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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SIEBEL SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SIEBEL SYSTEMS, INC.
1855 SOUTH GRANT STREET
SAN MATEO, CALIFORNIA 94402
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 25, 1996
TO THE STOCKHOLDERS OF SIEBEL SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of SIEBEL
SYSTEMS, INC., a Delaware corporation (the "Company"), will be held on Monday,
November 25, 1996 at 11:00 a.m. local time at the Company's principal executive
offices at 1855 South Grant Street, San Mateo, California 94402 to act on the
following matters:
1. To approve an amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 40,000,000
to 100,000,000 shares.
2. To approve an amendment to the Company's 1996 Equity Incentive Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 2,000,000 shares from 6,000,000 shares to
8,000,000 shares.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 28, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at this Special Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
James C. Gaither
Secretary
San Mateo, California
November 1, 1996
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
SIEBEL SYSTEMS, INC.
1855 SOUTH GRANT STREET
SAN MATEO, CALIFORNIA 94402
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
NOVEMBER 25, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Siebel Systems, Inc., a Delaware corporation (the "Company"), for use at the
Special Meeting of Stockholders to be held on Monday, November 25, 1996 at 11:00
a.m. local time (the "Special Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Special Meeting. The Special Meeting will be held at the Company's principal
executive offices located at 1855 South Grant Street, San Mateo, California
94402. The Company intends to mail this proxy statement and accompanying proxy
card on or about November 1, 1996 to all stockholders entitled to vote at the
Special Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on October
28, 1996 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting. On the Record Date, the Company had [16,747,931] shares of
Common Stock outstanding and entitled to vote.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Special Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. The affirmative vote of a majority of the
outstanding shares of Common Stock is required to approve Proposal 1 to be voted
on at the Special Meeting. For purposes of Proposal 1, abstentions and broker
non-votes will have the same effect as negative votes. The affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote will be required to approve Proposal 2 to be voted on
at the Special Meeting. For purposes of Proposal 2, abstentions will be counted
towards the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes will be
counted towards a quorum, but will not be counted for any purpose in determining
whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive
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office, 1855 South Grant Street, San Mateo, California 94402, a written notice
of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the 1997
Annual Meeting of Stockholders must be received by the Company at its offices at
1855 South Grant Street, San Mateo, California 94402, not later than January 1,
1997 and must satisfy the conditions established by the Securities and Exchange
Commission for stockholder proposals in order to be included in the proxy
statement and proxy relating to that Annual Meeting.
PROPOSAL 1
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the Company's authorized number of shares of Common Stock from
40,000,000 to 100,000,000.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common Stock
of the Company, except for effects incidental to increasing the number of shares
of the Company's Common Stock outstanding, such as dilution of the earnings per
share and voting rights of current holders of Common Stock. If the amendment is
adopted, it will become effective upon filing of a Certificate of Amendment of
the Company's Amended and Restated Certificate of Incorporation in substantially
the form set forth as Exhibit A with the Secretary of State of the State of
Delaware.
In addition to the [16,747,931] shares of Common Stock outstanding at
October 28, 1996, as of October 28, 1996 the Board had reserved (i) 4,897,825
shares for issuance upon exercise of options granted and heretofore unexercised
under the Company's 1996 Equity Incentive Plan and (ii) 350,000 shares for
issuance under the 1996 Employee Stock Purchase Plan.
The Board desires to have additional authorized shares for future business
and financial purposes. The additional shares may be used, without further
stockholder approval, for various purposes including, without limitation, stock
dividends to existing stockholders, raising capital, providing equity incentives
to employees, officers or directors, establishing certain strategic
relationships with other companies and expanding the Company's business or
product lines through certain acquisitions of other businesses or products.
The Board has approved, subject to stockholder approval of this Proposal 1,
a 100% stock dividend to be issued on all outstanding shares of the Company's
Common Stock. The objective of the stock dividend would be to proportionately
lower the market price of the Company's Common Stock. Such lower price is
expected to increase the liquidity and broaden the marketability of the
Company's Common Stock. In addition, the stock dividend would enable the Company
to provide its employees and consultants with more attractive equity-based
incentive packages, and therefore, would allow the Company to more easily
attract and retain qualified employees and consultants. The Board has not made a
final determination as to the timing of the stock dividend and may decide, in
the best interests of the Company and due to market conditions or otherwise, not
to effect such a dividend. Therefore, no assurances can be given that the Board
will determine to effect any stock dividend if the foregoing Proposal 1 is
adopted. Other than such possible dividend, the Company has no plans,
arrangements or understandings regarding the additional shares that would be
authorized pursuant to this Proposal 1.
