access to Query by Example
to generate ad-hoc reports on-line, or view reports in graphical format.
<PAGE> 90
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registration in connection with the
sale of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................................... $ 11,897
NASD filing fee........................................................... 3,950
Nasdaq application fee.................................................... 50,000
Blue sky qualification fee and expenses................................... 20,000
Printing and engraving expenses........................................... 100,000
Directors and officers insurance.......................................... 150,000
Legal fees and expenses................................................... 350,000
Accounting fees and expenses.............................................. 225,000
Transfer agent and registrar fees......................................... 30,000
Miscellaneous............................................................. 9,153
--------
Total................................................................ $950,000
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its affiliated enterprises, provided such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.
II-1
<PAGE> 91
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 13, 1993, the Registrant has sold and issued the following
unregistered securities:
(1) In September 1993, the Registrant sold 50,000 shares of Common Stock to
its founder, Thomas M. Siebel, for cash in the aggregate amount of $50,000.
(2) In January 1995, the Registrant issued 8,080,683 shares of Common Stock
and 2,344,500 shares of Series A Preferred Stock in exchange for the limited
partnership units of Siebel Systems, L.P.
(3) In March and July 1995, the Registrant sold 1,900,000 shares of Series
B Preferred Stock to a group of accredited investors for cash in the aggregate
amount of $4,560,000.
(4) In November and December 1995 and February and April 1996, the
Registrant sold 100,000 shares of Series B Preferred Stock to accredited
investors for cash in the aggregate amount of $528,116.
(5) In December 1995, the Registrant sold 594,585 shares of Series C
Preferred Stock to a group of accredited investors for cash in the aggregate
amount of $3,460,484.70.
(6) In April 1996, the Registrant sold 90,000 shares of Series D Preferred
Stock to a group of accredited investors for cash in the aggregate amount of
$900,000.
(7) In April 1996, the Registrant issued a warrant to purchase 75,000
shares of its Series C Preferred Stock at an exercise price of $5.82 per share
to a customer. The warrant was exercised in full in June 1996.
(8) During the period, the Registrant granted incentive stock options and
supplemental stock options to employees, directors and consultants under its
1996 Equity Incentive Plan covering an aggregate of 2,336,000 shares of the
Company's Common Stock, at an average exercise price of $4.61.
(9) During the period, the Registrant granted incentive stock options and
supplemental stock options to employees, directors and consultants under its
1996 Equity Incentive Plan covering an aggregate of 2,623,535 shares of the
Company's Common Stock, at an average exercise price of $1.64. Options to
purchase 304,375 shares of Common Stock have been canceled and none of these
options have lapsed without being exercised. The Registrant sold an aggregate of
866,210 shares of its Common Stock to employees, directors and consultants of
the Registrant for consideration in the aggregate amount of $752,291 pursuant to
the exercise of stock options granted under the Stock Option Plan.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (8) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated under the Securities Act. The purchasers in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. Similar legends were imposed in
connection with any subsequent sales of any such securities. All recipients
either received adequate information about the Registrant or had access, through
employment or other relationships, to such information.
The sales and issuance of securities in the transaction described in
paragraph (9) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder in that they were
offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701.
II-2
<PAGE> 92
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------ --------------------------------------------------------------------------------
<C> <C> <S>
(1) 1.1 Form of Underwriting Agreement.
(1) 2.1 Form of Agreement and Plan of Merger between the Registrant and Siebel Systems,
Inc., a California corporation.
(1) 3.1 Amended and Restated Articles of Incorporation of Siebel Systems, Inc., a
California corporation.
(1) 3.2 Bylaws of Siebel Systems, Inc., a California corporation.
(1) 3.3 Restated Certificate of Incorporation of the Registrant, to be effective upon
the completion of this offering.
(1) 3.4 Bylaws of the Registrant, to be effective upon the completion of this offering.
(1) 4.1 Reference is made to Exhibits 3.1 through 3.4.
(1) 4.2 Specimen Stock Certificate.
(1) 4.3 Restated Investor Rights Agreement, dated December 1, 1995, between the
Registrant and certain investors, as amended April 30, 1996.
(1) 4.4 Amendment Number 2 to the Amended and Restated Investor Rights Agreement dated
June 14, 1996.
(1) 5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
(1) 10.1 Registrant's 1996 Equity Incentive Plan, and forms of incentive and nonstatutory
stock options.
(1) 10.2 Registrant's Employee Stock Purchase Plan.
(1) 10.3 Form of Indemnity Agreement to be entered into between the Registrant and its
officers and directors.
(1) 10.4 Industrial Real Estate Lease, dated November 10, 1994, between the Registrant
and WVP Income Plus, III, as amended March 15, 1996.
(1) 10.5 Lease Agreement, dated December 8, 1995, between the Registrant and Bohannon
Trust Partnership, as amended December 13, 1995.
(2) 10.6 Master Alliance Agreement, dated March 17, 1995, between the Registrant and
Andersen Consulting LLP.
(1)(2) 10.7 Software License and Services Agreement, dated March 29, 1996, by and between
the Registrant and Montgomery Securities.
(2) 10.8 Strategic Alliance and Software License Agreement, dated December 12, 1995, by
and among the Registrant, Itochu Techno-Science Corporation and Itochu
Corporation.
(1) 10.9 Assignment Agreement, dated September 20, 1995, by and between the Registrant
and Thomas M. Siebel.
(1) 10.10 Lease Agreement, dated June 4, 1996, by and between the Registrant and Crossroad
Associates and Clocktower Associates.
(1) 11.1 Statement Regarding Computation of Pro Forma Net Income (Loss) Per Share.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
(1) 23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit
5.1.
(1) 24.1 Power of Attorney. Reference is made to the Signature page.
(1) 27.1 Financial Data Schedule.
99.1 Independent Research Data
</TABLE>
- ---------------
(1) Previously filed with the Commission.
(2) Confidential treatment requested.
II-3
<PAGE> 93
(b) Financial Statement Schedules.
All schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Amendment to the Registration Statement (No. 333-03751) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Menlo Park, State of California, on the 26th day of June, 1996.
SIEBEL SYSTEMS, INC.
By: /s/ THOMAS M. SIEBEL
------------------------------------
Thomas M. Siebel
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------------
<C> <S> <C>
/s/ THOMAS M. President, Chief Executive Officer June 26, 1996
SIEBEL and Chairman of the Board
- ------------------------------------------ (Principal Executive Officer)
Thomas M. Siebel
* Vice President Finance and June 26, 1996
- ------------------------------------------ Administration
Justin R. Dooley (Principal Financial
and Accounting Officer)
* Director June 26, 1996
- ------------------------------------------
Pehong Chen
* Director June 26, 1996
- ------------------------------------------
James C. Gaither
* Director June 26, 1996
- ------------------------------------------
George T. Shaheen
* Director June 26, 1996
- ------------------------------------------
Charles R. Schwab
* Director June 26, 1996
- ------------------------------------------
A. Michael Spence
* Director June 26, 1996
- ------------------------------------------
Eric E. Schmidt
*By: /s/ THOMAS M. June 26, 1996
SIEBEL
- ------------------------------------------
Thomas M. Siebel
Attorney-in-fact
</TABLE>
II-5
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------------ -----------------------------------------------------------------------------
<C> <S>
(1)1.1 Form of Underwriting Agreement.
(1)2.1 Form of Agreement and Plan of Merger between the Registrant and Siebel
Systems, Inc., a California corporation.
(1)3.1 Amended and Restated Articles of Incorporation of Siebel Systems, Inc., a
California corporation.
(1)3.2 Bylaws of Siebel Systems, Inc., a California corporation.
(1)3.3 Restated Certificate of Incorporation of the Registrant, to be effective upon
the completion of this offering.
(1)3.4 Bylaws of the Registrant, to be effective upon the completion of this
offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
(1)4.2 Specimen Stock Certificate.
(1)4.3 Restated Investor Rights Agreement, dated December 1, 1995, between the
Registrant and certain investors, as amended April 30, 1996.
(1)4.4 Amendment Number 2 to the Amended and Restated Investor Rights Agreement
dated June 14, 1996.
(1)5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
(1)10.1 Registrant's 1996 Equity Incentive Plan, and forms of incentive and
nonstatutory stock options.
(1)10.2 Registrant's Employee Stock Purchase Plan.
(1)10.3 Form of Indemnity Agreement to be entered into between the Registrant and its
officers and directors.
(1)10.4 Industrial Real Estate Lease, dated November 10, 1994, between the Registrant
and WVP Income Plus, III, as amended March 15, 1996.
(1)10.5 Lease Agreement, dated December 8, 1995, between the Registrant and Bohannon
Trust Partnership, as amended December 13, 1995.
(2)10.6 Master Alliance Agreement, dated March 17, 1995, between the Registrant and
Andersen Consulting LLP.
(1)(2)10.7 Software License and Services Agreement, dated March 29, 1996, by and between
the Registrant and Montgomery Securities.
(2)10.8 Strategic Alliance and Software License Agreement, dated December 12, 1995,
by and among the Registrant, Itochu Techno-Science Corporation and Itochu
Corporation.
(1)10.9 Assignment Agreement, dated September 20, 1995, by and between the Registrant
and Thomas M. Siebel.
(1)10.10 Lease Agreement, dated June 4, 1996, by and between the Registrant and
Crossroad Associates and Clocktower Associates.
(1)11.1 Statement Regarding Computation of Pro Forma Net Income (Loss) Per Share.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
(1)23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to
Exhibit 5.1.
(1)24.1 Power of Attorney. Reference is made to the Signature page.
(1)27.1 Financial Data Schedule.
99.1 Independent Research Data
</TABLE>
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(1) Previously filed with the Commission.
(2) Confidential treatment requested.
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.6
Siebel Systems and Andersen Consulting
Strategic Business Alliance
Master Alliance Agreement
<PAGE> 2
SIEBEL SYSTEMS, INC. AND ANDERSEN CONSULTING LLP
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement is entered into as of March 17, 1995 by
and between Siebel Systems, Inc., a California corporation ("Siebel") and
Andersen Consulting LLP, an Illinois partnership ("Andersen") on behalf of and
for the benefit of all entities throughout the world comprising the Andersen
Consulting worldwide organization (as defined below).
WHEREAS, Siebel is a software company with the objective of becoming
the global market leader in the Sales Force Automation market;
WHEREAS, Andersen Consulting is a leading business integration services
provider with the objective of becoming the global market leader in the Sales
Effectiveness professional services market;
WHEREAS, the parties as of March 17, 1995 entered into a Series B
Preferred Stock Purchase Agreement by which Andersen has acquired a minority
interest in Siebel with the intent of creating a unique and preferential
relationship between the parties, including a seat on the Siebel Board of
Directors; and
WHEREAS, the parties also wish to set forth the terms on which they
will work together in a partnership spirit to further their mutual benefit and
create a framework and structure for that cooperation related to Siebel's
application software products, (the "Siebel Product(s)").
NOW, THEREFORE, the parties, in consideration of the mutual promises
made herein, agree as follows:
1. ALLIANCE GOALS
The parties anticipate working together in a number of ways pursuant to
this Agreement with the objective of working together in a win/win relationship
to maximize the potential revenues and profitability of each party in its
respective areas without constraining each other's business. Each party intends
to be a leader in its respective market.
2. ALLIANCE SCOPE
(a) This alliance is broad and covers joint activities in marketing and
selling, Andersen's use of Siebel products, technology transfer, cooperative
development of products and solutions, cooperative development and marketing of
training, and Andersen's incorporation of Siebel Products in various
enterprises and business process management organizations/initiatives.
2
<PAGE> 3
CONFIDENTIAL TREATMENT REQUESTED
(b) This Agreement is intended to be worldwide in scope. All the rights and
benefits of this Agreement inure to the benefit of any entity comprising the
Andersen Consulting worldwide organization (i.e., any Andersen Consulting
entity having a Member Firm Interfirm Agreement with Andersen Worldwide or any
other entity controlling, controlled by or under common control with such an
entity or a partner of Andersen Worldwide). This Agreement is the overall
framework for this alliance. However in some cases, specific implementation of
this relationship in countries other than the US will need to be reflected in
local country addendum added to this Agreement from time to time, executed by
the Andersen Consulting entity in the country and an entity representing
Siebel; the intent is that such addendum will not modify the terms of this
Agreement except to the extent agreed by the parties as necessary to reflect
local business conditions and legal requirements. In any event, Siebel or its
representatives will not enter into any agreements with third parties in any
country outside the US with respect to implementation of the Siebel Products
without consideration of the Andersen [***]. Specifically, Siebel will not
enter into any agreement that would restrict Andersen's ability to act as an
independent integrator for Siebel Products in any market. Likewise, Andersen
will not enter into any agreements without consideration of Siebel's [ ].
(c) This Agreement is non-exclusive in nature. However, the intent is that
both parties will focus their efforts to build a significant and profitable
relationship beneficial to both parties. Each party will use commercially
reasonable efforts to raise the visibility of the other's products and services
within its organization.
(d) This Agreement and the relationship formalized under it are intended to
be implemented in a strong spirit of partnership between the parties. The
foregoing notwithstanding, nothing in this Agreement is intended to or shall be
deemed to create a partnership or joint venture of any kind or for any purpose.
The parties shall be and remain independent contractors at all times. Neither
party shall have any authority to, or shall attempt to, bind or commit the
other party for any purpose. Neither party shall make any representations or
warranties concerning the products or services of the other that are
inconsistent with those made by the other party in its then current published
materials.
(e) In general terms, Andersen and Siebel will cooperate to identify and
close business opportunities where Andersen will be the provider of Siebel
related professional services including sales force reengineering, change
management, system integration, configuration, installation, project management
and usage training, and where Siebel will be the provider of the application
software and related application software maintenance, support services and
user training. Upon closure of jointly marketed opportunities, Andersen
contracts directly with the customer for the professional services and Siebel
contracts directly for the application software license and application
software maintenance.
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<PAGE> 4
CONFIDENTIAL TREATMENT REQUESTED
(f) The objective of the Siebel and Andersen partnership is to create a
win/win environment which is characterized as helping both companies maximize
their growth and their respective global market leadership position. [***] As
such, Siebel serves as the provider of the Sales Force Automation application
software. Andersen serves as the provider of Siebel-related professional
services including sales force re-engineering, change management, system
integration, configuration, installation, and training.
(g) The goal of the Siebel and Andersen partnership is to maximize the
potential revenues and profits of both companies without constraining either
party's business. As part of this win/win approach to the partnership, Andersen
will promote the Siebel Sales Enterprise as Andersen's preferred solution for
Sales Force Automation, and Siebel will promote Andersen as Siebel's preferred
system integrator for the Siebel Sales Enterprise. The structure of this
business alliance is quite broad including joint marketing and selling
activities, an Andersen internal use agreement, joint product development and
product specification, and the cooperative development of industry specific
and application specific Siebel application templates.
(h) Whenever possible, Siebel and Andersen will team to jointly win
opportunities. However, in some cases customers will want to purchase Siebel
software without Andersen services, and in other cases, customers will want to
use Andersen's Sales Effectiveness services without using Siebel software. Both
Siebel and Andersen will endeavor to win business regardless of whether both
parties are able to team. Accordingly, neither party will constrain the others'
business opportunity; instead, through effective partnership, each party will
make the other party as successful as possible.
(i) Andersen and Siebel will conduct business with one another on a
preferred basis.
[***]
4
<PAGE> 5
Both organizations shall expect:
-- joint advertising
-- jointly developed brochures and other collateral
-- joint marketing and sales plans.
(j) Even though the intent of the parties is to work together to
accomplish stated alliance goals, it is understood there may be particular
prospects who will not wish to use the products or services of either party,
and in such cases, the parties will still work together as appropriate to
facilitate the opportunity for the one party as long as it makes good business
sense for each party (particularly taking into account whether a competitor is
involved).
3. BASIC UNDERSTANDINGS
(a) Joint Marketing and Sales -- The parties shall cooperate in joint
marketing and sales activities.
(1) Andersen will promote the Siebel Products as Andersen's preferred
solution for Sales Force Automation. Siebel will promote Andersen Consulting as
Siebel's preferred systems integrator for the Siebel Products.
(2) The parties will report performance no less than semi-annually
against the alliance goals to be defined from time to time. Additionally,
progress on the activities and objectives outlined in this partnership will be
reported no less than quarterly.
(3) In the absence of agreement to the contrary, each party shall bear
its own costs and expenses in performing joint sales and marketing activities.
(4) In those sales situations targeting specific major accounts or
defined groups of accounts the parties will execute a teaming agreement in the
form attached to this Agreement, described below in Section 7.
(5) Each party remains free to decline to pursue a specific
opportunity in its discretion and, (subject to Section 7(c) below) may work
with another product or services provider.
(6) Siebel and Andersen will establish a joint selling model to more
effectively coordinate joint selling activities. The details of the selling
model will be developed and documented on an annual basis in an annual
Siebel/Andersen Sales Plan.
(7) Joint Marketing Activities
(a) Siebel and Andersen joint marketing will focus on the
generation and closure of high-quality opportunities and a high level of
awareness for the Siebel solution and Andersen Sales Effectiveness practice.
The primary activities for achieving these goals are jointly-targeted key
account calls, executive sales automation briefings, key industry events,
advertising, press and analyst coverage, market specific demos and collateral.
Siebel and Andersen will agree to jointly staff and fund these activities on a
case-by-case basis.
(b) The following is a list of initial joint marketing activities
in which Andersen and Siebel are currently engaged or are investigating
participation. It is the clear mutual intent of each party to extend and
expand these activities.
5
<PAGE> 6
(i) Executive Briefings: Siebel and Andersen, in conjunction
with Microsoft have presented a series of nationwide executive briefings on
sales information systems. Executive briefings were held in 14 major cities in
the second quarter of 1995. Executive briefings were also held at the four 1995
DCI Field and Sales Force Automation conferences. Siebel and Andersen will use
the current executive briefing series as a basis for an on-going series of
seminars. It is anticipated that these executive briefings will be a key source
of highly-qualified prospects.
(ii) Key Industry Events: Siebel and Andersen will investigate
joint participation in key industry events such as the four 1996 DCI Field and
Sales Force Automation conferences. Joint marketing activities for these shows
include pre-show booth preparation, mailing, and advertising; show exhibit and
executive seminars; and post-show follow-up mailing and call backs.
(iii) Advertising: Siebel and Andersen will investigate joint
advertising in trade publications such as Oracle Magazine, DCI Show Guides,
Power Selling Magazine, and Sales and Marketing Management Magazine.
(iv) Press and Analyst Coverage: Siebel and Andersen will
jointly target editorial coverage in client/server software magazines and
through SFA client/server industry analysts including Gartner Group, Creative
Strategies, Dataquest, Meta Group and Sentry Market Research.
(v) Collateral: Siebel and Andersen will create joint collateral
materials including brochures and white papers. Andersen will explore
performing a study which will be the basis for a white paper on the
productivity improvements and benefits resulting from Sales Force Automation.
(vi) Delphi Study: Andersen and Siebel agree to investigate
joint sponsorship of a "Delphi Study" on the Sales Force Automation intentions
and requirements of major corporations. The parties expect that this study will
be self-funded by engagement clients.
(8) Neither party commits to the other any specific results of the
joint or separate marketing activities under this Agreement. However, each
party agrees to focus its best efforts in achieving the alliance goals.
(b) Publicity -- All press releases, publicity, marketing or sales
materials, or other materials developed by or on behalf of either party to
further the purposes of this Agreement that refer to this Agreement or the
relationship between the parties, or otherwise use the name of the other party,
shall be subject to prior review and written approval by the alliance executive
of the other party. There will be classes of materials that will be previously
approved by the parties and therefore do not require additional approval at the
time of use/issuance. Nothing in this Agreement conveys any license or right to
any trademark, service mark, trade name or other name of either party. The
foregoing notwithstanding, either party may include factual descriptions of the
relationship between the parties in oral presentations without consent. Both
parties agree to issue a news release to provide a market update on the
partnership in 1996.
(c) Andersen and Siebel Internal Marketing -- Andersen and Siebel agree to
implement activities to raise the internal visibility of each organization's
products and services. The Siebel/Andersen alliance team will develop
specific plans for internal marketing on an annual basis.
