<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------- -------------
COMMISSION FILE NUMBER: 0-20725
SIEBEL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3187233
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1855 SOUTH GRANT STREET
SAN MATEO, CA 94402
(Address of principal executive offices, including zip code)
(415) 295-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock, par value
$.001 per share, as of November 8, 1996, was 16,747,931.
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SIEBEL SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION ----
<S> <C> <C>
Item 1. Financial Statements
a) Balance Sheets
as of September 30, 1996 and December 31, 1995 3
b) Statements of Operations
for the three and nine months ended September
30, 1996 and 1995 4
c) Statements of Cash Flows
for the nine months ended September 30, 1996 and
1995 5
d) Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE 15
</TABLE>
2
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Part I. Financial Information
Item 1. Financial Statements
SIEBEL SYSTEMS, INC.
Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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(unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 51,256 $ 11,391
Short-term investments 25,210 -
Accounts receivable, net 4,505 3,066
Deferred income taxes 314 314
Prepaids and other 3,634 440
------------- ------------
Total current assets 84,919 15,211
Property and equipment, net 5,878 863
Other assets 380 17
------------- ------------
Total assets $ 91,177 $ 16,091
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 2,084 $ 493
Accrued expenses 5,937 1,075
Income taxes payable 617 395
Deferred revenue 5,665 4,166
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Total current liabilities 14,303 6,129
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Deferred income taxes 28 28
Total liabilities 14,331 6,157
Stockholders' equity:
Convertible preferred stock; $.001 par value; 10,000 shares authorized; - 5
4,906 and 0 shares issued and outstanding in 1995 and
1996, respectively
Common stock; $.001 par value; 35,000 shares authorized; 8,249 and 17 8
16,735 shares issued and outstanding in 1995 and 1996, respectively
Additional paid-in capital 75,644 9,999
Notes receivable from stockholders (508) (13)
Deferred compensation (1,115) (381)
Retained earnings 2,808 316
------------- ------------
Total stockholders' equity 76,846 9,934
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Total liabilities and stockholders' equity $ 91,177 $ 16,091
============= ============
</TABLE>
See accompanying notes to financial statements.
3
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SIEBEL SYSTEMS, INC.
Statements of Operations
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Software $ 10,235 $ 2,400 $ 21,373 $ 3,586
Maintenance and other 936 164 2,053 292
-------- ------- -------- -------
Total revenues 11,171 2,564 23,426 3,878
Cost of revenues:
Software 20 8 56 12
Maintenance and other 525 117 1,290 173
-------- ------- -------- -------
Total cost of revenues 545 125 1,346 185
-------- ------- -------- -------
Gross margin 10,626 2,439 22,080 3,693
Operating expenses:
Product development 1,685 822 3,836 2,059
Sales and marketing 5,443 903 12,049 1,765
General and administrative 1,395 292 2,823 630
-------- ------- -------- -------
Total operating expenses 8,523 2,017 18,708 4,454
-------- ------- -------- -------
Operating income (loss) 2,103 422 3,372 (761)
Other income, net 442 56 671 109
-------- ------- -------- -------
Income (loss) before income taxes 2,545 478 4,043 (652)
Income tax expense (benefit) 952 191 1,551 (261)
-------- ------- -------- -------
Net income (loss) $ 1,593 $ 287 $ 2,492 $ (391)
======== ======= ======== =======
Net income (loss) per share $ 0.08 $ 0.02 $ 0.13 $ (0.03)
======== ======= ======== =======
Shares used in net income (loss) per share computation 19,991 16,856 19,460 15,620
======== ======= ======== =======
</TABLE>
See accompanying notes to financial statements.
4
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SIEBEL SYSTEMS, INC.