The additional shares of Common Stock that would become available for
issuance if this proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board
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could (i) adopt a "poison pill" which would, under certain circumstances related
to an acquisition not approved by the Board of Directors, give certain holders
the right to acquire additional shares of Common Stock at a low price, or (ii)
sell shares of Common Stock in a private transaction to purchasers who would
oppose a takeover or favor the current Board. Although this proposal to increase
the authorized Common Stock has been prompted by business and financial
considerations and not by the threat of any known or threatened hostile takeover
attempt, stockholders should be aware that approval of this proposal could
facilitate future efforts by the Company to deter or prevent changes in control
of the Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over then current market prices.
The affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock will be required to approve this amendment to the Company's
Restated Certificate of Incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR PROPOSAL 1.
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1996 EQUITY INCENTIVE PLAN
In December 1994, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1994 Stock Option Plan. In February 1996,
the Board of Directors adopted, and the stockholders subsequently approved, the
Company's 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 (the "1996 Plan") which was subsequently approved by the
stockholders of the Company. On October 14, 1996, the Board of Directors
approved the amendment increasing the number of shares authorized for issuance
under the 1996 Plan discussed below.
At October 15, 1996, options (net of cancelled or expired options) covering
an aggregate of 5,764,035 shares of the Company's Common Stock had been granted
under the 1996 Plan, and only 235,965 shares (plus any shares that might in the
future be returned to the plans as a result of cancellations or expiration of
options) remained available for future grant under the 1996 Plan. Since the end
of the last fiscal year, under the 1996 Plan, the Company granted to all current
executive officers as a group options to purchase 1,920,000 shares at exercise
prices of $1.75 to $52.50 per share, to all employees (excluding executive
officers and directors) as a group options to purchase 2,235,000 shares at
exercise prices of $1.75 to $52.50 per share and to all current directors who
are not officers as a group options to purchase 286,000 shares at exercise
prices of $1.75 to $11.50 per share.
Stockholders are requested in this Proposal 2 to approve an amendment to
the 1996 Plan to increase the number of shares authorized for issuance under the
1996 Plan by 2,000,000 from a total of 6,000,000 shares to 8,000,000 shares. The
purpose of this amendment is to ensure that the Company can continue to grant
stock options to employees and consultants at levels determined appropriate by
the Board and Compensation Committee. The Company believes that its ability to
continue to provide employees with attractive equity-based incentives is
critical in allowing it to attract and retain qualified individuals. The Company
believes the grant of stock options encourages employees to build longterm
stockholders value. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the 1996 Plan, as amended. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR PROPOSAL 2.
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SUMMARY OF TERMS OF THE 1996 PLAN
GENERAL
The 1996 Plan provides for the grant of (i) both incentive and nonstatutory
stock options, (ii) stock bonuses, (iii) rights to purchase restricted stock,
and (iv) stock appreciation rights (collectively, "Stock Awards"). Incentive
stock options granted under the 1996 Plan are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Nonstatutory stock options granted under the 1996
Plan are intended not to qualify as incentive stock options under the Code. See
"Federal Income Tax Information" for a discussion of the tax treatment of
incentive and nonstatutory stock options.
PURPOSE
The 1996 Plan was adopted to (i) provide a means by which selected
directors, officers and employees of and consultants to the Company and its
affiliates could be given an opportunity to benefit from increases in the value
of the stock of the Company, (ii) assist in retaining the services of employees
holding key positions, to secure and retain the services of persons capable of
filling such positions and (iii) provide incentives for such persons to exert
maximum efforts for the success of the Company. All of the Company's 182
employees (as of October 15, 1996) and all of the Company's directors and
consultants are eligible to participate in the 1996 Plan, however, only
employees of the Company may be granted incentive stock options or stock
appreciation rights pursuant to the Plan.