6
<PAGE> 7
CONFIDENTIAL TREATMENT REQUESTED
(d) Andersen Use of Siebel Products - In the course of working
together, Andersen will need access to Siebel products for sales and marketing,
customer projects, coordination with the Siebel sales organization and
potentially for internal Andersen uses. Siebel will license the Siebel products
to Andersen under specific software license agreements that will be
incorporated into this agreement.
(1) For the purpose of promoting Siebel Products, coordinating
sales and marketing efforts with Siebel personnel and providing configuration,
training and integration services to current licensees of the Siebel products,
Siebel will provide [***] application software licenses for use by Andersen
personnel for the term of this Agreement. See Attachment I, Andersen Sales and
Marketing and Services Siebel Software Licensing Agreement for this license.
(2) Andersen shall have the right to demonstrate the Siebel
Products both to customer prospects and internally with and without direct
Siebel participation.
(3) Andersen may choose to provide Siebel Products to its
organization for internal business management. A separate Siebel Product
license will be developed for piloting and rolling out Siebel Product. Pricing
will be in accordance with the following:
(i) Andersen will be able to pilot the Siebel Sales
Enterprise (including all product modules that are included in the general
release of the Siebel Sales Enterprise at the time of the pilot) during
calendar year 1996 at [***]. The pilot period will end no later than
December 31, 1996. At the conclusion of this pilot period, Andersen will have
the option to acquire a perpetual license (for internal Andersen use only) of
a maximum of [***] serial numbered seats of the Siebel Sales Enterprise
Version 2.x for a license fee of [***] payable to Siebel on or before
December 31, 1996.
(ii) Andersen's pilot users and systems personnel will
be trained and supported by Andersen's Sales Force Effectiveness team. During
the pilot period, Andersen may use a maximum of [***] copies of the Siebel Sales
Enterprise. Should the number of copies in use at Andersen exceed [***], the
usage will be considered to be a production use and the [***] license fee
shall be immediately payable to Siebel.
(iii) In the event Andersen exercises the option to
acquire the Siebel Sales Enterprise license, all updates, enhancements, bug
fixes and support that Siebel provides to its other Siebel Sales Enterprise
licensees under Siebel's standard Software Maintenance and Support Services
will be provided to Andersen during the term of this Agreement for an annual
fee of [***] of license fees, payable in advance. The maintenance period shall
begin at the time that Andersen begins production use of Siebel Sales
Enterprise.
(iv) [***].
(4) During the term of this Agreement, in consideration of
Andersen's joint marketing role, Siebel will provide to the Andersen Sales
Force Effectiveness team usage of the Siebel Products for internal usage
without additional charge.
7
<PAGE> 8
CONFIDENTIAL TREATMENT REQUESTED
(5) Siebel will provide Andersen access to Siebel Product training
materials for the purposes of business development, configuration center and
project team skills development, and creation of customer specific training
materials. These training materials will be made available for both internal use
and for resale and reuse at the commercial list price then in effect, currently
[***] per set. Access to Siebel Product training materials will be governed by
Attachment II (Intellectual Property Rights and Copyright Provisions) and
Attachment III (Confidentiality).
(6) Siebel also agrees to provide Andersen personnel preferred access
to Siebel product briefings, user group meetings, training sessions and
materials, and product documentation.
(e) Responsibilities -- Each party shall be and remain fully responsible
for its products and services and for all licenses and other arrangements with
users of its products and/or services, including providing warranties,
maintenance and support. Each party shall remain fully responsible for the
activities of its personnel. Each party will indemnify the other and its
officers, partners, employees and affiliates from and against any claim by any
third party arising out of the responsibilities of the indemnifying party
hereunder, provided the indemnified party shall have given prompt notice of the
claim and shall make no settlement of such claim without the express written
consent of the indemnifying party.
(f) Subcontractor Relationships -- [***]
(g) Payment Obligations -- There shall be no payments or obligations to pay
between the parties except as expressly provided in this Agreement. Neither
party shall have any right to share in any revenues derived by the other, nor
shall there be any sharing of revenue of any kind as a result of joint marketing
activities hereunder. Each party shall be fully responsible for its costs or
expenses in performing under this Agreement except as expressly provided to the
contrary in this Agreement.
(h) Intellectual Property Rights and Copyrights -- Throughout the course of
working together on this alliance, there will be many occasions where we will
share proprietary information. Both parties agree to abide by the intellectual
property and copyrights provisions described in Attachment II.
(i) Confidentiality -- Both parties agree to protect each other's
confidential information as described in Attachment III.
8
<PAGE> 9
CONFIDENTIAL TREATMENT REQUESTED
(j) Facilities -- Both parties anticipate benefits from being
co-located. Facilities plans will be developed describing the facilities
requirements and cost sharing for Andersen personnel housed in Siebel facilities
and Siebel personnel in Andersen facilities.
4. RELATIONSHIP MANAGEMENT
(a) Each party shall designate an alliance executive to be its
principal representative in connection with performance under this Agreement.
The initial executives are John Rife for Andersen and Thomas Siebel for Siebel.
Both organizations should identify an alliance director responsible for the
ongoing management of the relationship.
(b) [***]
(c) Either party shall have the right to change participants in (a) and
(b) above although in any case a party's representatives shall always have
sufficient seniority and authority for the role, and shall be reasonably
acceptable to the other party.
5. TECHNOLOGY TRANSFER ACTIVITIES
(a) The parties will work together to explore ways in which they might
increase technology transfer processes to their mutual benefit. Specific
technology transfer activities and meetings will be defined from time to time
by the alliance executives and alliance directors, who will report to the Board
periodically on activities and progress in this area.
(b) [***]
(c) [***]
(d) Andersen will from time to time provide access to Andersen
developed software products and configuration templates for Siebel's evaluation
of possible use in future releases of the Siebel Products. Any such use may
only be with the execution of a written agreement granting Siebel the rights to
use the Andersen materials.
9
<PAGE> 10
(e) Andersen and Siebel intend to create a "Siebel Software Configuration
Center", staffed by Andersen personnel, on Siebel premises. The staffing
levels, functions and activities of this center will be defined from time to
time by the parties.
(f) It is understood that Siebel remains fully responsible for its
products and assumes full liability to its users and others with respect to
such products.
(g) The activities of the parties with respect to technology transfer
are subject to the Intellectual Property Rights and Confidentiality Provisions
described below in Attachment II and Attachment III, respectively.
6. FACILITIES
It is to the mutual advantage of Siebel and Andersen to have staff co-resident
in a common facility. As such, both parties agree to a cost sharing of direct
and indirect facilities cost. For the existing space leased by Siebel at 4005
Bohannon Drive, Menlo Park, California, Andersen agrees to pay a pro rata share
for all facilities costs including rent, utilities and administration on a
monthly basis. Andersen's share of the costs shall be based upon its relative
space consumption.
Given the increased personnel requirements for both Siebel and Andersen
associated with our increased business activity, it is clear that Siebel's
existing facility is insufficient to meet the needs of both parties.
Accordingly, Siebel and Andersen will jointly forecast space requirements 24
months in advance and then search for the appropriate space. For this next space
leased by Siebel, Andersen agrees to develop a mutually acceptable plan to pay
for a share of all facilities costs based on the projected percentage of space
and related-services used by Andersen employees at the facility.
Andersen is also responsible for the acquisition and support of appropriately
configured computers for Andersen employees at the Siebel facility. Andersen
will retain ownership of these computers. Andersen will provide administrative
support for Andersen personnel assigned to the facility.
7. EXHIBITS AND ATTACHMENTS TO THIS AGREEMENT
(a) The parties expect and intend a flexible and dynamic relationship
pursuant to this Agreement, and recognize that details of the arrangements will
change from time to time.
(b) The following exhibit is incorporated into this Agreement:
Exhibit A -- Teaming Agreement Form
(c) The following attachments describe specific elements of the alliance
and are incorporated into this agreement:
Attachment I - Andersen Sales and Marketing and Services Siebel
Software License Agreement
Attachment II - Intellectual Property Rights and Copyright Provisions
Attachment III - Confidentiality Provisions
10
<PAGE> 11
8. TERM AND TERMINATION
(a) The initial term of this Agreement shall be four years. Unless either
party notifies the other at least 90 days prior to expiration of a term of its
intent not to renew, this Agreement shall renew for up to two additional three
year terms on the terms set forth in this Agreement. Modifications to this
Agreement are subject to approval by the Alliance Board and the appropriate
executives in both organizations.
(b) Either party may terminate this Agreement at any time for material
breach by the other of any term of this Agreement, provided it has given the
other party prompt notice of the breach, identifying specifically the breach,
and provided further that the breaching party has not cured the breach within
30 days of its receipt of the notice.
(c) Sections 2(d), 3(e), 3(g), 3(h) and 3(i) shall survive termination of
this Agreement for any purpose, as shall any prime-subcontracts or licenses
granted hereunder (which shall be governed by their own terms).
9. MISCELLANEOUS
(a) Governing law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflict of laws rules.
(b) Notices. Any notice or formal communication required or permitted under
this Agreement shall be in writing and delivered to the parties at the
following addresses:
Andersen Consulting:
John T. Kunzweiler
Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, California 94304
Seibel:
Thomas Seibel
Seibel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
with a copy to
Kevin Johnson
Vice President, Legal
Seibel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
11
<PAGE> 12
(c) Nonsolicitation. Neither party shall, during the term of this
Agreement and a period of one year after termination hereof, solicit to hire or
solicit to retain in any form any personnel of the other to which such party
was exposed during the performance of this Agreement, without prior mutual
approval.
(d) Nonassignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by either party without the prior
written consent of the other party, provided that Andersen may assign this
Agreement to any other entity within the Andersen Worldwide organization via
the local country addendum.
(e) Entire agreement. This Agreement, together with the Attachments,
constitutes the entire business agreement between the parties hereto and
supersedes any and all prior agreements, arrangements and/or understandings
between the parties relating to the subject matter hereof. This Agreement shall
not be deemed or construed to be modified or amended except by written
agreement of the parties. In no event shall either party to this Agreement have
any liability to the other for any incidental, consequential, indirect or
punitive loss, damage or expense, even if it has been advised of its possible
existence.
(f) No Waiver. The failure of either party at any time to require
performance by the other of any provision hereof shall in no way constitute a
waiver thereof unless waived in writing. Nor shall the waiver of any breach of
any provision hereof be held to be a waiver of any subsequent breach of such
provision or any other provision.
(g) Force Majeure. Neither party shall be liable for any delays or
failure in performance due to causes beyond its reasonable control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
SIEBEL SYSTEMS, INC. ANDERSEN CONSULTING LLP
BY BY
------------------------------ -----------------------------
TITLE TITLE
-------------------------- --------------------------
SIGNATURE/DATE SIGNATURE/DATE
----------------- -----------------
12
<PAGE> 13
SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT I
SIEBEL SOFTWARE LICENSE
<PAGE> 14
ANDERSEN CONSULTING
SALES AND MARKETING AND SERVICES
SIEBEL SALES ENTERPRISE
SOFTWARE LICENSE AND SERVICES AGREEMENT
THIS SOFTWARE LICENSE AND SERVICES AGREEMENT (the "Agreement") is
between SIEBEL SYSTEMS, INC., with its principal place of business at 4005
Bohannon Drive, Menlo Park, CA 94025 ("Siebel"), and Andersen Consulting LLP,
with its principal place of business at 69 West Washington, Chicago, IL 60602
("Customer").
The terms of this Agreement shall apply to each Program License granted
by Siebel under this Agreement. When completed by the parties, the Order Form(s)
to this Agreement shall evidence the Program Licenses granted and the services
to be provided to Customer hereunder.
1. DEFINITIONS
1.1 "PROGRAM" OR "PROGRAMS" shall mean the computer software in object
code form owned or distributed by Siebel for which customer is
granted a Program License pursuant to this Agreement; the media
upon which such software is delivered to Customer; the guides and
manuals for use of such software ("Documentation"); and Updates.
1.2 "DESIGNATED SYSTEM" OR "DESIGNATED SYSTEMS" shall mean the
computer hardware and operating system(s) designated on the Order
Form(s).
1.3 "USER SYSTEM" shall mean the computer hardware and operating
systems operated by Users in the course of their employment with
Customer, including notebook and portable computers.
1.4 "SERVER PROGRAMS" shall mean those portions of the Programs that
reside and operate on the Designated System.
1.5 "USER PROGRAMS" shall mean those portions of the Programs that
reside and operate on User Systems.
1.6 "USER" OR "USERS" shall mean an individual or individuals
authorized by Customer to use specified Programs, regardless of
whether the individual is actively using the Programs at any given
time. The maximum number of Users that may use the User Programs
or access the Server Programs consistent with the terms of Program
Licenses granted herein is specified on the Order Form(s).
1.7 "LIMITED PRODUCTION PROGRAM" shall mean a Program which is not
generally licensed for commercial use by Siebel or which is not
listed in Siebel's generally available marketing literature or
which is designated as a Limited Production Program by Siebel.
1.8 "ANCILLARY PROGRAM" shall mean third party software delivered with
or embedded in the Programs that is necessary for the operation of
the Programs.
2
<PAGE> 15
2. PROGRAM LICENSE
2.1 RIGHTS GRANTED.
A. Siebel grants to Customer a nontransferable, nonexclusive
license to use the Programs which the Customer obtains under
this Agreement ("Program License") as follows:
i) To use the User Programs and Server Programs solely in
connection with Customer's consulting activities,
including marketing, training, configuration, limited
internal pilots, and integration, which support
marketing and licensing of the Programs by Siebel to
other third parties, up to the applicable maximum
number of designated Users as set forth in the Order
Form(s);
ii) To use the Documentation provided with the Programs in
support of customer's authorized use of the Programs;
iii) To use the Programs in conjunction with other software
products.
B. Customer agrees not to cause or permit the reverse
engineering, disassembly or decompilation of the Programs.
C. Customer agrees not to use Programs in connection with
Customer's internal information management requirements other
than those activities described in 2.1.A.i above.
D. Siebel shall retain all title, copyright and other
proprietary rights in and to the Programs. Customer does not
acquire any rights, express or implied, in the Programs,
other than those specified in this Agreement. In the event
that Customer makes suggestions to Siebel regarding new
features, functionality or performance enhancements that
Siebel adopts for the Programs, such new features,
functionality or performance shall become the sole and
exclusive property of Siebel.
E. To use a Program, Customer may need to use an Ancillary
Program. The Ancillary Program may be used only in
combination with Programs for the purpose of installing or
operating Programs as described on the Order Form(s) or
Documentation, and for no other purpose. Customer shall have
no right to use Ancillary Programs in connection or
combination with any other software programs.
F. As an accommodation to Customer, Siebel may supply Customer
with preproduction releases of Programs (which may be labeled
"Alpha" or "Beta"). Customer acknowledges that these products
may not be suitable for general use.
G. Siebel hereby represents and warrants that it has the right
to provide the Programs to Customer under this agreement.
3
<PAGE> 16
2.2 TRANSFER AND ASSIGNMENT. Customer may transfer a Program within
its organization from the Designated System to another Designated
System, provided Customer maintains a log showing the distribution
of Programs.
2.3 VERIFICATION. At Siebel's written request, not more frequently
than annually, Customer shall furnish Siebel with a certificate
executed by an officer of Customer (a) verifying that the Programs
are being used pursuant to the provisions of this Agreement,
including any User and other limitations; and (b) listing the
locations, types and serial numbers of the Designated Systems on
which the Programs are run.
Siebel may, at its expense and upon thirty (30) days prior written
notice to Customer, audit Customer's use of the Programs. Any such
audit shall be conducted during regular business hours and shall
not unreasonably interfere with Customer's business activities.
Audits shall be conducted no more than once annually.
3. TERM AND TERMINATION.
3.1 TERM. Each Program License granted under this Agreement shall
remain in effect perpetually unless the Program License or this
Agreement is terminated as provided in Section 3.2 or 3.3.
3.2 TERMINATION BY CUSTOMER. Customer may terminate any Program
License at any time by providing written notice to Siebel;
provided, however, that termination hereunder shall not relieve
Customer of its obligations specified in Section 3.4.
3.3 TERMINATION BY SIEBEL. Siebel may terminate this Agreement or any
Program License at any time by providing written notice to
Customer.
3.4 EFFECT OF TERMINATION. Termination of this Agreement or any
license shall not limit either party from pursuing other remedies
available to it including injunctive relief. The parties' rights
and obligations under Sections 2.1.B, 2.1.D, and Sections 4 and 5
shall survive termination of this Agreement.
3.5 HANDLING OF PROGRAMS UPON TERMINATION. If a Program License
granted under this Agreement terminates, Customer shall: (a) cease
using the Programs, and (b) certify to Siebel with ten (10) days
after expiration or termination that Customer has to the best of
their knowledge destroyed or has returned to Siebel the Programs
and all copies. This requirement applies to copies in all forms,
partial and complete, in all types of media and computer memory,
and whether or not modified or merged into other materials.
4. DISCLAIMERS AND LIMITATION OF LIABILITY.
4.1 DISCLAIMERS. Siebel makes no warranty or representation whatsoever
regarding the Programs or Documentation including but not limited
to any express or implied warranty, including any implied
warranties of merchantability or fitness for a particular purpose.
Siebel does not warrant that the Programs will meet Customer's
requirements, that the Programs will operate in the combinations
which Customer may select for use, that the operation of the
Programs will be uninterrupted or error- free, or that all Program
errors will be corrected.
4
<PAGE> 17
4.2 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES,
INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS, REVENUE,
DATA OR USE, INCURRED BY EITHER PARTY OF ANY THIRD PARTY, WHETHER
IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
The provisions of this Agreement allocate the risks between Siebel
and Customer. Siebel's pricing reflects this allocation of risk
and the limitation of liability specified herein.
5. GENERAL TERMS
5.1 NONDISCLOSURE. By virtue of this Agreement, the parties may have
access to information that is confidential to one another
("Confidential Information"). Siebel's Confidential Information
shall include but not be limited to the Programs, source code,
algorithms, formulas, methods, know how, processes, designs, new
products, developmental work, marketing requirements, marketing
plans, customer names, prospective customer names, the terms and
pricing under this Agreement, and all information clearly
identified in writing at the time of disclosure as confidential.
A party's Confidential Information shall not include information
that: (a) is or becomes a part of the public domain through no act
or omission of the other party; (b) was in the other party's
lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by
a third party without restriction on disclosure; or (d) is
independently developed by the other party. Customer shall not
disclose the results of any performance tests of the Programs to
any third party without Siebel's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of
five years after termination of this Agreement. The parties agree,
unless required by law, not to make each other's Confidential
Information available in any form to any third party or to use
each other's Confidential Information for any purpose other than
the implementation of this Agreement. Each party agrees to take
all reasonable steps to ensure that Confidential Information is
not disclosed or distributed by its employees or agents in
violation of the terms of this Agreement.
5.2 GOVERNING LAW. This agreement and all matters arising out of or
relating to this Agreement, shall be governed by the laws of the
State of California, excluding its conflict of law provisions.
5.3 JURISDICTION. Any legal action or proceeding relating to this
Agreement shall be instituted in a state court in Santa Clara or
San Mateo County, California, or in a federal court in the
Northern District of California. Siebel and Customer agree to
submit to the jurisdiction of, and agree that venue is proper in
these courts in any such legal action or proceeding.
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<PAGE> 18
5.4 NOTICES. All notices, including notices of address change,
required to be sent hereunder shall be in writing and shall be
deemed to have been given upon the date sent by confirmed
facsimile or three (3) days following the date such notice was
mailed by first class mail, to the addresses first set forth
above.
To expedite order processing, Customer agrees that Siebel may
treat documents faxed by Customer to Siebel as original documents;
nevertheless, either party may require the other to exchange
original signed documents.
5.5 SEVERABILITY. In the event any provision of this Agreement is held
to be invalid or unenforceable, the remaining provisions of this
Agreement will remain in full force.
