<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SIEBEL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 7372 94-3187233
(PRIOR TO REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
CLASSIFICATION CODE NUMBER) NUMBER)
DELAWARE
(AFTER REINCORPORATION)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
4005 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 329-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICERS)
------------------------
THOMAS M. SIEBEL
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SIEBEL SYSTEMS, INC.
4005 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 329-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES C. GAITHER, ESQ. WILLIAM D. SHERMAN, ESQ.
ERIC C. JENSEN, ESQ. C. PATRICK MACHADO, ESQ.
COOLEY GODWARD CASTRO C. JEFFREY CHAR, ESQ.
HUDDLESON & TATUM MORRISON & FOERSTER, LLP
300 SAND HILL ROAD, BLDG. 3, SUITE 230 755 PAGE MILL ROAD
MENLO PARK, CA 94025-7116 PALO ALTO, CA 94304
(415) 843-5000 (415) 813-5600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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- ---------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value.......... 2,300,000 $15.00 $34,500,000 $11,897
- ---------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 300,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SIEBEL SYSTEMS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
----------------------------------------------- -----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page and Outside Back Cover
Page
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges.................... Prospectus Summary; Risk Factors
4. Use of Proceeds................................ Use of Proceeds
5. Determination of Offering Price................ Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution....................................... Dilution
7. Selling Security Holders....................... Principal and Selling Stockholders
8. Plan of Distribution........................... Outside Front Cover Page and Inside Front Cover
Page; Underwriting
9. Description of Securities to be Registered..... Prospectus Summary; Capitalization; Description
of Capital Stock
10. Interests of Named Experts and Counsel......... Legal Matters; Experts
11. Information with Respect to
the Registration............................. Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 15, 1996
PROSPECTUS
2,000,000 SHARES
[LOGO]
COMMON STOCK
Of the 2,000,000 shares of Common Stock offered hereby, 1,800,000 shares
are being sold by the Company and 200,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $13.00 and $15.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market under the symbol SEBL.
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ----------------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Total(3)...................... $ $ $ $
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $950,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount, and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE> 4
LOGO
LOGO
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
[GATEFOLD]
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus.
THE COMPANY
Siebel Systems, Inc. ("Siebel," "Siebel Systems" or the "Company") is an
industry leading provider of enterprise-class sales and marketing information
software systems. The Company designs, develops, markets, and supports Siebel
Sales Enterprise, a leading Internet-enabled, object oriented client/server
application software product family designed to meet the sales and marketing
information system requirements of even the largest multi-national
organizations.
In today's increasingly competitive global markets, businesses must
continuously improve their operations. Having spent considerable effort and
resources in previous years automating finance, manufacturing, distribution,
human resources management and general office operations, many businesses are
now looking to apply the leverage of information technology to their sales and
marketing processes. Unlike previous automation projects which have focused on
decreasing expenses, sales and marketing information systems focus primarily on
increasing revenues.
The Siebel Sales Enterprise is comprised of a broad range of advanced
client/server application products designed to allow corporations to deploy
comprehensive customer information systems, product information systems,
competitive information systems, and decision support systems on a global basis.
The Company's products provide support for multiple languages and multiple
currencies with support for a number of frequently interdependent distribution
channels, including direct field sales, telesales, telemarketing, distribution,
retail, and Internet-based selling.
The Siebel Sales Enterprise is built upon a modern technology foundation
including intranet and Internet enablement, client/server, object oriented
programming, 32-bit processing, OLE 2 automation, relational database support
for Oracle, Sybase, and Informix, and system support for Windows 95, Windows NT,
and UNIX. The Siebel Sales Enterprise is designed to scale to meet the needs of
large organizations deploying thousands of sales and marketing professionals
with very large data storage and retrieval requirements. The Siebel Sales
Enterprise is designed to be comprehensive in its scope of functionality and
highly configurable, allowing for highly customized industry-specific and
company-specific system deployments.
The Company's objective is to establish and maintain a global market
leadership position in the sales and marketing information systems market. The
Company's strategy is to provide high-end enterprise client/server sales and
marketing applications in a broad range of industries, extend its technological
leadership, achieve universally successful customer implementations of Siebel
Sales Enterprise, expand its global sales and support capacity, and continue to
leverage strategic alignment with leading third-party technology providers,
system integrators, and distributors.
The Company markets and sells its software through its direct sales force,
telebusiness channels, and distributors in the Americas, Europe, and Asia. The
Siebel Sales Enterprise has been adopted by customers in a wide range of
industries, including transportation, financial services, securities brokerage,
manufacturing, computers, communications, chemicals, and computer software. The
Company's customers include American President Companies Ltd., AMP Incorporated,
Andersen Consulting, Charles Schwab & Co., Inc, Cisco Systems, Inc., The Dow
Chemical Company, Digital Equipment Corporation, Informix Software, Inc., LSI
Logic Corporation, Montgomery Securities, Newbridge Networks, Inc., The Quaker
Oats Company, Texas Commerce Bank National Association, Viking Freight System,
Inc., and Unisys Corporation.
The Company's principal executive offices are located at 4005 Bohannon
Drive, Menlo Park, CA 94025. Its telephone number is (415) 329-6500. Its email
address is [email protected]. The Company maintains an Internet home page.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 1,800,000 shares
Common Stock offered by the Selling Stockholders...... 200,000 shares
Common Stock to be outstanding after the offering..... 15,530,770 shares(1)
Use of proceeds....................................... For general corporate purposes,
including working capital
Proposed Nasdaq National Market symbol................ SEBL
</TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
SEPTEMBER 13, 1993 DECEMBER 31,
(INCEPTION) TO -------------------
DECEMBER 31, 1993 1994 1995
------------------ ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................................... $ -- $ 50 $ 8,038
Operating income (loss)...................................... (114) (1,779) 372
Net income (loss)............................................ (114) (1,766) 317
Pro forma net income per share(2)............................ $ .02
Shares used in pro forma per share computation(2)............ 16,340
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues......................................... $ 30 $ 1,284 $ 2,564 $ 4,160 $ 4,709
Operating income (loss)................................ (1,208 ) 25 422 1,133 211
Net income (loss)...................................... (720 ) 42 287 708 198
Pro forma net income (loss) per share(2)............... $ (.05 ) $ -- $ .02 $ .04 $ .01
Shares used in pro forma per share computation(2)...... 14,642 16,777 16,856 16,803 16,859
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 9,757 $ 11,094 $ 33,580
Total assets.................................................... 15,609 16,946 39,432
Total stockholders' equity...................................... 10,314 11,651 34,137
</TABLE>
- ---------------
(1) Based on shares outstanding as of April 30, 1996. Excludes 3,780,950 shares
of Common Stock issuable upon exercise of stock options outstanding as of
April 30, 1996 at a weighted average exercise price of $3.37 per share. See
"Management -- Equity Incentive Plans" and Notes 4 and 7 of Notes to
Financial Statements.
(2) See Note 1 of Notes to Financial Statements for a description of the
calculation of pro forma net income (loss) per share.
(3) Pro forma reflects (i) the sale of 90,000 shares of Series D Preferred Stock
at $10.00 per share on April 30, 1996, (ii) the issuance of 75,000 shares of
Series C Preferred Stock upon the exercise of a warrant at $5.82 per share
prior to the closing of this offering and (iii) the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock upon the
closing of this offering.
(4) Adjusted to reflect the sale of 1,800,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $14.00 per
share after deduction of the estimated underwriting discount and offering
expenses payable by the Company. See "Use of Proceeds."
------------------------
Except as otherwise indicated the information contained in this Prospectus
assumes (i) no exercise of the Underwriters' over-allotment option, (ii) the
exercise of a warrant to purchase 75,000 shares of Series C Preferred Stock,
(iii) the conversion of all outstanding shares of Preferred Stock into shares of
Common Stock upon the closing of this offering and (iv) the Company's
reincorporation in Delaware. See "Description of Capital Stock" and
"Underwriting."
5
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Prospectus.
Limited Operating History; History of Operating Losses. The Company
commenced operations in July 1993 and shipped version 1.0 of its product, Siebel
Sales Enterprise, in April 1995. As of May 15, 1996, only 23 entities have
licensed Siebel Sales Enterprise and each only on a limited deployment basis.
Accordingly, the Company has only a limited operating history, and its prospects
must be evaluated in light of the risks and uncertainties encountered by a
company in its early stage of development. The new and evolving markets in which
the Company operates make these risks and uncertainties particularly pronounced.
To address these risks, the Company must, among other things, successfully
implement its sales and marketing strategy, respond to competitive developments,
attract, retain, and motivate qualified personnel, continue to develop and
upgrade its products and technologies more rapidly than its competitors, and
commercialize its products and services incorporating these enhanced
technologies. The Company incurred net losses in each quarter from inception
through the quarter ended March 31, 1995. The Company expects to continue to
devote substantial resources to its product development and sales and customer
support and, as a result, will need to generate significant quarterly revenues
to achieve and maintain profitability. The Company's limited operating history
makes it difficult to predict accurately future operating results. There can be
no assurance that any of the Company's business strategies will be successful or
the Company will be profitable in any future quarter or period. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results. Prior growth rates in the Company's revenue and net income
should not be considered indicative of future operating results. Future
operating results will depend upon many factors, including the demand for the
Company's products, the level of product and price competition, the length of
the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the budget
cycles of the Company's customers, the Company's success in expanding its
customer support organization, direct sales force and indirect distribution
channels, the timing of new product introductions and product enhancements, the
mix of products and services sold, levels of international sales, activities of
and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates and the ability of the Company to develop and market new
products and control costs. In addition, the decision to implement a sales and
marketing information system is discretionary, involves a significant commitment
of customer resources and is subject to the budget cycles of the Company's
customers. The Company's sales generally reflect a relatively high amount of
revenue per order. The loss or delay of individual orders, therefore, would have
a significant impact on the revenue and quarterly results of the Company. The
timing of license revenue is difficult to predict because of the length and
variability of the Company's sales cycle, which has ranged to date from two to
eighteen months from initial contact to the execution of a license agreement.
The Company's operating expenses are based on anticipated revenue trends and,
because a high percentage of these expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in operating losses. To the extent such expenses precede, or are not
subsequently followed by, increased revenues, the Company's operating results
would be materially and adversely affected. To date, the Company has not
experienced significant seasonality of operating results. The Company expects
that future revenues for any period may be affected by the fiscal or quarterly
budget cycles of its customers. As a result of these and other factors, revenues
for any quarter are subject to significant
6
<PAGE> 9
variation, and the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. It is likely that the Company's
future quarterly operating results from time to time will not meet the
expectations of market analysts or investors, which would likely have an adverse
effect on the price of the Company's Common Stock. In addition, fluctuations in
operating results may also result in volatility in the price of the Company's
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Business -- Marketing" and "-- Sales."
Reliance on Andersen Consulting and Other Relationships; Dependence on
System Integrators. The Company has established strategic relationships with a
number of organizations that it believes are important to its worldwide sales,
marketing and support activities and the implementation of its products. The
Company believes that its relationships with such organizations provide
marketing and sales opportunities for the Company's direct sales force and
expand the distribution of its products. These relationships also assist it in
keeping pace with the technological and marketing developments of major software
vendors, and, in certain instances, provide it with technical assistance for its
product development efforts. In particular, the Company has established a
non-exclusive strategic relationship with Andersen Consulting, a principal
stockholder of the Company, which entity has provided system integration
services in connection with a majority of the Company's customer relationships
to date. Any deterioration of the Company's relationship with Andersen
Consulting could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company has
relationships with Wilson Learning Corporation, Itochu Corporation and Itochu
Techno-Science Corporation ("Itochu"), among others. The failure by the Company
to maintain its existing relationships, or to establish new relationships in the
future, could have a material adverse effect on the Company's business, results
of operations and financial condition. The Company's customers and potential
customers frequently rely on Andersen Consulting, as well as other third-party
system integrators to develop, deploy and/or manage Siebel Sales Enterprise. If
the Company is unable to train adequately a sufficient number of system
integrators or, if for any reason such integrators do not have or devote the
resources necessary to facilitate implementation of the Company's products or if
such integrators adopt a product or technology other than Siebel Sales
Enterprise, the Company's business, operating results and financial condition
could be materially and adversely affected. See "Business -- Global Strategic
Alignment" and "Principal and Selling Stockholders."
Dependence on the Internet. The Siebel Sales Enterprise facilitates online
communication over public and private networks. The success of the Company's
products may depend, in part, on the Company's ability to introduce products
which are compatible with the Internet and on the broad acceptance of the
Internet and the World Wide Web as a viable commercial marketplace. It is
difficult to predict with any assurance whether the Internet will prove to be a
viable commercial marketplace or whether the demand for Internet related
products and services will increase or decrease in the future. The increased
commercial use of the Internet could require substantial modification and
customization of the Company's products and services and the introduction of new
products and services, and there can be no assurance that the Company would be
able to effectively migrate its products to the Internet or to successfully
compete in the market for Internet-related products and services.
The Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as a reliable
network backbone with the necessary speed, data capability, and security, or
timely development of complementary products, such as high speed modems. The
Internet has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. There can be no assurance
that the Internet infrastructure will continue to be able to support the demands
placed on it by this continued growth. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased levels of Internet activity or due to increased
governmental regulation. Moreover, critical issues concerning the commercial use
of the Internet (including
7
<PAGE> 10
security, reliability, data corruption, cost, ease of use, accessibility and
quality of service) remain unresolved and may negatively affect the
attractiveness of commerce and communication on the Internet. Because global
commerce and online exchange of information on the Internet and other similar
open wide area networks are new and evolving, there can be no assurance that the
Internet will prove to be a viable commercial marketplace. If critical issues
concerning the commercial use of the Internet are not favorably resolved, if the
necessary infrastructure and complementary products are not developed, or if the
Internet does not become a viable commercial marketplace, the Company's
business, operating results and financial condition could be materially
adversely affected. See "Business -- Products" and "-- Technology."
Risk Associated with Emerging Client/Server and Sales Information
Markets. The client/server application software market is a relatively new
market and is intensely competitive, highly fragmented and subject to rapid
change. The Company markets its products only to customers who have migrated or
are in the process of migrating their enterprise computing systems to
client/server computing environments. The Company does not market its products
to customers exclusively using legacy computer systems. The Company's future
financial performance will depend in large part on continued growth in the
number of organizations successfully adopting client/server computing
environments. There can be no assurance that the client/server market will
maintain its current level of growth or continue to grow at all. If the
client/server market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, operating results and financial
condition would be materially and adversely affected. Similarly, the market for
sales and marketing information software is intensely competitive, highly
fragmented and subject to rapid change. The Company's future financial
performance will depend primarily on growth in the number of sales information
applications developed for use in client/server environments. There can be no
assurance that the market for sales and marketing information software will
continue to grow. If the sales information software market fails to grow or
grows more slowly than the Company currently anticipates, the Company's
business, operating results and financial condition would be materially and
adversely affected. See "Business -- Industry Background," "-- Products,"
"-- Technology" and "-- Competition."
Limited Deployment. The Company first shipped Siebel Sales Enterprise
version 1.0 in April 1995. As of March 31, 1996, many of the Company's customers
were in the pilot phase of implementing the Company's software. None of the
Company's customers has completed the enterprise-wide development and deployment
of Siebel Sales Enterprise, and many have not yet commenced such deployment. As
a result, the Company's products are currently being used by only a limited
number of sales professionals. There can be no assurance that such
enterprise-wide deployments will be successful. The Company's customer licenses
frequently contemplate the deployment of the product commercially to large
numbers of sales and marketing personnel, many of whom have not previously used
application software systems, and there can be no assurance of such end-users'
acceptance of the product. The Company's product is expected to be deployed on a
variety of computer hardware platforms and to be used in connection with a
number of third-party software applications and programming tools. Such
deployment presents very significant technical challenges, particularly as large
numbers of sales personnel attempt to use the Company's products concurrently.
If any of the Company's customers are not able to customize and deploy Siebel
Sales Enterprise successfully and on a timely basis to the number of anticipated
users, the Company's reputation could be significantly damaged, which could have
a material adverse effect on the Company's business, operating results and
financial condition. In addition to revenues from new customers, the Company
expects that a significant percentage of any future revenues will be derived
from sales to existing customers. However, such customers are not contractually
committed in all cases to purchase additional licenses. If existing customers
have difficulty further deploying Siebel Sales Enterprise or for any other
reason are not satisfied with Siebel Sales Enterprise, the Company's business,
operating results and financial condition could be materially adversely
affected. See "Business -- Products."
8
<PAGE> 11
Reliance on Single Product Family. All of the Company's revenues have been
attributable to sales of Siebel Sales Enterprise and related maintenance and
training services. The Company currently expects Siebel Sales Enterprise and
related maintenance and training services to continue to account for a
substantial majority of the Company's future revenues. As a result, factors
adversely affecting the pricing of or demand for Siebel Sales Enterprise, such
as competition or technological change, could have a material adverse effect on
the Company's business, operating results and financial condition. The Company's
future financial performance will depend, in significant part, on the successful
deployment of current versions of Siebel Sales Enterprise and the development,
introduction and customer acceptance of new and enhanced versions of Siebel
Sales Enterprise and other products. There can be no assurance that the Company
will be successful in marketing Siebel Sales Enterprise product or other
products. See "Business -- Products" and "-- Marketing."
Lengthy Sales and Implementation Cycles. The license of the Company's
software products is often an enterprise-wide decision by prospective customers
and generally requires the Company to provide a significant level of education
to prospective customers regarding the use and benefits of the Company's
products. In addition, the implementation of the Company's products involves a
significant commitment of resources by prospective customers and is commonly
associated with substantial reengineering efforts which may be performed by the
customer or third-party system integrators. The cost to the customer of the
Company's product is typically only a portion of the related hardware, software,
development, training and integration costs of implementing a large-scale sales
and marketing information system. For these and other reasons, the period
between initial contact and the implementation of the Company's products is
often lengthy (ranging to date from between approximately two and twenty-four
months) and is subject to a number of significant delays over which the Company
has little or no control. The Company's implementation cycle could be lengthened
by increases in the size and complexity of its license transactions and by
delays in its customers' implementation of client/server computing environments.
Delay in the sale or implementation of a limited number of license transactions
could have a material adverse effect on the Company's business and operations
and cause the Company's operating results to vary significantly from quarter to
quarter. Therefore, the Company believes that its quarterly operating results
are likely to vary significantly in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business -- Sales"
and " -- Marketing."
Risks Associated with Expanding Distribution. To date, the Company has
sold its products primarily through its direct sales force and has supported its
customers with its technical and customer support staff. The Company's ability
to achieve significant revenue growth in the future will depend in large part on
its success in recruiting and training sufficient direct sales, technical and
customer support personnel and establishing and maintaining relationships with
its strategic partners. Although the Company is currently investing, and plans
to continue to invest, significant resources to expand its direct sales force
and its technical and customer support staff, and to develop distribution
relationships with strategic partners, the Company has at times experienced and
continues to experience difficulty in recruiting qualified personnel and in
establishing necessary third-party relationships. There can be no assurance that
the Company will be able to expand successfully its direct sales force or other
distribution channels or that any such expansion will result in an increase in
revenues. The Company believes the complexity of its products and the
large-scale deployments anticipated by its customers will require a number of
highly trained customer support personnel. There can be no assurance that the
Company will successfully expand its technical and customer support staff to
meet customer demands. Any failure by the Company to expand its direct sales
force or other distribution channels, or to expand its technical and customer
support staff, could materially adversely affect the Company's business,
operating results and financial condition. See " -- Management of Growth;
Dependence upon Key Personnel," "Business -- Strategy," " -- Sales,"
" -- Marketing," and " -- Customer Support and Training."
Dependence on Large License Fee Contracts and Customer Concentration. A
relatively small number of customers have accounted for a significant percentage
of the Company's revenues. For the
9
<PAGE> 12
year ended December 31, 1995 and the three months ended March 31, 1996, sales to
the Company's 10 largest customers accounted for 93% and 98% of total revenues,
respectively. For the year ended December 31, 1995, Charles Schwab & Co., Inc.,
Informix Software, Inc., Itochu and Unisys Corporation accounted for 23%, 20%,
12% and 10% of total revenues, respectively. The Company expects that sales of
its products to a limited number of customers will continue to account for a
significant percentage of revenue for the foreseeable future. The loss of any
major customer or any reduction or delay in orders by any such customer, or the
failure of the Company to market successfully its products to new customers
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Customers and
Markets."
Risk Associated with New Versions and New Products; Rapid Technological
Change. The software market in which the Company competes is characterized by
rapid technological change, frequent introductions of new products, changes in
customer demands and evolving industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. For example, the Company's
customers have adopted a wide variety of hardware, software, database and
networking platforms, and as a result, to gain broad market acceptance, the
Company must support Siebel Sales Enterprise on a variety of such platforms. The
Company's future success will depend upon its ability to address the
increasingly sophisticated needs of its customers by supporting existing and
emerging hardware, software, database and networking platforms and by developing
and introducing enhancements to Siebel Sales Enterprise and new products on a
timely basis that keep pace with technological developments, evolving industry
standards and changing customer requirements. There can be no assurance that the
Company will be successful in developing and marketing enhancements to Siebel
Sales Enterprise, including the Siebel Virtual Computer, that respond to
technological developments, evolving industry standards or changing customer
requirements, or that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and sale of such
enhancements or that such enhancements will adequately meet the requirements of
the marketplace and achieve any significant degree of market acceptance. If
release dates of any future Siebel Sales Enterprise enhancements or new products
are delayed or if these products or enhancements fail to achieve market
acceptance when released, the Company's business, operating results and
financial condition would be materially adversely affected. In addition, the
introduction or announcement of new product offerings or enhancements by the
Company or the Company's competitors or major hardware, systems or software
vendors may cause customers to defer or forgo purchases of the Company's
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Technology" and
"-- Development Methodology."
Competition. The market for the Company's products is intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for sales and marketing
information systems, and the Company faces competition primarily from customers'
internal information technology departments and systems integrators, as well as
from other application software providers that offer a variety of products and
services to address this market. Many of the Company's customers and potential
customers have in the past attempted to develop sales and marketing information
systems in-house either alone or with the help of systems integrators. The
Company is able to compete successfully against these customers' and potential
customers' internal development efforts only to the extent such development
efforts fail.
The Company relies on a number of systems consulting and systems
integration firms for implementation and other customer support services, as
well as recommendations of its products during the evaluation stage of the
purchase process, particularly Andersen Consulting. Although the Company seeks
to maintain close relationships with these service providers, many of them have
similar, and often more established, relationships with the Company's
competitors. If the Company is unable to develop and retain effective, long-term
relationships with these third parties, the Company's
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<PAGE> 13
competitive position would be materially and adversely effected. Further, there
can be no assurance that these third parties, many of which have significantly
greater resources than the Company, will not market software products in
competition with the Company in the future or will not otherwise reduce or
discontinue their relationships with or support of the Company and its products.
A large number of personal, departmental and other products exist in the
sales automation market. Some of the Company's competitors and their products
include Symantec (ACT!), Brock International (Brock Activity Manager), Early
Cloud & Co. (CallFlow), IMA (EDGE), Marketrieve Company (Marketreive PLUS),
Oracle Corporation (Oracle Sales Manager), SaleSoft (PROCEED), Sales
Technologies (SNAP for Windows), SalesBook Systems (SalesBook), Aurum
(SalesTrak), SalesKit Software Corporation (SalesKit) and Saratoga Systems (SPS
for Windows). Many of these competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers
than the Company. In addition, many competitors have well-established
relationships with current and potential customers of the Company. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products, than can the
Company.
It is also possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. The Company also expects
that competition will increase as a result of consolidation in the software
industry. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely affect
the Company's business, operating results and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially and adversely affect its business, operating results
and financial condition. See "Business -- Competition."
Reliance on Third-Party Vendors. The Company incorporates into its
products certain software licensed to it by third-party software developers.
Although the Company believes there are other sources for these products, any
significant interruption in the supply of such products could have a material
adverse impact on the Company's sales unless and until the Company can replace
the functionality provided by these products. Because the Company's products
incorporate software developed and maintained by third parties, the Company is
to a certain extent dependent upon such third parties' abilities to enhance
their current products, to develop new products on a timely and cost-effective
basis and to respond to emerging industry standards and other technological
changes. There can be no assurance that the Company would be able to replace the
functionality provided by the third-party software currently offered in
conjunction with the Company's products in the event that such software becomes
obsolete or incompatible with future versions of the Company's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on the Company's sales. See "Business -- Products" and
"-- Development Methodology."
Risk of Product Defects. Software products as internally complex as those
offered by the Company frequently contain errors or failures, especially when
first introduced or when new versions are released. Although the Company
conducts extensive product testing during product development, the Company has
been forced to delay commercial release of products until the correction of
software problems and, in some cases, has provided product enhancements to
correct errors in released products. The Company could in the future lose
revenues as a result of software errors or defects. The Company's products are
intended for use in sales applications that may be critical to a customer's
business. As a result, the Company expects that its customers and potential
customers have a greater sensitivity to product defects than the market for
software products generally. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found in
new products or releases after commencement of commercial shipments, resulting
in loss of revenue or delay in market acceptance, diversion of development
resources, damage to the Company's reputation, or increased service and warranty
costs, any of which could have a material
11
<PAGE> 14
adverse effect upon the Company's business, operating results and financial
condition. See "Business -- Development Methodology."
Management of Growth; Dependence upon Key Personnel. In the event that the
significant growth of the Company's revenues continues, such growth may place a
significant strain upon the Company's management systems and resources. The
Company's ability to compete effectively and to manage future growth, if any,
will require the Company to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and expand, train
and manage its employee work force. There can be no assurance that the Company
will be able to do so successfully. The Company's failure to do so could have a
material adverse effect upon the Company's business, operating results and
financial condition. The Company's future performance depends in significant
part upon the continued service of its key technical, sales and senior
management personnel, particularly Thomas M. Siebel, the Company's Chairman and
Chief Executive Officer, none of whom has entered into an employment agreement
with the Company. The loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business, operating results and financial condition. The Company's future
success also depends on its continuing ability to attract and retain highly
qualified technical, customer support, sales and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to retain its key technical, sales and managerial
employees or that it can attract, assimilate or retain other highly qualified
technical, sales and managerial personnel in the future. See
"Business -- Sales," and "-- Marketing" and "Management."
Proprietary Rights; Risks of Infringement. The Company relies primarily on
a combination of patent, copyright, trade secret and trademark laws,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company also believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are essential to
establishing and maintaining a technology leadership position. The Company seeks
to protect its software, documentation and other written materials under patent,
trade secret and copyright laws, which afford only limited protection. The
Company currently has two patent applications pending in the United States.
There can be no assurance that any patents issued to the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications, whether or not being currently challenged
by applicable governmental patent examiners, will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technology or design around any patents issued to the Company.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary. Policing unauthorized
use of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as do
the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that the Company's competitors will not independently develop
similar technology. The Company has entered into agreements with substantially
all of its customers which require the Company to place Siebel Sales Enterprise
source code into escrow. Such agreements generally provide that such parties
will have a limited, non-exclusive right to use such code in the event that
there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business or if the Company fails to meet its support obligations.
The provision of the source code may increase the likelihood of misappropriation
by third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly
12
<PAGE> 15
be subject to infringement claims as the number of products and competitors in
the Company's industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without merit,
could be time consuming to defend, result in costly litigation, divert
management's attention and resources, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, if at all. In the event of a successful claim of product
infringement against the Company and failure or inability of the Company to
license the infringed or similar technology, the Company's business, operating
results and financial condition would be materially adversely affected.
The Company relies upon certain software that it licenses from third
parties, including software that is integrated with the Company's internally
developed software and used in Siebel Sales Enterprise to perform key functions.
There can be no assurance that these third-party software licenses will continue
to be available to the Company on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in shipment
delays or reductions until equivalent software could be developed, identified,
licensed and integrated which would materially adversely affect the Company's
business, operating results and financial condition. See "Business --
Intellectual Property and Other Proprietary Rights."
International Operations. The Company's sales are primarily to large
multi-national companies. To service the needs of such companies, both
domestically and internationally, the Company must provide worldwide product
support services. As a result, the Company intends to expand its existing
international operations and enter additional international markets, which will
require significant management attention and financial resources and could
adversely affect the Company's operating margins and earnings, if any. Revenues
from export sales accounted for approximately 12% and 11% of the Company's total
revenues in the year ended December 31, 1995 and the three months ended March
31, 1996, respectively. The Company believes that in order to increase sales
opportunities and profitability it will be required to expand its international
operations. The Company has committed and continues to commit significant
management time and financial resources to developing direct and indirect
international sales and support channels. There can be no assurance, however,
that the Company will be able to maintain or increase international market
demand for Siebel Sales Enterprise. To the extent that the Company is unable to
do so in a timely manner, the Company's international sales will be limited, and
the Company's business, operating results and financial condition could be
materially and adversely affected.
International operations are subject to inherent risks, including the
impact of possible recessionary environments in economies outside the United
States, costs of localizing products for foreign markets, longer receivables
collection periods and greater difficulty in accounts receivable collection,
unexpected changes in regulatory requirements, difficulties and costs of
staffing and managing foreign operations, reduced protection for intellectual
property rights in some countries, potentially adverse tax consequences and
political and economic instability. There can be no assurance that the Company
or its distributors or resellers will be able to sustain or increase
international revenues from licenses or from maintenance and service, or that
the foregoing factors will not have a material adverse effect on the Company's
future international revenues and, consequently, on the Company's business,
operating results and financial condition. The Company's direct international
revenues are generally denominated in local currencies. The Company does not
currently engage in hedging activities. Revenues generated by the Company's
distributors and resellers are generally paid to the Company in United States
dollars. Although exposure to currency fluctuations to date has been
insignificant, there can be no assurance that fluctuations in currency exchange
rates in the future will not have a material adverse impact on revenues from
international sales and thus the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Customers and Markets,"
" -- Sales" and "-- Marketing."
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible,
13
<PAGE> 16
however, that the limitation of liability provisions contained in the Company's
license agreements may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any product liability claims to date,
the sale and support of products by the Company may entail the risk of such
claims, and there can be no assurance that the Company will not be subject to
such claims in the future. A successful product liability claim brought against
the Company could have a material adverse effect upon the Company's business,
operating results and financial condition.
Control by Existing Stockholders. Upon completion of this offering, the
Company's officers, directors and affiliated entities together will beneficially
own approximately 67% of the outstanding shares of Common Stock (66% if the
Underwriters' over-allotment option is exercised in full). In particular, upon
completion of this offering Thomas M. Siebel, the Company's Chairman and Chief
Executive Officer, will own approximately 42% of the outstanding shares of
Common Stock (41% if the Underwriters' over-allotment option is exercised in
full. As a result, these stockholders will be able to exercise control over
matters requiring stockholder approval, including the election of directors, and
the approval of mergers, consolidations and sales of all or substantially all of
the assets of the Company. This may prevent or discourage tender offers for the
Company's Common Stock unless the terms are approved by such stockholders. See
"Principal and Selling Stockholders."
No Prior Public Market for Common Stock; Possible Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering. The initial public
offering price will be determined by negotiations between the Company, the
representatives of the Selling Stockholders and the representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Company's Common Stock could be subject to significant fluctuations in
response to variations in quarterly operating results, the gain or loss of
significant orders, changes in earning estimates by analysts, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the software and computer industries and other events or
factors. In addition, the stock market in general has experienced extreme price
and volume fluctuations which have affected the market price for many companies
in industries similar or related to that of the Company and which have been
unrelated to the operating performance of these companies. These market
fluctuations may adversely affect the market price of the Company's Common
Stock.
Effect of Certain Charter Provisions; Antitakeover Effects of Certificate
of Incorporation, Bylaws and Delaware Law. Following the completion of this
offering, the Company's Board of Directors will have the authority to issue up
to 2,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The Preferred
Stock could be issued with voting, liquidation, dividend and other rights
superior to those of the Common Stock. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. Further, certain provisions of the
Company's Certificate of Incorporation, including provisions that create a
classified board of directors and certain provisions of the Company's Bylaws and
of Delaware law, could delay or make more difficult a merger, tender offer or
proxy contest involving the Company. See "Description of Capital Stock."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
numbers of shares of Common Stock in the public market following this offering
could adversely affect the market price for the Common Stock. Upon completion of
the offering, the Company will have outstanding an aggregate of 15,530,770
shares of Common Stock, assuming no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options and based upon the number of
shares outstanding as of April 30, 1996. Of these shares, all of the shares sold
in this offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"),
14
<PAGE> 17
unless such shares are purchased by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act ("Affiliates"). The remaining
13,730,770 shares of Common Stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act
("Restricted Shares"). Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 under the Securities Act. As a result of contractual
restrictions and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus; (ii) 311,760
Restricted Shares (plus 212,875 shares of Common Stock issuable to employees and
consultants pursuant to stock options that are then vested) will be eligible for
sale upon expiration of the lock-up agreements 180 days after the date of this
Prospectus; and (iii) the remainder of the Restricted Shares will be eligible
for sale from time to time thereafter upon expiration of their respective
two-year holding periods commencing on January 3, 1997, subject to the
restrictions on such sales by Affiliates and certain vesting provisions. See
"Certain Transactions," "Description of Capital Stock" and "Shares Eligible for
Future Sale."
Discretion as to Use of Proceeds. The primary purposes of this offering
are to create a public market for the Company's Common Stock, to facilitate
future access to public markets and to obtain additional working capital. As of
the date of this Prospectus, the Company has no specific plans to use the net
proceeds from this offering other than for working capital and general corporate
purposes. Accordingly, the Company's management will retain broad discretion as
to the allocation of the net proceeds from this offering. Pending any such uses,
the Company plans to invest the net proceeds in investment-grade,
interest-bearing securities. See "Use of Proceeds."
Immediate and Substantial Dilution. Investors participating in this
offering will incur immediate and substantial dilution of $11.79 per share. To
the extent outstanding options to purchase the Company's Common Stock are
exercised, there will be further dilution. If the net proceeds of this offering,
together with available funds and cash generated from operations, are
insufficient to satisfy the Company's cash needs, the Company may be required to
sell additional equity or convertible debt securities. The sale of additional
equity or convertible debt securities could result in additional dilution to the
Company's stockholders. See "Dilution" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
THE COMPANY
The Company was incorporated under the laws of California in 1993 and
intends to reincorporate in Delaware prior to the completion of this offering.
The Company's principal executive offices are located at 4005 Bohannon Drive,
Menlo Park, CA 94025. Its telephone number is (415) 329-6500. Its email address
is [email protected]. The Company maintains an Internet home page. Siebel and
Siebel Sales Enterprise are trademarks of the Company. All other trade names or
trademarks appearing in this Prospectus are the property of their respective
holders.
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<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $14.00 per share, are estimated to be $22,486,000 ($26,392,000
if the Underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."
The principal purposes of this offering are to increase the Company's
equity capital and to create a public market for the Company's Common Stock,
which will facilitate future access by the Company to public equity markets and
enhance the ability of the Company to use its Common Stock as consideration for
acquisitions and as a means for attracting and retaining key employees.
The Company intends to use the net proceeds of this offering primarily for
working capital and other general corporate purposes, including expansion of
general sales and marketing and customer support activities to accommodate
growth in the Company's business and customer base. The amounts actually
expended by the Company for working capital purposes will vary significantly
depending upon a number of factors, including future revenue growth, the amount
of cash generated by the Company's operations and the progress of the Company's
product development efforts and hence the Company's management will retain broad
discretion in the allocation of the net proceeds from this offering. In
addition, the Company may make one or more acquisitions of complementary
technologies, products or businesses which broaden or enhance the Company's
current product offerings. However, the Company has no specific agreements or
commitments, and is not currently engaged in any negotiations for any such
acquisition. Pending the uses described above, the net proceeds will be invested
in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future.
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<PAGE> 19
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
March 31, 1996 after giving effect to the reincorporation of the Company in
Delaware, (ii) the pro forma capitalization of the Company after giving effect
to the sale of 90,000 shares of Series D Preferred Stock at $10.00 per share on
April 30, 1996, the issuance of 75,000 shares of Series C Preferred Stock upon
the exercise of a warrant at $5.82 per share prior to the closing of this
offering and the conversion of all outstanding shares of Preferred Stock into
Common Stock upon the closing of this offering and (iii) the capitalization as
adjusted to reflect the sale by the Company of 1,800,000 shares of the Common
Stock offered hereby at an assumed initial offering price of $14.00, the
application of the net proceeds therefrom and the subsequent restatement of the
Company's Certificate of Incorporation.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock; $.001 par value; actual --
10,000,000 shares authorized, 4,907,655 shares issued
and outstanding; pro forma -- 10,000,000 shares
authorized, none issued and outstanding; as
adjusted -- 2,000,000 shares authorized, none issued
and outstanding........................................ $ 5 $ -- $ --
Common stock; $.001 par value; actual -- 35,000,000 shares
authorized, 8,572,760 shares issued and outstanding;
pro forma -- 35,000,000 shares authorized, 13,645,415
shares issued and outstanding; as
adjusted -- 40,000,000 shares authorized, 15,445,415
shares issued and outstanding(1)....................... 9 14 15
Additional paid-in capital................................ 11,063 12,400 34,885
Notes receivable from stockholders........................ (57) (57) (57)
Deferred compensation..................................... (1,220) (1,220) (1,220)
Retained earnings......................................... 514 514 514
------- ------- -------
Total stockholders' equity and capitalization..... $10,314 $ 11,651 $34,137
======= ======= =======
</TABLE>
- ---------------
(1) Excludes (i) 2,367,750 shares of Common Stock issuable upon the exercise of
options outstanding under the Company's 1996 Equity Incentive Plan (the
"Equity Incentive Plan") as of March 31, 1996 at a weighted average
exercise price of $1.84 per share and (ii) 350,000 shares of Common Stock
reserved for issuance under the Employee Stock Purchase Plan (the "Purchase
Plan"), none of which has been issued. As of April 30, 1996, there were
outstanding options to purchase a total of 3,780,950 shares of Common Stock
under the Equity Incentive Plan at a weighted average exercise price of
$3.37 per share and an additional 1,512,840 shares of Common Stock reserved
for grant thereunder. See "Management -- Equity Incentive Plans."
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<PAGE> 20
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996,
was approximately $11.7 million or $0.85 per share. Pro forma net tangible book
value per share is equal to the Company's total tangible assets less its total
liabilities, divided by the number of pro forma outstanding shares of Common
Stock, after giving effect to the issuance of 90,000 shares of Series D
Preferred Stock at $10.00 per share on April 30, 1996, the issuance of 75,000
shares of Series C Preferred Stock upon exercise of a warrant at $5.82 per share
prior to the completion of this offering and the conversion of all outstanding
shares of Preferred Stock into Common Stock. After giving effect to the sale of
the 1,800,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $14.00 per share), the pro forma net
tangible book value of the Company at March 31, 1996 would have been
approximately $34.1 million or $2.21 per share. This represents an immediate
increase in such net tangible book value of $1.36 per share to existing
stockholders and an immediate dilution of $11.79 per share to new investors
purchasing shares in this offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $14.00
Pro forma net tangible book value per share as of March 31, 1996...... $0.85
Increase per share attributable to new investors...................... 1.36
-----
Pro forma net tangible book value per share after this offering......... 2.21
-----
Dilution per share of Common Stock to new investors..................... $11.79
=====
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 1996,
the differences between the number of shares purchased from the Company, after
giving effect to the issuance of 90,000 shares of Series D Preferred Stock at
$10.00 per share on April 30, 1996, the issuance of 75,000 shares of Series C
Preferred Stock upon exercise of a warrant at $5.82 per share prior to the
completion of the offering and the conversion of all outstanding shares of
Preferred Stock into Common Stock, the total consideration paid and the average
price paid per share by the existing holders of Common Stock and by the new
investors at an assumed initial public offering price of $14.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(1)........... 13,645,415 88.3% $11,636,000 31.6% $ 0.85
New Investors(1)................... 1,800,000 11.7 25,200,000 68.4 14.00
---------- --- ----------- ---
Total.................... 15,445,415 100.0% $36,836,000 100.0%
========== === =========== ===
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 13,445,415 shares or approximately
87.1% of the total shares of Common Stock outstanding after this offering
and will increase the number of shares held by new investors to 2,000,000
shares or approximately 12.9% of the total shares of Common Stock
outstanding after this offering.
The foregoing tables exclude 2,367,750 shares of Common Stock issuable upon
the exercise of options outstanding as of March 31, 1996 at a weighted average
exercise price of $1.84 per share. In addition, 350,000 shares of Common Stock
have been reserved for issuance under the Purchase Plan, none of which has been
issued. To the extent that options are exercised in the future, there will be
further dilution to new stockholders. As of April 30, 1996, there were
outstanding options to purchase a total of 3,780,950 shares of Common Stock
under the Equity Incentive Plan at a weighted average exercise price of $3.37
per share and an additional 1,512,840 shares of Common Stock reserved for grant
thereunder. See "Management -- Equity Incentive Plans."
18
<PAGE> 21
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the Notes related thereto included
elsewhere in this Prospectus. The statement of operations data from September
13, 1993 (inception) to December 31, 1993 and the years ended December 31, 1994
and 1995 and the balance sheet data at December 31, 1994 and 1995 are derived
from the financial statements of the Company included elsewhere in this
Prospectus which have been audited by KPMG Peat Marwick LLP, independent
auditors. The balance sheet data at December 31, 1993 are derived from audited
financial statements not included in this Prospectus. The balance sheet data at
March 31, 1996, and the statement of operations data for the three month periods
ended March 31, 1995 and 1996 are derived from unaudited financial statements
included elsewhere in this Prospectus. The unaudited financial statements
include all adjustments, consisting only of normal recurring adjustments, that
the Company considers necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
three months ended March 31, 1996 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1996. See "Risk
Factors -- Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results."
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13,
1993 THREE MONTHS ENDED
(INCEPTION) YEAR ENDED
TO DECEMBER 31, MARCH 31,
DECEMBER 31, ----------------- -------------------
1993 1994 1995 1995 1996
------------- ------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Software......................................... $ -- $ 50 $ 7,636 $ -- $ 4,402
Maintenance and other............................ -- -- 402 30 307
------ ------- ------- ------- ---------
Total revenues.............................. -- 50 8,038 30 4,709
Cost of revenues:
Software......................................... -- -- 41 -- 26
Maintenance and other............................ -- -- 385 9 343
------ ------- ------- ------- ---------
Total cost of revenues...................... -- -- 426 9 369
------ ------- ------- ------- ---------
Gross margin..................................... -- 50 7,612 21 4,340
Operating expenses:
Product development.............................. 64 868 2,816 616 986
Sales and marketing.............................. 28 718 3,232 456 2,553
General and administrative....................... 22 243 1,192 157 590
------ ------- ------- ------- ---------
Total operating expenses.................... 114 1,829 7,240 1,229 4,129
------ ------- ------- ------- ---------
Operating income (loss)..................... (114) (1,779) 372 (1,208) 211
Other income, net.................................. -- 13 156 8 119
------ ------- ------- ------- ---------
Income (loss) before income taxes................ (114) (1,766) 528 (1,200) 330
Income tax expense (benefit)..................... -- -- 211 (480) 132
------ ------- ------- ------- ---------
Net income (loss)........................... $(114) $(1,766) $ 317 $ (720) $ 198
============= ======== ======== ======== =========
Pro forma net income (loss) per share(1)........... $ .02 $ (.05) $ .01
======== ======== =========
Shares used in pro forma per share
computation(1)................................... 16,340 14,642 16,859
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- MARCH 31,
1993 1994 1995 1996
------- ------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Cash and cash equivalents...................... $ 703 $ 1,017 $11,391 $ 9,757
Total assets................................... 750 1,203 16,091 15,609
Retained earnings (accumulated deficit)........ -- (1) 316 514
Stockholders' equity........................... 746 1,189 9,934 10,314
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the
calculation of pro forma net income (loss) per share.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was engaged principally in product and market research and
development from commencement of operations (July 1993) through March 1995. The
Company shipped version 1.0 of Siebel Sales Enterprise in April 1995 and shipped
version 2.0 in November 1995. The Company did not record material license
revenues until the three months ended June 30, 1995. License fees for Siebel
Sales Enterprise are generally based on the specific products licensed and are
determined on either a per site or per user basis. Most of the Company's
revenues to date have been derived from non-recurring license fees of the Siebel
Sales Enterprise product family. The remaining revenues are primarily
attributable to lower margin maintenance and other revenues, including training
revenues. The Company does not intend to provide a material amount of
integration and other services related to its products. Accordingly, the Company
currently expects that license revenues from Siebel Sales Enterprise will
continue to account for a substantial majority of the Company's revenues for the
remainder of fiscal 1996 and for the foreseeable future. As a result, factors
adversely affecting the pricing of or demand for Siebel Sales Enterprise could
have a material adverse effect on the Company's business, operating results and
financial condition. Most of the Company's revenues to date have been derived
from one-time license fees from customers who have received a perpetual license
to the Company's products. The Company intends to also offer its customers the
ability to license its products on a monthly or other short-term basis. The
Company expects that these shorter term license fees could, in the future,
constitute an increasing portion of its software revenues. If these shorter term
fee payments increase as a percentage of total revenues, the Company believes it
will be able to alleviate somewhat the periodic revenue concentration from
one-time non-recurring licenses.
License revenues are recognized upon execution of a license agreement by
the parties and shipment of the product if no significant obligations remain and
collection of the resulting receivable is probable. Maintenance revenues
primarily consist of fees for ongoing support and product updates, generally
determined as a percentage of the initial license fees, and are recognized
ratably over the term of the contract, which to date have typically ranged from
12 to 36 months. For all periods presented, the Company has recognized revenues
in accordance with Statement of Position 91-1, "Software Revenue Recognition."
See Note 1 of Notes to Financial Statements.
A relatively small number of customers account for a significant percentage
of the Company's license revenues. For the year ended December 31, 1995 and the
three months ended March 31, 1996, sales to the Company's ten largest customers
accounted for 93% and 98% of total revenues, respectively. For the year ended
December 31, 1995, Charles Schwab & Co., Inc., Informix Software, Inc., Itochu
and Unisys Corporation accounted for 23%, 20%, 12% and 10% of total revenues,
respectively. The Company expects that sales of its products to a limited number
of customers will continue to account for a large percentage of revenue for the
foreseeable future. The license of the Company's software products is often an
enterprise-wide decision by prospective customers and generally requires the
Company to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's products. In addition, the
implementation of the Company's products involves a significant commitment of
resources by prospective customers and is commonly associated with substantial
reengineering efforts which may be performed by the customer or third-party
system integrators. The cost to the customer of the Company's product is
typically only a portion
20
<PAGE> 23
of the related hardware, software, development, training and integration costs
of implementing a large-scale sales and marketing information system. For these
and other reasons, the sales and implementation cycles associated with the
license of the Company's products is often lengthy (ranging to date from two and
twenty-four months) and is subject to a number of significant delays over which
the Company has little or no control. Given these factors and the expected
customer concentration, the loss of a major customer or any reduction or delay
in sales to or implementations by such customers could have a material adverse
effect on the Company's business, operating results, and financial condition.
As of March 31, 1996, many of the Company's customers were in the pilot
phase of implementation of Siebel Sales Enterprise. None of the Company's
customers has completed the enterprise-wide development and deployment of Siebel
Sales Enterprise, and many have not yet commenced such deployment. As a result,
the Company's products are currently being used by only a limited number of
sales professionals. If any of the Company's customers are not able to customize
and deploy Siebel Sales Enterprise successfully and on a timely basis to the
number of anticipated users, the Company's reputation could be significantly
damaged, which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company markets its products in the United States through its direct
sales force and internationally through its sales force and a distributor in
Japan. International revenues accounted for 12% and 11% of total revenues in
1995 and the three months ended March 31, 1996, respectively. The Company is
increasing its international sales force and seeking to establish distribution
relationships with appropriate strategic partners and expects international
revenues will account for an increasing portion of total revenues in the future.
As a result, failure to cost-effectively maintain or increase international
sales could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company's revenues have increased in each of the last five quarters,
and the Company had net income in each of the last four quarters. The Company's
limited operating history, however, makes the prediction of future operating
results difficult. The Company's future operating results will depend on many
factors, including demand for the Company's products, the level of product and
price competition, the ability of the Company to develop and market new products
and to control costs, the Company's relationship with system integrators, the
ability of the Company to expand its customer support staff and direct sales
force and indirect distribution channels and the ability to attract and retain
key personnel. There can be no assurance that any of the Company's business or
strategies will be successful or that the Company will be able to sustain
profitability on a quarterly or annual basis.
Prior growth rates in the Company's revenue and net income should not be
considered indicative of future operating results. Future operating results will
depend upon many factors, including the demand for the Company's products, the
level of product and price competition, the length of the Company's sales cycle,
the size and timing of individual license transactions, the delay or deferral of
customer implementations, the Company's success in expanding its direct sales
force, indirect distribution channels and customer support organization, the
timing of new product introductions and product enhancements, the mix of
products and services sold, levels of international sales, activities of and
acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates and the ability of the Company to develop and market new
products and control costs. The Company's sales generally reflect a relatively
high amount of revenues per order. The loss or delay of individual orders,
therefore, can have a significant impact on the revenues and quarterly results
of the Company. The timing of license revenue is difficult to predict because of
the length of the Company's sales cycle, which to date has ranged from two to
eighteen months from initial contact to the execution of a license agreement.
Because the Company's operating expenses are based on anticipated revenue trends
and because a high percentage of the Company's expenses are relatively fixed, a
delay in the recognition of
21
<PAGE> 24
revenue from a limited number of license transactions could cause significant
variations in operating results from quarter to quarter and could result in
losses. To the extent such expenses precede, or are not subsequently followed
by, increased revenues, the Company's operating results would be materially
adversely affected. As a result of these and other factors, revenues for any
quarter are subject to significant variation, and the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
It is likely that in some future quarter the Company's operating results will be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock would likely be adversely affected.
To date the Company has not experienced significant seasonality of
operating results. The Company expects that future revenues for any period may
be affected by the fiscal or quarterly budget cycles of its customers.
RESULTS OF OPERATIONS
The Company first generated significant software license revenues in the
second quarter of 1995 when the Company shipped version 1.0 of Siebel Sales
Enterprise. As a result, the Company believes that period-to-period comparisons
solely of annual operating results are less meaningful than an analysis of
recent quarterly operations. Accordingly, the Company is providing a discussion
and analysis of the Company's operating results primarily focused upon the five
quarters ended March 31, 1996.
22
<PAGE> 25
The following tables set forth the quarterly statement of operations for
the five quarters ended March 31, 1996, including such amounts expressed as a
percentage of total revenues. This quarterly information is unaudited, but has
been prepared on the same basis as the annual financial statements and, in the
opinion of the Company's management, reflects all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
information for the periods presented. Such statement of operations should be
read in conjunction with the Company's audited financial statements and notes
thereto included elsewhere herein. Operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995(1) 1995 1995 1995 1996
---------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Software............................................... $ -- $1,186 $ 2,400 $4,050 $4,402
Maintenance and other.................................. 30 98 164 110 307
------- ------ ------ ------ ------
Total revenues.................................... 30 1,284 2,564 4,160 4,709
Cost of revenues:
Software............................................... -- 4 8 29 26
Maintenance and other.................................. 9 47 117 212 343
------- ------ ------ ------ ------
Total cost of revenues............................ 9 51 125 241 369
------- ------ ------ ------ ------
Gross margin........................................... 21 1,233 2,439 3,919 4,340
Operating expenses:
Product development.................................... 616 621 822 757 986
Sales and marketing.................................... 456 406 903 1,467 2,553
General and administrative............................. 157 181 292 562 590
------- ------ ------ ------ ------
Total operating expenses.......................... 1,229 1,208 2,017 2,786 4,129
------- ------ ------ ------ ------
Operating income (loss)........................... (1,208) 25 422 1,133 211
Other income, net........................................ 8 45 56 47 119
------- ------ ------ ------ ------
Income (loss) before income taxes...................... (1,200) 70 478 1,180 330
Income tax expense (benefit)........................... (480) 28 191 472 132
------- ------ ------ ------ ------
Net income (loss)................................. $ (720) $ 42 $ 287 $ 708 $ 198
======= ====== ====== ====== ======
Pro forma net income (loss) per share.................... $ (.05) $ -- $ .02 $ .04 $ .01
======= ====== ====== ====== ======
Shares used in pro forma per share computation........... 14,642 16,777 16,856 16,803 16,859
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software................................................. 92.4% 93.6% 97.4% 93.5%
Maintenance and other.................................... 7.6 6.4 2.6 6.5
----- ----- ----- -----
Total revenues...................................... 100.0 100.0 100.0 100.0
Cost of revenues:
Software................................................. 0.3 0.3 0.7 0.6
Maintenance and other.................................... 3.7 4.6 5.1 7.2
----- ----- ----- -----
Total cost of revenues.............................. 4.0 4.9 5.8 7.8
----- ----- ----- -----
Gross margin............................................. 96.0 95.1 94.2 92.2
Operating expenses:
Product development...................................... 48.4 32.1 18.2 21.0
Sales and marketing...................................... 31.6 35.2 35.3 54.2
General and administrative............................... 14.1 11.4 13.5 12.5
----- ----- ----- -----
Total operating expenses............................ 94.1 78.7 67.0 87.7
----- ----- ----- -----
Operating income.................................... 1.9 16.4 27.2 4.5
Other income, net.......................................... 3.5 2.2 1.1 2.5
----- ----- ----- -----
Income before income taxes............................... 5.4 18.6 28.3 7.0
Income tax expense....................................... 2.2 7.4 11.3 2.8
----- ----- ----- -----
Net income.......................................... 3.2% 11.2% 17.0% 4.2%
===== ===== ===== =====
</TABLE>
- ---------------
(1) Due to insignificant revenues, presentation as a percentage of revenues is
not meaningful.
23
<PAGE> 26
REVENUES
Software. License revenues increased from $50,000 in 1994 to $7.6 million
in 1995. License revenues increased from $1.2 million in the second quarter of
1995 to $4.4 million in the first quarter of 1996. This increase was primarily
due to increased market and customer awareness of the Siebel Sales Enterprise
product family, and due in part to an expansion of the Company's direct sales
organization over the past five quarters.
Maintenance and Other. Maintenance and other revenues increased from less
than $100,000 in each of the first two quarters of 1995 to $307,000 in the first
quarter of 1996. Such increase was due to the more widespread licensing of
products to customers pursuant to agreements with a maintenance component.
Earlier licenses typically involved pilot installations which did not include
maintenance.
COST OF REVENUES
Software. Cost of software license revenues includes product packaging,
documentation and production. Cost of license revenues through March 31, 1996
have averaged less than 1% of software license revenues. All costs incurred in
the research and development of software products and enhancements to existing
products have been expensed as incurred, and, as a result, cost of license
revenues includes no amortization of capitalized software development costs. See
Note 1 of Notes to Financial Statements.
Maintenance and Other. Cost of maintenance and other revenues consists
primarily of personnel, facility and systems costs incurred in providing
customer support. Cost of maintenance and other revenues aggregated $385,000 in
1995 and $343,000 in the first quarter of 1996. These costs increased
significantly in the last two quarters of 1995 and the first quarter of 1996,
and exceeded maintenance and other revenues in the fourth quarter of 1995 and
the first quarter of 1996. Such increases reflect the effect of fixed costs
resulting from the Company's investment during 1995 and the first quarter of
1996 in a larger maintenance and support organization in anticipation of
entering into an increasing number of licenses with maintenance components.
OPERATING EXPENSES
Product Development. Product development expenses include expenses
associated with the development of new products, enhancements of existing
products and quality assurance activities, and consist primarily of employee
salaries, benefits, consulting costs and the cost of software development tools.
Product development expenses increased from $64,000 in 1993 to $2.8 million in
1995 and were $1.0 million for the three months ended March 31, 1996. These
expenses generally decreased, as a percentage of total revenues, from
approximately 48% in the second quarter of 1995 to approximately 21% for the
three months ended March 31, 1996. The increases in the dollar amount of product
development expenses were primarily attributable to costs of additional
personnel in the Company's product development operations. The Company
anticipates that it will continue to devote substantial resources to product
development and that product development expenses will increase in absolute
dollar amount but are expected to decline somewhat as a percentage of total
revenues from the level of the first quarter of 1996.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, field
office expenses, travel and entertainment and promotional expenses. Sales and
marketing expenses increased from $28,000 in 1993 to $3.2 million in 1995 and
were $2.6 million for the three months ended March 31, 1996. These expenses
increased as a percentage of total revenues from approximately 32% in the second
quarter of 1995 to approximately 54% in the first quarter of 1996. The increases
in the dollar amount of expenditures on sales and marketing and the increase in
these expenses as a percentage of total revenues reflects primarily the hiring
of additional sales and marketing personnel and, to a lesser degree, costs
associated with expanded promotional activities. The Company expects that sales
and marketing expenses will continue to increase in absolute dollar amount as
the Company continues to expand its sales and
24
<PAGE> 27
marketing efforts, establishes additional sales offices and increases
promotional activities. These expenses are expected to remain at approximately
the same percentage of total revenues as the first quarter of 1996.
General and Administrative. General and administrative expenses consist
primarily of salaries and occupancy costs for administrative, executive and
finance personnel. These expenses increased from $22,000 in 1993 to $1.2 million
in 1995 and were $590,000 for the three months ended March 31, 1996. These
expenses generally decreased as a percentage of total revenues from
approximately 14% in the second quarter of 1995 to approximately 13% in the
first quarter of 1996. The increases in the absolute dollar amount of general
and administrative expenses were primarily due to increased staffing and
associated expenses necessary to manage and support the Company's increased
scale of operations. The Company believes that its general and administrative
expenses will continue to increase in absolute dollar amount as a result of the
anticipated expansion of the Company's administrative staff to support growing
operations and the expenses associated with being a public company. The Company
anticipates that its general and administrative expenses as a percentage of
total revenues should decrease somewhat in the future.
OTHER INCOME, NET
Other income, net is primarily comprised of interest income earned on the
Company's cash and cash equivalents and reflects earnings on increasing cash
balances during 1995 and the first quarter of 1996.
PROVISION FOR INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
Company elected to be treated as an S corporation for 1993 and 1994. As an S
corporation, any loss allocated to the Company passed through to its
shareholder. Accordingly, the Company is not entitled to utilize the net
operating losses of the business incurred prior to that date. The Company
terminated the S corporation election effective January 1, 1995. Income taxes
for 1995 and the three months ended March 31, 1995 and 1996 have been provided
at an effective rate of 40%, which is comprised primarily of federal and state
taxes.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31, 1996, the Company funded its operations
primarily through cash flows from operations, the private sale of equity
securities totaling $11.6 million and, to a limited extent, bank indebtedness.
As of March 31, 1996, the Company had $9.8 million in cash and cash equivalents,
and no outstanding bank indebtedness.
Net cash used in operating activities was $119,000, $1.7 million and
$505,000 in 1993, 1994 and for the three months ended March 31, 1996,
respectively, and net cash provided by operating activities was $2.8 million in
1995. In 1995, the $2.8 million of net cash provided by operating activities was
primarily attributable to net income of $317,000 and increases in accounts
payable of $479,000, accrued expenses of $1.1 million and deferred revenue of
$4.2 million, offset by an increase in accounts receivable of $3.1 million and
prepaid and other assets of $411,000. For the three months ended March 31, 1996,
net cash used by operating activities of $505,000 was primarily attributable to
net income of $198,000 and increases in accounts payable of $313,000, offset by
a decrease in deferred revenue of $692,000.
Deferred revenues consist primarily of the unrecognized portion of revenues
under maintenance and support contracts (which revenues are deferred and
recognized ratably over the term of such contracts) and advance payment of
software license fees. Capital expenditures were primarily for computer
workstations used for product development, product demonstrations, customer
benchmarks and customer support. See Notes 2 and 3 of Notes to Financial
Statements.
25
<PAGE> 28
To date, the Company's investing activities have consisted primarily of
purchases of property and equipment, primarily for computer workstations used
for product development, product demonstrations and customer support. The
Company's capital expenditures were $38,000, $176,000, $872,000 and $1.3 million
in 1993, 1994, 1995 and the first quarter of 1996, respectively. The Company
expects that its capital expenditures will increase as the Company's employee
base grows. As of March 31, 1996, the Company did not have any material
commitments for capital expenditures.
The Company believes that the net proceeds from the offering, together with
the anticipated cash flows from operations, cash, cash equivalents and
short-term investments, will be adequate to meet its cash needs for working
capital and capital expenditures for at least the next twelve months.
Thereafter, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity financings or from other sources. There
can be no assurance that such additional financing will be available at all, or
that such financing, if available, will be obtainable on terms favorable to the
Company and will not be dilutive to the Company's then current stockholders.
26
<PAGE> 29
BUSINESS
INTRODUCTION
Siebel Systems, Inc. ("Siebel," or "Siebel Systems" or the "Company") is an
industry leading provider of enterprise-class sales and marketing information
software systems. The Company designs, develops, markets, and supports Siebel
Sales Enterprise, a leading Internet-enabled, object oriented client/server
application software product family designed to meet the sales and marketing
information system requirements of even the largest multi-national
organizations.
In today's increasingly competitive global markets, businesses must
continuously improve their operations. Having spent considerable effort and
resources in previous years automating finance, manufacturing, distribution,
human resources management, and general office operations, many businesses are
now looking to apply the leverage of information technology to their sales and
marketing processes. Unlike previous automation efforts which have focused on
decreasing expenses, sales and marketing information systems focus primarily on
increasing revenues.