Statements of Cash Flows
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,492 $ (391)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Compensation related to stock options 171 -
Depreciation and amortization 624 129
Loss on disposal of property and equipment 155 -
Provision for doubtful accounts 112 -
Licenses exchanged for equipment (1,156) -
Changes in operating assets and liabilities:
Accounts receivable, net (1,551) (2,155)
Prepaids and other (3,194) (400)
Other assets (363) 12
Accounts payable 1,591 271
Accrued expenses 4,862 907
Income taxes payable 222 -
Deferred revenue 1,499 888
-------- -------
Net cash provided by (used in) operating activities 5,464 (739)
-------- -------
Cash flows from investing activities:
Purchases of property and equipment (4,638) (646)
Purchases of short-term investments (25,210) -
-------- -------
Net cash used in investing activities (29,848) (646)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 63,212 31
Repurchases of common stock - (7)
Proceeds from issuance of preferred stock 1,532 4,560
Issuance of stockholder notes (507) (13)
Collection of stockholder notes 12 -
-------- -------
Net cash provided by financing activities 64,249 4,571
-------- -------
Change in cash and cash equivalents 39,865 3,186
Cash and cash equivalents, beginning of period 11,391 1,017
-------- -------
Cash and cash equivalents, end of period $ 51,256 $ 4,203
======== =======
Supplemental disclosures of cash flows information:
Cash paid for income taxes $ 1,280 $ -
======== =======
Noncash investing and financing activities:
Conversion of partnership units into common stock
and Series A preferred stock $ - $ 1,153
======== =======
Conversion of preferred stock into common stock $ 5 $ -
======== =======
Exercise of common stock options in exchange for
stockholder notes receivable $ 507 $ 13
======== =======
Credits used to purchase equipment $ 1,156 $ -
======== =======
</TABLE>
See accompanying notes to financial statements.
5
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SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements 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 their fair presentation. The interim
results presented are not necessarily indicative of results for any
subsequent quarter or for the year ending December 31, 1996.
For information as to the significant accounting policies followed by the
Company and other financial and operating information, see the Company's
Registration Statement on Form S-1 (No. 333-12061), filed with the
Securities and Exchange Commission on September 16, 1996 (the "Form S-1").
These financial statements should be read in conjunction with the financial
statements included in that Registration Statement.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed based on weighted average number of
common and preferred shares outstanding and is adjusted for shares issuable
upon the exercise of stock options (unless antidilutive) using the treasury
stock method.
3. PUBLIC OFFERINGS
On July 3, 1996 (the "Closing Date"), the Company closed an initial public
offering (the "Initial Offering") of 2,257,450 shares of its common stock,
which was comprised of 2,094,450 shares sold by the Company (including
294,450 shares to cover over-allotments) and 163,000 shares sold by selling
stockholders. The net proceeds to the Company of $33,113,000 from the
Initial Offering (prior to expenses) were received by the Company on the
Closing Date. Simultaneous with the closing of the Initial Offering, all
outstanding shares of preferred stock were converted to common stock on a
one-for-one basis.
On September 25, 1996 (the "Follow-On Closing Date"), the Company closed an
additional public offering (the "Follow-On Offering") of 1,500,000 shares of
its common stock, which was comprised of 750,000 shares sold by the Company
and 750,000 shares sold by selling stockholders. The net proceeds to the
Company of $30,637,500 from the Follow-On Offering (prior to expenses) were
received by the Company on the Follow-On Closing Date. On October 8, 1996
(the "Option Closing Date"), the Company closed the over-allotment portion
of the Follow-On Offering, which was comprised of 12,711 shares sold by the
Company and 212,289 shares sold by selling stockholders. The net proceeds to
the Company of $519,244 (prior to expenses) were received by the Company on
the Option Closing Date.
4. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. Short-term investments
generally consist of highly liquid municipal securities with original
maturities in excess of 90 days.
The Company has classified its investments in certain debt and equity
securities as "available for sale." Such investments are carried at fair
value, with gross unrealized gains and losses reported as a separate
component of stockholders' equity. As of September 30, 1996, gross
unrealized gains and losses have not been material.
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
-------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Certificates of deposit $ 1,325 $ -
Municipal securities 23,885 -
-------------------------------------------------------------------
$25,210 $ -
-------------------------------------------------------------------
</TABLE>
6
<PAGE>
5. ACCRUED EXPENSES
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
----------------------------------------------------------------
(unaudited)
<S> <C> <C>
Wages, Commissions, Bonuses $3,001 $ 364
Sales tax 547 486
Marketing 312 16
Other 2,077 209
----------------------------------------------------------------
$5,937 $1,075
----------------------------------------------------------------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN AND
UNDER THE CAPTION "RISK FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT ON FORM
S-1 (NO. 333-12061). ANY SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE
DATE SUCH STATEMENTS ARE MADE AND THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO THESE FORWARD-LOOKING
STATEMENTS.
OVERVIEW
Siebel Systems, Inc. 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.
Approximately 92% 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 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.