5.6 WAIVER. The waiver by either party of any default or breach of
this Agreement shall not constitute a waiver of any other or
subsequent default or breach. Except for actions for nonpayment or
breach of Siebel's proprietary rights in the Programs, no action,
regardless of form, arising out of this Agreement may be brought
be either party more than one year after the cause of action has
occurred.
5.7 EXPORT ADMINISTRATION. Customer agrees to comply fully with all
relevant export laws and regulations of the United States ("Export
Laws") to assure that neither the Programs nor any direct product
thereof are (i) exported, directly or indirectly, in violation of
Export Laws; or (ii) are intended to be used for any purposes
prohibited by the Export Laws, including, without limitation,
nuclear, chemical, or biological weapons proliferation.
5.8 RELATIONSHIP BETWEEN THE PARTIES. Siebel is an independent
contractor; nothing in this Agreement shall be construed to create
a partnership, joint venture or agency relationship between the
parties.
5.9 SUCCESSORS. This Agreement shall inure to the benefit of the
successors and assigns of Siebel and, subject to the restrictions
transfer or assignment herein set forth, shall be binding upon the
Customer and Customer's successors and assigns.
5.10 ENTIRE AGREEMENT. This Agreement, together with the exhibits,
appendices and attachments hereto, constitutes the complete
agreement between the parties and supersedes all prior or
contemporaneous agreements or representations, written or oral,
concerning the subject matter of this Agreement and such exhibits,
appendices and attachments. This Agreement may not be modified or
amended except in writing signed by a duly authorized
representative of each party; no other act, document, usage or
custom shall be deemed to amend or modify this Agreement.
THE EFFECTIVE DATE OF THIS AGREEMENT SHALL BE JANUARY 1, 1995.
EXECUTED BY ANDERSEN CONSULTING LLP EXECUTED BY SIEBEL SYSTEMS, INC.
Signature: Signature:
------------------------ ---------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
---------------------------- -------------------------
6
<PAGE> 19
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 1
SOFTWARE LICENSE AND SERVICES ORDER FORM
Software licenses and services shall be provided by Siebel Systems,
Inc. ("Siebel") to Andersen Consulting LLP ("Customer") pursuant to this Order
Form and the Software License and Services Agreement dated November 3, 1995
("Agreement").
DESIGNATED SYSTEM (SERVER): Hardware: N/A
Operating System: N/A
LOCATION OF DESIGNATED SYSTEM(S): N/A
NUMBER OF AUTHORIZED
DESIGNATED SYSTEMS: N/A
NUMBER OF AUTHORIZED USERS: [***]
USER PROGRAMS LICENSED:
<TABLE>
<CAPTION>
User Programs: Part Number Price per User
-------------- ----------- --------------
<S> <C> <C>
Opportunity Management System W310MSUS001-v1.0 $ [***]
Marketing Encyclopedia W31MESUS001-v1.0 $ [***]
Electronic Document Manager W31EDMUS001-v1.0 $ [***]
Correspondence and Fulfillment W31C&FFUS001-v1.0 $ [***]
Revenue Forecasting W31FORUS001-v1.0 $ [***]
Quote Generation W31QUOUS001-v1.0 $ [***]
Reportwriter with Standard Reports W31REPUS001-v1.0 $ [***]
Field Sale Connectivity W31FSCUS001-v1.0 $ [***]
Total: $ [***]
</TABLE>
The Program License fee per User referenced herein shall only apply to
a maximum of [***] users.
ORDER ACCEPTED AND ACKNOWLEDGED:
--------------------------------- ---------------------------------
ANDERSEN CONSULTING, LLP. SIEBEL SYSTEMS, INC.
DATE: DATE:
---------------------------- ----------------------------
7
<PAGE> 20
SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT II
INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS
1
<PAGE> 21
SIEBEL SYSTEMS, INC. AND ANDERSEN CONSULTING LLP
INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS AGREEMENT
THIS INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS AGREEMENT is
entered into by and between SIEBEL SYSTEMS, INC. ("Siebel") and ANDERSEN
CONSULTING LLP ("Andersen"), effective March 17, 1995.
1. DEFINITIONS.
1.1 "WORK PRODUCTS" shall mean all inventions, whether or not
patentable, know-how, original works of authorship, developments, improvements
or trade secrets (including but not limited to, computer software or related
product such as training materials, product documentation, presentations,
marketing collateral, etc.).
1.2 "PROPRIETARY RIGHTS" means all patents, trade secrets,
copyrights and other intellectual property rights.
1.3 "APPLICATION USER TRAINING" shall refer to training
materials incorporated into Siebel's General Release Product.
1.4 "APPLICATION USAGE TRAINING" shall refer to training
materials that are not incorporated into Siebel's General Release Product.
2. OWNERSHIP OF SIEBEL DEVELOPED WORK PRODUCTS. Siebel shall own
all Proprietary Rights in all Work Products developed by Siebel. Such
Siebel-owned Work Products, means all Work Products to which Siebel has
materially contributed to the specification, design, coding, documentation,
quality assurance or support, notwithstanding minor contributions by Andersen.
Andersen hereby assigns all Proprietary Rights in such Siebel-owned Work
Products to Siebel and agrees that such Siebel-owned Work Products may be used
by Andersen only with Siebel's prior written consent. Notwithstanding the
foregoing, Siebel agrees that if any such Siebel-owned Work Products contain
information which is confidential to Andersen, it shall be used by Siebel only
in accordance with the terms of the Nondisclosure Agreement. In general, all
software and related products developed by Siebel personnel are solely owned
and copyrighted by Siebel. In general, any computer software or related product
(training materials, product documentation, presentations, marketing
collateral, etc.) upon which Siebel contributes materially to the
specification, design, coding, documentation, quality assurance or support will
be classified as Siebel-owned work product. Such products may be used by
Andersen only with the permission of Siebel.
3. OWNERSHIP OF ANDERSEN DEVELOPED WORK PRODUCTS. Andersen shall
own all Proprietary Rights in any Work Products developed by Andersen. Such
Andersen-owned Work Products means all Work Products to which Andersen has
materially contributed to the specification, design, coding, documentation,
quality assurance or support, notwithstanding minor contributions by Siebel.
Siebel hereby assigns all Proprietary Rights in such Andersen-owned Work
Products to Andersen and agrees that such Andersen-owned Work Products may be
used by Siebel only with Andersen's prior written consent. Notwithstanding the
foregoing, Andersen agrees that if any such Andersen-owned Work Products
contain information which is confidential to Siebel, it shall be used by
Andersen only in accordance with the terms of the Nondisclosure Agreement. The
Andersen-owned Work Products shall include a copyright notice identifying
Andersen as the owner of the copyright therein.
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<PAGE> 22
4. OWNERSHIP OF JOINTLY DEVELOPED WORK PRODUCTS. Work Products shall be
deemed to have been jointly developed only when Siebel and Andersen agree in
writing in advance in the form of a Joint Development Agreement, and each party
materially participates in any phase of specification, design, coding,
documentation, quality assurance, or support. The purpose of a Joint
Development Agreement is to consider up front the potential economic and
strategic value of the proposed Work Products, as well as specifically
articulate "material participation" in terms of roles, responsibilities, effort
level, schedule, etc. of each party. A Joint Development Agreement also
addresses ownership rights if different from those identified in this section
of this Agreement. Ownership of jointly-developed Work Products will be
determined by type of Work Products as follows:
4.1 SOFTWARE. All software products, including new modules for
the General Release versions of Siebel software products (any Siebel product
that is or will be generally and commercially available) (the "Base Systems"),
interfaces to other products, and APIs (the "Software Work Product") will be
made available to Siebel for inclusion in the General Release of the Base System
at Siebel's discretion. Andersen hereby assigns to Siebel its Proprietary Rights
in such Software Work Products unless specified otherwise in a Joint Development
Agreement. Siebel shall be solely responsible for support of such Software Work
Product. For Software Work Products not incorporated in the Base System,
Andersen shall have an exclusive, royalty-free, fully-paid, worldwide,
perpetual, irrevocable license to use such Software Work Products and to
distribute such Software Work Products to joint Siebel/Andersen customers of the
Base System, provided that Andersen shall assume all responsibility for support
of such Software Work Products although Andersen is under no obligation to offer
such support to any customer. These distribution rights shall be exclusive of
other third party Siebel system implementors.
4.2 TRAINING MATERIALS. All Application User Training material
shall be owned by Siebel. Siebel agrees that Andersen will be given
royalty-free access to Application User Training material for inclusion in
Andersen developed Application Usage Training material. Royalty payments will
be determined on a case by case basis depending on specific commercial
arrangements for remarketing/reselling of Application Usage Training. Andersen
has the Proprietary Rights to Application Usage Training developed by Andersen.
The Siebel owned Application User Training shall include a copyright notice
identifying Siebel as the owner of the copyright therein. The Andersen owned
Application Usage Training shall include a copyright notice identifying
Andersen as the owner of the copyright therein. All Andersen Application Usage
Training will clearly identify Siebel Application User Training (or the system
documentation incorporated therein) and include appropriate copyright
identification.
4.3 CONFIGURATION TEMPLATES. Specific configurations of the
Base System which are jointly developed by Siebel and Andersen to address a
particular industry, market, or client need, shall be jointly-owned and both
parties agree to use such configuration templates only at joint Siebel/Andersen
customer engagements without obligation to account, unless otherwise documented
in the Joint Development Agreement or the Teaming Agreement. Any jointly-owned
configurations of the Base System shall include a valid copyright notice
identifying both Siebel and Andersen as joint owners of the copyright therein.
3
<PAGE> 23
4.4 OTHER WORK PRODUCTS. Other Work Products that are jointly developed
by Siebel and Andersen, including product demonstrations, presentations and
marketing collateral, will be jointly-owned and may be used without restriction
by either party without obligation to account, subject to each party's
obligations pursuant to the Nondisclosure Agreement. Any jointly-owned Other
Work Products shall include a valid copyright notice identifying both Siebel and
Andersen as joint owners of the copyright therein.
4.5 JOINTLY DEVELOPED COPYRIGHT MARK. Jointly developed documents that
contain proprietary or confidential information should be marked as such. To
facilitate the creation and security of these documents, the following verbiage
should appear on all jointly developed documents:
"This document contains confidential and/or copyrighted material
proprietary to Siebel Systems, Inc. and confidential and/or copyrighted material
proprietary to Andersen Consulting. This document, and the information and ideas
herein, may not be disclosed, copied, reproduced or distributed to anyone
outside Siebel Systems, Inc. and Andersen Consulting without prior written
consent of Siebel Systems and Andersen Consulting. Upon request, the recipient
will promptly return this document without retaining any copies and destroy all
analysis, reports or the other extracts based on the document."
5. PRE-EXISTING ANDERSEN MATERIALS. In the course of the development effort
hereunder, the parties may conclude that pre-existing Andersen proprietary
materials might be appropriate for use in connection with the Siebel Products.
In such cases, agreed by the parties in writing, Andersen will retain its
ownership in such materials and shall be free to continue to use them without
restriction, but will provide a license to Siebel to use or incorporate such
materials with the Siebel Products.
6. GENERAL
6.1 This Agreement may not be transferred or otherwise transferred by
either party, in whole or in part, without the prior written consent of the
other party. No provision of this Agreement may be waived except by a writing by
the party to be charged, nor may this Agreement be amended except by a writing
executed by both parties.
6.2 The foregoing represents the complete and exclusive statement of the
agreement between the parties with respect to the subject matter of this
Agreement and supersedes any and all prior oral or written agreements,
proposals, commitments, understandings, or communications with respect to the
subject matter of this Agreement.
4
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, each by its duly authorized representative, as of the date first
above written.
SIEBEL SYSTEMS, INC. ANDERSEN CONSULTING LLP
Address: 4005 Bohannon Drive Address:
Menlo, Park, CA 94025
By: By:
- ------------------------------- ---------------------------------
(Print Name) (Print Name)
- ------------------------------- ---------------------------------
(Title) (Title)
- ------------------------------- ---------------------------------
(Signature/Date) (Signature/Date)
5
<PAGE> 25
SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT III
CONFIDENTIALITY
DRAFT 5/6/96
<PAGE> 26
SIEBEL SYSTEMS, INC./ANDERSEN CONSULTING LLP
MUTUAL NON-DISCLOSURE AGREEMENT
This Agreement is made effective as of the 17th day of March, 1995 by and
between Siebel Systems, Inc. ("Siebel") a California corporation, and Andersen
Consulting LLP, ("Andersen") an Illinois partnership, to assure the protection
and preservation of the confidential and/or proprietary nature of information
to be disclosed or made available to each other.
In reliance upon and in consideration of the following undertakings, the
parties agree as follows:
1. Subject to the limitations set forth in Paragraph 2, all information
disclosed to the other party identified or marketed as proprietary or
confidential shall be deemed to be "Proprietary Information" provided however
that the following information or materials shall be deemed to constitute
Proprietary Information without the requirements that a party identify or mark
such information as proprietary or confidential; any trade secret, information,
process, technique, algorithm, computer program (source and object code),
documentation, training materials, design, drawing, formula or test data
relating to any research project, work in process, future development,
engineering, manufacturing, marketing, servicing, financing or personnel matter
relating to the disclosing party, its present or future products, sales,
suppliers, clients, customers, employees, investors or business, whether in
oral, written, graphic or electronic form. Proprietary Information shall also
include all information which either party has received from others and which
it is obligated to treat as confidential. If Proprietary Information is
disclosed in oral form, the disclosing party shall use reasonable efforts to
thereafter summarize it in writing and transmit it to the other party within
thirty (30) days of the oral disclosure.
2. The term "Proprietary Information" shall not be deemed to include
information which: (a) is now, or hereafter becomes, through no act or failure
to act on the part of the receiving party, generally known or available; (b) is
known by the receiving party at the time of receiving such information as
demonstrated by competent evidence; (c) is hereafter furnished to the receiving
party by a third party, as a matter of right and without restriction on
disclosure; (d) is independently developed by the receiving party without any
breach of this Agreement as demonstrated by competent evidence; or (e) is the
subject of a prior written permission to disclose provided by the disclosing
party.
3. Each party agrees to protect and treat the confidentiality of the other
party's Proprietary Information in a manner consistent with how it protects and
treats its own proprietary and confidential information. Each party may use
such Proprietary Information only to the extent required to accomplish the
purposes of the Master Alliance Agreement between the parties. Proprietary
Information shall not be used for any purpose or in any manner that would
constitute a violation of any laws or regulations, including without limitation
the export control laws of the United States. No rights or licenses to
trademarks, inventions, copyrights or patents are implied or granted under this
Agreement.
4. Proprietary Information shall not be reproduced in any form except as
reasonably required to accomplish the intent of the Master Alliance Agreement.
2
<PAGE> 27
5. Each party under this Agreement shall advise its employees who might
have access to Proprietary Information of the other party of the confidential
nature thereof and agrees that its employees shall be bound by the terms of
this Agreement. No Proprietary Information shall be disclosed to any employee
who does not have a need for such information. The receiving party shall not
disclose any Proprietary Information to any third party without the disclosing
party's express, written consent. For the purposes of this Section 5, the term
"employee" shall include, in addition to employees, directors, officers,
consultants and other agents of the receiving party.
6. All Proprietary Information (including all copies thereof) shall remain
the property of the disclosing party and shall be returned to the disclosing
party after the receiving party's need for it has expired of upon request of
the disclosing party, and in any event, upon completion or termination of this
Agreement.
7. Notwithstanding any other provision of this Agreement, disclosure of
Proprietary Information shall not be precluded if such disclosure:
(a) is in response to a valid order of a court or other governmental
body of the United States or any political subdivision thereof; provided,
however, that the responding party shall first have given notice to the other
party hereto to allow such other party to make a reasonable effort to obtain a
protective order requiring that the Proprietary Information so disclosed be
used only for the purposes for which the order was issued;
(b) is otherwise required by law; or
(c) is otherwise necessary to establish rights or enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary.
8. This Agreement shall be coterminous with the term of the Master
Alliance Agreement. The termination of this Agreement shall not relieve either
party of the obligations imposed by Paragraphs 3, 4, 5 and 6 of this Agreement
with respect to Proprietary Information disclosed prior to the effective date
of such termination and the provisions of those Paragraphs shall survive the
termination of this Agreement for a period of five (5) years from the date of
such termination.
9. This Agreement shall govern all confidentiality issues between the
parties and supersedes any prior agreements. Specifically, the terms of this
Agreement will govern all employee access agreements that will be signed by
Andersen personnel and their agents.
Agreed To: Agreed To:
Siebel Systems, Inc. Andersen Consulting LLP
Address: 4005 Bohannon Drive Address:
Menlo Park, CA 94025
By: By:
- ------------------------------------ --------------------------------------
(Print Name) (Print Name)
- ------------------------------------ --------------------------------------
(Title) (Title)
- ------------------------------------ --------------------------------------
3
<PAGE> 28
(Signature/Date) (Signature/Date)
4
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.8
SIEBEL SYSTEMS, INC.
STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT
THIS STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT (the
"Agreement") is made and entered into effective as of this _____ day of
__________, 1995 (the "Effective Date"), by and between SIEBEL SYSTEMS, INC.
("Siebel"), a California corporation, on the one hand, and ITOCHU TECHNO-SCIENCE
CORPORAT ION, a corporation organized and existing under the laws of Japan, and
ITOCHU CORPORATION, a corporation organized and existing under the laws of
Japan, (Itochu Techno-Science Corporation and Itochu Corporation are hereafter
referred to collectively as "Itochu"), on the other hand.
RECITALS
A.Siebel owns and/or has rights to certain computer software programs,
known collectively as the Siebel Sales Enterprise system, that are useful in
managing, coordinating and improving product marketing and sales efforts.
B.Siebel and Itochu wish to enter into a strategic alliance under which
the parties will cooperate to promote the marketing of the Siebel Sales
Enterprise software products in Japan, Siebel will grant Itochu the right and
license to reproduce and distribute the object code of the Siebel Sales Ent
erprise software product in Japan, and Itochu will agree to make an equity
investment in Siebel.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein,
the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "ANCILLARY PROGRAMS" means those software programs listed as
"Ancillary Programs" on EXHIBIT A (Licensed Software) attached hereto, which
programs are licensed to Siebel by third parties.
1.2 "AUTHORIZED USER" means an individual authorized by the End User to
use the Licensed Software, regardless of whether such individual is using any of
the programs in the Licensed Software at any given time. The maximum number of
Authorized Users of a particular End User that may use the User P rograms
sublicensed by Itochu shall be as specified in the sublicense agreements between
Itochu and that End User.
1.3 "CO-EXCLUSIVE" means that, Siebel may distribute and license, and
may appoint third parties to distribute and license the Licensed Software to
End Users for use in Japan, provided that Siebel pays Itochu as set forth in
Section 6.5 ("Siebel Payments") of the Agreement with respect to any such
licenses granted.
1.4 "DOCUMENTATION" means user manuals written in English relating to
the Licensed Software.
1
<PAGE> 2
1.5 "DESIGNATED SYSTEM" or "DESIGNATED SYSTEMS" means the computer
hardware and operating system(s) of an End User, which act as the computer
servers for Authorized Users of the End User. Each End User shall specify the
Designated System(s) on which the Server Programs shall operate under license .
1.6 "END USER" means a third party entity that does not commercially
distribute or otherwise offer a product that is competitive with the Licensed
Software as listed in Exhibit B (Siebel Competitors) and that licenses the
Licensed Software for its ordinary and customary business purposes, and not for
redistribution or resale.
1.7 "ERROR" means a material defect or error in the Licensed Software
(other than the Ancillary Software) that causes such Licensed Software not to
operate substantially in accordance with the performance and functional
description of the Licensed Software contained in the Documentation.
1.8 "FIRST-LINE SUPPORT" means direct customer support of Licensed
Software, which includes but is not limited to installation, training, technical
assistance, and identifying and correcting or resolving as much as possible the
software errors and problems encountered by an End User in using Licen sed
Software.
1.9 "LICENSE TERM" means the period commencing on the Effective Date
and continuing until the termination or expiration of the Agreement pursuant to
Section 13 ("Term and Termination").