The Siebel Sales Enterprise is comprised of a broad range of advanced
client/server application products designed to allow corporations to deploy
comprehensive customer information systems, product information systems,
competitive information systems, and decision support systems on a global basis.
The Company's products provide support for multiple languages and multiple
currencies with support for a number of frequently interdependent distribution
channels including direct field sales, telesales, telemarketing, distribution,
retail and Internet-based selling.
INDUSTRY BACKGROUND
Business Need for Sales and Marketing Information Systems
While the automation of finance, manufacturing, distribution, human
resources management, and general office operations has brought significant
improvements in efficiency and cost control to most large organizations, sales
and marketing remain largely unautomated. The Company believes that the need to
deploy closed-loop sales and marketing information systems is growing as
organizations expand their distribution channels and increasingly face stronger
competitive market pressures. The business demand to deploy sales and marketing
information systems is driven typically both by the goal of increasing sales
productivity as well as the concern that unless the organization applies
information technology to this largely unautomated process, it will rapidly
become uncompetitive.
LOGO
The market for sales and marketing information systems is large and rapidly
growing. An independent market research firm estimates the market size as $750
million in 1995, growing to more than a $3 billion market in the 1998 timeframe.
Availability of Enabling Technologies
The Company believes the adoption of sales and marketing information
systems is being further fueled by the recent availability of enabling
technologies which allow, perhaps for the first time, the successful deployment
of highly distributed, mobile sales and marketing applications. Some of these
27
<PAGE> 30
enabling technologies include: object oriented programming technologies
including Visual C++ and ActiveX from Microsoft, 32-bit PC operating systems
offering exceptionally accessible user-interface technologies like Windows 95
and Windows NT, rapid acceptance of intranets and the Internet, high bandwidth
communications capability, rich data manipulation technologies such as Adobe
Acrobat, SQL data replication services from Oracle, Sybase and Informix, as well
as continued advances in microprocessor central processing unit (CPU) capacity
from companies such as Intel.
The Challenges of Developing Sales and Marketing Information Systems
Enterprise-class application software includes categories such as financial
information systems, manufacturing systems, human resource management systems
and sales and marketing information systems. From a software engineering
perspective, these applications are considered to be quite complex, requiring
very large resource requirements and posing significant technical barriers.
Many organizations which have attempted to custom develop enterprise-class
applications have found their efforts to be largely unsuccessful, requiring cost
prohibitive resources -- frequently well beyond those initially budgeted. Many
large organizations have spent many millions of dollars over several years on
custom sales and marketing information systems development. Many of these
internally developed projects have been repeatedly delayed in implementation,
and often canceled altogether without reaching production.
To overcome the costs and risks associated with internally developed
enterprise-class applications software, many organizations are seeking to
purchase commercially designed, developed, tested, and supported application
software solutions.
Market Opportunity
The Company believes that the commercial availability of a high-end,
enterprise-class sales and marketing information software system will enable
companies to be successful in automating their sales processes. The Company
believes such an application should include the following characteristics:
- Complete Functionality -- Comprehensive customer information
systems, product information systems, competitive information systems and
decision support.
- Modern Technology Foundation -- Internet and intranet enabled,
client/server, object oriented, 32-bit, Windows 95 and Windows NT,
distributed relational database support, and OLE 2 automation support.
- Scalability -- Support for thousands of concurrent users deployed
globally, in multiple languages and multiple currencies with very large
relational datastores.
- Configurability -- Configurable business objects providing a high
level of application customization and modification.
The Company believes that an enterprise-class application which exhibits
these characteristics will enable organizations to deploy sales and marketing
information systems at lower cost, with lower risk, and more rapidly than
internally developed, custom project developments.
THE SIEBEL SOLUTION
The Company is a leading provider of Internet-enabled, object oriented,
enterprise-class sales and marketing information systems designed to meet the
needs of the largest and often multi-national corporations.
The Siebel Sales Enterprise is designed to offer users a sales information
solution that is functionally comprehensive, is built upon a modern technology
foundation, and scales to meet the requirements of global organizations with
thousands of concurrent users and very large data stores.
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The Siebel solution is designed to be easily and extensively configured to meet
industry-specific and company-specific data processing and data presentation
requirements.
Functionally Complete
The Siebel Sales Enterprise is designed to provide comprehensive
functionality for sales and marketing information systems. The product is
intended to enable the organization to deploy enterprise-wide customer
information systems, product information systems, competitive information
systems, and decision support systems. Specific functionality includes
opportunity and account management, product and revenue forecasting, quote
generation, on-line sales tools, contact and activity management,
correspondence, and fulfillment. The Siebel Sales Enterprise fully supports team
selling across multiple distribution channels, including field sales, telesales,
telemarketing, and resellers. The Siebel products are designed to improve
internal and external communications by integrating with e-mail, Intranet, and
Internet services.
Modern Technology Foundation
The Siebel solution takes advantage of advanced developments in technology
and computing trends, including Internet and intranet interoperability,
client/server architecture, configurable business object technology
(BusObjects), 32-bit processing capability, modern client operating systems
(Microsoft Windows 95 and Windows NT), relational database servers, modern
development environments (Microsoft Visual C++ and Microsoft Foundation Class
Libraries (MFC)), inter-application communications technologies (Microsoft OLE 2
automation), and database synchronization and replication.
The Company believes that the use of these modern and industry-standard
development tools and technologies has allowed Siebel Systems to rapidly develop
a comprehensive, configurable, scalable, enterprise-wide sales and marketing
information solution. The Company has found that sales of the Siebel Sales
Enterprise have been facilitated by the fact that its customers and prospects
have often adopted as their MIS standards these same technologies used by the
Company to build its products.
The Company believes that the technologies utilized to build Siebel Sales
Enterprise -- many of which became commercially available in the
mid-1990s -- are required to build an application of this nature and scope.
Prior to the advent of these technologies, it was technically difficult to build
an application robust enough to solve the information requirements of global
sales and marketing organizations. The Company believes that its use of these
technologies provides the Company with a significant market advantage.
Internet-Enabled
The Siebel Sales Enterprise is designed to allow organizations to harness
the power of the Internet to facilitate the sales and marketing process. The
Siebel Sales Enterprise enables organizations to use the Internet today for
collecting leads, for accessing product, company, and competitive information
through the World Wide Web, for communicating with prospects and customers via
Internet-based electronic mail, and for synchronizing and replicating data for
remote computing.
Many companies are using their home page to collect sales leads. The
information that prospects enter on these web-based forms, (e.g., name, address,
etc.) can be automatically loaded into Siebel Sales Enterprise using a standard
CGI (Common Gateway Interface) interface to the Siebel Open Interface product.
These leads can then be automatically processed by the Siebel Sales Enterprise
Territory Manager, assigned, and distributed to the appropriate sales
representatives for follow up.
Siebel customers can also integrate Siebel Sales Enterprise and the Siebel
Encyclopedia with a web browser, such as Netscape Navigator, to allow their
sales and marketing professionals to automatically access remotely stored and
managed sales and marketing information using the World
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Wide Web. In this fashion, sales and marketing personnel can readily gain remote
access to a broad range of product marketing materials including product
catalogues, data sheets, and annual reports.
Using Siebel Sales Enterprise, sales professionals can send correspondence
and quotes to their prospects and customers via Internet-based electronic mail.
Siebel Remote offers support for sales representatives using the Internet
to synchronize their remote laptop computers with the corporate databases. Users
can employ a local Internet access point to communicate "directly" with the
corporate headquarters to exchange account information, access new leads, and
transfer new orders. The Company believes the ability to use the Internet for
data synchronization or "docking" offers significant communications cost savings
to Siebel users and allows easy, local, and lower cost computer access globally.
Enterprise Scalability
The Siebel solution is designed to scale to meet the needs of organizations
whose sales forces range in size from fifty to thousands, including even the
largest global organizations. Many of the Company's customers have purchased
Siebel Sales Enterprise with the goal of automating thousands of sales
professionals, accessing multiple gigabyte data repositories.
BusObject Configurability
Siebel Systems employs the use of BusObjects, highly configurable object
oriented business objects, as the basic building blocks of Siebel Sales
Enterprise. Included in the family of Siebel BusObjects are Opportunity,
Account, Customer, Product, Competitor, and Campaign. The BusObjects contain
semantic information about the sales and marketing entities as well as
presentation and navigation logic. BusObjects control the physical access of
information from data sources, organize and inter-relate that information, and
present the information to the user. The Siebel Sales Enterprise is comprised of
a collection of these BusObjects. Highly configurable at the object code level,
Siebel BusObjects are designed to allow organizations to rapidly configure the
application to meet their business requirements while ensuring a clear and
consistent upgrade path for future releases. This flexibility is expected to
substantially reduce the long term maintenance costs associated with deploying a
highly configured application.
STRATEGY
The Company's objective is to establish and maintain a clear market
leadership position in the sales and marketing information systems market. The
Company's strategy incorporates the following key elements:
Target Large Multi-National Customers in a Broad Range of Industries
The Company has designed Siebel Sales Enterprise to satisfy the most
rigorous sales and marketing information requirements of multi-national
corporations that frequently employ multi-tiered distribution strategies. Siebel
Sales Enterprise is intended to be deployed on a global basis, and provide
shared, up-to-date information for field sales, telemarketing, telesales,
marketing, as well as third party reseller sales organizations. The Company
intends to leverage its experience and continue to target product development,
sales and marketing activities to expand worldwide market acceptance of Siebel
Sales Enterprise.
Maintain and Extend Technology Leadership
The Siebel Sales Enterprise utilizes advanced information technology. The
Company employs the use of configurable business objects (BusObjects) designed
to allow organizations to configure the Siebel application to fit their unique
needs while ensuring a clear and consistent upgrade path for future releases.
The Company has developed sophisticated database synchronization capabilities
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intended to allow large numbers of mobile users to intermittently connect and
synchronize their local database with a server database. The Company has made
extensive use of object oriented technology to develop a multi-tiered
architecture that supports Internet-enabled client/server, three-tiered, and
N-tiered deployment strategies. The Company intends to continue to commit
substantial resources to maintain and extend its technology leadership.
Global Strategic Alignment
The Company seeks to promote widespread adoption of Siebel Sales Enterprise
through the establishment of strategic relationships with leading systems
integrators, technology providers, and distributors.
Siebel Systems has formalized a global strategic business alliance with
Andersen Consulting to maximize the growth and establish the market leadership
position of both companies in the sales and marketing information systems
marketplace. Under this worldwide alliance agreement, Andersen Consulting
provides Siebel-related professional services including sales force
reengineering, change management, systems integration, configuration,
installation, project management, and training. This relationship provides
Siebel and Siebel's customers immediate access to a highly trained global
professional service organization to customize, integrate and deploy medium- and
large-scale Siebel implementations.
The Company has technology and marketing relationships with other leading
companies such as Itochu, Microsoft Corporation, and Adobe Systems, Inc. and
intends to establish additional relationships.
These relationships allow the Company to focus on its core areas of
expertise of developing and marketing sales and marketing information systems
software, while leveraging the strength and influence of complementary
information technology leaders in their respective domains.
Fully Exploit Intranets and the Internet
The Siebel Sales Enterprise has been designed to expand the accessibility
of comprehensive sales and marketing information to sales representatives
through the use of intranets and the Internet as a global, low-cost, virtual
private network. The Company believes that the Internet will enable the entire
corporate sales and marketing information base, currently only available to
users connected over a LAN (local area network) or WAN (wide area network), to
be available without geographic limitation for the low cost of a local Internet
connection. This capability will allow organizations to deploy targeted,
fully-informed sales professionals wherever needed without the expense and
overhead of physical offices or private leased lines. The Company plans to
continue to exploit the Internet and believes that in the future it will allow
customers to access comprehensive information systems which recommend and
deliver customized products, goods, and services directly to customers
worldwide.
Promote Successful Customer Implementations
The Company's success is dependent upon its customers' successful
implementation of Siebel Sales Enterprise. As a result, the Company actively
supports the customer's deployment efforts by providing Internet and telephone
technical support, providing comprehensive instructor-led training, and
assigning an account management team that consists of a sales representative,
technical account manager, and an executive sponsor. To objectively measure
customer satisfaction, Siebel Systems employs an independent third-party
organization to perform periodic customer satisfaction audits.
Expand Global Sales Capabilities
The Company intends to expand its global sales capabilities by increasing
the size of its direct sales organization in major markets and continuing to
leverage distributors in other selected markets. In
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particular, the Company plans to expand its direct sales and marketing
activities in North America, Europe, Asia, and Latin America. The Company has
operations in North America, the United Kingdom, and Japan and has recently
introduced with Itochu localized versions of the Siebel Sales Enterprise for the
Japanese market. The Company is developing localized versions for major European
markets.
PRODUCTS
The Siebel Sales Enterprise is a client/server application software product
family designed to meet the sales and marketing information system requirements
of large, frequently multi-national, organizations. The Siebel Sales Enterprise
is comprised of a broad range of advanced client/server application products
designed to allow corporations to deploy comprehensive customer information
systems, product information systems, competitive information systems and
decision support systems on a global basis. The Company shipped Siebel Sales
Enterprise version 1.0 in April 1995 and subsequently shipped version 2.0 in
November 1995.
The Siebel Sales Enterprise supports Windows for Workgroups, Windows 95 and
Windows NT Workstation clients. The Siebel application server operates on
Windows NT and can work with Oracle, Sybase and Informix relational databases
operating on a variety of leading UNIX servers and Windows NT database server
platforms.
The Company generally licenses its software based on the number of users.
The core system, Siebel Sales Enterprise, has a U.S. list price of $1,750 per
user. Additional product options range from $250 to $500 per module, resulting
in a total list price of $5,500 per user for an end-user system that includes
all software options. The Siebel application server products are priced and
licensed separately. Initial direct sales to an end-user customer have typically
ranged from $500,000 to $2,000,000, with certain transactions that have been
considerably greater than $2,000,000. The Company also provides software
maintenance service, training, and associated professional services. The Siebel
Sales Enterprise is usually licensed to customers who intend to automate the
sales organization of an entire corporation or of a large division. Licenses to
date of the Company's products range from 50 to 5,000 users.
Siebel Sales Enterprise
The Siebel Sales Enterprise is designed to allow teams of sales and
marketing professionals to manage sales information throughout the entire sales
cycle. This core application includes the Opportunity Management, Account
Management, Contact Management, Activity Tracking, and Calendar Systems. The
Siebel Sales Enterprise product family includes the following products:
Siebel Sales Enterprise Product Options
Siebel Encyclopedia
Siebel Encyclopedia provides sales professionals with access to a
repository of their organization's sales-related information, including complete
product information, competitive information, decision support, and on-line
literature. This information is published by marketing and made available to all
end users of the system. Built-in communications capabilities are designed to
allow users to immediately send information to prospects, customers, and other
sales team members via intranet, Internet, electronic mail, fax, or automated
correspondence and fulfillment.
Siebel Office
Siebel Office automates the process of sending sales-related letters to
customers. Correspondence includes integration with Microsoft Word, pre-built
correspondence templates, and automatic mail-merge capabilities. Fulfillment
center support is provided for internal and third-party fulfillment centers to
ensure timely completion of fulfillment requests.
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Siebel Quotes
Siebel Quotes allows sales professionals to develop, verify, submit and
revise quotes tailored to meet customer requirements. Siebel Quotes is designed
to permit the generation of quotes from the opportunity information, verify that
quotes are complete and accurate, print quotes using a variety of formats, or
use electronic mail integration to send quotes to customers over the Internet.
Siebel Revenue Forecasting
Siebel Revenue Forecasting allows sales professionals to estimate and
submit forecasts based on opportunity revenues over time. Revenue Forecasting
includes opportunity-driven forecasts, forecast revisions, forecast histories,
forecast roll-up capabilities, and forecast reports. Forecasting for managers
based on direct report forecasts is included.
Siebel Product Forecasting
Siebel Product Forecasting allows sales professionals to estimate and
submit forecasts based on unit volume and price estimates over time. Siebel
Product Forecasting includes opportunity product-driven forecasts, forecast
revisions, forecast histories, forecast roll-up capabilities, and forecast
reports. Forecasting for managers based on direct report forecasts is included.
Siebel Reports
With Siebel Reports, users have access to the full power of Query by
Example to generate ad-hoc reports on-line, or view reports in graphical format.
Siebel Reports integrates with multiple report writers and delivers more than
forty-five pre-built reports.
Siebel EIS
Siebel EIS (Executive Information System) allows sales and marketing
professionals and executives to dynamically visualize information in a variety
of on-line graphical formats. The Siebel EIS system comes with more than
thirty-five pre-defined graphical charts, as well as the ability to configure
new graphics that are uniquely tailored to user requirements.
Siebel Remote
Siebel Remote enables mobile computing by allowing the exchange and
synchronization of information between the sales professional's mobile computer
and the corporate server. Mobile users can access the full functionality of
Siebel Sales Enterprise on a laptop, and later "dock" to upload local changes to
the server, initiate requests for information, and download any new information
from the corporate server. Siebel Remote is Internet-enabled to support database
synchronization and replication over the Internet.
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LOGO
Siebel Tele-Business
Siebel Tele-Business enables lead generation and lead qualification by
equipping Telesales and Telemarketing professionals with powerful Campaign, Call
Scripting, and Campaign Administrator functionality, as well as automated call
distributor (ACD) integration.
Siebel Systems Administration and Management Software
Siebel Systems Administration and Management Software is separately priced
and licensed and includes the following components:
Siebel BusObject Configurator
For application configuration, Siebel Sales Enterprise provides business
object definitions to allow systems administrators, systems integrators, and
application developers to configure the look, feel, data content, and layout of
Siebel business objects without changing source code.
Siebel Marketing Manager
The Siebel Sales Enterprise provides a suite of marketing administration
screens to define and manage marketing information such as product information,
product lines, price lists, competitive information, and decision issues.
Siebel Sales Manager
The Siebel Sales Enterprise provides a suite of systems administration
screens to define and manage key system information such as employees, sales
territories, available views, user responsibility profiles, and system
preferences.
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Siebel Anywhere
The Siebel Sales Enterprise provides a server component of Siebel Remote
to manage all information exchanges with mobile users. Siebel Anywhere monitors
this two-way exchange, and provides comprehensive conflict detection and
resolution facilities designed to ensure the integrity and synchronization of
both server and client databases.
Siebel Enterprise Integration Manager
The Siebel Enterprise Integration Manager allows Siebel customers to
exchange information with other enterprise applications such as manufacturing,
accounting, human resource, and customer service applications.
Siebel Database Extension Manager
For application configuration, the Siebel Database Extension Manager is
designed to allow Siebel customers to capture the information most appropriate
for their business. Siebel Database Extension Manager provides an intuitive
graphical user interface for systems administrators to extend the Siebel Sales
Enterprise database schema while maintaining a clear and consistent upgrade path
to future releases.
Siebel Product Advantages
Application Configuration
The Company's customers each have unique business needs requiring
varying levels of application configuration. For instance, different
organizations may use a combination of direct sales, field sales, telesales or
third-party sales. The Company believes it has anticipated these needs and
provides configurable business objects to allow organizations to configure the
application to fit their unique requirements. Each business object defines the
look and feel, the information displayed, and the workflow of the application to
address major areas of business functionality. For example, a business object
may contain the business logic and rules that describe how leads and prospects
are shared across multiple sales channels. The Company provides a range of
business objects that address the sales and marketing process.
The Siebel Sales Enterprise is designed to allow organizations to
configure and modify the properties and attributes of the business objects
without needing to change application source code. The Company believes this
approach to configuration provides several key benefits:
- Reduces cost of configuration and maintenance,
- Permits a clear and consistent upgrade path for future releases of
Siebel software, and
- Allows the Company to maintain and support a single source code base
that addresses the varied needs of its customers.
Application configuration is typically performed by a Siebel systems
integration partner or the customer's MIS department. The software may be
configured in a number of manners including:
- User Preferences
- System Administration Preferences
- Server Preferences
- Database Extensibility
- Object Definitions
This combination of configuration options offers customers extensive
configurability without having to write or modify source code.
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Data Synchronization and Replication
Typically, field sales, telesales, and order administration personnel
all have contact with the same customers. Sharing information about customers
across often geographically dispersed sales teams can be difficult. The
challenge is to provide every member of the sales team with up-to-date
information on the account or prospect. Siebel Remote, the Company's
asynchronous replication technology, addresses the data synchronization and
distribution needs of these sales teams. Siebel has applied for a patent on its
proprietary data synchronization and replication technology. See
"-- Intellectual Property and Other Proprietary Rights." Siebel considers this
technology a major source of competitive market advantage.
LOGO
Mobile users can utilize Siebel Remote to synchronize their laptop or
hand-held computer with the central data repository. Adhering to preestablished
visibility rules, Siebel users can share overlapping subsets of data to support
team selling. Traditional data synchronization approaches are typically limited,
allowing only the primary user to update shared data. With such limited
approaches, other synchronized users only have read access to information
entered by the primary owner. Siebel Remote is designed to allow any designated
member of the sales team to update records, and to automatically synchronize the
updates with all other users.
Giving multiple users update rights can create conflicts, particularly when
some users operate in a mobile environment and are not permanently connected to
the central data repository. The Siebel application supports an extensive set of
configurable business rules that detect and resolve conflicts at the database
field level.
Siebel uses a sophisticated "net change" architecture with highly
compressed transaction instructions designed to minimize network traffic, reduce
data synchronization time, and limit network expense. Siebel's architecture is
network independent, allowing data synchronization to occur over LAN, WAN,
dial-up, as well as intranet and Internet connections.
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LOGO
User Interface
The Siebel Sales Enterprise has been ergonomically designed by human
factors experts to be easy to use and easy to learn. The use of Microsoft
Windows and Microsoft Office compliant user interface technology is intended to
ensure that users are immediately familiar with buttons, menus, and
industry-standard commands. A tab metaphor allows users to click a mouse and
view the key components of their sales and marketing information system.
Siebel's patent-pending Thread Manager technology displays, records, and
restores the user's screen-by-screen navigation. System-wide, context sensitive
help provides immediate answers to questions.
Scalability and Performance
Scalability and performance are key considerations in enterprise-wide
deployments of sales information systems. For large deployments, thousands of
users need to access a common data repository that may contain tens of gigabytes
of information. Scalability and performance are impacted by design and
implementation of both the client and server side of the application. The Siebel
Sales Enterprise is designed to address the performance and usability issues
that arise in large-scale deployments.
Efficient Use of Network Bandwidth to Optimize Performance
The Siebel client/server architecture is designed to minimize network
traffic to optimize performance. The client is designed to intelligently cache
data and group database queries and updates, thereby minimizing the number of
transactions over the network. This feature is intended to allow large numbers
of users to be simultaneously connected over a LAN or WAN to a single
centralized database while exhibiting acceptable performance characteristics.
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High Performance Application Server
The Siebel Application Server has been designed to permit high throughput.
Multiple application servers can run in parallel with a single database server.
The number of users each Siebel Application Server can support varies depending
on the type and frequency of data updates, as well as the particular server
hardware.
High Performance Computer Hardware and Database Support
The Siebel products are designed to support scalability for large user
communities by taking advantage of leading, high-performance databases and
computer hardware. The Company supports industry-standard approaches to
high-performance such as symmetric multi-processing hardware which allows
multiple processors within one server machine.
Support for Global Enterprises
Built for multi-national customers, Siebel software supports international
standards in several ways, including support for:
- Local language support for non-English application deployment
- Multiple currencies, exchange rates and automatic currency conversions
- International time, date, and phone number conventions
- Double-byte Asian character sets
The Company recently introduced with Itochu a localized version of Siebel
Sales Enterprise for the Japanese market. The Company is developing localized
versions for major European markets.
TECHNOLOGY
The Siebel Sales Enterprise exploits an advanced information technology
platform. The Siebel products embrace and incorporate the utility and power of
the Internet. The application is built on a multi-tiered client/server
architecture supporting Microsoft Windows clients and a variety of Windows NT
and UNIX servers running Informix, Oracle, and Sybase relational databases. The
technology foundation includes object oriented application development, MS
Visual C++, MFC Libraries, OLE 2 automation, 32- or 16-bit processing, and
Microsoft Windows and Microsoft Office user interface compliance. The Siebel
application is a modern, scalable and customizable enterprise-wide client/server
sales and marketing information system. The application uses a multi-tiered
architecture with separate client, application server and database server layers
connected together over a LAN or a WAN.
The Siebel N-Tiered Architecture
The Company has developed an advanced, N-tiered object oriented software
architecture. The software architecture is designed to provide Siebel customers
with robust flexibility in application deployment to meet the unique needs of
the organization. Using Siebel's N-tiered architecture, customers have the
flexibility of deploying their applications on remote pen-based and laptop
computers, on standalone desktop workstations, on client/server systems, on
highly distributed replicated "mainframe" server environments, and in the
future, on the Internet, or any combination thereof.
The Company believes that the utility offered by this flexible architecture
provides a major source of competitive market advantage.
Siebel's N-tiered architecture separates the information presentation,
application logic, database access, and interprocess communications layers into
separate tiers in order to partition and distribute the application components
to run where necessary.
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Siebel's N-tiered architecture currently supports the following application
deployments: Personal Computer for mobile sales professionals and Client/Server
for connected sales professionals. The Company expects that this architecture
can be further exploited to support additional Internet-enabled application
deployment configurations in future Siebel product releases, including the
Virtual Computer for Internet-connected sales professionals, resellers,
partners, and individual buyers.
LOGO
Personal Computer
The Siebel Personal Computer supports mobile sales professionals who
typically use either laptop or hand-held portable computers. These users are not
permanently connected to their organization's network and usually run the client
disconnected from the central database. Mobile clients have a local SQL database
that contains a subset of the information in the server database. While the
field sales representative is disconnected from the LAN or WAN, the local
database is used for information access and updates. This gives mobile users the
complete range of functionality available to connected users anywhere their
business takes them. The Company's patent-pending technology allows for exchange
and synchronization of information between the mobile and server databases,
using LANs, WANs, dial-up, or the Internet.
Client/Server
The Siebel Client/Server software connects the client to the server
database via a LAN or WAN. Connected clients access and update information
directly against the server database. A typical use for a connected client is a
telesales representative based in the headquarters office, or possibly in a
regional office connected to headquarters through a WAN.
Virtual Computer
The Siebel Virtual Computer product is being designed to expand the
accessibility of comprehensive sales and marketing information to sales
representatives through use of the Internet as a global, low-cost, virtual
private network. The Company believes that the Internet will enable the entire
corporate sales and marketing information base, previously available only to
users connected over a LAN or WAN, to be available without geographic limitation
for the cost of a local Internet connection.
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The Company believes that this capability will allow organizations to deploy
targeted, fully-informed sales professionals wherever needed without the expense
and overhead of private leased lines or physical offices.
The Siebel Virtual Computer is being designed to deliver one-to-one sales
and marketing on a global basis. The Company believes this may well re-define
the concept of "selling on the Internet." Today, buyers can order anything from
consumer goods to automobiles using the Internet to browse home pages and tour
virtual shopping malls. This passive approach to selling can be characterized as
using the Internet simply as an inexpensive way to deliver an electronic
catalog. Electronic catalogs do not currently lead customers through the product
evaluation and selection phase, do not up-sell or cross-sell, only offer limited
customized alternatives, and add no incremental value to the selling process.
The Company believes that such electronic catalogs are not a replacement for a
true sales professional who can identify the specific product configuration that
best suits the customers' needs and requirements.
The Company believes that its N-tiered architecture will, in the future, be
able to provide organizations with the technology foundation to deliver a
powerful new generation of selling applications over the Internet. For example,
through a web page, buyers may have access to a virtual sales consultant, fully
knowledgeable about the buyer's demographics, interests, and buying patterns.
The Company believes that this virtual sales approach will allow organizations
to dynamically target marketing programs, tailor solutions, and deliver
customized products, goods and services worldwide, directly to customers based
on their needs. The Company believes that this use of the Internet may
fundamentally change the economics of selling by permitting organizations to
reduce distribution and selling costs, while simultaneously increasing revenues,
and growing new markets through disintermediation. See "Risk Factors -- Risk
Associated with New Versions and New Products; Rapid Technological Change."
LOGO
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CUSTOMERS AND MARKETS
Siebel has targeted large organizations operating globally and conducting
business through multiple sales channels. The Company believes this market has
been underserved by existing vendors and offers substantial opportunities to the
Company. The following were customers of the Company as of May 15, 1996.
<TABLE>
<S> <C>
FINANCIAL SERVICES
- Charles Schwab & Co., Inc.
- Frank Russell Company
- Montgomery Securities
- Texas Commerce Bank National
Association
SERVICE
- Andersen Consulting LLP
SOFTWARE
- BMC Software, Inc.
- Informix Software, Inc.
- Pure Software, Inc.
TRANSPORTATION
- American President Companies Ltd.
- Viking Freight System, Inc.
CONSUMER PACKAGED GOODS
- The Dial Corp
- The Quaker Oats Company
MANUFACTURING
- Cisco Systems, Inc.
- Newbridge Networks, Inc.
- The Dow Chemical Company
- AMP Incorporated
- LSI Logic Corporation
- Hewlett-Packard Japan, Ltd.
- Digital Equipment Corporation
- Unisys Corporation
</TABLE>
The Siebel Sales Enterprise has been selected for use by a wide variety of
industries as illustrated by the following customer examples:
Financial Services
In December 1995, a prominent retail brokerage firm selected Siebel Sales
Enterprise as its principal sales solution to be used by more than 4,000
brokers. After detailed tests of multiple products in the areas of
configurability, scalability, and functionality, the firm chose Siebel Sales
Enterprise. The Siebel Sales Enterprise is designed to allow shared, up-to-date
access to customer profiles and histories and to improve the organization's
responsiveness to their nearly 3.5 million active customer accounts and
prospects.
Transportation
A large transportation company was challenged with providing their sales
representatives with the tools necessary to compete in a global marketplace.
After conducting an extensive review of sales and marketing information systems,
they selected Siebel Sales Enterprise. This implementation is being designed to
integrate internal customer information with government trade data to establish
tariffs, optimize loads and provide increased customer service. Utilizing
Siebel's work flow capabilities, these sales representatives are expected to be
able to balance multiple customer inquiries and increase their revenue
generating capacity.
Manufacturing
A global technology provider has adopted Siebel Sales Enterprise for use in
selling complex high-technology products and services. After a multi-year
internal development effort and many millions of dollars in expense, they
canceled their project and selected Siebel as their sales and marketing
information solution. They have employed a multi-tiered distribution strategy
and plan to use Siebel to manage many elements of the sales process. The
customer intends to use Siebel to help consolidate formerly disparate customer
databases and prospect lists. Operating over a worldwide WAN, telesales
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representatives are expected to be able to access sales history, product
information, create quotations, take orders, share information and route leads
to field representatives.
MARKETING
The Company's marketing efforts are directed at establishing a market
leadership position for Siebel Systems. Targeted at sales, marketing and
information technology executives within large, multi-national organizations,
Siebel's marketing programs are focused on creating awareness and generating
interest in the Siebel solution.
Siebel Systems is an active participant in the Digital Consulting Inc.
(DCI) Field and Sales Automation and Internet EXPO, a leading international
conference and trade show in the sales and marketing information systems
marketplace. In 1996, the DCI Field and Sales Automation/Internet Conferences
are being held in San Jose, Chicago, Toronto, Boston, Atlanta, and London. These
week-long conferences will feature Thomas M. Siebel, Chairman and Chief
Executive Officer of the Company, delivering the plenary Keynote Address. In
addition, Siebel Systems will demonstrate its products and showcase its
partners' solutions.
Thomas Siebel is a frequent speaker at many software industry events,
including the Sales Automation Association and Insight Technology Group's Chief
Sales Officer Conferences, as well as the Andersen Global Consulting Seminar.
Mr. Siebel joined Bill Gates, Chairman of Microsoft, in the delivery of the
Keynote Address at WindowsWorld 95 in Atlanta, showcasing the Siebel Sales
Enterprise to an audience of more than 5,000.
Supporting its worldwide direct and indirect sales channels, the Company's
co-marketing efforts include conducting global Sales and Marketing Executive
Briefings including the following:
<TABLE>
<S> <C> <C> <C> <C> <C>
- Sales Automation Executive Briefings with Microsoft and Andersen Consulting
Chicago Los Angeles New York Irvine Philadelphia
Toronto Detroit Hartford Houston Boston
- Mobile Computing for Sales Executives with Hewlett-Packard
Tampa St. Louis Ft. Lauderdale Atlanta
Raleigh Minneapolis New York Houston
Dallas Denver Seattle San Francisco
Fullerton Van Nuys Glastonbury Chicago
Cincinnati Toronto Boston
- Increasing Revenue for Sales Executives with Informix
Phoenix Boston Chicago New York
Denver San Francisco Irvine Dallas
Atlanta Detroit Minneapolis
- The Impact of Sales and Marketing Information Systems in Japan with Itochu
Tokyo Osaka
</TABLE>
Thomas Siebel and Michael Malone, co-author of the best-selling business
book, The Virtual Corporation, have written Virtual Selling, Going Beyond the
Automated Sales Force to Achieve Total Sales Quality. Published by the Free
Press, a division of Simon & Schuster, in February 1996, Virtual Selling
describes the business benefits of applying information technology to the sales
and marketing process.
Siebel's marketing personnel engage in a variety of marketing activities,
including managing and maintaining the Siebel web site, issuing newsletters,
making direct mailings, placing advertisements, conducting public relations and
establishing and maintaining close relationships with recognized industry
analysts.
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SALES
Siebel sells its software primarily through its direct sales organization.
As of April 30, 1996 the Company's direct sales force consisted of 18 sales
professionals located in eight domestic offices (Boston, New York, McLean,
Atlanta, Chicago, Dallas, Los Angeles, and Menlo Park) and two international
offices (London and Tokyo). The field sales force is complemented by two
telemarketing representatives situated in the Company's Menlo Park, California
headquarters. Technical sales support is provided by 11 sales consultants
co-located in the field offices. Sales in the Asia/Pacific market are leveraged
through a co-exclusive distribution agreement with Itochu. The Company currently
intends to add sales representatives and sales consultants in the United States,
Germany, France, the United Kingdom, Spain, Japan, Australia and Singapore.
The Company deploys sales teams consisting of both sales and technical
professionals who work with strategic systems integration partners to create
industry specific proposals, presentations and demonstrations which address the
exact requirements of the customer. The decision makers within Siebel's
prospective customers for the Siebel products are their executive management
teams, frequently consisting of the Chief Information Officer, VP Sales, VP
Marketing, the Chief Financial Officer and the Chief Executive Officer.
The Company manages its business using Siebel Sales Enterprise, running on
the Company's intranet. The Siebel product is used to manage all aspects of the
sales process and to share information among members of the sales team and
Siebel management.
The Company believes that the deployment of an integrated sales and
marketing information system offers a distinct competitive advantage, and that
focusing corporate resources on revenue generating systems offers greater return
than automation efforts focused on cost reduction in areas such as human
resources and accounting. The Company believes its customers' understanding of
this fact establishes the value of the Siebel Sales Enterprise and shortens the
sales cycle.
The Company's sales process consists of several phases: lead generation,
initial contact, lead qualification, needs assessment, company overview, product
demonstration, proposal generation and contract negotiations. In a number of
instances the Company believes that its relationships with strategic partners,
including systems integrators, has substantially shortened the Company's sales
cycle. Partners have generated and qualified sales leads, made initial customer
contacts and assessed needs prior to Siebel's introduction. Additionally,
systems integration partners have assisted the Company in the creation of
customized presentations and demonstrations which the Company believes enhance
the competitive position. While the sales cycle varies substantially from
customer to customer, for initial sales it has ranged to date from two to
eighteen months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
GLOBAL STRATEGIC ALIGNMENT
An important element of the Company's sales and marketing strategy is to
continue to enhance and expand its strategic partnerships with key industry
leaders in order to increase market awareness and acceptance of Siebel Systems.
The Company believes these relationships with industry leaders help to ensure
that Siebel Systems delivers a comprehensive solution to its customers for their
sales and marketing information system needs. The Company has established
relationships with organizations in three general categories: systems
integrators, development and distribution partners and educational services
providers.
System Integrators
Andersen Consulting -- Strategic Business Alliance
Siebel Systems and Andersen Consulting have formalized a strategic business
alliance designed to maximize the growth and establish the market leadership
position of both organizations in the sales and marketing information systems
marketplace. Worldwide in scope, the parties' agreement includes
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cooperative specification and development of products and solutions, technology
transfer and training, and joint marketing and sales programs. Under this
agreement, Siebel promotes Andersen as its preferred systems integration
partner, and Andersen promotes Siebel as its preferred software solution for
sales and marketing information systems. In connection with the strategic
alignment, Andersen Consulting has made an equity investment in Siebel Systems
and George Shaheen, the Managing Partner of Andersen Consulting, serves on the
Company's Board of Directors. See "Management" and "Principal and Selling
Stockholders."
Andersen Consulting provides Siebel-related professional services including
sales force reengineering, change management, system integration, configuration,
installation, project management and training. Andersen Consulting operates
Siebel Configuration Centers in Menlo Park, London, and Tokyo. Siebel believes
that this relationship provides Siebel and Siebel's customers immediate access
to a highly trained global professional service organization to customize,
integrate and deploy medium-and large-scale Siebel deployments. Andersen
Consulting has provided system integration services in connection with a
majority of the Company's customers to date. See "Risk Factors -- Reliance on
Andersen Consulting and Other Relationships; Dependence on Other Relationships."
Siebel Systems and Andersen Consulting conduct joint market development and
promotional activities, including joint advertising, joint public relations,
jointly developed brochures and market-specific product demonstrations, and
collateral. The two companies jointly participate in industry events and conduct
Executive Briefings both in worldwide seminar programs as well as in DCI Field
and Sales Automation tradeshows. Siebel and Andersen Consulting have created a
global joint selling model targeted at specific vertical markets and major
accounts.
Other Systems Integrators
The relationship between Siebel Systems and Andersen Consulting is
non-exclusive. As requested by its customers, Siebel Systems frequently
collaborates with other systems integrators, including KPMG Peat Marwick LLP and
Deloitte & Touche LLP to provide Siebel-related professional services.
Technology and Distribution Partners
Itochu Techno-Science Corporation -- Strategic Business Alliance
Siebel and Itochu Techno-Science Corporation have entered into a strategic
alliance agreement under which the two companies have agreed to jointly develop,
promote, market, sell and support the Company's products in Japan. The companies
are working together to localize the Siebel products for the Japanese market and
jointly promote and support these products in Japan. In connection with the
alliance, Itochu Techno-Science Corporation and related entities made an equity
investment in the Company. See "Principal and Selling Stockholders." Itochu
Techno-Science Corporation is a large technology provider to the Japanese
market, representing many leading companies including Sun Microsystems, Inc.,
Compaq Computer Corporation, Sybase, Inc., and Informix Software, Inc. Itochu
Techno-Science Corporation is a subsidiary of Itochu Corporation, which is one
of the largest companies in the world with revenues in excess of $150 billion
per annum.
Under the agreement, Itochu Techno-Science Corporation has agreed to
prepare Japanese localized versions of the Company's products, including the
software, on-line help and training materials. Acting as the co-exclusive
distributor of the Siebel products in Japan, Itochu Techno-Science Corporation
promotes and markets the Siebel software to Japanese end-user organizations. A
dedicated, full-time marketing team within Itochu Techno-Science Corporation
coordinates the marketing, promotion and distribution efforts for the Siebel
products. This marketing team promotes the Siebel products through marketing
programs including seminars, trade shows and conferences. In addition, Itochu
Techno-Science Corporation produces Japanese versions of Siebel sales tools and
collateral.
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Itochu Techno-Science Corporation provides the installation, training,
technical support and maintenance to Siebel end-users. To promote customer
satisfaction in the Japanese market, Itochu provides technical support and
administers maintenance and software upgrade programs.
Other Strategic Relationships
Microsoft Corporation
The Company and Microsoft have a strategic technology and marketing
relationship. As a member of the Microsoft Developer Network and Microsoft
Solution Provider programs, the Company receives frequent briefings on
Microsoft's strategic and technical product direction, as well as early access
to new software releases.
The Company uses Microsoft development tools extensively, including
Microsoft Visual C++, MFC, and OLE 2. The Siebel applications run under Windows
for Workgroups in 16-bit, and Windows 95 and Windows NT in a native 32-bit
environment. Microsoft has promoted Siebel's extensive use of its technology in
a Siebel Systems Solutions Datasheet, a Siebel Systems focus brochure, and has
featured the Siebel Sales Enterprise in multiple Microsoft product launches.
Siebel and Microsoft have collaborated in numerous joint marketing programs
targeted at Microsoft's key customers and prospects. The two companies have
conducted a nationwide series of Executive Sales Information Systems Briefings
and jointly participated with each other in trade shows and industry events.
Thomas Siebel joined Bill Gates, Chairman of Microsoft, in the delivery of
the keynote address at WindowsWorld 95 in Atlanta to more than 5,000 conference
attendees, and demonstrated Siebel Sales Enterprise as a Windows 95-compliant
client/server application that takes advantage of the Microsoft application
development and enterprise software.
Adobe Systems, Inc.
Siebel Systems and Adobe have a joint technology and marketing
relationship. The Siebel Sales Enterprise utilizes Adobe Acrobat technology
which is designed to allow sales people to more quickly access sales information
and enable sales professionals to have immediate, on-line access to all of their
sales tools including annual reports, brochures, customer stories and
presentations.
The companies have jointly promoted the integrated solution through a
number of joint marketing programs, including collaboration in product
announcements, tradeshows and joint sales collateral.
In connection with the strategic relationship, Adobe Ventures, a venture
partnership associated with Adobe, has made an equity investment in the Company.
See "Principal and Selling Stockholders."
Mobile and Hand-Held Computer Providers
Siebel Systems has relationships with Norand and Telxon Corporation,
leading providers of mobile hand-held devices used by field sales personnel.
Telxon and Norand's line of hand-held information workstations integrate
point-and-touch pen-based computing devices with barcode data capture and
wireless communications. Siebel's products will run on these hand-held devices
for use in industries such as consumer packaged goods where hand-held devices
enable sales representatives to implement more effective in-store promotions.
Siebel collaborates with Norand and Telxon in numerous marketing
activities, including joint trade shows and industry events, joint participation
in user groups, and targeted joint customer calls.
Educational Service Provider -- Wilson Learning Corporation
Siebel Systems has a relationship with Wilson Learning Corporation, a
worldwide sales training company. As part of the relationship, Wilson Learning
has agreed to develop and deliver a wide range
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of end-user training courses for Siebel end-users. Wilson Learning will offer
instructor-led classroom training and self-paced computer-based training
modules. As a part of the Siebel implementation project team, Wilson Learning's
professional course developers and sales training experts will design training
that reflects the customer's unique Siebel configuration and specific business
processes.
This strategic relationship is designed to address end-user training, the
last critical step that an organization must take to successfully deploy its
Siebel-based sales and marketing information system.
CUSTOMER SUPPORT AND TRAINING
The Company has implemented a multi-tiered strategy designed to provide
comprehensive customer support programs to ensure successful implementation and
customer satisfaction. This multi-tiered approach includes on-line support via
the Internet, toll-free telephone technical support and direct support from a
customer satisfaction team.
Through on-line support, a suite of Internet-based User Groups for specific
topics is available to Siebel customers. Internet support also includes a
knowledge repository to address customers' questions. The Company's Internet
service programs provide links to selective Siebel product documentation,
technical notes and frequently asked questions (FAQs). Customers can directly
check the status of their technical support requests over the Internet.
Separately, a toll-free 800 phone number provides customers with direct access
to technical service professionals.
Another facet of Siebel's customer support is provided by the customer
satisfaction team. Each Siebel customer is assigned a team which consists of a
sales representative, a technical account manager and an executive sponsor. The
goal of this team is to ensure the success and satisfaction of the customer by
facilitating open communications to quickly identify, analyze and solve
problems. Through a combination of regularly scheduled conference calls, on-site
visits, and project team planning meetings, Siebel personnel participate in
every phase of the customer implementation from planning to project management
to system test and organizational design. Customer satisfaction is tracked on an
account-by-account basis and reported weekly to the Company's executive
management. Customer satisfaction is also audited periodically by an
independent, objective third-party organization.
The Company and Wilson Learning offer a wide range of training courses in
the configuration, administration and use of the Siebel products. Training is
available at the Company's Learning Center or at the customer site. Andersen
Consulting also offers training services in connection with implementation of
Siebel Sales Enterprise.
DEVELOPMENT METHODOLOGY
The Company's success is dependent in part upon its ability to continually
release robust, reliable products with functionality that meets customers' needs
in a timely manner. To achieve this goal, the Company's software engineering
organization utilizes a number of advanced, proven methodologies in the
development of its products. The Company believes that it has developed a robust
product specification, development and quality assurance process which
facilitates the delivery of high quality, high performance production software
that has been demonstrated to meet both the product specification and the
customer expectations. The Company intends to continue to invest in development
to respond to customer requirements, extend its current product functionality,
and introduce new products.
Release Content Definition
Each product development cycle begins with a formal process of determining
the feature content of the upcoming release after extensive consultation with
customers and analysis of industry trends. The product marketing group produces
for the engineering group formal Marketing Requirements Documents and Feature
Specifications. All engineering development requires input from the product
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marketing group. During the development process, the product marketing group
continues to test its decisions by reviewing early prototypes with customers and
third-party human factors experts, modifying specifications as appropriate.
Formalized Data Modeling
Recognizing the importance of building a sound data representation
foundation, the Company employs a formalized data modeling process which
consists of a dedicated group using data modeling CASE tools. The data modeling
process begins as soon as input is received from Product Marketing, before code
development begins, as the Company believes that the data modeling process is a
critical, central part of the development process.
Project Planning
After receiving input from the product marketing, the Company's development
methodology requires clear assignment and ownership of each development task, an
analysis of each task, a breakdown of each task into manageable subtasks, entry
of all tasks into centralized project tracking software and continual monitoring
of development progress against plan with load balancing as necessary.
Development Tools
The Company utilizes advanced object-oriented development tools and
technologies in the development of its products, including Microsoft Visual C++
(to create 16-bit and native 32-bit Windows client software), Microsoft App
Studio, Microsoft Foundation Classes, Microsoft OLE 2 automation, Microsoft
Project, Pure Software Purify, Nu-Mega Bounds Checker, and Oracle Designer 2000
CASE tools.
Coding Standards
In order to ensure maintainability and readability of source code, all
Siebel engineers follow formal, written coding standards that cover coding style
issues such as naming conventions, indentation, common utilization of standard
utility functions and consistent use of operating system calls. In order to
minimize the effort involved in localizing the product to other languages,
formal, written coding standards are followed to help ensure that the base
product is built in a language-neutral way. This language-neutral approach has
been adopted so that as the product is localized (translated) into other
languages, the effort can be focused on the translation itself, rather that the
difficult and time consuming process of finding and correcting code constructs
which assume an English user interface. This approach aids in issues such as
alternate character sets, double-byte character encoding, sort order, multiple
currency support, and date/number formatting.
Source Code Control
Source code for every release (as well as for development in progress) is
formally checked into a central source code control system (Microsoft Source
Safe), which is regularly backed up. This system is designed to help ensure that
code is not lost, avoid confusion over identifying the latest version of a
software module, and help ensure that only one engineer is editing a piece of
code at any given time. All releases of software to customers are made through a
formal, repeatable build process on dedicated central machines.
Code Ownership
The Company employs a code "ownership" policy to ensure that every piece of
code in a product is assigned to a specific engineer. The Company believes this
contributes to efficient task distribution as well as to ensuring that all code
is reviewed and integrated.
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Quality Assurance
The Quality Assurance department creates test plans for each of the product
features. These test plans, driven directly from the same Marketing Requirements
Documents used by Engineering to develop features, drive the testing efforts of
the Quality Assurance department. The test plans are designed to ensure a
repeatable, understandable and measurable method of testing the software. Also
included in the test suites are a number of methods to measure the performance
and scalability of the product. The Company has developed a set of Key
Performance Indicators (KPI's) which it believes are a collection of
representative user activities whose performance is key to ensuring customer
satisfaction. The quality assurance tests include timing each of these KPI's for
compliance with stated performance goals. These KPI's are generally run
simulating a single user on a small database as well as simulating multiple,
simultaneous users on a large database. A number of technologies are employed to
execute the test plans, including automated testing software, system load
simulation tools, and performance monitoring software.
Error Tracking
The Company maintains a central tracking system into which software errors
are entered and tracked. The system allows the status of such errors to be
maintained as they are routed through the organization to their eventual
resolution. Management reports can be generated on demand that indicate the rate
of error discovery, the rate of error correction, the areas of instability in
the product and the engineering work load. Enhancement requests, user
misunderstandings and customer requests are also entered into this system as
well.
As of March 31, 1996, there were 27 employees on the Company's product
development staff. The Company's product development expenditures in 1994, 1995
and the three month period ended March 31, 1996 were $868,000, $2.8 million and
$1.0 million, respectively. The Company expects that it will continue to commit
substantial resources to product development in the future.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company also believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable product maintenance are essential to establishing and maintaining a
technology leadership position. The Company seeks to protect its software,
documentation and other written materials under patent, trade secret, and
copyright laws, which afford only limited protection. The Company currently has
two patent applications pending in the United States. There can be no assurance
that any patents issued to the Company will not subsequently be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications, whether or not being currently challenged by
applicable governmental patent examiners, will be issued with the scope of the
claims sought by the Company, if at all. Furthermore, there can be no assurance
that others will not develop technologies that are similar or superior to the
Company's technology or design around any patents owned by the Company. Despite
the Company's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as do
the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competition will not independently develop similar
technology. The Company has entered into agreements with substantially all of
its customers which require the Company to place Siebel Sales Enterprise source
code into escrow. Such agreements generally provide that such parties
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will have a limited, non-exclusive right to use such code in the event that
there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business or if the Company fails to meet its support obligations.
The provision of the source code may increase the likelihood of misappropriation
by third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company, if at all. In
the event of a successful claim of product infringement against the Company and
failure or inability of the Company to license the infringed or similar
technology, the Company's business, operating results and financial condition
would be materially adversely affected.
The Company relies upon certain software that it licenses from third
parties, including software that is integrated with the Company's internally
developed software and used in Siebel Sales Enterprise to perform key functions.
There can be no assurance that these third-party software licenses will continue
to be available to the Company on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in shipment
delays or reductions until equivalent software could be developed, identified,
licensed and integrated which could materially adversely affect the Company's
business, operating results and financial condition.
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are targeted
at the emerging market for sales and marketing information systems, and the
Company faces competition from customers' internal development efforts, custom
system integration products, as well as other application software providers
that offer a variety of products and services designed to address this market.
The Company believes that the market for global sales and marketing information
systems has historically not been well served by the application software
industry. The Company believes that most customer deployments have been the
result of large internal development projects, custom solutions from systems
integrators or the application of personal and departmental productivity tools
to the global enterprise.
Internal Development
The Company's major competition continues to come from its customers' and
potential customers' internal development efforts. Internal Information
Technology departments have staffed projects to build their own systems
utilizing a variety of tools. Many of these projects can fail as software
development, support and maintenance are not core competencies of these
organizations. The competitive factors in this area require that the Company
produce a product that conforms to the customer's information technology
standards, scales to meet the needs of large enterprises, operates globally and
costs less than the result of an internal development effort.
Custom System Integration Projects
A second source of competition results from systems integrators engaged to
build a custom development application. While many of these projects also fail,
the introduction of a systems integrator increases the likelihood of success for
the customer. However, this approach is expensive and typically results in a
product that will not be supported, maintained and enhanced by a focused
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software development company. Maintenance and support for the custom code can
become burdensome in future years, with enhancements and modifications being
cost-prohibitive. The competitive factors in this area require that the Company
demonstrate to the customer the cost savings and advantages of a configurable,
upgradeable and commercially-supported product developed by a dedicated
professional software organization.
The Company relies on Andersen Consulting and other systems consulting and
systems integration firms for implementation and other customer support
services, as well as recommendations of its products during the evaluation stage
of the purchase process. Although the Company seeks to maintain close
relationships with these service providers, many of these third parties have
similar, and often more established, relationships with the Company's
competitors. If the Company is unable to develop and retain effective, long-term
relationships with Andersen Consulting or other such third parties, the
Company's competitive position would be materially and adversely effected.
Further, there can be no assurance that these third parties, many of which have
significantly greater resources than the Company, will not market software
products in competition with the Company in the future or will not otherwise
reduce or discontinue their relationships with or support of the Company and its
products.
Other Competitors
A large number of personal, departmental and other products exist in the
sales automation market. Companies (Products) such as Symantec (ACT!), Brock
International (Brock Activity Manager), Early Cloud & Co. (CallFlow), IMA
(EDGE), Marketrieve Company (Marketrieve PLUS), Oracle Corporation (Oracle Sales
Manager), SaleSoft (PROCEED), Sales Technologies (SNAP for Windows), SalesBook
Systems (SalesBook), Aurum (SalesTrak), SalesKit Software Corporation (SalesKit)
and Saratoga Systems (SPS for Windows) are among the many firms in this market
segment. Many of these competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers
than the Company. In addition, many competitors have well-established
relationships with current and potential customers of the Company. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale or their products, than can the
Company. The Company believes it competes favorably in this marketplace based on
the following competitive advantages: breadth and depth of functionality,
configurable business objects, Internet and intranet enablement, strategic
alignments with industry leaders, support for the global enterprise, scalability
allowing support for large user communities and a modern and enduring product
architecture.
It is also possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. The Company also expects
that competition will increase as a result of consolidation in the software
industry. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely affect
the Company's business, operating results and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially and adversely affect its business, operating results
and financial condition. See "Risk Factors -- Competition."
EMPLOYEES
As of April 30, 1996, the Company had a total of 103 employees, of which 98
were based in the United States, 4 in the United Kingdom and 1 in Japan. Of the
total, 41 were engaged in sales and marketing, 27 were in product development,
21 were in customer support and 14 were in finance, administration and
operations. The Company's future performance depends in significant part upon
the continued service of its key technical, sales and senior management
personnel, particularly Thomas M. Siebel, the Company's Chairman and Chief
Executive Officer, none of whom is bound by an employment agreement. The loss of
the services of one or more of the Company's key employees could have a material
adverse effect on the Company's business, operating results and financial
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condition. The Company's future success also depends on its continuing ability
to attract, train and retain highly qualified technical, sales and managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company can retain its key technical, sales and managerial
personnel in the future. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be good. See "Risk Factors -- Management of
Growth; Dependence upon Key Personnel."
FACILITIES
The Company's principal administrative, sales, marketing, support and
research and development facilities are located in two sites of approximately
7,200 square feet and 12,000 square feet of space in Menlo Park, California. The
leases on these office spaces expire in July 1997 and December 1996,
respectively. The Company currently leases other domestic sales and support
offices in Georgia, Illinois, New York, Texas, and Virginia. The Company also
maintains international offices in the United Kingdom and Japan. The Company is
currently examining its alternatives with respect to additional facilities as
may be necessary for future growth.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
April 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Thomas M. Siebel.................. 43 Chairman, Chief Executive Officer and President
Patricia A. House................. 42 Executive Vice President and Chief Operating Officer
Craig D. Ramsey................... 49 Senior Vice President Worldwide Operations
Bruce A. Cleveland................ 37 Vice President Marketing
Justin R. Dooley.................. 32 Vice President Finance and Administration
William B. Edwards................ 41 Vice President Engineering
Kevin A. Johnson.................. 40 Vice President Legal Affairs
Ronald M. McElhaney, Ph.D. ....... 53 Vice President and Chief Technical Officer
Pehong Chen, Ph.D. ............... 38 Director
James C. Gaither(1)............... 58 Director
Eric E. Schmidt, Ph.D. ........... 41 Director
Charles R. Schwab(1).............. 58 Director
George T. Shaheen(2).............. 51 Director
A. Michael Spence, Ph.D.(2)....... 52 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
THOMAS M. SIEBEL has served as Chairman, Chief Executive Officer, and
President since the Company's inception in July 1993. From July 1991 until
December 1992, he served as Chief Executive Officer of Gain Technology, a
multimedia software company which merged with Sybase in December 1992. Mr.
Siebel served as President and Chief Operating Officer of Gain Technology from
May 1991 to July 1991. From January 1984 until September 1990, Mr. Siebel worked
at Oracle Corporation where he held a number of executive management positions
including Vice President Product Line Marketing, Group Vice President Industry
Marketing, Group Vice President and General Manager Direct Marketing Division,
and most recently Group Vice President Oracle USA. Mr. Siebel is a graduate of
the University of Illinois at Champaign-Urbana from which he holds a B.A. in
History, an M.B.A. and an M.S. in Computer Science.
PATRICIA A. HOUSE has been with the Company since its inception in July
1993. From February 1996 to the present, she has served as the Company's
Executive Vice President and Chief Operating Officer, and from July 1993 to
February 1995, she served as Senior Vice President of Marketing of the Company.
From September 1989 to June 1993, Ms. House served in various senior management
positions including Executive Vice President of Frame Technology Corporation, a
document authoring software company. Ms. House received a B.A. in Education from
Western Michigan University.
CRAIG D. RAMSEY has served as the Company's Senior Vice President Worldwide
Operations since March 1996. From March 1994 to March 1996, Mr. Ramsey served as
Senior Vice President of Worldwide Sales, Marketing and Support for n Cube
Corporation, a leader in distribution of digitized media. From February 1986 to
March 1994, Mr. Ramsey was employed by Oracle Corporation and held a variety of
executive positions, including Vice President of U.S. Commercial Sales and Vice
President of OEM Strategic Accounts. Mr. Ramsey received a B.A. in Economics
from Denison University.
BRUCE A. CLEVELAND has served as the Company's Vice President Marketing
since May 1996. From January 1992 to April 1996, Mr. Cleveland served as a
Senior Director in the Object Technologies Business Unit at Apple Computer, a
computer company. From April 1990 to January 1992,
52
<PAGE> 55
Mr. Cleveland served as a Vice President of Siren Software Corporation, a
systems software company. From August 1985 through April 1989 Mr. Cleveland was
Senior Director, Unix Product Line Division at Oracle Corporation, a relational
database company. Mr. Cleveland received a B.S. in Business Administration from
California State University at Sacramento.
JUSTIN R. DOOLEY has served as the Company's Vice President Finance and
Administration since March 1996. From October 1995 to March 1996 Mr. Dooley
served as Vice President Quality Programs at Siebel Systems. From May 1993 to
September 1995, Mr. Dooley served as Vice President and General Manager of the
Hayward Division of Davis Wire Corporation. From October 1989 to August 1991, he
served as Operating Department Manager, Tin Coating and Manager of the Acid
Regeneration Unit for USS/POSCO, a joint venture between US Steel and Pohang
Iron and Steel. Mr. Dooley received a B.S. in Chemical Engineering from the
University of Illinois of Champaign-Urbana and an M.B.A. from the Graduate
School of Business at Stanford University.
WILLIAM B. EDWARDS has served as the Company's Vice President Engineering
since March 1994. From June 1993 to March 1994, Mr. Edwards served as Director
of Graphical Authoring Systems at Macromedia, Inc., a multimedia software
development company. From July 1989 to June 1993, Mr. Edwards served as Senior
Vice President, Engineering, Research and Development of Frame Technology, a
document authoring software company. Mr. Edwards received a B.S. in Computer
Science from Louisiana State University, and an M.S. in Computer Science from
Rutgers University.
KEVIN A. JOHNSON has served as the Company's Vice President Legal Affairs
since November 1995. From August 1993 to October 1995, Mr. Johnson served as
Assistant General Counsel to Gupta Corporation, a client/server software
company. From March 1989 to July 1993, Mr. Johnson served as Vice President,
Corporate Affairs, General Counsel and Assistant Secretary of NETG, a multimedia
training company. Mr. Johnson received a B.S. in Business Management from the
University of California at Davis and a J.D. from Santa Clara Law School.
RONALD M. MCELHANEY, PH.D. has served as the Company's Vice President and
Chief Technical Officer since February 1996. From July 1995 to November 1995,
Dr. McElhaney served as Vice President/General Manager of the Multimedia
Business Unit for Asymetrix Corporation, a multimedia software company. From
July 1993 to September 1994, Dr. McElhaney was Vice President/General Manager
for the Advanced Products Group for Computervision Corporation, a CAD/CAM/CAE
software company. Dr. McElhaney served from February 1990 to July 1992 as Vice
President Core Technology at PRIME Computer. From September 1988 to September
1989 Dr. McElhaney served as Vice President, Engineering at Autodesk, a
multimedia and design software development company. Dr. McElhaney received a
B.S. in Physics from San Jose State University and a Ph.D. in Theoretical
Physics from the University of Hawaii.
PEHONG CHEN, PH.D. has served as a Director of the Company since February
1994. From December 1993 to the present, Dr. Chen has served as President of
BroadVision, Inc., an electronic commerce software developer. From October 1992
to August 1993, Dr. Chen served as Vice President - Multimedia of Sybase, Inc.,
a software company. From June 1989 to September 1992, he served as President of
Gain Technology, a multimedia software company. Dr. Chen received a B.S. from
National Taiwan University, an M.S. from Indiana University and a Ph.D. from
University of California at Berkeley, all in Computer Science.