ADMINISTRATION
The 1996 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1996 Plan and, subject to the
provisions of the 1996 Plan, to determine the persons to whom and the dates on
which Stock Awards will 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 right; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
The Board of Directors is authorized to delegate administration of the 1996 Plan
to a committee composed of not fewer than two members of the Board. The Board
has delegated administration of the 1996 Plan to the Compensation Committee of
the Board. As used herein with respect to the 1996 Plan, the "Board" refers to
the Compensation Committee as well as to the Board of Directors itself.
The 1996 Plan provides that, in the Board's discretion, directors serving
on the Committee will also be "outside directors" within the meaning of Section
162(m). This limitation would exclude from the Compensation Committee (i)
current employees of the Company, (ii) former employees of the Company receiving
compensation for past services (other than benefits under a tax-qualified
pension plan), (iii) current and former officers of the Company, (iv) directors
currently receiving direct or indirect remuneration from the Company in any
capacity (other than as a director), unless any such person is otherwise
considered an "outside director" for purposes of Section 162(m).
ELIGIBILITY
Incentive stock options and stock appreciation rights related to incentive
stock options may be granted under the 1996 Plan only to employees (including
officers) of the Company and its affiliates. Employees (including officers),
directors and consultants are eligible to receive Stock Awards other than
incentive stock options and such stock appreciation rights under the 1996 Plan.
No incentive stock option may be granted under the 1996 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market
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value of the stock subject to the option on the date of grant, and the term of
the option does not exceed five years from the date of grant. For incentive
stock options granted under the 1996 Plan, the aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which such options are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000.
The Company has included in the 1996 Plan a per-employee, per-calendar year
limitation equal to 500,000 shares of Common Stock on options granted under the
1996 Plan. The purpose of adding this limitation is generally to permit the
Company to be able to deduct for tax purposes the compensation attributable to
the exercise of options granted under the 1996 Plan.
STOCK SUBJECT TO THE 1996 PLAN
If any Stock Award granted under the 1996 Plan expires or otherwise
terminates, in full or in part, without being exercised in full, the Common
Stock not acquired pursuant to such Stock Award again becomes available for
issuance under the 1996 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1996 Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 1996 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the 1996 Plan is determined by
the Board. At October 28, 1996, the closing price of the Company's Common Stock
as reported on the Nasdaq National Market System was $ per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1996 Plan is deemed to be cancelled and a new option granted.
Both the option deemed to be cancelled and the new option deemed to be granted
will be counted against the 500,000 share limitation.
The exercise price of options granted under the 1996 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) by delivery of
other Common Stock of the Company or (c) in the discretion of the Board,
pursuant to a deferred payment arrangement or in any other form of legal
consideration.
Option Exercise. Options granted under the 1996 Plan may become
exercisable ("vest") in cumulative increments as determined by the Board. Shares
covered by currently outstanding options under the 1996 Plan typically vest at
the rate of 20% of the shares subject to the option on the first anniversary of
the date of hire and 5% of such shares at the end of each quarter thereafter
during the optionee's employment or provision of services as a consultant.
Shares covered by options granted in the future under the 1996 Plan may be
subject to different vesting terms. The Board has the power to accelerate the
time during which an option may be exercised. In addition, options granted under
the 1996 Plan may permit exercise prior to vesting, but in such event the
optionee may be required to enter into an early exercise stock purchase
agreement that allows the Company to repurchase shares not yet vested at their
exercise price should the optionee leave the service of the Company before
vesting. To the extent provided by the terms of an option, and in the discretion
of the Board, an optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
Term. The maximum term of options under the 1996 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1996 Plan terminate three months after termination of the
optionee's employment or relationship as a consultant or director of the Company
or any
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affiliate of the Company, unless (a) such termination is due to such person's
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised at any time within
one year of such termination; (b) the optionee dies while employed by or serving
as a consultant or director of the Company or any affiliate of the Company, or
within a period specified by the option after termination of such relationship,
in which case the option may be exercised (to the extent the option was
exercisable at the time of the optionee's death) within the period ending on the
earlier of twelve (12) months of the optionee's death or the expiration of the
term of the option by the person or persons to whom the rights to such option
pass by will or by the laws of descent and distribution; or (c) the option by
its terms specifically provides otherwise. The option term may also be extended
in the event that exercise of the option within these periods is prohibited for
specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
The following is a description of the permissible terms of stock bonuses
and restricted stock purchase agreements under the 1996 Plan. 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
includes the substance of each of the following provisions as appropriate:
Purchase Price. The purchase price under each restricted stock purchase
agreement is such amount as the Board may determine and designate in such
agreement but in no event may 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 may determine that eligible
participants in the 1996 Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company
for its benefit.
Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement must 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 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 may
award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
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.
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 re-acquire 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.
STOCK APPRECIATION RIGHTS
The three types of Stock Appreciation Rights that are authorized for
issuance under the 1996 Plan are as follows:
Tandem Stock Appreciation Rights. Tandem stock appreciation rights may be
granted appurtenant to an option, and are generally subject to the same terms
and conditions applicable to the particular option grant to which it pertains.
Tandem stock appreciation rights 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 is 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 (i)
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 (ii) the aggregate exercise price payable for such
vested shares.
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Concurrent Stock Appreciation Rights. Concurrent rights may 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 are generally subject to the same
terms and conditions applicable to the particular option grant to which it
pertains. A concurrent right is 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 is 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 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.
Independent Stock Appreciation Rights. Independent Rights may be granted
independently of any option and are generally subject to the same terms and
conditions applicable to nonstatutory stock options. The appreciation
distribution payable on an exercised independent right may not be 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 is 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.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1996 Plan or subject to
any Stock Award granted under the 1996 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or transaction not involving the receipt
of consideration by the Company), the 1996 Plan and Stock Award outstanding
thereunder will be appropriately adjusted as to the class and the maximum number
of shares subject to such plan, the maximum number of shares which may be
granted to an employee during a calendar year, and the class, number of shares
and price per share of stock subject to such outstanding Stock Awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1996 Plan provides that, in the event of a dissolution, liquidation or
sale of substantially all of the assets of the Company, a specified type of
merger or other corporate reorganization, to the extent permitted by law, any
surviving corporation will be required to either assume Stock Awards outstanding
under the 1996 Plan or substitute similar Stock Awards for those outstanding
under such plan, or such outstanding Stock Awards will continue in full force
and effect. In the event that any surviving corporation declines to assume or
continue Stock Awards outstanding under the 1996 Plan, or to substitute similar
Stock Awards, 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 will be accelerated and the Stock Awards
terminated if not exercised prior to such corporate event. The acceleration of a
Stock Award in the event of an acquisition or similar corporate event may be
viewed as an anti-takeover provision, which may have the effect of discouraging
a proposal to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1996 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1996 Plan will terminate on May 14, 2006.
The Board may also amend the 1996 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its
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adoption by the Board if the amendment would: (a) modify the requirements as to
eligibility for participation (to the extent such modification requires
stockholder approval in order for the Plan to satisfy Section 422 of the Code,
if applicable, or Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (b) increase the number of shares
reserved for issuance upon exercise of options; or (c) change any other
provision of the Plan in any other way if such modification requires stockholder
approval in order to comply with Rule 16b-3 or satisfy the requirements of
Section 422 of the Code. The Board may submit any other amendment to the 1996
Plan for stockholder approval, including, but not limited to, amendments
intended to satisfy the requirements of Section 162(m) of the Code regarding the
exclusion of performance-based compensation from the limitation on the
deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1996 Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and distribution
and during the lifetime of the optionee, may be exercised only by the optionee.
A nonstatutory stock option may not be transferred except by will or by the laws
of descent and distribution or pursuant to a "qualified domestic relations
order." In any case, the optionee may designate in writing a third party who may
exercise the option in the event of the optionee's death. In addition, shares
subject to repurchase by the Company under an early exercise stock purchase
agreement may be subject to restrictions on transfer which the Board deems
appropriate. No rights under a stock bonus or restricted stock purchase
agreement shall be transferable except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order satisfying the
requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1996 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
8
<PAGE> 11
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1996 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses
granted under the 1996 Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award,
the recipient normally will recognize taxable ordinary income equal to the
excess of the stock's fair market value over the purchase price, if any.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the recipient elects to be taxed on receipt of the stock.
Generally, with respect to employees, the Company is required to withhold from
regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income realized by the recipient. Upon disposition of the stock, the
recipient will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock, if any, plus
any amount recognized as ordinary income upon acquisition (or vesting) of the
stock. Such gain or loss will be long or short-term depending on whether the
stock was held for more than one year from the date ordinary income is measured.
Slightly different rules may apply to persons who acquire stock subject to
forfeiture.