1.10 "LICENSED SOFTWARE" means the object code format of the Siebel
Sales Enterprise system, comprising of the software programs listed on EXHIBIT A
(Licensed Software) attached hereto (including Ancillary Programs), or any of
such software programs in object code individually or in combination. "Licensed
Software" shall include (i) both the English version of the Siebel Sales
Enterprise software products and all Japanese Localized Versions (as defined in
Section 1.11) of such products prepared by Itochu and accepted by Siebel
pursuant to Section 3.3 ("Preparation of Localized Versions") a nd (ii) Updates
(as defined in Section 1.17).
1.11 "LOCALIZATION SOURCE CODE" means such portions of the human
readable source code version of the Licensed Software (excluding the Ancillary
Programs) as are necessary for Itochu to prepare the Japanese localized version
of any program included within the Licensed Software (a "Japanese Localize d
Version"), and all associated technical documentation necessary for preparing
such Japanese Localized Version.
2
<PAGE> 3
1.12 "LIST PRICE" means the then current list price for licenses of the
Licensed Software in Japan as published by Siebel from time to time during the
term of the Agreement and attached hereto as EXHIBIT C (Current Software List
Price). The List Price for a particular program in the Licensed Soft ware varies
according to the number of Authorized Users permitted under the applicable End
User license to use such program.
1.13 "NET END USER PRICE" means the gross income received by Siebel for
the license or distribution of Licensed Software to any End User for use in
Japan, less distributor discounts, stock balancing, sales and consumption taxes,
customs duties and other government charges, returns and license fee s paid by
Siebel for the Ancillary Programs included in such Licensed Software. "Net End
User Price" shall also means the gross income received by Siebel for the
provision by Siebel (or any third party appointed by Siebel) of First-Line or
Second-Line Support related to the Licensed Software licen sed to any End User
for use in Japan, less any applicable discounts, sales and consumption taxes,
customs duties and other government charges, and charges paid by Siebel to third
parties for the provision of services in connection with such First-Line or
Second-Line Support.
1.14 "SERVER PROGRAMS" shall mean those portions of the Licensed
Software that reside and operate on Designated Systems.
1.15 "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean support
provided under Siebel's policies in effect on the date Software Maintenance and
Support Services is ordered, subject to payment by Itochu of the applicable fees
for such support as set forth in Section 6.9 ("Software Maintenance a nd Support
Services") of this Agreement.
1.16 "TRAINING MATERIALS" has the meaning described in Section 3.4
("Installation and Training").
1.17 "UPDATE" means an updated or enhanced version of any of the
software programs listed on EXHIBIT A (Licensed Software), in object code
format, that is generally released by Siebel to its distributors and End Users,
which corrects Errors and/or adds such minor additional features or functions a
s Siebel, in its discretion, may choose to include in the release. Updates
typically will be designated by a change in the version number to the right of
the first decimal point. Updates shall also include new version releases that
are typically designated by a change in the version number to the left of the
first decimal point. Updates shall not include any release, option, upgrade or
future product that Siebel licenses separately or only offers for an additional
fee (above and beyond any annual maintenance or support fee).
1.18 "USER PROGRAMS" means those software programs within the Licensed
Software that reside and operate on the individual computer hardware systems
operated by the employees of a particular End User.
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CONFIDENTIAL TREATMENT REQUESTED
2. APPOINTMENT AS CO-EXCLUSIVE DISTRIBUTOR IN JAPAN.
2.1 APPOINTMENT. Siebel hereby appoints Itochu, effective during the
License Term, as Siebel's distributor of the Licensed Software for use in Japan.
The appointment shall be Co-Exclusive during the Co-Exclusive Period as defined
in Section 6.2 ("Minimum Payment Obligations During Co-Exclusive P eriod") and
shall otherwise be non-exclusive.
2.2 LICENSE GRANT. Subject to the terms and conditions of this
Agreement, Siebel hereby grants to Itochu the following non-transferable,
limited license rights exercisable solely during the License Term:
(a) the right to reproduce, exactly as provided by Siebel,
object code copies of the Licensed Software, as needed for distribution to End
Users;
(b) the right to distribute the Licensed Software to End
Users;
(c) the right to use the Licensed Software at Itochu's
facilities for the sole purpose of testing and evaluating the Licensed
Software, for training Itochu's personnel, and for demonstrating and promoting
the Licensed Software to potential customers and for providing First-Line
Support to End Users;
(d) the right to reproduce, exactly as provided by Siebel,
translate into Japanese, and distribute to End Users the Documentation and the
Training Materials, whether in English or in Japanese;
(e) the right to use the Localization Source Code at Siebel's
California facility for the sole purpose of creating Japanese localizations
pursuant to Section 3.3 ("Preparation of Localized Versions"); and
(f) The right to use that component of Siebel's source code
known as "Microsoft AppStudio Resource Files (.rc files)" which define the
screen layouts as Itochu's facilities subject to the terms and conditions of
Section 8.3 ("Protection of Source Code"). In addition, Itochu shall maintain a
log in the form of EXHIBIT D (Access Log of Employees of Itochu Granted Access
to Siebel Systems Inc.'s Source Code) of each authorized employee who has
received access to such source code. Itochu shall maintain the original of such
log and shall provide a copy to Siebel upon request.
The foregoing rights may not be sublicensed except as permitted in Section 2.3
("Right to Grant End User Sublicenses").
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2.3 RIGHT TO GRANT END USER SUBLICENSES. Subject to the terms and
conditions of this Agreement, Siebel hereby grants to Itochu the
non-transferable right, exercisable solely during the License Term, to grant to
each End User the following limited, non-transferable sublicense rights:
(a) to use the Server Programs solely for the End User's own
internal data processing and business operations on the Designated Systems
specified by such End User (or on a backup system if such Designated Systems are
inoperative); to use the User Programs solely for the End User's own internal
dat a processing and business operations for and by up to that number of
Authorized Users as provided in the license with Itochu; provided, however, that
the End User may not relicense the Licensed Software or use the Licensed
Software for third-party training, commercial time-sharing, rental or servic e
bureau use;
(b) the right to reproduce the User Programs, up to the
maximum number of Authorized Users permitted under the sublicense agreement with
such End User; provided, however, that in no event shall Itochu grant such right
to an End User if Itochu has reproduced and distributed to such End User a numbe
r of copies of the User Programs equal to such number of Authorized Users;
(c) the right to use the Documentation provided by Itochu in
support of the authorized use of the Licensed Software; and
(d) the right to copy the Licensed Software solely for
archival or backup purposes; provided, however, that User Programs may be copied
to up to one additional computer system for each Authorized User; all titles,
trademarks, and copyright and restricted rights notices shall be reproduced in
such copies; and all archival and backup copies of the Programs shall be subject
to the terms of this Agreement.
For purposes of this Agreement, an "End User" may include Itochu if Itochu
agrees to be bound by the terms and conditions of EXHIBIT E (Terms for End User
Agreement) to this Agreement and pays the amounts set forth in Section 6.2
("Itochu End User Payment").
2.4 END USER SUBLICENSE AGREEMENT. Itochu shall enter into an
End User sublicense agreement in Japanese language with each End User to whom
Itochu grants sublicense rights to use Licensed Software, which sublicense
agreement shall contain, and be at least as protective of Siebel's rights and
inte rests as, the terms and conditions for such agreement as attached hereto as
Exhibit E (Terms for End User Agreement). Such sublicense agreement shall
specify the Designated Systems on which the Server Programs may be used and the
maximum number of Authorized Users permitted to use the User Program s.
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<PAGE> 6
2.5 CO-EXCLUSIVE SIEBEL DISTRIBUTION IN JAPAN. Notwithstanding the
above, Itochu understands and agrees that during the Co-Exclusive Period (as set
forth in Section 6.4 ("Minimum Payment Obligations During Co-Exclusive Period"))
Siebel may distribute and license, and may appoint third parties to distribute
and license, the Licensed Software to End Users for use in Japan, and such
licensing shall not constitute a breach of any terms of the Agreement, provided
that Siebel pays Itochu with the amounts set forth in Section 6.5 ("Siebel
Payments") with respect to any such licenses granted.
3. MARKETING AND SUPPORT OBLIGATIONS.
3.1 MARKETING AND SALES EFFORTS. Itochu shall use best efforts to
promote and market the Licensed Software to End Users and potential End Users in
order to maximize the licensing and distribution of the Licensed Software to End
Users in Japan. Such marketing efforts shall include, without limita tion:
establishment of a marketing and sales team (the "Marketing Team") dedicated
exclusively to promoting and distributing the Licensed Software in Japan, as
provided in Section 3.2 ("Marketing Team"); advertising the Licensed Software in
Japan in a commercially appropriate and reasonable manner ; and promoting the
Licensed Software at seminars, trade shows and conferences. Itochu agrees
further that its marketing and advertising efforts with respect to the Licensed
Software will be of the highest quality and in good taste, and shall preserve
the professional image and reputation of Siebe l and the Licensed Software.
Itochu agrees that if Itochu Techno-Science Corporation or any of its
subsidiaries, divisions, joint ventures or "Affiliates" (as defined below")
promote, market, license or distribute any products which are competitive
("Competitive Products") with the Licensed Softwa re (collectively referred to
as "Itochu Competitive Activity"), the Co-Exclusive Period (and Itochu's
Co-Exclusive distribution rights) shall immediately end and the following shall
immediately occur: (i) the payments which Itochu would otherwise be entitled to
under Section 6.5 ("Siebel Payments" ) shall be of no force or effect commencing
on the date when such Itochu Competitive Activity first occurred, (ii) Itochu's
rights hereunder shall convert to a non-exclusive basis and Itochu shall retain
such rights for the rest of the License Term on such basis. For purposes of the
foregoing, the term "Affiliates" shall mean any company in which Itochu
Techno-Science Corporation or any of its subsidiaries, divisions, or joint
ventures hold an equity or other capital investment in excess of $1,000,000. The
parties agree that the products which shall be considered to be "Competitive
Product s" as of the Effective Date are listed in EXHIBIT F (Competitive
Products).
3.2 MARKETING TEAM. Itochu shall establish a full time Marketing Team
that is dedicated exclusively to marketing, promoting and selling the Licensed
Software within Japan. Itochu shall ensure that the Itochu employees on such
Marketing Team use best efforts to promote and market the Licensed Sof tware in
Japan. The Marketing Team shall include, at a minimum, the following personnel:
(a) The "Itochu Marketing Manager," who will have overall
responsibility for coordinating the marketing, promotion, and distribution
efforts by Itochu for the Licensed Software and for managing the activities of
the Itochu Technical Services Manager, the Itochu Sales Director and the Itochu
Market ing Programs Manager (as described below);
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<PAGE> 7
(b) The "Itochu Technical Services Manager," who will have
primary responsibility for directing, coordinating and implementing the
technical services and support activities related to installations of the
Licensed Software in Japan, which activities include without limitation customer
training pro grams, customer service, integration services and technical
support;
(c) The "Itochu Sales Director," who will have primary
responsibility for the directing, coordinating and implementing the sales and
distribution of the Licensed Software by Itochu in Japan; and
(d) The "Itochu Marketing Programs Director," who will have
primary responsibility for all activities in the marketing and promotion of the
Licensed Software, including without limitation advertising, seminar
coordination, sales communication development, brochures and other marketing
materials de velopment and trade show coordination.
Itochu shall appoint such other employees to the Marketing Team as are needed to
satisfy Itochu's obligation to use best efforts to market and sell the Licensed
Software in Japan.
3.3 PREPARATION OF LOCALIZED VERSIONS. Itochu shall be responsible for
utilizing the Localization Source Code to prepare the Japanese Localized
Versions of the Licensed Software (excluding the Ancillary Programs) and of any
new version thereof in accordance with a schedule to be agreed upon for e ach
such new version. Itochu's obligation in the immediately preceding sentence
shall be expressly conditioned upon Itochu's receipt from Siebel of such
technical support and assistance regarding the Licensed Software as Itochu may
reasonably request in connection with the preparation of Japanese Localized
Versions. All such localization efforts shall take place at Siebel's California
facility, at Itochu's expense. Employees and agents of Itochu will observe the
working hours, rules and holiday schedule of Siebel while working on Siebel's
premises and shall agree to such other reasonable conditions as Siebel may
require. Itochu shall also be responsible for translating the Documentation,
on-line help, and the Training Materials into Japanese, as set forth in EXHIBIT
G ("Core Documentation, Help and Training Related Materials"). Siebel will
provide ten (10) copies in hard copy and one (1) copy each in electronic format
of such Documentation, on-line help and Training Materials in the English
language no later than ten (10) consecutive business days following the
Effective Date. Itochu shall use best efforts to assure that such localized
versions are of the highest quality and faithfully and accurately translate into
Japanese the relevant information and materials in the Licensed Software, the
Documentation, on-line help and the Training Materials, and Itochu will use
commercially reasonable efforts to complete the localization of each Licensed
Software version with in sixty (60) days of the release of such version to
Itochu. In order to facilitate the localization process, Siebel agrees to
provide Itochu with beta releases of such versions as soon as they become
available in the United States. Upon completion of the development of each
Localized Version, Ito chu shall deliver a master copy of the localization to
Siebel and Siebel shall have thirty (30) business days in which to accept or
reject the same. Siebel shall own the entire right, title and interest in and to
all such localized and/or translated versions of the Licensed Software,
Documentation , on-line help and Training Materials.
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<PAGE> 8
Itochu shall have exclusive responsibility for the development, packaging and
quality assurance of the Japanese Localized Versions. Itochu shall indemnify
Siebel from any liability, damages, costs and expenses caused by any errors in
such localizations or translations. In the event that Siebel a ccepts such
master copy of the Localized Version of the Licensed Software within the period
described above, such Localized Version shall be included within the definition
of the Licensed Software and Itochu retains such rights as set forth in Sections
2.2 ("License Grant") and 2.3 ('Right to Grant End User Sublicenses") of this
Agreement for such Localized Version. In the event that Siebel rejects any
master copy of a Localized Version, Itochu shall have no right to distribute
such version.
3.4 INSTALLATION AND TRAINING. Itochu shall be responsible for
conducting all activities required to install the Licensed Software at End User
locations in Japan and for providing training to the End Users and any systems
integrators involved in such installation. Siebel shall provide to Itochu,
promptly after the Effective Date, an English copy of all Siebel training
materials relating to the Licensed Software, and Itochu shall translate such
materials into Japanese (the English and Japanese versions of the Siebel
training materials are referred to collectively as the "Training Materials"). A
complete list of training courses, as covered by the Training Materials, that
Itochu shall utilize in training customers and integrators on the Licensed
System is set forth on EXHIBIT H (Training Courses) attached hereto. Itochu
shall provide such installation for End User customers located in Japan and
licensed by Siebel or any third parties, at Siebel's request and Itochu may
charge a reasonable fee to such End Users for such installation. Itochu shall
also conduct the training related activities for such End Users, at such End
User's request, and charge a reasonable fee to such End Users for such
training. All such installation and training shall be conducted with the highest
level of professionalism and quality.
3.5 TECHNICAL SUPPORT AND MAINTENANCE. Itochu shall be responsible for
providing First-Line Support with respect to technical questions, support
problems, and Error evaluation and correction to all End Users of Licensed
Software in Japan (including End Users licensed directly by Siebel or any thi rd
parties) who have entered into the Software Maintenance Agreement with Itochu,
as set forth in Section 6.9 ("Software Maintenance and Support Services") of
this Agreement, or an agreement with Siebel (or a third party appointed by
Siebel) for the provision of First-Line or Second-Line Support re lated to the
Licensed Software to any End User in Japan provided that Itochu shall receive
appropriate payment for such agreement as set forth in Section 6.5 ("Siebel
Payments") or such other payment as the parties may mutually agree to in the
event the Co-Exclusive Period ends; provided, however, that Siebel reserves the
right to provide (or appoint others to provide) First-Line Support to End Users
in the event Itochu does not have qualified technical personnel, Itochu is not
adequately equipped to provide such First-Line Support or Itochu is not
providing quality support to End Users. Si ebel shall be responsible for
providing to Itochu Second-Line Support with respect to any such support or
Error correction issues arising from End Users located in Japan. Such technical
support obligations are as follows:
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<PAGE> 9
(a) First-Line Support. Itochu will provide First-Line Support
to all Licensed Software End Users located in Japan. Itochu shall provide
telephone and other appropriate contact points so that such End Users may
contact Itochu regarding technical and support questions and Errors or other
problem s regarding use of the Licensed Software. Itochu shall inform such End
Users that End Users must contact Itochu for resolution of all support,
technical questions and Error correction issues with respect to the Licensed
Software. Itochu shall use best efforts to answer all such technical and supp
ort questions promptly and accurately and to provide workaround or other
solutions to any Errors or problems reported by such End Users. If, after using
its best efforts, Itochu is not able to answer a support question or to correct
a reported material Error or problem in the Licensed Software, It ochu may
contact Siebel for Second-Line Support, as provided below.
(b) Second-Line Support. Siebel will offer second line support
to Itochu in the form of an eight (8) hours per day, five (5) days per week
telephone hot line and email support which qualified Itochu support personnel
can use after attempting to resolve support or Error correction problems relatin
g to the Licensed Software for (i) a diagnosis of problems or performance
deficiencies of the Licensed Software, and (ii) a resolution of problems or
performance deficiencies of the Licensed Software. If Itochu requests Siebel to
provide applications support or Error correction at a customer site or at
Itochu, Itochu agrees to pay Siebel for services in accordance with Siebel's
then current List Price for such services and to reimburse Siebel all its
out-of-pocket expenses, including travel and accommodations, in providing such
support.
3.6 SOFTWARE MAINTENANCE AND SUPPORT SERVICES FOR PROGRAMS OTHER THAN
LIMITED PRODUCTION PROGRAMS. Software Maintenance and Support Services shall be
provided under Siebel's Software Maintenance and Support Services policies in
effect on the date the Software Maintenance and Support Services is o rdered,
subject to the payment by Itochu of the applicable fees. Siebel reserves the
right to alter such policies from time to time, in its reasonable discretion, on
ninety (90) days' prior notice to Itochu. Itochu hereby agrees to purchase
Software Maintenance and Support Services from Siebel fo r the term of this
Agreement for all Licensed Software which is licensed to Itochu (for internal
purposes only) pursuant to this Agreement. Itochu is hereby authorized to
distribute any and all Error corrections and Updates which it receives from
Siebel as a part of Software Maintenance and Suppor t Services to all of its End
User customers and sublicensees.
3.7 END USER VISITS. Siebel may visit the End Users located in Japan
(directly licensed by Itochu) from time to time to stay abreast of customer
requirements and to evaluate features for potential future products provided
that Siebel notifies Itochu in writing in advance regarding such visits. I tochu
agrees to provide Siebel reasonable assistance in arranging such visits with End
Users.
3.8 ITOCHU WARRANTY. Itochu warrants that it maintains the facilities,
resources and experienced personnel necessary to market and distribute Licensed
Software and to perform the necessary installation, training and maintenance
services related to such Licensed Software and otherwise to fulfill i ts
obligations under this Agreement and that it is not precluded by any existing
arrangement, contractual or otherwise, from entering into this Agreement.
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3.9 ITOCHU INDEMNITY. Itochu will indemnify Siebel for, and hold Siebel
harmless from, any loss, expense, damages, claims, demands, or liability arising
from any claim, suit, action or demand resulting from: (a) the negligence,
error, omission or willful misconduct of Itochu or its representati ves or
sublicensees; (b) the breach of any terms of this Agreement; or (c) Itochu's
non-compliance with applicable laws and regulations pursuant to Section 14
("Compliance with Laws").
3.10 SIEBEL WARRANTY. Siebel warrants and covenants that it has and
will during the License Term take all actions reasonably necessary and
appropriate to maintain the right to grant Itochu to use, reproduce, or
sublicense the Licensed Software under this Agreement.
4. DELIVERY AND ACCEPTANCE.
4.1 DELIVERY OF LICENSED SOFTWARE. Within ten (10) business days after
the Effective Date of this Agreement, Siebel shall deliver to Itochu one copy,
appropriate for reproduction, of the Licensed Software and of the Documentation
and the Training Materials, in English. In the event that Siebel de velops any
Update of the Licensed Software or creates revised or updated versions of the
Documentation and/or Training Materials, Siebel shall deliver to Itochu one (1)
copy of such Licensed Software, Documentation and/or Training Materials no later
than ten (10) business days after the commercial release of such version to its
distributors and End Users.