JAMES C. GAITHER has served as a Director of the Company since February
1994. From 1971 to the present, Mr. Gaither has been a Partner of the law firm
of Cooley Godward Castro Huddleson & Tatum and was the managing partner of the
firm from 1984 to 1990. Prior to beginning his law practice with the firm, he
served in a variety of positions, including law clerk to The Honorable Earl
Warren, Chief Justice of the United States; Special Assistant to the Assistant
Attorney General in the U.S. Department of Justice; and Staff Assistant to the
President of the United States, Lyndon Johnson. Mr. Gaither is the former
president of the Board of Trustees at Stanford University and is a member of the
Board of Trustees of the Carnegie Endowment for International Peace, RAND, The
William and Flora Hewlett Foundation and The James Irvine Foundation. Mr.
Gaither is currently a Director of Amylin
53
<PAGE> 56
Pharmaceuticals, Inc., Basic American, Inc. and Levi Strauss & Company. Mr.
Gaither received a B.A. in Economics from Princeton University, and a J.D. from
Stanford University.
ERIC E. SCHMIDT, PH.D. has served as a Director of the Company since May
1996. From 1994 to the present, Dr. Schmidt has been the Chief Technical Officer
of Sun Microsystems, Inc., a producer of workstations, servers, and computer
software. From 1983 to 1994, Dr. Schmidt held various other positions at Sun
Microsystems, Inc., including President, Sun Technology Enterprises; Vice
President, General Systems Group; and Vice President and General Manager,
Software Products division. Dr. Schmidt is currently a Director of Geoworks, a
developer of application software for consumer computing devices. Dr. Schmidt
received a B.S. in Electrical Engineering from Princeton University, and an M.S.
in Electrical Engineering and a Ph.D. in Computer Science from the University of
California at Berkeley.
CHARLES R. SCHWAB has served as a Director of the Company since October
1994. From 1987 to the present, he has been the Chairman and Chief Executive
Officer of The Charles Schwab Corporation, a discount brokerage firm founded in
1971 by Mr. Schwab. Mr. Schwab also serves as a director of The Gap, Inc.,
Transamerica Corporation and AirTouch Communications. Mr. Schwab is a member of
the Board of Trustees of Stanford University and a member of the Board of
Directors of the National Park Foundation. Mr. Schwab received a B.A. in
Economics from Stanford University, and an M.B.A. from the Graduate School of
Business at Stanford University.
GEORGE T. SHAHEEN has served as a Director of the Company since October
1995. From 1989 to the present, Mr. Shaheen has been the Managing Partner of
Andersen Consulting. Mr. Shaheen has been a partner at Andersen Consulting since
1977 and he held various other positions at Andersen Consulting from 1967 to
1977. Mr. Shaheen is on the Board of Trustees at Bradley University and is a
member of the Board of Advisors for the Northwestern University J.L. Kellogg
Graduate School of Business. Mr. Shaheen received a B.S. in Marketing and an
M.B.A. from Bradley University.
A. MICHAEL SPENCE, PH.D. has served as a Director of the Company since
October 1995. From 1990 to the present, Dr. Spence has served as Dean of the
Graduate School of Business at Stanford University. From 1984 to 1990, Dr.
Spence served as Dean of Faculty of Arts and Sciences at Harvard University. Dr.
Spence also serves as a director of BankAmerica Corporation, General Mills,
Inc., Nike, Inc., Sun Microsystems, Inc. and Verifone, Inc. Dr. Spence received
a B.A. in Philosophy from Princeton University, a B.A. and an M.A. in
Mathematics from Oxford University, and a Ph.D. in Economics from Harvard
University.
The Company currently has authorized seven directors. In May 1996, the
Board of Directors approved, subject to stockholder approval, the Company's
Certificate of Incorporation in connection with the Company's reincorporation in
Delaware. The Certificate of Incorporation provides, among other things, for a
classified Board of Directors. In accordance with the terms of such Certificate
of Incorporation the terms of office of the Board of Directors will be divided
into three classes: Class I will expire at the annual meeting of stockholders to
be held in 1997; Class II will expire at the annual meeting of stockholders to
be held in 1998; and Class III will expire at the annual meeting of stockholders
to be held in 1999. At each annual meeting of stockholders beginning with the
1997 annual meeting, the successors to directors whose terms will then expire
will be elected to serve from the time of election and qualification until the
third annual meeting following election and until their successors have been
duly elected and qualified.
COMMITTEES
The Audit Committee consists of A. Michael Spence, Ph.D. and George T.
Shaheen. The Audit Committee makes recommendations to the Board of Directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by the Company's independent auditors
and reviews and evaluates the Company's audit and control functions.
54
<PAGE> 57
The Compensation Committee consists of James C. Gaither and Charles R.
Schwab. The Compensation Committee makes recommendations regarding the Company's
Equity Incentive Plan and the Purchase Plan and makes decisions concerning
salaries and incentive compensation for employees and consultants of the
Company.
DIRECTORS' COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four 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)(3).................... 39,000 -- 180,000 71,196
Vice President Worldwide Sales
</TABLE>
- ---------------
(1) Represents premiums paid on life insurance (including accidental death and
dismemberment insurance and supplemental long-term disability insurance for
all officers).
(2) Includes commissions in the amount of $71,196 accrued in fiscal year 1995
but paid in fiscal 1996.
(3) In March 1996, Craig Ramsey joined the Company as Vice President Worldwide
Sales. Since March 1996, Mr. Turano has served as Vice President Eastern
Americas.
EQUITY INCENTIVE PLANS
1996 Equity Incentive Plan. The Company's 1996 Equity Incentive (the
"Equity Incentive Plan") is an amendment and restatement of the Company's 1994
Stock Option Plan and 1996 Supplemental Stock Option Plan. The Company has
reserved a total of 6,000,000 shares of Common Stock for issuance under the
Equity Incentive Plan. The Equity Incentive Plan provides for grants of stock
options to employees (including officers and employee directors) and
nonstatutory stock options, restricted stock purchase awards, stock bonuses and
stock appreciation rights to employees (including officers and employee
directors), directors and consultants of the Company. The Equity Incentive Plan
is presently administered by the Board of Directors, which determines recipients
and types of awards to be granted and the terms of such grants, including the
exercise price, number of shares subject to the award and the exercisability
thereof.
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<PAGE> 58
The term of a stock option granted under the Equity Incentive Plan
generally may not exceed 10 years (5 years in the case of an incentive stock
option granted to a holder of more than 10% of the Company's capital stock). The
exercise price of options granted under the Equity Incentive Plan is determined
by the Board of Directors, but, in the case of an incentive stock option, cannot
be less than 100% of the fair market value of the Common Stock on the date of
grant or, in the case of holders of more than 10% of the Company's capital
stock, not less than 110% of the fair market value of the Common Stock on the
date of grant. Options granted under the Equity Incentive Plan to new employees
and consultants generally vest at the rate of 20% of the shares subject to
option on the first annual anniversary of the date of hire and 5% of such shares
at the end of each quarter thereafter. No option may be transferred by the
optionee other than by will or the laws of descent or distribution or, in
certain limited instances, pursuant to a qualified domestic relations order. An
optionee whose relationship with the Company or any related corporation ceases
for any reason (other than by death or permanent and total disability) may
exercise options in the three month period following such cessation (unless such
options terminate or expire sooner by their terms) or in such longer period as
may be determined by the Board of Directors.
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Equity Incentive Plan. Furthermore, the
Board of Directors may offer to exchange new options for existing options, with
the shares subject to the existing options again becoming available for grant
under the Equity Incentive Plan. In the event of a decline in the value of the
Company's Common Stock, the Board of Directors has the authority to offer
optionees the opportunity to replace outstanding higher priced options with new
lower price options. Upon any merger or consolidation in which the Company is
not the surviving corporation, all outstanding awards under the Equity Incentive
Plan shall either be assumed or substituted by the surviving entity. If the
surviving entity determines not to assume or substitute such awards, the time
during which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to the merger or consolidation.
Restricted stock purchase awards granted under the Equity Incentive Plan
may be granted pursuant to a repurchase option in favor of the Company in
accordance with a service vesting schedule determined by the Board. The purchase
price of such awards will be at least 85% of the fair market value of the Common
Stock on the date of grant. Stock bonuses may be awarded in consideration for
past services without a purchase payment. Stock appreciation rights authorized
for issuance under the Incentive Plan may be tandem stock appreciation rights,
concurrent stock appreciation rights or independent stock appreciation rights.
As of April 30, 1996, 706,210 shares of Common Stock have been issued upon
the exercise of options granted under the Equity Incentive Plan, options to
purchase 3,780,950 shares of Common Stock at a weighted average exercise price
of $3.37 per share were outstanding and 1,512,840 shares remained available for
future option grants. The Equity Incentive Plan will terminate in May 2006,
unless terminated sooner by the Board of Directors. See Notes 4 and 7 of Notes
to Financial Statements.
Employee Stock Purchase Plan. In May 1996, the Board adopted the Employee
Stock Purchase Plan (the "Purchase Plan") covering an aggregate of 350,000
shares of Common Stock. The Purchase Plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Internal Revenue
Code. Under the Purchase Plan, the Board of Directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering will be no more than six months.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, for at
least 20 hours per week and are employed by the Company or a subsidiary of the
Company designated by the Board for at least five months per calendar year.
Employees who participate in an offering can have up to 10% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld will then be used to
purchase shares of the Common Stock
56
<PAGE> 59
on specified dates determined by the Board of Directors. The price of Common
Stock purchased under the Purchase Plan will be equal to 85% of the lower of the
fair market value of the Common Stock on the commencement date of each offering
period or the specified purchase date. Employees may end their participation in
the offering at any time during the offering period. Participation ends
automatically on termination of employment with the Company.
In the event of a merger, reorganization, consolidation or liquidation to
involving the Company in which the Company is not a surviving corporation, the
Board of Directors has discretion to provide that each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, or the Board may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The Purchase Plan will terminate at
the Board's direction. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock. See Note 7 of Notes to
Financial Statements.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------------- ANNUAL RATES OF
PERCENTAGE STOCK PRICE
NUMBER OF OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM
UNDERLYING GRANTED IN EXERCISE MARKET ($)(5)
OPTIONS FISCAL PRICE PRICE EXPIRATION ---------------------------------
NAME(1) GRANTED(2) 1995(3) ($/SH) ($/SH)(4) DATE 0% 5% 10%
- ---------------------- ---------- ----------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Siebel...... -- -- -- -- -- -- --
Patricia A. House..... -- -- -- -- -- -- --
William B. Edwards.... -- -- -- -- -- -- --
Daniel A. Turano...... 180,000 13.5% 0.50 14.00 10/02/2005 2,430,000 4,015,000 6,446,000
--- --- ---
</TABLE>
- ---------------
(1) Since the end of fiscal 1995, the Company has granted options to Ms. House
and Messrs. Siebel and Edwards. The grants were for the following number
shares and at the following exercise prices: Ms. House received options to
purchase an aggregate of 100,000 shares at an exercise price of $2.90 per
share in March 1996 and 100,000 shares at an exercise price of $5.50 in
April 1996, Mr. Siebel received an option to purchase 1,000,000 shares at an
exercise price of $5.50 per share in April 1996 and Mr. Edwards received an
option to purchase 50,000 shares at an exercise price of $5.50 per share in
April 1996.
(2) Options generally become exercisable at a rate of 20% on the first
anniversary of the grant 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 to the Named Executive Officers.
(4) Based on an assumed initial public offering price of $14.00 per share.
(5) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Stock price appreciation of 0%, 5% and 10%
is assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance. The potential realizable value is calculated by assuming
that the assumed initial public offering price of $14.00 per share
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price.
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<PAGE> 60
AGGREGATED OPTIONS EXERCISED IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(2)
ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Turano......... -- -- 180,000 0 2,430,000 0
--
-----------
</TABLE>
- ---------------
(1) Options are immediately exercisable; however, the shares purchasable under
such options are subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior
to the vesting of such shares.
(2) Based on the difference between an assumed initial public offering price of
$14.00 per share and the exercise price.
401(K) PLAN
In October 1995, the Board adopted an employee savings and retirement plan
(the "401(k) Plan") covering certain of the Company's employees who have at
least one month of service with the Company and have attained the age of 21.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of such compensation or the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of such
reduction contributed to the 401(k) Plan. The Company may make contributions to
the 401(k) Plan on behalf of eligible employees. Employees become 20% vested in
these Company contributions after one year of service, and increase their vested
percentages by an additional 20% for each year of service thereafter. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code of
1986, as amended, so that contributions by employees or by the Company to the
401(k) Plan, and income earned on the 401(k) Plan contributions, are not taxable
to employees until withdrawn from the 401(k) Plan, and so that contributions by
the Company, if any, will be deductible by the Company when made. The trustee
under the 401(k) Plan, at the direction of each participant, invests the 401(k)
Plan employee salary deferrals in selected investment options. The Company made
no contributions to the 401(k) Plan in 1995, or in the first quarter of fiscal
1996. The Company does not presently expect to make any contributions to the
401(k) Plan during fiscal 1996.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person it is
required or permitted to indemnify. Pursuant to this provision, the Company has
entered into indemnity agreements with each of its directors and executive
officers.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for any transaction from
which the director derived an improper personal benefit, for improper
transactions between the director and the Company and for
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<PAGE> 61
improper distributions to stockholders and loans to directors and officers. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
CERTAIN TRANSACTIONS
In September 1993, Siebel Systems, L.P., a California limited partnership
(the "Partnership") was formed and Siebel Systems, Inc., a California
corporation, and the predecessor of the Company, became the general partner of
the Partnership. In January 1995, all limited partners of the Partnership
voluntarily exchanged their limited partnership units for an aggregate of
8,080,683 shares of Common Stock and 2,344,500 shares of Series A Preferred
Stock (the "Series A Stock") of the Company. In connection with the exchange,
the Company issued (i) 6,250,000 shares of Common Stock and 280,000 shares of
Series A Stock to Thomas M. Siebel, an officer, director and principal
stockholder of the Company, (ii) 600,000 shares of Common Stock to Patricia A.
House, an officer of the Company, (iii) 295,000 shares of Common Stock to
William B. Edwards, an officer of the Company, (iv) 50,000 shares of Common
Stock and 740,000 shares of Series A Stock to Pehong Chen, a director and
principal stockholder of the Company, (v) 88,000 shares of Common Stock to James
C. Gaither, a director of the Company and (vi) 310,000 shares of Series A Stock
to Charles R. Schwab, a director of the Company.
In March and July 1995, the Company issued 1,900,000 shares of Series B
Preferred Stock (the "Series B Stock") for an aggregate consideration
$4,560,000. In connection with such financing, the Company issued 1,250,000
shares of Series B Stock to Andersen Consulting, a principal stockholder of the
Company. In April 1996, the Company issued 90,000 shares of Series D Preferred
Stock (the "Series D Stock") for an aggregate consideration of $900,000. In
connection with such financing, the Company issued 50,000 shares of Series D
Stock to Andersen Consulting, a principal stockholder of the Company, 20,000
shares of Series D Stock to Charles R. Schwab and 20,000 shares of Series D
Stock to Pehong Chen. The Company and Andersen have entered into a Master
Alliance Agreement, dated March 17, 1995, and a Software License and Services
Agreement, dated January 1, 1995. See "Business -- Global Strategic Alignment."
George T. Shaheen, the Managing Partner of Andersen Consulting, is a director of
the Company.
In September 1995, the Company and Thomas M. Siebel entered into an
assignment agreement pursuant to which Mr. Siebel assigned certain rights and
the Company assumed certain obligations under a publishing agreement between Mr.
Siebel, Michael S. Malone and Simon & Schuster, Inc., dated December 13, 1994,
relating to the publication of the book entitled Virtual Selling, Going Beyond
the Automated Sales Force to Achieve Total Sales Quality.
In May 1996, Craig D. Ramsey, an officer of the Company, exercised an
option to purchase 160,000 shares of Common Stock and paid the exercise price by
issuing a promissory note to the Company in the amount of $464,000. The note is
secured by the shares of Common Stock issued upon exercise. The note accrues
interest at the rate of 7% per annum and is due in May 2000.
James C. Gaither, a director of the Company, is a partner of Cooley Godward
Castro Huddleson & Tatum, which has provided legal services to the Company since
its inception.
The Company and Charles Schwab & Co., Inc. have entered into a Software
License and Services Agreement pursuant to which Charles Schwab & Co., Inc. made
payments to the Company of approximately $1,836,000 in fiscal 1995 in connection
with the license of Siebel Sales Enterprise. Charles R. Schwab, a director of
the Company, is the founder, Chairman and Chief Executive Officer of The Charles
Schwab Corporation, the parent of Charles Schwab & Co, Inc. Such transaction was
negotiated on an arms-length basis between the parties, with the agreement to
purchase the Company's products, entered into in December 1995, subsequent to
the acquisition by Mr. Schwab of Series A Stock in January 1995 and his
appointment to the Company's Board of Directors in October 1994.
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<PAGE> 62
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of April 30,
1996, and as adjusted to reflect the sale of the Common Stock being offered
hereby by (i) each person (or group of affiliated persons) who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) other
principal stockholders who are known by the Company to own beneficially more
than 2% of the Common Stock, (iii) each of the Company's directors, (iv) each of
the Named Executive Officers, (v) all directors and executive officers of the
Company as a group, and (vi) the Selling Stockholders. The table assumes the
conversion of all outstanding Preferred Stock into Common Stock upon the
completion of this offering. Unless otherwise specified, the address of
stockholders owning more than 5% of the Company's Common Stock is the address of
the Company set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) NUMBER OF OFFERING(1)(2)
PRINCIPAL STOCKHOLDERS, DIRECTORS ---------------------- SHARES ----------------------
AND OFFICERS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
---------- ------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Thomas M. Siebel(3)............... 6,580,000 47.9% 50,000 6,530,000 42.1%
Andersen Consulting LLP(4)........ 1,388,000 10.0 -- 1,388,000 8.9
1661 Page Mill Road
Palo Alto, CA 94304
Pehong Chen and Adele Chi,
Trustees of the Chen Family
Trust(5)........................ 810,000 5.9 -- 810,000 5.2
Patricia A. House(6).............. 600,000 4.4 -- 600,000 3.9
Adobe Ventures L.P.(7)............ 588,488 4.3 -- 588,488 3.8
Itochu Corporation(8)............. 343,642 2.5 92,783 250,859 1.6
William B. Edwards(9)............. 295,000 2.2 10,000 285,000 1.8
Daniel A. Turano(10).............. 180,000 1.3 -- 180,000 1.2
James C. Gaither(11).............. 116,000 * -- 116,000 *
Pehong Chen, Ph.D.(12)............ 810,000 5.9 -- 810,000 5.2
Eric E. Schmidt, Ph.D. ........... 0 -- -- 0 --
A. Michael Spence, Ph.D.(13)...... 88,000 * -- 88,000 *
George T. Shaheen(14)............. 1,388,000 10.0 -- 1,388,000 8.9
Charles R. Schwab(15)............. 414,000 3.0 -- 414,000 2.7
All directors and executive
officers as a group (14
persons)(16).................... 10,956,000 75.8 60,000 10,896,000 67.0
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 13,730,770 shares of Common
Stock outstanding as of April 30, 1996 and 15,530,770 shares of Common
Stock outstanding after completion of this offering.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 300,000 shares of Common Stock from the Company.
(3) Includes 120,000 shares held by Mr. Siebel's minor children, for which Mr.
Siebel has sole voting power.
(4) Mr. Shaheen, a director of the Company, is the Managing Partner of Andersen
Consulting. Mr. Shaheen disclaims beneficial ownership of such shares held
by Andersen Consulting LLP except to the extent of his partnership interest
therein. Also includes 88,000 shares issuable to Mr. Shaheen upon exercise
of options subject to vesting through February 2001.
(5) Dr. Chen, a director of the Company, is the co-trustee of the Chen Family
Trust. Includes 50,000 shares which are subject to a right of repurchase in
favor of the Company which expires ratably through March 1998.
60
<PAGE> 63
(6) Includes 400,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through February 1998.
(7) Adobe Ventures, L.P. is a venture fund managed by Hambrecht & Quist LLC
which is one of the Representatives. See "Underwriting."
(8) Includes 171,821 shares held by Itochu Techno-Science Corporation and
34,364 shares held by Itochu Technology, Inc., affiliates of Itochu
Corporation. 51,546 of the shares are being offered by Itochu Techno-
Science Corporation and 41,237 of the shares are being offered by Itochu
Technology, Inc.
(9) Includes 240,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through March 1998.
(10) Includes 180,000 shares issuable upon exercise of options subject to
vesting through March 2001.
(11) Includes 28,000 shares held by GC&H Investments. Mr. Gaither, a partner of
GC&H Investments, disclaims beneficial ownership of such shares, except to
the extent of his pecuniary interest therein. Also includes 88,000 shares
which are subject to a right of repurchase in favor of the Company which
expires ratably through March 1998.
(12) Includes shares held by the Chen Family Trust, of which Dr. Chen is a
co-trustee. Also includes 50,000 shares which are subject to a right of
repurchase in favor of the Company which expires ratably through March
1998.
(13) Includes 88,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 1999.
(14) Includes 1,300,000 shares held by Andersen Consulting LLP. Mr. Shaheen, the
Managing Partner of Andersen Consulting LLP, disclaims beneficial ownership
of such shares, except to the extent of his pecuniary interest therein.
Also includes 88,000 shares issuable upon exercise of options subject to
vesting through February 2001.
(15) Includes 90,000 shares which are subject to a right of repurchase in favor
of the Company which expires ratably through October 1999. Also includes
4,000 shares held by Mr. Schwab's children.
(16) Includes 1,300,000 shares held by Andersen Consulting LLP. See footnote
(12). Also includes 733,000 shares issuable upon exercise of options held
by all officers and directors subject to vesting on various dates through
March 2002. See footnotes (3), (6) and (9) through (15).
61
<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
Following the closing of this offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock, will consist of 40,000,000 shares of Common Stock,
$.001 par value and 2,000,000 shares of Preferred Stock, $.001 par value. As of
April 30, 1996 there were approximately 100 holders of record of the Company's
Common and Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock (including 31,430 shares of Series B Preferred Stock issued in April 1996)
will be converted into 5,104,085 shares of Common Stock. See Note 4 of Notes to
Financial Statements for a description of the currently outstanding Preferred
Stock. Following the closing of this offering, the Company's Certificate of
Incorporation will be restated to delete all references to the prior series of
Preferred Stock, and the Board of Directors will have the authority, without
further action by the stockholders, to issue up to 2,000,000 shares of Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such series,
without any further vote or action by stockholders. The issuance of Preferred
Stock could adversely affect the voting power of holders of Common Stock and the
likelihood that such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plan to issue any
shares of Preferred Stock.
REGISTRATION RIGHTS
After this offering, the holders of approximately 11,070,515 shares of
Common Stock will be entitled to certain rights with respect to the registration
of such shares under the Securities Act, pursuant to the Restated Investor
Rights Agreement among such holders and the Company, dated December 1, 1995, as
amended as of April 30, 1996 (the "Investor Rights Agreement"). Under the terms
of the Investor Rights Agreement, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled, subject to certain
limitations, to include shares therein. The holders may also require the Company
to file a registration statement under the Securities Act with respect to their
shares, and the Company is required to use its best efforts to effect two such
registrations. Furthermore, the holders may require the Company to register
their shares on Form S-3 when such form becomes available to the Company.
Generally, the Company is required to bear all registration and selling expenses
incurred in connection
62
<PAGE> 65
with any such registrations. These rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration. Such registration rights
terminate five years from the date of this offering.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
The Company's Certificate of Incorporation also requires that, effective
upon the closing of this offering, any action required or permitted to be taken
by stockholders of the Company must be effected at a duly called annual or
special meeting of the stockholders and may not be effected by a consent in
writing. In addition, special meetings of the stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer. These provisions may have the effect of delaying, deferring
or preventing a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its telephone number is
(415) 954-9512.
63
<PAGE> 66
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of 15,530,770 shares of Common Stock, assuming no exercise of
outstanding options and based upon the number of shares outstanding as of April
30, 1996. Of these shares, the 2,000,000 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless such shares are purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"). The
remaining 13,530,770 shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act (the "Restricted Shares"). Restricted Shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules
are summarized below. As a result of the contractual restrictions described
below and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus; (ii) 311,760
Restricted Shares (plus 212,875 shares of Common Stock issuable to employees and
consultants pursuant to stock options that are then vested) will be eligible for
sale upon expiration of the lock-up agreements 180 days after the date of this
Prospectus; and (iii) the remainder of the Restricted Shares will be eligible
for sale from time to time thereafter upon expiration of their respective
two-year holding periods beginning January 3, 1997, subject to restrictions on
such sales by Affiliates and certain vesting provisions on certain units. See
"Certain Transactions."
Upon completion of this offering, the holders of 11,070,515 shares of
Common Stock, or their transferees, will be entitled to certain rights with
respect to the registration of such shares under the Securities Act.
Registration of such shares under the Securities Act would result in such shares
becoming freely tradeable without restriction under the Securities Act (except
for shares purchased by Affiliates) immediately upon the effectiveness of such
registration. See "Description of Capital Stock -- Registration Rights."
The Company and its officers, directors and certain stockholders holding an
aggregate of shares 13,384,263 of Common Stock after this offering have agreed
that they will not, without the prior written consent of Hambrecht & Quist LLC,
directly or indirectly, offer, sell, contract to sell, transfer the economic
risk of ownership in, make any short sale, pledge or otherwise dispose of any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any other right to purchase or acquire shares of Common Stock
owned by them during the 180-day period commencing on the date of this
Prospectus.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Company's Common Stock or (ii) the average weekly
trading volume of the Company's Common Stock in the Nasdaq National Market
during the four calendar weeks immediately preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission. Sales pursuant to
Rule 144 are subject to certain requirements relating to manner of sale, notice
and availability of current public information about the Company. A person (or
person whose shares are aggregated) who is not deemed to have been an Affiliate
of the Company at any time during the 90 days immediately preceding the sale and
who has beneficially owned Restricted Shares for at least
64
<PAGE> 67
three years is entitled to sell such shares pursuant to Rule 144(k) without
regard to the limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Company's
Equity Incentive Plan and Purchase Plan. Based on the number of options
outstanding and options and shares reserved for issuance at April 30, 1996, such
registration statement would cover approximately 5,643,790 shares. Such
registration statement is expected to be filed and to become effective as soon
as practicable after the date hereof. Shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to Affiliates,
be available for sale in the open market, unless such shares are subject to
vesting restrictions with the Company or the lock-up agreements described above.
See "Management."
65
<PAGE> 68
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
Montgomery Securities, and Robertson, Stephens & Company LLC, have severally
agreed to purchase from the Company and the Selling Stockholders the following
respective number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------------ ---------
<S> <C>
Hambrecht & Quist LLC...................................................
Montgomery Securities...................................................
Robertson, Stephens & Company LLC.......................................
--------
Total......................................................... 2,000,000
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 300,000 additional shares of Common Stock at the initial public offering
price, less the underwriting discount, set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise this option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares of Common Stock
offered hereby. The Company will be obligated, pursuant to the option, to sell
shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The Selling Stockholders, and certain other stockholders of the Company,
including the officers and directors, who will own in the aggregate 13,384,263
shares of Common Stock after this offering, have agreed that they will not,
without the prior written consent of Hambrecht & Quist LLC ("H&Q"), offer, sell,
or otherwise dispose of any shares of Common Stock, options or warrants to
acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock owned by them during the 180-day period following
the date of this Prospectus. The Company has agreed, subject to certain
exceptions, that it will not, without the prior written consent of H&Q, offer,
sell or otherwise dispose of any share of Common Stock, options or warrants to
acquire shares of
66
<PAGE> 69
Common Stock or securities exchangeable for or convertible into shares of Common
Stock during the 180-day period following the date of this Prospectus, except
that the Company may grant options and sell shares of its Common Stock under the
Equity Incentive Plan, provided that such shares shall not be sold during such
period.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
In March 1995 and December 1995, Adobe Ventures L.P., a venture capital
fund managed by H&Q, Hambrecht & Quist L.P., an affiliate of H&Q, certain
employees and directors of H&Q and of entities affiliated with H&Q purchased
from the Company an aggregate of 525,002 shares of Series B Preferred Stock and
an aggregate of 205,878 shares of Series C Preferred Stock for aggregate cash
purchase prices of approximately $1,260,000 and $1,198,000, respectively. On the
closing of this offering, the Series B and Series C Preferred Stock will be
converted into an aggregate of 730,880 shares of Common Stock, representing
approximately 4.7% of the outstanding Common Stock, assuming no exercise of the
Underwriters' over-allotment option.
The Company and Montgomery Securities have entered into a Software License
and Services Agreement dated March 29, 1996, pursuant to which Montgomery
Securities received a license to use Siebel Sales Enterprise. The terms of such
agreement were negotiated by the parties at arms-length prior to the Company's
selection of Montgomery Securities as an underwriter of this offering.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market conditions, revenues and earnings of the Company, market valuations of
other companies engaged in activities similar to those of the Company, estimates
of the business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Cooley Godward Castro
Huddleson & Tatum, Menlo Park, California ("Cooley Godward"). As of the date of
this Prospectus, certain members of Cooley Godward own through an investment
partnership an aggregate of 28,000 shares of Common Stock and James C. Gaither,
a director of the Company and a partner of Cooley Godward, owns 88,000 shares of
Common Stock and has an option to purchase 22,000 shares of Common Stock.
Certain legal matters will be passed upon for the Underwriters by Morrison &
Foerster LLP, Palo Alto, California.
EXPERTS
The financial statements of Siebel Systems, Inc. as of December 31, 1994
and 1995, for the period from September 13, 1993 (inception) to December 31,
1993, and for each of the years in the two-year period ended December 31, 1995
have been included in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Securities and Exchange Commission,
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<PAGE> 70
Washington, D.C. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from the Commission upon the payment of certain fees prescribed by the
Commission.
68
<PAGE> 71
SIEBEL SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Form of Report of KPMG Peat Marwick LLP, Independent Auditors......................... F-2
Balance Sheets........................................................................ F-3
Statements of Operations.............................................................. F-4
Statements of Stockholders' Equity.................................................... F-5
Statements of Cash Flows.............................................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 72
FORM OF INDEPENDENT AUDITORS' REPORT
WHEN THE TRANSACTION REFERRED TO UNDER "REINCORPORATION" IN NOTE 7 OF NOTES
TO FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE IN A POSITION TO RENDER
THE FOLLOWING REPORT.
KPMG PEAT MARWICK LLP
The Board of Directors
Siebel Systems, Inc.:
We have audited the accompanying balance sheets of Siebel Systems, Inc. as
of December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for the period from September 13, 1993
(inception) to December 31, 1993, and for the years ended December 31, 1994 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Siebel Systems, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the period from September 13, 1993 (inception) to December 31, 1993, and for
the years ended December 31, 1994 and 1995, in conformity with generally
accepted accounting principles.
San Jose, California
April 26, 1996, except as
to Note 7, which is as
of May 14, 1996
F-2
<PAGE> 73
SIEBEL SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
----------------- -------------------
1994 1995 ACTUAL PRO
------ ------ ------ FORMA
--------
(NOTE 7)
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................ $1,017 11,391 9,757 11,094
Accounts receivable.................................. -- 3,066 3,112 3,112
Deferred income taxes................................ -- 314 314 314
Prepaids and other................................... 29 440 398 398
------ ------ ----- ------
Total current assets......................... 1,046 15,211 13,581 14,918
Property and equipment, net............................ 133 863 2,006 2,006
Other assets........................................... 24 17 22 22
------ ------ ----- ------
Total assets................................. $1,203 16,091 15,609 16,946
====== ====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 14 493 806 806
Accrued expenses..................................... -- 1,075 895 895
Income taxes payable................................. -- 395 92 92
Deferred revenue..................................... -- 4,166 3,474 3,474
------ ------ ----- ------
Total current liabilities.................... 14 6,129 5,267 5,267
Deferred income taxes.................................. -- 28 28 28
------ ------ ----- ------
Total liabilities............................ 14 6,157 5,295 5,295
Commitments and contingencies
Stockholders' equity:
Partners' capital.................................... 1,153 -- -- --
Convertible preferred stock; $.001 par value; 10,000
shares authorized; actual -- no shares issued and
outstanding in 1994, 4,906 and 4,908 shares issued
and outstanding in 1995 and 1996, respectively;
pro forma -- no shares issued and outstanding..... -- 5 5 --
Common stock; $.001 par value; 35,000 shares
authorized; actual -- 50, 8,249, and 8,573 shares
issued and outstanding in 1994, 1995, and 1996,
respectively; pro forma -- 13,646 shares issued
and outstanding................................... 1 8 9 14
Additional paid-in capital........................... 49 9,999 11,063 12,400
Notes receivable from stockholders................... (13) (13) (57) (57)
Deferred compensation................................ -- (381) (1,220) (1,220)
Retained earnings (accumulated deficit).............. (1) 316 514 514
------ ------ ----- ------
Total stockholders' equity................... 1,189 9,934 10,314 11,651
------ ------ ----- ------
Total liabilities and stockholders' equity... $1,203 16,091 15,609 16,946
====== ====== ===== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 74
SIEBEL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13, 1993 YEAR ENDED THREE MONTHS
(INCEPTION) DECEMBER 31, ENDED MARCH 31,
TO DECEMBER 31, ----------------- ----------------
1993 1994 1995 1995 1996
------------------ ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software................................. $ -- 50 7,636 -- 4,402
Maintenance and other.................... -- -- 402 30 307
----- ------- ------ ------- -------
Total revenues................... -- 50 8,038 30 4,709
Cost of revenues:
Software................................. -- -- 41 -- 26
Maintenance and other.................... -- -- 385 9 343
----- ------- ------ ------- -------
Total cost of revenues........... -- -- 426 9 369
----- ------- ------ ------- -------
Gross margin..................... -- 50 7,612 21 4,340
Operating expenses:
Product development...................... 64 868 2,816 616 986
Sales and marketing...................... 28 718 3,232 456 2,553
General and administrative............... 22 243 1,192 157 590
----- ------- ------ ------- -------
Total operating expenses......... 114 1,829 7,240 1,229 4,129
----- ------- ------ ------- -------
Operating income (loss).......... (114) (1,779) 372 (1,208) 211
Other income, net.......................... -- 13 156 8 119
----- ------- ------ ------- -------
Income (loss) before income
taxes.......................... (114) (1,766) 528 (1,200) 330
Income tax expense (benefit)............... -- -- 211 (480) 132
----- ------- ------ ------- -------
Net income (loss)................ $ (114) (1,766) 317 (720) 198
===== ======= ====== ======= =======
Pro forma net income (loss) per share...... $ 0.02 (0.05) 0.01
====== ======= =======
Shares used in pro forma net income (loss)
per share computation.................... 16,340 14,642 16,859
====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 75
SIEBEL SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES RETAINED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DEFERRED EARNINGS TOTAL
PARTNERS' --------------- --------------- PAID-IN FROM STOCK (ACCUMULATED STOCKHOLDERS'
CAPITAL SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT) EQUITY
-------- ------ ------ ------ ------ ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Partners'
initial
capital
contribution... $ 810 -- $ -- -- $-- -- -- -- -- 810
Issuance
of common
stock.... -- -- -- 50 1 49 -- -- -- 50
Net
loss..... (114 ) -- -- -- -- -- -- -- -- (114)
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1993..... 696 -- -- 50 1 49 -- -- -- 746
Partners'
capital
contributions... 2,222 -- -- -- -- -- (13) -- -- 2,209
Net
loss..... (1,765 ) -- -- -- -- -- -- -- (1) (1,766)
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1994..... 1,153 -- -- 50 1 49 (13) -- (1) 1,189
Conversion
of
partners'
capital... (1,153 ) 2,344 2 8,081 7 1,144 -- -- -- --
Compensation
related to
stock
options... -- -- -- -- -- 381 -- (381) -- --
Issuance
of common
stock.... -- -- -- 328 -- 83 -- -- -- 83
Repurchase
of common
stock.... -- -- -- (210 ) -- (9) -- -- -- (9)
Issuance
of Series
B
preferred
stock.... -- 1,967 2 -- -- 4,892 -- -- -- 4,894
Issuance
of Series
C
preferred
stock.... -- 595 1 -- -- 3,459 -- -- -- 3,460
Net
income... -- -- -- -- -- -- -- -- 317 317
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
December
31,
1995..... -- 4,906 5 8,249 8 9,999 (13) (381) 316 9,934
Issuance
of common
stock
(unaudited)... -- -- -- 324 1 170 (44) -- -- 127
Issuance
of Series
B
preferred
stock
(unaudited)... -- 2 -- -- -- 12 -- -- -- 12
Compensation
related to
stock
options
(unaudited)... -- -- -- -- -- 882 -- (882) -- --
Amortization
of deferred
stock
compensation
(unaudited)... -- -- -- -- -- -- -- 43 -- 43
Net income
(unaudited)... -- -- -- -- -- -- -- -- 198 198
--
------- ----- ------ ----- --- --- ----- --- ------
Balances,
March 31,
1996
(unaudited)... $ -- 4,908 $ 5 8,573 $9 11,063 (57) (1,220) 514 10,314
======= ===== ====== ===== == === === ===== === ======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 76
SIEBEL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 13, 1993 YEAR ENDED THREE MONTHS
(INCEPTION) DECEMBER 31, ENDED MARCH 31,
TO DECEMBER 31, ----------------- ----------------
1993 1994 1995 1995 1996
------------------ ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (114) (1,766) 317 (720) 198
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Compensation related to stock options.......... -- -- -- -- 43
Depreciation and amortization.................. 6 75 142 28 125
Deferred income taxes.......................... -- -- (286) -- --
Changes in operating assets and liabilities:
Accounts receivable.......................... -- -- (3,066) (392) (46)
Prepaids and other........................... (6) (23) (411) (651) 42
Other assets................................. (9) (15) 7 (10) (5)
Accounts payable............................. 4 10 479 209 313
Accrued expenses............................. -- -- 1,075 103 (180)
Income taxes payable......................... -- -- 395 -- (303)
Deferred revenue............................. -- -- 4,166 787 (692)
----- ------- ------- ------ -------
Net cash provided by (used in) operating
activities.............................. (119) (1,719) 2,818 (646) (505)
----- ------- ------- ------ -------
Cash used in investing activities -- purchases of
property and equipment............................ (38) (176) (872) (147) (1,268)
----- ------- ------- ------ -------
Cash flows from financing activities:
Partners' capital contributions................... 810 2,209 -- -- --
Proceeds from issuance of common stock............ 50 -- 83 -- 127
Repurchases of common stock....................... -- -- (9) -- --
Proceeds from issuance of preferred stock......... -- -- 8,354 4,482 12
----- ------- ------- ------ -------
Net cash provided by financing
activities.............................. 860 2,209 8,428 4,482 139
----- ------- ------- ------ -------
Change in cash and cash equivalents................. 703 314 10,374 3,689 (1,634)
Cash and cash equivalents, beginning of period...... -- 703 1,017 1,017 11,391
----- ------- ------- ------ -------
Cash and cash equivalents, end of period............ $ 703 1,017 11,391 4,706 9,757
===== ======= ======= ====== =======
Supplemental disclosures of cash flows information:
Cash paid:
Taxes.......................................... $ -- -- 100 -- 385
===== ======= ======= ====== =======
Noncash investing and financing activities:
Conversion of partnership units into common
stock and Series A preferred stock........... $ -- -- 1,153 1,153 --
===== ======= ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 77
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(1) SUMMARY OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Siebel Systems, Inc. (the "Company") is an industry leading provider of
enterprise-class sales and marketing information software systems. The Company
designs, develops, markets, and supports Siebel Sales Enterprise, a leading
Internet-enabled, object oriented client/server application software product
family designed to meet the sales and marketing information system requirements
of even the largest multi-national organizations.
The Company was incorporated in the state of California on September 13,
1993 and elected to be treated as an S corporation effective on that date. Its
principal activity prior to January 1995 was serving as the general partner of
Siebel Systems, L.P. (the Partnership), a limited partnership. Accordingly, the
financial statements for the period from September 13, 1993 (inception) to
December 31, 1993, and as of and for the year ended December 31, 1994, reflect
the combined financial position and operating results of the Company and the
Partnership. The Company terminated its S corporation election on January 1,
1995. On January 3, 1995, under provisions of the Partnership agreement, all
partners elected to dissolve the Partnership and convert their partnership units
into common stock and preferred stock of the Company.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position No.
91-1, Software Revenue Recognition. Software license revenue is recognized when
all of the following criteria have been met: there is an executed license
agreement, software has been shipped to the customer, no significant vendor
obligations remain, and collection is deemed probable. Maintenance and other
revenues consist primarily of maintenance and are recognized ratably over the
term of the maintenance contract, typically 12 to 36 months.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents are
classified as "available-for-sale," and are carried at fair value with any
unrealized gains or losses reported as a separate component of stockholders'
equity. Gross unrealized gains and losses to date have not been material.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis over their estimated useful lives, generally three to seven
years.
F-7
<PAGE> 78
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
CAPITALIZED SOFTWARE
Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility in the form of a working model has been
established. To date, the Company's software development has been completed
concurrent with the establishment of technological feasibility, and,
accordingly, no costs have been capitalized.
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled.
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per share is computed using net income (loss)
and is based on the weighted average number of shares of common stock
outstanding, convertible preferred stock, on an "as if converted" basis, using
the exchange rate in effect at the initial public offering date, and dilutive
common equivalent shares from stock options and warrants outstanding using the
treasury stock method. In accordance with certain Securities and Exchange
Commission (SEC) Staff Accounting Bulletins, such computations include all
common and common equivalent shares issued within 12 months of the offering date
as if they were outstanding for all periods presented using the treasury stock
method and the anticipated initial public offering price.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 will be effective for fiscal years beginning after
December 15, 1995, and will require that the Company either recognize in its
financial statements costs related to its employee stock-based compensation
plans, such as stock option and stock purchase plans, or make pro forma
disclosures of such costs in a footnote to the financial statements.
The Company expects to continue to use the intrinsic value-based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its financial statements for fiscal 1996, the Company will make the required pro
forma disclosures in a footnote to the financial statements. SFAS No. 123 is not
expected to have a material effect on the Company's results of operations or
financial position.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral on accounts receivable, as the majority of the
Company's customers are large, well established companies. The Company maintains
reserves for potential credit losses, but historically has not experienced any
significant losses related to individual customers or groups of customers in any
particular industry or geographic area.
F-8
<PAGE> 79
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1996, and
for the three months ended March 31, 1995 and 1996, have been prepared on
substantially the same basis as the audited financial statements, and in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information set forth therein.
(2) FINANCIAL STATEMENT DETAILS
PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
----- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment.................................... $183 666 1,353
Furniture and fixtures................................ 31 46 113
Computer software..................................... -- 374 888
---- --- -----
214 1,086 2,354
Less accumulated depreciation......................... 81 223 348
---- --- -----
$133 863 2,006
==== === =====
</TABLE>
ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
---- ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Bonuses................................................ $-- 133 167
Commissions............................................ -- 152 238
Vacation............................................... -- 79 125
Sales tax.............................................. -- 486 118
Other.................................................. -- 225 247
--- ----- ---
$-- 1,075 895
=== ===== ===
</TABLE>
OTHER INCOME, NET
Other income, net consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C>
Interest income......................................... $15 163 124
Interest expense........................................ (2 ) (7 ) (5)
--- --- ---
$13 156 119
=== === ===
</TABLE>
F-9
<PAGE> 80
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
(3) COMMITMENTS AND CONTINGENCIES
BANK BORROWINGS
In October 1995, the Company entered into a $500,000 equipment line of
credit with a bank. Borrowings under the agreement bear interest at the bank's
prime rate plus 1% (9.75% as of December 31, 1995). In October 1995, the Company
borrowed $231,000 on the line of credit, which was subsequently repaid in
December 1995. The line of credit expired on April 15, 1996.
LEASE OBLIGATIONS
As of December 31, 1995, the Company leased facilities under noncancelable
leases expiring between 1996 and 2001. Future minimum lease payments are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------------------------------------------------------------
<S> <C>
1996................................................................ $ 383
1997................................................................ 228
1998................................................................ 157
1999................................................................ 157
2000................................................................ 157
Thereafter.......................................................... 26
------
$ 1,108
======
</TABLE>
Rent expense for the period from September 13, 1993 (inception) to December
31, 1993, and for the years ended December 31, 1994 and 1995, was $18,000,
$86,000, and $191,000, respectively.
EMPLOYEE BENEFIT PLAN
During 1995, the Company adopted a 401(k) plan that allows eligible
employees to contribute up to 20% of their compensation, limited to $9,500 in
1995. Employee contributions and earnings thereon vest immediately. Although,
the Company may make discretionary contributions to the 401(k) plan, none have
been made to date.
LEGAL ACTIONS
The Company is engaged in certain legal actions arising in the ordinary
course of business. The Company believes it has adequate legal defenses and
believes that the ultimate outcome of these actions will not have a material
effect on the Company's financial position or results of operations.
(4) STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The rights, preferences, and privileges of the Series A, B, and C
convertible preferred stock are as follows:
- Each share of Series A, B, and C preferred stock may be converted into
common stock at the option of the holder on a one-for-one basis.
Automatic conversion will occur upon an affirmative vote of a majority of
the holders of preferred stock or upon the closing of an initial public
offering of common stock in which the per share price is at least $7.00,
and gross proceeds to the Company are at least $7,500,000. The conversion
rate is subject to certain antidilution provisions.
F-10
<PAGE> 81
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
- Holders of preferred stock are entitled to noncumulative annual
dividends, when and if declared by the Board of Directors, of $.08, $.19,
and $.47 per share for Series A, B, and C, respectively.
- Holders of Series A, B, and C preferred stock have the right to one vote
for each share of common stock into which such shares could be converted.
- Holders of Series A, B, and C preferred stock have a liquidation
preference of $1.00, $2.40, and $5.82 per share, respectively, plus all
declared but unpaid dividends.
In January 1995, the Company issued 2,344,000 shares of Series A preferred
stock in exchange for the Partnership's Class C and D partnership units, on a
one-for-one basis.
Convertible preferred stock issued and outstanding as of December 31, 1995,
is as follows (in thousands):
<TABLE>
<CAPTION>
ISSUED AND CARRYING LIQUIDATION
SERIES AUTHORIZED OUTSTANDING AMOUNT PREFERENCE
------------------------------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
A.............................. 2,400 2,344 $1,139 $ 2,344
B.............................. 2,500 1,967 4,894 4,721
C.............................. 601 595 3,460 3,463
----- ----- ------ -------
5,501 4,906 $9,493 $10,528
===== ===== ====== =======
</TABLE>
In December 1995, the Company issued to a customer a warrant to purchase
75,000 shares of Series C preferred stock at $5.82 per share. The warrant had
nominal value on the date of issuance. The warrant expires upon the earlier of
December 15, 1996, or the closing of an initial public offering of the Company's
common stock (see Note 7).
COMMON STOCK
In January 1995, the Company issued 8,081,000 shares of common stock in
exchange for the Partnership's Class A and B partnership units, on a one-for-one
basis.
During 1995, the Company repurchased approximately 210,000 shares of common
stock from employees who had terminated employment with the Company. These
repurchases were at each employee's original purchase price.
1994 STOCK OPTION PLAN
In December 1994, the Board of Directors approved the 1994 Stock Option
Plan (the Plan) which provides for the issuance of up to 3,000,000 shares of
common stock to employees, directors, and consultants. The Plan provides for the
issuance of incentive and nonstatutory stock options.
Under the Plan, the exercise price for incentive options is at least 100%
of the fair market value on the date of the grant. The exercise price for
nonstatutory stock options is at least 85% of the fair market value on the date
of grant. The exercise price for both incentive and nonstatutory stock options
is at least 110% of the fair market value on the date of the grant for persons
with greater than 10% of the voting power of all classes of stock.
Under the Plan, options generally expire in 10 years; however, options may
expire in 5 years if the optionee owns stock representing more than 10% of the
voting power of all classes of stock. Vesting periods are determined by the
Board of Directors and generally provide for shares to vest ratably over 5
years.
F-11
<PAGE> 82
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
Plan activity is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS
AVAILABLE NUMBER EXERCISE PRICE
FOR GRANT OF SHARES PER SHARE
---------- --------- --------------
<S> <C> <C> <C>
Authorized........................................ 3,000,000 -- $ --
Options granted................................... (92,000) 92,000 .05 -- .10
---------- ----------
Balances, December 31, 1994......................... 2,908,000 92,000 .05 -- .10
Options granted................................... (1,440,785) 1,440,785 .10 -- .50
Options exercised................................. -- (328,285) .10 -- .50
Options canceled.................................. 245,500 (245,500) .10 -- .50
---------- ----------
Balances, December 31, 1995......................... 1,712,715 959,000 .05 -- .50
Additional shares authorized (unaudited).......... 3,000,000 -- --
Options granted (unaudited)....................... (1,784,750) 1,784,750 1.75 -- 2.90
Options exercised (unaudited)..................... -- (324,000) .05 -- 2.90
Options canceled (unaudited)...................... 52,000 (52,000) .10 -- 1.75
---------- ----------
Balances, March 31, 1996 (unaudited)................ 2,979,965 2,367,750 .10 -- 2.90
========== ==========
</TABLE>
As of December 31, 1995, 41,900 options were vested.
The Plan also allows for the exercise of otherwise unvested options, which
are subject to repurchase by the Company, at a rate equivalent to the current
vesting schedule of each option. As of December 31, 1995, 252,500 unvested
options had been exercised which were subject to repurchase.
During the period from October 1995 through April 1996, the Company granted
options to purchase an aggregate of 4,096,750 shares of common stock at exercise
prices ranging from $0.50 to $6.50 per share. Based in part on an independent
appraisal obtained by the Company's Board of Directors, and other factors, the
Company recorded $381,000 of deferred compensation expense in 1995 and an
additional $882,000 deferred compensation expense (unaudited) for the three
months ended March 31, 1996 relating to these options. These amount are being
amortized over the vesting period of the individual options, generally five
years.
(5) INCOME TAXES
As discussed in Note 1, the Company was an S corporation and the general
partner in the Partnership prior to January 3, 1995. For tax purposes, losses
incurred through December 31, 1994 were allocated to the Partners in accordance
with the Partnership loss sharing agreement. The portion of losses allocated to
the Company as general partner was passed through to its stockholder. Therefore,
the Company is not entitled to any net operating loss carryforwards from periods
prior to January 1995. The S corporation election was terminated on January 1,
1995. Accordingly, income tax expense has been provided only for operations
during the year ended December 31, 1995.
F-12
<PAGE> 83
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
The components of income tax expense for the year ended December 31, 1995
are as follows (in thousands):
<TABLE>
<S> <C>
Current:
Federal........................................................... $ 289
State............................................................. 108
Foreign........................................................... 100
-----
Total current............................................. 497
Deferred:
Federal........................................................... (228)
State............................................................. (58)
-----
Total deferred............................................ (286)
-----
Total income taxes........................................ $ 211
=====
</TABLE>
The difference between the "expected" income tax expense computed at the
federal statutory rate of 34% and the Company's actual income tax expense for
the year ended December 31, 1995, is as follows (in thousands):
<TABLE>
<S> <C>
Expected income tax expense......................................... $ 180
State income taxes, net of federal tax benefit...................... 33
Other, net.......................................................... (2)
----
Total income taxes........................................ $ 211
====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1995, are as
follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Deferred state taxes.............................................. $ 17
Accruals and reserves, not currently taken for tax purposes....... 297
----
Net deferred assets............................................ 314
Deferred tax liability:
Depreciation...................................................... (28)
----
Net deferred liability......................................... (28)
----
Net deferred assets............................................ $ 286
====
</TABLE>
(6) RELATED PARTIES, SIGNIFICANT CUSTOMERS, AND GEOGRAPHIC INFORMATION
In 1995, the Company had revenues of $1.0 million and $1.8 million (12% and
23% of total revenues, respectively) from each of two related parties, both of
which are holders of preferred stock. Accounts receivable from these parties at
December 31, 1995 were $900,000 and $200,000, respectively. The Company also had
revenues of $1.6 million and $823,000, or approximately 20% and 10% of total
revenues, respectively, from each of two customers.
The Company has a royalty arrangement with a holder of preferred stock
relating to the licensing of certain products. To date, royalty obligations
under this arrangement have not been material.
The Company's export sales in 1995 were comprised of the $1.0 million sale
to the related party, which is located in Japan.
F-13
<PAGE> 84
SIEBEL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
(7) SUBSEQUENT EVENTS
REINCORPORATION
In May 1996, the Board of Directors approved the reincorporation of the
Company as a Delaware corporation. The Certificate of Incorporation provides for
35,000,000 authorized shares of common stock with a $.001 par value per share
and 10,000,000 authorized shares of preferred stock with a $.001 par value per
share. The financial statements have been retroactively restated to give effect
to the reincorporation.
SERIES B PREFERRED STOCK
In April 1996, the Company closed the sale of 31,430 shares of Series B
preferred stock for proceeds of $183,000.
SERIES D PREFERRED STOCK
On April 30, 1996, the Company closed the sale of 90,000 shares of Series D
preferred stock for proceeds of $900,000. The rights, preferences, and
privileges of the Series D preferred stock are similar to those of the Series A,
B and C preferred stock.
REGISTRATION STATEMENT
In May 1996, the Board of Directors approved a proposed filing of a
registration statement with the SEC to sell up to 2,000,000 shares of the
Company's common stock to the public. If the offering is consummated under the
proposed terms, the Company's outstanding shares of A, B, C, and D convertible
preferred stock will automatically convert into shares of its common stock. The
issuance of the Series D preferred stock, the exercise of the Series C preferred
stock warrant described in Note 4, and this conversion have been reflected in
the accompanying pro forma balance sheet as of March 31, 1996.
1996 EMPLOYEE STOCK PURCHASE PLAN
In May 1996, the Company adopted the 1996 Employee Stock Purchase Plan (the
Purchase Plan) and reserved 350,000 shares for issuance thereunder. The Purchase
Plan will become effective upon the completion of the Company's proposed initial
public offering. The Purchase Plan permits eligible employees to purchase common
stock, through payroll deductions of up to 10% of the employee's compensation,
at a price equal to 85% of the fair market value of the common stock at either
the beginning or the end of each offering period, whichever is lower.
1996 EQUITY INCENTIVE PLAN
In May 1996, the Board of Directors approved the 1996 Equity Incentive Plan
(Equity Incentive Plan) which amended and restated the Plan (see Note 4) and
reserved a total of 6,000,000 shares of common stock for issuance under the
Equity Incentive Plan. The Equity Incentive Plan provides for the issuance of
incentive and nonstatutory stock options.
F-14
<PAGE> 85
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 4
Risk Factors.............................. 6
The Company............................... 15
Use of Proceeds........................... 16
Dividend Policy........................... 16
Capitalization............................ 17
Dilution.................................. 18
Selected Financial Data................... 19
Management's Discussion And Analysis
of Financial Condition And Results
of Operations........................... 20
Business.................................. 27
Management................................ 52
Certain Transactions...................... 59
Principal and Selling Stockholders........ 60
Description Of Capital Stock.............. 62
Shares Eligible For Future Sale........... 64
Underwriting.............................. 66
Legal Matters............................. 67
Experts................................... 67
Additional Information.................... 67
Index To Financial Statements............. F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER AS PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
2,000,000 SHARES
[LOGO]
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registration in connection with the
sale of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................................... $ 11,897
NASD filing fee........................................................... 3,950
Nasdaq application fee.................................................... 1,000
Blue sky qualification fee and expenses................................... *
Printing and engraving expenses........................................... *
Directors and officers insurance.......................................... *
Legal fees and expenses................................................... *
Accounting fees and expenses.............................................. *
Transfer agent and registrar fees......................................... *
Miscellaneous............................................................. *
--------
Total................................................................ $ *
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its affiliated enterprises, provided such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.
II-1
<PAGE> 87
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 13, 1993, the Registrant has sold and issued the following
unregistered securities:
(1) In September 1993, the Registrant sold 50,000 shares of Common Stock to
its founder, Thomas M. Siebel, for cash in the aggregate amount of $50,000.
(2) In January 1995, the Registrant issued 8,080,683 shares of Common Stock
and 2,344,500 shares of Series A Preferred Stock in exchange for the limited
partnership units of Siebel Systems, L.P.
(3) In March and July 1995, the Registrant sold 1,900,000 shares of Series
B Preferred Stock to a group of accredited investors for cash in the aggregate
amount of $4,560,000.
(4) In November and December 1995 and February and April 1996, the
Registrant sold 100,000 shares of Series B Preferred Stock to consultants of the
Registrant for cash in the aggregate amount of $528,116.
(5) In December 1995, the Registrant sold 594,585 shares of Series C
Preferred Stock to a group of accredited investors for cash in the aggregate
amount of $3,460,484.70.
(6) In April 1996, the Registrant sold 90,000 shares of Series D Preferred
Stock to a group of accredited investors for cash in the aggregate amount of
$900,000.
(7) In April 1996, the Registrant issued a warrant to purchase 75,000
shares of its Series C Preferred Stock at an exercise price of $5.82 per share
to a customer.
(8) During the period, the Registrant granted incentive stock options and
supplemental stock options to employees, directors and consultants under its
1996 Equity Incentive Plan covering an aggregate of 1,998,000 shares of the
Company's Common Stock, at an average exercise price of $4.47.
(9) During the period, the Registrant granted incentive stock options and
supplemental stock options to employees, directors and consultants under its
1996 Equity Incentive Plan covering an aggregate of 2,793,535 shares of the
Company's Common Stock, at an average exercise price of $1.37. Options to
purchase 304,375 shares of Common Stock have been canceled and none of these
options have lapsed without being exercised. The Registrant sold an aggregate of
866,210 shares of its Common Stock to employees, directors and consultants of
the Registrant for consideration in the aggregate amount of $752,291 pursuant to
the exercise of stock options granted under the Stock Option Plan.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (8) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated under the Securities Act. The purchasers in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. Similar legends were imposed in
connection with any subsequent sales of any such securities. All recipients
either received adequate information about the Registrant or had access, through
employment or other relationships, to such information.
The sales and issuance of securities in the transaction described in
paragraph (9) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder in that they were
offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701.
II-2
<PAGE> 88
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- ------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger between the Registrant and Siebel
Systems, Inc., a California corporation.
3.1 Amended and Restated Articles of Incorporation of Siebel Systems, Inc., a
California corporation.
3.2 Bylaws of Siebel Systems, Inc., a California corporation.
3.3 Restated Certificate of Incorporation of the Registrant, to be effective upon
the completion of this offering.
3.4 Bylaws of the Registrant, to be effective upon the completion of this
offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
*4.2 Specimen Stock Certificate.
4.3 Restated Investor Rights Agreement, dated December 1, 1995, between the
Registrant and certain investors, as amended April 30, 1996.
*5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 Registrant's 1996 Equity Incentive Plan, and forms of incentive and
nonstatutory stock options.
10.2 Registrant's Employee Stock Purchase Plan.
10.3 Form of Indemnity Agreement to be entered into between the Registrant and its
officers and directors.
10.4 Industrial Real Estate Lease, dated November 10, 1994, between the Registrant
and WVP Income Plus, III, as amended March 15, 1996.
10.5 Lease Agreement, dated December 8, 1995, between the Registrant and Bohannon
Trust Partnership, as amended December 13, 1995.
**10.6 Master Alliance Agreement, dated March 17, 1995, between the Registrant and
Andersen Consulting LLP.
**10.7 Software License and Services Agreement, dated March 29, 1996, by and between
the Registrant and Montgomery Securities.
**10.8 Strategic Alliance and Software License Agreement, dated December 12, 1995, by
and between the Registrant and Itochu Corporation.
10.9 Assignment Agreement, dated September 20, 1995, by and between the Registrant
and Thomas M. Siebel.
11.1 Statement Regarding Computation of Pro forma Net Income (Loss) Per Share.
23.1 Form of consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the Signature page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment requested.
(b) Financial Statement Schedules.
All schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or notes
thereto.
II-3
<PAGE> 89
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Menlo Park, State of
California, on the 15th day of May, 1996.
SIEBEL SYSTEMS, INC.
By: /s/ THOMAS M. SIEBEL
------------------------------------
Thomas M. Siebel
Chairman, President and
Chief Executive Officer
II-5
<PAGE> 91
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Thomas
M. Siebel and Justin R. Dooley his true and lawful attorney-in-fact and agent,
each acting alone, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to the Registration Statement
on Form S-1, and to any registration statement filed under Securities and
Exchange Commission Rule 462, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------------
<C> <S> <C>
/s/ THOMAS M. President, Chief Executive Officer May 15, 1996
SIEBEL and Chairman of the Board
- ------------------------------------------ (Principal Executive Officer)
Thomas M. Siebel
/s/ JUSTIN R. Vice President Finance and May 15, 1996
DOOLEY Administration
- ------------------------------------------ (Principal Financial
Justin R. Dooley and Accounting Officer)
/s/ PEHONG Director May 15, 1996
CHEN
- ------------------------------------------
Pehong Chen
/s/ JAMES C. Director May 15, 1996
GAITHER
- ------------------------------------------
James C. Gaither
/s/ GEORGE T. SHAHEEN Director May 15, 1996
- ------------------------------------------
George T. Shaheen
/s/ CHARLES R. Director May 15, 1996
SCHWAB
- ------------------------------------------
Charles R. Schwab
/s/ A. MICHAEL Director May 15, 1996
SPENCE
- ------------------------------------------
A. Michael Spence
</TABLE>
II-6
<PAGE> 92
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- ---------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger between the Registrant and Siebel
Systems, Inc., a California corporation.