Stock Appreciation Rights. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation right
the fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the recipient in the year
of such exercise. Generally, with respect to employees, the Company is required
to withhold from the payment made on exercise of the stock appreciation right or
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a reporting obligation, the Company will be
entitled to a business expense deduction equal to the taxable ordinary income
recognized by the recipient.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards under the 1996 Plan, when combined with all
other types of compensation received by a covered employee from the Company, may
cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with applicable Treasury regulations issued under Section 162(m) of
the Code, compensation attributable to stock options and stock appreciation
rights will qualify as performance-based compensation, provided that: (i) the
stock award plan contains a per-employee limitation on the number of shares for
which stock options and stock appreciation rights may be granted during a
specified period; (ii) the per-employee limitation is approved by the
stockholders; (iii) the award is granted by a compensation committee comprised
solely of "outside directors"; and (iv) the exercise price of
9
<PAGE> 12
the award is no less than the fair market value of the stock on the date of
grant. Compensation attributable to restricted stock will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors"; and (ii) the
purchase price of the award is no less than the fair market value of the stock
on the date of grant. Stock bonuses qualify as performance-based compensation
under these Treasury regulations only if: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied; and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
ADDITIONAL EQUITY INCENTIVE PLANS
1996 EMPLOYEE STOCK PURCHASE PLAN
In May 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the 1996 Employee Stock Purchase Plan (the "Purchase
Plan") authorizing the issuance of 350,000 shares of the Company's Common Stock.
SUMMARY OF TERMS OF THE PURCHASE PLAN
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company. Approximately all of
the Company's approximately 182 employees (as of October 15, 1996) are eligible
to participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power to delegate
administration of such plan to a committee of not less than two Board members.
The Board may abolish any such committee at any time and revest in the Board the
administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. The offering period for any offering
may be no more than 27 months. The initial offering period commenced on June 27,
1996 and has a term of 24 months which consists of four six-month purchase
periods (each a "Purchase Period") ending on December 31, 1996, June 30, 1997,
December 31, 1997 and June 30, 1998, respectively.
10
<PAGE> 13
ELIGIBILITY
Unless otherwise specifically provided in any particular offering, any
person who is customarily employed at least 20 hours per week and five months
per calendar year by the Company (or by any parent or subsidiary of the Company
designated from time to time by the Board) on the first day of an offering
period (or the first day of a Purchase Period within an offering period) is
eligible to participate in that offering under the Purchase Plan, provided such
employee has been in the continuous employ of the Company for such period
preceding the first day of the offering period (or the first day of a Purchase
Period, as the case may be) as determined by the Board (not to exceed two
years). The Board may provide in any offering that officers of the Company who
are "highly compensated" as defined in the Code are not eligible to be granted
rights under the Purchase Plan.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15% of such
employees' earnings during the Purchase Period.
PURCHASE PRICE
For each Purchase Period, the purchase price per share at which shares are
sold under the Purchase Plan will not be less than the lower of (a) 85% of the
fair market value of a share of Common Stock on the date of commencement of the
offering or, if lower, the first day of such Purchase Period or any previous
Purchase Period within the offering, and (b) 85% of the fair market value of a
share of Common Stock on the last day of the Purchase Period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during any Purchase Period, a participant may
terminate his or her payroll deductions. A participant may reduce, increase or
begin such payroll deductions after the beginning of any offering period, only
as provided for in the applicable Offering. All payroll deductions made for a
participant are credited to his or her account under the Purchase Plan and
deposited with the general funds of the Company. A participant may not make any
additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and the maximum aggregate
number of shares which may be purchased pursuant to such offering by all
participants. If the aggregate number of shares to be purchased upon exercise of
rights granted in the offering would exceed the maximum aggregate number, the
Board would make a pro rata allocation of shares available in a uniform and
equitable manner. Unless the employee's participation is discontinued, his or
her right to purchase shares is exercised automatically at the end of the
purchase period at the applicable price. See "Withdrawal" below.
11
<PAGE> 14
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable offering period,
subject to any specific limitations in the Offering.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan in its discretion.
Unless terminated earlier, such plan will terminate at such time that all of the
shares subject to the Purchase Plan's reserve have been issued under the terms
of the Plan.