4.2 ACCEPTANCE. Itochu acknowledges that it is familiar with the
Licensed Software and that such Licensed Software shall therefore be deemed to
have been accepted by Itochu concurrent with delivery pursuant to Section 4.1
("Delivery of Licensed Software") above.
4.3 LOCALIZATION SOURCE CODE. The Localization Source Code will be made
available to Itochu at Siebel's California facility for the limited purpose of
preparing Japanese localizations pursuant to Section 3.3 ("Preparation of
Localized Versions"), and Itochu agrees that it will not copy such Local ization
Source Code or use it outside of Siebel's California facility.
5. COVENANTS AND RESTRICTIONS REGARDING LICENSED SOFTWARE.
5.1 LICENSE RESTRICTIONS. Itochu acknowledges that, except as
explicitly stated in this Agreement, the Agreement does not grant Itochu any
right or license under the Licensed Software or any proprietary rights therein,
and no license or other rights shall be created by implication or estoppel. I n
particular, but without limiting the generality of the foregoing, no right or
license in or to source code for the Licensed Software is granted hereunder,
except with respect to the Localization Source Code for the limited purpose of
preparing the Japanese localization. Itochu covenants that it shall not prepare,
and it shall not permit any others to prepare, any derivative works of the
Licensed Software, or otherwise modify or revise any of the software therein,
except specifically to create the Japanese localization. Itochu covenants that
it shall not use, reproduce, distribute or sell the Licensed Software in any
manner or for any purpose except as specifically permitted under this Agreement.
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5.2 PROHIBITION ON DECOMPILING. Itochu acknowledges that the Licensed
Software contains the valuable information of Siebel and its suppliers, and
Itochu agrees not to cause or permit the modification, reverse engineering,
translation, disassembly, or decompilation of, or otherwise to attempt to derive
the source code of the Licensed Software, whether in whole or in part.
5.3 LIMITATION ON DISTRIBUTION. Itochu shall use best efforts to assure
that it distributes Licensed Software only to End Users who will use the
Licensed Software, in whole or in part, in Japan.
5.4 PROPRIETARY NOTICES. In order to protect Siebel's and its
licensor's copyright and other ownership interests in the Licensed Software,
Itochu agrees that as a condition of its rights hereunder, each copy of the
Licensed Software and related documentation of Siebel reproduced by or on behalf
o f Itochu shall contain the same proprietary notices on the media, within the
code and on the Documentation which appear on the media or within the code of
the Licensed Software or on the Documentation delivered by Siebel to Itochu and
as otherwise reasonably required by Siebel.
5.5 U.S. GOVERNMENT END USER LICENSING. The Licensed Software is
"commercial computer software" and the Documentation is "commercial computer
software documentation" as such terms are used in 48 C.F.R. 12.212 (SEPT 1995).
Itochu shall only provide the Licensed Software and Documentation to agenci es
of the U.S. Government in accordance with the following:
(i) for acquisition by or on behalf of civilian agencies, Itochu shall
provide the Licensed Software and Documentation consistent with the
policy set forth in 48 C.F.R. 12.212 (SEPT 1995); or
(ii) for acquisition by or on behalf of units of the Department of
Defense, Itochu shall provide the Licensed Software and Documentation
consistent with the policies set forth in 48 C.F.R. 227.7202-1 (JUNE
1995) and 227.7202-3 (JUNE 1995).
5.6 END USERS OUTSIDE JAPAN. In the event Itochu identifies a potential
End User that desires a license granting rights to use the Licensed Software
solely at location(s) outside Japan, Itochu shall promptly identify such
potential End User to Siebel. Siebel shall have the sole right to grant su ch
End User the rights to use the Licensed Software. Itochu may license End Users
to use the Licensed Software at locations worldwide, provided that such End
Users will use the Licensed Software, in whole or in part, in Japan and provided
further that Itochu pays to Siebel the license fees require d hereunder.
5.7 FOREIGN GOVERNMENT AGREEMENTS. Itochu will take all reasonable
steps in making proposals and agreements with foreign governments other than the
United States which involve the Licensed Software and/or related documentation
to ensure that Siebel's proprietary rights in such Licensed Software a nd
related documentation receive the maximum protection available from such foreign
government for commercial computer software and related documentation developed
at private expense.
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CONFIDENTIAL TREATMENT REQUESTED
6. PAYMENTS.
6.1 ITOCHU LICENSE PAYMENTS. [ *** ] of the licensing revenues received
for distribution and sublicensing of Licensed Software by Itochu in Japan will
accrue to the benefit of Itochu, subject to Itochu's obligation to pay Siebel
license fees as provided herein. For each copy of Licensed Software distributed
to, or produced by, an End User for use in Japan pursuant to an agreement with
Itochu, Itochu shall pay Siebel a license fee of [ *** ] of the appropriate List
Price for the specific programs in the Licensed Software, and for each copy of
Licensed Software distributed to, or produced by, an End User for use outside of
Japan, Itochu shall pay Siebel a license fee of [ *** ] of its receipts (but in
no event less than the appropriate List Price for the specific programs in the
Licensed Software), as determined according to the schedule on EXHIBIT C
(Current Software List Price) with respect to the relevant category for the
number of Authorized Users permitted in the specific license to the End User.
Such license fee obligation will accrue upon the delivery, or reproduction, of
the Licensed Software to or by the End User. Itochu also shall pay [ *** ] for
each copy of the Training Materials (either English or Japanese version)
distributed to a customer. This [ *** ] fee shall be due for each set of
Training Materials distributed to a customer or third party for training or
educational purposes of any kind, including without limitation, a set of
Training Materials distributed to each student in any training class. Siebel
retains the right to amend the current list price for the specific programs in
the Licensed Software attached hereto as Exhibit C (Current Software List Price)
upon ninety (90) days prior written notice to Itochu. In the event of any price
increase, Siebel shall be bound to honor any orders placed at the prices in
effect prior to the effective date of the subject price increase (which
effective date shall be the 91st day following Siebel's written notice des
cribed in the immediately proceeding sentence), and in the event of any price
decrease, unfulfilled orders for the Licensed Software affected by the price
reduction shall be adjusted to reflect the price decrease.
6.2 ITOCHU END USER PAYMENT. In the event that Itochu licenses the
Licensed Software for its own internal data processing and business operations,
it shall pay Siebel a license fee equal to [ *** ] of the List
Price, as determined according to the Schedule in EXHIBIT C (Current Software
List Price).
6.3 AMOUNTS DUE FROM ITOCHU TO SIEBEL. Amounts due from Itochu to
Siebel pursuant to Section 6.1 ("Itochu License Payments") or 6.2 ("Itochu End
User Payments") shall be payable within thirty (30) days after the end of each
calendar quarter when such distributions or license occurred, subject to an
applicable credit in the aggregate amount of all minimum payments actually made
as provided in Section 6.4 ("Minimum Payment Obligations During Co-Exclusive
Period") below.
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CONFIDENTIAL TREATMENT REQUESTED
6.4 MINIMUM PAYMENT OBLIGATIONS DURING CO-EXCLUSIVE PERIOD.
6.4.1 In consideration for the Co-Exclusive rights granted to
Itochu under this Agreement during the first year of this Agreement commencing
on the Effective Date and ending December 31, 1996 (the initial "Co-Exclusive
Period"), Itochu also agrees to pay to Siebel, subject to the credits provided b
elow, the following irrevocable and non-refundable minimum license amounts (the
"Minimum Co-Exclusive Fees") on the indicated dates provided that Itochu shall
have received from Siebel appropriate invoices therefor (i) immediately upon the
Effective Date for the first payment, and (ii) no later tha n thirty (30) days
prior to the due date for the subsequent payments:
<TABLE>
<CAPTION>
Payment Amount Due Date
- -------------- --------
<C> <C>
$[***] Within thirty (30) days after the Effective Date
but not later than December 22, 1995 \
$[***] March 15, 1996
$[***] June 15, 1996
</TABLE>
6.4.2 By the mutual written agreement of both Siebel and
Itochu, the parties may extend the Co-Exclusive Period for an additional one (1)
year term ending December 31, 1997. The parties agree to use their collective
reasonable efforts to reach such mutual agreement to extend the Co-Exclusive
Perio d by no later than October 30, 1996. In the event the Co-Exclusive Period
is so extended, Itochu agrees to pay Siebel, subject to the credits provided
below, the following irrevocable and non-refundable minimum license amounts (the
"Additional Minimum Co-Exclusive Fees") on the indicated dates pro vided that
Itochu shall have received from Siebel an appropriate invoice no later than
thirty (30) days prior to the due date for the subsequent payments:
<TABLE>
<CAPTION>
Payment Amount Due Date
- -------------- --------
<C> <C>
$[***] December 15, 1996
$[***] March 15, 1997
$[***] June 15, 1997
</TABLE>
In the event the parties agree to extend the Co-Exclusive Period to include
calendar year 1998, then the parties shall also agree upon the minimum license
amounts to be paid by Itochu to Siebel with respect to calendar year 1998.
In the event the parties do not extend the Co-Exclusive Period beyond December
31, 1996, then: (i) the payments which Itochu would otherwise be entitled to
under Section 6.5 ("Siebel Payments") shall be of no force or effect commencing
January 1, 1997, (ii) Itochu's rights hereunder shall convert to a non-exclusive
basis and Itochu shall retain such rights for the rest of the License Term on
such basis. For purposes of clarification, if the Co-Exclusive Period ends,
Itochu shall be free to promote, market, license or distribute any Competitive
Products.
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CONFIDENTIAL TREATMENT REQUESTED
6.4.3 Itochu shall be entitled to credit against a specific
Minimum Co-Exclusive Fee (and the Additional Minimum Co-Exclusive Fee, if
applicable) owed to Siebel all license fees paid to Siebel under Section 6.1
("Itochu License Payments") prior to the due date of such Minimum Co-Exclusive
Fee (or the Additional Minimum Co-Exclusive Fee, if applicable) payment (the
"Prior License Fees"), to the extent such license fees have not been credited
against any earlier Minimum Co-Exclusive Fee (or the Additional Minimum
Co-Exclusive Fee, if applicable) payment.
6.4.4 To the extent that any portion of a Minimum Co-Exclusive
Fee(or the additional Co-Exclusive Fee, if applicable) remains after deducting
Prior License Fees therefrom, Itochu shall have the right to carry forward and
apply all of such remaining portion as a credit against all future fees payable
by Itochu pursuant to section 6.1 above, subject to the restrictions contained
in Section 6.4.5 and 6.4.6 below:
6.4.5 For purposes of clarification, any portion of the
aggregate U.S. [***] Minimum Co-Exclusive Fee amount which has not been
credited against license fees owed pursuant to Section 6.1 ("Itochu License
Payments") as of the expiration of the initial Co-Exclusive Period shall be
applied as a credit against license fees otherwise payable to Siebel thereafter
whether or not Itochu has exercised the right to extend the Co-Exclusive Period
described in Section 6.4.2 above; provided, however, that in no event shall such
credit be carried forward longer than December 31, 1997.
6.4.6 For purposes of clarification, any portion of the
aggregate U.S. [***] Additional Minimum Co-Exclusive Fee amount (if
Itochu exercises such right described in Section 6.4.2) which has not been
credited against license fees owed pursuant to Section 6.1 ("Itochu License
Payments") as of the expiration of the succeeding Co-Exclusive Period shall
be applied as a credit against license fees otherwise payable to Siebel
thereafter; provided, however, that in no event shall such credit be carried
forward longer than December 31, 1998.
6.5 SIEBEL PAYMENTS. During any Co-Exclusive Period of this Agreement,
in the event that (i) Siebel or any third party licenses the Licensed Software
to any End User for use in Japan ("Siebel Japanese License Agreement"), or (ii)
Siebel (or any third party appointed by Siebel) enters into an agreement for
the provision by Siebel (or any third party appointed by Siebel) of First-Line
or Second-Line Support related to the Licensed Software to any End User in Japan
("Siebel Japanese Support Agreement"), Siebel shall pay Itochu a credit equal to
[***] of Siebel's Net End User Price for such Siebel Japanese License
Agreements and Siebel Japanese Support Agreements ("Siebel Payment
Amounts"). Such Siebel Payment Amounts shall not be due and payable to Itochu
unless and until Siebel has received payment of the applicable Net End User
Price. Siebel shall wire transfer the Siebel Payment Amounts to Itochu's
designated bank account within 30 days following the month when the later of the
following two events has occurred: (i) Siebel has received payment of the
applicable Net End User Price, or (ii) the date Siebel has shipped the Licensed
Software to the applicable End User for use in Japan. With respect to Siebel
Japanese Support Agreements, no payments will be due and payable by Siebel with
respect to any contract where Siebel has reasonably determined that Itochu does
not have qualified technical personnel Itochu is not adequately equipped to
provide such First-Line Support with respect to such End User or
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Itochu is not providing quality support to End Users. Siebel will keep
and maintain, for a period of three (3) years, proper records and books of
account relating to such Siebel Japanese License Agreements and Siebel Japanese
Support Agreements. I tochu may inspect, or have an independent audit firm
inspect on its behalf, any such records to verify Siebel's compliance with its
payments obligations hereunder. Any such inspection will be conducted during
regular business hours at the recordholder's offices in a manner that does not
unreasonab ly interfere with the recordholder's business activities. Such
inspection shall be at Itochu's cost and expense, unless the inspection reveals
that Siebel underpaid the amount actually owing by Five Percent (5%) or more, in
which case Siebel shall pay such costs and expenses. Such audits may be c
onducted no more than once in any twelve (12) month period. In the event that
Itochu wishes to inspect such books and records, the recordholder will make all
relevant records available. For the End Users which Siebel grants the right to
reproduce the User Programs, Siebel shall use commercially r easonable efforts
to compel such End Users to permit Itochu to inspect the records of such
sublicensee as provided in this Section. Siebel shall owe interest at the rate
of Two Percent (2%) per month or the highest legal interest rate, whichever is
lower, on any past due balances pursuant to this Section 6 ("Payments").
6.6 REPORTS. Within fifteen (15) days of the end of each calendar
quarter within the License Term, (i) Itochu shall render a statement to Siebel
showing in detail the number of units of Licensed Software and Training
Materials distributed by Itochu or sublicensed for reproduction by an End User s
ublicensee of Itochu during the previous calendar quarter, the amount owing
Siebel therefor, the names and locations of the End Users, and (ii) Siebel shall
render a statement to Itochu showing in detail the number of units of Licensed
Software distributed by Siebel or any third party during the previous month,
Siebel's gross receipts, the Net End User Price thereof, and the names and
locations of the End Users, and the amount and due date for the transaction.
6.7 TAXES. Itochu shall pay any sales, use, property, license, value
added, withholding, excise or similar tax or duty, or any tax imposed by the
Government of Japan on the income of Siebel from any payments pursuant hereto,
whether federal, state or local, that may be imposed upon or with respec t to
the Licensed Software, exclusive of taxes on Siebel's net income. Siebel
acknowledges and agrees that Itochu's payments to Siebel pursuant to this
Agreement to be paid by Itochu under this Agreement may be subject to
withholding income tax based on the income tax laws of Japan (the "USA/Japan Tax
Convention"). Notwithstanding anything to the contrary to the foregoing, in the
event withholding tax payments must be made under the USA/Japan Tax Convention
or such other applicable laws, Itochu shall: (i) withhold such tax on behalf of
Siebel, and (ii) pay such required tax to the Japane se tax authority on behalf
of Siebel, and (iii) transmit to Siebel an official tax receipt issued by the
Japanese tax authority after such tax payment. For this purposes, Siebel shall
execute and deliver to Itochu an appropriate form and Itochu shall execute such
application form and file it with a competent tax office in Japan in order to
reduce an applicable tax rate of withholding income tax in accordance with the
USA/Japan Tax Convention.
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CONFIDENTIAL TREATMENT REQUESTED
Siebel shall pay any sales, use, property, license, value added,
withholding, excise or similar tax or duty, or any tax imposed by the Government
of United States on the income of Itochu from any payments pursuant hereto,
whether federal, state or local, that may be imposed upon or with respect to the
Licensed Software, exclusive of taxes on Itochu's net income. Notwithstanding
anything to the contrary to the foregoing, in the event withholding tax payments
must be made under the income tax laws of the United States or such other
applicable laws, Siebel shall: (i) withhold such tax on beh alf of Itochu, and
(ii) pay such required tax to the tax authority on behalf of Itochu, and (iii)
transmit to Itochu an official tax receipt issued by the tax authority after
such tax payment.
6.8 RECORDS AND INSPECTION RIGHTS. Itochu will keep and maintain, for a
period of three (3) years, proper records and books of account relating to its
distribution and sublicensing of Licensed Software to End Users. Siebel may
inspect, or have an independent audit firm inspect on its behalf, any such
records to verify Itochu's compliance with its payments obligations hereunder.
Any such inspection will be conducted during regular business hours at the
recordholder's offices in a manner that does not unreasonably interfere with the
recordholder's business activities. Such inspection shall be at Siebel's cost
and expense, unless the inspection reveals that Itochu underpaid the amount
actually owing by [ *** ] or more, in which case Itochu shall pay
such costs and expenses. Such audits may be conducted no more than once in any
twelve (12) month period. In the event that Siebel wishes to inspect such books
and records, the recordholder will make all relevant records available. For the
End Users which Itochu grants the right to reproduce the User programs in
accordance with Section 2.3 (b), Itochu shall use commercially reasonable
efforts to compel such End Users t o permit Siebel to inspect the records of
such sublicensee as provided in this Section. Itochu shall owe interest at the
rate of Two Percent (2%) per month or the highest legal interest rate, whichever
is lower, on any past due balances pursuant to this Section 6 ("Payments").
6.9 SOFTWARE MAINTENANCE AND SUPPORT SERVICES. Itochu shall use
commercially reasonable efforts to enter into Software Maintenance agreements
with End Users (including End Users licensed directly by Siebel or by third
parties). Such Software Maintenance agreements shall provide for services subs
tantially equivalent to the Siebel Maintenance and Support Services Schedule
attached hereto as EXHIBIT I (Siebel Maintenance and Support Services Schedule)
as may be modified by Siebel from time to time during the term of this Agreement
to revise, delete and add Maintenance and Support related ser vices. Itochu
agrees to pay Siebel [ *** ] of initial maintenance and any renewal maintenance
fees which it received from its End Users (excluding consumption tax), but in no
event will it pay Siebel less than [ *** ] of the cumulative aggregate List
Price of all Licensed Software which it has distributed to End Users from the
Effective Date during each twelve (12) month period of this Agreement. If, at
the end of each twelve (12) month period, the fees actually paid to Siebel are
less than [ *** ] of the cumulative aggregate List Price of all Licensed
Software which Itochu has distributed to End Users from the Effective Date (the
"[ *** ]"), Itochu shall promptly remit the difference to Siebel. Such fees
will be paid by Itochu to Siebel on a quarterly basis as they accrue to Itochu
within thirty (30) days of the end of the quarter in U.S. Dollars calculated at
the exchange rate between U.S. Dollar and Japanese Yen, of which, exchange rate
shall be the T/T selling rate announced by the bank of Tokyo at the last day of
the respective calendar quarter. In consideration of such payment by Itochu,
Siebel shall provide Second Line support as described in Section 3.5 (b) to
Itochu.
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CONFIDENTIAL TREATMENT REQUESTED
6.10 SPECIAL PRICING TRANSACTIONS. The parties agree and acknowledge
that there may occur individual cases where a potential End User of Itochu may
seek to acquire the right to use the Licensed Software or maintenance and
support for the Licensed Software under special circumstances where it is n ot
economically feasible for Itochu to provide Licensed Software or maintenance and
support for the Licensed Software under the discounts or payment related
provisions set forth in this Agreement. When Itochu identifies such a
transaction, Itochu shall present such opportunity to Siebel, along with a
detailed written proposal to Siebel including the discounts Itochu proposes to
provide to such End User. If, in Siebel's reasonable discretion, Itochu's
proposal is accepted, the parties shall confirm their agreement in writing which
shall, among other things, specify that: (i) the parties shall split all of the
license, maintenance and support fees or other related fees due under the
transaction on an [ *** ] basis, and (ii) the [ *** ] set forth in
Section 6.9 shall not apply with respect to such transaction.