3.1 Amended and Restated Articles of Incorporation of Siebel Systems, Inc., a
California corporation.
3.2 Bylaws of Siebel Systems, Inc., a California corporation.
3.3 Restated Certificate of Incorporation of the Registrant, to be effective
upon the completion of this offering.
3.4 Bylaws of the Registrant, to be effective upon the completion of this
offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
*4.2 Specimen Stock Certificate.
4.3 Restated Investor Rights Agreement, dated December 1, 1995, between the
Registrant and certain investors, as amended April 30, 1996.
*5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 Registrant's 1996 Equity Incentive Plan, and forms of incentive and
nonstatutory stock options.
10.2 Registrant's Employee Stock Purchase Plan.
10.3 Form of Indemnity Agreement to be entered into between the Registrant and
its officers and directors.
10.4 Industrial Real Estate Lease, dated November 10, 1994, between the
Registrant and WVP Income Plus, III, as amended March 15, 1996.
10.5 Lease Agreement, dated December 8, 1995, between the Registrant and
Bohannon Trust Partnership, as amended December 13, 1995.
**10.6 Master Alliance Agreement, dated March 17, 1995, between the Registrant and
Andersen Consulting LLP.
**10.7 Software License and Services Agreement, dated March 29, 1996, by and
between the Registrant and Montgomery Securities.
**10.8 Strategic Alliance and Software License Agreement, dated December 12, 1995,
by and between the Registrant and Itochu Corporation.
10.9 Assignment Agreement, dated September 20, 1995, by and between the
Registrant and Thomas M. Siebel.
11.1 Statement Regarding Computation of Pro forma Net Income (Loss) Per Share.
23.1 Form of Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the Signature page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment requested.
<PAGE> 93
APPENDIX -- (DESCRIPTION OF GRAPHICS)
INSIDE FRONT COVER
[Graphic: Closed-Loop Sales and Marketing. This graphic depicts a closed-loop
sales and marketing information system in which sales opportunities and
information from a marketing encyclopedia are shared and managed across multiple
distribution channels.]
Graphic Caption: A closed-loop sales and marketing information system allows
organizations to share and manage sales opportunities and information from a
marketing encyclopedia across multiple distribution channels.
[Graphic: Typical Centralized Data Distribution. This graphic depicts a typical
configuration of a multi-channel sales organization with stationary Siebel users
who are permanently connected to the central database server and mobile Siebel
users who are intermittently connected to the central database server.]
Graphic Caption: Siebel's centralized data distribution architecture supports a
multi-tiered sales organization with stationary Siebel users who are permanently
connected to the central database server and mobile Siebel users who are
intermittently connected to the central database server.
GATEFOLD FOLLOWING INSIDE FRONT COVER
[Graphic: Siebel's N-Tiered Architecture. This graphic depicts Siebel's N-tiered
architecture and illustrates several tiers including Siebel Applet Objects,
Siebel Universal Applet Manager, Siebel Business Object Manager, Siebel Data
Manager, Siebel Universal Data Exchange, and Siebel Data Repository.]
PAGE 27
[Graphic: Closed-Loop Sales and Marketing. This graphic depicts a closed-loop
sales and marketing information system in which sales opportunities and
information from a marketing encyclopedia are shared and managed across multiple
distribution channels.]
Graphic Caption: A closed-loop sales and marketing information system allows
organizations to share and manage sales opportunities and information from a
marketing encyclopedia across multiple distribution channels.
PAGE 34
Graphic Caption: Organizations can unite their connected Siebel users and their
mobile Siebel users in a common sales information system. Siebel Remote provides
two-way data synchronization between mobile users and the central database
repository, using LAN, WAN, dial-up, as well as intranet and Internet
connections.
[Graphic: SIEBEL REMOTE: This graphic depicts Siebel connected clients, Siebel
mobile clients, and the two-way database synchronization between mobile Siebel
users and the central database repository.]
PAGE 36
[Graphic: Typical Centralized Data Distribution. This graphic depicts a typical
configuration of a multi-channel sales organization with stationary Siebel users
who are permanently connected to the central database server and mobile Siebel
users who are intermittently connected to the central database server.]
Graphic Caption: Siebel's centralized data distribution architecture supports a
multi-tiered sales organization with stationary Siebel users who are permanently
connected to the central database server and mobile Siebel users who are
intermittently connected to the central database server.
<PAGE> 94
PAGE 37
[Graphic: This graphic depicts the Siebel application running in an environment
in which multiple database servers provide support for different connected and
mobile subsets of the sales organization.]
Graphic Caption: Siebel's de-centralized data distribution architecture is
designed to support multiple, de-centralized data servers which can be
geographically located in the sales region they support.
PAGE 39
[Graphic: N-Tiered Architecture. This graphic depicts Siebel's N-tiered
architecture, separating the information presentation, application logic,
database access, and interprocess communications layers into separate tiers.]
Graphic Caption: Siebel's N-tiered architecture separates the information
presentation, application logic, database access, and interprocess
communications layers into separate tiers in order to partition and distribute
the application components to run where necessary.
PAGE 40
[Graphic: Siebel's Flexible Products. This graphic depicts how Siebel's N-tiered
architecture can support the Personal Computer, Client/Server, and the Virtual
Computer.]
Graphic Caption: Siebel's N-tiered architecture is designed to allow
organizations to flexibly deploy their Siebel applications to run on the
Personal Computer, Client/Server, and in the future, the Virtual Computer.
INSIDE BACK COVER
[Graphic: Siebel Sales Enterprise. The Siebel Sales Enterprise provides a list
of all sales opportunities and allows users to graphically visualize a Pipeline
Analysis and a Pipeline Revenue Analysis.]
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of April ___, 1993, by and between SIEBEL SYSTEMS, INC.,
a California corporation ("Siebel California"), and SIEBEL ACQUISITION
CORPORATION, a Delaware corporation ("Siebel Delaware"). Siebel California and
Siebel Delaware are sometimes referred to as the "Constituent Corporations."
The authorized capital stock of Siebel California consists of thirty-five
million (35,000,000) shares of Common Stock, no par value, and ten million
(10,000,000) shares of Preferred Stock, no par value. The authorized capital
stock of Siebel Delaware, upon effectuation of the transactions set forth in
this Merger Agreement, will consist of thirty-five million (35,000,000) shares
of Common Stock, $.001 par value, and ten million (10,000,000) shares of
Preferred Stock, $.001 par value.
The directors of the Constituent Corporations deem it advisable and to the
advantage of the Constituent Corporations that Siebel California merge into
Siebel Delaware upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Siebel California
shall merge into Siebel Delaware on the following terms, conditions and other
provisions:
I. TERMS AND CONDITIONS.
1.1 MERGER. Siebel California shall be merged with and into Siebel
Delaware (the "Merger"), and Siebel Delaware shall be the surviving corporation
(the "Surviving Corporation") effective upon the date when this Merger
Agreement is filed with the Secretary of State of Delaware (the "Effective
Date").
1.2 NAME CHANGE. On the Effective Date, the name of Siebel Delaware shall
be Siebel Systems, Inc.
1.3 SUCCESSION. On the Effective Date, Siebel Delaware shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Siebel California, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.4 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and
all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and
1.
<PAGE> 2
all property, real, personal and mixed, of each of the Constituent
Corporations, and all debts due to each of the Constituent Corporations on
whatever account, and all things in action or belonging to each of the
Constituent Corporations shall be transferred to and vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest, shall be thereafter the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the
Merger; provided, however, that the liabilities of the Constituent Corporations
and of their shareholders, directors and officers shall not be affected and all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and any claim existing
or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and all
debts, liabilities and duties of or upon each of the Constituent Corporations
shall attach to the Surviving Corporation, and may be enforced against it to
the same extent as if such debts, liabilities and duties had been incurred or
contracted by it.
1.5 COMMON STOCK OF SIEBEL CALIFORNIA AND SIEBEL DELAWARE. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, each share of
Common Stock of Siebel California issued and outstanding immediately prior
thereto shall be converted into one (1) fully paid and nonassessable share of
the Common Stock of Siebel Delaware and each share of Common Stock of Siebel
Delaware issued and outstanding immediately prior thereto shall be cancelled
and returned to the status of authorized but unissued shares.
1.6 PREFERRED STOCK OF SIEBEL CALIFORNIA AND SIEBEL DELAWARE. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, each share of
Series A Preferred Stock of Siebel California issued and outstanding
immediately prior thereto shall be converted into one (1) fully paid and
nonassessable share of Series A Preferred Stock of Siebel Delaware, each share
of Series B Preferred Stock of Siebel California issued and outstanding
immediately prior thereto shall be converted into one (1) fully paid and
nonassessable share of Series B Preferred Stock of Siebel Delaware, each share
of Series C Preferred Stock of Siebel California issued and outstanding
immediately prior thereto shall be converted into one (1) fully paid and
nonassessable share of Series C Preferred Stock of Siebel Delaware and each
share of Series D Preferred Stock of Siebel California issued and outstanding
immediately prior thereto shall be converted into one (1) fully paid and
nonassessable share of Series D Preferred Stock of Siebel Delaware.
1.7 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of Siebel California shall be deemed for
all purposes to evidence ownership of and to represent the shares of Siebel
Delaware into which the shares of Siebel California represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agents.
The registered owner of any such outstanding stock certificate shall, until
such certificate shall have been surrendered for
2.
<PAGE> 3
transfer or conversion or otherwise accounted for to the Surviving Corporation
or its transfer agent, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividend and other distributions upon
the shares of Siebel Delaware evidenced by such outstanding certificate as
above provided.
1.8 OPTIONS. On the Effective Date, the Surviving Corporation will assume
and continue Siebel California's 1996 Equity Incentive Plan and Employee Stock
Purchase Plan and the outstanding and unexercised portions of all options to
purchase Common Stock of Siebel California, including without limitation all
options outstanding under such stock plans and any other outstanding options,
shall be converted into options of Siebel Delaware, such that an option for one
(1) share of Siebel California shall be converted into an option for one (1)
share of Siebel Delaware, with no change in the exercise price of the Siebel
Delaware option. No other changes in the terms and conditions of such options
will occur. Effective on the Effective Date, Siebel Delaware hereby assumes
the outstanding and unexercised portions of such options and the obligations of
Siebel California with respect thereto.
1.9 WARRANTS. On the Effective Date, the Surviving Corporation will
assume and continue warrants of Siebel California and the outstanding and
unexercised portions of all warrants, including without limitation all warrants
to purchase shares of Series C Preferred Stock outstanding and any other
outstanding warrants, shall be converted into warrants of Siebel Delaware, such
that a warrant for one (1) share of Siebel California shall be converted into a
warrant for one (1) share of Siebel Delaware, with no change in the exercise
price of the Siebel Delaware warrant. No other changes in the terms and
conditions of such warrants will occur. Effective on the Effective Date,
Siebel Delaware hereby assumes the outstanding and unexercised portions of such
warrants and the obligations of Siebel California with respect thereto.
1.10 EMPLOYEE BENEFIT PLANS. On the Effective Date, the Surviving
Corporation shall assume all obligations of Siebel California under any and all
employee benefit plans in effect as of such date. On the Effective Date, the
Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger and shall reserve that number of shares of Siebel Delaware
Common Stock with respect to each such employee benefit plan as is proportional
to the number of shares of Siebel California Common Stock (if any) so reserved
on the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Siebel Delaware in effect on the Effective Date
shall continue to be the Certificate of Incorporation and Bylaws of the
Surviving Corporation, except that Article I of the Certificate of
Incorporation and Bylaws of the Surviving Corporation shall, effective upon the
filing of this Merger Agreement with the Secretary of State of the State of
Delaware, be amended to read in its entirety as follows: "The name of this
corporation is Siebel Systems, Inc."
3.
<PAGE> 4
2.2 DIRECTORS. The directors of Siebel California immediately preceding
the Effective Date shall become the directors of the Surviving Corporation on
and after the Effective Date to serve until the expiration of their terms and
until their successors are elected and qualified.
2.3 OFFICERS. The officers of Siebel California immediately preceding
the Effective Date shall become the officers of the Surviving Corporation on
and after the Effective Date to serve at the pleasure of its Board of
Directors.
III. MISCELLANEOUS.
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Siebel California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest or perfect in or
to conform of record or otherwise, in the Surviving Corporation the title to
and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Siebel California and otherwise
to carry out the purposes of this Merger Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name and on
behalf of Siebel California or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the shareholders
of Siebel California, this Merger Agreement may be amended in any manner
(except that, after the approval of the Merger Agreement by the shareholders of
Siebel California, the principal terms may not be amended without the further
approval of the shareholders of Siebel California) as may be determined in the
judgment of the respective Board of Directors of Siebel Delaware and Siebel
California to be necessary, desirable, or expedient in order to clarify the
intention of the parties hereto or to effect or facilitate the purpose and
intent of this Merger Agreement.
3.3 CONDITIONS TO MERGER. The obligations of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(a) the Merger shall have been approved by the shareholders of Siebel
California in accordance with applicable provisions of the General Corporation
Law of the State of California; and
(b) Siebel California, as sole stockholder of Siebel Delaware, shall
have approved the Merger in accordance with the General Corporation Law of the
State of Delaware; and
(c) any and all consents, permits, authorizations, approvals, and
orders deemed in the sole discretion of Siebel California to be material to
consummation of the Merger shall have been obtained.
4.
<PAGE> 5
3.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either Siebel California or Siebel Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Siebel California or Siebel Delaware, or the consummation of the Merger may be
deferred for a reasonable period of time if, in the opinion of the Boards of
Directors of Siebel California and Siebel Delaware, such action would be in the
best interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no effect and there
shall be no liability on the part of either Constituent Corporation or its
Board of Directors or shareholders with respect thereto, except that Siebel
California shall pay all expenses incurred in connection with the Merger or in
respect of this Merger Agreement or relating thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
5.
<PAGE> 6
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Siebel California and Siebel Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
SIEBEL SYSTEMS, INC.
A California corporation
By
-------------------------------------
Thomas M. Siebel
President and Chief Executive Officer
ATTEST:
- ---------------------------------
Eric C. Jensen
Assistant Secretary
SIEBEL ACQUISITION CORPORATION
A Delaware corporation
By
-------------------------------------
Thomas M. Siebel
Chief Executive Officer
ATTEST:
- ---------------------------------
Eric C. Jensen
Assistant Secretary
6.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
SIEBEL SYSTEMS, INC.
Thomas M. Siebel and Eric C. Jensen hereby certify that:
ONE: They are the duly elected and acting President and Assistant
Secretary, respectively, of SIEBEL SYSTEMS, INC., a California corporation (the
"Corporation" or the "Company").
TWO: The Articles of Incorporation of the Company are hereby amended and
restated to read as follows:
I.
The name of the Company is Siebel Systems, Inc.
II.
The purpose of the Company is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This Company 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 Forty-Five
Million (45,000,000) shares, Thirty-Five Million (35,000,000) shares of which
shall be Common Stock (the "Common Stock") and Ten Million (10,000,000) shares
of which shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock
and the Common Stock shall have no par value.
B. The Preferred Stock may be issued from time to time in one or more
series. Except as provided in this Article III, the Board of Directors is
hereby authorized, within the limitations and restrictions stated in this
Restated Articles, to fix or alter the dividend rights, dividend rate,
conversion rights, voting rights, the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
C. Two Million Four Hundred Thousand (2,400,000) of the authorized shares
of Preferred Stock are hereby designated "Series A Preferred Stock" (the
"Series A Preferred"). Two Million Five Hundred Thousand (2,500,000) of the
authorized shares of Preferred Stock are hereby designated as "Series B
Preferred Stock" (the "Series B Preferred"). Nine Hundred Thousand (900,000)
of the authorized shares of Preferred Stock are hereby designated "Series C
Preferred Stock" (the "Series C
1.
<PAGE> 2
Preferred"). One Hundred Thirty Thousand (130,000) of the authorized shares of
Preferred Stock are hereby designated as "Series D Preferred Stock" (the "Series
D Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, the Series B Preferred, the Series C
Preferred and the Series D Preferred (sometimes collectively referred to herein
as the "Preferred Stock") are as follows:
1. DIVIDEND RIGHTS.
Holders of Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, in preference to the holders of any Common Stock, shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds that are legally available therefor, cash dividends at the rate of
eight percent (8%) of the "Original Issue Price" per annum on each outstanding
share of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred (as adjusted for any stock dividends, combinations or splits with
respect to such shares) payable out of funds legally available therefor. The
Original Issue Price of the Series A Preferred shall be One Dollar ($1.00).
The Original Issue Price of the Series B Preferred shall be Two Dollars and
Forty Cents ($2.40). The Original Issue Price of the Series C Preferred shall
be Five Dollars and Eighty Two Cents ($5.82). The Original Issue Price of the
Series D Preferred shall be Ten Dollars ($10.00). Such dividends shall be
payable only when, as and if declared by the Board of Directors and shall be
non-cumulative.
2. VOTING RIGHTS. Except as otherwise provided herein or as required by
law, the Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred shall be voted equally with the shares of the Common Stock of the
Company and not as a separate class, at any annual or special meeting of
shareholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either case upon the following basis: each holder of
shares of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred shall be entitled to such number of votes as shall be equal to the
whole number of shares of Common Stock into which such holder's aggregate
number of shares of Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred, respectively, are convertible (pursuant to Section 4
hereof) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
3. LIQUIDATION RIGHTS.
(a) PREFERRED STOCK. Upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Common Stock, the holders of Series
A Preferred, Series B Preferred, Series C Preferred and Series D Preferred
shall be entitled to be paid out of the assets of the Company an amount per
share equal to the respective Original Issue Price plus all declared but unpaid
dividends on such share for each share of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred then held by them. Each
share of Preferred Stock shall rank on parity with every other share of
Preferred Stock, irrespective of series, as to receipt of the respective
preferential amounts for each such series upon the occurrence of such event and
no amount shall be paid or set apart for payment on the series of Preferred
Stock unless at the same time amounts in the like proportion to the respective
preferential amounts of each other series of Preferred Stock then outstanding
shall be paid or set apart. If, upon any liquidation, distribution, or winding
up, the assets of the Company shall be insufficient to make payment in full to
2.
<PAGE> 3
all holders of Preferred Stock, then such assets shall be distributed among the
holders of Preferred Stock at the time outstanding, ratably in proportion to
the preferential amount each holder is otherwise entitled to receive.
(b) COMMON STOCK. After the payment of the full liquidation
preference of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred as set forth in Section 3(a) above, the remaining assets of
the Company legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock.
(c) LIQUIDATION EVENTS. The following events shall be considered a
liquidation under Section 3(a):
(i) any consolidation or merger of the Company with or into any
other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than fifty percent (50%)
of the Company's voting power immediately after such consolidation, merger or
reorganization, or any transaction or series of related transactions in which in
excess of fifty percent (50%) of the Company's voting power is transferred (an
"Acquisition"); or
(ii) a sale, lease or other disposition of all or substantially
all of the assets of the Company (an "Asset Transfer").
Upon the occurrence of an event specified in this Section 3(c), each
holder of Preferred Stock may elect to (x) convert his shares of Preferred Stock
into Common Stock pursuant to Section 4(a) below, in which case such shares will
be treated as shares of Common Stock for purposes of Section 3(b) above and not
as shares of Preferred Stock for purposes of Section 3(a) above, or (y) retain
his shares of Preferred Stock, in which case such shares will be treated as
shares of Preferred Stock for purposes of Section 3(a) above and not as shares
of Common Stock for purposes of Section 3(b) above, but in no event shall such
shares be eligible for participation under both Sections 3(a) and 3(b) above.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall have the following rights with respect to
the conversion of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred into shares of Common Stock:
(a) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred may, at the option of the
holder, be converted at any time into fully-paid and nonassessable shares of
Common Stock. The number of shares of Common Stock to which a holder of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred shall be
entitled upon conversion shall be the product obtained by multiplying the
"Series A Conversion Rate," "Series B Conversion Rate," "Series C Conversion
Rate," or "Series D Conversation Rate," as appropriate, then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred being
converted.
(b) CONVERSION RATE. The conversion rate in effect at any time for
conversion of the Series A Preferred (the "Series A Conversion Rate") shall be
the quotient obtained by dividing the
3.
<PAGE> 4
Original Issue Price of the Series A Preferred by the "Series A Conversion
Price," calculated as provided in Section 4(c). The conversion rate in effect
at any time for conversion of the Series B Preferred (the "Series B Conversion
Rate") shall be the quotient obtained by dividing the Original Issue Price of
the Series B Preferred by the "Series B Conversion Price," calculated as
provided in Section 4(c). The conversion rate in effect at any time for
conversion of the Series C Preferred (the "Series C Conversion Rate") shall be
the quotient obtained by dividing the Original Issue Price of the Series C
Preferred by the "Series C Conversion Price," calculated as provided in Section
4(c). The conversion rate in effect at any time for conversion of the Series D
Preferred (the "Series D Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series D Preferred by the "Series D
Conversion Price," calculated as provided in Section 4(c).
(c) CONVERSION PRICE. The conversion price for the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred shall initially
be the Original Issue Price of the Series A Preferred (the "Series A Conversion
Price"), the Original Issue Price of the Series B Preferred (the "Series B
Conversion Price"), the Original Issue Price of the Series C Preferred (the
"Series C Conversion Price"), and the Original Issue Price of the Series D
Preferred (the "Series D Conversion Price"), respectively. Such initial Series
A Conversion Price, Series B Conversion Price, Series C Conversion Price, and
Series D Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price or Series D Conversion Price herein
shall mean the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred who desires to convert the
same into shares of Common Stock pursuant to this Section 4 shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Company or any transfer agent for the Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred, and shall give written notice to the
Company at such office that such holder elects to convert the same. Such
notice shall state the number of shares of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred being converted.
Thereupon, the Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock
to which such holder is entitled and shall promptly pay in cash or, to the
extent sufficient funds are not then legally available therefor, in Common
Stock (at the Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid dividends
on the shares of Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred being converted. Such conversion shall be deemed to have
been made at the close of business on the date of such surrender of the
certificates representing the shares of Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at
any time or from time to time after the date that the first share of Series D
Preferred is issued (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock, the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price and Series D Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares, the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price and Series D Conversion Price in effect
immediately before the combination
4.
<PAGE> 5
shall be proportionately increased. Any adjustment under this Section 4(e)
shall become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes,
or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price and Series D Conversion
Price then in effect shall be decreased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on such record
date, by multiplying the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price and Series D Conversion Price then in effect by a
fraction (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (2) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price and Series D Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price
and Series D Conversion Price shall be adjusted pursuant to this Section 4(f)
to reflect the actual payment of such dividend or distribution.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company at
any time or from time to time after the Original Issue Date makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, in each such event provision shall be made
so that the holders of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Company which they would have received had
their Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred been converted into Common Stock on the date of such event and had
they thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called for during such
period under this Section 4 with respect to the rights of the holders of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred or with respect to such other securities by their terms.
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any
time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred shall have the right thereafter to convert such stock into the kind
and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Common Stock into which such shares of Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred could have been
converted immediately prior to such recapitalization, reclassification
5.
<PAGE> 6
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
(i) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at
any time or from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock (other than an Acquisition or Asset Transfer
as defined in Section 3(c) or as recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 4), as a part of such capital reorganization, provision shall be
made so that the holders of the Series A Preferred, Series B Preferred, Series
C Preferred and Series D Preferred shall thereafter be entitled to receive upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred the number of shares of stock or other securities or
property of the Company to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 4 with respect to the rights
of the holders of Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred after the capital reorganization to the end that the
provisions of this Section 4 (including adjustment of the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price and Series D
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred) shall be applicable after that event and be as nearly
equivalent as practicable.
(j) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price and Series D Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred, if the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred is then convertible pursuant to this Section 4, the Company,
at its expense, shall compute such adjustment or readjustment in accordance
with the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred at the holder's address as shown in
the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (1) the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price and Series D
Conversion Price at the time in effect, and (2) the type and amount, if any, of
other property which at the time would be received upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in
Section 3(c)), or any voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company shall mail to each holder of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred at
least ten (10) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (3) the date, if
any, that is to be fixed as
6.
<PAGE> 7
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price and Series D Conversion Price, as
applicable, at any time upon the affirmative vote of the holders of at a
majority of the outstanding shares of the Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred voting together as a class,
or immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company in which (1) the per share price is at least Seven Dollars ($7.00)
(as adjusted for stock splits, recapitalizations and the like), and (2) the
gross cash proceeds to the Company (before underwriting discounts, commissions
and fees) are at least Seven Million Five Hundred Thousand Dollars ($7,500,000).
(ii) Upon the occurrence of the event specified in paragraph (i) above,
the outstanding shares of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall be converted automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred are either delivered to the Company or
its transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred, the holders of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred. Thereupon, there shall be issued and delivered
to such holder promptly at such office and in its name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares of Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred surrendered were
convertible on the date on which such automatic conversion occurred, and the
Company shall promptly pay in cash or, to the extent sufficient funds are not
then legally available therefor, in Common Stock (at the Common Stock's fair
market value determined by the Board of Directors as of the date of such
conversion), or all declared and unpaid dividends on the shares of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred being
converted, to and including the date of such conversion.
(m) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance
7.
<PAGE> 8
of any fractional share, the Company shall, in lieu of issuing any fractional
share, pay cash equal to the product of such fraction multiplied by the Common
Stock's fair market value (as determined by the Board) on the date of
conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding shares of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(o) NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
(p) PAYMENT OF TAXES. The Company will pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred, excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred so converted were registered.
(q) NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Restated Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred against dilution
or other impairment.
5. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED, SERIES C
PREFERRED OR SERIES D PREFERRED. No share or shares of Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred acquired by the
Company by reason of redemption, purchase, conversion or otherwise shall be
reissued.
6. PROTECTIVE PROVISION. As long as any shares of Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred remain
outstanding, the Company will nor declare
8.
<PAGE> 9
or pay any cash dividends on any shares of the Company's capital stock without
the vote or written consent of a majority of the then outstanding shares of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred, voting together as a single class.
IV.
A. The liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
B. The Company is authorized to indemnify the directors and officers of
the Company to the fullest extent permissible under California law.
C. Any repeal or modification of this Article shall only be prospective
and shall not effect the rights under this Article in effect at the time of the
alleged occurrence of any action or omission to act giving rise to liability.
At this point, auto numbering ends as document submitted drops back from 9 to
3.
THREE: The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors of this Company.
FOUR: The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of the Corporation entitled to vote is 8,487,760
shares of Common Stock, 2,344,500 shares of Series A Preferred, 1,968,570
shares of Series B Preferred and 594,585 Shares of Series C Preferred. The
number of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was (i) more than 50% of the
outstanding shares of Common Stock (ii) more than 50% of the outstanding shares
of Common Stock, Series A Preferred, Series B Preferred and Series C Preferred
of the Company, voting together as if the Series A Preferred, Series B
Preferred and Series C Preferred had converted into Common Stock, and (iii)
more than 50% of the outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred voting together as a separate class.
We further declare under penalty of perjury under the laws of the state of
California that the matters set forth in the foregoing certificate are true and
correct of our own knowledge.
Executed at Palo Alto, California, on April ___, 1996.
------------------------------
Thomas M. Siebel
President
------------------------------
Eric C. Jensen
Assistant Secretary
9.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SIEBEL SYSTEMS, INC.
(A California corporation)
As Amended October 12, 1994
As Amended April 17, 1995
As Amended October 2, 1995
1.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - OFFICES 1.
Section 1. Principal Office......................................... 1.
Section 2. Other Offices............................................ 1.
ARTICLE II - CORPORATE SEAL 1.
Section 3. Corporate Seal........................................... 1.
ARTICLE III - SHAREHOLDERS' MEETINGS AND VOTING RIGHTS 1.
Section 4. Place of Meetings........................................ 1.
Section 5. Annual Meeting........................................... 1.
Section 6. Postponement of Annual Meeting........................... 2.
Section 7. Special Meetings......................................... 2.
Section 8. Notice of Meetings....................................... 2.
Section 9. Manner of Giving Notice.................................. 3.
Section 10. Quorum and Transaction of Business....................... 4.
Section 11. Adjournment and Notice of Adjourned Meetings............. 4.
Section 12. Waiver of Notice, Consent to Meeting or Approval
of Minutes............................................. 4.
Section 13. Action by Written Consent Without a Meeting.............. 5.
Section 14. Voting................................................... 6.
Section 15. Persons Entitled to Vote or Consent...................... 6.
Section 16. Proxies.................................................. 7.
Section 17. Inspectors of Election................................... 7.
ARTICLE IV - BOARD OF DIRECTORS 8.
Section 18. Powers................................................... 8.
Section 19. Number of Directors...................................... 8.
Section 20. Election Of Directors, Term, Qualifications.............. 9.
Section 21. Resignations............................................. 9.
Section 22. Removal.................................................. 9.
Section 23. Vacancies................................................ 9.
Section 24. Regular Meetings......................................... 10.
Section 25. Participation by Telephone............................... 10.
Section 26. Special Meetings......................................... 10.
Section 27. Notice of Meetings....................................... 10.
Section 28. Place of Meetings........................................ 10.
Section 29. Action by Written Consent Without a Meeting.............. 10.
Section 30. Quorum and Transaction of Business....................... 11.
Section 31. Adjournment.............................................. 11.
Section 32. Organization............................................. 11.
Section 33. Compensation............................................. 11.
Section 34. Committees............................................... 11.
</TABLE>
i.
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V - OFFICERS 12.
Section 35. Officers................................................. 12.
Section 36. Appointment.............................................. 12.
Section 37. Inability to Act......................................... 12.
Section 38. Resignations............................................. 12.
Section 39. Removal.................................................. 13.
Section 40. Vacancies................................................ 13.
Section 41. Chairman of the Board.................................... 13.
Section 42. President................................................ 13.
Section 43. Vice Presidents.......................................... 13.
Section 44. Secretary................................................ 14.
Section 45. Chief Financial Officer.................................. 14.
Section 46. Compensation............................................. 15.
ARTICLE VI - Contracts, Loans, Bank Accounts, Checks and Drafts 15.
Section 47. Execution of Contracts and Other Instruments............. 15.
Section 48. Loans.................................................... 15.
Section 49. Bank Accounts............................................ 16.
Section 50. Checks, Drafts, Etc...................................... 16.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER 16.
Section 51. Certificate for Shares................................... 16.
Section 52. Transfer on the Books.................................... 16.
Section 53. Lost, Destroyed and Stolen Certificates.................. 17.
Section 54. Issuance, Transfer and Registration of Shares............ 17.
ARTICLE VIII - INSPECTION OF CORPORATE RECORDS 17.
Section 55. Inspection by Directors.................................. 17.
Section 56. Inspection by Shareholders............................... 17.
Section 57. Written Form............................................. 18.
ARTICLE IX - MISCELLANEOUS 18.
Section 58. Fiscal Year.............................................. 18.
Section 59. Annual Report............................................ 18.
Section 60. Record Date.............................................. 19.
Section 61. Bylaw Amendments......................................... 19.
Section 62. Construction and Definition.............................. 19.
ARTICLE X - INDEMNIFICATION 20.
Section 63. Indemnification of Directors, Officers,
Employees And Other Agents............................. 20.
ARTICLE XI - LOANS OF OFFICERS AND OTHERS 23.
Section 64. Certain Corporate Loans and Guaranties................... 23.
ARTICLE XII - RIGHT OF FIRST REFUSAL................................... 24.
</TABLE>
ii.
<PAGE> 4
<TABLE>
<S> <C>
Section 65. Right of First Refusal................................... 24.
</TABLE>
iii.
<PAGE> 5
BYLAWS
OF
SIEBEL SYSTEMS, INC.
(A California Corporation)
ARTICLE I - OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal executive office of the
corporation shall be located at such place as the Board of Directors may from
time to time authorize. If the principal executive office is located outside
this state, and the corporation has one or more business offices in this state,
the Board of Directors shall fix and designate a principal business office in
the State of California.
SECTION 2. OTHER OFFICES. Additional offices of the corporation shall be
located at such place or places, within or outside the State of California, as
the Board of Directors may from time to time authorize.
ARTICLE II - CORPORATE SEAL
SECTION 3. CORPORATE SEAL. If the Board of Directors adopts a corporate
seal such seal shall have inscribed thereon the name of the corporation and the
state and date of its incorporation. If and when a seal is adopted by the
Board of Directors, such seal may be engraved, lithographed, printed, stamped,
impressed upon, or affixed to any contract, conveyance, certificate for shares,
or other instrument executed by the corporation.
ARTICLE III - SHAREHOLDERS' MEETINGS AND VOTING RIGHTS
SECTION 4. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the principal executive office of the corporation, or at any other place,
within or outside the State of California, which may be fixed either by the
Board of Directors or by the written consent of all persons entitled to vote at
such meeting, given either before or after the meeting and filed with the
Secretary of the Corporation.
SECTION 5. ANNUAL MEETING. The annual meeting of the shareholders of the
corporation shall be held on any date and time which may from time to time be
designated by the Board of Directors. At such annual meeting, directors shall
be elected and any other business may be transacted which may properly come
before the meeting.
1.
<PAGE> 6
SECTION 6. POSTPONEMENT OF ANNUAL MEETING. The Board of Directors and the
President shall each have authority to hold at an earlier date and/or time, or
to postpone to a later date and/or time, the annual meeting of shareholders.
SECTION 7. SPECIAL MEETINGS.
(a) Special meetings of the shareholders, for any purpose or purposes,
may be called by the Board of Directors, the Chairman of the Board of
Directors, the President, or the holders of shares entitled to cast not less
than ten percent (10%) of the votes at the meeting.
(b) Upon written request to the Chairman of the Board of Directors, the
President, any vice president or the Secretary of the corporation by any person
or persons (other than the Board of Directors) entitled to call a special
meeting of the shareholders, such officer forthwith shall cause notice to be
given to the shareholders entitled to vote, that a meeting will be held at a
time requested by the person or persons calling the meeting, such time to be
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after
receipt of such request, the person or persons calling the meeting may give
notice thereof in the manner provided by law or in these bylaws. Nothing
contained in this Section 7 shall be construed as limiting, fixing or affecting
the time or date when a meeting of shareholders called by action of the Board
of Directors may be held.
SECTION 8. NOTICE OF MEETINGS. Except as otherwise may be required by law
and subject to subsection 7(b) above, written notice of each meeting of
shareholders shall be given to each shareholder entitled to vote at that
meeting (see Section 15 below), by the Secretary, assistant secretary or other
person charged with that duty, not less than ten (10) (or, if sent by third
class mail, thirty (30)) nor more than sixty (60) days before such meeting.
Notice of any meeting of shareholders shall state the date, place and hour
of the meeting and,
(a) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be transacted at such
meeting;
(b) in the case of an annual meeting, the general nature of matters
which the Board of Directors, at the time the notice is given, intends to
present for action by the shareholders;
(c) in the case of any meeting at which directors are to be
elected, the names of the nominees intended at the time of the notice to be
presented by management for election; and
(d) in the case of any meeting, if action is to be taken on any of
the following proposals, the general nature of such proposal:
(1) a proposal to approve a transaction within the provisions
of California Corporations Code, Section 310 (relating to certain transactions
in which a director has a direct or indirect financial interest);
2.
<PAGE> 7
(2) a proposal to approve a transaction within the provisions
of California Corporations Code, Section 902 (relating to amending the Articles
of Incorporation of the corporation);
(3) a proposal to approve a transaction within the provisions
of California Corporations Code, Sections 181 and 1201 (relating to
reorganization);
(4) a proposal to approve a transaction within the provisions
of California Corporations Code, Section 1900 (winding up and dissolution);
(5) a proposal to approve a plan of distribution within the
provisions of California Corporations Code, Section 2007 (relating to certain
plans providing for distribution not in accordance with the liquidation rights
of preferred shares, if any).
At a special meeting, notice of which has been given in accordance
with this Section, action may not be taken with respect to business, the general
nature of which has not been stated in such notice. At an annual meeting,
action may be taken with respect to business stated in the notice of such
meeting, given in accordance with this Section, and, subject to subsection 8(d)
above, with respect to any other business as may properly come before the
meeting.
SECTION 9. MANNER OF GIVING NOTICE. Notice of any meeting of shareholders
shall be given either personally or by first-class mail, or, if the corporation
has outstanding shares held of record by 500 or more persons (determined as
provided in California Corporations Code Section 605) on the record date for
such meeting, third-class mail, or telegraphic or other written communication,
addressed to the shareholder at the address of that shareholder appearing on
the books of the corporation or given by the shareholder to the corporation for
the purpose of notice. If no such address appears on the corporation's books
or is given, notice shall be deemed to have been given if sent to that
shareholder by first-class mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices shall be deemed to have been duly given
without further mailing if these shall be available to the shareholder on
written demand by the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice.
An affidavit of mailing of any notice or report in accordance with the
provisions of this Section 9, executed by the Secretary, Assistant Secretary or
any transfer agent, shall be prima facie evidence of the giving of the notice.
3.
<PAGE> 8
SECTION 10. QUORUM AND TRANSACTION OF BUSINESS.
(a) At any meeting of the shareholders, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum.
If a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter shall be the act
of the shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles of Incorporation, and except as provided in
subsection (b) below.
(b) The shareholders present at a duly called or held meeting of the
shareholders at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, provided that any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
(c) In the absence of a quorum, no business other than adjournment
may be transacted, except as described in subsection (b) above.
SECTION 11. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
shareholders may be adjourned from time to time, whether or not a quorum is
present, by the affirmative vote of a majority of shares represented at such
meeting either in person or by proxy and entitled to vote at such meeting.
In the event any meeting is adjourned, it shall not be necessary to give
notice of the time and place of such adjourned meeting pursuant to Sections 8
and 9 of these bylaws; provided that if any of the following three events
occur, such notice must be given:
(1) announcement of the adjourned meeting's time and place is not
made at the original meeting which it continues or
(2) such meeting is adjourned for more than forty-five (45) days from
the date set for the original meeting or
(3) a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any business which
might have been transacted at the original meeting.
SECTION 12. WAIVER OF NOTICE, CONSENT TO MEETING OR APPROVAL OF MINUTES.
(a) Subject to subsection (b) of this Section, the transactions of
any meeting of shareholders, however called and noticed, and wherever held,
shall be as valid as though made at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the persons entitled to vote but not
present in person or by proxy signs a written waiver of notice or a consent to
holding of the meeting or an approval of the minutes thereof.
4.
<PAGE> 9
(b) A waiver of notice, consent to the holding of a meeting or
approval of the minutes thereof need not specify the business to be transacted
or transacted at nor the purpose of the meeting; provided that in the case of
proposals described in subsection (d) of Section 8 of these bylaws, the general
nature of such proposals must be described in any such waiver of notice and such
proposals can only be approved by waiver of notice, not by consent to holding of
the meeting or approval of the minutes.
(c) All waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
(d) A person's attendance at a meeting shall constitute waiver of
notice of and presence at such meeting, except when such person objects at the
beginning of the meeting to transaction of any business because the meeting is
not lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters which are required
by law or these bylaws to be in such notice (including those matters described
in subsection (d) of Section 8 of these bylaws), but are not so included if such
person expressly objects to consideration of such matter or matters at any time
during the meeting.
SECTION 13. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which
may be taken at any meeting of shareholders may be taken without a meeting and
without prior notice if written consents setting forth the action so taken are
signed by the holders of the outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors;
provided that any vacancy on the Board of Directors (other than a vacancy
created by removal) which has not been filled by the board of directors may be
filled by the written consent of a majority of outstanding shares entitled to
vote for the election of directors.
Any written consent may be revoked pursuant to California Corporations
Code Section 603(c) prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary. Such revocation must be in writing and will be effective upon its
receipt by the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of any corporate action approved by the shareholders without a meeting
to those shareholders entitled to vote on such matters who have not consented
thereto in writing. This notice shall be given in the manner specified in
Section 9 of these bylaws. In the case of approval of (i) a transaction within
the provisions of California Corporations Code, Section 310 (relating to
certain transactions in which a director has an interest), (ii) a transaction
within the provisions of California Corporations Code, Section 317 (relating to
indemnification of agents of the corporation), (iii) a transaction within the
provisions of California Corporations Code, Sections 181 and 1201 (relating to
reorganization), and (iv) a plan of distribution within
5.
<PAGE> 10
the provisions of California Corporations Code, Section 2007 (relating to
certain plans providing for distribution not in accordance with the liquidation
rights of preferred shares, if any), the notice shall be given at least ten
(10) days before the consummation of any action authorized by that approval.
SECTION 14. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
15 of these bylaws, subject to the provisions of Sections 702 through 704 of
the California Corporations Code (relating to voting shares held by a
fiduciary, in the name of a corporation, or in joint ownership). Voting at any
meeting of shareholders need not be by ballot; provided, however, that
elections for directors must be by ballot if balloting is demanded by a
shareholder at the meeting and before the voting begins.
Every person entitled to vote at an election for directors may cumulate
the votes to which such person is entitled, i.e., such person may cast a total
number of votes equal to the number of directors to be elected multiplied by
the number of votes to which such person's shares are entitled, and may cast
said total number of votes for one or more candidates in such proportions as
such person thinks fit; provided, however, no shareholder shall be entitled to
so cumulate such shareholder's votes unless the candidates for which such
shareholder is voting have been placed in nomination prior to the voting and a
shareholder has given notice at the meeting, prior to the vote, of an intention
to cumulate votes. In any election of directors, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Except as may be otherwise provided in the Articles of Incorporation or by
law, and subject to the foregoing provisions regarding the cumulation of votes,
each shareholder shall be entitled to one vote for each share held.
Any shareholder may vote part of such shareholder's shares in favor of a
proposal and refrain from voting the remaining shares or vote them against the
proposal, other than elections to office, but, if the shareholder fails to
specify the number of shares such shareholder is voting affirmatively, it will
be conclusively presumed that the shareholder's approving vote is with respect
to all shares such shareholder is entitled to vote.
No shareholder approval, other than unanimous approval of those entitled
to vote, will be valid as to proposals described in subsection 8(d) of these
bylaws unless the general nature of such business was stated in the notice of
meeting or in any written waiver of notice.
SECTION 15. PERSONS ENTITLED TO VOTE OR CONSENT. The Board of Directors
may fix a record date pursuant to Section 60 of these bylaws to determine which
shareholders are entitled to notice of and to vote at a meeting or consent to
corporate actions, as provided in Sections 13 and 14 of these bylaws. Only
persons in whose name shares otherwise entitled to vote stand on the stock
records of the corporation on such date shall be entitled to vote or consent.
6.
<PAGE> 11
If no record date is fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day notice is given or, if
notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held;
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given;
(3) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned
meeting; provided, however, that the Board of Directors shall fix a new record
date if the meeting is adjourned for more than forty-five (45) days from the
date set for the original meeting.
Shares of the corporation held by its subsidiary or subsidiaries (as
defined in California Corporations Code, Section 189(b)) are not entitled to
vote in any matter.
SECTION 16. PROXIES. Every person entitled to vote or execute consents
may do so either in person or by one or more agents authorized to act by a
written proxy executed by the person or such person's duly authorized agent and
filed with the Secretary of the corporation; provided that no such proxy shall
be valid after the expiration of eleven (11) months from the date of its
execution unless otherwise provided in the proxy. The manner of execution,
suspension, revocation, exercise and effect of proxies is governed by law.
SECTION 17. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and
on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares
represented in person or proxy shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall, appoint a person
to fill that vacancy.
7.
<PAGE> 12
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE IV - BOARD OF DIRECTORS
SECTION 18. POWERS. Subject to the provisions of law or any limitations
in the Articles of Incorporation or these bylaws, as to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised, by or under the direction of the Board of Directors. The Board of
Directors may delegate the management of the day-to-day operation of the
business of the corporation to a management company or other person, provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board
of Directors.
SECTION 19. NUMBER OF DIRECTORS. The authorized number of directors of
the corporation shall be not less than a minimum of four (4) nor more than a
maximum of seven (7) (which maximum number in no case shall be greater than two
times said minimum, minus one) and the number of directors presently authorized
is six (6). The exact number of directors shall be set within these limits
from time to time (a) by approval of the Board of Directors, or (b) by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum) or by the written
consent of shareholders pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, an amendment reducing the
minimum number of directors to less than five (5), cannot be adopted if votes
cast against its adoption at a meeting or the shares not consenting to
8.
<PAGE> 13
it in the case of action by written consent are equal to more than 16-2/3
percent of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall remove any
director prior to the expiration of such director's term of office.
SECTION 20. ELECTION OF DIRECTORS, TERM, QUALIFICATIONS. The directors
shall be elected at each annual meeting of shareholders to hold office until
the next annual meeting. Each director, including a director elected or
appointed to fill a vacancy, shall hold office either until the expiration of
the term for which elected or appointed and until a successor has been elected
and qualified, or until his death, resignation or removal. Directors need not
be shareholders of the corporation.
SECTION 21. RESIGNATIONS. Any director of the corporation may resign
effective upon giving written notice to the Chairman of the Board, the
President, the Secretary or the Board of Directors of the corporation, unless
the notice specifies a later time for the effectiveness of such resignation.
If the resignation specifies effectiveness at a future time, a successor may be
elected pursuant to Section 23 of these bylaws to take office on the date that
the resignation becomes effective.
SECTION 22. REMOVAL. The Board of Directors may declare vacant the office
of a director who has been declared of unsound mind by an order of court or who
has been convicted of a felony.
The entire Board of Directors or any individual director may be removed
from office without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote on such removal; provided, however, that
unless the entire Board is removed, no individual director may be removed when
the votes cast against such director's removal, or not consenting in writing to
such removal, would be sufficient to elect that director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled to vote were
voted) and the entire number of directors authorized at the time of such
director's most recent election were then being elected.
SECTION 23. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in case of the death, resignation or removal of any
director, or upon increase in the authorized number of directors or if
shareholders fail to elect the full authorized number of directors at an annual
meeting of shareholders or if, for whatever reason, there are fewer directors
on the Board of Directors, than the full number authorized. Such vacancy or
vacancies, other than a vacancy created by the removal of a director, may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director. A vacancy created by the removal of a director
may be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) or by the written consent of shareholders pursuant to Section
13 hereinabove. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by written consent,
other than to fill a vacancy created by removal, requires the
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consent of a majority of the outstanding shares entitled to vote. Any such
election by written consent to fill a vacancy created by removal requires the
consent of all of the outstanding shares entitled to vote.
If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of five percent (5%) or more of the shares outstanding at that time and having
the right to vote for such directors may call a special meeting of shareholders
to be held to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
SECTION 24. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times, places and dates as fixed in these bylaws or by
the Board of Directors; provided, however, that if the date for such a meeting
falls on a legal holiday, then the meeting shall be held at the same time on
the next succeeding full business day. Regular meetings of the Board of
Directors held pursuant to this Section 24 may be held without notice.
SECTION 25. PARTICIPATION BY TELEPHONE. Members of the Board of Directors
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Such participation constitutes presence in person at
such meeting.
SECTION 26. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose may be called by the Chairman of the Board or the President or
any vice president or the Secretary of the corporation or any two (2)
directors.
SECTION 27. NOTICE OF MEETINGS. Notice of the date, time and place of all
meetings of the Board of Directors, other than regular meetings held pursuant
to Section 24 above shall be delivered personally, orally or in writing, or by
telephone or telegraph to each director, at least forty-eight (48) hours before
the meeting, or sent in writing to each director by first-class mail, charges
prepaid, at least four (4) days before the meeting. Such notice may be given
by the Secretary of the corporation or by the person or persons who called a
meeting. Such notice need not specify the purpose of the meeting. Notice of
any meeting of the Board of Directors need not be given to any director who
signs a waiver of notice of such meeting, or a consent to holding the meeting
or an approval of the minutes thereof, either before or after the meeting, or
who attends the meeting without protesting prior thereto or at its commencement
such director's lack of notice. All such waivers, consents and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 28. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at any place within or without the state which has been designated in the
notice of the meeting or, if not stated in the notice or there is no notice,
designated in the bylaws or by resolution of the Board of Directors.
SECTION 29. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Directors may be taken
without a meeting, if all members
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of the Board of Directors individually or collectively consent in writing to
such action. Such written consent or consents shall be filed with the minutes
of the proceedings of the Board of Directors. Such action by written consent
shall have the same force and effect as a unanimous vote of such directors.
SECTION 30. QUORUM AND TRANSACTION OF BUSINESS. A majority of the
authorized number of directors shall constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the authorized
number of directors present at a meeting duly held at which a quorum is present
shall be the act of the Board of Directors, unless the law, the Articles of
Incorporation or these bylaws specifically require a greater number. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding withdrawal of directors, if any action taken is approved by at
least a majority of the number of directors constituting a quorum for such
meeting. In the absence of a quorum at any meeting of the Board of Directors,
a majority of the directors present may adjourn the meeting, as provided in
Section 31 of these bylaws.
SECTION 31. ADJOURNMENT. Any meeting of the Board of Directors, whether
or not a quorum is present, may be adjourned to another time and place by the
affirmative vote of a majority of the directors present. If the meeting is
adjourned for more than twenty-four (24) hours, notice of such adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
SECTION 32. ORGANIZATION. The Chairman of the Board shall preside at
every meeting of the Board of Directors, if present. If there is no Chairman
of the Board or if the Chairman is not present, a Chairman chosen by a majority
of the directors present shall act as chairman. The Secretary of the
corporation or, in the absence of the Secretary, any person appointed by the
Chairman shall act as secretary of the meeting.
SECTION 33. COMPENSATION. Directors and members of committees may receive
such compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed or determined by the Board of Directors.
SECTION 34. COMMITTEES. The Board of Directors may, by resolution adopted
by a majority of the authorized number of directors, designate one or more
committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors, by a vote of the
majority of authorized directors, may designate one or more directors as
alternate members of any committee, to replace any absent member at any meeting
of such committee. Any such committee shall have authority to act in the
manner and to the extent provided in the resolution of the Board of Directors,
and may have all the authority of the Board of Directors in the management of
the business and affairs of the corporation, except with respect to:
(a) the approval of any action for which shareholders' approval or
approval of the outstanding shares also is required by the California
Corporations Code;
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(b) the filling of vacancies on the Board of Directors or any of
its committees;
(c) the fixing of compensation of directors for serving on the
Board of Directors or any of its committees;
(d) the adoption, amendment or repeal of these bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) a distribution to shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors; or
(g) the appointment of other committees of the Board of Directors
or the members thereof.
Any committee may from time to time provide by resolution for regular
meetings at specified times and places. If the date of such a meeting falls on
a legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. No notice of such a meeting need be given. Such
regular meetings need not be held if the committee shall so determine at any
time before or after the time when such meeting would otherwise have taken
place. Special meetings may be called at any time in the same manner and by
the same persons as stated in Sections 26 and 27 of these bylaws for meetings
of the Board of Directors. The provisions of Sections 25, 28, 29, 30, 31 and
32 of these bylaws shall apply to committees, committee members and committee
meetings as if the words "committee" and "committee member" were substituted
for the word "Board of Directors," and "director," respectively, throughout
such sections.
ARTICLE V - OFFICERS
SECTION 35. OFFICERS. The corporation shall have a Chairman of the Board
or a President or both, a Secretary, a Chief Financial Officer and such other
officers with such titles and duties as the Board of Directors may determine.
Any two or more offices may be held by the same person.
SECTION 36. APPOINTMENT. All officers shall be chosen and appointed by
the Board of Directors; provided, however, the Board of Directors may empower
the chief executive officer of the corporation to appoint such officers, other
than Chairman of the Board, President, Secretary or Chief Financial Officer, as
the business of the corporation may require. All officers shall serve at the
pleasure of the Board of Directors, subject to the rights, if any, of an
officer under a contract of employment.
SECTION 37. INABILITY TO ACT. In the case of absence or inability to act
of any officer of the corporation or of any person authorized by these bylaws
to act in such officer's place, the Board of Directors may from time to time
delegate the powers or duties of such officer to any
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other officer, or any director or other person whom it may select, for such
period of time as the Board of Directors deems necessary.
SECTION 38. RESIGNATIONS. Any officer may resign at any time upon written
notice to the corporation, without prejudice to the rights, if any, of the
corporation under any contract to which such officer is a party. Such
resignation shall be effective upon its receipt by the Chairman of the Board,
the President, the Secretary or the Board of Directors, unless a different time
is specified in the notice for effectiveness of such resignation. The
acceptance of any such resignation shall not be necessary to make it effective
unless otherwise specified in such notice.
SECTION 39. REMOVAL. Any officer may be removed from office at any time,
with or without cause, but subject to the rights, if any, of such officer under
any contract of employment, by the Board of Directors or by any committee to
whom such power of removal has been duly delegated, or, with regard to any
officer who has been appointed by the chief executive officer pursuant to
Section 36 above, by the chief executive officer or any other officer upon whom
such power of removal may be conferred by the Board of Directors.
SECTION 40. VACANCIES. A vacancy occurring in any office for any cause
may be filled by the Board of Directors, in the manner prescribed by this
Article of the bylaws for initial appointment to such office.
SECTION 41. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be
such an officer, shall, if present, preside at all meetings of the Board of
Directors and shall exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors or prescribed by these
bylaws. If no President is appointed, the Chairman of the Board is the general
manager and chief executive officer of the corporation, and shall exercise all
powers of the President described in Section 42 below.
SECTION 42. PRESIDENT. Subject to such powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the general manager and chief executive officer
of the corporation and shall have general supervision, direction, and control
over the business and affairs of the corporation, subject to the control of the
Board of Directors. The President may sign and execute, in the name of the
corporation, any instrument authorized by the Board of Directors, except when
the signing and execution thereof shall have been expressly delegated by the
Board of Directors or by these bylaws to some other officer or agent of the
corporation. The President shall have all the general powers and duties of
management usually vested in the president of a corporation, and shall have
such other powers and duties as may be prescribed from time to time by the
Board of Directors or these bylaws. The President shall have discretion to
prescribe the duties of other officers and employees of the corporation in a
manner not inconsistent with the provisions of these bylaws and the directions
of the Board of Directors.
SECTION 43. VICE PRESIDENTS. In the absence or disability of the
President, in the event of a vacancy in the office of President, or in the
event such officer refuses to act, the Vice President shall perform all the
duties of the President and, when so acting, shall have all the powers of, and
be subject to all the restrictions on, the President. If at any such time the
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corporation has more than one vice president, the duties and powers of the
President shall pass to each vice president in order of such vice president's
rank as fixed by the Board of Directors or, if the vice presidents are not so
ranked, to the vice president designated by the Board of Directors. The vice
presidents shall have such other powers and perform such other duties as may be
prescribed for them from time to time by the Board of Directors or pursuant to
Sections 35 and 36 of these bylaws or otherwise pursuant to these bylaws.
SECTION 44. SECRETARY. The Secretary shall:
(a) Keep, or cause to be kept, minutes of all meetings of the
corporation's shareholders, Board of Directors, and committees of the Board of
Directors, if any. Such minutes shall be kept in written form.
(b) Keep, or cause to be kept, at the principal executive office
of the corporation, or at the office of its transfer agent or registrar, if any,
a record of the corporation's shareholders, showing the names and addresses of
all shareholders, and the number and classes of shares held by each. Such
records shall be kept in written form or any other form capable of being
converted into written form.
(c) Keep, or cause to be kept, at the principal executive office
of the corporation, or if the principal executive office is not in California,
at its principal business office in California, an original or copy of these
bylaws, as amended.
(d) Give, or cause to be given, notice of all meetings of
shareholders, directors and committees of the Board of Directors, as required by
law or by these bylaws.
(e) Keep the seal of the corporation, if any, in safe custody.
(f) Exercise such powers and perform such duties as are usually
vested in the office of secretary of a corporation, and exercise such other
powers and perform such other duties as may be prescribed from time to time by
the Board of Directors or these bylaws.
If any assistant secretaries are appointed, the assistant secretary, or
one of the assistant secretaries in the order of their rank as fixed by the
Board of Directors or, if they are not so ranked, the assistant secretary
designated by the Board of Directors, in the absence or disability of the
Secretary or in the event of such officer's refusal to act or if a vacancy
exists in the office of Secretary, shall perform the duties and exercise the
powers of the Secretary and discharge such duties as may be assigned from time
to time pursuant to these bylaws or by the Board of Directors.
SECTION 45. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall:
(a) Be responsible for all functions and duties of the treasurer
of the corporation.
(b) Keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of account for the corporation.
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(c) Receive or be responsible for receipt of all monies due and
payable to the corporation from any source whatsoever; have charge and custody
of, and be responsible for, all monies and other valuables of the corporation
and be responsible for deposit of all such monies in the name and to the credit
of the corporation with such depositaries as may be designated by the Board of
Directors or a duly appointed and authorized committee of the Board of
Directors.
(d) Disburse or be responsible for the disbursement of the funds
of the corporation as may be ordered by the Board of Directors or a duly
appointed and authorized committee of the Board of Directors.
(e) Render to the chief executive officer and the Board of
Directors a statement of the financial condition of the corporation if called
upon to do so.
(f) Exercise such powers and perform such duties as are usually
vested in the office of chief financial officer of a corporation, and exercise
such other powers and perform such other duties as may be prescribed by the
Board of Directors or these bylaws.
If any assistant financial officer is appointed, the assistant financial
officer, or one of the assistant financial officers, if there are more than
one, in the order of their rank as fixed by the Board of Directors or, if they
are not so ranked, the assistant financial officer designated by the Board of
Directors, shall, in the absence or disability of the Chief Financial Officer
or in the event of such officer's refusal to act, perform the duties and
exercise the powers of the Chief Financial Officer, and shall have such powers
and discharge such duties as may be assigned from time to time pursuant to
these bylaws or by the Board of Directors.
SECTION 46. COMPENSATION. The compensation of the officers shall be fixed
from time to time by the Board of Directors, and no officer shall be prevented
from receiving such compensation by reason of the fact that such officer is
also a director of the corporation.
ARTICLE VI - CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS AND DRAFTS
SECTION 47. EXECUTION OF CONTRACTS AND OTHER INSTRUMENTS. Except as these
bylaws may otherwise provide, the Board of Directors or its duly appointed and
authorized committee may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authorization may be general or
confined to specific instances. Except as so authorized or otherwise expressly
provided in these bylaws, no officer, agent, or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or in any amount.
SECTION 48. LOANS. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name, unless and
except as authorized by the Board of Directors or its duly appointed and
authorized committee. When so authorized by the Board of Directors or such
committee, any officer or agent of the corporation may effect loans and
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advances at any time for the corporation from any bank, trust company, or other
institution, or from any firm, corporation or individual, and for such loans
and advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the corporation and, when authorized as aforesaid,
may mortgage, pledge, hypothecate or transfer any and all stocks, securities
and other property, real or personal, at any time held by the corporation, and
to that end endorse, assign and deliver the same as security for the payment of
any and all loans, advances, indebtedness, and liabilities of the corporation.
Such authorization may be general or confined to specific instances.
SECTION 49. BANK ACCOUNTS. The Board of Directors or its duly appointed
and authorized committee from time to time may authorize the opening and
keeping of general and/or special bank accounts with such banks, trust
companies, or other depositaries as may be selected by the Board of Directors,
its duly appointed and authorized committee or by any officer or officers,
agent or agents, of the corporation to whom such power may be delegated from
time to time by the Board of Directors. The Board of Directors or its duly
appointed and authorized committee may make such rules and regulations with
respect to said bank accounts, not inconsistent with the provisions of these
bylaws, as are deemed advisable.
SECTION 50. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, acceptances or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents, of the corporation, and in such manner, as shall be
determined from time to time by resolution of the Board of Directors or its
duly appointed and authorized committee. Endorsements for deposit to the credit
of the corporation in any of its duly authorized depositaries may be made,
without counter-signature, by the President or any vice president or the Chief
Financial Officer or any assistant financial officer or by any other officer or
agent of the corporation to whom the Board of Directors or its duly appointed
and authorized committee, by resolution, shall have delegated such power or by
hand-stamped impression in the name of the corporation.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 51. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an assistant financial
officer or by the Secretary or an assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all
of the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
In the event that the corporation shall issue any shares as only partly
paid, the certificate issued to represent such partly paid shares shall have
stated thereon the total consideration to be paid for such shares and the
amount paid thereon.
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SECTION 52. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent (if any) of the corporation of a certificate for shares of the
corporation duly endorsed, with reasonable assurance that the endorsement is
genuine and effective, or accompanied by proper evidence of succession,
assignment or authority to transfer and upon compliance with applicable federal
and state securities laws and if the corporation has no statutory duty to
inquire into adverse claims or has discharged any such duty and if any
applicable law relating to the collection of taxes has been complied with, it
shall be the duty of the corporation, by its Secretary or transfer agent, to
cancel the old certificate, to issue a new certificate to the person entitled
thereto and to record the transaction on the books of the corporation.
SECTION 53. LOST, DESTROYED AND STOLEN CERTIFICATES. The holder of any
certificate for shares of the corporation alleged to have been lost, destroyed
or stolen shall notify the corporation by making a written affidavit or
affirmation of such fact. Upon receipt of said affidavit or affirmation the
Board of Directors, or its duly appointed and authorized committee or any
officer or officers authorized by the Board so to do, may order the issuance of
a new certificate for shares in the place of any certificate previously issued
by the corporation and which is alleged to have been lost, destroyed or stolen.