A relatively small number of customers account for a significant percentage of
the Company's license revenues. For 1995 and the first nine months of 1996,
sales to the Company's ten largest customers accounted for 93% and 74% 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 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 September 30, 1996, many of the Company's customers were in the pilot
phase of implementation of Siebel Sales Enterprise. Only a few of the Company's
customers have completed a significant portion of their enterprise-wide
development and deployment of Siebel Sales Enterprise, while most have only
recently commenced such development and 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 8% of total revenues in 1995 and
the first nine months 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.
8
<PAGE>
The Company's limited operating history 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 revenue per
order. The loss or delay of individual orders, therefore, can 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 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 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
REVENUES
Software. License revenues increased to $10,235,000 for the three months ended
September 30, 1996 from $2,400,000 for the three months ended September 30,
1995. For the nine months ended September 30, 1996, license revenues increased
to $21,373,000 from $3,586,000 for the nine months ended September 30, 1995.
License revenues increased during these periods from the respective prior year
periods due to an increase in the number of licenses of Siebel Sales
Enterprise. This increase in the number of licenses was primarily due to the
increased market and customer awareness of the Siebel Sales Enterprise product
family, and, to a lesser degree, an expansion of the Company's direct sales
organization over the past six quarters.
Maintenance and Other. Maintenance and other revenues increased to $936,000 for
the three months ended September 30, 1996 from $164,000 for the three months
ended September 30, 1995. For the nine months ended September 30, 1996,
maintenance and other revenues increased to $2,053,000 from $292,000 for the
nine months ended September 30, 1995. These increases were 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 September 30,
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.
9
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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 $525,000 for
the three months ended September 30, 1996 and $117,000 for the three months
ended September 30, 1995. For the nine months ended September 30, 1996, cost of
maintenance and other revenues increased to $1,290,000 from $173,000 for the
nine months ended September 30, 1995. These increases reflect the effect of
fixed costs resulting from the Company's expansion of its 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 to $1,685,000 for the three months ended
September 30, 1996 from $822,000 for the three months ended September 30, 1995.
For the nine months ended September 30, 1996, product development expenses
increased to $3,836,000 from $2,059,000 for the nine months ended September 30,
1995. These expenses generally decreased, as a percentage of total revenues, to
approximately 15% for the third quarter of 1996 from approximately 32% for the
third quarter of 1995. 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. The Company expects product development expenses to increase in
absolute dollar amount but to remain at approximately the same percentage of
total revenues as the third 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 to $5,443,000 for the three months ended September
30, 1996 from $903,000 for the three months ended September 30, 1995. For the
nine months ended September 30, 1996, sales and marketing expenses increased to
$12,049,000 from $1,765,000 for the nine months ended September 30, 1995. These
expenses increased, as a percentage of total revenues, to approximately 49% in
the third quarter of 1996 from approximately 35% for the third quarter of 1995.
The increases in the dollar amount of expenditures on sales and marketing and
the increase in these expenses as a percentage of total revenues reflect
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 third 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 to $1,395,000 for the three months
ended September 30, 1996 from $292,000 for the three months ended September 30,
1995. For the nine months ended September 30, 1996, general and administrative
expenses increased to $2,823,000 from $630,000 for the nine months ended
September 30, 1995. These expenses increased as a percentage of total revenues
to approximately 12% in the third quarter of 1996 from approximately 11% in the
third quarter of 1995. 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
continued expansion of the Company's administrative staff and facilities 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 remain at approximately the same
percentage as the third quarter of 1996.
OTHER INCOME, NET
Other income, net is primarily comprised of interest income earned on the
Company's cash short-term investments and reflects earnings on increasing cash
and short-term investment balances during 1996.
10
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PROVISION FOR INCOME TAXES
Income taxes have been provided at an effective rate of approximately 38%, which
is comprised primarily of federal and state taxes. The Company accounts for
income taxes in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company's cash and cash equivalents increased by
$39,865,000 from the Company's cash and cash equivalents as of December 31,
1995. This increase was primarily attributable to net income, proceeds from the
Company's initial public offering of common stock which closed on July 3, 1996
(the "Initial Offering") and the Company's additional public offering of common
stock which closed on September 25, 1996 (the "Follow-On Offering") (together,
the "Offerings"), and increases in accrued expenses, partially offset by an
increase in short-term investments and purchases of property and equipment.
The Company's cash, cash equivalents and short-term investments increased to
$76,466,000 at September 30, 1996 from $11,391,000 at December 31, 1995,
representing approximately 84% of total assets. The Company received
approximately $33.1 million in proceeds (prior to expenses) in connection with
the Initial Offering and approximately $30.6 million in proceeds (prior to
expenses) in connection with the Follow-On Offering. See Note 3 of Notes to
Financial Statements.