6.11 ITOCHU TECHNOLOGY INC. to Act as Agent for Itochu. The parties
agree that Itochu shall appoint Itochu Technology Inc. ("ITI"), located at 3100
Patrick Henry Drive, Santa Clara, California, 95054, a Delaware corporation and
subsidiary of Itochu Corporation, to act as an agent for and on behal f of
Itochu with Itochu's full authority to conduct the following activities: (i) to
receive shipments from Siebel, (ii) to place orders with Siebel, and (iii) to
make payments to Siebel. Itochu agrees and acknowledges that Itochu shall be
responsible for any acts or omissions of ITI with respect to any of these
activities.
7. LIMITED RIGHT TO USE TRADEMARKS.
7.1 GRANT OF LICENSE. Siebel hereby grants to Itochu under the terms
hereinafter set forth a non-exclusive license to use the trademarks and trade
names set forth in EXHIBIT J (Trademarks) hereto (the "Trademarks"), solely in
connection with the marketing, distribution and support of the Licensed Software
in Japan and only in the manner prescribed in this Agreement. Any other proposed
use of the Trademarks must be approved in writing by Siebel in advance of such
use. Itochu shall use the Trademarks in accordance with the terms of Siebel's
Trademark Use Policy as amended by Siebel from ti me-to-time, which contains
Siebel's policies and procedures describing the proper usage of the Trademarks
and other intellectual property. As Siebel revises this policy, it shall provide
an up-to-date copy to Itochu.
7.2 FORM OF USE. Itochu shall only use the Trademarks in the form(s)
approved in writing by Siebel, including the O symbol (and, upon registration of
the Licensed Mark, the (R) symbol), and an indication that Siebel is the owner
of the Trademarks.
7.3 NO USE OF IDENTICAL OR SIMILAR NAMES. Itochu shall not use as its
company name or a component thereof or on other products a mark or name
identical with or confusingly similar to the Trademarks except as permitted
herein.
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7.4 REGISTRATION OF TRADEMARK. Siebel shall use reasonable efforts to
register in Japan the Trademarks. Itochu shall not attempt to register on its
behalf, or for its benefit, Trademarks.
7.5 PRIOR SUBMISSION OF SAMPLES. Upon periodic requests by Siebel,
Itochu shall submit to Siebel samples of advertising or other items bearing the
Trademarks prior to the use of such advertising or other items. Siebel shall
have the right to make reasonable objections to any such sample within f ifteen
(15) days of its submission on the grounds that Siebel believes in good faith
that the use of such advertising or other items by Itochu will be damaging to
the recognition value or reputation for quality associated with the Trademarks
or that the advertising or other items do not meet the st andards of quality
required by Siebel. In the event of such an objection, Itochu shall modify the
advertising or other items in accordance with the objection of Siebel prior to
the use of such advertising or other items.
7.6 NO OBJECTIONS TO VALIDITY. Itochu agrees not to raise or cause to
be raised any objections to the validity of the Trademarks or to the respective
rights of Siebel.
7.7 NOTIFICATION OF ADVERSE USE. Itochu shall promptly notify Siebel of
any adverse use by a third party of any of the Trademarks or of a mark or name
confusingly similar to any of the Trademarks and agrees to take no action of any
kind with respect thereto except with the prior written authoriza tion of
Siebel. Itochu further agrees to provide full cooperation with any legal or
equitable action by Siebel to protect its rights, title and interest in the
Trademarks.
7.8 INFRINGEMENT PROCEEDINGS. In the event of infringement of the
Trademarks by a third party, Siebel shall have the sole right to bring
proceedings (including notifications to the Customs Department objecting to the
importation of infringing goods) against the infringing party and to retain any
damages recovered in such proceedings. Itochu shall cooperate with Siebel in the
prosecution of any such infringement proceedings. Siebel shall indemnify and
hold harmless Itochu against any proceeding brought by a third party on a claim
that the Trademarks infringes upon the trademark or other i ntellectual property
rights of such third party. Itochu shall promptly notify Siebel in writing of
any such proceeding and shall provide complete authority, information and
assistance to Siebel in connection with such proceeding. Siebel shall have the
sole and exclusive authority and obligation t o defend and/or settle any
proceeding with respect to the Trademarks.
8. SOURCE CODE.
8.1 SOURCE CODE ESCROW. Siebel has placed, or will place within thirty
(30) days of the commencement of the License Term, documented and working order
copies of the source code of the User Programs and Server Programs under the
control of an escrow agent pursuant to the terms of an escrow agreeme nt which
provides for the release of the source code for such programs to Itochu in the
event one or more of the following conditions exists and is uncorrected for a
period of thirty (30) days: entry of an order as to Siebel under Title 11 of the
United States Code, the making by Siebel of a gener al assignment for the
benefit of creditors, the appointment of a general receiver or trustee in
bankruptcy of Siebel's business or
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property, or action by Siebel under any state insolvency or similar law
for the purpose of Siebel's bankruptcy, reorganization or liquidation.
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8.2 LICENSE. Effective solely in the event Itochu obtains the Licensed
Software source code pursuant to Section 8.1 ("Source Code Escrow"), Siebel
hereby grants to Itochu the right and license (subject to Itochu's payment
obligations under this Agreement) solely to use the Licensed Software sour ce
code for maintenance of the Licensed Software licensed to End Users in Japan.
8.3 PROTECTION OF SOURCE CODE. In the event of release of the Licensed
Software source code to Itochu, Itochu will protect the Licensed Software source
code with the same care and using the precautions which it uses to protect its
own source code. Itochu will limit access to the Licensed Softwar e source code
to its employees with a need to know which have agreed in writing to maintain
the confidentiality of such source code.
9. OWNERSHIP AND PROPRIETARY RIGHTS.
9.1 OWNERSHIP. Siebel and its suppliers shall retain all title,
copyright and other proprietary rights in and to the Licensed Software. Itochu
does not acquire any rights, express or implied, in the Licensed Software, other
than those specified in this Agreement. In the event that Itochu makes s
uggestions to Siebel regarding new features, functionality or performance that
Siebel adopts for the Licensed Software, such new features, functionality or
performance shall become the sole and exclusive property of Siebel, free from
any restriction imposed upon Siebel by the provisions of Section 15.1
("Non-disclosure").
9.2 ASSIGNMENT OF RIGHTS IN LOCALIZATIONS. Itochu hereby assigns to
Siebel any and all right and title, including without limitation copyright, it
may have in the Japanese translations and/or Localized Versions of the Licensed
Software, the Documentation, on-line help and the Training Materials a s
prepared by Itochu hereunder, including but not limited to any previous work
performed by Itochu pursuant to the Proprietary Information and Inventions
Agreement dated September 1, 1994. If Itochu has any rights, including without
limitation moral rights, in such Localized Versions or translatio ns that cannot
be assigned to Siebel, Itochu unconditionally and irrevocably waives enforcement
of such rights and all claims and causes of action of any kind against Siebel
and any of its licensees and customers with respect to such rights. Itochu
further agrees, at Siebel's request and expense, to consent to and join in any
action to enforce such rights. If Itochu has any rights, including without
limitation moral rights, in such Localized Versions and/or translations that
cannot be assigned to Siebel or waived by Itochu, Itochu hereby unconditionally
and irrevocably grants to Siebel dur ing the term of such rights the exclusive,
perpetual, worldwide, fully paid and royalty-free right and license, with the
right to sublicense through multiple tiers of sublicensees, to reproduce, create
derivative works or, distribute, perform, display, make, use and sell such
rights or any product claimed or covered by such rights.
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9.3 SIEBEL'S RIGHTS IN FUTURE DEVELOPMENT WORKS. Itochu agrees and
hereby assigns all right, title and interest in any derivative works including
enhancements, new software modules or product options (collectively such future
versions of the Licensed Software and any derivative works including
enhancements, new software modules or product options shall be referred to as
"Future Development Work(s)"). For purposes this Section, any Itochu software
engineer or any other Itochu employee or independent contractor providing
assistance in connection with such Future Development Works shall be referred to
as "Itochu Development Personnel. If any Itochu or any Itochu Development
Personnel have any rights, including without limitation moral rights, in Future
Development Works that cannot be assigned to Siebel, Itochu (and any such Itochu
Development Personnel in their individual capaciti es, as may be necessary)
unconditionally and irrevocably waive enforcement of such rights and all claims
and causes of action of any kind against Siebel and any of its licensees and
customers with respect to such rights. Itochu and any such Itochu Development
Personnel (in their individual capacit ies, as may be necessary) further agree,
at Siebel's request and expense, to consent to and join in any action to enforce
such rights. If Itochu or any Itochu Development Personnel have any rights,
including without limitation moral rights, in such Future Development Works that
cannot be assigned to Siebel or waived by Itochu, Itochu and any Itochu
Development Personnel hereby unconditionally and irrevocably grant to Siebel
during the term of such rights the exclusive, perpetual, worldwide, fully paid
and royalty-free right and license, with the right to sublicense through
multiple tiers of sublicensees, to reproduce, create derivative works or,
distribute, perform, display, make, use and sell such rights or any product
claimed or covered by such rights. In the event that Itochu Development
Personnel have personal rights in the Future Development Works, Itochu agrees to
use its bes t efforts to cause such Itochu Development Personnel to execute such
documents as are necessary to grant Siebel the rights sought under this Section.
10. INFRINGEMENT INDEMNITY.
To the best of Siebel's knowledge, no portion of the Licensed Software
(excluding the Ancillary Program) infringes any third party intellectual
property rights. Siebel shall defend and indemnify Itochu against any and all
costs, liabilities, damages and expenses finally awarded against Itochu by a
court of competent jurisdiction (including settlement) arising out of a claim by
a third party that the Licensed Software infringes a copyright, patent or other
intellectual property rights of the United States or Japan, provided that: (a)
Itochu notifies Siebel in writing within thirty (30) days of the Itochu's
initial learning of a potential claim; (b) Siebel has sole control of the
defense of such claim and all related settlement negotiations; and (c) Itochu
provides Siebel, at Siebel's reasonable expense, with the assistance,
information and authority necessary to perform Siebel's obli gations under this
Section. Notwithstanding the foregoing, Siebel shall have no liability for any
claim of infringement based on (i) use of a superseded or altered release of
Licensed Software if the infringement would have been avoided by the use of a
current unaltered release of the Licensed Sof tware, which Siebel provided to
Itochu, or (ii) use of the Licensed Software in combination with any other
software, hardware or data where in the absence of such combination the Licensed
Software would not have been infringing.
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In the event the Licensed Software is held or believed by Siebel to
infringe, Siebel shall have the option, at its expense, to (a) modify the
Licensed Software to be non-infringing provided that Siebel maintains the
overall functionality of the Licensed Software; (b) obtain for Itochu and/or End
Users a license to continue using the Licensed Software; or (c) terminate this
Agreement with respect to the infringing Licensed Software and refund the
license fees paid for such Licensed Software, such amount to be reduced by
Twenty Percent (20%) for each year of each Itochu End User's use thereo f. This
Section states Siebel's entire liability and Itochu's exclusive remedy for
infringement.
11. LIMITED WARRANTIES AND DISCLAIMERS.
11.1 LIMITED PROGRAM WARRANTY. Siebel warrants for a period of one (1)
year from the date on which the Licensed Software is first delivered to Itochu
pursuant to Section 4.1 ("Delivery of Licensed Software") hereunder, that the
unmodified version of the Licensed Software will perform in all mater ial
respects the functions described in the Documentation when operated on a
platform which is supported by Siebel.
11.2 LIMITED MEDIA WARRANTY. Siebel warrants that the tapes, diskettes
or other media upon which Licensed Software is delivered by Siebel to Itochu to
be free of defects in materials and workmanship under normal use for ninety (90)
days from the date of delivery by Siebel.
11.3 LIMITED SERVICES WARRANTY. Siebel warrants that any services
contracted to be performed by Siebel pursuant to this Agreement shall be
performed in a manner consistent with generally accepted industry standards.
This warranty shall be valid for ninety (90) days from performance of service.
11.4 DISCLAIMERS. Siebel does not warrant that the Licensed Software
will meet Itochu's requirements, that the Licensed Software will operate in the
combinations which Itochu may select for use, that the operation of the Licensed
Software will be uninterrupted or error-free, or that all Program e rrors will
be corrected. Limited Production Licensed Software, pre-production releases of
Licensed Software, and computer-based training products are distributed "AS IS".
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED OR STATUTORY, INCLUDING WIT HOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11.5 EXCLUSIVE REMEDIES. Itochu must report any breach of the
warranties contained in this Section 11 to Siebel during the relevant warranty
period, and Itochu's exclusive remedy and Siebel's entire liability for such
breach shall be:
(a) FOR LICENSED SOFTWARE. To correct or provide a workaround
for reproducible Errors that cause breach of this warranty.
(b) FOR MEDIA. The replacement of defective media, provided
that Itochu shall acquire an RMA number from Siebel before returning defective
media to Siebel.
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(c) FOR SERVICES. The reperformance of the services, or if
Siebel is unable to perform the services as warranted, Itochu shall be entitled
to recover the fees paid to Siebel for the unsatisfactory services.
12. LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF
PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN
ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN A DVISED OF THE
POSSIBILITY OF SUCH DAMAGES. Notwithstanding the foregoing, Siebel's lost
revenue caused by a breach by Itochu shall constitute a direct damage. Except as
provided for under Section 10 ("Infringement Indemnity") of this Agreement,
Siebel's liability for damages hereunder shall in no event exceed the amount of
fees paid by Itochu under this Agreement, and if such damages result from
Itochu's use of the Licensed Software or services, such liability shall be
limited to fees paid for the relevant Program or services giving rise to the
liability.
The provisions of this Agreement allocate the risks between Siebel and
Itochu. Siebel's pricing reflects this allocation of risk and the limitation of
liability specified herein.
13. TERM AND TERMINATION.
13.1 TERM. This Agreement shall commence on the Effective Date and
shall continue in force for an initial term through December 31, 1998 (the
"Initial Term"). The Agreement may be extended after the Initial Term for
successive one (1) year terms by mutual agreement of the parties. Siebel shall h
ave no obligation to renew or extend the term of the Agreement, and no payments,
liabilities or damages shall be due Itochu, or shall be imposed upon Siebel, for
its decision to terminate or not to renew the Agreement.
13.2 TERMINATION FOR CAUSE. Either party may terminate this Agreement,
by written notice to the other party: (a) upon the material failure of the other
party to observe, keep or perform any of the covenants, terms or conditions
herein (including the failure to pay sums owed to the other party wh en due), if
such default continues for thirty (30) days after written notice by the other
party, (b) upon the institution by or against either party of insolvency,
receivership or bankruptcy proceedings or any other proceedings for the
settlement of its debts, (c) upon either party's assignment for the benefit of
creditors, or (d) upon either party's dissolution or ceasing to do business.
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CONFIDENTIAL TREATMENT REQUESTED
13.3 PAYMENT OF DAMAGES FOR TERMINATION BY SIEBEL FOR CAUSE. In the
event Siebel, during the first year of the Co-Exclusive Period, terminates the
Agreement for cause under Section 13.2 ("Termination for Cause"), Itochu shall
immediately thereafter pay to Siebel the difference between [***] and the
total license fees paid to Siebel by Itochu prior to such termination under the
Agreement (if less than [***]). In the event Siebel, during the second year
of the Co-Exclusive Period, terminates the Agreement for cause under Secti on
13.2 ("Termination for Cause"), Itochu shall immediately pay to Siebel the
difference between [***] and the total license fees paid to Siebel by Itochu
prior to such termination under the Agreement (if less than [***]). The
parties acknowledge and agree that the damage to Siebel due to the early
termination of the Agreement by Siebel for cause cannot readily be measured but
will, in any event, be significant, and that the remedy for such damages set
forth in this Section provides a reasonable and efficient method of compensa
ting Siebel for such damages. Itochu's payment of such amount shall be Siebel's
sole and exclusive remedy for a termination of this Agreement by Siebel for
cause under Section 13.2; provided; however, that Siebel reserves all other
rights and remedies available under copyright, patent, trademark, trade secret
and other applicable laws for a breach by Itochu of its obligations under
Section 5 ("Covenants and Restrictions Regarding Licensed Software") and Section
15.1 ("Non-disclosure").
13.4 PAYMENT OF DAMAGES FOR TERMINATION by Itochu for Cause.
Notwithstanding any provision to the contrary contained in Sections 6.4.1 or
6.4.2, in the event Itochu during the term of this Agreement, terminates this
Agreement for cause under Section 13.2 ("Termination for Cause") due to Siebel,
S iebel shall immediately thereafter pay to Itochu any portion of the Minimum
Co-Exclusive Fees (or the Additional Minimum Co-Exclusive Fee, if applicable) as
incurred pursuant to Section 6.4.4 above) which has not been credited against
license fees owed pursuant to Section 6.1 ("Itochu License Payme nt") as of the
termination of this Agreement. Siebel's payment of such amount shall be Itochu's
sole and exclusive remedy for a termination of this Agreement by Itochu for
cause under Section 13.2.
13.5 EFFECTS OF TERMINATION. Upon expiration or termination of this
Agreement: (a) all licenses and rights granted to the parties shall terminate,
except as set forth below or in Section 13.7 ("Survival"); (b) each party shall
refrain from representing themselves as a party to this Agreement; (c) any End
User sublicenses granted hereunder will not be affected; and (d) any other
rights of either party which may have accrued up to the date of termination
shall not be affected.
13.6 LIMITATION OF LIABILITY ON TERMINATION. Notwithstanding the
foregoing, upon expiration or termination, neither party will be liable to the
other party, because of such termination, for compensation (except for accrued
compensation and except as provided in Section 13.3 ("Payment of Damages f or
Termination by Siebel for Cause") or Section 13.4 ("Payment of Damages for
Termination by Itochu for Cause")), reimbursement or damages on account of the
loss of prospective profits or anticipated sales or on account of expenditures,
inventory, investments, leases or commitments in connection wi th the business
or goodwill of Siebel or Itochu.
24
<PAGE> 25
13.7 SURVIVAL. Sections 3.9 ("Itochu Indemnity"), 5.2 ("Prohibition on
Decompiling"), 6 ("Payments") except that Section 6.4 shall not survive in the
event of a termination of this Agreement by Itochu for cause under Section 13.4,
7.8 ("Infringement Proceedings"), 9 ("Ownership and Proprietary Ri ghts"), 10
("Infringement Indemnity"), 12 ("Limitation of Liability") and 15
("Miscellaneous") shall survive the termination of this Agreement; provided,
however, that Section 15.1 ("Non-disclosure") shall survive expiration or
termination of this Agreement for five years. In the event that Siebel obtains a
release of the Licensed Software source code from escrow pursuant to Section 8
("Source Code") at or prior to such termination, the provisions of Paragraphs
8.2 ("License") and 8.3 ("Protection of Source Code") shall also survive into
perpetuity. In addition, the confidentiality and non -disclosure provisions
EXHIBIT D shall also survive into perpetuity.
14. COMPLIANCE WITH LAWS.
14.1 COMPLIANCE WITH LAW AND REGULATIONS. Itochu shall act in strict
compliance with all applicable laws, ordinances, regulations and other
requirements of any government authority pertaining to Itochu's activities under
the Agreement and shall provide, pay for, and keep in good standing all perm
its, licenses or other consents necessary for such activities.
14.2 EXPORT CONTROL. The parties agree that the export of Licensed
Software is subject to the export control laws of the United States of America
and each party agrees to abide by all such export control laws and regulations,
including without limitation any regulations promulgated by the Departm ent of
Commerce (or its successors) or the Department of Treasury.