However, the Board of Directors or such authorized committee, officer or
officers may require the owner of the allegedly lost, destroyed or stolen
certificate, or such owner's legal representative, to give the corporation a
bond or other adequate security sufficient to indemnify the corporation and its
transfer agent and/or registrar, if any, against any claim that may be made
against it or them on account of such allegedly lost, destroyed or stolen
certificate or the replacement thereof. Said bond or other security shall be in
such amount, on such terms and conditions and, in the case of a bond, with such
surety or sureties as may be acceptable to the Board of Directors or to its
duly appointed and authorized committee or any officer or officers authorized
by the Board of Directors to determine the sufficiency thereof. The
requirement of a bond or other security may be waived in particular cases at
the discretion of the Board of Directors or its duly appointed and authorized
committee or any officer or officers authorized by the Board of Directors so to
do.
SECTION 54. ISSUANCE, TRANSFER AND REGISTRATION OF SHARES. The Board of
Directors may make such rules and regulations, not inconsistent with law or
with these bylaws, as it may deem advisable concerning the issuance, transfer
and registration of certificates for shares of the capital stock of the
corporation. The Board of Directors may appoint a transfer agent or registrar
of transfers, or both, and may require all certificates for shares of the
corporation to bear the signature of either or both.
ARTICLE VIII - INSPECTION OF CORPORATE RECORDS
SECTION 55. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind of the corporation and any of its subsidiaries and
to inspect the physical properties of the corporation and any of its
subsidiaries. Such inspection may be made by the director in person or by
agent or attorney, and the right of inspection includes the right to copy and
make extracts.
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SECTION 56. INSPECTION BY SHAREHOLDERS.
(a) INSPECTION OF CORPORATE RECORDS.
(i) A shareholder or shareholders holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent of such voting shares and have
filed a Schedule 14B with the United States Securities and Exchange Commission
relating to the election of directors of the corporation shall have an absolute
right to do either or both of the following:
(A) Inspect and copy the record of shareholders' names
and addresses and shareholdings during usual business hours upon five (5)
business days' prior written demand upon the corporation; or
(B) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(ii) The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interest as a
shareholder or holder of a voting trust certificate.
(iii) The accounting books and records and minutes of
proceedings of the shareholders and the Board of Directors and of any committees
of the Board of Directors of the corporation and of each of its subsidiaries
shall be open to inspection, copying and making extracts upon written demand on
the corporation of any shareholder or holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or as a holder of such
voting trust certificate.
(iv) Any inspection, copying, and making of extracts under
this subsection (a) may be done in person or by agent or attorney.
(b) INSPECTION OF BYLAWS. The original or a copy of these bylaws
shall be kept as provided in Section 44 of these bylaws and shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is not in California, and the
corporation has no principal business office in the state of California, a
current copy of these bylaws shall be furnished to any shareholder upon written
request.
SECTION 57. WRITTEN FORM. If any record subject to inspection pursuant to
Section 56 above is not maintained in written form, a request for inspection is
not complied with unless and until the corporation at its expense makes such
record available in written form.
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ARTICLE IX - MISCELLANEOUS
SECTION 58. FISCAL YEAR. Unless otherwise fixed by resolution of the
Board of Directors, the fiscal year of the corporation shall end on the 31st
day of December in each calendar year.
SECTION 59. ANNUAL REPORT.
(a) Subject to the provisions of Section 59(b) below, the Board of
Directors shall cause an annual report to be sent to each shareholder of the
corporation in the manner provided in Section 9 of these bylaws not later than
one hundred twenty (120) days after the close of the corporation's fiscal year.
Such report shall include a balance sheet as of the end of such fiscal year and
an income statement and statement of changes in financial position for such
fiscal year, accompanied by any report thereon of independent accountants or, if
there is no such report, the certificate of an authorized officer of the
corporation that such statements were prepared without audit from the books and
records of the corporation. When there are more than 100 shareholders of record
of the corporation's shares, as determined by Section 605 of the California
Corporations Code, additional information as required by Section 1501(b) of the
California Corporations Code shall also be contained in such report, provided
that if the corporation has a class of securities registered under Section 12 of
the United States Securities Exchange Act of 1934, that Act shall take
precedence. Such report shall be sent to shareholders at least fifteen (15) (or,
if sent by third-class mail, thirty-five (35)) days prior to the next annual
meeting of shareholders after the end of the fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
shareholders of the corporation is hereby expressly waived.
SECTION 60. RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of or to vote at any meeting or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any change, conversion or exchange of shares
or entitled to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days nor less than ten
(10) days prior to the date of the meeting nor more than sixty (60) days prior
to any other action or event for the purpose of which it is fixed. If no
record date is fixed, the provisions of Section 15 of these bylaws shall apply
with respect to notice of meetings, votes, and consents and the record date for
determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolutions
relating thereto, or the sixtieth (60th) day prior to the date of such other
action or event, whichever is later.
Only shareholders of record at the close of business on the record date
shall be entitled to notice and to vote or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the
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corporation after the record date, except as otherwise provided in the Articles
of Incorporation, by agreement or by law.
SECTION 61. BYLAW AMENDMENTS. Except as otherwise provided by law or
Section 19 of these bylaws, these bylaws may be amended or repealed by the
Board of Directors or by the affirmative vote of a majority of the outstanding
shares entitled to vote, including, if applicable, the affirmative vote of a
majority of the outstanding shares of each class or series entitled by law or
the Articles of Incorporation to vote as a class or series on the amendment or
repeal or adoption of any bylaw or bylaws; provided, however, after issuance of
shares, a bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa may only be adopted by approval of the outstanding shares as provided
herein.
SECTION 62. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the California Corporations Code shall govern the construction of
these bylaws.
Without limiting the foregoing, "shall" is mandatory and "may" is
permissive.
ARTICLE X - INDEMNIFICATION
SECTION 63. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers to the fullest extent not
prohibited by the California General Corporation Law; provided, however, that
the corporation may limit the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the board of directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the California General Corporation Law.
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have the power to indemnify its other officers, employees and other agents
as set forth in the California General Corporation Law.
(c) DETERMINATION BY THE CORPORATION. Promptly after receipt of a
request for indemnification hereunder (and in any event within 90 days thereof)
a reasonable, good faith determination as to whether indemnification of the
director or executive officer is proper under the circumstances because such
director or executive officer has met the applicable standard of care shall be
made by:
20.
<PAGE> 25
(1) a majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(2) if such quorum is not obtainable, by independent legal
counsel in a written opinion; or
(3) approval or ratification by the affirmative vote of a
majority of the shares of this corporation represented and voting at a duly held
meeting at which a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) or by written consent of
a majority of the outstanding shares entitled to vote; where in each case the
shares owned by the person to be indemnified shall not be considered entitled to
vote thereon.
(d) GOOD FAITH.
(1) For purposes of any determination under this bylaw, a
director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in the best interests of the corporation
and its shareholders, and, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe that his conduct was unlawful, if his
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:
(i) one or more officers or employees of the corporation
whom the director or executive officer believed to be reliable and competent in
the matters presented;
(ii) counsel, independent accountants or other persons
as to matters which the director or executive officer believed to be within such
person's professional competence; and
(iii) with respect to a director, a committee of the
Board upon which such director does not serve, as to matters within such
committee's designated authority, which committee the director believes to merit
confidence; so long as, in each case, the director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in the best interests of the
corporation and its shareholders or that he had reasonable cause to believe that
his conduct was unlawful.
(3) The provisions of this paragraph (d) shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth by the
California General Corporation Law.
(e) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any director or
21.
<PAGE> 26
executive officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it shall be
determined ultimately that such person is not entitled to be indemnified under
this bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (f) of this bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding (or, if no such quorum exists, by independent legal counsel in a
written opinion) that the facts known to the decision making party at the time
such determination is made demonstrate clearly and convincingly that such
person acted in bad faith or in a manner that such person did not believe to be
in the best interests of the corporation and its shareholders.
(f) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in the forum in
which the proceeding is or was pending or, if such forum is not available or a
determination is made that such forum is not convenient, in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the California General Corporation Law
for the corporation to indemnify the claimant for the amount claimed. Neither
the failure of the corporation (including its board of directors, independent
legal counsel or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the California General Corporation Law, nor an actual determination by
the corporation (including its board of directors, independent legal counsel or
its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
(g) NON-EXCLUSIVITY OF RIGHTS. To the fullest extent permitted by
the corporation's Articles of Incorporation and the California General
Corporation Law, the rights conferred on any person by this bylaw shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, bylaws,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent permitted
by the California General Corporation Law and the corporation's Articles of
Incorporation.
22.
<PAGE> 27
(h) SURVIVAL OF RIGHTS. The rights conferred on any person by this
bylaw shall continue as to a person who has ceased to be a director or executive
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(i) INSURANCE. The corporation, upon approval by the board of
directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this bylaw.
(j) AMENDMENTS. Any repeal or modification of this bylaw shall
only be prospective and shall not affect the rights under this bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(k) EMPLOYEE BENEFIT PLANS. The corporation shall indemnify the
directors and officers of the corporation who serve at the request of the
corporation as trustees, investment managers or other fiduciaries of employee
benefit plans to the fullest extent permitted by the California General
Corporation Law.
(l) SAVING CLAUSE. If this bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the fullest extent permitted by any applicable portion of this bylaw that shall
not have been invalidated, or by any other applicable law.
(m) CERTAIN DEFINITIONS. For the purposes of this bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this bylaw with respect to the resulting or surviving
23.
<PAGE> 28
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is or was serving at the request of the corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
ARTICLE XI - LOANS OF OFFICERS AND OTHERS
SECTION 64. CERTAIN CORPORATE LOANS AND GUARANTIES. If the corporation
has outstanding shares held of record by 100 or more persons on the date of
approval by the Board of Directors, the corporation may make loans of money or
property to, or guarantee the obligations of, any officer of the corporation or
its parent or any subsidiary, whether or not a director of the corporation or
its parent or any subsidiary, or adopt an employee benefit plan or plans
authorizing such loans or guaranties, upon the approval of the Board of
Directors alone, by a vote sufficient without counting the vote of any
interested director or directors, if the Board of Directors determines that
such a loan or guaranty or plan may reasonably be expected to benefit the
corporation. Notwithstanding the foregoing, the corporation shall have the
power to make loans permitted by the California Corporations Code.
ARTICLE XII - RIGHT OF FIRST REFUSAL
SECTION 65. RIGHT OF FIRST REFUSAL.
No shareholder holding shares of common stock or preferred stock of the
corporation shall sell, assign, pledge, or in any manner transfer any of the
shares of common stock or preferred stock of the corporation or any right or
interest therein, whether voluntarily or by operation of law, or by gift or
otherwise, except by a transfer which meets the requirements hereinafter set
forth in this bylaw:
(a) If the shareholder desires to sell or otherwise transfer any of its
shares of common stock or preferred stock, then the shareholder shall first
give written notice thereof to the corporation. The notice shall name the
proposed transferee and state the number of shares to be transferred, the
proposed consideration, and all other terms and conditions of the proposed
transfer.
(b) For thirty (30) days following receipt of such notice, the corporation
shall have the option to purchase all (but not less than all) of the shares
specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the shareholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the
proposed transferee is not paying the full price for the shares, and that is
not otherwise exempted from the provisions of this Section 10.1, the price
shall be deemed to be the fair market value of the stock at such time as
determined in good faith by the Board of Directors. In the event the
corporation elects to purchase all of the shares
24.
<PAGE> 29
or, with consent of the shareholder, a lesser portion of the shares, it shall
give written notice to the transferring shareholder of its election and
settlement for said shares shall be made as provided below in paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to acquire
any of the shares of the transferring shareholder as specified in said
transferring shareholder's notice, the Secretary of the corporation shall so
notify the transferring shareholder and settlement thereof shall be made in
cash within sixty (60) days after the Secretary of the corporation receives
said transferring shareholder's notice; provided that if the terms of payment
set forth in said transferring shareholder's notice were other than cash
against delivery, the corporation and/or its assignee(s) shall pay for said
shares on the same terms and conditions set forth in said transferring
shareholder's notice.
(e) In the event the corporation and/or its assignees(s) do not elect to
acquire all of the shares specified in the transferring shareholder's notice,
said transferring shareholder may, within the sixty (60) day period following
the expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
shareholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring shareholder's notice. All
shares so sold by said transferring shareholder shall continue to be subject to
the provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A shareholder's transfer of any or all shares held either during
such shareholder's lifetime or on death by will or intestacy to such
shareholder's immediate family or to any custodian or trustee for the account of
such shareholder or such shareholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the shareholder making such transfer.
(2) A shareholder's bona fide pledge or mortgage of any shares with a
commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
bylaw.
(3) A shareholder's transfer of any or all of such shareholder's shares
to the corporation or to any other shareholder of the corporation.
(4) A shareholder's transfer of any or all of such shareholder's shares
to a person who, at the time of such transfer, is an officer or director of the
corporation.
(5) A corporate shareholder's transfer of any or all of its shares
pursuant to and in accordance with the terms of any merger, consolidation,
reclassification of shares or
25.
<PAGE> 30
capital reorganization of the corporate shareholder, or pursuant to a sale of
all or substantially all of the stock or assets of a corporate shareholder.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the
votes represented by those shares to be transferred by the transferring
shareholder). This bylaw may be amended or repealed either by a duly
authorized action of the Board of Directors or by the shareholders, upon the
express written consent of the owners of a majority of the voting power of the
corporation.
(h) Any sale or transfer, or purported sale or transfer, of shares of
common stock or preferred stock of the corporation shall be null and void
unless the terms, conditions, and provisions of this bylaw are strictly
observed and followed.
(i) The foregoing right of first refusal shall terminate on either of the
following dates, whichever shall first occur:
(1) On April 30, 2005; or
(2) Upon the date securities of the corporation are first offered to
the public pursuant to a registration statement filed with, and declared
effective by, the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(j) The certificates representing shares of common stock and preferred
stock of the corporation shall bear on their face the following legend so long
as the foregoing right of first refusal remains in effect:
"The shares represented by this Certificate are subject to a right of first
refusal option in favor of the Corporation and/or its Assignee(s), as provided
in the Bylaws of the Corporation."
26.
<PAGE> 31
CERTIFICATE OF SECRETARY
I hereby certify that:
I am the duly elected and acting Secretary of Siebel Systems, Inc., a
California corporation (the "Company"); and
Attached hereto is a complete and accurate copy of the Bylaws of the
Company as duly adopted by the Board of Directors by Unanimous Written Consent
dated September 16, 1993, amended by the Board of Directors at a regular
meeting held on October 12, 1994, and amended by the Board of Directors at a
regular meeting held on April 17, 1995, and said Bylaws are presently in
effect.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Company this 17th day of April, 1995.
-------------------------------
Andrei M. Manoliu
Assistant Secretary
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SIEBEL SYSTEMS, INC.
SIEBEL SYSTEMS, INC., a corporation organized and existing under the laws
of the state of Delaware (the "Corporation") hereby certifies that:
1. The name of the Corporation is Siebel Systems, Inc.. The corporation
was originally incorporated under the name Siebel Acquisition Corporation.
2. The date of filing of the Corporation's original Certificate of
Incorporation was May ___, 1996.
3. The Amended and Restated Certificate of Incorporation of the
Corporation as provided in Exhibit A hereto was duly adopted in accordance with
the provisions of Section 242 and Section 245 of the General Corporation Law of
the State of Delaware by the Board of Directors of the corporation.
4. Pursuant to Section 245 of the Delaware General Corporation Law,
approval of the stockholders of the corporation has been obtained.
5. The Amended and Restated Certificate of Incorporation so adopted reads
in full as set forth in Exhibit A attached hereto and is hereby incorporated by
reference.
IN WITNESS WHEREOF, the undersigned have signed this certificate this ____
day of __________, 1996, and hereby affirm and acknowledge under penalty of
perjury that the filing of this Restated Certificate of Incorporation is the
act and deed of Siebel Systems, Inc.
SIEBEL SYSTEMS, INC.
By
--------------------------
Thomas M. Siebel
President and Chief Executive
Officer
ATTEST:
- --------------------------
Eric C. Jensen
Assistant Secretary
<PAGE> 2
AMENDED AND RESTATED EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
SIEBEL SYSTEMS, INC.
I.
The name of this corporation is Siebel Systems, Inc.
II.
The address, including street, number, city and county of the registered
officer of the corporation in the State of Delaware is 1013 Centre Road, City
of Wilmington 19805, County of New Castle; and the name of the registered agent
of the corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
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 Forty-Two
Million (42,000,000) shares. Forty Million (40,000,000) 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).
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation
Law, to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
1.
<PAGE> 3
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
1.
(1) The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
(2) Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, following the date
on which the corporation is no longer subject to Section 2115 of the California
Corporations Code (the "Qualifying Record Date"), the directors shall be divided
into three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the Qualifying Record Date, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
Qualifying Record Date, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Qualifying Record
Date, the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
(3) Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock"). Subject to the rights of the holders of any series of Preferred Stock
and as except as otherwise provided by law, no director of the Company may be
removed from office without cause.
2.
<PAGE> 4
(4) Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless (i) the Board of Directors determines by resolution that any such
vacancies or newly created directorships shall be filled by the stockholders, or
(ii) as otherwise provided by law, be filled only by the affirmative vote of a
majority of the directors then in office, even though less than a quorum of the
Board of Directors, and not by the stockholders. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified.
2.
(a) Subject to paragraph (h) of Section 43 of the Bylaws, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock to the public (the "Initial Public Offering"), the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
(b) The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
(c) No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
(d) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).
(e) Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
3.
<PAGE> 5
VI.
1. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director shall be eliminated or limited to the fullest
extent permitted by the Delaware General corporation Law, as so amended.
2. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
1. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in paragraph 2. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
2. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this
Certificate of Incorporation or any Preferred Stock Designation, following the
Initial Public Offering the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal Articles V, VI and VII (other than
any amendment of such Articles in connection with a restatement of the
Certificate of Incorporation).
4.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
SIEBEL ACQUISITION CORP.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES .................................................... 1
Section 1. Registered Office ...................................... 1
Section 2. Other Offices .......................................... 1
ARTICLE II CORPORATE SEAL ............................................. 1
Section 3. Corporate Seal ......................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS ..................................... 1
Section 4. Place of Meetings ...................................... 1
Section 5. Annual Meeting ......................................... 2
Section 6. Special Meetings ....................................... 3
Section 7. Notice of Meetings ..................................... 4
Section 8. Quorum ................................................. 4
Section 9. Adjournment and Notice of Adjourned Meetings ........... 5
Section 10. Voting Rights .......................................... 5
Section 11. Joint Owners of Stock .................................. 5
Section 12. List of Stockholders ................................... 6
Section 13. Action Without Meeting ................................. 6
Section 14. Organization ........................................... 7
ARTICLE IV DIRECTORS .................................................. 7
Section 15. Number and Term of Office .............................. 7
Section 16. Powers ................................................. 8
Section 17. Classes of Directors. .................................. 8
Section 18. Vacancies .............................................. 8
Section 19. Resignation ............................................ 8
Section 20. Removal ................................................ 9
Section 21. Meetings ............................................... 9
(a) Annual Meetings ............................. 9
(b) Regular Meetings. ........................... 9
(c) Special Meetings ............................ 9
(d) Telephone Meetings .......................... 9
(e) Notice of Meetings .......................... 10
(f) Waiver of Notice ............................ 10
Section 22. Quorum and Voting ...................................... 10
Section 23. Action Without Meeting ................................. 10
Section 24. Fees and Compensation .................................. 10
Section 25. Committees ............................................. 11
(a) Executive Committee ......................... 11
(b) Other Committees ............................ 11
(c) Term ........................................ 11
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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(d) Meetings .................................... 12
Section 26. Organization ........................................... 12
ARTICLE V OFFICERS 12
Section 27. Officers Designated .................................... 12
Section 28. Tenure and Duties of Officers .......................... 13
(a) General ..................................... 13
(b) Duties of Chairman of the Board of Directors 13
(c) Duties of President ......................... 13
(d) Duties of Vice Presidents ................... 13
(e) Duties of Secretary ......................... 13
(f) Duties of Chief Financial Officer ........... 14
Section 29. Delegation of Authority ................................ 14
Section 30. Resignations ........................................... 14
Section 31. Removal ................................................ 14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION ........................ 15
Section 32. Execution of Corporate Instruments ..................... 15
Section 33. Voting of Securities Owned by the Corporation .......... 15
ARTICLE VII SHARES OF STOCK ............................................ 16
Section 34. Form and Execution of Certificates ..................... 16
Section 35. Lost Certificates ...................................... 16
Section 36. Transfers .............................................. 17
Section 37. Fixing Record Dates .................................... 17
Section 38. Registered Stockholders ................................ 18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION ........................ 18
Section 39. Execution of Other Securities .......................... 18
ARTICLE IX DIVIDENDS .................................................. 19
Section 40. Declaration of Dividends ............................... 19
Section 41. Dividend Reserve ....................................... 19
ARTICLE X FISCAL YEAR ................................................ 19
Section 42. Fiscal Year ............................................ 19
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TABLE OF CONTENTS
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ARTICLE XI INDEMNIFICATION ............................................ 19
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents .............. 19
(a) Directors and Executive Officers ................... 19
(b) Employees and Other Agents ......................... 20
(c) Expenses ........................................... 20
(d) Enforcement ........................................ 20
(e) Non-Exclusivity of Rights .......................... 21
(f) Survival of Rights ................................. 21
(g) Insurance .......................................... 21
(h) Amendments ......................................... 21
(i) Saving Clause ...................................... 21
(j) Certain Definitions ................................ 22
ARTICLE XII NOTICES .................................................... 23
Section 44. Notices ................................................ 23
(a) Notice to Stockholders ............................. 23
(b) Notice to directors ................................ 23
(c) Affidavit of Mailing ............................... 23
(d) Time Notices Deemed Given .......................... 23
(e) Methods of Notice .................................. 23
(f) Failure to Receive Notice .......................... 23
(g) Notice to Person with Whom Communication Is Unlawful 24
(h) Notice to Person with Undeliverable Address ........ 24
ARTICLE XIII AMENDMENTS ................................................. 24
Section 45. Amendments ............................................. 24
ARTICLE XIV LOANS TO OFFICERS .......................................... 25
Section 46. Loans to Officers ...................................... 25
ARTICLE XV MISCELLANEOUS .............................................. 25
Section 47. Annual Report .......................................... 25
</TABLE>
iii.
<PAGE> 5
BYLAWS
OF
SIEBEL ACQUISITION CORP.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
1.
<PAGE> 6
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he
2.
<PAGE> 7
should so determine, he shall so declare at the meeting that any such business
not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies
3.
<PAGE> 8
in previously authorized directorships at the time any such resolution is
presented to the Board of Directors for adoption), and shall be held at such
place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a
quorum, any meeting of stockholders may be adjourned, from time to time, either
by the chairman of the meeting or by vote of the holders of a majority of the
shares represented thereat, but no other business shall be transacted at such
meeting. The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, all action taken by the holders of a majority of the vote
cast, excluding abstentions, at any meeting at which a quorum is present shall
be
4.
<PAGE> 9
valid and binding upon the corporation; provided, however, that directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Where a separate vote by a class or classes or series is required,
except where otherwise provided by the statute or by the Certificate of
Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes
cast, including abstentions, by the holders of shares of such class or classes
or series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the
shares casting votes, excluding abstentions. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty (30) days or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, as provided in Section 12
of these Bylaws, shall be entitled to vote at any meeting of stockholders.
Every person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a proxy granted in
accordance with Delaware law. An agent so appointed need not be a stockholder.
No proxy shall be voted after three (3) years from its date of creation unless
the proxy provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two (2) or more persons have the
same fiduciary relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(a) if only one (1) votes, his act binds all; (b) if more than one (1) votes,
the act of the majority so voting binds all; (c) if more than one (1) votes,
but the vote is evenly split on any particular matter, each faction may vote
the securities in question proportionally, or may apply to the Delaware Court
of Chancery for relief as provided in the General Corporation Law of Delaware,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is
5.
<PAGE> 10
held in unequal interests, a majority or even-split for the purpose of
subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
6.
<PAGE> 11
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
7.
<PAGE> 12
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, following the date
on which the corporation is no longer subject to Section 2115 of the California
Corporations Code (the "Qualifying Record Date"), the directors shall be divided
into three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the Qualifying Record Date, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
Qualifying Record Date, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Qualifying Record
Date, the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more directors shall resign from the Board of
Directors, effective at
8.
<PAGE> 13
a future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
Subject to the rights of the holders of any series of Preferred Stock, the
Board of Directors or any individual director may be removed from office at any
time with cause by the affirmative vote of the holders of a majority of the
voting power of all the then-outstanding shares of voting stock of the
corporation, entitled to vote at an election of directors (the "Voting Stock").
Subject to the rights of the holders of any series of Preferred Stock and as
except as otherwise provided by law, no director of the Company may be removed
from office without cause.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall
be held immediately before or after the annual meeting of stockholders and at
the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
9.
<PAGE> 14
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and
such writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of
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Directors and at any meeting of a committee of the Board of Directors. Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee, or otherwise
and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy
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created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more
Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting
of the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other
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officers and agents with such powers and duties as it shall deem necessary.
The Board of Directors may assign such additional titles to one or more of the
officers as it shall deem appropriate. Any one person may hold any number of
offices of the corporation at any one time unless specifically prohibited
therefrom by law. The salaries and other compensation of the officers of the
corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other
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duties given him in these Bylaws and other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the
Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory
officer or officers, or other person or persons, to execute on behalf of the
corporation any corporate instrument or document, or to sign on behalf of the
corporation the corporate name without limitation, or to enter into contracts
on behalf of the corporation, except where otherwise provided by law or these
Bylaws, and such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock owned by the corporation, shall be executed, signed or endorsed
by the Chairman of the Board of Directors, or the President or any Vice
President, and by the Secretary or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so
to do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the
name of the corporation by the Chairman of the Board of Directors, or the
President or any Vice President and by the Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary, certifying the number of shares owned by
him in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall
state upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Within a
reasonable time after the issuance or transfer of uncertificated stock, the
corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to this section or otherwise required by law or with respect to this
section a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Except as otherwise expressly provided by law, the
rights and obligations of the holders of certificates representing stock of the
same class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
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SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any stockholder of record seeking to
have the stockholders authorize or take corporate action by written consent
shall, by written notice to the Secretary, request the Board of Directors to fix
a record date. The Board of Directors shall promptly, but in all events within
10 days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within 10 days of the date on which such a request is received, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of
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stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the
manual signature, or where permissible facsimile signature, of a trustee under
an indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be
authorized by the Board of Directors, or bear imprinted thereon the facsimile
signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear
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thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any
regular or special meeting. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall end on
the 31st day of December or on such other date as may be fixed by resolution of
the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be
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required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding
was authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the Delaware General
Corporation Law or (iv) such indemnification is required to be made under
subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power to
indemnify its other officers, employees and other agents as set forth in the
Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith
or in a manner that such person did not believe to be in or not opposed to the
best interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim
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for indemnification, the corporation shall be entitled to raise as a defense to
any such action that the claimant has not met the standards of conduct that
make it permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
21.
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(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate
existence had continued.
(iv) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as
a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this Bylaw.
22.
<PAGE> 27
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
23.
<PAGE> 28
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS.
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
24.
<PAGE> 29
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee
who is a Director of the corporation or its subsidiaries, whenever, in the
judgment of the Board of Directors, such loan, guarantee or assistance may
reasonably be expected to benefit the corporation. The loan, guarantee or
other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing in
these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty
or warranty of the corporation at common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the Board
of Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of the
corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
25.
<PAGE> 1
EXHIBIT 4.3
AMENDMENT NO. 1
TO THE
SIEBEL SYSTEMS, INC.
RESTATED INVESTOR RIGHTS AGREEMENT
WHEREAS, Siebel Systems, Inc. (the "Company") and certain shareholders
of the Company ("Shareholders") entered into the Restated Investor Rights
Agreement dated December 1, 1995 attached hereto as Exhibit A ("Investor Rights
Agreement"); and
WHEREAS, certain Shareholders are purchasing Series D Preferred Stock
of the Company ("New Purchasers");
NOW, THEREFORE, in consideration of the New Purchasers buying Series D
Preferred Stock of the Company, the holders of a majority of the Registrable
Securities (as defined in the Investor Rights Agreement) hereby amend, pursuant
to section 4.6.1 of the Investor Rights Agreement, the definition of the word
"Shares" under section 1.1 of the Investor Rights Agreement to read as follows:
"`Shares' shall mean the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock originally issued to the Purchasers."
<PAGE> 2
IN WITNESS WHEREOF, the Company and a majority of the holders of
Registrable Securities have duly authorized and caused this amendment to be
executed as follows:
SIEBEL SYSTEMS, INC. -----------------------------------
(Print Name of Shareholder)
By:
---------------------------
Thomas M. Siebel, President
By:
-------------------------------
Title:
----------------------------
-----------------------------------
(Print Name of Shareholder)
By:
-------------------------------
Title:
----------------------------
-----------------------------------
(Print Name of Shareholder)
By:
-------------------------------
Title:
----------------------------
-----------------------------------
(Print Name of Shareholder)
By:
-------------------------------
Title:
----------------------------
<PAGE> 3
EXHIBIT A
RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 4
SIEBEL SYSTEMS, INC.
RESTATED INVESTOR RIGHTS AGREEMENT
DECEMBER 1, 1995
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. GENERAL ......................................................... 1
II. REGISTRATION; RESTRICTIONS ON TRANSFER .......................... 2
2.1 Restrictions on Transfer ................................. 2
2.2 Demand Registration ...................................... 3
2.3 Piggyback Registrations .................................. 4
2.4 Form S-3 Registration .................................... 5
2.5 Expenses of Registration ................................. 6
2.6 Obligations of the Company ............................... 6
2.7 Termination of Registration Rights ....................... 7
2.8 Delay of Registration .................................... 7
2.9 Indemnification .......................................... 7
2.10 Assignment of Registration Rights ........................ 9
2.11 "Market Stand-Off" Agreement ............................. 9
III. RIGHTS OF FIRST REFUSAL ......................................... 10
3.1 Subsequent Offerings ..................................... 10
3.2 Exercise of Rights ....................................... 10
3.3 Issuance of Equity Securities to Other Persons ........... 10
3.4 Sales of Equity Securities by Purchasers ................. 11
3.5 Termination of Rights of First Refusal ................... 12
3.6 Transfer of Rights of First Refusal ...................... 12
3.7 Excluded Securities ...................................... 12
IV. MISCELLANEOUS ................................................... 13
4.1 Amendment of Prior Agreement ............................. 13
4.2 Governing Law ............................................ 13
4.3 Survival ................................................. 13
4.4 Successors and Assigns ................................... 13
4.5 Separability ............................................. 14
4.6 Amendment and Waiver ..................................... 14
4.7 Delays or Omissions ...................................... 14
4.8 Notices .................................................. 14
4.9 Titles and Subtitles ..................................... 14
4.10 Counterparts ............................................. 14
</TABLE>
i
<PAGE> 6
RESTATED INVESTOR RIGHTS AGREEMENT
THIS RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into
as of the 1st day of December 1995, by and among Siebel Systems, Inc., a
California corporation (the "Company"), Thomas M. Siebel ("Siebel") and the
persons and entities set forth on Exhibit A attached hereto. Such persons and
entities shall be referred to hereinafter as the "Purchasers" and each
individually as a "Purchaser."
RECITALS
WHEREAS, the Company granted Siebel and certain purchasers (the "Series A
and B Purchasers") of its Series A Preferred Stock (the "Series A Stock") and
Series B Preferred Stock (the "Series B Stock") certain registration and other
rights pursuant to the Investor Rights Agreement, dated March 17, 1995, among
the Company, Siebel and the Series A and B Purchasers (the "Original
Agreement"); and
WHEREAS, the Company proposes to sell and issue shares of its Series C
Preferred Stock (the "Series C Stock") pursuant to that certain Series C
Preferred Stock Purchase Agreement dated as of the date hereof (the "Purchase
Agreement"); and
WHEREAS, as a condition of entering into the Purchase Agreement, the
purchasers of Series C Stock (the "Series C Purchasers") have requested that
the Company extend to them registration rights and other rights as set forth
below;
WHEREAS, the Company, Siebel and the Series A and B Purchasers desire to
amend the Original Agreement to grant such rights to the Series C Purchasers;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
I. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
1
<PAGE> 7
"Registrable Securities" means (i) Common Stock of the Company issued or
issuable upon the conversion of the Shares; (ii) Siebel Shares; and (iii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferror's rights under Section 2.10 of this
Agreement are not assigned.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed Ten
Thousand Dollars ($10,000) of a single special counsel for the Holders, blue
sky fees and expenses and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock, Series B Stock and
Series C Stock.
"Siebel Shares" shall mean the shares of Common Stock of the Company now
owned or hereinafter obtained by Siebel.
II. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities (or the Common Stock issuable upon the
conversion thereof) unless and until the transferee has agreed in writing for
the benefit of the Company to be bound by this Section 2.1, provided and to the
extent such Sections are then applicable and:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A)
2
<PAGE> 8
a partnership to its partners in accordance with partnership interests, or (B)
to the Holder's family member or trust for the benefit of an individual Holder,
provided the transferee will be subject to the terms of this Section 2.1 to the
same extent as if he were an original Holder hereunder.
(b) Each certificate representing Series A Stock, Series B Stock,
Series C Stock or Common Stock shall (unless otherwise permitted by the
provisions of the Agreement) be stamped or otherwise imprinted with legends
substantially similar to the following (in addition to any legend required under
applicable state securities laws or as provided elsewhere in the Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR
BASED ON OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A RIGHT OF FIRST REFUSAL
OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE AS PROVIDED IN AN
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
2.2.1 Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of (i) more than fifty percent
(50%) of the Registrable Securities then outstanding held by the Purchasers with
respect to one of the registrations under this Section 2.2 or (ii) more than
fifty percent (50%) of the Siebel Shares then outstanding, with respect to the
other one of the registrations under this Section 2.2 (in each such case, the
"Initiating Holders") that the Company file a registration statement under the
Securities Act, then the Company shall effect, within thirty (30) days of the
receipt thereof, give written notice of such request to all Holders, and subject
to the limitations of Section 2.2.2, as soon as practicable, the registration
under the Securities Act either of all Registrable Securities that the Holders
request to be registered, but in any event the registration statement with
respect to such offering shall be filed within one hundred twenty (120) days of
such receipt.
2.2.2 If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company shall include such information in the written notice referred to
in Section 2.2.1. In such event, the right of any Holder to include his
securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's securities
in the underwriting (unless otherwise mutually agreed by a majority in interest
3
<PAGE> 9
of the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders (which underwriter or underwriters shall be
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 2.2, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so
advise all Holders of such securities which would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities
on a pro rata basis based on the number of Registrable Securities held by all
such Holders (including the Initiating Holders). Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.
2.2.3 The Company shall not be obligated to effect more than two (2)
registrations pursuant to this Section 2.2.
2.2.4 The Holders shall not have the right to request any registration
under this Section 2.2 until the date one hundred eighty (180) days following
the effective date of the registration statement pertaining to the initial
firmly underwritten public offering of the Company's common stock (the "Initial
Offering"). In addition, the Company shall not be required to effect a
registration pursuant to this Section 2.2 if within thirty (30) days of receipt
of a written request from Initiating Holders pursuant to Section 2.2.1, the
Company gives notice to the Holders of the Company's intention to register its
securities pursuant to Section 2.3 within ninety (90) days and in such event the
Initiating Holders' request shall not be counted for purposes of Section 2.2.3
above.
2.2.5 Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the Chairman of the Board stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company no more than once in any one-year period.
2.3 PIGGYBACK REGISTRATIONS.
2.3.1 The Company shall notify all Holders of Registrable Securities in
writing at least twenty (20) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans and
corporate reorganizations) and will afford each such Holder an opportunity to
include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after receipt of the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
4
<PAGE> 10
2.3.2 If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company shall
so advise the Holders of Registrable Securities. In such event, the right of any
such Holder to be included in a registration pursuant to this Section 2.3 shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Holders requesting inclusion on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting. If such
registration is subsequent to the Company's Initial Offering, the number of
Registrable Securities held by the Holders shall not be reduced to less than 30%
of the total number of shares registered.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
2.4.1 promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
2.4.2 as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4: (i) if
Form S-3 is not available for such offering by the Holders, (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$500,000, (iii) if the Company shall furnish to the Holders a certificate signed
by the Chairman of the Board of Directors of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4, provided that such right to delay a
request shall be exercised by the Company no more than once in any one-year
period, (iv) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two (2) registrations on Form S-3 for
the Holders pursuant to this Section 2.4, or (v) in any particular jurisdiction
in which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
2.4.3 Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All such Registration Expenses incurred in
5
<PAGE> 11
connection with registrations requested pursuant to this Section 2.4 after the
first two (2) registrations shall be paid by the selling Holders pro rata in
proportion to the number of shares sold by each.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall
be borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the
Holders of a majority of Registrable Securities agree to forfeit their right to
one requested registration pursuant to Section 2.2 or Section 2.4 in which
event such right shall be forfeited by all Holders). If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to Section 2.5(a), then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
2.6.1 Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of either the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days.
2.6.2 Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
2.6.3 Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
2.6.4 Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
2.6.5 In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
2.6.6 Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities
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Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
2.6.7 Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Article II shall terminate and be of no further force and effect
seven (7) years after the date following the Company's Initial Offering.
2.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article 2.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
2.9.1 To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended, (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.9.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor
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shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
2.9.2 To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
2.9.3 Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
2.9.4 If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying
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party on the one hand and of the indemnified party on the other in connection
with the Violation(s) that resulted in such loss, claim, damage or liability,
as well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
2.9.5 The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any indemnified party if a copy of the Final Prospectus was furnished
to the indemnified party, the indemnified party had an obligation to furnish
such Final Prospectus to the person asserting the loss, liability, claim or
damage and the indemnified party did not so furnish the Final Prospectus to the
person asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Securities Act.
2.9.6 The obligations of the Company and Holders under this Section 2.9
shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Article II may be assigned
by a Holder to a transferee or assignee of Registrable Securities; provided,
however, that no such transferee or assignee shall be entitled to registration
rights under Sections 2.2, 2.3 or 2.4 hereof unless it acquires at least fifty
thousand (50,000) shares of Registrable Securities (as adjusted for stock
splits and combinations) and the Company shall, within twenty (20) days after
such transfer, be furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned. Notwithstanding the foregoing, rights
to cause the Company to register securities may be assigned to any subsidiary,
parent, general partner or limited partner of a Holder.
2.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Purchaser
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Purchaser (other than those included in
the registration) for a period specified by the underwriters not to exceed one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
(i) such agreement shall apply only to the Company's Initial Offering;
and
(ii) all officers and directors of the Company and holders of at least
one percent (1%) of the Company's voting securities enter into similar
agreements.
The obligations described in this Section 2.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject
to the foregoing restriction until the end of said one hundred eighty (180) day
period.
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III. RIGHTS OF FIRST REFUSAL.
3.1 SUBSEQUENT OFFERINGS. Each Purchaser holding more than 250,000
shares (as adjusted for any stock splits, combinations and similar events) of
Series B Stock, Series C Stock or Common Stock issued upon conversion thereof
(a "Major Purchaser") shall have a right of first refusal to purchase its pro
rata share of all Equity Securities, as defined below, that the Company may,
from time to time, propose to sell and issue after the date of this Agreement,
other than the Equity Securities excluded by Section 3.6 hereof. ITOCHU
Corporation, ITOCHU TECHNO-SCIENCE Corporation and ITOCHU TECHNOLOGY, Inc.
(collectively, the "Itochu Group") shall be considered as one entity for the
purposes of the preceding sentence, and therefore the ITOCHU Group shall be a
Major Purchaser so long as it collectively holds more than 250,000 shares of
Series C Stock or Common Stock issued upon conversion thereof. Each Major
Purchaser's pro rata share is equal to the ratio of the number of shares of the
Company's Common Stock (including all shares of Common Stock issued or issuable
upon conversion of the Series B Stock or Series C Stock) which such Major
Purchaser is deemed to be a holder of immediately prior to the issuance of such
Equity Securities to the total number of shares of the Company's Common Stock
on a fully-diluted basis (including all shares of Common Stock issuable upon
conversion of the Series A Stock, Series B Stock and Series C Stock and other
convertible securities and shares issuable upon exercise of warrants or options
then outstanding) then outstanding. The term "Equity Securities" shall mean
(i) any stock or similar security of the Company, (ii) any security
convertible, with or without consideration, into any stock or similar security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any stock or
similar security or (iv) any such warrant or right, but shall exclude the
securities set forth in Section 3.7 below.
3.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Purchaser written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Purchaser shall have
ten (10) days from the giving of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Major Purchaser who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or
sale.
3.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Purchasers elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Major
Purchasers who do so elect and shall offer such Major Purchasers the right to
acquire such unsubscribed shares ("Subscription Notice"). The Major Purchasers
shall have five (5) days after receipt of the Subscription Notice to notify the
Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Major Purchasers fail to exercise in full the
rights of first refusal, the Company shall have ninety (90) days thereafter to
sell the Equity Securities in respect of which the Major Purchasers' rights
were not exercised, at a price and upon terms and conditions no more favorable
to the purchasers thereof than specified in the Company's notice to the Major
Purchasers pursuant to Section 3.2 hereof. If the Company has not sold such
Equity Securities within such ninety (90) days, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Major Purchasers in the manner provided above.
Notwithstanding the foregoing, the Company agrees that for as long as Andersen
Consulting shall hold at least a 7.5% fully diluted interest in the Company,
the Company will not issue equity securities to any of the following companies
or their affiliated companies: Electronic Data Systems, International Business
Machines, Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KPMG Peat
Marwick and Price Waterhouse.
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3.4 SALES OF EQUITY SECURITIES BY PURCHASERS. No Purchaser shall sell,
assign, pledge, or in any manner transfer any of the shares of stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this Section 3.4:
(a) If the Purchaser desires to sell or otherwise transfer any of his
shares of stock, then the Purchaser shall first give written notice thereof to
the Company. The notice shall name the proposed transferee and state the number
of shares to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the Company
shall have the option to purchase all (but not less than all) of the shares
specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the Purchaser, the Company
shall have the option to purchase a lesser portion of the shares specified in
said notice at the price and upon the terms set forth therein. In the event of a
gift, property settlement or other transfer in which the proposed transferee is
not paying the full price for the shares, and that is not otherwise exempted
from the provisions of this Section 3.4, the price shall be deemed to be the
fair market value of the stock at such time as determined in good faith by the
Company's Board of Directors. In the event the Company elects to purchase all of
the shares or, with consent of the Purchaser, a lesser portion of the shares, it
shall give written notice to the transferring Purchaser of its election and
settlement for said shares shall be made as provided below in paragraph (d).
(c) The Company may assign its rights hereunder.
(d) In the event the Company and/or its assignee(s) elect to acquire
any of the shares of the transferring Purchaser as specified in said
transferring Purchaser's notice, the Company shall so notify the transferring
Purchaser and settlement thereof shall be made in cash within thirty (30) days
after the Secretary of the Company receives said transferring Purchaser's
notice; provided that if the terms of payment set forth in said transferring
Purchaser's notice were other than cash against delivery, the Company and/or its
assignee(s) shall pay for said shares on the same terms and conditions set forth
in said transferring Purchaser's notice.
(e) In the event the Company and/or its assignees(s) do not elect to
acquire all of the shares specified in the transferring Purchaser's notice, said
transferring Purchaser may, within the 90-day period following the expiration of
the option rights granted to the Company and/or its assignees(s) herein,
transfer the shares specified in said transferring Purchaser's notice which were
not acquired by the Company and/or its assignees(s) as specified in said
transferring Purchaser's notice. All shares so sold by said transferring
Purchaser shall continue to be subject to the provisions of this Section 3.4 in
the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this Section 3.4,
provided in each case that the transferee is not a competitor of the Company:
(1) A Purchaser's transfer of any or all shares held either during
such Purchaser's lifetime or on death by will or intestacy to such Purchaser's
immediate family or to any custodian or trustee for the account of such
Purchaser or such Purchaser's immediate family. "Immediate family" as used
herein shall mean spouse, lineal descendant, father, mother, brother, or sister
of the Purchaser making such transfer.
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(2) A Purchaser's bona fide pledge or mortgage of any shares with
a commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
Section 3.4.
(3) A Purchaser's transfer of any or all of such Purchaser's
shares to the Company or to any other Purchaser.
(4) A Purchaser's transfer of any or all of such Purchaser's
shares to a person who, at the time of such transfer, is an officer or director
of the Company.
(5) A corporate Purchaser's transfer of any or all of its shares
pursuant to and in accordance with the terms of any merger, consolidation,
reclassification of shares or capital reorganization of the corporate Purchaser,
or pursuant to a sale of all or substantially all of the stock or assets of a
corporate Purchaser.
(6) A corporate Purchaser's transfer of any or all of its shares
to any or all of its shareholders.
(7) A transfer by a Purchaser which is a limited or general
partnership to any or all of its partners or former partners, or in the case of
Andersen Consulting, LLP, any entity within the Andersen Consulting worldwide
organization (i.e., any entity having a member firm interfirm agreement with
Arthur Andersen S.C. or any entity which controls, is controlled by, or is under
common control with any such entity having such an agreement).
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this Section 3.4, and
there shall be no further transfer of such stock except in accord with this
Section 3.4.
(g) The provisions of this Section 3.4 may be waived with respect to
any transfer by the Company.
(h) Any sale or transfer, or purported sale or transfer, of securities
of the Company by a Purchaser shall be null and void unless the terms,
conditions and provisions of this Section 3.4 are strictly observed and
followed.
3.5 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Article III shall terminate upon the closing of the Initial
Offering.
3.6 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Purchaser under this Article III may be transferred to any
constituent partner or affiliate of such Major Purchaser, to any successor in
interest to all or substantially all the assets of such Major Purchaser, or to
a transferee who acquires two hundred fifty thousand (250,000) shares of Series
B Preferred Stock or Common Stock issued upon conversion thereof.
3.7 EXCLUDED SECURITIES. The rights of first refusal established by
this Article III in favor of the Major Purchasers shall have no application to
any of the following Equity Securities:
3.7.1 shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to
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employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board;
3.7.2 stock issued pursuant to any rights or agreements outstanding as
of the date of this Agreement, options and warrants outstanding as of the date
of this Agreement; and stock issued pursuant to any such rights or agreements
granted after the date of this Agreement, provided that the rights of first
refusal established by this Article III applied with respect to the initial sale
or grant by the Company of such rights or agreements;
3.7.3 any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
3.7.4 any Equity Securities that are issued by the Company as part of
an underwritten public offering referred to in Section 3.4 hereof;
3.7.5 shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
3.7.6 shares of Common Stock issued upon conversion of the Series A
Stock, Series B Stock and Series C Stock;
3.7.7 any Equity Securities issued pursuant to any equipment leasing
arrangement, corporate partnering transaction or bank financing, and
3.7.8 with respect to the Major Holders holding only Series C Stock,
Equity Securities issued and sold in exchange for an aggregate consideration of
$1,000,000 or less.
IV. MISCELLANEOUS.
4.1 AMENDMENT OF PRIOR AGREEMENT. Effective upon the execution of this
Agreement by the Company and the Holders of a majority of the outstanding
Registrable Securities issued under the Original Agreement, such agreement
shall be null and void and shall be superseded by the rights and obligations
set forth in this Agreement. Each Major Purchaser which was a party to the
Original Agreement hereby waives any right of first refusal under Article III
of the Original Agreement with respect to the issuance of the Series C Stock
and Common Stock issuable upon conversion thereof, including waiver of any
notice period.
4.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
4.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and
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<PAGE> 19
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of Registrable Securities from
time to time; provided, however, that prior to the receipt by the Company of
adequate written notice of the transfer of any Registrable Securities
specifying the full name and address of the transferee, the Company may deem
and treat the person listed as the holder of such shares in its records as the
absolute owner and holder of such shares for all purposes, including the
payment of dividends or any redemption price.
4.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
4.6 AMENDMENT AND WAIVER.
4.6.1 Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at a majority of the Registrable Securities.
4.6.2 Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
4.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character
on any Holder's part of any breach, default or noncompliance under the
Agreement or any waiver on such Holder's part of any provisions or conditions
of this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and
not alternative.
4.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall
be sent to the party to be notified at the address as set forth on the
signature page or the Schedule of Purchasers or at such other address as such
party may designate by ten (10) days advance written notice to the other
parties hereto.
4.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Restated
Investor Rights Agreement as of the date set forth in the first paragraph
hereof.
SIEBEL SYSTEMS, INC. THOMAS M. SIEBEL
By:
------------------------- -----------------------------------
Thomas M. Siebel Thomas M. Siebel
President
Address: Address:
4005 Bohannon Drive 4005 Bohannon Drive
Menlo Park, CA 94025 Menlo Park, CA 94025
PURCHASER
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Print Name of Purchaser
By:
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Title:
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15
<PAGE> 21
RESTATED INVESTOR RIGHTS AGREEMENT
SCHEDULE OF PURCHASERS
ANDERSEN CONSULTING LLP
ADOBE VENTURES L.P.
IRWIN FEDERMAN TRUST
HAMBRECHT & QUIST, L.P.
CRISTINA M. MORGAN
JAMES A. DAVIDSON
WILLIAM R. TIMKEN
STANDISH H. O'GRADY, SOLE & SEPARATE PROPERTY
ANDREW J. FILIPOWSKI
THOMAS B. PETERS
BRUCE M. LUPATKIN
J. NEIL WEINTRAUT
DONALD T. VALENTINE, TRUSTEE OF THE DONALD T. VALENTINE FAMILY TRUST DATED
APRIL 1967, AS AMENDED
ALBERT GEORGE BATTLE
ROGER J. BAMFORD
HEATHER BEACH
RICHARD J. BEACH
MARC BENIOFF
DONALD BLAIR BRUSCO, TRUSTEE OF THE DONALD BLAIR BRUSCO AND DIANE IRIS BRUSCO
1981 TRUST, DATED 11/9/89
ROY BUKSTEIN AND KATHERINE BUKSTEIN, COMMUNITY PROPERTY
PEHONG CHEN AND ADELE W. CHI, TRUSTEES OF THE CHEN FAMILY TRUST
<PAGE> 22
MICHAEL J. CORLEY AND LORI B. CORLEY, TRUSTEES OF THE CORLEY LIVING TRUST DATED
11/13/90
JOHN DAWSON
FREDERICK K. FLUEGEL
TERENCE J. GARNETT AND KATRINA S. GARNETT, JOINT TENANTS
GC&H INVESTMENTS
MARK D. HANSON
FREDERICK M. HOAR AND SHEILA J. HOAR, JOINT TENANTS
ITOCHU TECHNO-SCIENCE CORPORATION
ITOCHU CORPORATION
ITOCHU TECHNOLOGY, INC.
DAVID A. LEE
CHARLES R. SCHWAB
IGOR M. SILL
RICHARD E. STEINY AND LISA STEINY, TRUSTEES OF THE STEINY 1993 TRUST, DATED
5/18/93
CHRISTOPHER AND ELLEN GREENDALE
<PAGE> 1
EXHIBIT 10.1
SIEBEL SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED MAY 14, 1996
APPROVED BY STOCKHOLDERS MAY 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 as a single plan.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees 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 Consultants, to secure and retain the
services of new Employees 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.
1.
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(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 California corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means
a right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a 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 stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "DISINTERESTED PERSON" means a Director who either: (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any Affiliate entitling the participants therein to acquire equity securities
of the Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or
(ii) is otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.
(l) "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.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.
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(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock of the Company determined as follows:
(1) 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;
(2) 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;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.
(o) "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.
(p) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(3) of the Plan.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(u) "OPTIONEE" means an Employee 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
3.
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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 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.
(ab) "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:
(1) 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.
(2) 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
4.
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Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
14.
(4) 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 Disinterested Persons and may also be, in the
discretion of the Board, 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 (and references in this
Plan to the Board shall thereafter be to the Committee), 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.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
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 six million (6,000,000) 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.
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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 or Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time of grant the Director is also an Employee or Consultant.
(c) 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.
(d) 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 covering more than five hundred thousand (500,000) shares of the
Company's common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price lower
than that set forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the
6.
<PAGE> 7
Company, (B) according to a deferred payment or other arrangement (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
not be transferable except by will, by 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
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
7.
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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.
8.
<PAGE> 9
(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 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% stockholder (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:
9.
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(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 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.
(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 or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees and Consultants. 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. If a Stock Appreciation Right is granted to an individual
who is at the time subject to Section 16(b) of the Exchange Act (a "Section
16(b) Insider"), the Stock Award Agreement of grant shall incorporate all the
terms and conditions at the time necessary to assure that the subsequent
exercise of such right shall qualify for the safe-harbor exemption from
short-swing profit liability provided by Rule 16b-3 promulgated under the
Exchange Act (or any successor rule or regulation). Except as provided in
subsection 5(d), no limitation shall exist
10.
<PAGE> 11
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:
(1) 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.
(2) 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.
(3) 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.
11.
<PAGE> 12
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of any adversely affected holders of Options and/or Stock Appreciation Rights,
the cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of 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% stockholder (as described in subsection 5(c)), 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(d) 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(d) 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
12.
<PAGE> 13
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, a 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, 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 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, 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
13.
<PAGE> 14
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(d), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of shares and
price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such Stock Awards shall
continue in full force and effect. In the event any surviving corporation and
its Affiliates refuse to assume or continue such Stock Awards, or to substitute
similar options
14.
<PAGE> 15
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 stockholders 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 stockholder
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 stockholder 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 stockholder 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
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.
<PAGE> 16
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 stockholders 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.
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 stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
16.
<PAGE> 17
SIEBEL SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
SIEBEL SYSTEMS, INC. (the "Company") is pleased to inform you that its
Board of Directors has granted you an option to purchase shares of the common
stock of the Company ("Common Stock") under the SIEBEL SYSTEMS, INC. 1996 Equity
Incentive Plan (the "Plan").
The details of your option are as follows:
Optionee Name:
------------------------
Number of Shares:
---------------------
Exercise Price: $ per share
----------------
Grant Date:
---------------------------
Expiration Date: , unless it ends sooner for the reasons
------------------
described in Section 5 of the Additional Terms and Conditions attached.
Vesting Commencement Date:
-----------
Vesting Schedule: % on anniversary of the Vesting
-------- --------------
Commencement Date and
% each anniversary thereafter until
-------- ------------
fully vested.
Vesting is subject to termination under the circumstances
set forth in the Supplemental Terms and Conditions
attached.
Tax Qualification: This option is is not intended to qualify for the
--- ---
federal income tax benefits available to an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
Additional Terms and Optionee's Acknowledgements: This option is also subject to
all the terms of the Additional Terms and Conditions attached to this Agreement.
The undersigned optionee acknowledges receipt of this option agreement, the
Additional Terms and Conditions with the exhibits referred to therein, and
understands and agrees to all their terms. Optionee further acknowledges that as
of the date of grant of this option, this option, the Additional Terms and
Conditions and its exhibits set forth the entire understanding between optionee
and the Company regarding the acquisition of stock in the Company and supersedes
all prior oral and written agreements on that subject with the exception of (i)
the option agreements previously granted and delivered to optionee under the
Plan (including its predecessors), and (ii) the following agreements only:
OTHER AGREEMENTS:
-------------------------------
-------------------------------
-------------------------------
SIEBEL SYSTEMS, INC. OPTIONEE:
----------------------------
By:
---------------------------------- -------------------------------------
Signature
Name:
--------------------------------
Date: Date:
-------------------------------- --------------------------------
1.
<PAGE> 1
EXHIBIT 10.2
SIEBEL SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD MAY 14, 1996
APPROVED BY STOCKHOLDERS ON MAY 14, 1996
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Siebel Systems, Inc. (the "Company"), and
its Affiliates, as defined in subparagraph 1(b), which are designated as
provided in subparagraph 2(b), may be given an opportunity to purchase stock of
the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain 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.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
1.
<PAGE> 2
(iii) To construe and interpret the Plan and rights 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, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) 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 and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section 423
of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). 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, 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.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate three hundred fifty thousand
(350,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the memorandum documenting the Offering or
2.
<PAGE> 3
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
3.
<PAGE> 4
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares which may be purchased by
any employee as well as a maximum aggregate number of shares which may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering which contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
4.
<PAGE> 5
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125, Section
402(h), or Section 403(b) of the Code, and also including any deferrals under a
non-qualified deferred compensation plan or arrangement established by the
Company), which shall include or exclude bonuses, commissions, overtime pay,
incentive pay, profit sharing, other remuneration paid directly to the employee,
the cost of employee benefits paid for by the Company or an Affiliate, education
or tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an Affiliate under any employee benefit plan, and similar items of
compensation, as determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such
5.
<PAGE> 6
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by beneficiary designation as provided in paragraph 14, and otherwise during his
or her lifetime, shall be exercisable only by the person to whom such rights are
granted.
8. EXERCISE.
(a) On each date specified therefor in the relevant Offering ("Purchase
Date"), each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. No fractional shares shall be issued upon the exercise of rights
granted under the Plan. The amount, if any, of accumulated payroll deductions
remaining in each participant's account after the purchase of shares which is
less than the amount required to purchase one share of stock on the final
Purchase Date of an Offering shall be held in each such participant's account
for the purchase of shares under the next Offering under the Plan, unless such
participant withdraws from such next Offering, as provided in subparagraph 7(b),
or is no longer eligible to be granted rights under the Plan, as provided in
paragraph 5, in which case such amount shall be distributed to the participant
after such final Purchase Date, without interest. The amount, if any, of
accumulated payroll deductions remaining in any participant's account after the
purchase of shares which is equal to the amount required to purchase whole
shares of stock on the final Purchase Date of an Offering shall be distributed
in full to the participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance,
6.
<PAGE> 7
except that the Purchase Date shall not be delayed more than twelve (12) months
and the Purchase Date shall in no event be more than twenty-seven (27) months
from the Offering Date. If on the Purchase Date of any Offering hereunder, as
delayed to the maximum extent permissible, the Plan is not registered and in
such compliance, no rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire stock) shall be
distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other 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 rights granted under the Plan. 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 rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's stockholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the 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 other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated
7.
<PAGE> 8
as a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (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; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders 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 rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan
treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulation, or except as necessary to
ensure that the Plan and/or rights granted
8.
<PAGE> 9
under the Plan comply with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
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 at the time that all of the shares
subject to the Plan's share reserve, as increased and/or adjusted from time to
time, have been issued under the terms of the Plan. No rights may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the closing date of the Company's initial
public offering of stock that has been registered on an effective S-1
Registration Statement (the "Effective Date"), but no rights granted under the
Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company within 12 months before or after the date the Plan
is adopted by the Board or the Committee, which date may be prior to the
Effective Date.
9.
<PAGE> 1
EXHIBIT 10.3
FORM OF
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of __________,
1996 by and between SIEBEL ACQUISITION CORPORATION, a Delaware corporation (the
"Corporation"), and _______________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in the
capacity as _____________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as
_______________ of the Corporation, the Corporation has determined and agreed to
enter into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
_______________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
____________ of the Corporation or as a director, officer or other fiduciary of
an affiliate of the Corporation faithfully and to the best of Agent's ability so
long as Agent is duly elected and qualified in accordance with the provisions of
the Bylaws or other applicable charter documents of the Corporation or such
affiliate; provided, however, that Agent may at any time and for any reason
resign from such position (subject to any contractual obligation that Agent may
have assumed apart from this Agreement) and that the Corporation or any
affiliate shall have no obligation under this Agreement to continue Agent in any
such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such
<PAGE> 2
amendment permits the Corporation to provide broader indemnification rights than
the Bylaws or the Code permitted prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay by reason of any claim
or claims made against or by Agent in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 42 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment actually is made to Agent under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect,
both the Corporation and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and therefore is
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
2.
<PAGE> 3
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
expressly is required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent; provided,
however, that the fees and expenses of Agent's separate counsel shall be borne
by the
3.
<PAGE> 4
Corporation if (i) the employment of counsel by Agent has been authorized by the
Corporation, (ii) Agent reasonably shall have concluded that there may be a
conflict of interest between the Corporation and Agent in the conduct of the
defense of such action or (iii) the Corporation in fact shall not have employed
counsel to assume the defense of such action. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. Promptly following request therefor, the Corporation shall
advance, prior to the final disposition of any proceeding, all expenses incurred
by Agent in connection with such proceeding upon receipt of an undertaking by or
on behalf of Agent to repay such amounts if it shall be determined ultimately
that Agent is not entitled to be indemnified under the provisions of this
Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within 90 days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, also shall be entitled to be paid the expense of
prosecuting Agent's claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right Agent may have or hereafter
acquire under any statute, provision of the Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of
4.
<PAGE> 5
stockholders or directors, or otherwise, both as to action in Agent's official
capacity and as to action in another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity
contained herein or unenforceability shall not affect the validity or
enforceability of the other provisions hereof. Furthermore, if this Agreement
shall be invalidated in its entirety on any ground, then the Corporation
nevertheless shall indemnify Agent to the fullest extent provided by the Bylaws,
the Code or any other applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless signed in writing by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed for all purposes to be an
original but all of which together shall constitute this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature
page hereof.
5.
<PAGE> 6
(b) If to the Corporation, to
Siebel Acquisition Corporation
4005 Bohannon Drive
Menlo Park, CA 94025
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
SIEBEL ACQUISITION CORPORATION
By:
------------------------------------
Title:
---------------------------------
AGENT
---------------------------------------
(Signature)
Agent Print Name and Address:
---------------------------------------
---------------------------------------
6.