The Board may also amend the Purchase Plan in its discretion. Any amendment
of the Purchase Plan must be approved by the stockholders within 12 months of
its adoption by the Board if the amendment would (a) increase the number of
shares of Common Stock reserved for issuance under the Purchase Plan, (b) modify
the requirements relating to eligibility for participation in the Purchase Plan,
or (c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 under the Exchange Act.
Rights granted before amendment or termination of the Purchase Plan will
not be impaired by any amendment or termination of such plan without consent of
the person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
12
<PAGE> 15
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a long-term capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income. The maximum capital gains rate
for federal income tax purposes is 28% while the maximum ordinary rate is
effectively 39.6% at the present time.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be long or short-term
depending on whether the stock has been held for more than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation).
13
<PAGE> 16
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of October 8,
1996 (i) each person (or group of affiliated persons) who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each of the
Company's directors, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS NUMBER PERCENT
----------------------------------------------------------------- ---------- -------
<S> <C> <C>
Thomas M. Siebel(2).............................................. 6,330,000 37.8%
1855 S. Grant St. San Mateo, CA 94402
Andersen Consulting LLP(3)....................................... 1,388,000 8.2
1661 Page Mill Road Palo Alto, CA 94304
Patricia A. House(4)............................................. 522,000 3.1
William B. Edwards(5)............................................ 254,783 1.5
Daniel A. Turano(6).............................................. 190,000 1.1
James C. Gaither(7).............................................. 116,000 *
Eric E. Schmidt, Ph.D............................................ 11,000 *
A. Michael Spence, Ph.D.(8)...................................... 88,000 *
George T. Shaheen(9)............................................. 1,389,070 8.3
Charles R. Schwab(10)............................................ 414,000 2.5
All directors and executive officers as a group (13 9,619,853 56.1
persons)(11)...................................................
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 16,747,931 shares of Common
Stock outstanding as of October 8, 1996.
(2) Includes 120,000 shares held by Mr. Siebel's minor children, for which Mr.
Siebel has sole voting power.
(3) Mr. Shaheen, a director of the Company, is the Managing Partner of Andersen
Consulting. Mr. Shaheen disclaims beneficial ownership of such shares held
by Andersen Consulting LLP except to the extent of his partnership interest
therein. Also includes 88,000 shares issuable to Mr. Shaheen upon exercise
of options subject to vesting through February 2001.
(4) Includes 400,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through February 1998.
(5) Includes 240,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through March 1998.
(6) Includes 180,000 shares issuable upon exercise of options subject to vesting
through March 2001.
(7) Includes 28,000 shares held by GC&H Investments. Mr. Gaither, a partner of
GC&H Investments, disclaims beneficial ownership of such shares, except to
the extent of his partnership interest therein. Also includes 88,000 shares
which are subject to a right of repurchase in favor of the Company which
expires ratably through March 1998.
(8) Includes 88,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 2000.
(9) Includes 1,300,000 shares held by Andersen Consulting LLP. Mr. Shaheen, the
Managing Partner of Andersen Consulting, disclaims beneficial ownership of
such shares, except to the extent of his pecuniary interest therein. Also
includes 88,000 shares issuable upon exercise of options subject to vesting
through February 2001 and 1,070 shares held by the Shaheen Revocable Trust.
14
<PAGE> 17
(10) Includes 90,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 1999. Also includes
4,000 shares held by Mr. Schwab's children.
(11) Includes 1,300,000 shares held by Andersen Consulting LLP. See footnote (3)
above. Also includes 393,000 shares issuable upon exercise of options held
by all officers and directors subject to vesting on various dates through
March 2002. See footnotes (6) and (9).
EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings. In May 1996, Dr. Schmidt received an option to purchase 110,000 shares
of the Company's Common Stock at an exercise price per share of $11.50; in April
1996, Dr. Spence and Messrs. Gaither, Shaheen and Schwab each received an option
to purchase 22,000 shares of the Company's Common Stock at an exercise price per
share of $6.50; in April 1996, Mr. Siebel received an option to purchase
1,000,000 shares of the Company's Common Stock at an exercise price per share of
$5.50; in February 1996, Mr. Shaheen received an option to purchase 88,000
shares of the Company's Common Stock at an exercise price per share of $1.75; in
October 1995, Dr. Spence received an option to purchase 88,000 shares of the
Company's Common Stock at an exercise price per share of $0.50; and, in January
1995, Mr. Schwab received an option to purchase 90,000 shares of the Company's
Common Stock at an exercise price per share of $.05 per share. Each such grant
was made pursuant to the Company's 1996 Equity Incentive Plan. See "Proposal 2"
for a description of the Company's 1996 Equity Incentive Plan.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the three other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended December 31, 1995 were in excess of $100,000 for
services rendered in all capacities to the Company for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL AWARDS
COMPENSATION ---------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS($) OPTIONS COMPENSATION($)(1)
- ----------------------------------- ------- -------- --------------------- ------------------
<S> <C> <C> <C> <C>
Thomas M. Siebel................... 180,000 50,000 -- --
Chairman and Chief Executive
Officer............................