15. MISCELLANEOUS.
15.1 NON-DISCLOSURE. By virtue of this Agreement, the parties may have
access to information that is confidential to one another ("Confidential
Information"). Siebel's Confidential Information shall include the Licensed
Software, the source code for the Licensed Software, formulas, methods,
know-how, processes, designs, new products, developmental work, marketing
requirements, marketing plans, customer names, prospective customer names, the
terms and pricing under this Agreement, and all information clearly identified
in writing at the time of disclosure as confidential. In the event of o ral
disclosure only the information disclosed which is reduced to writing,
designated as confidential and transmitted to Itochu within thirty (30) days of
such oral disclosure shall be deemed the Confidential Information and subject to
this Section 15.1.
A party's Confidential Information shall not include information that
(a) is or becomes a part of the public domain through no act or omission of the
other party; (b) was in the other party's lawful possession prior to the
disclosure and had not been obtained by the other party either directly or
indirectly from the disclosing party; (c) is lawfully disclosed to the other
party by a third party without restriction on disclosure; or (d) is
independently developed by the other party. Itochu shall not disclose the
results of any performance tests of the Licensed Software to any third party wi
thout Siebel's prior written approval.
25
<PAGE> 26
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of five (5) years
after termination of this Agreement; provided, however, that with respect to the
source code for the Licensed Software, the nondisclosure obligations s et forth
in this Agreement and the escrow agreement shall survive into perpetuity. The
parties agree, unless required by law, not to make each other's Confidential
Information available in any form to any third party or to use each other's
Confidential Information for any purpose other than in the performance of this
Agreement. Each party agrees to take all reasonable steps to ensure that
Confidential Information is not disclosed or distributed by its employees or
agents in violation of the terms of this Agreement.
15.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the United States of America and the State of California as such
laws are applied to agreements entered into and to be performed entirely within
California between California residents. This Agreement is prepared and executed
in the English language only and any translation of this Agreement into any
other language shall have no effect. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods is specifically
excluded from application to this Agreement.
15.3 ATTORNEYS FEES. In the event any proceeding or lawsuit is brought
by Siebel, its suppliers or Itochu in connection with this Agreement, the
prevailing party in such proceeding shall be entitled to receive its costs,
expert witness fees and reasonable attorneys' fees, including costs and fees on
appeal.
15.4 ARBITRATION; Choice of Forum and Venue. Any dispute, controversy
or claim arising out of or relating to this Agreement, or the breach,
termination, or invalidity thereof, shall be settled by arbitration held in San
Francisco, California, United States of America , in accordance with the UNCIT
RAL Arbitration Rules in effect on the date of this Agreement and, to the extent
different from such rules the following rules and provisions:
(a) The arbitrator(s) shall apply the laws of the United
States of America and the State of California, United States of America, to
decide the dispute. The language of the arbitration shall be English. At the
first arbitration hearing, each party shall be entitled to submit a written list
of cat egories of documents to be produced to it by the other party relating to
the subject matter of the dispute. The arbitrator or arbitrators shall resolve
at the first hearing any dispute between the parties regarding the documents to
be produced. The arbitration hearings shall then be recessed for a reasonable
period of time to be determined by the arbitrator or arbitrators to allow the
parties to produce the requested categories of documents to each other. The
parties shall also be entitled to discovery as provided in Sections 1283.5 and
1283.1 of the Code of Civil Procedure of the State of California, whether or not
the California Arbitration Act is deemed to apply to such arbitration.
(b) If the dispute at issue involves a claim for money damages
only and in amount less than One Million U.S. Dollars ($1,000,000), exclusive of
attorneys' fees and costs of the arbitration, then the parties shall choose, by
mutual agreement, one (1) neutral arbitrator to hear the dispute. If the dispute
involves a claim for equitable relief and/or money damages in excess of One
Million U.S. Dollars ($1,000,000), exclusive of attorneys' fees and costs of the
arbitration, the parties shall designate three (3) neutral arbitrators. In the
event the parties cannot agree on the selection of the arbitrator(s) within
thirty (30) days after a demand for arbitration has been served, the
arbitrator(s) shall be selected by the American Arbitration Association.
26
<PAGE> 27
(c) The award shall be made promptly by the arbitrator(s) and,
unless otherwise agreed by the parties, no later than thirty (30) days from the
date of closing of the hearing, or if oral hearings have been waived, from the
date of transmittal of final statements and proofs to the arbitrator(s). If the
arbitrator(s) fails to reach a decision within thirty (30) days, the
arbitrator(s) shall be discharged, and new arbitrator(s) shall be appointed and
shall proceed in the same manner, and the process shall be repeated until a
decision is finally reached.
(d) The award rendered by the arbitrator(s) shall include
costs of the arbitration, reasonable attorneys' fees and reasonable costs for
experts and other witnesses. The award of the arbitrator shall be final,
non-appealable and binding upon the parties and their respective successors and
assigns . Judgment on the award may be entered in any court having jurisdiction.
(e) The parties agree that the arbitrator(s) shall have the authority
to issue interim orders for provisional relief, including, but not limited to,
orders for injunctive relief, attachment or other provisional remedy, as
necessary to protect either party's name, proprietary information, trade se
crets, know-how or any other proprietary right. The parties agree that any
interim order of the arbitrator(s) for any injunctive or other preliminary
relief shall be enforceable in any court of competent jurisdiction. In addition,
nothing in this Agreement shall be deemed as preventing either part y from
seeking provisional relief from any court of competent jurisdiction, in order to
protect that party's name or proprietary rights.
15.5 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission, or by certified or
registered mail, return receipt requested, and shall be deemed given upon person
al delivery, five (5) days after deposit in the mail, or upon acknowledgment of
receipt of electronic transmission. Notices sent to Siebel shall be sent to the
following address:
Siebel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
Attention: President
Fax: (415) 329-6524
with a copy to the Vice President, Legal, at the same address.
Notices sent to Itochu shall be sent to the following address:
Itochu Techno-Science Corporation
16-7 Komazawa 1-Chome,
Setagaya-Ku
Tokyo, 154 Japan
Fax: 03-3419-9099
Either party may change the above addresses by written notice to the other.
27
<PAGE> 28
15.6 INJUNCTIVE RELIEF. It is expressly agreed that a breach of this
Agreement by Itochu will cause irreparable harm to Siebel and that a remedy at
law would be inadequate. Therefore, in addition to any and all remedies
available at law, Siebel will be entitled to an injunction or other equitabl e
remedies in all legal proceedings in the event of any threatened or actual
violation of any or all of the above provisions. In the event that Itochu or any
Itochu customer continues to distribute the Licensed Software or any portion
thereof, after its right to do so has terminated or expired, Si ebel shall also
be entitled to injunctive relief, including, without limitation, an order
directing that any copies of the Licensed Software, or any portion thereof,
which Itochu or any direct or indirect customers of Itochu attempt to distribute
be seized, impounded and destroyed by appropriate of ficials in order to prevent
such distribution.
15.7 INDEPENDENT CONTRACTOR. The parties are independent contractors
under this Agreement and nothing in this Agreement shall be construed to create
a partnership, franchise, joint venture, agency or employment relationship
between Siebel and Itochu. Neither party has any right, power or authori ty to
assume or create any obligation on behalf of the other party.
15.8 FORCE MAJEURE. Neither party shall be liable hereunder by reason
of any failure or delay in the performance of its obligations hereunder (except
for the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, acts of God, war, governmental ac tion, labor
conditions, earthquakes, material shortages, or any other cause which is beyond
the reasonable control of such party.
15.9 WAIVER. The failure of either party to require performance by the
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver o f the
provision itself.
15.10 SEVERABILITY. In the event that any provision of this Agreement
shall be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity shall not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
15.11 HEADINGS. The paragraph headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe,
or describe the scope or extent of such paragraph, or in any way affect this
Agreement.
28
<PAGE> 29
15.12 ASSIGNMENT. Neither this Agreement nor any rights or obligations
of Itochu hereunder may be assigned by Itochu in whole or in part without the
prior written approval of Siebel. For the purposes of this Section, a change in
the persons or entities who control Fifty Percent (50%) or more of the equity
securities or voting interest of Itochu shall be considered an assignment of
Itochu's rights. Siebel's rights and obligations, in whole or in part, under
this Agreement may be assigned by Siebel. Siebel may exercise full transfer and
assignment rights in any manner at Siebel's discretion and specifically may
sell, pledge or otherwise transfer its right to receive royalties under this
Agreement.
15.13 EXPORT. Itochu acknowledges that the laws and regulations of the
United States restrict the export and re-export of commodities and technical
data of United States origin, including the Siebel Support Information. Itochu
agrees that it will not export or re-export any Siebel Support Informa tion in
any form, without the appropriate United States and foreign governmental
licenses. Itochu agrees that its obligations pursuant to this Section shall
survive and continue after any termination or expiration of rights under this
Agreement.
15.14 FULL POWER. Each party warrants that it has full power to enter
into and perform this Agreement, and the person signing this Agreement on such
party's behalf has been duly authorized and empowered to enter into this
Agreement. Itochu further acknowledges that it has read this Agreement, und
erstands it, and agrees to be bound by it.
15.15 EARLIER TERMINATION -- GOVERNMENTAL OVERSIGHT. This Agreement is
subject to all necessary approvals and/or authorizations or other required
procedures of the Governments of Japan and the United States having been
obtained or completed. Siebel will be responsible for obtaining any U.S. Gove
rnment approvals and Itochu will be responsible for obtaining any Japanese
Government approvals. In the event that a recommendation or order for
modification or suspension of the terms and conditions of this Agreement or the
acts contemplated hereunder is made by either of the above-mentioned Gove
rnments, this Agreement shall only become or continue to be effective if an
amendment is executed in writing by the parties. Failure by the parties to reach
agreement shall result in this Agreement being deemed null and void ab initio,
and all rights, duties and obligations of each party to the ot her shall no
longer exist, except as otherwise provided in Section 15.1 ("Non-disclosure")
and Itochu shall return to Siebel the Licensed Software delivered by Siebel
pursuant to Section 4.1 ("Delivery of Licensed Software"). In the event of such
termination, any expenses which either party may ha ve incurred in respect to
this Agreement and the subject matter of this Agreement shall be for the account
of the party having incurred them, but Siebel shall retain any amounts
previously paid to Siebel by Itochu.
15.16 CONFIDENTIAL AGREEMENT. Neither party will disclose any terms or
the existence of this Agreement, except pursuant to a mutually agreeable press
release or as otherwise required by law.
15.17 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be considered an original, but all
of which together will constitute one and the same instrument.
29
<PAGE> 30
15.18 ENTIRE AGREEMENT. This Agreement, together with the referenced
and attached Exhibits, completely and exclusively states the agreement of the
parties regarding its subject matter. It supersedes, and its terms govern, all
prior and contemporaneous proposals, negotiations, representations, ag reements,
or other communications between the parties, written or oral, regarding the
subject matter hereof. This Agreement shall not be modified except by a
subsequently dated written amendment or appendix signed on behalf of Siebel and
Itochu by their duly authorized representatives and any prov ision of a purchase
order purporting to supplement or vary the provisions hereof shall be void.
15.19 BINDING EFFECT. This agreement is binding upon and inures to the
benefit of the parties and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
SIEBEL SYSTEMS, INC. ITOCHU TECHNO-SCIENCE CORPORATION
By: By:
----------------------------------- -----------------------------
Name: Name:
----------------------------------- -----------------------------
Title: Title:
----------------------------------- -----------------------------
Date: Date:
----------------------------------- -----------------------------
ITOCHU CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
30
<PAGE> 31
EXHIBIT A
LICENSED SOFTWARE
(1) Server Programs:
SYSTEM MANAGEMENT SOFTWARE(1)
<TABLE>
<CAPTION>
SOFTWARE VERSION
<S> <C>
Marketing Administration Manager v 2.0
Sales Administration Manager v 2.0
Data Replication Manager v 2.0
Enterprise Integration Manager v 2.0
Database Extension Manager v 2.0
</TABLE>
(1) Version 1.2 operates on Oracle 7.1, Sybase System 10, Informix
On-line 7.1 and Version 2.0 operates on Oracle 7.2 but such software does not
include any Oracle, Sybase, Informix or MS SQL Server DBMS Server licenses.
(2) User Programs:
SALES MANAGEMENT SOFTWARE LICENSING(2)
<TABLE>
<CAPTION>
END-USER SOFTWARE VERSION
<S> <C>
SIEBEL SALES ENTERPRISE V 2.0
PRODUCT OPTIONS:
Marketing Encyclopedia v 2.0
Correspondence System v 2.0
Quote Generation System v 2.0
Revenue Forecasting System v 2.0
Product Forecasting System v 2.0
Reportwriter w/ Standard Reports v 2.0
Field Sales Synchronization v 2.0
Tele-Business Extensions v 2.0
Business Object Configurator v 2.0
Executive Information System v 2.0
</TABLE>
(2) Minimum system requirements include Microsoft Windows 3.1 or
Windows 95, 486 66 MHz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate
DBMS-specific remote connectivity hardware and network software.
<PAGE> 32
(3)Ancillary Programs:
<TABLE>
<CAPTION>
PRODUCT VERSION
<S> <C>
Watcom SQL Database Runtime v4.0
MS Access Runtime v2.0
Adobe Exchange LE v2.x
Adobe Type Manager v3.01
MS ODBC Text Driver v2.0
</TABLE>
(4)Description of Documentation:
<TABLE>
<CAPTION>
DOCUMENT VERSION
<S> <C>
Release Notes(3) v 2.0
Installation and Upgrade Guide(3) v 2.0
Administration Guide(3) v 2.0
Database Extension Reference Manual(4) v 2.0
Data Model Reference Manual(5) v 2.0
Business Object Configuration Guide(4) v 2.0
</TABLE>
(3) A Non-disclosure agreement reasonably acceptable to Siebel is
required before access or disclosure of any kind is given to Itochu customers or
third parties.
(4) A Non-disclosure agreement reasonably acceptable to Siebel is
required before access or disclosure of any kind is given to Itochu employees,
customers or third parties.
(5) Available on an limited, as needed basis; special Non-disclosure
agreement and Siebel's CEO approval required before access or disclosure of any
kind is given to Itochu employees, customers or third parties.
<PAGE> 33
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
SIEBEL COMPETITORS
[***]
Siebel reserves the right to add additional companies (who commercially
distribute or otherwise offer a product that is competitive with the Licensed
Software) to this list from time to time during this Agreement with the consent
of Itochu which consent shall not be unreasonably withheld or delayed . For
purposes of adding additional companies to this EXHIBIT B after the Effective
Date, the above listed companies are illustrative of the type of companies who
commercially distribute or otherwise offer a product that is competitive with
the Licensed Software.
<PAGE> 34
EXHIBIT C
CURRENT SOFTWARE LIST PRICE
<PAGE> 35
CONFIDENTIAL TREATMENT REQUESTED
SIEBEL
- --------------------------------------------------------------------------------
SIEBEL SALES ENTERPRISE INTERNATIONAL PRICE LIST
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (1)
<TABLE>
<CAPTION>
PRICE PER NAMED USER
END-USER SOFTWARE PART NO. LIST PRICE
<S> <C> <C>
SIEBEL SALES ENTERPRISE SSEOMS001 [***]
PRODUCT OPTIONS:
Marketing Encyclopedia SSEMES001 [***]
Correspondence System SSECOR001 [***]
Quote Generation System SSEQUO001 [***]
Revenue Forecasting System SSERFOR001 [***]
Product Forecasting System SSEPFOR001 [***]
Reportwriter w/Standard Reports SSEREP001 [***]
Field Sales Synchronization SSEFSS001 [***]
Tele-Business Extensions SSETEL001 [***]
Business Object Configurator SSEBOBJ001 [***]
</TABLE>
(1) Minimum system requirements include Microsoft Windows 3.1 or Windows 95, 486
66 Mhz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate DBMS-specific
remote connectivity hardware and network software.
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (2)
<TABLE>
<CAPTION>
PRICE PER NAMED USER
(UP TO [**] USERS)
END-USER SOFTWARE PART NO. LIST PRICE
<S> <C> <C>
Marketing Administration Manager SSEDMADM001 [***]
Sales Administration Manager SSEDSADM001 [***]
Data Replication Manager SSEDREP001 [***]
Enterprise Integration Manager SSEINT001 [***]
Database Extension Manager SSEDBEX001 [***]
</TABLE>
(2) Does not include Oracle, Sybase, Informix or MS SQL Server DBMS Server
license.
SIEBEL SYSTEMS, INC. CONFIDENTIAL -
PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE PAGE 1
NOVEMBER 10, 1995 PART #9003-001-00
<PAGE> 36
CONFIDENTIAL TREATMENT REQUESTED
SIEBEL
FOR INTERNAL USE ONLY
- --------------------------------------------------------------------------------
SIEBEL SALES ENTERPRISE INTERNATIONAL GUIDELINES
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (1)
<TABLE>
<CAPTION>
QUANTITY DISCOUNT GUIDELINES
PRICE PER NAMED USER
(BY NUMBER OF USERS)
---------------------------------------------------------------------------
END-USER SOFTWARE PART NO. 1-49 50-99 100-249 250-499 500-999 1000+
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIEBEL SALES ENTERPRISE SSEOMS001 [***] [***] [***] [***] [***] [***]
PRODUCT OPTIONS:
Marketing Encyclopedia SSEMES001 [***] [***] [***] [***] [***] [***]
Correspondence System SSECOR001 [***] [***] [***] [***] [***] [***]
Quote Generation System SSEQUO001 [***] [***] [***] [***] [***] [***]
Revenue Forecasting System SSERFOR001 [***] [***] [***] [***] [***] [***]
Product Forecasting System SSEPFOR001 [***] [***] [***] [***] [***] [***]
Reportwriter w/Standard Reports SSEREP001 [***] [***] [***] [***] [***] [***]
Field Sales Synchronization SSEFSS001 [***] [***] [***] [***] [***] [***]
Tele-Business Extensions SSETEL001 [***] [***] [***] [***] [***] [***]
Business Object Configurator SSEBOBJ001 [***] [***] [***] [***] [***] [***]
</TABLE>
(1) Minimum system requirements include Microsoft Windows 3.1 or Windows 95, 486
66 Mhz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate DBMS-specific
remote connectivity hardware and network software.
- --------------------------------------------------------------------------------
SYSTEM MANAGEMENT SOFTWARE LICENSING (2)
<TABLE>
<CAPTION>
QUANTITY DISCOUNT GUIDELINES
PRICE PER NAMED USER
END-USER SOFTWARE (BY NUMBER OF USERS)
----------------------------------------------------------------------------
PART NO. 1-49 50-99 100-249 250-499 500-999 1000+
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marketing Administration Manager SSEDMADM001 [***] [***] [***] [***] [***] [***]
Sales Administration Manager SSEDSADM001 [***] [***] [***] [***] [***] [***]
Data Replication Manager SSEDREP001 [***] [***] [***] [***] [***] [***]
Enterprise Integration Manager SSEINT001 [***] [***] [***] [***] [***] [***]
Database Extension Manager SSEDBEX001 [***] [***] [***] [***] [***] [***]
</TABLE>
(2) Does not include Oracle, Sybase, Informix or MS SQL Server DBMS Server
license.
FOR INTERNAL USE ONLY
SIEBEL SYSTEMS, INC. CONFIDENTIAL -
PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE PAGE 1
NOVEMBER 10, 1995 PART #9003-001-00
<PAGE> 37
EXHIBIT A
ORDER FORM
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 38
EXHIBIT D
ACCESS LOG OF EMPLOYEES OF ITOCHU
GRANTED ACCESS TO
SIEBEL SYSTEMS INC.'S SOURCE CODE
By signing below, you agree to the following:
(1) To protect any and all portions of that component of Siebel's source code
known as "Microsoft AppStudio Resource Files (.rc files)" ("Source Code")
including, but not limited to, all versions thereof (whether in a electronic or
hard copy formats) against unauthorized use, dissemination, or disc losure;
(2) To protect any and all portions of such Source Code" including, but not
limited to, all versions thereof (whether in a electronic or hard copy formats)
consistent with the security measures which apply to Itochu's highly sensitive
proprietary technical data and information;
(3) To maintain the strictest confidence of Siebel's Source Code
forever regardless of the status of my employment relationship with Itochu.