<PAGE> 1
EXHIBIT 10.4
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(Do not use this form for Multi-Tenant Property)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
November 10, 1994, is made by and between WVP Income Plus, III ("LESSOR") and
Siebel Systems, L.P. ("LESSEE") (collectively the "PARTIES", or individually
a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 4005 Bohannon Drive, located in the County of San
Mateo, State of California, and generally described as (describe briefly the
nature of the property) An approximate 12,000 square foot office building
("PREMISES"). (See Paragraph 2 for further provisions.)
1.3 TERM: 19 Months ("ORIGINAL TERM") commencing on January 1, 1995
("COMMENCEMENT DATE") and ending July 31, 1996 ("EXPIRATION DATE"). (See
Paragraph 3 for further provisions).
1.4 EARLY POSSESSION: Tenant shall be allowed to install telephone
wiring, furniture prior to commencement ("EARLY POSSESSION DATE"). (See
Paragraphs 3.2 and 3.3 for further provisions.)
1.5 BASE RENT: $11,400 per month ("BASE RENT"), payable on the first
day of each month commencing January 1, 1995. There shall be no rent due for the
month of July, 1996 (See Paragraph 4 for further provisions.) "/ / If this box
is checked, there are provisions in this Lease for the Base Rent to be
adjusted."
1.6 BASE RENT PAID UPON EXECUTION: $11,400 as Base Rent for the period
January, 1995. "/ / If this box is checked, there are provisions in this Lease
for the Base Rent to be adjusted."
1.7 SECURITY DEPOSIT: $11,400 ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: General office, computer software engineering and
marketing and other legal related (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY: Lessor is the 'Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties: Cornish & Carey Commercial
represents both Lessor and Lessee.
1.11 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 50 through 55 and Exhibits _________________________________________,
all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition as per paragraph 51 of the Addendum. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alternations or Utility Installations (as defined in Paragraph 7.3(a)) made
Initials __________
____________
PAGE 1
<PAGE> 2
or to be made by Lessee. If the Premises do not comply with said warranty,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify the same at Lessor's expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the
Premises for Lessee's intended use, (b) that Lessee has made such investigation
as it deems necessary with reference to such matters and assumes all
responsibility therefor as the same relate to Lessee's occupancy of the
Premises and/or the term of this Lease, and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties
with respect to the said matters other than as set forth in this Lease.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, shall be in effect during such period. Any such early possession
shall not affect nor advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not , except as otherwise provided herein, be obligated to
pay rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within thirty (30) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent
or charges, may be adjusted from time to time, to be received by Lessor in
lawful money of the United States, without offset or deduction, on or before the
day on which it is due under the terms of this Lease. Base Rent and all other
rent and charges for any period during the term hereof which is for less than
one (1) full calendar month shall be prorated based upon the actual number of
days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Lessee's faithful
performance of Lessee's obligations under this Lease. If Lessee fails to pay
Base Rent or other rent or charges due hereunder, or otherwise Defaults under
this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all
or any portion of said Security Deposit for the payment of any amount due Lessor
or to reimburse or compensate Lessor for any liability, cost, expense, loss or
damage (including attorneys' fees) which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit moneys
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease. Lessor shall not be required to keep all or any part of
the Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee in a timely fashion (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest herein), that portion
of the Security Deposit not used or applied by Lessor. Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered to be held in trust, to bear interest or other increment, or to be
prepayment for any moneys to be paid by Lessee under the Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
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6.2 HAZARDOUS SUBSTANCES.
(A) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in, on or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority.
Reportable Use shall also include Lessee's being responsible for the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonably required to be used by
Lessee in the normal course of Lessee's business permitted on the Premises, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to the use or presence of any
Hazardous Substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or therefor,
including, but not limited to, the installation (and removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give Lessor
a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(C) INDEMNIFICATION. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens, expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for Lessee
or under Lessee's control. Lessee's obligations under this Paragraph 6 shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation (including consultant's and attorney's fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances or storage tanks, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee shall, at Lessee's sole cost and expense, fully, diligently and in
a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the
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purpose of inspecting the condition of the Premises and for verifying compliance
by Lessee with this Lease and all Applicable Laws (as defined in Paragraph 6.3),
and to employ experts and/or consultants in connection therewith and/or to
advise Lessor with respect to Lessee's activities, including but not limited to
the installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused by materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request, reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc.), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises and every part thereof in good
order, condition and repair, structural and non-structural (whether or not such
portion of the Premises requiring repair, or the means of repairing the same,
are reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result of Lessee's use, any prior use, the elements or
the age of such portion of the Premises), including, without limiting the
generality of the foregoing, all equipment or facilities serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or
standpipe and hose or other automatic fire extinguishing system, including fire
alarm and/or smoke detection systems and equipment, fire hydrants, fixtures,
walls (interior and exterior), ceilings, floors, windows, doors, plate glass,
landscaping, driveways, fences, signs. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial\l action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of, the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance and/or storage tank brought
onto the Premises by or for Lessee or under its control. Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices. Lessee's obligations shall include keeping the Premises
and all improvements thereon or a part thereof in good order and condition.
See Addendum paragraph 53.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "Alterations" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structure Utility
Installations to the interior of the Premises (excluding the roof), as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000. Lessor acknowledges
Lessee intends to replace carpet.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereon furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration and
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by any
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mechanics' or materialmen's liens against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so. Lessor may require Lessee to pay Lessor's attorney's fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee shall
be the property of and owned by Lessee, but considered a part of the Premises.
Lessor may, at any time and at its option elect in writing to Lessee to be the
owner of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
their installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
by the end of the last day of the Lease term or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear excepted. "Ordinary wear and tear" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified in writing by Lessor, the Premises, as surrendered, shall
include the Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due, as per
Addendum paragraph 53.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a) above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
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8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lender(s)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an insured
Loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition,
obtain and keep in force during the term of this Lease a policy or policies in
the name of Lessor, with loss payable to Lessor and Lender(s), insuring the loss
of the full rental and other charges payable by Lessee to Lessor under this
Lease for one (1) year (including all real estate taxes, insurance costs, and
any scheduled rental increases). Said insurance shall provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease. If Lessee is the Insuring Party, the
policy carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancellable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
Insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
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8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other courses or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or more of
the then Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE-INSURED LOSS. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at lessor's expense, repair such
damage (but no Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall
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have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If Lessor does not receive such funds or assurance within said period,
Lessor may nevertheless elect by written notice to Lessee within ten (10) days
thereafter to make such restoration and repair as is commercially reasonable
with Lessor paying any shortage in proceeds, in which case this Lease shall
remain in full force and effect. If in such case Lessor does not so elect, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimburse from Lessor for any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE-UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION.. Notwithstanding any other provision hereof, if
a Premises Total destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration give written notice to
Lessor and to any lenders of which Lessee has actual notice of Lessee's
election to terminate this Lease on a date not less than sixty (60) days
following the giving of such notice.
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prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "Commence" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve months.
9.8 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. See Addendum paragraph 53.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be that
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payment shall be adjusted as required to provide the fund needed to pay
the applicable taxes before delinquency. If the amounts paid to Lessor by Lessee
under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Real Property Taxes as the same become due,
Lessee shall pay to Lessor, upon Lessor's demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of the
obligations of Lessee under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional Security
Deposit under Paragraph 5.
10.2 DEFINITION OF "REAL PROPERTY TAXES". As used herein, the term
"REAL PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL
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PROPERTY TAXES" shall also include any tax, fee, levy, assessment or charge, or
any increase therein, imposed by reason of events occurring, or changes in
applicable law taking effect, during the term of this Lease, including but not
limited to a change in the ownership of the Premises or in the improvements
thereon, the execution of this Lease, or any modification, amendment or transfer
thereof, and whether or not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations. Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without consent given under and subject to the terms of Paragraph
36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of Lessee,
as hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the
time of the execution by Lessor of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles consistently applied.
(D) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c) or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a noncurable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice ("Lessor's Notice"), increase the monthly Base Rent to fair
market rental value or one hundred ten percent (110%) of the Base Rent then in
effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
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12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) after the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of the Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
Sublessee. However, Lessor may consent to subsequent subletting and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable on the Lease or sublease and without obtaining
their consent, and such action shall not relieve such persons from liability
under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accomplished by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a non-refundable deposit of $1,000 or ten percent (10%) of the
current monthly Base Rent, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with the provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, the Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any
assignment or subletting, may require that the amount and adjustment structure
of the rent payable under this Lease be adjusted to what is then the market
value and/or adjustment structure for property similar to the Premises as then
consulted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING,. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfer to Lessor all of
Lessee's interest in all rentals and income arising from any sublease or all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's obligations under
this Lease; provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Lessee's obligations under this Lease,
Lessee may, except as otherwise provided in this Lease, receive, collect and
enjoy the rents from a sublessee, be deemed liable to the sublessee for any
failure of Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and directs
any such sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease, to
pay to Lessor the rents and other charges due and to become due under the
sublease. Sublessee shall rely upon any such statement and request from Lessor
and shall pay such rents and other charges to Lessor without any obligation or
right to inquire as to whether such Breach exists and notwithstanding any notice
from or claim from Lessee to the contrary. Lessee shall have no right or claim
against said sublessee, or, until the Breach has been cured, against Lessor, for
any such rents and other charges so paid by said sublessee to Lessor.
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(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
Defaults or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "Default" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach": is defined as the occurrence of any one or more of the following
Defaults, and, where a grace period for cure after notice is specified herein,
the failure by Lessee to cure such Default prior to the expiration of the
applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable Law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section 101
or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all
of Lessee's assets located at the Premises or to Lessee's interest in this
Lease, where possession is not restored to Lessee within thirty (30) days; or
(iv) the attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days; provided,
however, in the event that any provision of this subparagraph (e) is contrary
to any applicable law, such provision shall be of no force or effect, and not
affect the validity of the remaining provisions.
(f) The discovery by lessor that any financial statement given
to Lessor by Lessee or any
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Guarantor of Lessee's obligations hereunder was materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such event,
to provide Lessor with written alternative assurance or security, which, when
coupled with the then existing resources of Lessee, equals or exceeds the
combined financial resources of Lessee and the guarantors that existed at the
time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises expenses of reletting including necessary renovation
and alteration of the Premises, reasonable attorneys' fees, and that portion of
the leasing commission paid by Lessor applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in provision
(iii) of the prior sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's
Default or Breach of this Lease shall not waive Lessor's right to recover
damages under this Paragraph. If termination of this Lease is obtained through
the provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay or quit or to perform or quit, or to perform or quit as
the case may be, given to Lessee under any statute authorizing the forfeiture
of leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect in California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided Lessee
has the right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws of judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, or other charge, bonus, inducement
or consideration theretofore abated, given or paid by Lessor under such
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Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "CONDEMNATION"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion
of the Premises remaining, except that the Base Rent shall be reduced in the
same proportion as the rentable floor area of the Premises taken bears to the
total rentable floor area of the building located on the Premises. No reduction
of Base Rent shall occur if the only portion of the Premises taken is land on
which there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2. Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers for brokerage services rendered by said Brokers to Lessor in
this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee acquires
any rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of the term of this
Lease after having failed to
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exercise an Option, or (d) if said Brokers are the procuring cause by any other
lease or sale entered into between the Parties pertaining to the Premises and/or
any adjacent property in which Lessor has an interest, or (e) if Base Rent is
increased, whether by agreement or operation of an escalation clause herein,
then as to any of said transactions. Lessor shall pay said Brokers a fee in
accordance with the schedule of said Brokers in effect at the time of the
execution of this Lease.
15.4. Any buyer or transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed to
have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the"REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a party, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises, or, if this is
a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within thirty (30) days
following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
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23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
party may by written notice to other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
cared, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required therein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any preceding Default or Breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted. Any payment given Lessor by Lessee may be accepted
by Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reasons thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall given written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any
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prior lessor or with respect to events occurring prior to acquisition of
ownership, (ii) be subject to any offsets or defenses which Lessee might have
against any prior lessor, or (iii) be bound by prepayment of more than one
month's rent.
3.03 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings any action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, "PREVAILING PARTY"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that Lessee
may, with Lessor's prior written consent, install (but not on the roof) such
signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with conduct of Lessee's
business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease
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or subletting of the Premises by Lessee shall not constitute an acknowledgment
that no Default or Breach by Lessee of this Lease exists, nor shall such consent
be deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor shall be in
the form most recently published by the American Industrial Real Estate
Association, and each Guarantor shall have the same obligations as Lessee under
this Lease, including but not limited to the obligation to provide the Tenancy
Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, an no Option may be separated from this Lease in any manner, by
reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three or more notices of Default under Paragraph 13.1
during any twelve month period, whether or not the Defaults are cured, or (iii)
if Lessee commits a Breach of this Lease.
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40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the party of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was legally required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation. of this Lease by Lessor's agent and submission of same
to Lessee shall not be deemed an offer to lease to Lessee. This Lease is not
intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do no
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or person plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
49. ADDENDUM: Attached hereto is an addendum containing paragraphs 50 - 55 which
constitute a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS, STORAGE TANKS
OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OF
THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS
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LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FOR THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
<TABLE>
<S> <C>
Executed at _______________________________ Executed at _______________________________
on ______________________________________ on ______________________________________
by LESSOR: WVP Income Plus, III by LESSEE: Siebel Systems
By______________________________________ By______________________________________
Name Printed:_____________________________ Name Printed:_____________________________
Title:____________________________________ Title:____________________________________
By______________________________________ By______________________________________
Name Printed:_____________________________ Name Printed:_____________________________
Title:____________________________________ Title:____________________________________
Address:_________________________________ Address:_________________________________
Tel. No. (____)__________Fax No. (__)________ Tel. No. (____)__________Fax No. (__)________
</TABLE>
NOTICE: These forms are often modified to meet changing requirements of
law and industry needs. Always write or call to make sure you are
utilizing the most current form: American Industrial Real Estate
Association, 345 South Figueroa Street, Suite M-1, Los Angeles,
CA 90071. (213) 687-8777, Fax No. (213) 687-8616
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ADDENDUM TO THAT CERTAIN LEASE AGREEMENT DATED
NOVEMBER 10, 1994 MADE BY AND BETWEEN WVP INCOME PLUS, III,
HEREIN CALLED "LESSOR" AND SIEBEL SYSTEMS, A CALIFORNIA CORPORATION,
HEREIN CALLED "LESSEE"
50. RENT SCHEDULE - NET NET NET. Rent shall be due on the first day of each
month. Rent for the period January 1, 1995 through July 31, 1996 shall be
$11,400.00 per month. Lessor agrees to grant Lessee a rent credit not to
exceed $11,400.00 during the last month of the lease term.
51. CONDITION OF PREMISES. Lessor shall warrant that all electrical including
lighting and plumbing and HVAC and mechanical systems shall be in good working
order for the term of the Lease and any extension hereof. Lessor shall provide
Premises in clean condition and in an otherwise "as is" condition to Lessee.
The Premises are a part of a two building complex (the "Complex") and,
in this connection, Lessee agrees to abide by, keep and observe all reasonable
rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the Complex. Without limiting the
foregoing, Lessee shall not use, keep or permit to be kept, any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to
be occupied or used in a manner that unreasonably interferes in any way with
other tenants or those having business in the Complex.
52. HAZARDOUS MATERIALS.
A. Definitions.
As used herein, the term "Hazardous Materials" shall mean any hazardous
wastes, materials or substances and other pollutants or contaminants, which
are or become regulated by any federal, state or local laws, ordinances,
regulations, rules or requirements, including but not limited to, the Resource
Conservation and Recovery Act, as amended, (42 U.S.C. Sections 6901 et seq.),
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, (42 U.S.C. Section 9601 et seq.), the California Hazardous Materials
Control Act, as amended, (Cal. Health & Safety Code Section 25100 et seq.),
the California Hazardous Substance Account Act, as amended, (Cal. Health &
Safety Code Sections 25300 et seq.) and the Safe Drinking Water and Toxic
Enforcement Act (Cal. Health & Safety Code Section 25249.8) (Proposition 65).
Without limiting the above, the term "Hazardous Materials" also includes
petroleum (including crude oil and any ofits fractions), radioactive
materials, asbestos, pesticides, PCB's, and medical or biological wastes.
B. Compliance with Law.
(1) Lessee shall comply with all federal, state and local
laws, ordinances, regulations, rules or requirements relating to the Lessee's
use, and occupancy of the Leased Premises, including but not limited to those
relating to worker safety, public health and the environment ("Applicable
Laws"). Specifically, but without limiting Lessee's obligations described
above, Lessee shall establish and adhere to any hazardous material management
plan (the "Plan") required by the County of San Mateo, City of Menlo Park or
any other federal, state or local governmental agency having jurisdiction
("Agency"), and if a Plan is required, Lessee shall, not later than six months
from the commencement of this Lease, allow Lessor and Agency representatives
to inspect the Leased Premises for compliance with the Plan, and correct and
all items not in compliance with the Plan, and correct any items not in
compliance with Applicable Laws. Lessor may require that Lessee coordinate its
Plan with other occupants of the Building. Lessee also shall not cause,
maintain or permit any nuisance in, on or about the Premises, and shall not
install any tanks outside or within the Premises, above or below ground,
without the express written consent of Lessor.
(2) If an Agency directs Lessee or Lessor to take any action
with respect to the presence, release or threatened release of any Hazardous
Materials on, under or about the Premises, and that directive arises out of
Lessee's use of Hazardous Materials at the Premises or at any common area,
Lessee shall promptly commence and thereafter diligently prosecute to
completion, at Lessee's sole expense, any and all actions required by the
Agency. Lessor shall retain the right to review and approve any remediation
action proposed by Lessee. Lessee shall notify Lessor prior to taking any
action in response to the directive.
C. Lessee's Use of Hazardous Materials.
(1) Lessee shall not, and Lessee shall not permit its
employees, agents, contractors, subtenants, licensees, customers, invitees or
parties permitted to enter the Premises by any of the foregoing (Lessee and
such persons, collectively, "Lessee Parties") to, manage, handle, store or use
in any way on the Premises any Hazardous Materials other than those necessary
or useful for Lessee's business, and all activity involving Hazardous
Materials must be in full and strict compliance with all Applicable Laws.
Lessee parties shall not spill, leak, pump, pour, emit, empty, discharge,
inject, leach, dump or dispose (hereinafter "Release") any Hazardous Materials
onto, into or about the Premises, except to the extent permitted under
Applicable Laws. Upon Lessor's request, Lessee shall provide Lessor with a
list of all Hazardous Materials
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managed, handled, stored, used, or located on the Leased Premises at any time
during the Lease Term, together with evidence that Lease has complied with all
applicable Laws, including obtainment of a state identification number for
Hazardous Materials uses, if Laws, including obtainment of a state
identification number for Hazardous Materials uses, if Applicable Laws require
that Lessee obtain the same. Lessee shall comply fully, including the
completion of any corrective or remediation action, with any premises closure
requirements under Applicable Laws relating to Lessee's or Lessee Parties use
of Hazardous Materials not later than the end of the Lease Term.
(2) Lessee shall have an individual on staff (on at least a
part-time basis) who is trained and assigned to handle environmental, health
and safety matters, such as, but no limited to, radiation safety and emergency
planning.
D. Lessor's Right to Inspect.
Upon prior written notice to Lessee, Lessor shall have the
right at all times during the Lease Term to conduct a reasonable inspection of
the Leased Premises, including performing reasonable tests and investigations
to determine if Lessee is in compliance with the terms of this Lease. In
conducting these inspections, Lessor shall use its best efforts not to
unreasonably disrupt Lessee's business operations. Lessor shall bear the cost
of any tests and/or investigations, except that the cost of such test and/or
investigations shall be borne by Lessee if (a) the tests and/or investigations
indicate that Hazardous Materials are present on or under the Premises at
concentrations exceeding levels for which remediation is required under any
applicable Law, and (b) Lessee is responsible for the presence of such
Hazardous Materials.
E. Notices.
Lessee will immediately notify Lessor orally (with a written
follow-up notice with five days) if Lessee knows or has reasonable cause to
believe that a Release of Hazardous Material has come or will come to be
located on, in about or beneath the Premises in violation of Applicable Laws,
provided that such notification obligation shall not in itself imply the
existence of a remediation obligation on the part of Lessee. Lessee also shall
notify Lessor of (a) any formal or informal correspondence or communication
from any Agency concerning the release of Hazardous Materials on or mitigating
to or from the Premises, or the violation or possible violation of any
Applicable Law; or (b) any claims made or threatened by any third party
relating to loss, damage or injury claimed to have been caused by and Lessee
Party's handling, storage or use of any kind of Hazardous Materials on the
Premises or any Leased Party's alleged violation of any Applicable Laws.
F. Indemnification.
(1) Lessee shall indemnify, defend (with legal counsel
acceptable to Lessor) and hold Lessor, its shareholders, officers, agents,
employees, successor's and assigns harmless from any and all claims, demands,
judgments, damages, liabilities or losses (including diminution in value of
the Premises or damages from loss or restriction on use of the Premises),
costs and expenses (including costs associated with site restoration,
monitoring, corrective action), or closure, penalties, fines and punitive
damages arising out of or in connection with the handling, storage, use,
generation, treatments, manufacture, other management or Release of any
Hazardous Materials by any Lessee Party.
(2) Lessor shall indemnify, defend and hold Lessee, its
shareholders, officers, agents, employees, successors and assigns harmless
from any and all claims, demands, judgments, liabilities or losses, penalties,
fines and punitive damages arising out of or in connection with the handling ,
storage, use, generation, treatment, manufacture, other management or Release
of any Hazardous Materials in or about the Premises, the Building or Complex
caused by any portion or entity other than a Lessee Party.
G. Remediation of Hazardous Materials.
If a Release of any Hazardous Materials occurs on the Leased
Premises during the term of the Lease as a result of any act or omission of
any Lessee Party, Lessee, at its sole expense, shall (a) promptly make all
reasonable efforts to contain and mitigate such Release, (b) provide prompt
notification to the proper authorities if required by an Applicable Law, and
(c) upon notice to Lessor and with Lessor's approval, investigate and take all
appropriate removal or remedial actions necessary to comply with any
Applicable Law. This provision shall survive the expiration or termination of
this Lease.
53. OPERATING EXPENSES:
(A) The term "Operating Expenses" as defined in the lease,
shall also include (a) the repair and maintenance of the roof and roof
covering to the building (b) the repair and maintenance of any HVAC system
serving the building (c) the repair and maintenance of all plumbing and
electrical systems (d) any and all other repairs and maintenance costs of any
kind attributable to the Premises or to Common Areas (e) all costs of
utilities to the building, and the common areas including but not limited to,
water, gas,
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electricity, and garbage removal (f) landscape maintenance and (g) a property
management fee equal to 5% of the total amount of base rent, operating
expenses, insurance premiums, and real property taxes.
(B) The term "Operating Expenses" as defined in the lease,
shall not include (a) any and all repairs and maintenance costs of any kind
attributable to any part of the Complex leased to other tenants and (b)
replacement of either the roof or the HVAC system.
(C) All "Operating Expenses" as defined in the lease, which
are not solely attributable to the Premises but are attributable to the
Complex, shall be allocated by Lessor among the tenants in the Complex. Lessor
shall allocate these costs on an equitable basis such that all such costs and
charges are paid by tenants and not by Lessor, whether or not the Building or
the Complex are fully occupied. (If Lessee is the only occupant of the
Building, Lessee shall pay 100% of the operating expenses for the Building and
Common Area, except for common area costs allocated to the other Building in
the Complex.) All "Operating Expenses" attributable specifically to the
Premises, shall be allocated and paid 100% by Lessee.
(D) All insurance premiums and property taxes shall be
allocated by Lessor as though the Building and/or the Complex were fully
leased. Lessee shall pay the insurance premiums and property taxes allocated
to the Premises. The Building's share of these expenses shall be prorated for
the Complex.
(E) Notwithstanding anything to the contrary, Lessor shall be
responsible for providing and paying for all services to the building,
including but not limited to repairs, maintenance, real estate taxes, building
insurance, and all other items for the use and operation of the Building.
However, Lessee shall be responsible for providing and paying for its own
janitorial service and utilities. This paragraph is intended to identify who
will do the work and Lessee shall still pay for all of these items as they are
included in operating expenses as provided in the lease.
54. INDEMNITY
Notwithstanding anything to the contrary in the Lease, Lessee shall not
be required to indemnify, defend, or hold Lessor harmless from or against
claims, liability, loss, cost or expense arising out of the breach by Lessor,
or Lessor's agents, employees, licensee, invitees, or independent contractors
(collectively "Lessor's Agents"), of any convenient, representation or
warranty under this Lease, or any negligence or willful misconduct of Lessor
or Lessor's Agent.
Any claim by Lessee against Lessor shall be limited as described in the
lease, and furthermore, Lessee expressly waives any and all rights to proceed
against the individual partners, General Partners, officers or agents of
Lessor, and shall look solely to the assets of the partnership, WVP Income
Plus III, for any liability that Lessor may have to Lessee.
55. OPTION TO EXTEND
If this Lease shall not have been terminated pursuant to any provisions
hereof, and Lessee is not in receipt of notice of default under the terms
hereof, then Lessee may, at Lessee's option, extend the term of this lease for
one (1) additional term of twelve (12) months commencing on the expiration of
the original lease term. Lessee may exercise this option by giving Lessor a
minimum of four (4) months prior written notice, but shall use a "best effort"
to give Lessor written notice as soon as feasible. Upon giving Lessor notice,
Lessor or Lessee shall execute an extension of the Lease which will
incorporate all the same terms and conditions of the original Lease, including
rent.
Any conflict between the printed Lease and this Addendum shall be controlled
by the Addendum.
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The parties have signed this Addendum to Lease, which for reference purposes
shall be deemed to be dated as of the date first written above.
LESSOR LESSEE
WVP Income Plus III Siebel Systems, LP
A California Limited Partnership
By:______________________________ By:________________________________
Its:_____________________________ Its:_______________________________
Date:____________________________ Date:______________________________
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FIRST AMENDMENT OF LEASE
This First Amendment of Lease ("Amendment") is made and entered into this 15th
day of March, 1996, by and between WVP Income Plus III, a California Limited
Partnership ("Lessor") and Siebel Systems, Inc., a California Corporation
("Lessee").
RECITALS
A. Lessor and Lessee entered into a lease dated November 10, 1994
wherein Lessee agreed to lease from Lessor approximately 12,000 rentable square
feet of space at 4005 Bohannon Drive, Menlo Park, California ("Premises").
B. Lessor and Lessee now desire to amend the terms of the Lease.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt of which is hereby acknowledged, Lessor and Lessee
agree as follows:
1. The term of the Lease shall be extended such that the expiration
date of the Lease shall be July 31, 1997.
The parties have signed this First Amendment of Lease, which for reference
purposes shall be deemed to be dated as of the date first written above.
LESSOR LESSEE
WVP Income Plus 3, Siebel Systems, Inc.,
A California Limited Partnership A California Corporation
By: ____________________________ By: ___________________________
Date: __________________________ Date: _________________________
<PAGE> 1
EXHIBIT 10.5
TENANT SIEBEL SYSTEMS
LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1 PREMISES AND TERM 1
2 RENT 1
3 LANDLORD'S WORK - TENANT'S WORK 3
4 USE 3
5 RULES AND REGULATIONS AND COMMON AREA 4
6 PARKING 5
7 OPERATION, MANAGEMENT AND MAINTENANCE EXPENSES 5
8 ACCEPTANCE AND SURRENDER OF PREMISES 7
9 ALTERATIONS AND ADDITIONS 8
10 BUILDING PLANNING 8
11 UTILITIES 8
12 TAXES 9
13 LIABILITY INSURANCE 11
14 TENANT'S INSURANCE 11
15 PROPERTY INSURANCE 11
16 INDEMNIFICATION 12
17 COMPLIANCE 12
18 LIENS 14
19 ASSIGNMENT AND SUBLETTING 14
20 SUBORDINATION AND MORTGAGES 16
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
21 ENTRY BY LANDLORD 17
22 BANKRUPTCY AND DEFAULT 17
23 ABANDONMENT 19
24 DESTRUCTION 19
25 EMINENT DOMAIN 20
26 SALE OR CONVEYANCE BY LANDLORD 21
27 ATTORNMENT TO LENDER OR THIRD PARTY 21
28 HOLDING OVER 22
29 CERTIFICATE OF ESTOPPEL 22
30 CONSTRUCTION CHANGES 22
31 RIGHT OF LANDLORD TO PERFORM 23
32 ATTORNEYS' FEES 23
33 WAIVER 23
34 NOTICES 24
35 EXAMINATION OF LEASE 24
36 DEFAULT BY LANDLORD 24
37 CORPORATE AUTHORITY 24
38 LIMITATION OF LIABILITY 25
39 MISCELLANEOUS AND GENERAL PROVISIONS 25
40 BROKERS 27
41 SIGNS 27
</TABLE>
<PAGE> 3
MENLO PLACE OFFICE PARK
LEASE AGREEMENT
THIS LEASE, made this ____ day of December, 1995, between BOHANNON TRUST
PARTNERSHIP, a California general partnership, hereinafter called Landlord, and
SIEBEL SYSTEMS, INC. a California corporation, hereinafter called Tenant.
WITNESSETH:
ARTICLE 1 - PREMISES AND TERM
Section 1.1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference, more particularly
described as follows: all of the building located at 1000 Marsh Road, Menlo
Park, California 94025 and consisting of approximately 7207 gross square feet of
space on the ground floor.
Section 1.2. The demised term of this Lease shall be for a period of six
(6) months unless sooner terminated as hereinafter provided, and, shall commence
on the 11th day of December, 1995, and end on the 10th day June, 1996.
Provided that Tenant is not, and has not been, in default hereunder Tenant
shall have the option to extend the demised term of the Lease for one (1)
additional period of six (6) months (i.e., May 11, 1996 through December 10,
1996) by giving written notice to Landlord of such election on or before April
10, 1996. The extended term shall be on all the same terms and conditions of the
Lease except that there shall be no further option to extend.
Section 1.3. As used herein, the "Complex" shall mean and include all of
the land shown on Exhibit "B: attached hereto and incorporated herein by this
reference, and all of the buildings, improvements, fixtures and equipment now or
hereafter situated on said land.
Section 1.4. Said leasing is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
ARTICLE 2 - RENT
Section 2.1. Basic Rent. Tenant agrees to pay to Landlord without
deduction, recoupment, offset, prior notice, or demand, and Landlord agrees to
accept as Basic Rent for the leased Premises the amount of Seven Thousand
Dollars ($7,000.00) per month. Basic Rent shall be paid monthly in advance on
the first (1st) day of each calendar month during the demised term of this
Lease.
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Section 2.2. For any period prior to the commencement of the first full
calendar month or subsequent to the end of the last full calendar month of the
demised term, rent shall be prorated on the basis of the rental rate then
payable.
Section 2.3. All sums payable and all statements deliverable to Landlord by
Tenant under this Lease shall be paid and delivered at 60 Hillsdale Mall, San
Mateo, California 94403-3497, or at such other place as Landlord may from time
to time direct by notice to Tenant and all such sums shall be paid in lawful
money of the United States.
Section 2.4. Tenant, concurrently with Tenant's execution of the Lease,
shall pay to the Landlord the following:
(A) Seven Thousand Dollars ($7,000.00) which shall be applied by Landlord
to the first rent to become due and payable under this Lease, and
[(B) Seven Thousand Dollars ($7,000.00) which shall be held as a Security
Deposit pursuant to the terms of Section 39.10.]
Section 2.5. Additional Rent. Beginning with the commencement date of the
demised term of this Lease, Tenant shall pay to Landlord the following, in
addition to the Basic Rent and as Additional Rent, whether or not the same to be
designated as such, and Additional Rent shall be included in the term "rent"
wherever used in this Lease; and, unless another time shall be expressly
provided for the payment thereof, all rent and Additional Rent shall be due and
payable together with the next succeeding installment of Basic Rent; and
Landlord shall have the same remedies for failure to pay the same as for a
nonpayment of Basic Rent:
(a) Expenses for the operation, management, maintenance and repair of the
building in which the Premises are located and Parking Areas of the Complex as
set forth in Article 7, and
(b) All utilities relating to the building in which the Premises are
located as set forth in Article 11, and
(c) All Real Property Taxes relating to the Complex as set forth in Article
12, and
(d) All insurance premiums relating to the Complex, as set forth in Article
15, and
(e) All charges, costs and expenses which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses,
including attorneys' fees and legal expenses, that may accrue thereto in the
event of Tenant's failure to pay such amounts, and all damages, reasonable costs
and expenses which Landlord may incur by reason of default of Tenant or failure
on Tenant's part to comply with the terms of this Lease.
Tenant shall pay to Landlord monthly, in advance, Tenant's proportionate
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimated amount shall
be reconciled at the end of each calendar year as compared to Landlord's actual
expenditure for said Additional Rent items, with Tenant paying to Landlord, upon
demand, any amount of actual expenses expended by Landlord in excess of said
estimated amount, or Landlord refunding to Tenant (providing
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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Tenant is not in default in the performance of any of the terms, covenants and
conditions of this Lease) any amount of estimated payments made by Tenant in
excess of Landlord's actual expenditures for said Additional Rent items.
Tenant's payment for such Additional Rent as of the commencement of the
term of this Lease shall be Two Thousand Seven Hundred Dollars ($2,700.00) per
month.
The respective obligations of Landlord and Tenant under this Article shall
survive the expiration or other termination of the demised term of this Lease,
and if the demised term hereof shall expire or shall otherwise terminate on a
day other than the last day of a calendar year, the actual Additional Rent
incurred for the calendar year in which the demised term hereof expires or
otherwise terminates shall be determined and settled on the basis of the
statement of actual Additional Rent for such calendar year and shall be prorated
in the proportion which the number of days in such calendar year preceding such
expiration or termination bears to 365.
Section 2.6. Any amount due from Tenant to Landlord that is not paid when
due shall bear interest at the highest rate then permitted to be charged on late
payments under leases under California law; provided, however, the payment of
any such interest shall not excuse or cure the default upon which such interest
accrued. Tenant acknowledges and agrees that payment of such interest on late
payments is reasonable compensation to Landlord for the additional costs
incurred by Landlord caused by such late payment, including, but not limited to,
collection and administration expenses and the loss of the use of the money that
was late in payment.
ARTICLE 3 - LANDLORD'S WORK - TENANT'S WORK
Section 3.1. Landlord shall not be required to perform any work in the
Premises; and Tenant accepts the Premises in an "as is" condition.
Section 3.2. Any work to be performed shall be performed at the sole cost
of Tenant in accordance with detailed plans and specifications therefor which
must be approved, in writing, by Landlord or Landlord's architect before work is
commenced. Tenant shall furnish Landlord with a set of "as built" plans after
any such work is completed. Tenant shall be entitled to undertake any
alterations or improvements to the Premises which cost less than $20,000.00,
provided Tenant obtains Landlord's prior approval, which approval shall not be
unreasonably withheld or delayed.
ARTICLE 4 - USE
Section 4.1. Tenant shall use the Premises only in conformance with
applicable governmental laws, regulations, rules and ordinances for the purpose
of general offices_ and for no other purpose. Tenant shall not do or permit to
be done in or about the Premises or the Complex nor bring or keep or permit to
be brought or kept in or about the Premises or the Complex anything which is
prohibited by or will in any way increase the existing rate of (or otherwise
affect) fire or any insurance covering the Complex or any part
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thereof, or any of its contents, or will cause a cancellation of any insurance
covering the Complex or any part thereof, or any of its contents. Tenant shall
not do or permit to be done anything in, on or about the Premises or the Complex
which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Complex or injure or annoy them, or use or allow the Premises
to be used for any improper, immoral, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the Premises
or the Complex. No sale by auction shall be permitted on the Premises. Tenant
shall not place any loads upon the floors, walls, or ceiling which endanger the
structure, or place any harmful fluids or other materials in the drainage system
of the building, or overload existing electrical or other mechanical systems. No
waste materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises or outside of the building in which the Premises are a
part, except in trash containers placed inside exterior enclosures designated by
Landlord for that purpose or inside of the building proper where designated by
Landlord. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain outside the Premises or on any portion of Common Areas of
the Complex. No loudspeaker or other device, system or apparatus which can be
heard outside the Premises shall be used in or at the Premises without the prior
written consent of Landlord. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises. Tenant shall indemnify, defend and hold
Landlord harmless against any loss, expense, damage, attorneys' fees, or
liability arising out of failure of Tenant to comply with any applicable law.
Tenant shall comply with any covenant, condition, or restriction ("CC&R")
affecting the Premises. The provisions of this Article are for the benefit of
Landlord only and shall not be construed to be for the benefit of any tenant or
occupant of the Complex.
ARTICLE 5 - RULES AND REGULATIONS AND COMMON AREA
Section 5.1. Subject to the terms and conditions of this Lease and such
Rules and Regulations as Landlord may from time to time prescribe, Tenant and
Tenant's employees, invitees and customers shall have the non-exclusive right to
use the access roads, parking areas, and facilities provided and designated by
Landlord for the general use and convenience of the occupants of the Complex in
which the Premises is located, which areas and facilities are referred to herein
as "Parking Area". This right shall terminate upon the termination of this
Lease. Landlord reserves the right from time to time to make changes in the
shape, size, location, amount and extent of Parking Areas. Landlord further
reserves the right to promulgate such reasonable rules and regulations relating
to the use of the Parking Area, and any part or parts thereof, as Landlord may
deem appropriate for the best interest of the occupants of the Complex. The
Rules and Regulations shall be binding upon Tenant upon delivery of a copy of
them to Tenant, and Tenant shall abide by them and cooperate in their
observance. Such Rules and Regulations may be amended by Landlord from time to
time, with or without advance notice, and all amendments shall be effective upon
delivery of a copy to Tenant. Landlord shall not be responsible to Tenant for
the non-performance by any other tenant or occupant of the Complex of any of
said Rules and Regulations.
Landlord shall operate, manage and maintain the Parking Area. The manner in
which the Parking Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord.
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ARTICLE 6 - PARKING
Section 6.1. Tenant shall have the right to use the parking spaces in the
Parking Areas. Tenant agrees that Tenant, Tenant's employees, agents,
representatives and/or invitees shall not use parking spaces in excess of the
spaces allocated to Tenant hereunder. Tenant shall not, at any time, park, or
permit to be parked, any truck or vehicles adjacent to the loading areas so as
to interfere in any way with the use of such areas, nor shall Tenant at any time
park, or permit the parking of, Tenant's trucks or other vehicles or the trucks
and vehicles of Tenant's suppliers or others in any portion of the Parking Area
not designated by Landlord for such use by Tenant. Tenant shall not park nor
permit to be parked any inoperative vehicles or equipment on any portion of the
common parking area or other Parking Areas of the Complex. Tenant agrees to
assume responsibility for compliance by its employees with the parking provision
contained herein. If Tenant or its employees park in other than such designed
parking areas, then Landlord may charge Tenant, as an additional charge, and
Tenant agrees to pay, Twenty Dollars ($20.00) per day for each day or partial
day each such vehicle is parked in any area other than that designated. Tenant
hereby authorizes Landlord at Tenant's sole expense to tow away from the Complex
any vehicle belonging to Tenant or Tenant's employees parked in violation of
these provisions, or attach violation stickers or notices to such vehicles.
Tenant shall use the parking areas for vehicle parking only, and shall not use
the parking areas for storage.
ARTICLE 7 - OPERATION, MANAGEMENT AND MAINTENANCE EXPENSES
Section 7.1. As Additional Rent and in accordance with Article 2 of this
Lease, Tenant shall pay to Landlord all expenses of operation, management,
maintenance and repair of the Parking Areas of the Complex including, but not
limited to, license, permit, and inspection fees; the cost of all insurance
required for the Parking Areas of the Complex, including, without limitation,
liability insurance for personal injury, death and property damage, Worker's
Compensation insurance covering personnel, boiler and machinery insurance
covering equipment in the Parking Areas of the Complex, and any repair costs not
covered by insurance; security; utility charges associated with exterior
landscaping and lighting (including water and sewer charges); all charges
incurred in the maintenance of landscaped areas, lakes, parking lots, sidewalks,
driveways; maintenance, repair and replacement of all fixtures and electrical,
mechanical, and plumbing systems; structural elements and exterior surfaces of
the buildings; salaries and employee benefits of personnel and payroll taxes
applicable thereto; supplies, materials, equipment and tools; the cost of
capital expenditures which have the effect of reducing operating expenses,
provided, however, that in the event Landlord makes such capital improvements
Landlord may amortize its investment in said improvements (together with
interest at the rate of fifteen percent (15%) per annum on the unamortized
balance) as an operating expense in accordance with standard accounting
practices, provided that such amortization is not at a rate greater than the
anticipated savings in the operating expenses.
Section 7.2. As Additional Rent and in accordance with Article 2 of this
Lease, Tenant shall pay of the cost of operation (including common utilities),
management, maintenance, and repair of the Premises and the building (including
areas such as lobbies, restrooms, janitor's closets, hallways, elevators,
mechanical and telephone rooms, stairwells, entrances, spaces
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above the ceilings) in which the Premises are located. The maintenance items
herein referred to include, but are not limited to, janitorization, electrical
systems (such as outlets, lighting fixtures, lamps, bulbs, tubes, ballasts),
heating and air-conditioning controls (such as mixing boxes, thermostats, time
clocks, supply and return grills), all interior improvements within the Premises
including, but not limited to, wall covering, window coverings, acoustical
ceilings, vinyl tile, carpeting, partitioning, doors (both interior and
exterior, including closing mechanisms, latches, locks), and all other interior
improvements of any nature whatsoever, all windows, window frames, plate glass,
glazing, truck doors, main plumbing systems of the building (such as water and
drain lines, sinks, toilets, faucets, drains, showers and water fountains), main
electrical systems (such as panels and conduits), heating and air-conditioning
systems (such as compressors, fans, air handlers, ducts, boilers, heaters),
store fronts, roofs, downspouts, building common area interiors (such as wall
coverings, window coverings, floor coverings and partitioning), ceiling,
building exterior doors, skylights (if any), automatic fire extinguishing
systems, and elevators; license, permit and inspection fees; the cost of all
insurance required for the building of which the Premises is a part including,
without limitation, liability insurance for personal injury, death and property
damage in the common areas of the building, owner's protective liability
insurance, Worker's Compensation insurance covering personnel, boiler and
machinery insurance covering equipment in the building, and any repair costs not
covered by insurance; security; salaries and employee benefits of personnel and
payroll taxes applicable thereto; supplies, materials, equipment and tools; the
cost of capital expenditures which have the effect of reducing operating
expenses, provided, however, that in the event Landlord makes such capital
improvements, Landlord may amortize its investment in said improvements
(together with interest at the rate of fifteen percent (15%) per annum on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided that such amortization is not at a rate greater
than the anticipated savings in the operating expenses. Tenant hereby waives all
rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941
and 1942 of the California Civil Code and under any similar law, statute or
ordinance now or hereafter in effect. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sole expense upon Lease termination.
Section 7.3. "Additional Rent" as used herein shall not include: Landlord's
debt repayments; interest on charges; expenses directly or indirectly incurred
by Landlord solely for the benefit of any other tenant; cost for the
installation of partitioning or any other tenant improvements; cost of
attracting tenants; any original construction costs of a capital nature or
depreciation of such costs; interest, or executive salaries; Landlord's personal
income, franchise estate, inheritance and capital stock taxes, expenses for
which Landlord is reimbursed or indemnified either by an insurer, condemor,
tenant or otherwise; expenses incurred in leasing or procuring new tenants,
including, without limitation, lease or broker commissions, advertising expenses
and expenses of renovating space for new tenants; legal, accounting and other
professional expenses arising out of the construction of the building or in
enforcing Landlord's rights against other tenants, occupants or third parties;
rental expenses under any ground or underlying leases; the cost of any work or
service performed for or facilities furnished to tenant or other tenants at the
tenant's cost; the cost of correcting defects (latent or otherwise) in the
construciton of the building or in the building equipment; provided,
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however, that conditions resulting from ordinary wear and tear shall not be
deemed defects; expenses incurred to comply with any governmental regulation or
other provision dealing with the removal, treatment or handling of asbestos or
any other hazardous materials in the building provided Lessee is not responsible
for placing such hazardous material in the Premises; and the cost of any capital
improvements not made for the express purpose of reducing operating costs.
ARTICLE 8 - ACCEPTANCE AND SURRENDER OF PREMISES
Section 8.1. By entry hereunder, Tenant accepts the Premises as being in
good and sanitary order, condition and repair and accepts the building and
improvements included in the Premises in their present condition and without
representation or warranty by Landlord as to the condition of such building or
as to the use or occupancy which may be made thereof. Any exceptions to the
foregoing must be by written agreement executed by Landlord and Tenant.
Section 8.2. Tenant agrees on the last day of the demised term, or on the
sooner termination of this Lease, to surrender the Premises promptly and
peaceably to Landlord in good condition and repair (damage by acts of God, fire,
normal wear and tear excepted), with all interior walls painted, or cleaned so
that they appear freshly painted, and repaired and replaced, if damaged; all
floors cleaned and waxed; all carpets cleaned and shampooed; the
air-conditioning and heating equipment serviced by a reputable and licensed
service firm and in good operating condition (provided the maintenance of such
equipment has been Tenant's responsibility during the term of this Lease)
together with all alterations, additions and improvements which may have been
made in, to, or on the Premises (except movable trade fixtures installed at the
expense of Tenant) [except that Tenant shall ascertain from Landlord within
thirty (30) days before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant; and
if Landlord shall so desire, then Tenant shall restore said Premises or such
part or parts thereof before the end of this Lease at Tenant's sole cost and
expense.] Tenant, on or before the end of the demised term or sooner termination
of this Lease, shall remove all of Tenant's personal property and trade fixtures
from the Premises, and all property not so removed on or before the end of the
term or sooner termination of this Lease shall be deemed abandoned by Tenant and
title to same shall thereupon pass to Landlord without compensation to Tenant.
Landlord may, upon termination of this Lease, remove all moveable furniture and
equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage
caused by such removal at Tenant's sole cost. If the Premises be not surrendered
at the end of the term or sooner termination of this Lease, Tenant shall
indemnify Landlord against loss or liability resulting from the delay by Tenant
in so surrendering the Premises including, without limitation, any claims made
by any succeeding tenant founded on such delay. Nothing contained herein shall
be construed as an extension of the term hereof or as a consent of Landlord to
any holding over by Tenant. The voluntary or other surrender of this Lease or
the Premises by Tenant or a mutual cancellation of this Lease shall not work as
a merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies.
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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ARTICLE 9 - ALTERATIONS AND ADDITIONS
Section 9.1. Tenant shall not make, or suffer to be made, any alteration or
addition to the Premises, or any part thereof, without written consent of
Landlord first had and obtained by Tenant, and such alteration or addition shall
be at the cost of Tenant; and any addition to, or alteration of, the Premises,
except moveable furniture and trade fixtures, shall at once become a part of the
Premises and belong to Landlord. If Landlord consents to the making of any
alteration, addition, or improvement to or of the Premises by Tenant, the same
shall be made by Landlord at Tenant's sole cost and expense. Any modifications
to the building or building systems required by governmental code or otherwise
as a result of Tenant's alterations or improvements shall be made at Tenant's
sole cost and expense. Tenant shall retain title to all moveable furniture and
trade fixtures placed in the Premises. All heating, lighting, electrical,
air-conditioning, partitioning (excepting any demountible partitions installed
by Tenant), drapery, carpeting and floor installations made by Tenant, together
with all property that has become an integral part of the Premises, shall not be
deemed trade fixtures. Tenant agrees that it will not proceed to make any
alteration or additions without having obtained consent from Landlord to do so,
and until five (5) days from the receipt of such consent, in order that Landlord
may post appropriate notices to avoid any liability to contractors or material
suppliers for payment for Tenant's improvements. Tenant will at all times permit
such notices to be posted and to remain posted until the completion of work.
Tenant shall, if required by Landlord, secure at Tenant's own cost and expense a
completion and lien indemnity bond satisfactory to Landlord for such work.
ARTICLE 10 - BUILDING PLANNING
[Section 10.1. In the event Landlord requires the Premises for use in
conjunction with another suite or for other reasons connected with the building
planning program, Landlord, upon notifying Tenant in writing, shall have the
right to move Tenant to space in the Complex of which the Premises form a part,
at Landlord's sole cost and expense, and the terms and conditions of the
original Lease shall remain in full force and effect, save and excepting the
Premises shall be in a new location. However, if the new space does not meet
with Tenant's approval, Tenant shall have the right to cancel said Lease upon
giving Landlord thirty (30) days' written notice within ten (10) days of receipt
of Landlord's notification.]
ARTICLE 11 - UTILITIES
Section 11.1. As Additional Rent and in accordance with Article 2 of this
Lease, Tenant shall pay the cost of all utility charges such as water, gas,
electricity, telephone, telex and other electronic communications service, sewer
service, waste-pick-up and any other utilities, materials or services furnished
directly to the building in which the Premises are located, including, without
limitation, any temporary or permanent utility surcharge or other exactions
whether or not hereinafter imposed.
Section 11.2. Landlord shall not be liable for and Tenant shall not be
entitled to any abatement or reduction of rent by reason of any interruption or
failure of utility services to the Premises when such interruption or failure is
caused by accident, breakage, repair, strikes,
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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lockouts, or other labor disturbances or labor disputes of any nature, or by any
other cause, similar or dissimilar, beyond the reasonable control of Landlord.
In the event utility services to the Premises are interrupted on account of
Landlord's negligent act or omission Tenant may (if it ceases operating for
business in the Premises) abate its Rent until such service(s) is restored;
provided further, however, that if such stoppage or interruption caused by
Landlord's negligent act or omission continues for a period exceeding thirty
(30) days, Tenant may terminate this Lease upon written notice to Landlord.
Section 11.3. Provided that Tenant is not in default in the performance or
observance of the terms, covenants or conditions of this Lease to be performed
or observed by it, Landlord shall furnish to the Premises between the hours of
8:00 a.m. and 6:00 p.m., Mondays through Fridays (holidays excepted), and
subject to the rules and regulations of the Complex hereinbefore referred to,
reasonable quantities of water, gas and electricity suitable for the normal use
of the Premises as general office space and heat and air-conditioning required
in Landlord's judgment for the comfortable use and occupation of the Premises
for such purposes. Tenant agrees that at all times it will cooperate fully with
Landlord and abide by all regulations and requirements that Landlord may
prescribe for the proper functioning and protection of the building heating,
ventilating and air-conditioning systems. Whenever heat generating machines,
equipment, or any other devices (including exhaust fans) are used in the
Premises by Tenant which affect the temperature otherwise maintained by the
air-conditioning system, Landlord shall have the right to install supplementary
air-conditioning units in the Premises and the cost thereof, including the cost
of installation and the cost of operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord. Tenant will not, without the
written consent of Landlord, use any apparatus or device in the Premises,
including, without limitation, electronic data processing machines or machines
using current in excess of 110 Volts, which will in any way increase the amount
of electricity, gas, water or air-conditioning usually furnished or supplied to
premises being used as general office space, or connect with electric current
(except through existing electrical outlets in the Premises), or with gas or
water pipes any apparatus or device for the purposes of using electric current,
gas, or water. If Tenant shall require water, gas, or electric current in excess
of that usually furnished or supplied to premises being used as general office
space, Tenant shall first obtain the written consent of Landlord, which consent
shall not be unreasonably withheld, and Landlord may cause an electric current,
gas, or water meter to be installed in the Premises in order to measure the
amount of electric current, gas, or water consumed for any such excess use. The
cost of any such meter and of the installation, maintenance and repair thereof,
all charges for such excess water, gas and electric current consumed (as shown
by such meters and at the rates then charged by the furnishing public utility),
and any additional expense incurred by Landlord in keeping account of electric
current, gas, or water so consumed shall be paid by Tenant, and Tenant agrees to
pay Landlord therefor promptly upon demand by Landlord.
ARTICLE 12 - TAXES
Section 12.1. As Additional Rent and in accordance with Article 2 of this
Lease, Tenant shall pay to Landlord all Real Property Taxes allocated to the
leased Premises by Landlord. The term "Real Property Taxes", as used herein,
shall mean (i) all taxes, assessments, levies and other charges of any kind or
nature whatsoever, general and special, foreseen and unforeseen (including all
installments of principal and interest required to pay any general or
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special assessments for public improvements and any increases resulting from
reassessment caused by any change in ownership of the Complex) now or hereafter
imposed by any governmental or quasi-governmental authority or special district
having the direct or indirect power to tax or levy assessments, which are levied
or assessed against, or with respect to the value, occupancy or use of all or
any portion of the Complex (as now constructed or as may at any time hereafter
be constructed, altered, or otherwise changed) or Landlord's interest therein;
any improvements located within the Complex (regardless of ownership); the
fixtures, equipment and other property of Landlord, real or personal, that are
an integral part of and located in the Complex; or parking areas, public
utilities, or energy within the Complex; (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Complex; and (iii) all costs and fees (including attorneys' fees) incurred
by Landlord in contesting any Real Property Tax and in negotiating with public
authorities as to any Real Property Tax. If at any time during the term of this
Lease the taxation or assessment of the Complex prevailing as of the
commencement date of this Lease shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge (i) on the value, use or occupancy of the Complex or
Landlord's interest therein or (ii) on or measured by the gross receipts, income
or rental from the Complex, on Landlord's business of leasing the Complex, or
computed in any manner with respect to the operation of the Complex, then any
such tax or charge, however designated, shall be included within the meaning of
the term "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is based upon property or rents unrelated to the Complex, then only part of
such real Property Tax that is fairly allocable to the Complex shall be included
within the meaning of the term "Real Property Taxes". Notwithstanding the
foregoing, the term "Real Property Taxes" shall not include estate, inheritance,
gift or franchise taxes of Landlord or the federal or state net income tax
imposed on Landlord's income from all sources.
Section 12.2. Taxes on Tenant's Property
(a) Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against any personal property or trade fixtures placed
by Tenant in or about the Premises. If any such taxes on Tenant's personal
property or trade fixtures are levied against Landlord or Landlord's property or
if the assessed value of the Premises is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant and if
Landlord, after written notice to Tenant, pays the taxes based on such increased
assessment, which Landlord shall have the right to do regardless of the validity
thereof, but only under proper protest if requested by Tenant, Tenant shall upon
demand, as the case may be, repay to Landlord the taxes so levied against
Landlord, or the proportion of such taxes resulting from such increase in the
assessment; provided that in any such event Tenant shall have the right, in the
name of Landlord and with Landlord's full cooperation, to bring suit in any
court of competent jurisdiction to recover the amount of any such taxes so paid
under protest, and any amount so recovered shall belong to Tenant.
(b) If the tenant improvements in the Premises, whether installed and/or
paid for by Landlord or Tenant and whether or not affixed to the real property
so as to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which standard office improvements in
other space in the Complex are assessed, then the real
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property taxes and assessments levied against Landlord or the Complex by reason
of such excess assessed valuation shall be deemed to be taxes levied against
personal property of Tenant and shall be governed by the provisions of Section
12.2(a) above. If the records of the County Assessor are available and
sufficiently detailed to serve as a basis for determining whether said tenant
improvements are assessed at a higher valuation than standard office
improvements in other space in the Complex, such records shall be binding on
both the Landlord and Tenant. If the records of the County Assessor are not
available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.
ARTICLE 13 - LIABILITY INSURANCE
Section 13.1. Tenant, at Tenant's expense, agrees to keep in force during
the term of the Lease a policy of comprehensive public liability insurance with
limits in the amount of Two Million Dollars ($2,000,000) for injuries to or
death of any one or more persons occurring in, on or about the Premises or the
Complex, and damage to property, combined single limit. The policy or policies
affecting such insurance, certificates of which shall be furnished to Landlord,
shall name Landlord as an additional insured, and shall insure any liability of
Landlord, contingent or otherwise, as respects acts or omissions of Tenant, its
agents, employees or invitees or otherwise by any conduct or transactions of any
said persons in or about or concerning the Premises, including any failure of
Tenant to observe or perform any of its obligations hereunder; shall be issued
by an insurance company admitted to transact business in the State of California
acceptable to Landlord; and shall provide that the insurance effected thereby
shall not be canceled, except upon thirty (30) days' prior written notice to
Landlord. If, during the term of this Lease, in the considered opinion of
Landlord's Lender, insurance advisor or counsel, the amount of insurance
described in this Article 13 is not adequate, Tenant agrees to increase said
coverage to such reasonable amount as Landlord's Lender, insurance advisor or
counsel shall deem adequate.
ARTICLE 14 - TENANT'S INSURANCE
Section 14.1. Tenant shall maintain a policy or policies of fire and
property damage insurance in "all risk" form with a sprinkler leakage
endorsement insuring the personal property, inventory and trade fixtures within
the leased Premises for the full replacement value thereof. The proceeds from
any such policies shall be used for the repair or replacement of such items so
insured. Tenant may, at its election, self-insure for such coverage.
Section 14.2. Tenant shall also maintain a policy or policies of workman's
compensation insurance and any other employee benefit insurance sufficient to
comply with all laws.
ARTICLE 15 - PROPERTY INSURANCE
Section 15.1. Landlord shall purchase and keep in force, and as Additional
Rent and in accordance with Article 2 of this Lease Tenant shall pay to Landlord
the cost of, a policy or policies of insurance covering loss or damage to the
Premises, including leasehold
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improvements, and Complex in the amount of the full replacement value thereof,
providing protection against those perils included within the classification of
"all risks" insurance and, at Landlord's option, flood and/or earthquake
insurance, if available, plus a policy of rental income insurance in the amount
of one hundred percent (100%) of the annual Basic Rent, plus sums paid as
Additional Rent. If Landlord's standard insurance cost is increased due to
Tenant's use of the Premises or the Complex, Tenant agrees to pay to Landlord
the full cost of such increase. Tenant shall have no interest in nor any right
to proceeds of any insurance procured by Landlord for the Complex. Tenant shall
submit to Landlord an itemized statement setting forth the cost of any leasehold
improvements installed by Tenant promptly upon completion thereof. Tenant shall
periodically notify Landlord in writing of any change in the replacement value
of any such leasehold improvements to enable Landlord to adjust its insurance
accordingly.
Section 15.2. Landlord and Tenant do each hereby respectively release the
other, to the extent of insurance coverage maintained, or required to be
maintained, hereunder, from any liability for loss or damage caused by fire or
any of the extended coverage casualties included in the releasing party's
insurance policies, irrespective of the cause of such fire or casualty.
ARTICLE 16 - INDEMNIFICATION
Section 16.1. Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises or the Complex by
or from any cause whatsoever, including, without limitation, gas, fire, oil,
electricity or leakage of any character from the roof, walls, basement or other
portion of the Premises or the Complex but excluding, however, the negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property the cause of which is the negligence of
Landlord, Tenant shall indemnify and hold Landlord harmless from and defend
Landlord against all claims arising from any act, omission or negligence of
Tenant, or its contractors, licensees, agents, servants, invitees or employees,
or arising from any accident, injury or damage whatsoever caused to any person,
or to the property of any person occurring during the demised term in or about
the Premises, and from and against all costs, expenses and liabilities incurred
in or in connection with any such claim or proceeding brought thereon,
including, but not limited to, reasonable attorneys' fees and court costs.
Tenant shall not be liable to Landlord, its agents, servants, employees,
contractors, customers or invitees for any damage to person or property in or
about the Premises caused by any act, omission or neglect of Landlord, its
agents, servants or employees and agrees to indemnify and hold Tenant harmless
from all liability and claims for any such damage.
ARTICLE 17 - COMPLIANCE
Section 17.1. Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or
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hereafter constituted; and with any direction or occupancy certificate issued
pursuant to law by any public officer; provided, however, that no such failure
shall be deemed a breach of the provisions if Tenant, immediately upon
notification, commences to remedy or rectify said failure. The judgment of any
court of competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
such law, statute, ordinance or governmental rule, regulation, requirement,
direction or provision, shall be conclusive of that fact as between Landlord and
Tenant. This Article shall
not be interpreted as requiring Tenant to make structural changes or
improvements, except to the extent such changes or improvements are required as
a result of Tenant's use of the Premises. Tenant shall, at its sole cost and
expense, comply with any and all requirements pertaining to said Premises, of
any insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance covering the Premises.
Section 17.2. Tenant shall, at its expense, comply with all applicable
laws, regulations, rules and orders, regardless of when they become or became
effective, including, without limitation, those relating to health, safety,
noise, environmental protection, waste disposal, and water and air quality, and
furnish satisfactory evidence of such compliance upon request of Landlord.
Should any discharge, leakage, spillage, emission or pollution of any type
occur upon or from the Premises or the Complex due to Tenant's use and occupancy
thereof, Tenant, at its expense, shall be obligated to remedy the same to the
satisfaction of Landlord and any governmental body having jurisdiction
thereover. Tenant agrees to indemnify, hold harmless, and defend Landlord
against all liability, cost, and expense (including without limitation any
fines, penalties, judgments, litigation costs, and attorneys' fees) incurred by
Landlord as a result of Tenant's breach of this section, or as a result of any
such discharge, leakage, spillage, emission, or pollution, regardless of whether
such liability, cost, or expense arises during or after the lease term, unless
such liability, cost or expense is proximately caused solely by the active
negligence of Landlord.