The Company intends to use the net proceeds of the Offerings primarily for
working capital and other general corporate purposes, including expansion of
general sales and marketing and customer support activities to accommodate
continued 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. 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 of the
Offerings have been invested in short-term, interest-bearing, investment-grade
securities.
In August 1996, the Company moved its principal administrative, sales,
marketing, support and research and development operations to a 66,000 square
foot site in San Mateo, California. The Company currently has no material
commitments for capital expenditures other than expenditures for leasehold
improvements and other costs associated with the relocation of its principal
operations and normal purchases of property and equipment, primarily computer
workstations used for product development, demonstration and customer support
purposes.
The Company believes that the net proceeds from the Offerings, 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.
FACTORS AFFECTING OPERATING RESULTS
Limited Operating History. The Company commenced operations in July 1993 and
shipped version 1.0 of its product, Siebel Sales Enterprise, in April 1995. 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 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.
11
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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 the first nine months of 1996, approximately 60%
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 Itochu
Corporation and Itochu Techno-Science Corporation, 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.
Limited Deployment. The Company first shipped Siebel Sales Enterprise version
1.0 in April 1995. As of September 30, 1996, many of the Company's customers
were in the pilot phase of implementing the Company's software. 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 product 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.
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 customer
have in the past attempted to develop sales and marketing 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 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!), Borealis Corporation (Arsenal), Brock
International (Brock Activity Manager), Early Cloud & Co. (CallFlow), IMA
(EDGE), Marketrieve Company (Marketrieve PLUS), Clarify, Inc. (Clear-Sales),
Oracle Corporation (Oracle Sales Manager), SaleSoft
12
<PAGE>
(PROCEED), Pivotal Software, Inc. (Relationship), 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.
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.
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 has expanded and intends to continue to
expand its 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 international sales accounted for approximately 8% of the
Company's total revenues in the first nine months of 1996. 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.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company is engaged in certain legal proceedings as disclosed in the
Company's Registration Statement on Form S-1. There were no significant changes
to these legal proceedings in the three months ended September 30, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
(1) 3.3 Restated Certificate of Incorporation of the Registrant.
(1) 3.4 Bylaws of the Registrant.
(1) 4.1 Reference is made to Exhibits 3.3 and 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 and June 14, 1996.
(3) 10.1 Registrant's 1996 Equity Incentive Plan, as amended.
(1) 10.2 Registrant's Employee Stock Purchase Plan.
(1) 10.3 Form of Indemnity Agreement entered into between the
Registrant and its officers and directors.
(1)(2) 10.6 Master Alliance Agreement, dated March 17, 1995, between
the Registrant and Andersen Consulting LLP.
(1)(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.
(3) 11.1 Statement Regarding Computation of Net Income (Loss) Per
Share.
(3) 27.1 Financial Data Schedule.
</TABLE>
- -----------------
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 333-03751), as amended.
(2) Confidential treatment has been granted with respect to
portions of this exhibit.
(3) Filed herewith.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the period.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIEBEL SYSTEMS, INC.
Date: November 14, 1996 By: /s/ Justin R. Dooley
-----------------------------------------
Justin R. Dooley
Vice President Finance and Administration
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
15
<PAGE>
EXHIBIT 10.1
SIEBEL SYSTEMS, INC.
AMENDED AND RESTATED
1996 EQUITY INCENTIVE PLAN
ADOPTED MAY 14, 1996
APPROVED BY SHAREHOLDERS MAY 14, 1996
AMENDED OCTOBER 14, 1996
INTRODUCTION.
In December 1994, the Board of Directors adopted the Siebel Systems, Inc.
1994 Stock Option Plan, which was later amended in February 1996. In February
1996, the Board of Directors adopted the Siebel Systems, Inc. 1996 Supplemental
Stock Option Plan. On May 14, 1996, the Board of Directors amended and restated
both of the above plans in the form of the 1996 Equity Incentive Plan. On
October 14, 1996 the Board of Directors amended and restated the 1996 Equity
Incentive Plan in the form of this Amended and Restated 1996 Equity Incentive
Plan.
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the stock of the
Company through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, (iv) rights to purchase restricted stock,
and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. Definitions.
1.
<PAGE>
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Siebel Systems, a Delaware corporation.