<TABLE>
<CAPTION>
Printed Name of Authorized Employee Signature Date
<S> <C> <C>
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
</TABLE>
<PAGE> 39
MINIMUM TERMS OF END USER AGREEMENT
FOR
SIEBEL SALES ENTERPRISE
Itochu agrees that its agreements with End Users will contain the
following minimum terms and conditions, and that such agreements will not
include any additional terms and conditions which are inconsistent with such
minimum terms and conditions.
1. DEFINITIONS,
1.1. "ANCILLARY PROGRAM" shall mean the third party software specified
in one or more Order Forms issued pursuant to this Agreement and which
are delivered with or embedded in the Programs and are necessary for
the operation of the Programs.
1.2. "COMMENCEMENT DATE" of each Program License shall mean the date on
which End User and Itochu enter into an Order Form pursuant to which
End User purchases Program Licenses for such Program(s).
1.3. "DESIGNATED SYSTEM" or "DESIGNATED SYSTEMS" shall mean the
computer hardware and operating system(s) designated on the Order
Form(s).
1.4. "LIMITED PRODUCTION PROGRAM" shall mean a Program which is not
generally licensed for commercial use by Itochu or which is not listed
in Itochu's generally available marketing literature or which is
designated as a Limited Production Program by Itochu.
1.5. "ORDER FORM" shall mean the document by which End User orders
Program Licenses and which is executed by the parties. Each Order Form
shall reference the Effective Date of this Agreement and shall, upon
signature by both parties, be deemed to have been added to the Software
Licenses and Services Agreement. A blank copy of the Order Form is
attached hereto as Exhibit A.
1.6. "PROGRAM" or "PROGRAMS" shall mean the User Programs and the
Server Programs, all as described in one or more Order Forms issued
pursuant to this Agreement; the media upon which such software is
delivered to End User; the guides and manuals for use of such software
("Documentation"); and Updates. Unless specifically set forth to the
contrary or unless the context clearly requires otherwise, "Programs"
shall also include the Ancillary Programs described in such Order
Form(s).
1.7. "SERVER PROGRAMS" shall mean those Programs specified in one or
more Order Forms issued pursuant to the Software License and Services
Agreement and which reside and operate on the Designated System.
1.8. "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean Program
support provided under Itochu's policies in effect on the date Software
Maintenance and Support Services is ordered, subject to the payment by
End User of the applicable fees for such support. Itochu reserves the
right to alter such policies from time to time using reasonable
discretion.
1.9. "UPDATE" shall mean a subsequent release of the Program which is
generally made available for Program Licenses receiving Software
Maintenance and Support Services, at no additional charge other than
media and handling charges. Updates shall not include any release,
option or future product which Siebel Systems Incorporated ("Siebel")
licenses separately or only offers for an additional fee or any upgrade
in features, functionality or performance of the Programs which Itochu
licenses separately or only offers for an additional fee.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 40
1.10. "USER" or "USERS" shall mean a named individual or individuals
authorized by End User to use specified Programs, regardless of whether
the individual is actively using the Programs at any given time. The
maximum number of Users that may use the User Programs or access the
Server Programs consistent with the terms of Program Licenses granted
herein is specified in the Order Form(s).
1.11. "USER PROGRAMS" shall mean those Programs specified in one or
more Order Form issued pursuant to this Agreement and which reside and
operate on User Systems.
1.12. "USER SYSTEM" shall mean the computer hardware and operating
systems operated by Users in the course of their employment with End
User, including notebook and portable computers.
2. PROGRAM LICENSE,
2.1. RIGHTS GRANTED,
A. Subject to the terms and conditions of this Agreement
and effective as of the applicable Commencement Date of each
Program License, Itochu grants to End User a worldwide,
nontransferable, nonexclusive sublicense to use the Programs
which the End User obtains under this Agreement, including a
worldwide, nontransferable, nonexclusive sublicense to use
the Ancillary Programs, as follows:
I) To use the Server Programs solely for End
User's own internal data processing operations on the
Designated Systems or on a backup system if the
Designated Systems are inoperative, up to any
applicable maximum number of designated Users set
forth in the Order Form(s); to use the User Programs
solely for End User's own internal data processing
operations for, and by up to, the number of
designated Users indicated in the Order Form(s);
provided, however, that End User may not relicense
the Programs or use the Programs for third-party
training, commercial time-sharing, rental or service
bureau use;
II) To use the Documentation provided with the
Programs in support of End User's authorized use of
the Programs;
III) To reproduce, exactly as provided by Itochu,
and distribute the Server Programs, the Ancillary
Programs and up to that number of copies of the User
Programs specified in the Order Form(s) to End User
for use by End User, provided that (a) each User
Program may be copied to up to one additional User
System for each designated User; (b) Programs may be
copied for archival or backup purposes; (c) all
titles, trademarks, and copyright and restricted
rights notices shall be reproduced in such copies;
and (d) all archival and backup copies of the
Programs shall be subject to the terms of this
Agreement; and
IV) To use the Programs in conjunction with other
software products.
Except as set forth herein, no other copies shall be made
without Itochu's prior written consent. For purposes of this
Agreement, "Program License" shall constitute each sublicense
granted to End User pursuant hereto to use a Server Program on
a single Server System and each sublicense granted to End
User for a User to use a User Program as specified in one or
more Order Forms.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 41
B. End User recognizes and agrees that the source code of
the Program contains valuable confidential information
belonging to Siebel, and End User therefore agrees not to
cause or permit the reverse engineering, disassembly or
decompilation of the Programs.
C. Siebel and its suppliers shall retain all title,
copyright and other proprietary rights in and to the Programs.
End User does not acquire any rights, express or implied, in
the Programs, other than those specified in this Agreement.
D. To use a User Program or a Server Program, End User may
need to use an Ancillary Program. The Ancillary Program may be
used only in combination with Programs for the purpose of
installing or operating Programs as described on the Order
Form or Documentation, and for no other purpose. End User
shall have no right to use Ancillary Programs in connection or
combination with any other software programs.
E. As an accommodation to End User, Itochu may supply End
User with pre-production releases of Programs (which may be
labeled "Alpha" or "Beta"). End User acknowledges that these
products may not be suitable for general use.
F. The Program is comprised of "commercial computer
software" and "commercial computer software documentation" as
such terms are used in 48 C.P.R. 12.212 (SEPT 1995).
Government End Users acquire the Program under the following
terms:
i) for acquisition by or on behalf of
civilian agencies, consistent with the
policy set forth in 48 C.F.R. 12.212 (SEPT
1995); or
ii) for acquisitions by or on behalf of
units of the Department of Defense,
consistent with the policies set forth in 48
C.F.R. 227.7202-1 (JUN 1995) and 227.7202-3
(JUN1995)
The contractor/manufacturer is: Siebel Systems Incorporated,
4005 Bohannon Drive, Menlo Park, California 94025.
2.2 TRANSFER AND ASSIGNMENT
A. End User may, upon written notice to Itochu and payment
of any then-applicable transfer fee, transfer a Program within
its organization from the Designated System to another
computer system; provided, however, that if End User transfers
the Program to a hardware and/or software platform which is
not supported by Itochu at the time of such transfer, Itochu
shall continue to provide Updates to End User which operate on
the Designated System and Itochu shall have no further
obligation to fix errors which occur when the Program is run
on an unsupported platform, Notwithstanding the foregoing, End
User shall remain obligated to pay for Software Maintenance
and Support Services ordered by End User prior to such
transfer.
B. Neither this Agreement nor any rights granted
hereunder, nor the use of any of the Programs, may be sold,
leased, assigned, or otherwise transferred, in whole or in
part, by End User, and any such attempted assignment shall be
void and of no effect; provided, however, that each End User
may assign this Agreement in connection with a merger,
acquisition or sale of all or substantially all of its assets
unless the surviving entity is a direct competitor of Siebel.
For purposes of this Agreement, "Direct Competitor" shall mean
company which offers an opportunity management system, a
personal information management system or a marketing
encyclopedia system or otherwise engaged in sales force
automation.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 42
2.3 VERIFICATION, Itochu is hereby notified that Siebel Systems
Incorporated, a California corporation located at 4005 Bohannon Drive,
Menlo Park, California 94025 is a third-party beneficiary to this
Agreement and that the provisions of this Agreement related to End
User's use of the Programs are made expressly for the benefit of Siebel
and are enforceable by Siebel in addition to Licensor. At Siebel's
written request, not more frequently than annually, End User shall
furnish Siebel with a certificate executed by an officer of End User
(a) verifying that the Programs are being used pursuant to the
provision of the Agreement, including any User and other limitations,
and that End User is not in breach of any other license restrictions;
(b) providing a list of Users by name; and (c) listing the locations,
types and serial numbers of the Designated Systems on which the Server
Programs are run.
Itochu or Siebel may, at its expense, and upon thirty (30) days prior
written notice to End User, audit End User's use of the Programs. Any
such audit shall be conducted during regular business hours at End
User's facilities and shall not unreasonably interfere with End User's
business activities. If an audit reveals that End User has underpaid
fees to Itochu as a result of unauthorized use or copying of the
Programs, End User shall pay to Itochu such underpaid fees based on the
Program License fees incurred by End User for such Programs plus
interest thereon at the prevailing U.S. dollar prime rate from the
initial date of the unauthorized use. If the amount of the underpayment
exceeds Five Percent (5%) of the license fees paid, then End User shall
also pay Itochu's or Siebel's reasonable costs of conducting the audit.
Audits shall be conducted no more than once annually.
3. TERM AND TERMINATION,
3.1 TERM. Each Program License granted under this Agreement shall
commence on the applicable Commencement Date and shall remain in effect
perpetually unless such Program License or this Agreement is terminated
as provided in Section 3.2 (Termination by Itochu).
3.2 TERMINATION BY ITOCHU. Itochu may terminate this Agreement or
any Program License upon written notice if End User breaches this
Agreement and fails to correct the breach within thirty (30) days
following written notice from Itochu specifying the breach.
3.3 HANDLING OF PROGRAMS UPON TERMINATION. If a Program License
granted under this Agreement terminates, End User shall (a) cease using
the applicable Programs, and (b) certify to Itochu within thirty (30)
days after termination that End User has destroyed , or has returned to
Itochu, the Programs and all copies thereof. This requirement applies
to copies in all forms, partial and complete, in all types of media and
computer memory, and whether or not modified or merged into other
materials. Before returning Programs to Itochu, End User shall acquire
a Return Material Authorization ("RMA") number from Itochu.
4. GENERAL TERMS,
4.1 NONDISCLOSURE. By virtue of this Agreement, the parties may
have access to information that is confidential to one another
("Confidential Information"). Itochu's Confidential Information shall
include the Programs, formulas, methods, know-how, processes, designs,
new products, developments work, marketing requirements, marketing
plans, customer names, prospective customer names, the terms and
pricing under this Agreement, and all information clearly identified in
writing at the time of disclosure as confidential.
A party's Confidential Information shall not include information that
(a) is or becomes a part of the public domain through no act or
omission of the other party; (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party;
(c) is lawfully disclosed to the other party by a third party without
restriction on disclosure; or (d) is independently developed by the
other party. End User shall not disclose the results of any
performance tests of the Programs to any other third party without
Siebel's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of five
(5) years after termination of this Agreement. The parties agree,
unless
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 43
required by law, not to make each other's Confidential Information
available in any form to any third party or to use each other's
Confidential Information for any purpose other than in the performance
of this Agreement. Each party agrees to take all reasonable steps to
ensure that Confidential Information is not disclosed or distributed
by its employees or agents in violation of the terms of this Agreement.
4.2 DISCLAIMER OF IMPLIED WARRANTIES. END USER ACKNOWLEDGES AND
AGREES THAT SIEBEL MAKES NO EXPRESS OR IMPLIED WARRANTIES TO END USER,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
4.3 EXPORT. End User will not export or re-export the Programs
without the appropriate United States or foreign government permits or
licenses and will take no actions in violation of U.S. export control,
embargo, or foreign corrupt practice laws and regulations.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 44
EXHIBIT E
TERMS FOR END USER AGREEMENT
<PAGE> 45
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT F
COMPETITIVE PRODUCTS
<TABLE>
<CAPTION>
COMPETITIVE PRODUCT(1) COMPANY (2)
<S> <C>
[***]
</TABLE>
<PAGE> 46
CONFIDENTIAL TREATMENT REQUESTED
[ *** ]
<PAGE> 47
CONFIDENTIAL TREATMENT REQUESTED
[ *** ]
(1) Siebel reserves the right to add additional products to this list
from time to time during this Agreement with the consent of Itochu which consent
shall not be unreasonably withheld or delayed. For purposes of adding additional
companies to this Exhibit B after the Effective Date, the above lis ted products
are illustrative of the type of products which are considered by the parties as
competitive with the Licensed Software as of the Effective Date.
(2) The list of companies is simply to identify the company which
either developed the Competitive Product or, to the best of Siebel's knowledge,
is currently the primary licensor of such Competitive Product.
<PAGE> 48
EXHIBIT G
CORE DOCUMENTATION, HELP AND TRAINING RELATED MATERIALS
CORE DOCUMENTATION SHIPPED WITH EVERY LICENSE OF SIEBEL SALES ENTERPRISE
- - Siebel Sales Enterprise Administration Guide
- - Siebel Sales Enterprise Release Notes
- - Siebel Sales Enterprise Installation and Upgrade Guide
HELP FILES SHIPPED WITH EVERY LICENSE OF SIEBEL SALES ENTERPRISE
- - On-Line Help RTF
- - End-User On-Line Help
TRAINING RELATED MATERIALS
- - Using Siebel Sales Enterprise
- - Marketing Administration
- - Application Administration
- - Docking Administration
- - Configuration and Customization
Siebel reserves the right to add additional documentation, help, and the
training related materials (which materials are important to a complete
understanding of the proper use and operation of the Licensed Software) to this
list from time to time during this Agreement with the consent of Itochu wh ich
consent shall not be unreasonably withheld or delayed.
<PAGE> 49
EXHIBIT H
TRAINING COURSES
Current Training Courses
- - Using Siebel Sales Enterprise
- - Marketing Administration
- - Application Administration
- - Docking Administration
- - Configuration and Customization
<PAGE> 50
EXHIBIT I
MAINTENANCE AND SUPPORT SERVICES SCHEDULE
SIEBEL SYSTEMS, INC.
SOFTWARE MAINTENANCE AND SUPPORT SERVICES SCHEDULE
At any given time, Siebel shall provide support for (a) the
then-current version of the Programs enumerated in Order Forms executed pursuant
to an applicable Software License and Services Agreement and (b) the immediately
preceding version of such Programs, but only for a period of six (6) months
following the release of the then-current version. Such Programs are referred to
in this Schedule as the "Supported Programs."
1. MAINTENANCE.
1.1 SOFTWARE MAINTENANCE COVERS SUPPORTED PROGRAMS. Siebel will use
reasonable commercial efforts to cure, as described below,
reported and verifiable errors in Supported Programs so that
such Programs operate as specified in the associated
Documentation. Siebel recognizes three error levels:
- HIGH SEVERITY ERROR: A high severity error is an error
which halts the operation of a Program and for which there
is no work-around. Siebel will begin work on the error
within two hours of notification during normal business
hours and will engage development staff until an
acceptable work-aro und is achieved.
- LOW SEVERITY ERROR: A low severity error may halt
operation of a Program but has a work-around available.
Siebel will begin work on the error within a day of
notification and will engage development staff.
- INCONVENIENCE: An error which exhibits incorrect
functionality but does not halt operation of a Program.
Siebel will use its best efforts to deliver a fix or a
work-around in a subsequent Program Update.
Siebel will provide Customer with a single copy of the fix or
work-around on suitable media. Customer will distribute the fix
or work-around to User Systems or Server Systems as necessary.
<PAGE> 51
2. UPDATES.
2.1 Siebel shall, from time to time, in its sole discretion make
Updates to Supported Programs available to Customer at no
additional charge except for media and handling charges. Updates
shall mean a subsequent release of the such Programs which is
generally made available at no additional charge for Program
Licenses receiving Software Maintenance and Support Services.
Updates shall not include any release, option, or future product
which Siebel licenses separately or offers for an additional
fee, or any upgrade in features, functionality or performance of
such Programs which Siebel licenses separately or offers for an
additional fee (above and beyond any annual maintenance or
support fee).
3. SUPPORT.
3.1 Customer shall establish and maintain the organization and
processes to provide "First Line Support" for the Supported
Programs directly to Users. First Line Support shall include but
not be limited to (a) a direct response to Users with respect to
inquiries concerning the performance, functio nality or
operation of the Supported Programs, (b) a direct response to
Users with respect to problems or performance deficiencies with
the Supported Programs, (c) a diagnosis of problems or
performance deficiencies of the Supported Programs and (d) a
resolution of problems or performance deficienc ies of the
Supported Programs.
3.2 If after reasonable commercial efforts Customer is unable to
diagnose or resolve problems or performance deficiencies of the
Supported Programs, Customer shall contact Siebel for "Second
Line Support" and Siebel shall provide support for the Supported
Programs in accordance with Siebel's then c urrent policies and
procedures for Second Line Support.
3.3 Siebel shall establish and maintain the organization and
processes to provide Second Line Support for the Supported
Programs to Customer. Second Line Support shall be provided to
Customer only if, after reasonable commercial efforts, Customer
is unable to diagnose and/or resolve problems or pe rformance
deficiencies of the Programs. Second Line Support shall be
provided to up to two designated representatives of Customer.
Siebel shall not provide Second Line Support directly to Users.
<PAGE> 52
CONFIDENTIAL TREATMENT REQUESTED
3.4 Second Line Support shall include but not be limited to (i) a
diagnosis of problems or performance deficiencies of the
Supported Programs and (ii) a resolution of problems or
performance deficiencies of the Supported Programs, in each case
via telephone.
3.5 Second Line Support shall be provided via telephone by Siebel
from 8:30 a.m. Pacific Time to 6:00 p.m. Pacific time on regular
U.S. business days, holidays excepted.
4. MAINTENANCE AND SUPPORT FEES.
4.1 ANNUAL FEES for software maintenance, update and support
services as described herein shall be equal to [ *** ] of the
then current list price of Program Licenses times the number of
Program Licenses for Supported Programs purchased by Customer.
Such fees shall be payable annuall y, in advance, with the first
payment due thirty (30) days from applicable Commencement Date
and the payment every year thereafter due in advance. In the
event Customer acquires additional Program Licenses, maintenance
fees for such additional Programs will be payable on the same
terms except, how ever, that the first installment shall be
pro-rated for the balance of the annual period referenced above
such that all subsequent fees for maintenance, updates and
support shall be payable on the same anniversary date for all
Program Licenses granted pursuant to the Agreement.
4.2 REINSTATEMENT. Siebel may, at its sole option, reinstate lapsed
Software Maintenance and Support Services in accordance with its
then current policies upon payment by Customer of the applicable
reinstatement fee.
5. Excluded Services. The following services are outside the scope of Siebel's
Software Maintenance and Support Services:
5.1 Service for Programs which have been subject to unauthorized
modification by Customer.
5.2 Service which becomes necessary due to:
(i)Failure of computer hardware or equipment or programs not
covered by this schedule;
(ii)Catastrophe, negligence of Customer or any third party,
operator error, improper use of hardware or software or
attempted maintenance by unauthorized persons;
(iii)Services at the Customer's site.
<PAGE> 53
6. OTHER TERMS. Except as stated in this Schedule, services shall
be subject to the terms and conditions of the applicable
Software License and Services Agreement between Siebel and
Customer.
<PAGE> 54
EXHIBIT J
TRADEMARKS
TSQ(R) (registered in the United States)
Siebel(TM)
Siebel Sales Enterprise(TM)
Virtual Selling(TM)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Siebel Systems, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
KPMG PEAT MARWICK LLP
San Jose, California
June 26, 1996
<PAGE> 1
EXHIBIT 99.1
INDEPENDENT RESEARCH DATA
Copies of the reports of the independent research organizations named on
page 29 of the Prospectus may be obtained from the following:
AberdeenGroup
One Boston Place
Boston, MA 02108
Telephone: (617) 723-7890
Facsimile: (617) 723-7897
GartnerGroup
251 River Oaks Pkwy
San Jose, California 95134
Telephone: (408) 748-1111