Patricia A. House.................. 120,000 30,000 -- --
Executive Vice President and Chief
Operating Officer
William B. Edwards................. 100,833 20,000 -- --
Vice President Engineering
Daniel A. Turano(2)................ 39,000 -- 180,000 71,196
Vice President Worldwide Sales
</TABLE>
- ---------------
(1) Includes commissions in the amount of $71,196 accrued in fiscal 1995 but
paid in fiscal 1996.
(2) In March 1996, Craig Ramsey joined the Company as Senior Vice President
Worldwide Operations. Since March 1996, Mr. Turano has served as Vice
President Eastern Americas.
15
<PAGE> 18
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUME
----------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENTAGE STOCK PRICE
SECURITIES OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM($)(5)
OPTIONS GRANTED IN PRICE MARKET EXPIRATION ---------------------------------
NAMES(1) GRANTED(2) FISCAL 1995(3) ($/SH) PRICE DATE 0% 5% 10%
- --------------------- --------- -------------- -------- ------ ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Siebel..... -- -- -- -- -- --
Patricia A. House.... -- -- -- -- -- --
William B. Edwards... -- -- -- -- -- --
Daniel A. Turano..... 180,000 13.5% 0.50 17.00 10/02/2005 2,970,000 4,894,418 7,846,852
</TABLE>
- ---------------
(1) Since the end of fiscal 1995, the Company has granted options to Ms. House
and Messrs. Siebel and Edwards. The grants were for the following number
shares and at the following exercise prices: Ms. House received options to
purchase an aggregate of 100,000 shares at an exercise price of $2.90 per
share in March 1996 and 100,000 shares at an exercise price of $5.50 in
April 1996, Mr. Siebel received an option to purchase 1,000,000 shares at an
exercise price of $5.50 per share in April 1996 and Mr. Edwards received an
option to purchase 50,000 shares at an exercise price of $5.50 per share in
April 1996.
(2) Options generally become exercisable at a rate of 20% on the first
anniversary of the vesting commencement date and 5% each quarter thereafter
and have a term of 10 years. Options may be exercised prior to vesting,
subject to the Company's right to repurchase in the event service is
terminated.
(3) Based on an aggregate of 1,331,885 shares subject to options granted to
employees of the Company in the fiscal year ended December 31, 1995,
including the Named Executive Officers.
(4) Based on the initial public offering price of $17.00 per share.
(5) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Stock price appreciation of 0%, 5% and 10%
is assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance. The potential realizable value is calculated by assuming
that the initial public offering price of $17.00 per share appreciates at
the indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day of its term at the
appreciated price.
AGGREGATED OPTIONS EXERCISED IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(2)
ACQUIRED ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Turano.......... -- -- 180,000 0 2,970,000 0
</TABLE>
- ---------------
(1) Options are immediately exercisable; however, the shares purchasable under
such options are subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior
to the vesting of such shares.
(2) Based on the difference between the initial public offering price of $17.00
per share and the exercise price.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of James C. Gaither and
Charles R. Schwab. Prior to the first meeting of the Compensation Committee in
June 1996, the Board of Directors made all determinations with respect to
compensation. Thomas M. Siebel, the Company's Chief Executive Officer and the
Chairman of the Board of Directors participated in the deliberations of the
Board of Directors concerning executive compensation.
In September 1993, Siebel Systems, L.P., a California limited partnership
(the "Partnership") was formed and Siebel Systems, Inc., a California
corporation and the predecessor of the Company, became the general partner of
the Partnership. In January 1995, all limited partners of the Partnership
voluntarily exchanged their limited partnership units on a one-for-one basis for
an aggregate of 8,080,683 shares of Common Stock and 2,344,500 shares of Series
A Preferred Stock (the "Series A Stock") of the Company. In connection with the
exchange, the Company issued (i) 88,000 shares of Common Stock to James C.