(f) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "Continuous Status as an Employee, Director or Consultant" means that
the service of an individual to the Company, whether an Employee, Director or
Consultant is not interrupted or terminated. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; or (ii) transfers between locations of the Company or between
the Company, Affiliates or their successors.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market of
The Nasdaq Stock
2.
<PAGE>
Market, the Fair Market Value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in common stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the common stock is quoted on The Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(iii) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Independent Stock Appreciation Right" or "Independent Right" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the
Plan.
3.
<PAGE>
(u) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(v) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Plan" means this Siebel Systems, Inc. 1996 Equity Incentive Plan.
(x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company when discretion is being
exercised with respect to the Plan.
(y) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(aa) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(bb) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation
4.
<PAGE>
Right; and the number of shares with respect to which a Stock Award shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 14.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, at any time the Board or the Committee may delegate to a committee of
one or more members of the Board the authority to grant Stock Awards to eligible
persons who (1) are not then subject to Section 16 of the Exchange Act and/or
(2) are either (i) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award,
or (ii) not persons with respect to whom the Company wishes to avoid the
application of Section 162(m) of the Code.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate ten million (10,000,000) shares of the Company's
common stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan. Shares subject to Stock Appreciation Rights
exercised in accordance with Section 8 of the Plan shall not be available for
subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5.
<PAGE>
5. Eligibility.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the Fair Market Value
of such stock at the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, following the expiration of the extended reliance period for
compliance with the requirements of Code Section 162(m) set forth in Treasury
Regulations Section 1.162-27(f)(2), no person shall be eligible to be granted
Options and Stock Appreciation Rights covering more than five hundred thousand
(500,000) shares of the Company's common stock in any calendar year.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price lower
than that set forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement arrangement, except that
payment of the common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not
6.
<PAGE>
be made by deferred payment, (which may include, without limiting the generality
of the foregoing, the use of other common stock of the Company) with the person
to whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) in any other form of legal consideration that may be
acceptable to the Board. In the case of any deferred payment arrangement,
interest shall be payable at least annually and shall be charged at the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall only be
transferable by the Optionee upon such terms and conditions as are set forth in
the Option Agreement for such Nonstatutory Stock Option, as the Board or the
Committee shall determine in its discretion. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Employment or Relationship as a Director or Consultant.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under
7.
<PAGE>
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the first paragraph of this subsection 6(f), or (ii) the
expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during which
the exercise of the Option would not be in violation of such registration
requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of such Option as set
forth in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option.
8.
<PAGE>
Any unvested shares so purchased may be subject to a repurchase right in favor
of the Company or to any other restriction the Board determines to be
appropriate.
(j) Re-Load Options. Without in any way limiting the authority of the Board
or Committee to make or not to make grants of Options hereunder, the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
common stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the common stock subject to the Re-
Load Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% shareholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(d) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. Terms of Stock Bonuses and Purchases of Restricted Stock.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded
9.
<PAGE>
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Committee, according to a deferred
payment arrangement, except that payment of the common stock's "par value" (as
defined in the Delaware General Corporation Law) shall not be made by deferred
payment, or other arrangement with the person to whom the stock is sold; or
(iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) Termination of Employment or Relationship as a Director or Consultant.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. Stock Appreciation Rights.
(a) The Board or Committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights under the Plan to
Employees, Directors of and Consultants to the Company or its Affiliates. To
exercise any outstanding Stock Appreciation Right, the holder must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Award Agreement evidencing such right. Except as provided in
subsection 5(d), no limitation shall exist on the aggregate amount of cash
payments the Company may make under the Plan in connection with the exercise of
a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option, and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to the particular Option grant to which
10.
<PAGE>
it pertains. Tandem Stock Appreciation Rights will require the holder to elect
between the exercise of the underlying Option for shares of stock and the
surrender, in whole or in part, of such Option for an appreciation distribution.
The appreciation distribution payable on the exercised Tandem Right shall be in
cash (or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the Option surrender) in an amount up to the
excess of (A) the Fair Market Value (on the date of the Option surrender) of the
number of shares of stock covered by that portion of the surrendered Option in
which the Optionee is vested over (B) the aggregate exercise price payable for
such vested shares.
(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(iii) Independent Stock Appreciation Rights. Independent Rights will be
granted independently of any Option and shall, except as specifically set forth
in this Section 8, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess of (A)
the aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (B) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.
9. Cancellation and Re-Grant of Options.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options and/or
any Stock Appreciation Rights under the Plan and/or (ii) with the consent of any
adversely affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of
11.