Landlord shall be responsible for compliance with any repair or maintenance
necessitated by any governmental regulation or law dealing with the removal
treatment or handling of asbestos or other hazardous materials in the building;
provided that Tenant was not responsible for the introduction of such materials
into the building or Premises.
Tenant shall pay all amounts due Landlord under this section, as Additional
Rent, within ten (10) days after any such amounts become due.
Section 17.3. Should a government agency or municipality require Landlord
to institute TSM (Transportation System Management or Transportation Demand
Management) facilities and/or programs, Tenant hereby agrees that the cost of
TSM imposed facilities required on the Premises, including but not limited to
employee showers, lockers, cafeteria, or lunchroom facilities, shall be included
as a portion of Tenant's leasehold improvements, and any ongoing costs or
expenses associated with a TSM program, such as an on-site TSM coordinator,
which are required for the Premises and not provided by Tenant, shall be
provided by Landlord with such costs being included as Additional Rent and
reimbursed to Landlord by Tenant.
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ARTICLE 18 - LIENS
Section 18.1. Tenant shall promptly pay all sums of money in respect to any
labor, services, materials, supplies or equipment furnished or alleged to have
been furnished to Tenant in, at or about the Premises, or furnished to Tenant's
agents, employees, contractors or subcontractors, that may be secured by any
mechanic's, materialmen's, supplier's or other liens against the Premises or
Landlord's interest therein. In the event any such or similar liens shall be
filed, Tenant shall, within three (3) days of receipt thereof, give notice to
Landlord of such lien, and Tenant shall, within ten (10) days after receiving
notice of the filing of the lien, discharge such lien by payment of the amount
due to the lien claimant. However, Tenant may in good faith contest such lien
provided that within such ten (10) day period Tenant provides Landlord with a
surety bond of a company acceptable to Landlord, protecting against said lien in
an amount at least one and one-half (1-1/2) times the amount claimed or secured
as a lien or such greater amount as may be required by applicable law and
provided further that Tenant, if it should decide to contest such lien, shall
agree to indemnify, defend and save harmless Landlord from and against all costs
arising from or out of any proceeding with respect to such lien. Failure of
Tenant to discharge the lien, or if contested to provide such bond and
indemnification, shall constitute a default under this Lease and in addition to
any other right or remedy of Landlord, Landlord may, but shall not be obligated
to, discharge or secure the release of any lien by paying the amount claimed to
be due, and the amount so paid by Landlord, and all costs and expenses incurred
by Landlord therewith, including, but not limited to, court costs and reasonable
attorneys' fees, shall be due and payable by Tenant to Landlord forthwith on
demand. Notwithstanding any such contest, if any such lien shall be reduced to
final judgment and such judgment or such process as may be issued for the
enforcement thereof is not promptly stayed or if so stayed and said stay
thereafter expires, then and in any such event Tenant shall forthwith pay and
discharge said judgment. Landlord shall have the right to post and maintain on
the Premises such notices of non-responsibility as are provided for under the
mechanic's lien laws of California.
ARTICLE 19 - ASSIGNMENT AND SUBLETTING
Section 19.1.
A. Except as otherwise provided herein, Tenant shall not, by operation of
law or otherwise, transfer, assign, sublet, enter into license or concession
agreements, change ownership, mortgage or hypothecate this Lease or the Tenant's
interest in and to the Premises without first procuring the written consent of
Landlord. Any attempted transfer, assignment, subletting, license or concession
agreement, change of ownership, mortgage or hypothecation without Landlord's
written consent shall be void and confer no rights upon any third person.
Landlord's consent to a proposed assignment or sublease shall not be
unreasonably withheld provided that the proposed assignee or sublessee shall
have: (i) a net worth, at the time of the assignment or sublease, determined in
accordance with good accounting principles, equal to or in excess of the net
worth at the date of the Lease of Tenant; (ii) been active in its current
business for a minimum of three (3) years immediately prior to the assignment or
sublease; and (iii) a good reputation in the business community; provided
further that Tenant shall give Landlord not less than sixty (60) days' notice
prior to the effective date of any such assignment or sublease, and Landlord
shall have the option to terminate this Lease with respect to the
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space to be assigned or subleased by notice to Tenant given within thirty (30)
days of Landlord's receipt of Tenant's notice. If Tenant intends to sublet the
entire Premises and Landlord elects to terminate this Lease, this Lease shall be
terminated on the date specified in Tenant's notice. If, however, this Lease
shall terminate pursuant to the foregoing with respect to less than all the
Premises, the rent, as defined and reserved hereinabove, shall be adjusted on a
prorata basis to the number of square feet retained by Tenant, and this Lease as
so amended shall continue in full force and effect. Nothing herein contained
shall relieve Tenant and any Guarantor from its covenants and obligations for
the demised term. Tenant agrees to reimburse Landlord for Landlord's reasonable
outside attorneys' fees incurred in conjunction with the processing and
documentation of any such requested transfer, assignment, subletting, licensing
or concession agreement, change of ownership, mortgage or hypothecation of this
Lease or Tenant's interest in and to the Premises. If Landlord consents to any
assignment or sublease pursuant to this Article, Tenant shall pay Landlord, as
Additional Rent:
(a) in the case of each and every assignment, an amount equal to
all monies, property, and other consideration of every kind whatsoever
paid or payable to Tenant by the assignee for such assignment and for
all property of Tenant transferred to the assignee as part of the
transaction (including, but not limited to, fixtures, other leasehold
improvements, furniture, equipment, and furnishings); and
(b) in the case of each and every sublease, all rent, and/or other
monies, property, and consideration of every kind whatsoever paid or
payable to Tenant by the subtenant under the sublease, less all fixed
rent and Additional Rent under this Lease accruing during the term of
the sublease in respect of the subleased space (as reasonably
determined by Landlord, taking into account the useable area of the
premises demised under the sublease).
B. Each transfer, assignment, subletting, license, concession agreement,
mortgage and hypothecation to which there has been consent shall be by an
instrument in writing in form satisfactory to Landlord, and shall be executed by
the transferor, assignor, sublessor, licensor, concessionaire, hypothecator or
mortgagor and the transferee, assignee, sublessee, licensee, concessionaire or
mortgagee in each instance, as the case may be; and each transferee, assignee,
sublessee, licensee, concessionaire or mortgagee shall agree in writing for the
benefit of Landlord herein to assume, to be bound by, and to perform the terms,
covenants and conditions of this Lease to be done, kept and performed by Tenant,
including the payment of all amounts due or to become due under this Lease
directly to Landlord. One (1) executed copy of such written instrument shall be
delivered to Landlord. Failure to first obtain in writing Landlord's consent or
failure to comply with the provisions of this Article shall operate to prevent
any such transfer, assignment, subletting, license, concession agreement,
mortgage, or hypothecation from becoming effective.
C. Notwithstanding anything to the contrary herein Tenant may, without
Landlord's consent and without application of any of the provisions of Section
19.1.A. hereinabove, assign the Lease or sublet the Premises to an affiliate,
subsidiary, parent company or sucessor in interest to the entire corporation
business and assets of Tenant; provided that, in no event shall any such tansfer
relieve Tenant- of liability hereunder. [If Tenant hereunder is a corporation
which, under the then current laws of the State of California, is not deemed a]
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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[public corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of
twenty-five percent (25%) shall be deemed an assignment within the meaning and
provisions of this Section 19.1.]
D. Landlord's rights to assign this Lease are and shall remain unqualified.
Upon any sale of the Premises and provided the purchaser assumes all obligations
under this Lease, Landlord shall thereupon be entirely released of all
obligations of Landlord hereunder and shall not be subject to any liability
resulting from any act or omission or event occurring after such sale.
E. The consent of Landlord to any transfer, assignment, sublease, license
or concession agreement, change in ownership, mortgage or hypothecation of this
Lease is not and shall not operate as a consent to any future or further
transfer, assignment, sublease, license or concession agreement, change in
ownership, mortgage or hypothecation, and Landlord specifically reserves the
right to refuse to grant any such consents except as otherwise provided in this
Section 19.1.
ARTICLE 20 - SUBORDINATION AND MORTGAGES
Section 20.1. In the event Landlord's title or leasehold interest is now or
hereafter encumbered by a deed of trust, upon the interest of Landlord in the
land and buildings in which the Premises are located, to secure a loan from a
lender (hereinafter referred to as "Lender") to Landlord, Tenant shall, at the
request of Landlord or Lender, execute in writing an agreement subordinating its
rights under this Lease to the lien of such deed of trust, or, if so requested,
agreeing that the lien of Lender's deed of trust shall be or remain subject and
subordinate to the rights of Tenant under this Lease. Tenant hereby irrevocably
appoints Landlord the attorney in fact of Tenant to execute, deliver and record
any such instrument or instruments for and in the name and on behalf of Tenant.
Notwithstanding any such subordination, Tenant's possession under this Lease
shall not be disturbed if Tenant is not in default and so long as Tenant shall
pay all rent and observe and perform all of the provisions set forth in this
Lease. Tenant agrees to send to any mortgagees and/or deed of trust holders, by
registered mail, a copy of any notice of default served by Tenant upon the
Landlord, provided that prior to such notice, Tenant has been notified, in
writing (by way of notice of assignment of rents or otherwise), of the addresses
of such mortgagees and/or deed of trust holders. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, any such mortgagees and/or deed of trust holders shall have an
additional thirty (30) days within which to cure such default, or if such
default is not reasonably susceptible of cure within that time, then such
additional time as may be reasonably necessary if within such thirty (30) days
any mortgagee and/or deed of trust holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings), in which event this Lease shall not
be terminated when such remedies are being diligently pursued.
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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ARTICLE 21 - ENTRY BY LANDLORD
Section 21.1. Landlord reserves, and shall at all reasonable times have,
the right to enter the Premises to inspect them; to perform any services to be
provided by Landlord hereunder; to submit the Premises to prospective
purchasers, mortgagers or tenants; to post notices of nonresponsibility; and to
alter, improve or repair the Premises and any portion of the Complex, all
without abatement of rent; and may erect scaffolding and other necessary
structures in or through the Premises where reasonably required by the character
of the work to be performed; provided, however, that the business of Tenant
shall be interfered with to the least extent that is reasonably practical. For
each of the foregoing purposes, Landlord shall at all times have and retain a
key with which to unlock all of the doors in an emergency in order to obtain
entry to the Premises, and any entry to the Premises obtained by Landlord by any
of said means, or otherwise, shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof. Landlord shall also have the right at any time to change the
arrangement or location of entrances or passageways, doors and doorways, and
corridors, elevators, stairs, toilets or other public parts of the Complex and
to change the name, number or designation by which the Complex is commonly
known, and none of the foregoing shall be deemed an actual or constructive
eviction of Tenant, or shall entitle Tenant to any reduction of rent or other
compensation hereunder.
ARTICLE 22 - BANKRUPTCY AND DEFAULT
Section 22.1. The commencement of a bankruptcy, liquidation, reorganization
or insolvency action or an assignment of or by Tenant for the benefit of
creditors, or any similar action undertaken by Tenant, or the insolvency of
Tenant, shall, at Landlord's option, constitute a breach of this Lease by
Tenant. If the trustee or receiver appointed to serve during a bankruptcy,
liquidation, reorganization, insolvency or similar action elects to reject
Tenant's unexpired Lease, the trustee or receiver shall notify Landlord in
writing of its election within thirty (30) days after an order for relief in a
liquidation action or within thirty (30) days after the commencement of any
action.
Section 22.2. Within thirty (30) days after court approval of the
assumption of this Lease, the trustee or receiver shall cure (or provide
adequate assurance to the reasonable satisfaction of Landlord that the trustee
or receiver shall cure) any and all previous defaults under the unexpired Lease
and shall compensate Landlord for all actual pecuniary loss and shall provide
adequate assurance of future performance under said Lease to the reasonable
satisfaction of Landlord. Adequate assurance of future performance, as used
herein, includes, but shall not be limited to: (i) assurance of source and
payment of rent, and other consideration due under this Lease, (ii) assurance
that the assumption or assignment of this Lease will not breach substantially
any provision, such as radius, location, use or exclusivity provision, in any
agreement relating to the above described Premises.
Section 22.3. Nothing contained in this section shall affect the existing
right of Landlord to refuse to accept an assignment upon commencement of or in
connection with a bankruptcy, liquidation, reorganization or insolvency action
or an assignment of Tenant for the benefit of creditors or other similar act.
Nothing contained in this Lease shall be construed as giving or
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granting or creating an equity in the Premises to Tenant. In no event shall the
leasehold estate under this Lease, or any interest therein, be assigned by
voluntary or involuntary bankruptcy proceeding without the prior written consent
of Landlord. In no event shall this Lease or any rights or privileges hereunder
be an asset of Tenant under any bankruptcy, insolvency or reorganization
proceedings.
Section 22.4. The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a default hereunder by
Tenant upon expiration of the appropriate grace period hereinafter provided.
Tenant shall have a period of ten (10) [five (5)] days from the date of written
notice from Landlord within which to cure any default in the payment of (i)
rental, or adjustment thereto, or (ii) any other monies due hereunder. Tenant
shall have a period of thirty (30) [ten (10)] days from the date of written
notice from Landlord within which to cure any other default under this Lease
provided, however, that if the default is of such a nature that the same can be
rectified or cured by Tenant, but cannot with reasonable diligence be rectified
or cured within said thirty (30) day period, then such default shall be deemed
to be rectified or cured if Tenant within said thirty (30) day period shall have
commenced the rectification and curing thereof and shall continue thereafter to
cause such rectification and curing to proceed diligently to completion. Upon an
uncured default of this Lease by Tenant, Landlord shall have the following
rights and remedies in addition to any other rights or remedies available to
Landlord at law or in equity:
(a) If Tenant breaches any covenants of this Lease or if any event of
default occurs, whether or not Tenant abandons the Premises, this Lease shall
continue in effect until Landlord terminates Tenant's right to possession by
written notice to Tenant, and Tenant shall remain liable to perform all of its
obligations under this Lease and Landlord may enforce all of Landlord's rights
and remedies, including the right to recover rent as it falls due. If Tenant
abandons the Premises or fails to maintain and protect the same as herein
provided, Landlord shall have the right to do all things necessary or
appropriate to maintain, preserve and protect the Premises, including the
installation of guards, and may do all things appropriate to a re- letting of
the Premises, and none of said acts shall be deemed to terminate Tenant's right
of possession, unless Landlord elects to terminate the same by written notice to
Tenant. Tenant agrees to reimburse Landlord on demand for all amounts reasonably
expended by Landlord in maintaining, preserving and protecting the Premises,
together with interest on the amounts expended from time to time at the maximum
legal rate. Landlord shall also have the right to repair, remodel and renovate
the Premises at the expense of Tenant and as deemed necessary by Landlord.
(b) Landlord shall have the right to terminate Tenant's possession of the
Premises, and if Tenant's right to possession of the Premises is terminated by
Landlord by reason of a breach of this Lease by Tenant, or by reason of the
happening of an event of default, or by reason of abandonment of the Premises by
Tenant, Tenant agrees to pay to Landlord on demand (i) all unpaid rent earned at
the time of termination, together with interest on all unpaid installments from
the times they were due to the date of termination at the maximum legal rate;
(ii) the amounts by which the unpaid rent which would have been due and payable
by Tenant since the date of termination exceeds the amount of any rental loss
that Tenant proves could have been avoided, together with interest on said
amounts from the dates they were due at the maximum legal rate; (iii) the worth
at the time of demand of the amount by which the unpaid rent for the balance of
the term of this Lease exceeds the amount of rental loss that
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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Tenant proves may reasonably be avoided, together with interest on such amount
at the maximum legal rate from the date of demand until paid; (iv) all other
amounts due Landlord from Tenant under the terms of this Lease, or necessary to
compensate Landlord for all detriment caused by Tenant's failure to perform its
obligations under this Lease. The right to possession of the Premises by Tenant
should not be deemed terminated until Landlord gives Tenant written notice of
such termination or until Landlord re-lets all or a portion of the Premises. In
the event that Landlord seeks to recover the amount due, Landlord shall be
entitled to recover the amounts specified in paragraphs (a) (1), (a) (2) and (a)
(4) of Section 1951.2 of the Civil Code of California as such section reads at
the date of this Lease, together with interest on said amounts at the maximum
legal rate from the dates they were due, computed as of the date of the award,
together with the worth at the time of the award of the amount by which the
unpaid rent for the balance of the term exceeds the amount of such rental loss
that Tenant proves could reasonably have been avoided. Landlord shall be
required to mitigate damages by making a good faith effort to re-let the
Premises.
(c) No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy herein or by law, provided
that each shall be cumulative and in addition to every other right or remedy
given herein or now hereafter existing at law or in equity or by statute.
(d) The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises.
ARTICLE 23 - ABANDONMENT
Section 23.1. Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or surrender
said Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord.
ARTICLE 24 - DESTRUCTION
Section 24.1. In the event the Premises are destroyed in whole or in part
from any cause, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage
or destruction, or
(b) Terminate this Lease.
If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises, including leasehold
improvements installed by Landlord, to their condition prior to the damage or
destruction. Tenant shall be entitled to a reduction in rent while such repair
is being made in
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the proportion that the area of the Premises rendered untenantable by such
damage bears to the total area of the Premises. If Landlord does not complete
the rebuilding or restoration within two hundred seventy (270) days following
the date of destruction (such period of time to be extended for delays caused by
the fault or neglect of Tenant or because of acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy
weather, inability to obtain materials, supplies or fuels, acts of contractors
or subcontractors, or delay of the contractors or subcontractors due to such
causes or other contingencies beyond the control of Landlord), then Tenant shall
have the right to terminate this Lease by giving written notice to Landlord
within fifteen (15) days after said 270-day period. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.
Section 24.2. Unless this Lease is terminated pursuant to the foregoing
provisions, this Lease shall remain in full force and effect. Tenant hereby
expressly waives the provisions of Section 1932, Subdivision 2 (and) Section
1933, Subdivision 4 of the California Civil Code.
Section 24.3. In the event that the building in which the Premises are
situated is damaged or destroyed to the extent of thirty three and one-third
percent (33-1/3%) or more of the replacement cost thereof, Landlord may elect to
terminate this Lease, whether the Premises be injured or not. In the event the
destruction of the Premises is caused by Tenant, Tenant shall pay the deductible
portion of Landlord's insurance proceeds.
ARTICLE 25 - EMINENT DOMAIN
Section 25.1. If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing, any
compensation specifically awarded Tenant for loss of business, Tenant's personal
property, moving cost or loss of goodwill shall be and remain the property of
Tenant.
Section 25.2. If (i) any action or proceeding is commenced for such taking
of the Premises or any part thereof, or if Landlord is advised in writing by any
entity or body having the right or power of condemnation of its intention to
condemn the Premises or any portion thereof, or (ii) any of the foregoing events
occur with respect to the taking of any space or Common Areas in the Complex not
leased hereby, or if any such spaces or Common Areas be so taken or conveyed in
lieu of such taking, and Landlord shall decide to discontinue the use and
operation of the Complex, or decide to demolish, alter or rebuild the Complex,
then, in any of such events, Landlord shall have the right to terminate this
Lease by giving Tenant written notice thereof within sixty (60) days of the date
of receipt of said written advice, or
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<PAGE> 23
commencement of said action or proceeding, or taking conveyance, which
termination shall take place as of the first to occur of the last day of the
calendar month next following the month in which such notice is given or the
date on which title to the Premises shall vest in the condemnor.
Section 25.3. In the event of such a partial taking or conveyance of the
Premises, if the portion of the Premises taken or conveyed is so substantial
that the Tenant can no longer reasonably conduct its business, Tenant shall have
the right to terminate this Lease within sixty (60) days from the date of such
taking or conveyance, upon written notice to Landlord of its intention so to do,
and upon giving of such notice this Lease shall terminate on the last day of the
calendar month next following the month in which such notice is given, upon
payment by Tenant of the rent from the date of such taking or conveyance to the
date of termination.
Section 25.4. If a portion of the Premises be taken by condemnation or
conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this
Lease as provided herein, this Lease shall continue in full force and effect as
to the part of the Premises not so taken or conveyed, and the rent herein shall
be adjusted as of the date of such taking or conveyance so that thereafter the
rent to be paid by Tenant shall be in the ratio that the area of the portion of
the Premises not so taken or conveyed bears to the total area of the Premises
prior to such taking, and Landlord shall at its own cost and expense make all
necessary repairs or alterations to the Premises so as to constitute the portion
of the Premises not taken a complete architectural unit for the purposes allowed
by this Lease, but such work shall not exceed the scope of the work to be done
by Landlord in originally constructing the Premises as of the commencement of
the Lease.
Section 25.5. Each party waives the provisions of Code of Civil Procedure
Section 1265.130 allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking.
ARTICLE 26 - SALE OR CONVEYANCE BY LANDLORD
Section 26.1. In the event of a sale or conveyance of the Complex or any
interest therein by any owner of the reversion then constituting Landlord, the
transferor shall thereby be released from any further liability upon any of the
terms, covenants or conditions (express or implied) herein contained in favor of
Tenant, and in such event, insofar as such transfer is concerned, Tenant agrees
to look solely to the responsibility of the successor in interest of such
transferor in and to the Complex and this Lease. This Lease shall not be
affected by any such sale or conveyance, and Tenant agrees to attorn to the
successor in interest of such transferor.
ARTICLE 27 - ATTORNMENT TO LENDER OR THIRD PARTY
Section 27.1. In the event the interest of Landlord in the land and
buildings in which the Premises are located (whether such interest of Landlord
is a fee title interest or a leasehold interest) is encumbered by deed of trust,
and such interest is acquired by the lender or any third party through judicial
foreclosure, by deed in lieu of foreclosure, or by exercise of a power of sale
at private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at
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<PAGE> 24
any such foreclosure sale and to recognize such purchaser as the Landlord under
this Lease. In the event the lien of the deed of trust securing the loan from a
Lender to Landlord is prior and paramount to the Lease, this Lease shall
nonetheless continue in full force and effect for the remainder of the unexpired
term hereof, at the same rental herein reserved and upon all the other terms,
conditions and covenants herein contained.
ARTICLE 28 - HOLDING OVER
Section 28.1. Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred ten percent (110%) [two hundred percent (200%)]
of the monthly Basic Rent required during the last month of the Lease term.
ARTICLE 29 - CERTIFICATE OF ESTOPPEL
Section 29.1. Tenant shall at any time upon not less than ten (10) days'
prior written notice to Landlord execute, acknowledge and deliver to Landlord
or, at Landlord's request, Landlord's mortgagee, a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent and other charges are paid in advance, if any, (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, or specifying such defaults, if any, are claimed, and (iii)
ratifying and certifying any such other matters as may reasonably be requested.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises. Tenant's failure to deliver such statement
within such time shall be conclusive upon Tenant that this Lease is in full
force and effect, without modification except as may be represented by Landlord;
that there are no uncured defaults in Landlord's performance, and that not more
than one month's rent has been paid in advance.
ARTICLE 30 - CONSTRUCTION CHANGES
Section 30.1. It is understood that the description of the Premises and the
location of ductwork, plumbing and other facilities therein are subject to such
minor changes as Landlord or Landlord's architect determines to be desirable in
the course of construction of the Premises, and no such changes, or any changes
in plans for any other portions of the Complex, shall affect this Lease or
entitle Tenant to any reduction of rent hereunder or result in any liability of
Landlord to Tenant. Landlord does not guarantee the accuracy of any drawings
supplied to Tenant and verification of the accuracy of such drawings rests with
Tenant.
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 25
ARTICLE 31 - RIGHT OF LANDLORD TO PERFORM
Section 31.1. All terms, covenants and conditions of this Lease to be
performed or observed by Tenant shall be performed or observed by Tenant at
Tenant's sole cost and expense and without any reduction of rent. If Tenant
shall fail to pay any sum of money, or other rent, required to be paid by it
hereunder or shall fail to perform any other term or covenant hereunder on its
part to be performed, and such failure shall continue for five (5) days after
written notice thereof by Landlord, Landlord, without waiving or releasing
Tenant from any obligation of Tenant hereunder, may, but shall not be obligated
to, make any such payment or perform any such other term or covenant on Tenant's
part to be performed. All sums so paid by Landlord and all necessary costs of
such performance by Landlord together with interest thereon at the maximum legal
rate from the date of such payment or performance by Landlord, shall be paid
(and Tenant covenants to make such payment) to Landlord on demand by Landlord,
and Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of nonpayment by Tenant as in the case
of failure by Tenant in the payment of Basic Rent hereunder.
ARTICLE 32 - ATTORNEYS' FEES
Section 32.1. In the event that Landlord should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against Tenant hereunder, then all costs and expenses, including reasonable
attorneys' fees, incurred by the prevailing party therein shall be paid by the
other party, which obligation on the part of the other party shall be deemed to
have accrued on the date of the commencement of such action and shall be
enforceable whether or not the action is prosecuted to judgment.
Section 32.2. Should Landlord be named as a defendant in any suit brought
against Tenant in connection with or arising out of Tenant's occupancy
hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such
suit, including reasonable attorneys' fees.
ARTICLE 33 - WAIVER
Section 33.1. The waiver by either party of the other party's failure to
perform or observe any term, covenant or condition herein contained to be
performed or observed by such waiving party shall not be deemed to be a waiver
of such term, covenant or condition or of any subsequent failure of the party
failing to perform or observe the same or any other such term, covenant or
condition therein contained, and no custom or practice which may develop between
the parties hereto during the term hereof shall be deemed a waiver of, or in any
way affect, the right of either party to insist upon performance and observance
by the other party in strict accordance with the terms hereof.
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<PAGE> 26
ARTICLE 34 - NOTICES
Section 34.1. All notices, demands, requests, advices or designations which
may be or are required to be given by either party to the other hereunder shall
be in writing and shall be sent by United States certified or registered mail,
postage prepaid, addressed as follows:
To Tenant at 1000 Marsh Road, Menlo Park, California 94025, with a copy to:
(1) Siebel Systems, Inc., 4005 Bohannon Drive, Menlo Park, California 94025,
Attn: C.F.O.; and (2) Siebel Systems, Inc., 4005 Bohannon Drive, Menlo park,
California 94025, Attn: Vice President, Legal Affairs. [or shall be sufficiently
given, made or delivered if personally served on Tenant by leaving the same at
the Premises or if sent by United States certified or registered mail, postage
prepaid, addressed to Tenant at the Premises;]
To Landlord at its offices at 60 Hillsdale Mall, San Mateo, California
94403-3497.
Section 34.2. Each notice, request, demand, advice or designation referred
to in this Article shall be deemed received on the date of the personal service
or mailing thereof in the manner herein provided, as the case may be.
ARTICLE 35 - EXAMINATION OF LEASE
Section 35.1. Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for a Lease, and this
instrument is not effective as a Lease or otherwise until its execution and
delivery by both Landlord and Tenant.
ARTICLE 36 - DEFAULT BY LANDLORD
Section 36.1. Landlord shall not be in default unless Landlord fails to
perform obligations required of Landlord within a reasonable time, but in no
event earlier than thirty (30) days after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than thirty (30) days are required for performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.
ARTICLE 37 - CORPORATE AUTHORITY
Section 37.1. If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnerhsip)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 27
execution of this Lease, deliver to Landlord a certified copy of the resolution
of the Board of Directors of said corporation authorizing or ratifying the
execution of this Lease.
ARTICLE 38 - LIMITATION OF LIABILITY
Section 38.1. In consideration of the benefits accruing hereunder, Tenant
and all successors and assigns covenant and agree that, in the event of any
actual or alleged failure, breach or default hereunder by Landlord: (i) the sole
and exclusive remedy shall be against Landlord and Landlord's assets; (ii) no
partner of Landlord shall be sued or named as a party in any suit or action
(except as may be necessary to secure jurisdiction of the partnership); (iii) no
service of process shall be made against any partner of Landlord (except as may
be necessary to secure jurisdiction of the partnership); (iv) no partner of
Landlord shall be required to answer or otherwise plead to any service of
process; (v) no judgment will be taken against any partner of Landlord; (vi) any
judgment taken against any partner of Landlord may be vacated and set aside at
any time without hearing; (vii) no writ of execution will ever be levied against
the assets of any partner of Landlord; (viii) these covenants and agreements are
enforceable both by Landlord and also by any partner of Landlord; and (ix) the
term "Landlord", as used in this section, shall mean only the owner or owners
from time to time of the fee title or the tenant's interest under a ground lease
of the land described in Exhibit "B", and in the event of any transfer of such
title or interest, Landlord herein named (and in case of any subsequent
transfers the then grantor) shall be relieved from and after the date of such
transfer of all liability as respects Landlord's obligations thereafter to be
performed, provided that any funds in the hands of Landlord or the then grantor
at the time of such transfer, in which Tenant has an interest, shall be
delivered to the grantee. Similarly, the obligations contained in this Lease to
be performed by Landlord shall be binding on Landlord's successors and assigns
only during their respective periods of ownership. Tenant agrees that each of
the foregoing covenants and agreements shall be applicable to any covenant or
agreement either expressly contained in this Lease or imposed by statute or at
common law.
ARTICLE 39 - MISCELLANEOUS AND GENERAL PROVISIONS
Section 39.1. Tenant shall not, without the written consent of Landlord,
use the name of the building for any purpose other than as the address of the
business conducted by Tenant in the Premises.
Section 39.2. This Lease shall in all respects be governed by and construed
in accordance with the laws of California. If any provision of this Lease shall
be invalid, unenforceable or ineffective for any reason whatsoever, all other
provisions hereof shall be and remain in full force and effect.
Section 39.3. The term "Premises" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The term
"Landlord" or any pronoun used in place thereof includes the plural as well as
the singular and the successors and assigns of Landlord. The term "Tenant" or
any pronoun used in place thereof includes the plural as well as the singular
and individuals, firms, associations, partnerships and corporations, and their
and each of their respective heirs, executors, administrators,
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<PAGE> 28
successors and permitted assigns, according to the context hereof, and the
provisions of this Lease shall inure to the benefit of and bind such heirs,
executors, administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than one Tenant, the
obligations of Tenant hereunder are joint and several. The Article headings of
this Lease are for convenience of reference only and shall have no effect upon
the construction or interpretation of any provision hereof.
Section 39.4. Time is and shall be of the essence of this Lease and all of
the terms, provisions, covenants and conditions hereof.
Section 39.5. At the expiration or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days
after written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in the
State of California, to remove the cloud or encumbrance created by this Lease
from the real property of which Tenant's Premises are a part.
Section 39.6. This instrument along with any exhibits and attachments
hereto constitutes the entire agreement between Landlord and Tenant relative to
the Premises and this agreement and the exhibits and attachments may be altered,
amended or revoked only by an instrument in writing signed by both Landlord and
Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral
agreements between and among themselves and their agents or representatives
relative to the leasing of the Premises are merged in or revoked by this
agreement.
Section 39.7. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.
Section 39.8. Tenant further agrees to execute any amendments required by a
Lender to enable Landlord to obtain financing, so long as Tenant's rights
hereunder are not substantially affected.
Section 39.9. Tenant covenants and agrees that no diminution or shutting
off of light, air or view by any structure which may be hereafter erected
(whether or not by Landlord) shall in any way affect this Lease, entitle Tenant
to any reduction of rent hereunder or result in any liability of Landlord to
Tenant.
Section 39.10. Security Deposit. [Concurrently with Tenant's execution of
this Lease, Tenant shall deposit with Landlord the sum of Seven Thousand Dollars
($7,000.00). Said sum shall be held by Landlord as a Security Deposit for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to, the provisions relating to the payment of rent and any of the monetary sums
due herewith, Landlord may (but shall not be required to) use, apply or retain
all or any part of this Security Deposit for the payment of any other amount
which Landlord may spend by reason of Tenant's default or to compensate Landlord
for any other loss or damage which Landlord may]
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 29
[suffer by reason of Tenant's default. If any portion of said Security
Deposit is so used or applied, Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in the amount sufficient to restore
the Security Deposit to its original amount. Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Security Deposit. If Tenant fully and faithfully
performs every provision of this Lease to be performed by it, the Security
Deposit or any balance thereof shall be returned to Tenant (or at Landlord's
option, to the last assignee of Tenant's interest hereunder) at the expiration
of the Lease term and after Tenant has vacated the Premises. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer said
Security Deposit to Landlord's successor in interest whereupon Tenant agrees to
release Landlord from liability for the return of such Security Deposit or the
accounting therefor.]
Section 39.11. Notwithstanding anything to the contrary herein, unless
another standard is specifically set forth herein, all consents required by
either Landlord or Tenant hereunder shall not be unreasonably withheld or
delayed.
ARTICLE 40 - BROKERS
Section 40.1. Tenant warrants that it had dealings with only the following
real estate brokers or agents in connection with the negotiation of this Lease:
Cornish & Carey and that it knows of no other real estate broker or agent who
is entitled to a commission in connection with this Lease.
ARTICLE 41 - SIGNS
Section 41.1. No sign, placard, picture, advertisement, name or notice
shall be inscribed, displayed or printed or affixed on or to any part of the
outside of the Premises or any exterior windows of the Premises without the
written consent of Landlord first had and obtained and Landlord shall have the
right to remove any such sign, placard, picture, advertisement, name or notice
without notice to and at the expense of Tenant. If Tenant is allowed to print or
affix or in any way place a sign in, on or about the Premises, upon expiration
or sooner termination of this Lease, Tenant at Tenant's sole cost and expense
shall both remove such sign and repair all damage in such a manner as to restore
all aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
Language indicated as being shown by strike-out in the typeset document
is enclosed in brackets "[" and "]" in the electronic format.
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<PAGE> 30
Section 41.2. All approved signs or lettering on outside doors shall be
printed, painted, affixed or inscribed at the expense of Tenant by a person
approved of by Landlord. Tenant shall not place anything or allow anything to be
placed near the glass of any window, door, partition or wall which may appear
unsightly from outside the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year first above written.
TENANT: LANDLORD:
SIEBEL SYSTEMS, INC. BOHANNON TRUST PARTNERSHIP
a California corporation a California general partnship
By:
---------------------------
President
By: By:
--------------------------- ---------------------------
Secretary Frances E. Nelson
Managing Parnter
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<PAGE> 31
[SIEBEL letterhead]
December 13, 1995 BY FAX (415) 573-5457
Dave Bohannon
Vice President
Bohannon Trust Partnership
60 Hillsdale Mall
San Mateo, CA 04403-3497
Re: Lease Agreement (the "Lease") between Bohannon Trust Partnership
("Landlord") and Siebel Systems, Inc ("Tenant") for the Building located at 1000
Marsh Road (the "Premises").
Dear Dave,
This letter will serve to modify the Lease as follows:
1. Tenant Exceptions: In accordance with Section 8.1 of the Lease, Tenant
hereby states the following exceptions to the Premises "being in good and
sanitary order, condition and repair."
1.1 Upstairs Bathrooms and Related Plumbing: Tenant is aware of a some
leakage and an odor related problem with the upstairs bathroom and related
plumbing. Landlord agrees to have its janitorial service for the Premises
resolve any leakage and related odor problems.
1.2 Mechanical and Electrical Equipment and Systems (e.g., HVAC): Tenant is
not familiar with or aware of the condition of the mechanical and
electrical equipment and systems on the Premises, and therefore must rely
on Landlord's representation that such equipment and systems are in good
working order as of the commencement date of the Lease. Landlord and Tenant
agree that: (1) Tenant shall be responsible for routine maintenance for
such equipment and systems (not to exceed $200/month), and (2) Landlord
shall be responsible for all other repair and maintenance of such equipment
and systems provided: (i) such expenses do not exceed $7,500 during the
initial 6 month term of the Lease, and (ii) such other repair or
maintenance is not caused by the Tenant's acts or omissions, excepting
normal wear and tear. In the event the costs for such repairs or
maintenance exceed $7,500 and the Landlord fails or declines to pay for any
further needed repairs or maintenance, Tenant shall have the option to
immediately terminate this Lease upon written notice to Landlord.
1.3 Painting of Upstairs: Tenant is aware that the upstairs area of the
Premises is in need of fresh application of paint. Landlord agrees to
paint the upstairs area prior to Tenant's occupancy.
2. Tenant Pre-Move Work: Attached for Landlord's approval in accordance with
Section 3.2, is a listing of the work which Tenant proposes to perform
prior to occupancy. Landlord's signature below will be deemed approval for
Tenant to proceed with such work upon the execution of the Lease.
3. Tenant Insurance: Section 13.1 is hereby modified such that Tenant shall
only be required to maintain property insurance with limits of
$1,000,000/occurrence and $2,000,000 aggregate.
4. Utilities: Section 11.3 is hereby modified so that Landlord shall furnish
to the Premises 24 hours/day, 7 days/week reasonable quantities of
water, gas, electricity, heat, and air conditioning suitable for the
comfortable use and occupation of the Premises as general office space.
<PAGE> 32
Dave Bohannon
Page 2 of Letter Dated December 13,1995
Lease Agreement for 1000 Marsh Road
5. Sprinkler System To Be Monitored: Landlord agrees that the existing
sprinkler system in the Premises is in good working order and that it will be
monitored by local fire authorities.
6. ATM and Surrounding Area: Landlord agrees that it will be responsible for
the ATM for the operation of the existing ATM and will ensure that the
surrounding area is maintained in a clean condition, free of debris.
7. Cooking in the Premises: Landlord agrees that the Tenant shall be permitted
to use the existing cooking facilities in the Premises and to install and use
one or two microwave ovens to heat and prepare food items.
Sincerely,
Kevin A Johnson
Vice President, Legal Affairs
Agreed and Accepted:
Bohannon Trust Partnership
By: _____________________
Title: _____________________
Date: ______________________
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.6
Siebel Systems and Andersen Consulting
Strategic Business Alliance
Master Alliance Agreement
<PAGE> 2
SIEBEL SYSTEMS, INC. AND ANDERSEN CONSULTING LLP
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement is entered into as of March 17, 1995 by
and between Siebel Systems, Inc., a California corporation ("Siebel") and
Andersen Consulting LLP, an Illinois partnership ("Andersen") on behalf of and
for the benefit of all entities throughout the world comprising the Andersen
Consulting worldwide organization (as defined below).
WHEREAS, Siebel is a software company with the objective of becoming
the global market leader in the Sales Force Automation market;
WHEREAS, Andersen Consulting is a leading business integration services
provider with the objective of becoming the global market leader in the Sales
Effectiveness professional services market;
WHEREAS, the parties as of March 17, 1995 entered into a Series B
Preferred Stock Purchase Agreement by which Andersen has acquired a minority
interest in Siebel with the intent of creating a unique and preferential
relationship between the parties, including a seat on the Siebel Board of
Directors; and
WHEREAS, the parties also wish to set forth the terms on which they
will work together in a partnership spirit to further their mutual benefit and
create a framework and structure for that cooperation related to Siebel's
application software products, (the "Siebel Product(s)").
NOW, THEREFORE, the parties, in consideration of the mutual promises
made herein, agree as follows:
1. ALLIANCE GOALS
The parties anticipate working together in a number of ways pursuant to
this Agreement with the objective of working together in a win/win relationship
to maximize the potential revenues and profitability of each party in its
respective areas without constraining each other's business. Each party intends
to be a leader in its respective market.
2. ALLIANCE SCOPE
(a) This alliance is broad and covers joint activities in marketing and
selling, Andersen's use of Siebel products, technology transfer, cooperative
development of products and solutions, cooperative development and marketing of
training, and Andersen's incorporation of Siebel Products in various
enterprises and business process management organizations/initiatives.
2
<PAGE> 3
CONFIDENTIAL TREATMENT REQUESTED
(b) This Agreement is intended to be worldwide in scope. All the rights and
benefits of this Agreement inure to the benefit of any entity comprising the
Andersen Consulting worldwide organization (i.e., any Andersen Consulting
entity having a Member Firm Interfirm Agreement with Andersen Worldwide or any
other entity controlling, controlled by or under common control with such an
entity or a partner of Andersen Worldwide). This Agreement is the overall
framework for this alliance. However in some cases, specific implementation of
this relationship in countries other than the US will need to be reflected in
local country addendum added to this Agreement from time to time, executed by
the Andersen Consulting entity in the country and an entity representing
Siebel; the intent is that such addendum will not modify the terms of this
Agreement except to the extent agreed by the parties as necessary to reflect
local business conditions and legal requirements. [***]
(c) This Agreement is non-exclusive in nature. However, the intent is that
both parties will focus their efforts to build a significant and profitable
relationship beneficial to both parties. Each party will use commercially
reasonable efforts to raise the visibility of the other's products and services
within its organization.
(d) This Agreement and the relationship formalized under it are intended to
be implemented in a strong spirit of partnership between the parties. The
foregoing notwithstanding, nothing in this Agreement is intended to or shall be
deemed to create a partnership or joint venture of any kind or for any purpose.
The parties shall be and remain independent contractors at all times. Neither
party shall have any authority to, or shall attempt to, bind or commit the
other party for any purpose. Neither party shall make any representations or
warranties concerning the products or services of the other that are
inconsistent with those made by the other party in its then current published
materials.
(e) In general terms, Andersen and Siebel will cooperate to identify and
close business opportunities where Andersen will be the provider of Siebel
related professional services including sales force reengineering, change
management, system integration, configuration, installation, project management
and usage training, and where Siebel will be the provider of the application
software and related application software maintenance, support services and
user training. Upon closure of jointly marketed opportunities, Andersen
contracts directly with the customer for the professional services and Siebel
contracts directly for the application software license and application
software maintenance.
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CONFIDENTIAL TREATMENT REQUESTED
(f) The objective of the Siebel and Andersen partnership is to create a
win/win environment which is characterized as helping both companies maximize
their growth and their respective global market leadership position. [***] As
such, Siebel serves as the provider of the Sales Force Automation application
software. Andersen serves as the provider of Siebel-related professional
services including sales force re-engineering, change management, system
integration, configuration, installation, and training.
(g) The goal of the Siebel and Andersen partnership is to maximize the
potential revenues and profits of both companies without constraining either
party's business. As part of this win/win approach to the partnership, Andersen
will promote the Siebel Sales Enterprise as Andersen's preferred solution for
Sales Force Automation, and Siebel will promote Andersen as Siebel's preferred
system integrator for the Siebel Sales Enterprise. The structure of this
business alliance is quite broad including joint marketing and selling
activities, an Andersen internal use agreement, joint product development and
product specification, and the cooperative development of industry specific
and application specific Siebel application templates.
(h) Whenever possible, Siebel and Andersen will team to jointly win
opportunities. However, in some cases customers will want to purchase Siebel
software without Andersen services, and in other cases, customers will want to
use Andersen's Sales Effectiveness services without using Siebel software. Both
Siebel and Andersen will endeavor to win business regardless of whether both
parties are able to team. Accordingly, neither party will constrain the others'
business opportunity; instead, through effective partnership, each party will
make the other party as successful as possible.
(i) Andersen and Siebel will conduct business with one another on a
preferred basis.
[***]
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Both organizations shall expect:
-- joint advertising
-- jointly developed brochures and other collateral
-- joint marketing and sales plans.
(j) Even though the intent of the parties is to work together to
accomplish stated alliance goals, it is understood there may be particular
prospects who will not wish to use the products or services of either party,
and in such cases, the parties will still work together as appropriate to
facilitate the opportunity for the one party as long as it makes good business
sense for each party (particularly taking into account whether a competitor is
involved).
3. BASIC UNDERSTANDINGS
(a) Joint Marketing and Sales -- The parties shall cooperate in joint
marketing and sales activities.
(1) Andersen will promote the Siebel Products as Andersen's preferred
solution for Sales Force Automation. Siebel will promote Andersen Consulting as
Siebel's preferred systems integrator for the Siebel Products.
(2) The parties will report performance no less than semi-annually
against the alliance goals to be defined from time to time. Additionally,
progress on the activities and objectives outlined in this partnership will be
reported no less than quarterly.
(3) In the absence of agreement to the contrary, each party shall bear
its own costs and expenses in performing joint sales and marketing activities.
(4) In those sales situations targeting specific major accounts or
defined groups of accounts the parties will execute a teaming agreement in the
form attached to this Agreement, described below in Section 7.
(5) Each party remains free to decline to pursue a specific
opportunity in its discretion and, (subject to Section 7(c) below) may work
with another product or services provider.
(6) Siebel and Andersen will establish a joint selling model to more
effectively coordinate joint selling activities. The details of the selling
model will be developed and documented on an annual basis in an annual
Siebel/Andersen Sales Plan.
(7) Joint Marketing Activities
(a) Siebel and Andersen joint marketing will focus on the
generation and closure of high-quality opportunities and a high level of
awareness for the Siebel solution and Andersen Sales Effectiveness practice.
The primary activities for achieving these goals are jointly-targeted key
account calls, executive sales automation briefings, key industry events,
advertising, press and analyst coverage, market specific demos and collateral.
Siebel and Andersen will agree to jointly staff and fund these activities on a
case-by-case basis.
(b) The following is a list of initial joint marketing activities
in which Andersen and Siebel are currently engaged or are investigating
participation. It is the clear mutual intent of each party to extend and
expand these activities.
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(i) Executive Briefings: Siebel and Andersen, in conjunction
with Microsoft have presented a series of nationwide executive briefings on
sales information systems. Executive briefings were held in 14 major cities in
the second quarter of 1995. Executive briefings were also held at the four 1995
DCI Field and Sales Force Automation conferences. Siebel and Andersen will use
the current executive briefing series as a basis for an on-going series of
seminars. It is anticipated that these executive briefings will be a key source
of highly-qualified prospects.
(ii) Key Industry Events: Siebel and Andersen will investigate
joint participation in key industry events such as the four 1996 DCI Field and
Sales Force Automation conferences. Joint marketing activities for these shows
include pre-show booth preparation, mailing, and advertising; show exhibit and
executive seminars; and post-show follow-up mailing and call backs.
(iii) Advertising: Siebel and Andersen will investigate joint
advertising in trade publications such as Oracle Magazine, DCI Show Guides,
Power Selling Magazine, and Sales and Marketing Management Magazine.
(iv) Press and Analyst Coverage: Siebel and Andersen will
jointly target editorial coverage in client/server software magazines and
through SFA client/server industry analysts including Gartner Group, Creative
Strategies, Dataquest, Meta Group and Sentry Market Research.
(v) Collateral: Siebel and Andersen will create joint collateral
materials including brochures and white papers. Andersen will explore
performing a study which will be the basis for a white paper on the
productivity improvements and benefits resulting from Sales Force Automation.
(vi) Delphi Study: Andersen and Siebel agree to investigate
joint sponsorship of a "Delphi Study" on the Sales Force Automation intentions
and requirements of major corporations. The parties expect that this study will
be self-funded by engagement clients.
(8) Neither party commits to the other any specific results of the
joint or separate marketing activities under this Agreement. However, each
party agrees to focus its best efforts in achieving the alliance goals.
(b) Publicity -- All press releases, publicity, marketing or sales
materials, or other materials developed by or on behalf of either party to
further the purposes of this Agreement that refer to this Agreement or the
relationship between the parties, or otherwise use the name of the other party,
shall be subject to prior review and written approval by the alliance executive
of the other party. There will be classes of materials that will be previously
approved by the parties and therefore do not require additional approval at the
time of use/issuance. Nothing in this Agreement conveys any license or right to
any trademark, service mark, trade name or other name of either party. The
foregoing notwithstanding, either party may include factual descriptions of the
relationship between the parties in oral presentations without consent. Both
parties agree to issue a news release to provide a market update on the
partnership in 1996.
(c) Andersen and Siebel Internal Marketing -- Andersen and Siebel agree to
implement activities to raise the internal visibility of each organization's
products and services. The Siebel/Andersen alliance team will develop
specific plans for internal marketing on an annual basis.
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CONFIDENTIAL TREATMENT REQUESTED
(d) Andersen Use of Siebel Products - In the course of working
together, Andersen will need access to Siebel products for sales and marketing,
customer projects, coordination with the Siebel sales organization and
potentially for internal Andersen uses. Siebel will license the Siebel products
to Andersen under specific software license agreements that will be
incorporated into this agreement.
(1) For the purpose of promoting Siebel Products, coordinating
sales and marketing efforts with Siebel personnel and providing configuration,
training and integration services to current licensees of the Siebel products,
Siebel will provide [***] See Attachment I, Andersen Sales and
Marketing and Services Siebel Software Licensing Agreement for this license.
(2) Andersen shall have the right to demonstrate the Siebel
Products both to customer prospects and internally with and without direct
Siebel participation.
(3) Andersen may choose to provide Siebel Products to its
organization for internal business management. A separate Siebel Product
license will be developed for piloting and rolling out Siebel Product. Pricing
will be in accordance with the following:
(i) Andersen will be able to pilot the Siebel Sales
Enterprise (including all product modules that are included in the general
release of the Siebel Sales Enterprise at the time of the pilot) during
calendar year 1996 at [***]. The pilot period will end no later than
December 31, 1996. At the conclusion of this pilot period, Andersen will have
the option to acquire a perpetual license (for internal Andersen use only) of
a maximum of [***] serial numbered seats of the Siebel Sales Enterprise
Version 2.x for a license fee of [***] payable to Siebel on or before
December 31, 1996.
(ii) Andersen's pilot users and systems personnel will
be trained and supported by Andersen's Sales Force Effectiveness team. During
the pilot period, Andersen may use a maximum of [***] copies of the Siebel Sales
Enterprise. Should the number of copies in use at Andersen exceed [***], the
usage will be considered to be a production use and the [***] license fee
shall be immediately payable to Siebel.
(iii) In the event Andersen exercises the option to
acquire the Siebel Sales Enterprise license, all updates, enhancements, bug
fixes and support that Siebel provides to its other Siebel Sales Enterprise
licensees under Siebel's standard Software Maintenance and Support Services
will be provided to Andersen during the term of this Agreement for an annual
fee of [***] of license fees, payable in advance. The maintenance period shall
begin at the time that Andersen begins production use of Siebel Sales
Enterprise.
(iv) [***].
(4) During the term of this Agreement, in consideration of
Andersen's joint marketing role, Siebel will provide to the Andersen Sales
Force Effectiveness team usage of the Siebel Products for internal usage
without additional charge.
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CONFIDENTIAL TREATMENT REQUESTED
(5) Siebel will provide Andersen access to Siebel Product training
materials for the purposes of business development, configuration center and
project team skills development, and creation of customer specific training
materials. These training materials will be made available for both internal use
and for resale and reuse at the commercial list price then in effect, currently
[***] per set. Access to Siebel Product training materials will be governed by
Attachment II (Intellectual Property Rights and Copyright Provisions) and
Attachment III (Confidentiality).
(6) Siebel also agrees to provide Andersen personnel preferred access
to Siebel product briefings, user group meetings, training sessions and
materials, and product documentation.
(e) Responsibilities -- Each party shall be and remain fully responsible
for its products and services and for all licenses and other arrangements with
users of its products and/or services, including providing warranties,
maintenance and support. Each party shall remain fully responsible for the
activities of its personnel. Each party will indemnify the other and its
officers, partners, employees and affiliates from and against any claim by any
third party arising out of the responsibilities of the indemnifying party
hereunder, provided the indemnified party shall have given prompt notice of the
claim and shall make no settlement of such claim without the express written
consent of the indemnifying party.
(f) Subcontractor Relationships -- [***]
(g) Payment Obligations -- There shall be no payments or obligations to pay
between the parties except as expressly provided in this Agreement. Neither
party shall have any right to share in any revenues derived by the other, nor
shall there be any sharing of revenue of any kind as a result of joint marketing
activities hereunder. Each party shall be fully responsible for its costs or
expenses in performing under this Agreement except as expressly provided to the
contrary in this Agreement.
(h) Intellectual Property Rights and Copyrights -- Throughout the course of
working together on this alliance, there will be many occasions where we will
share proprietary information. Both parties agree to abide by the intellectual
property and copyrights provisions described in Attachment II.
(i) Confidentiality -- Both parties agree to protect each other's
confidential information as described in Attachment III.
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CONFIDENTIAL TREATMENT REQUESTED
(j) Facilities -- Both parties anticipate benefits from being
co-located. Facilities plans will be developed describing the facilities
requirements and cost sharing for Andersen personnel housed in Siebel facilities
and Siebel personnel in Andersen facilities.
4. RELATIONSHIP MANAGEMENT
(a) Each party shall designate an alliance executive to be its
principal representative in connection with performance under this Agreement.
The initial executives are John Rife for Andersen and Thomas Siebel for Siebel.
Both organizations should identify an alliance director responsible for the
ongoing management of the relationship.
(b) [***]
(c) Either party shall have the right to change participants in (a) and
(b) above although in any case a party's representatives shall always have
sufficient seniority and authority for the role, and shall be reasonably
acceptable to the other party.
5. TECHNOLOGY TRANSFER ACTIVITIES
(a) The parties will work together to explore ways in which they might
increase technology transfer processes to their mutual benefit. Specific
technology transfer activities and meetings will be defined from time to time
by the alliance executives and alliance directors, who will report to the Board
periodically on activities and progress in this area.
(b) [***]
(c) [***]
(d) Andersen will from time to time provide access to Andersen
developed software products and configuration templates for Siebel's evaluation
of possible use in future releases of the Siebel Products. Any such use may
only be with the execution of a written agreement granting Siebel the rights to
use the Andersen materials.
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(e) Andersen and Siebel intend to create a "Siebel Software Configuration
Center", staffed by Andersen personnel, on Siebel premises. The staffing
levels, functions and activities of this center will be defined from time to
time by the parties.
(f) It is understood that Siebel remains fully responsible for its
products and assumes full liability to its users and others with respect to
such products.
(g) The activities of the parties with respect to technology transfer
are subject to the Intellectual Property Rights and Confidentiality Provisions
described below in Attachment II and Attachment III, respectively.
6. FACILITIES
It is to the mutual advantage of Siebel and Andersen to have staff co-resident
in a common facility. As such, both parties agree to a cost sharing of direct
and indirect facilities cost. For the existing space leased by Siebel at 4005
Bohannon Drive, Menlo Park, California, Andersen agrees to pay a pro rata share
for all facilities costs including rent, utilities and administration on a
monthly basis. Andersen's share of the costs shall be based upon its relative
space consumption.
Given the increased personnel requirements for both Siebel and Andersen
associated with our increased business activity, it is clear that Siebel's
existing facility is insufficient to meet the needs of both parties.
Accordingly, Siebel and Andersen will jointly forecast space requirements 24
months in advance and then search for the appropriate space. For this next space
leased by Siebel, Andersen agrees to develop a mutually acceptable plan to pay
for a share of all facilities costs based on the projected percentage of space
and related-services used by Andersen employees at the facility.
Andersen is also responsible for the acquisition and support of appropriately
configured computers for Andersen employees at the Siebel facility. Andersen
will retain ownership of these computers. Andersen will provide administrative
support for Andersen personnel assigned to the facility.
7. EXHIBITS AND ATTACHMENTS TO THIS AGREEMENT
(a) The parties expect and intend a flexible and dynamic relationship
pursuant to this Agreement, and recognize that details of the arrangements will
change from time to time.
(b) The following exhibit is incorporated into this Agreement:
Exhibit A -- Teaming Agreement Form
(c) The following attachments describe specific elements of the alliance
and are incorporated into this agreement:
Attachment I - Andersen Sales and Marketing and Services Siebel
Software License Agreement
Attachment II - Intellectual Property Rights and Copyright Provisions
Attachment III - Confidentiality Provisions
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8. TERM AND TERMINATION
(a) The initial term of this Agreement shall be four years. Unless either
party notifies the other at least 90 days prior to expiration of a term of its
intent not to renew, this Agreement shall renew for up to two additional three
year terms on the terms set forth in this Agreement. Modifications to this
Agreement are subject to approval by the Alliance Board and the appropriate
executives in both organizations.
(b) Either party may terminate this Agreement at any time for material
breach by the other of any term of this Agreement, provided it has given the
other party prompt notice of the breach, identifying specifically the breach,
and provided further that the breaching party has not cured the breach within
30 days of its receipt of the notice.
(c) Sections 2(d), 3(e), 3(g), 3(h) and 3(i) shall survive termination of
this Agreement for any purpose, as shall any prime-subcontracts or licenses
granted hereunder (which shall be governed by their own terms).
9. MISCELLANEOUS
(a) Governing law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflict of laws rules.
(b) Notices. Any notice or formal communication required or permitted under
this Agreement shall be in writing and delivered to the parties at the
following addresses:
Andersen Consulting:
John T. Kunzweiler
Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, California 94304
Seibel:
Thomas Seibel
Seibel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
with a copy to
Kevin Johnson
Vice President, Legal
Seibel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
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(c) Nonsolicitation. Neither party shall, during the term of this
Agreement and a period of one year after termination hereof, solicit to hire or
solicit to retain in any form any personnel of the other to which such party
was exposed during the performance of this Agreement, without prior mutual
approval.
(d) Nonassignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by either party without the prior
written consent of the other party, provided that Andersen may assign this
Agreement to any other entity within the Andersen Worldwide organization via
the local country addendum.
(e) Entire agreement. This Agreement, together with the Attachments,
constitutes the entire business agreement between the parties hereto and
supersedes any and all prior agreements, arrangements and/or understandings
between the parties relating to the subject matter hereof. This Agreement shall
not be deemed or construed to be modified or amended except by written
agreement of the parties. In no event shall either party to this Agreement have
any liability to the other for any incidental, consequential, indirect or
punitive loss, damage or expense, even if it has been advised of its possible
existence.
(f) No Waiver. The failure of either party at any time to require
performance by the other of any provision hereof shall in no way constitute a
waiver thereof unless waived in writing. Nor shall the waiver of any breach of
any provision hereof be held to be a waiver of any subsequent breach of such
provision or any other provision.
(g) Force Majeure. Neither party shall be liable for any delays or
failure in performance due to causes beyond its reasonable control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
SIEBEL SYSTEMS, INC. ANDERSEN CONSULTING LLP
BY BY
------------------------------ -----------------------------
TITLE TITLE
-------------------------- --------------------------
SIGNATURE/DATE SIGNATURE/DATE
----------------- -----------------
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SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT I
SIEBEL SOFTWARE LICENSE
<PAGE> 14
ANDERSEN CONSULTING
SALES AND MARKETING AND SERVICES
SIEBEL SALES ENTERPRISE
SOFTWARE LICENSE AND SERVICES AGREEMENT
THIS SOFTWARE LICENSE AND SERVICES AGREEMENT (the "Agreement") is
between SIEBEL SYSTEMS, INC., with its principal place of business at 4005
Bohannon Drive, Menlo Park, CA 94025 ("Siebel"), and Andersen Consulting LLP,
with its principal place of business at 69 West Washington, Chicago, IL 60602
("Customer").
The terms of this Agreement shall apply to each Program License granted
by Siebel under this Agreement. When completed by the parties, the Order Form(s)
to this Agreement shall evidence the Program Licenses granted and the services
to be provided to Customer hereunder.
1. DEFINITIONS
1.1 "PROGRAM" OR "PROGRAMS" shall mean the computer software in object
code form owned or distributed by Siebel for which customer is
granted a Program License pursuant to this Agreement; the media
upon which such software is delivered to Customer; the guides and
manuals for use of such software ("Documentation"); and Updates.
1.2 "DESIGNATED SYSTEM" OR "DESIGNATED SYSTEMS" shall mean the
computer hardware and operating system(s) designated on the Order
Form(s).
1.3 "USER SYSTEM" shall mean the computer hardware and operating
systems operated by Users in the course of their employment with
Customer, including notebook and portable computers.
1.4 "SERVER PROGRAMS" shall mean those portions of the Programs that
reside and operate on the Designated System.
1.5 "USER PROGRAMS" shall mean those portions of the Programs that
reside and operate on User Systems.
1.6 "USER" OR "USERS" shall mean an individual or individuals
authorized by Customer to use specified Programs, regardless of
whether the individual is actively using the Programs at any given
time. The maximum number of Users that may use the User Programs
or access the Server Programs consistent with the terms of Program
Licenses granted herein is specified on the Order Form(s).
1.7 "LIMITED PRODUCTION PROGRAM" shall mean a Program which is not
generally licensed for commercial use by Siebel or which is not
listed in Siebel's generally available marketing literature or
which is designated as a Limited Production Program by Siebel.
1.8 "ANCILLARY PROGRAM" shall mean third party software delivered with
or embedded in the Programs that is necessary for the operation of
the Programs.
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2. PROGRAM LICENSE
2.1 RIGHTS GRANTED.
A. Siebel grants to Customer a nontransferable, nonexclusive
license to use the Programs which the Customer obtains under
this Agreement ("Program License") as follows:
i) To use the User Programs and Server Programs solely in
connection with Customer's consulting activities,
including marketing, training, configuration, limited
internal pilots, and integration, which support
marketing and licensing of the Programs by Siebel to
other third parties, up to the applicable maximum
number of designated Users as set forth in the Order
Form(s);
ii) To use the Documentation provided with the Programs in
support of customer's authorized use of the Programs;
iii) To use the Programs in conjunction with other software
products.
B. Customer agrees not to cause or permit the reverse
engineering, disassembly or decompilation of the Programs.
C. Customer agrees not to use Programs in connection with
Customer's internal information management requirements other
than those activities described in 2.1.A.i above.
D. Siebel shall retain all title, copyright and other
proprietary rights in and to the Programs. Customer does not
acquire any rights, express or implied, in the Programs,
other than those specified in this Agreement. In the event
that Customer makes suggestions to Siebel regarding new
features, functionality or performance enhancements that
Siebel adopts for the Programs, such new features,
functionality or performance shall become the sole and
exclusive property of Siebel.