Gaither, a director of the Company and a member of the Compensation Committee
and (ii) 310,000 shares of Series A Stock to Charles R. Schwab, a director of
the Company and a member of the Compensation Committee. Mr. Gaither and Mr.
Schwab purchased their partnership units for an aggregate consideration of
$4,400 and $387,500, respectively.
James C. Gaither, a director of the Company and a member of the
Compensation Committee, is a partner of Cooley Godward LLP, which has provided
legal services to the Company since its inception.
The Company and Charles Schwab & Co., Inc. have entered into a Software
License and Services Agreement pursuant to which Charles Schwab & Co., Inc. made
payments to the Company of approximately $1,836,000 in fiscal 1995 in connection
with the license of Siebel Sales Enterprise. Charles R. Schwab, a director of
the Company and a member of the Compensation Committee, is the founder, Chairman
and Chief Executive Officer of The Charles Schwab Corporation, the parent of
Charles Schwab & Co., Inc. Such transaction was negotiated on an arms-length
basis between the parties, with the agreement to purchase the Company's products
entered into in December 1995, subsequent to the acquisition by Mr. Schwab of
Series A Stock in January 1995 and his appointment to the Company's Board of
Directors in October 1994.
The Company believes that the foregoing transactions were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
By Order of the Board of Directors
James C. Gaither
Secretary
November 1, 1996
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<PAGE> 20
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SIEBEL SYSTEMS, INC.
SIEBEL SYSTEMS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: The name of the corporation is Siebel Systems, Inc. The corporation
was originally incorporated under the name Siebel Acquisition Corporation.
SECOND: The date on which the Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware was
May 9, 1996. An Amended and Restated Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
July 9, 1996.
THIRD: The Board of Directors of the corporation, acting in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware, adopted resolutions to amend the Amended and Restated Certificate of
Incorporation of the corporation by deleting the first paragraph of Article IV
and substituting therefor a new first paragraph of Article IV in the following
form:
"This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the corporation is authorized to issue is
one hundred two million (102,000,000) shares. One hundred million
(100,000,000) shares shall be Common Stock, each having a par value of
one-tenth of one cent ($.001). Two million (2,000,000) shares shall be
Preferred Stock, each having a par value of one-tenth of one cent
($.001)."
FOURTH: Thereafter, pursuant to a resolution of the Board of Directors,
this Certificate of Amendment was submitted to the stockholders of the
corporation for their approval and was duly adopted in accordance with the
provision of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Siebel Systems, Inc. has caused this Certificate of
Amendment to be signed by its Chairman and Chief Executive Officer and attested
to by its Secretary this day of December, 1996.
SIEBEL SYSTEMS, INC.
--------------------------------------
Thomas M. Siebel
Chairman and Chief Executive Officer
ATTEST:
- --------------------------------------
James C. Gaither
Secretary
<PAGE> 21
APPENDIX A
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 the 1996 Equity Incentive Plan
to increase the number of shares authorized for issuance under the 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.
(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.
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(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 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.
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(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.
(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 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.
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(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 eight million (8,000,000) 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. 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.
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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 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
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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 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. 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
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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 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.
A-7
<PAGE> 28
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 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
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<PAGE> 29
different numbers of shares of 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 to an 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 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
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<PAGE> 30
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.
(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
A-10
<PAGE> 31
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 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.
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<PAGE> 32
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.
A-12
<PAGE> 33
PROXY
SIEBEL SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 25, 1996
The undersigned hereby appoints Thomas M. Siebel and Justin R. Dooley,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Siebel Systems, Inc.
which the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Siebel Systems, Inc. to be held at the Company's principal
executive offices at 1855 South Grant Street, San Mateo, California 94402 on
Monday, November 25, 1996 at 11:00 a.m. (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters in accordance with the following instructions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
(Continued and to be signed on reverse side.)
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<PAGE> 34
Please mark [x]
your votes as
indicated in
this example.
PROPOSAL 1: To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 40,000,000 to 100,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 2: To approve an amendment to the Company's 1996 Equity Incentive Plan
to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 2,000,000 shares from
6,000,000 to 8,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
SIGNATURE(S)________________________________________DATED_____________, 1996
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
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