<PAGE>
stock, but having an exercise price per share not less than: eighty-five percent
(85%) of the Fair Market Value for a Nonstatutory Stock Option, one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock Option
or, in the case of an Incentive Stock Option held by a 10% shareholder (as
described in subsection 5(b)), not less than one hundred ten percent (110%) of
the Fair Market Value per share of stock on the new grant date. Notwithstanding
the foregoing, the Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth above if
such Option and/or Stock Appreciation Right is granted as part of a transaction
to which section 424(a) of the Code applies.
(b) Shares subject toan Option or Stock Appreciation Right canceled under
this Section 9 shall continue to be counted against the maximum award of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The repricing of an Option and/or Stock Appreciation Right
under this Section 9, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and/or Stock Appreciation
Right and the grant of a substitute Option and/or Stock Appreciation Right; in
the event of such repricing, both the original and the substituted Options and
Stock Appreciation Rights shall be counted against the maximum awards of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The provisions of this subsection 9(b) shall be applicable
only to the extent required by Section 162(m) of the Code.
10. Covenants of the Company.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is
obtained.
11. Use of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest
12.
<PAGE>
pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Employee, Director or Consultant, nor any person to whom a
Stock Award is transferred in accordance with the Plan, shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director or Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate or to continue acting as a Director or Consultant, or shall affect the
right of the Company or any Affiliate to terminate the employment of any
Employee with or without notice and with or without cause, the right of the
Company's Board of Directors and/or the Company's shareholders to remove any
Director pursuant to the terms of the Company's Bylaws and the provisions of the
California Corporations Code, or the right to terminate the relationship of any
Consultant pursuant to the terms of such Consultant's agreement with the Company
or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
13.
<PAGE>
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13. Adjustments Upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such Stock Awards shall
continue in full force and effect. In the event any surviving corporation and
its Affiliates refuse to assume or continue such Stock Awards, or to substitute
similar options for those outstanding under the Plan, then, with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants, the time during which such Stock Awards may be exercised shall be
accelerated and the Stock Awards terminated if not exercised prior to such
event.
14. Amendment of the Plan and Stock Awards.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment
14.
<PAGE>
shall be effective unless approved by the shareholders of the Company within
twelve (12) months before or after the adoption of the amendment, where the
amendment will:
(i) Increase the number of shares reserved for Stock Awards under the
Plan;
(ii) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires shareholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b 3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the shareholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
15.
<PAGE>
16. Effective Date of Plan.
The Plan shall become effective on the effective date of the registration
statement with respect to the Company's initial public offering of shares of
common stock, but no Stock Awards granted under the Plan shall be exercised
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
16.
<PAGE>
Exhibit 11.1
SIEBEL SYSTEMS, INC.
Statement Regarding Computation of Net Income (Loss) Per Share
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 1,593 $ 287 $ 2,492 $ (391)
========== ========= ========= ========
Weighted average number of shares outstanding
Common stock 15,791 8,014 10,956 8,036
Preferred stock, as if converted 167 4,238 3,362 3,695
Number of common stock equivalents as a result of stock options
outstanding using the treasury stock method (1) 4,033 746 3,184 -
Number of common stock issued and stock options granted in
accordance with SAB No. 83 - 3,858 1,958 3,889
--------- --------- --------- --------
Shares used in net income (loss) per share computation 19,991 16,856 19,460 15,620
========= ========= ========= ========
Net income (loss) per share $ 0.08 $ 0.02 $ 0.13 $ (0.03)
========= ========= ========= ========
</TABLE>
(1) Common equivalent shares from outstanding stock options are not included in
nine months ended September 30, 1995 calculations as they are antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 51,256 11,391
<SECURITIES> 25,210 0
<RECEIVABLES> 4,505 3,066
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 84,919 15,211
<PP&E> 5,878 863
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 91,177 16,091
<CURRENT-LIABILITIES> 14,303 6,129
<BONDS> 0 0
0 0
0 5
<COMMON> 17 8
<OTHER-SE> 76,846 9,934
<TOTAL-LIABILITY-AND-EQUITY> 91,177 16,091
<SALES> 10,235 2,400
<TOTAL-REVENUES> 11,171 2,564
<CGS> 545 125
<TOTAL-COSTS> 8,523 2,017
<OTHER-EXPENSES> 442 56
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 2,545 478
<INCOME-TAX> 952 191
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,593 287
<EPS-PRIMARY> .08 .02
<EPS-DILUTED> .08 .02
</TABLE>