E. To use a Program, Customer may need to use an Ancillary
Program. The Ancillary Program may be used only in
combination with Programs for the purpose of installing or
operating Programs as described on the Order Form(s) or
Documentation, and for no other purpose. Customer shall have
no right to use Ancillary Programs in connection or
combination with any other software programs.
F. As an accommodation to Customer, Siebel may supply Customer
with preproduction releases of Programs (which may be labeled
"Alpha" or "Beta"). Customer acknowledges that these products
may not be suitable for general use.
G. Siebel hereby represents and warrants that it has the right
to provide the Programs to Customer under this agreement.
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2.2 TRANSFER AND ASSIGNMENT. Customer may transfer a Program within
its organization from the Designated System to another Designated
System, provided Customer maintains a log showing the distribution
of Programs.
2.3 VERIFICATION. At Siebel's written request, not more frequently
than annually, Customer shall furnish Siebel with a certificate
executed by an officer of Customer (a) verifying that the Programs
are being used pursuant to the provisions of this Agreement,
including any User and other limitations; and (b) listing the
locations, types and serial numbers of the Designated Systems on
which the Programs are run.
Siebel may, at its expense and upon thirty (30) days prior written
notice to Customer, audit Customer's use of the Programs. Any such
audit shall be conducted during regular business hours and shall
not unreasonably interfere with Customer's business activities.
Audits shall be conducted no more than once annually.
3. TERM AND TERMINATION.
3.1 TERM. Each Program License granted under this Agreement shall
remain in effect perpetually unless the Program License or this
Agreement is terminated as provided in Section 3.2 or 3.3.
3.2 TERMINATION BY CUSTOMER. Customer may terminate any Program
License at any time by providing written notice to Siebel;
provided, however, that termination hereunder shall not relieve
Customer of its obligations specified in Section 3.4.
3.3 TERMINATION BY SIEBEL. Siebel may terminate this Agreement or any
Program License at any time by providing written notice to
Customer.
3.4 EFFECT OF TERMINATION. Termination of this Agreement or any
license shall not limit either party from pursuing other remedies
available to it including injunctive relief. The parties' rights
and obligations under Sections 2.1.B, 2.1.D, and Sections 4 and 5
shall survive termination of this Agreement.
3.5 HANDLING OF PROGRAMS UPON TERMINATION. If a Program License
granted under this Agreement terminates, Customer shall: (a) cease
using the Programs, and (b) certify to Siebel with ten (10) days
after expiration or termination that Customer has to the best of
their knowledge destroyed or has returned to Siebel the Programs
and all copies. This requirement applies to copies in all forms,
partial and complete, in all types of media and computer memory,
and whether or not modified or merged into other materials.
4. DISCLAIMERS AND LIMITATION OF LIABILITY.
4.1 DISCLAIMERS. Siebel makes no warranty or representation whatsoever
regarding the Programs or Documentation including but not limited
to any express or implied warranty, including any implied
warranties of merchantability or fitness for a particular purpose.
Siebel does not warrant that the Programs will meet Customer's
requirements, that the Programs will operate in the combinations
which Customer may select for use, that the operation of the
Programs will be uninterrupted or error- free, or that all Program
errors will be corrected.
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4.2 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES,
INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS, REVENUE,
DATA OR USE, INCURRED BY EITHER PARTY OF ANY THIRD PARTY, WHETHER
IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
The provisions of this Agreement allocate the risks between Siebel
and Customer. Siebel's pricing reflects this allocation of risk
and the limitation of liability specified herein.
5. GENERAL TERMS
5.1 NONDISCLOSURE. By virtue of this Agreement, the parties may have
access to information that is confidential to one another
("Confidential Information"). Siebel's Confidential Information
shall include but not be limited to the Programs, source code,
algorithms, formulas, methods, know how, processes, designs, new
products, developmental work, marketing requirements, marketing
plans, customer names, prospective customer names, the terms and
pricing under this Agreement, and all information clearly
identified in writing at the time of disclosure as confidential.
A party's Confidential Information shall not include information
that: (a) is or becomes a part of the public domain through no act
or omission of the other party; (b) was in the other party's
lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by
a third party without restriction on disclosure; or (d) is
independently developed by the other party. Customer shall not
disclose the results of any performance tests of the Programs to
any third party without Siebel's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of
five years after termination of this Agreement. The parties agree,
unless required by law, not to make each other's Confidential
Information available in any form to any third party or to use
each other's Confidential Information for any purpose other than
the implementation of this Agreement. Each party agrees to take
all reasonable steps to ensure that Confidential Information is
not disclosed or distributed by its employees or agents in
violation of the terms of this Agreement.
5.2 GOVERNING LAW. This agreement and all matters arising out of or
relating to this Agreement, shall be governed by the laws of the
State of California, excluding its conflict of law provisions.
5.3 JURISDICTION. Any legal action or proceeding relating to this
Agreement shall be instituted in a state court in Santa Clara or
San Mateo County, California, or in a federal court in the
Northern District of California. Siebel and Customer agree to
submit to the jurisdiction of, and agree that venue is proper in
these courts in any such legal action or proceeding.
5
<PAGE> 18
5.4 NOTICES. All notices, including notices of address change,
required to be sent hereunder shall be in writing and shall be
deemed to have been given upon the date sent by confirmed
facsimile or three (3) days following the date such notice was
mailed by first class mail, to the addresses first set forth
above.
To expedite order processing, Customer agrees that Siebel may
treat documents faxed by Customer to Siebel as original documents;
nevertheless, either party may require the other to exchange
original signed documents.
5.5 SEVERABILITY. In the event any provision of this Agreement is held
to be invalid or unenforceable, the remaining provisions of this
Agreement will remain in full force.
5.6 WAIVER. The waiver by either party of any default or breach of
this Agreement shall not constitute a waiver of any other or
subsequent default or breach. Except for actions for nonpayment or
breach of Siebel's proprietary rights in the Programs, no action,
regardless of form, arising out of this Agreement may be brought
be either party more than one year after the cause of action has
occurred.
5.7 EXPORT ADMINISTRATION. Customer agrees to comply fully with all
relevant export laws and regulations of the United States ("Export
Laws") to assure that neither the Programs nor any direct product
thereof are (i) exported, directly or indirectly, in violation of
Export Laws; or (ii) are intended to be used for any purposes
prohibited by the Export Laws, including, without limitation,
nuclear, chemical, or biological weapons proliferation.
5.8 RELATIONSHIP BETWEEN THE PARTIES. Siebel is an independent
contractor; nothing in this Agreement shall be construed to create
a partnership, joint venture or agency relationship between the
parties.
5.9 SUCCESSORS. This Agreement shall inure to the benefit of the
successors and assigns of Siebel and, subject to the restrictions
transfer or assignment herein set forth, shall be binding upon the
Customer and Customer's successors and assigns.
5.10 ENTIRE AGREEMENT. This Agreement, together with the exhibits,
appendices and attachments hereto, constitutes the complete
agreement between the parties and supersedes all prior or
contemporaneous agreements or representations, written or oral,
concerning the subject matter of this Agreement and such exhibits,
appendices and attachments. This Agreement may not be modified or
amended except in writing signed by a duly authorized
representative of each party; no other act, document, usage or
custom shall be deemed to amend or modify this Agreement.
THE EFFECTIVE DATE OF THIS AGREEMENT SHALL BE JANUARY 1, 1995.
EXECUTED BY ANDERSEN CONSULTING LLP EXECUTED BY SIEBEL SYSTEMS, INC.
Signature: Signature:
------------------------ ---------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
---------------------------- -------------------------
6
<PAGE> 19
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 1
SOFTWARE LICENSE AND SERVICES ORDER FORM
Software licenses and services shall be provided by Siebel Systems,
Inc. ("Siebel") to Andersen Consulting LLP ("Customer") pursuant to this Order
Form and the Software License and Services Agreement dated November 3, 1995
("Agreement").
DESIGNATED SYSTEM (SERVER): Hardware: N/A
Operating System: N/A
LOCATION OF DESIGNATED SYSTEM(S): N/A
NUMBER OF AUTHORIZED
DESIGNATED SYSTEMS: N/A
NUMBER OF AUTHORIZED USERS: [***]
USER PROGRAMS LICENSED:
<TABLE>
<CAPTION>
User Programs: Part Number Price per User
-------------- ----------- --------------
<S> <C> <C>
Opportunity Management System W310MSUS001-v1.0 $ [***]
Marketing Encyclopedia W31MESUS001-v1.0 $ [***]
Electronic Document Manager W31EDMUS001-v1.0 $ [***]
Correspondence and Fulfillment W31C&FFUS001-v1.0 $ [***]
Revenue Forecasting W31FORUS001-v1.0 $ [***]
Quote Generation W31QUOUS001-v1.0 $ [***]
Reportwriter with Standard Reports W31REPUS001-v1.0 $ [***]
Field Sale Connectivity W31FSCUS001-v1.0 $ [***]
Total: $ [***]
</TABLE>
The Program License fee per User referenced herein shall only apply to
a maximum of [***] users.
ORDER ACCEPTED AND ACKNOWLEDGED:
--------------------------------- ---------------------------------
ANDERSEN CONSULTING, LLP. SIEBEL SYSTEMS, INC.
DATE: DATE:
---------------------------- ----------------------------
7
<PAGE> 20
SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT II
INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS
1
<PAGE> 21
SIEBEL SYSTEMS, INC. AND ANDERSEN CONSULTING LLP
INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS AGREEMENT
THIS INTELLECTUAL PROPERTY RIGHTS AND COPYRIGHT PROVISIONS AGREEMENT is
entered into by and between SIEBEL SYSTEMS, INC. ("Siebel") and ANDERSEN
CONSULTING LLP ("Andersen"), effective March 17, 1995.
1. DEFINITIONS.
1.1 "WORK PRODUCTS" shall mean all inventions, whether or not
patentable, know-how, original works of authorship, developments, improvements
or trade secrets (including but not limited to, computer software or related
product such as training materials, product documentation, presentations,
marketing collateral, etc.).
1.2 "PROPRIETARY RIGHTS" means all patents, trade secrets,
copyrights and other intellectual property rights.
1.3 "APPLICATION USER TRAINING" shall refer to training
materials incorporated into Siebel's General Release Product.
1.4 "APPLICATION USAGE TRAINING" shall refer to training
materials that are not incorporated into Siebel's General Release Product.
2. OWNERSHIP OF SIEBEL DEVELOPED WORK PRODUCTS. Siebel shall own
all Proprietary Rights in all Work Products developed by Siebel. Such
Siebel-owned Work Products, means all Work Products to which Siebel has
materially contributed to the specification, design, coding, documentation,
quality assurance or support, notwithstanding minor contributions by Andersen.
Andersen hereby assigns all Proprietary Rights in such Siebel-owned Work
Products to Siebel and agrees that such Siebel-owned Work Products may be used
by Andersen only with Siebel's prior written consent. Notwithstanding the
foregoing, Siebel agrees that if any such Siebel-owned Work Products contain
information which is confidential to Andersen, it shall be used by Siebel only
in accordance with the terms of the Nondisclosure Agreement. In general, all
software and related products developed by Siebel personnel are solely owned
and copyrighted by Siebel. In general, any computer software or related product
(training materials, product documentation, presentations, marketing
collateral, etc.) upon which Siebel contributes materially to the
specification, design, coding, documentation, quality assurance or support will
be classified as Siebel-owned work product. Such products may be used by
Andersen only with the permission of Siebel.
3. OWNERSHIP OF ANDERSEN DEVELOPED WORK PRODUCTS. Andersen shall
own all Proprietary Rights in any Work Products developed by Andersen. Such
Andersen-owned Work Products means all Work Products to which Andersen has
materially contributed to the specification, design, coding, documentation,
quality assurance or support, notwithstanding minor contributions by Siebel.
Siebel hereby assigns all Proprietary Rights in such Andersen-owned Work
Products to Andersen and agrees that such Andersen-owned Work Products may be
used by Siebel only with Andersen's prior written consent. Notwithstanding the
foregoing, Andersen agrees that if any such Andersen-owned Work Products
contain information which is confidential to Siebel, it shall be used by
Andersen only in accordance with the terms of the Nondisclosure Agreement. The
Andersen-owned Work Products shall include a copyright notice identifying
Andersen as the owner of the copyright therein.
2
<PAGE> 22
4. OWNERSHIP OF JOINTLY DEVELOPED WORK PRODUCTS. Work Products shall be
deemed to have been jointly developed only when Siebel and Andersen agree in
writing in advance in the form of a Joint Development Agreement, and each party
materially participates in any phase of specification, design, coding,
documentation, quality assurance, or support. The purpose of a Joint
Development Agreement is to consider up front the potential economic and
strategic value of the proposed Work Products, as well as specifically
articulate "material participation" in terms of roles, responsibilities, effort
level, schedule, etc. of each party. A Joint Development Agreement also
addresses ownership rights if different from those identified in this section
of this Agreement. Ownership of jointly-developed Work Products will be
determined by type of Work Products as follows:
4.1 SOFTWARE. All software products, including new modules for
the General Release versions of Siebel software products (any Siebel product
that is or will be generally and commercially available) (the "Base Systems"),
interfaces to other products, and APIs (the "Software Work Product") will be
made available to Siebel for inclusion in the General Release of the Base System
at Siebel's discretion. Andersen hereby assigns to Siebel its Proprietary Rights
in such Software Work Products unless specified otherwise in a Joint Development
Agreement. Siebel shall be solely responsible for support of such Software Work
Product. For Software Work Products not incorporated in the Base System,
Andersen shall have an exclusive, royalty-free, fully-paid, worldwide,
perpetual, irrevocable license to use such Software Work Products and to
distribute such Software Work Products to joint Siebel/Andersen customers of the
Base System, provided that Andersen shall assume all responsibility for support
of such Software Work Products although Andersen is under no obligation to offer
such support to any customer. These distribution rights shall be exclusive of
other third party Siebel system implementors.
4.2 TRAINING MATERIALS. All Application User Training material
shall be owned by Siebel. Siebel agrees that Andersen will be given
royalty-free access to Application User Training material for inclusion in
Andersen developed Application Usage Training material. Royalty payments will
be determined on a case by case basis depending on specific commercial
arrangements for remarketing/reselling of Application Usage Training. Andersen
has the Proprietary Rights to Application Usage Training developed by Andersen.
The Siebel owned Application User Training shall include a copyright notice
identifying Siebel as the owner of the copyright therein. The Andersen owned
Application Usage Training shall include a copyright notice identifying
Andersen as the owner of the copyright therein. All Andersen Application Usage
Training will clearly identify Siebel Application User Training (or the system
documentation incorporated therein) and include appropriate copyright
identification.
4.3 CONFIGURATION TEMPLATES. Specific configurations of the
Base System which are jointly developed by Siebel and Andersen to address a
particular industry, market, or client need, shall be jointly-owned and both
parties agree to use such configuration templates only at joint Siebel/Andersen
customer engagements without obligation to account, unless otherwise documented
in the Joint Development Agreement or the Teaming Agreement. Any jointly-owned
configurations of the Base System shall include a valid copyright notice
identifying both Siebel and Andersen as joint owners of the copyright therein.
3
<PAGE> 23
4.4 OTHER WORK PRODUCTS. Other Work Products that are jointly developed
by Siebel and Andersen, including product demonstrations, presentations and
marketing collateral, will be jointly-owned and may be used without restriction
by either party without obligation to account, subject to each party's
obligations pursuant to the Nondisclosure Agreement. Any jointly-owned Other
Work Products shall include a valid copyright notice identifying both Siebel and
Andersen as joint owners of the copyright therein.
4.5 JOINTLY DEVELOPED COPYRIGHT MARK. Jointly developed documents that
contain proprietary or confidential information should be marked as such. To
facilitate the creation and security of these documents, the following verbiage
should appear on all jointly developed documents:
"This document contains confidential and/or copyrighted material
proprietary to Siebel Systems, Inc. and confidential and/or copyrighted material
proprietary to Andersen Consulting. This document, and the information and ideas
herein, may not be disclosed, copied, reproduced or distributed to anyone
outside Siebel Systems, Inc. and Andersen Consulting without prior written
consent of Siebel Systems and Andersen Consulting. Upon request, the recipient
will promptly return this document without retaining any copies and destroy all
analysis, reports or the other extracts based on the document."
5. PRE-EXISTING ANDERSEN MATERIALS. In the course of the development effort
hereunder, the parties may conclude that pre-existing Andersen proprietary
materials might be appropriate for use in connection with the Siebel Products.
In such cases, agreed by the parties in writing, Andersen will retain its
ownership in such materials and shall be free to continue to use them without
restriction, but will provide a license to Siebel to use or incorporate such
materials with the Siebel Products.
6. GENERAL
6.1 This Agreement may not be transferred or otherwise transferred by
either party, in whole or in part, without the prior written consent of the
other party. No provision of this Agreement may be waived except by a writing by
the party to be charged, nor may this Agreement be amended except by a writing
executed by both parties.
6.2 The foregoing represents the complete and exclusive statement of the
agreement between the parties with respect to the subject matter of this
Agreement and supersedes any and all prior oral or written agreements,
proposals, commitments, understandings, or communications with respect to the
subject matter of this Agreement.
4
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, each by its duly authorized representative, as of the date first
above written.
SIEBEL SYSTEMS, INC. ANDERSEN CONSULTING LLP
Address: 4005 Bohannon Drive Address:
Menlo, Park, CA 94025
By: By:
- ------------------------------- ---------------------------------
(Print Name) (Print Name)
- ------------------------------- ---------------------------------
(Title) (Title)
- ------------------------------- ---------------------------------
(Signature/Date) (Signature/Date)
5
<PAGE> 25
SIEBEL SYSTEMS AND ANDERSEN CONSULTING
STRATEGIC BUSINESS ALLIANCE
ATTACHMENT III
CONFIDENTIALITY
DRAFT 5/6/96
<PAGE> 26
SIEBEL SYSTEMS, INC./ANDERSEN CONSULTING LLP
MUTUAL NON-DISCLOSURE AGREEMENT
This Agreement is made effective as of the 17th day of March, 1995 by and
between Siebel Systems, Inc. ("Siebel") a California corporation, and Andersen
Consulting LLP, ("Andersen") an Illinois partnership, to assure the protection
and preservation of the confidential and/or proprietary nature of information
to be disclosed or made available to each other.
In reliance upon and in consideration of the following undertakings, the
parties agree as follows:
1. Subject to the limitations set forth in Paragraph 2, all information
disclosed to the other party identified or marketed as proprietary or
confidential shall be deemed to be "Proprietary Information" provided however
that the following information or materials shall be deemed to constitute
Proprietary Information without the requirements that a party identify or mark
such information as proprietary or confidential; any trade secret, information,
process, technique, algorithm, computer program (source and object code),
documentation, training materials, design, drawing, formula or test data
relating to any research project, work in process, future development,
engineering, manufacturing, marketing, servicing, financing or personnel matter
relating to the disclosing party, its present or future products, sales,
suppliers, clients, customers, employees, investors or business, whether in
oral, written, graphic or electronic form. Proprietary Information shall also
include all information which either party has received from others and which
it is obligated to treat as confidential. If Proprietary Information is
disclosed in oral form, the disclosing party shall use reasonable efforts to
thereafter summarize it in writing and transmit it to the other party within
thirty (30) days of the oral disclosure.
2. The term "Proprietary Information" shall not be deemed to include
information which: (a) is now, or hereafter becomes, through no act or failure
to act on the part of the receiving party, generally known or available; (b) is
known by the receiving party at the time of receiving such information as
demonstrated by competent evidence; (c) is hereafter furnished to the receiving
party by a third party, as a matter of right and without restriction on
disclosure; (d) is independently developed by the receiving party without any
breach of this Agreement as demonstrated by competent evidence; or (e) is the
subject of a prior written permission to disclose provided by the disclosing
party.
3. Each party agrees to protect and treat the confidentiality of the other
party's Proprietary Information in a manner consistent with how it protects and
treats its own proprietary and confidential information. Each party may use
such Proprietary Information only to the extent required to accomplish the
purposes of the Master Alliance Agreement between the parties. Proprietary
Information shall not be used for any purpose or in any manner that would
constitute a violation of any laws or regulations, including without limitation
the export control laws of the United States. No rights or licenses to
trademarks, inventions, copyrights or patents are implied or granted under this
Agreement.
4. Proprietary Information shall not be reproduced in any form except as
reasonably required to accomplish the intent of the Master Alliance Agreement.
2
<PAGE> 27
5. Each party under this Agreement shall advise its employees who might
have access to Proprietary Information of the other party of the confidential
nature thereof and agrees that its employees shall be bound by the terms of
this Agreement. No Proprietary Information shall be disclosed to any employee
who does not have a need for such information. The receiving party shall not
disclose any Proprietary Information to any third party without the disclosing
party's express, written consent. For the purposes of this Section 5, the term
"employee" shall include, in addition to employees, directors, officers,
consultants and other agents of the receiving party.
6. All Proprietary Information (including all copies thereof) shall remain
the property of the disclosing party and shall be returned to the disclosing
party after the receiving party's need for it has expired of upon request of
the disclosing party, and in any event, upon completion or termination of this
Agreement.
7. Notwithstanding any other provision of this Agreement, disclosure of
Proprietary Information shall not be precluded if such disclosure:
(a) is in response to a valid order of a court or other governmental
body of the United States or any political subdivision thereof; provided,
however, that the responding party shall first have given notice to the other
party hereto to allow such other party to make a reasonable effort to obtain a
protective order requiring that the Proprietary Information so disclosed be
used only for the purposes for which the order was issued;
(b) is otherwise required by law; or
(c) is otherwise necessary to establish rights or enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary.
8. This Agreement shall be coterminous with the term of the Master
Alliance Agreement. The termination of this Agreement shall not relieve either
party of the obligations imposed by Paragraphs 3, 4, 5 and 6 of this Agreement
with respect to Proprietary Information disclosed prior to the effective date
of such termination and the provisions of those Paragraphs shall survive the
termination of this Agreement for a period of five (5) years from the date of
such termination.
9. This Agreement shall govern all confidentiality issues between the
parties and supersedes any prior agreements. Specifically, the terms of this
Agreement will govern all employee access agreements that will be signed by
Andersen personnel and their agents.
Agreed To: Agreed To:
Siebel Systems, Inc. Andersen Consulting LLP
Address: 4005 Bohannon Drive Address:
Menlo Park, CA 94025
By: By:
- ------------------------------------ --------------------------------------
(Print Name) (Print Name)
- ------------------------------------ --------------------------------------
(Title) (Title)
- ------------------------------------ --------------------------------------
3
<PAGE> 28
(Signature/Date) (Signature/Date)
4
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.7
SOFTWARE LICENSE AND SERVICES AGREEMENT
THIS SOFTWARE LICENSE AND SERVICES AGREEMENT (the "Agreement") is
between SIEBEL SYSTEMS, INC., with its principal place of business at 4005
Bohannon Drive, Menlo Park, CA 94025 ("Siebel"), and MONTGOMERY SECURITIES, with
its principal place of business at 600 Montgomery Street, San Francisco, CA
94111 ("Customer").
The terms of this Agreement shall apply to each Program License
granted and to all services provided by Siebel under this Agreement. When
completed by the parties, the Order Form(s) shall evidence the Program Licenses
(as defined in Section 2.1 below) to be provided to Customer hereunder. The
terms and conditions set forth in this Agreement and in any Order Form issued
pursuant hereto shall control in the event that there are different or
additional terms set forth in any other purchase order form submitted by
Customer or acceptance or confirmation form issued by Siebel. The terms and
conditions of any Order Form shall control over any conflicting terms and
conditions contained in the Agreement.
1. DEFINITIONS.
1.1. "ANCILLARY PROGRAM(S)" shall mean the third party software
specified in one or more Order Forms issued pursuant to this
Agreement and which are delivered with or embedded in the Programs
and are necessary for the operation of the Programs.
1.2. "COMMENCEMENT DATE" of each Program License shall mean the date on
which Customer and Siebel enter into an Order Form pursuant to
which Customer purchases Program Licenses for such Program(s).
1.3. "DESIGNATED SYSTEM(S) shall mean the computer hardware and
operating system(s) designated on the Order Form(s).
1.4. "DOCUMENTATION" means Siebel's published guides, manuals and
on-line help for use of the Licensed Software. As of the Effective
Date, such guides and manuals for Siebel Sales Enterprise version
2.x are listed in EXHIBIT C.
1.5. "LIMITED PRODUCTION PROGRAM" shall mean a Program which is not
generally licensed for commercial use by Siebel or which is not
listed in Siebel's generally available marketing literature or
which is designated as a Limited Production Program by Siebel.
1.6. "PROGRAM" OR "PROGRAMS" shall mean the User Programs and the
Server Programs, all as described in one or more Order Forms
issued pursuant to this Agreement; the media upon which such
software is delivered to Customer; Documentation; and Updates.
1.7. "ORDERED PROGRAM(S)" shall mean the User Programs and the Server
Programs, all as described in one or more Order Forms issued
pursuant to this Agreement.
1.8. "SERVER PROGRAM(S)" shall mean those Programs specified in one or
more Order Forms issued pursuant to this Agreement and which
reside and operate on the Designated System.
1.9. "SERVER SYSTEM(S)" shall mean the server hardware and operating
system(s) of Customer and/or its Affiliates designated on the
Order Form(s).
1.10. "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean Program
support provided under Siebel's policies in effect on the date
Software Maintenance and Support Services is ordered, subject to
the payment by Customer of the applicable fees for such support. A
copy of Siebel's current policy for Software Maintenance and
Support Services is attached as EXHIBIT B. Siebel reserves the
right to alter such policies from time to time using reasonable
discretion.
Page 1 of 17
<PAGE> 2
1.11. "UPDATE" shall mean a subsequent release of the Program which is
generally made available for Program Licenses receiving Software
Maintenance and Support Services, at no additional charge other
than media and handling charges. Updates shall not include any
release, option or future product which Siebel licenses separately
or only offers for an additional fee, or any upgrade in features,
functionality or performance of the Programs which Siebel licenses
separately or only offers for an additional fee.
1.12. "USER" or "USERS" shall mean a named individual or individuals
authorized by Customer to use specified Programs, regardless of
whether the individual is actively using the Programs at any given
time. The maximum number of Users that may use the User Programs
or access the Server Programs consistent with the terms of Program
Licenses granted herein is specified in the Order Form(s). "Users"
may include the employees of Customer and the employees of
independent contractors and consultants of Customer provided such
person's access to and use of the Programs is made subject to
non-disclosure agreement which contains provisions which are
consistent with the provisions of Section 9.1.
1.13. "USER PROGRAMS" shall mean those Programs specified in one or more
Order Forms issued pursuant to this Agreement and which reside and
operate on User Systems.
1.14. "USER SYSTEM" shall mean the computer hardware and operating
systems operated by Users in the course of their employment with
Customer, including notebook and portable computers.
1.15. "ORDER FORM" shall mean the document (substantially in the form of
Exhibit A) by which Customer orders Program Licenses and which is
executed by the parties. Each Order Form shall reference the
Effective Date of this Agreement and shall, upon signature by both
parties, be deemed to have been incorporated into to this
Agreement
2. PROGRAM LICENSE.
2.1. RIGHTS GRANTED.
A. Subject to the terms and conditions of this Agreement and
effective as of the applicable Commencement Date of each
Program License, Siebel grants to Customer a worldwide,
nontransferable, nonexclusive license to use the Programs
which the Customer obtains under this Agreement, including a
worldwide, nontransferable, nonexclusive sublicense to use
the Ancillary Programs, as follows:
i. To use the Server Programs solely for Customer's own
internal data processing operations on the Designated
Systems or on a backup system if the Designated Systems
are inoperative, up to any applicable maximum number of
designated Users set forth in the Order Form(s); to use
the User Programs solely for Customer's own internal
data processing operations for, and by up to, the
number of designated Users indicated in the Order
Form(s); provided, however, that Customer may not
relicense the Programs or use the Programs for
third-party training, commercial time-sharing, rental
or service bureau use;
ii. To use the Documentation provided with the Programs in
support of Customer's authorized use of the Programs;
and to make limited copies of portions of the on-line
help Documentation for internal use
iii. To reproduce, exactly as provided by Siebel, and
distribute the Server Programs, the Ancillary Programs
and up to that number of copies of the User Programs
specified in the Order Form(s) to Customer for use by
Customer, provided that (a) each User Program may be
copied to up to one additional user system for each
designated User; (b) Programs may be copied for
archival or backup purposes; (c) all titles,
trademarks, and copyright and restricted rights
Page 2 of 17
<PAGE> 3
notices shall be reproduced in such copies; and (d) all
archival and backup copies of the Programs shall be
subject to the terms of this Agreement; and
iv. To use the Programs in conjunction with other software
products.
Except as set forth herein, no other copies shall be made
without Siebel's prior written consent. For purposes of this
Agreement, "Program License" shall constitute each license
granted to Customer pursuant hereto to use a Server Program
on a single Server System and each license granted to
Customer for a User to use a User Program as specified in one
or more Order Forms.
B. Customer recognizes and agrees that the source code of the
Programs contains valuable confidential information belonging
to Siebel and its suppliers, and Customer therefore agrees
not to cause or permit the reverse engineering, disassembly
or decompilation of the Programs.
C. Siebel and its suppliers shall retain all title, copyright
and other proprietary rights in and to the Programs. Customer
does not acquire any rights, express or implied, in the
Programs, other than those specified in this Agreement. In
the event that Customer makes suggestions to Siebel regarding
new features, functionality or performance that Siebel adopts
for the Programs, such new features, functionality or
performance shall become the sole and exclusive property of
Siebel, free from any restriction imposed upon Siebel by the
provisions of Section 9.1 unless otherwise agreed to in
writing by the parties prior to a Customer suggestion being
given to Siebel.
D. To use a User Program or a Server Program, Customer may need
to use an Ancillary Program. The Ancillary Program may be
used only in combination with Programs for the purpose of
installing or operating Programs as described on the Order
Form or Documentation, and for no other purpose. Customer
shall have no right to use Ancillary Programs in connection
or combination with any other software programs.
E. As an accommodation to Customer, Siebel may supply Customer
with pre- production releases of Programs (which may be
labeled "Alpha" or "Beta"). Customer acknowledges that these
products may not be suitable for general use and are provided
explicitly subject to the provisions of Section 6.2.D.
F. Programs acquired with United States Federal Government funds
or intended for use within or for any United States federal
agency are provided with "Restricted Rights" as defined in
DFARS 252.227-7013(c)(1)(ii) or FAR 52.227-19.
2.2. ACCEPTANCE OF PROGRAM.
A. The first time a Program License for each Program is issued
to Customer pursuant to this Agreement, Customer shall have a
thirty (30)-day "Acceptance Period," beginning on the
applicable Commencement Date, to evaluate such Program.
During the Acceptance Period, Customer may terminate the
Program License by giving written notice to Siebel in
accordance with Section 5.2 and returning the Program in
accordance with Section 5.5. Unless such termination-notice
is given, the license will be deemed accepted by Customer at
the end of the Acceptance Period. To the extent that Customer
is granted the right to make additional copies of such
Program hereunder, all such copies, made by Customer or
Siebel, shall be deemed accepted.
B. In the event that Customer elects to terminate the Program
Licenses for Programs ordered by Customer in the initial
Order Form pursuant to Section 2.2.A of this Agreement,
Customer's sole and exclusive remedy shall be to terminate
this Agreement and to obtain a refund (except as otherwise
provided in the Order Form) of any Program License fees paid
under this Agreement as of such date.
Page 3 of 17
<PAGE> 4
C. In the event that Customer elects to terminate a Program
License for other Program(s) ordered by Customer in any
subsequent Order Form pursuant to Section 2.2.A of this
Agreement, Customer's sole and exclusive remedy shall be to
obtain a refund (except as otherwise provided in the Order
Form) of the corresponding Program License fees for such
rejected Program(s).
2.3. TRANSFER AND ASSIGNMENT.
A. Customer may, upon written notice to Siebel and payment of
any then-applicable transfer fee, transfer a Program within
its organization from the Designated System to another
computer system; provided, however, that if Customer
transfers the Program to a hardware and/or software platform
which is not supported by Siebel at the time of such
transfer, Siebel shall continue to provide Updates to
Customer which operate on the Designated System and Siebel
shall have no further obligation to fix errors which occur
when the Program is run on the unsupported platform.
Notwithstanding the foregoing, Customer shall remain
obligated to pay for Software Maintenance and Support
Services ordered by Customer prior to such transfer.
B. Neither this Agreement nor any rights granted hereunder, nor
the use of any of the Programs, may be sold, leased,
assigned, or otherwise transferred, in whole or in part, by
Customer, and any such attempted assignment shall be void and
of no effect; provided, however, that Customer may assign
this Agreement in connection with a merger, acquisition or
sale of all or substantially all of its assets unless the
surviving entity is a direct competitor of Siebel.
2.4. VERIFICATION. At Siebel's written request, not more frequently
than annually, Customer shall furnish Siebel with a document
signed by an authorized representative of Customer (a) verifying
that the Programs are being used pursuant to the provisions of
this Agreement, including any User and other limitations, and that
Customer is not in breach of any other license restrictions; (b)
providing a list of Users by name; and (c) listing the locations,
types and serial numbers of the Designated Systems on which the
Server Programs are run.
Siebel may, at its expense, and upon thirty (30) days' prior
written notice to Customer, audit Customer's use of the Programs.
Any such audit shall be conducted during regular business hours at
Customer's facilities and shall not unreasonably interfere with
Customer's business activities. If an audit reveals that Customer
has underpaid fees to Siebel as a result of unauthorized use or
copying of the Programs, Customer shall pay to Siebel such
underpaid fees based on the Program License fees incurred by
Customer for such Programs plus interest thereon at the prevailing
U.S. dollar prime rate from the initial date of the unauthorized
use. If the amount of the underpayment exceeds 5% of the license
fees paid, then Customer shall also pay Siebel's reasonable costs
of conducting the audit. Audits shall be conducted no more than
once annually.
3. SOURCE CODE ESCROW.
Siebel has placed, or will place within thirty (30) days of the
Commencement Date, documented and working order copies of the User
Programs and Server Programs under the control of an escrow agent
pursuant to the terms of an escrow agreement which provides for the
release of the source code for such Programs to Customer in the event one
or more of the following conditions exists and is uncorrected for a
period of thirty (30) days: entry of an order as to Siebel under Title 11
of the United States Code, the making by Siebel of a general assignment
for the benefit of creditors, the appointment of a general receiver or
trustee in bankruptcy of Siebel's business or property, or action by
Siebel under any state insolvency or similar law for the purpose of
Siebel's bankruptcy, reorganization or liquidation.
Page 4 of 17
<PAGE> 5
4. TECHNICAL SERVICES.
4.1. SOFTWARE MAINTENANCE AND SUPPORT SERVICES FOR PROGRAMS OTHER THAN
LIMITED PRODUCTION PROGRAMS. Software Maintenance and Support
Services shall be provided under Siebel's Software Maintenance and
Support Services policies in effect on the date the Software
Maintenance and Support Services is ordered, subject to the
payment by Customer of the applicable fees. Customer hereby agrees
to purchase Software Maintenance and Support Services for the
three (3)-year period, commencing on the Commencement Date, for
each Program which is licensed pursuant to this Agreement.
Reinstatement of lapsed Software Maintenance and Support Services
is subject to Siebel's Software Maintenance and Support Services
reinstatement fees in effect on the date Software Maintenance and
Support Services is re-ordered.
4.2. SOFTWARE MAINTENANCE AND SUPPORT SERVICES FOR LIMITED PRODUCTION
PROGRAMS. Customer may obtain Software Maintenance and Support
Services for Limited Production Programs on a time and materials
basis at Siebel's then-current rates for such services.
4.3. TRAINING. Training will only be provided by Siebel as agreed to by
the parties in accordance with Siebel's training and fee schedule
in effect at the time such training is ordered.
4.4. OTHER SUPPORT SERVICES. Other support services will only be
provided by Siebel as agreed to from time to time by the parties,
at Siebel's then-standard billing rate (currently $1,500 per
person per day), plus actual travel and other out-of-pocket
expenses.
4.5. INCIDENTAL EXPENSES. For any on-site services requested by
Customer, Customer shall reimburse Siebel for reasonable travel
and other out-of-pocket expenses.
5. TERM AND TERMINATION.
5.1. TERM. Each Program License granted under this Agreement shall
commence on the applicable Commencement Date and shall remain in
effect perpetually unless such Program License or this Agreement
is terminated as provided in Section 5.2 or 5.3 or in accordance
with the provisions of Section 2.2.
5.2. TERMINATION BY CUSTOMER. Customer may terminate any Program
License at any time by providing written notice to Siebel;
provided, however, that termination hereunder shall not relieve
Customer of its obligations specified in Section 5.4.
5.3. TERMINATION BY SIEBEL. Siebel may terminate this Agreement or any
Program License upon written notice if Customer breaches this
Agreement and fails to correct the breach within thirty (30) days
following written notice from Siebel specifying the breach.
5.4. EFFECT OF TERMINATION. Subject to the provisions of Section 2.2,
termination of this Agreement or any Program License shall not
limit either party from pursuing other remedies available to it,
including injunctive relief, nor shall such termination relieve
Customer of its obligation to pay all fees that have accrued or
are otherwise owed by Customer under any Order Form. The parties'
rights and obligations under Sections 2.1.B, 2.1.C and 2.2 and
Sections 5, 6.1, 7, 8 and 9 shall survive termination of this
Agreement.
5.5. HANDLING OF PROGRAMS UPON TERMINATION. If a Program License
granted under this Agreement terminates, Customer shall (a) cease
using the applicable Programs, and (b) certify to Siebel within
thirty (30) days after termination that Customer has destroyed, or
has returned to Siebel, the Programs and all copies thereof. This
requirement applies to copies in all forms, partial and complete,
in all types of media and computer memory, and whether or not
modified or merged into other materials. Before returning Programs
to Siebel, Customer shall acquire a Return Material Authorization
("RMA") number from Siebel.
Page 5 of 17
<PAGE> 6
6. INDEMNITY, WARRANTIES, REMEDIES.
6.1. INFRINGEMENT INDEMNITY. Siebel will defend and indemnify Customer
against any and all costs, liabilities, damages and expenses
incurred by Customer related to or arising out of a claim that the
Programs infringe a trade secret, trademark, copyright, or patent
recognized in the United States, provided that: (a) Customer
notifies Siebel in writing within thirty (30) days of the
Customer's written or other documented notice of a potential
claim; (b) Siebel has sole control of the defense of such claim
and all related settlement negotiations; and (c) Customer provides
Siebel, at Siebel's reasonable expense, with the assistance,
information and authority necessary to perform Siebel's
obligations under this Section. Notwithstanding the foregoing,
Siebel shall have no liability for any claim of infringement based
on (i) use of a superseded or altered release of Programs if the
infringement would have been avoided by the use of a current
unaltered release of the Programs, which Siebe l provided to
Customer, or (ii) use of the Programs in combination with any
other software, hardware or data to the extent that the absence of
such combination the Programs would not have been infringing.
In the event the Programs are held or are believed by Siebel to
infringe, Siebel shall have the option, at its expense, to (a)
modify the Programs to be noninfringing; (b) obtain for Customer a
license to continue using the Programs; or (c) terminate the
Program License for the infringing Programs and refund the license
fees paid for those Programs, such amount to be reduced by twenty
percent (20%) for each year of the Customer's use thereof since
the Commencement Date of the applicable Program License. This
Section 6.1 states Siebel's entire liability and Customer's
exclusive remedy for infringement.
6.2. LIMITED WARRANTIES AND DISCLAIMERS.
A. LIMITED PROGRAM WARRANTY. Siebel warrants for a period of one
(1) year from the date on which an Ordered Program is first
delivered to Customer hereunder, that each unmodified Ordered
Program for which Customer has a Program License will perform
in all material respects the functions described in the
Documentation when operated on a platform which is supported
by Siebel.
B. LIMITED MEDIA WARRANTY. Siebel warrants that the tapes,
diskettes or other media upon which Programs are delivered by
Siebel to Customer to be free of defects in materials and
workmanship under normal use for ninety (90) days from the
Commencement Date.
C. LIMITED SERVICES WARRANTY. Siebel warrants that any services
contracted to be performed by Siebel pursuant to this
Agreement, including Maintenance and Support Services, shall
be performed in a manner consistent with generally accepted
industry standards. This warranty shall be valid for ninety
(90) days from performance of service.
D. DISCLAIMERS. Siebel does not warrant that the Programs will
meet Customer's requirements, that the Programs will operate
in the combinations which Customer may select for use, that
the operation of the Programs will be uninterrupted or
error-free, or that all Program errors will be corrected.
Limited Production Programs, pre-production releases of
Programs, and computer-based training products are
distributed "AS IS". THE WARRANTIES ABOVE ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED
OR STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
Page 6 of 17
<PAGE> 7
CONFIDENTIAL TREATMENT REQUESTED
6.3. EXCLUSIVE REMEDIES. Customer must report in writing any breach of
the warranties contained in Section 6.2 to Siebel during the
relevant warranty period, and Customer's exclusive remedy and
Siebel's entire liability for such breach shall be:
A. FOR PROGRAMS. To use its commercially reasonable efforts to
correct or provide a workaround for reproducible Program
errors that cause breach of this warranty, or if Siebel is
unable to make the Program operate as warranted, Customer
shall be entitled to recover the fees paid to Siebel for the
Program License, such amount to be reduced by [***]
for each year of Customer's use thereof since the
Commencement Date of the applicable Program.
B. FOR MEDIA. The replacement of defective media, provided that
Customer shall acquire an RMA number from Siebel before
returning defective media to Siebel.
C. FOR SERVICES. The reperformance of the services, or if Siebel
is unable to perform the services as warranted, Customer
shall be entitled to recover the fees paid to Siebel for the
unsatisfactory services.
6.4. GENERAL INDEMNITY. Siebel will indemnify, hold harmless, and at
Customer's request defend, Customer from and against any loss,
cost, liability or expense (including court costs and the
reasonable fees of attorneys and other professionals) arising out
of or resulting from the performance by Siebel of its obligations
under this Agreement, to the extent caused by any negligent or
willful act or omission of Siebel's employees or agents that
contributes to the following: (i) any bodily injury, sickness,
disease or death; (ii) any injury or destruction to tangible
property resulting therefrom; or (iii) any violation of any
statute, ordinance or regulation.
7. LIMITATION OF LIABILITY GENERALLY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOSS OF PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER
THAT NOTHING IN THIS SECTION OR THIS AGREEMENT SHALL LIMIT EITHER PARTY'S
LIABILITY FOR DEATH OR PERSONAL INJURY CAUSED BY ITS NEGLIGENCE OR
WILFULL CONDUCT.
Notwithstanding the foregoing, Siebel's lost revenue caused by a breach
by Customer of the scope of the license granted under Section 2 or its
obligations regarding Siebel's intellectual property rights under
Sections 2 and 9.1 shall constitute a direct damage. Siebel's liability
for damages hereunder shall in no event exceed the amount of fees paid by
Customer under this Agreement, and if such damages result from Customer's
use of the Program or services, such liability shall be limited to fees
paid for the relevant Program or services giving rise to the liability,
such amount to be reduced [***] for each year of use thereof since the
Commencement Date of the applicable Program License or the date of
performance of the applicable services.
The provisions of this Agreement allocate the risks between Siebel and
Customer. Siebel's pricing reflects this allocation of risk and the
limitation of liability specified herein.
8. PAYMENT PROVISIONS.
8.1. LICENSE FEES. License fees shall be payable as set forth in the
Order Forms attached hereto. Concurrently with the execution of
this Agreement, Customer agrees to place a binding initial order
for Programs of not less than [***] in Program License Fees
using the Order Form attached hereto as EXHIBIT A.
Page 7 of 17
<PAGE> 8
8.2. SOFTWARE MAINTENANCE AND SUPPORT SERVICES. Fees for Software
Maintenance and Support Services shall be payable annually, in
advance, with the first payment due thirty (30) days from the
applicable Commencement Date and the payment every year thereafter
due in advance provided Customer has received Siebel's invoice not
less than thirty (30) days prior to the applicable payment date.
In the event Customer acquires additional Program Licenses
pursuant to this Agreement, maintenance fees will be payable on
the same terms except, however, that the first installment shall
be pro-rated for the balance of the annual period referenced above
such that all subsequent fees for maintenance, Updates and support
shall be payable on the same anniversary date for all Program
Licenses granted pursuant to this Agreement.
8.3. OTHER FEES. All other applicable fees, if any, shall be payable
thirty (30) days from the receipt of Siebel's invoice.
8.4. LATE PAYMENTS. Any amounts payable by Customer hereunder which
remain unpaid more than ten (10) days after the due date shall be
subject to a late charge equal to one and one-half percent (1.5%)
per month from the due date until such amount is paid.
8.5. MEDIA AND SHIPPING CHARGES. Customer agrees to pay applicable
media and shipping charges.
8.6. TAXES. The fees listed in this Agreement do not include taxes; if
Siebel is required to pay sales, use, property, value-added or
other taxes based on the Program Licenses granted or services
provided in this Agreement or on Customer's use of Programs or
services, then such taxes shall be billed to and paid by Customer.
This Section shall not apply to taxes based on Siebel's income.
9. GENERAL TERMS.
9.1. NONDISCLOSURE. By virtue of this Agreement, the parties may have
access to information that is confidential to one another
("Confidential Information"). Siebel's Confidential Information
shall include the Programs, formulas, methods, know how,
processes, designs, new products, developmental work, marketing
requirements, business and marketing plans, customer names,
prospective customer names, the terms and pricing under this
Agreement, any data relating to any research project, work in
process, engineering, manufacturing, marketing, servicing,
financing or personnel matter relating to Siebel, its present or
future products, sales, suppliers, clients, customers, employees,
investors or business partners (including any confidential
information of such suppliers, clients, customers, employees,
investors or business partners) and all information clearly
identified in writing at the time of disclosure as confidential,
but shall not include the source code for the Programs, which shal
l be handled in accordance with the applicable provisions of the
source code escrow agreement. Customer's Confidential Information
shall include its formulas, methods, know how, processes, designs,
new products, developmental work, marketing requirements, business
and marketing plans, customer names, prospective customer names,
proprietary software programs, the terms and pricing under this
Agreement, any data relating to any research project, work in
process, engineering, manufacturing, marketing, servicing,
financing or personnel matter relating to Customer, its present or
future products, sales, suppliers, clients, customers, employees,
investors or business partners (including any confidential
information of such suppliers, clients, customers, employees,
investors or business partners) and all information clearly
identified in writing at the time of disclosure as confidential.
A party's Confidential Information shall not include information
that (a) is or becomes a part of the public domain through no act
or omission of the other party; (b) was in the other party's
lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by
a third party without restriction on disclosure; or (d) is
independently developed by the other party. Customer shall not
disclose the results of any performance tests of the Programs to
any third party without Siebel's prior written approval.
Page 8 of 17
<PAGE> 9
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of
five years after termination of this Agreement. The parties agree,
unless required by law, not to make each other's Confidential
Information available in any form to any third party or to use
each other's Confidential Information for any purpose other than
in the performance of this Agreement. Each party agrees to take
all reasonable steps to ensure that Confidential Information is
not disclosed or distributed by its employees or agents in
violation of the terms of this Agreement.
9.2. GOVERNING LAW. This Agreement and all matters arising out of or
relating to this Agreement, shall be governed by the laws of the
State of California, excluding its conflict of law provisions. The
parties agree that the United Nations Convention on Contracts for
the International Sale of Goods is specifically excluded from the
application to this Agreement.
9.3. JURISDICTION. Any legal action or proceeding relating to this
Agreement shall be instituted in a state court in Santa Clara or
San Mateo County, California, or in a federal court in the
Northern District of California. Siebel and Customer agree to
submit to the jurisdiction of, and agree that venue is proper in,
these courts in any such legal action or proceeding.
9.4. NOTICES. All notices, including notices of address change,
required to be sent hereunder shall be in writing and shall be
deemed to have been given upon the date sent by confirmed
facsimile or three (3) days following the date such notice was
mailed by first class mail, to the addresses first set forth
above.
To expedite order processing, Customer agrees that Siebel may
treat documents faxed by Customer to Siebel as original documents;
nevertheless, either party may require the other to exchange
original signed documents.
9.5. SEVERABILITY. In the event any provision of this Agreement is held
to be invalid or unenforceable, the remaining provisions of this
Agreement will remain in full force.
9.6. WAIVER. The waiver by either party of any default or breach of
this Agreement shall not constitute a waiver of any other or
subsequent default or breach. Except for actions for nonpayment or
breach of Siebel's proprietary rights in the Programs, no action,
regardless of form, arising out of this Agreement may be brought
by either party more than one year after the cause of action has
accrued.
9.7. EXPORT ADMINISTRATION. Customer agrees to comply fully with all
relevant export laws and regulations of the United States ("Export
Laws") to assure that neither the Programs nor any direct product
thereof are (i) exported, directly or indirectly, in violation of
Export Laws; or (ii) are intended to be used for any purposes
prohibited by the Export Laws, including, without limitation,
nuclear, chemical, or biological weapons proliferation.
9.8. RELATIONSHIP BETWEEN THE PARTIES. Siebel is an independent
contractor; nothing in this Agreement shall be construed to create
a partnership, joint venture or agency relationship between the
parties.
9.9. SUCCESSORS. This Agreement shall inure to the benefit of the
successors and assigns of Siebel and, subject to the restrictions
on transfer or assignment herein set forth in Section 2.3, shall
be binding upon the Customer and Customer's successors and
assigns.
9.10. PUBLICITY. Upon Customer's prior written approval, Customer and
Siebel agree to issue a joint press release regarding the
licensing to Customer of the Programs, and for a mutually
determined executive of Customer to publicly endorse the Siebel's
product and the Customer's relationship with Siebel. Upon
Customer's prior written approval, Customer agrees to allow Siebel
to publicize its licensing of the Programs to Customer in its
marketing and advertising material, and authorizes to reproduce
its company logo in connection therewith.
Page 9 of 17
<PAGE> 10
9.11. ENTIRE AGREEMENT. This Agreement, together with the exhibits,
appendices and attachments hereto, constitutes the complete
agreement between the parties and supersedes all prior or
contemporaneous agreements or representations, written or oral,
concerning the subject matter of this Agreement and such exhibits,
appendices and attachments. This Agreement may not be modified or
amended except in a writing signed by a duly authorized
representative of each party. No other act, document, usage or
custom shall be deemed to amend or modify this Agreement.
The Effective Date of this Agreement shall be March 29, 1996.
EXECUTED BY MONTGOMERY SECURITIES EXECUTED BY SIEBEL SYSTEMS, INC.
LWC INVESTMENTS, A GENERAL PARTNER
Signature: Signature:
----------------------------- ------------------------
Name: Name:
---------------------------------- -----------------------------
Title: Title:
--------------------------------- ----------------------------
Date: Date:
---------------------------------- -----------------------------
Signature:
-----------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
----------------------------------
Page 10 of 17
<PAGE> 11
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
ORDER FORM
Customer Name: Montgomery Securities
----------------------------------------------------
Effective Date of Software License and Services Agreement: March 29, 1996
----------------------
Number of Server Systems:
------------------
Maximum Number of Named Users: [***] except as otherwise provided below with
--------------------------------------------------
respect to certain User Programs
- --------------------------------
DESIGNATED SYSTEM:
Server Hardware NT
Server Location(s) 600 Montgomery Street, San Francisco
Data Base Management System Sybase v11
USER PROGRAMS:
<TABLE>
<CAPTION>
=============================================================================================================================
USER PROGRAMS LICENSED: Number PROGRAM NUMBER VERSION PRICE PER NAMED USER
of Users
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Siebel Sales Enterprise [***] 10 M01-SE-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Marketing Encyclopedia [***] 10 M01-ME01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Correspondence System [***] 10 M01-CR01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Revenue Forecasting System [***] 10 M01-RV01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Reportwriter with Standard Reports [***] 10 M01-RW01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Executive Information Systems [***] 10 M01-EI01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Tele Business Extensions [***] 10 M01-TE01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Field Sales Synchronization [***] 10 M01-FS01-02000 2.1 [***]
- -----------------------------------------------------------------------------------------------------------------------------
Business Object Configurator [***] 10 M01-BO01-02000 2.1 [***]
=============================================================================================================================
</TABLE>
Page 11 of 17
<PAGE> 12
CONFIDENTIAL TREATMENT REQUESTED
SERVER PROGRAMS:
<TABLE>
<CAPTION>
=====================================================================================================================
SERVER PROGRAMS LICENSED: PROGRAM NUMBER VERSION PRICE PER NAMED USER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Marketing Administration Manager 10 M01-MM01-02000 2.1 [***]
Sales Administration Manager 10 M01-SA01-02000 2.1 [***]
Data Replication Manager 10 M01-DR01-02000 2.1 [***]
Enterprise Integration Manager 10 M01-EM01-02000 2.1 [***]
=====================================================================================================================
</TABLE>
Page 12 of 17
<PAGE> 13
CONFIDENTIAL TREATMENT REQUESTED
ANCILLARY PROGRAMS:
<TABLE>
<CAPTION>
================================================================================
PRODUCT VERSION
- --------------------------------------------------------------------------------
<S> <C>
Watcom SQL Database Runtime v4.0
- --------------------------------------------------------------------------------
MS Access Runtime v2.0
- --------------------------------------------------------------------------------
Adobe Acrobat Exchange LE v2.x
- --------------------------------------------------------------------------------
Adobe Type Manager v3.01
- --------------------------------------------------------------------------------
MS ODBC Drivers v3.x
================================================================================
</TABLE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
TOTAL PROGRAM LICENSE FEES FOR USER, SERVER AND ANCILLARY PROGRAM [***]
LICENSES FOR [***] USERS DUE AND PAYABLE AS FOLLOWS:
</TABLE>
[***] ON OR BEFORE EXECUTION OF THIS AGREEMENT(1)
[***] NET 30 DAYS FROM THE EXECUTION OF THIS AGREEMENT(2)
================================================================================
(1) This payment is nonrefundable.
(2) This payment is nonrefundable unless Customer gives Siebel a written
termination-notice within the thirty (30)-day Acceptance Period in accordance
with the provisions of Section 2.2A.
SOFTWARE MAINTENANCE AND SUPPORT SERVICES: Customer hereby purchases Software
Maintenance and Support Services for that number of Program Licenses for each
supported Program which Customer purchases pursuant to this Agreement, for the
three year period commencing on the applicable Commencement Date. The annual fee
for such Software Maintenance and Support Services shall be 15% of the
cumulative license fees due under this Agreement.
<TABLE>
<S> <C>
TOTAL ANNUAL MAINTENANCE FEES $ [***]/YEAR
</TABLE>
SUBSEQUENT ORDERS. Assuming Customer enters into a binding license agreement for
[***] in Program License Fees by March 31,1996, and pays such amount on or
before April 30, 1996, Siebel will extend to Customer the same quantity discount
of [***] from Siebel's then current List Price for additional Program Licenses
purchased prior to December 31, 1997, pursuant to a new binding, noncancelable
Order Form (substantially in the form of this EXHIBIT A). These discounts apply
only to minimum purchases of the same configuration of Programs purchased herein
in blocks of not less than [***] Users. In addition, Customer may purchase
Program Licenses for the Database Extension Manager Server Program at the same
[***] quantity discount from Siebel's then current List Price if such Program
Licenses are purchased prior to December 31, 1996 and in a minimum block of
[***] Users.
ORDER ACCEPTED AND ACKNOWLEDGED:
MONTGOMERY SECURITIES SIEBEL SYSTEMS, INC.
LWC INVESTMENTS, A GENERAL PARTNER
Signature: Signature:
---------------------------- --------------------------
Name: Name:
--------------------------------- -------------------------------
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
Signature:
----------------------------
Name:
---------------------------------
Title:
--------------------------------
Page 13 of 17
<PAGE> 14
Date:
---------------------------------
Page 14 of 17
<PAGE> 15
EXHIBIT B
SOFTWARE MAINTENANCE AND SUPPORT SERVICES SCHEDULE
At any given time, Siebel shall provide support for (a) the then-current version
of the Programs enumerated in Order Forms executed pursuant to an applicable
Software License and Services Agreement, (b) the immediately preceding version
of such Programs, but only for a period of six (6) months following the release
of the then-current version. In any event, Siebel agrees that it will shall
provide support for every major release of the Programs (e.g., version 2,
version 3) for a period of not less than 12 months following the date of initial
release. Such Programs are referred to in this Schedule as the "Supported
Programs."
1. MAINTENANCE.
1.1 Software Maintenance covers Supported Programs. Siebel will use
reasonable commercial efforts to cure, as described below,
reported and verifiable errors in Supported Programs so that such
Programs operate as specified in the associated Documentation.
Siebel recognizes three error levels:
High severity error: A high severity error is an error which
halts the operation of a Program and for which there is no
work-around. Siebel will begin work on the error within two hours
of notification during normal business hours and will engage
development staff until an acceptable work-around is achieved.
Low severity error: A low severity error may halt operation
of a Program but has a work-around available. Siebel will begin
work on the error within a day of notification and will engage
development staff.
Inconvenience: An error which exhibits incorrect
functionality but does not halt operation of a Program. Siebel
will use its best efforts to deliver a fix or a work-around in a
subsequent Program Update.
Siebel will provide Customer with a single copy of the fix or
work-around on suitable media. Customer will distribute the fix or
work-around to User Systems or Server Systems as necessary.
2. UPDATES.
2.1 Siebel shall, from time to time, in its sole discretion make
Updates to Supported Programs available to Customer at no
additional charge except for media and handling charges.
3. SUPPORT.
3.1 Customer shall establish and maintain the organization and
processes to provide "First Line Support" for the Supported
Programs directly to Users. First Line Support shall include but
not be limited to (a) a direct response to Users with respect to
inquiries concerning the performance, functionality or operation
of the Supported Programs, (b) a direct response to Users with
respect to problems or performance deficiencies with the Supported
Programs, (c) a diagnosis of problems or performance deficiencies
of the Supported Programs and (d) a resolution of problems or
performance deficiencies of the Supported Programs.
Page 15 of 17
<PAGE> 16
CONFIDENTIAL TREATMENT REQUESTED
3.2 If after reasonable commercial efforts Customer is unable to
diagnose or resolve problems or performance deficiencies of the
Supported Programs, Customer shall contact Siebel for "Second Line
Support" and Siebel shall provide support for the Supported
Programs in accordance with Siebel's then current policies and
procedures for Second Line Support.
3.3 Siebel shall establish and maintain the organization and processes
to provide Second Line Support for the Supported Programs to
Customer. Second Line Support shall be provided to Customer only
if, after reasonable commercial efforts, Customer is unable to
diagnose and/or resolve problems or performance deficiencies of
the Programs. Second Line Support shall be provided to up to two
designated representatives of Customer. Siebel shall not provide
Second Line Support directly to Users. [Note: Other
representatives of Customer are free to contact appropriate
representatives of Siebel to discuss or obtain assistance on
technical matters not related to Second Line Support]
3.4 Second Line Support shall include but not be limited to (i) a
diagnosis of problems or performance deficiencies of the Supported
Programs and (ii) a resolution of problems or performance
deficiencies of the Supported Programs, in each case via
telephone.
3.5 Second Line Support shall be provided via telephone (800-214-0400)
by Siebel from 8:30 a.m. Pacific Time to 6:00 p.m. Pacific time on
regular U.S. business days, holidays excepted.
4. MAINTENANCE AND SUPPORT FEES.
4.1 Annual Fees: Annual Fees for software maintenance, update and
support services as described herein shall be equal to
[***] of the as stated on the applicable Order Form as
"Total Program License Fees" provided, however, that the fees for
such Software Maintenance and Support Services shall not increase
by more than [***] of the previous year's fees for a comparable
level of service. Such fees shall be payable annually, in advance,
with the first payment due thirty (30) days from applicable
Commencement Date and the payment every year thereafter due in
advance. In the event Customer acquires additional Program
Licenses, maintenance fees for such additional Programs will be
payable on the same terms except, however, that the first
installment shall be pro-rated for the balance of the annual
period referenced above such that all subsequent fees for
maintenance, updates and support shall be payable on the same
anniversary date for all Program Licenses granted to the
Agreement.
4.2 Reinstatement: Siebel may, at its sole option, reinstate lapsed
Software Maintenance and Support Services in accordance with its
then current policies upon payment by Customer of the applicable
reinstatement fee.
5. EXCLUDED SERVICES. The following services are outside the scope of
Siebel's Software Maintenance and Support Services:
5.1 Service for Programs which have been subject to unauthorized
modification by Customer.
5.2 Service which becomes necessary due to:
(i) Failure of computer hardware or equipment or programs not
covered by this schedule; or
(ii) Catastrophe, negligence of Customer or any third party,
operator error, improper use of hardware or software or
attempted maintenance by unauthorized persons.
5.3 Services at the Customer's site.
6. OTHER TERMS. Except as stated in this Schedule, services shall be
subject to the terms and conditions of the applicable Software
License and Services Agreement between Siebel and Customer.
Page 16 of 17
<PAGE> 17
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
DOCUMENTATION
Description of Documentation:
Siebel's Documentation includes on-line help for all licensed users and three
(3) copies of the Siebel Sales Enterprise Installation Guide and the
Administration Guide per site is provided at [***]. Additional
Documentation is priced as follows:
<TABLE>
<CAPTION>
DOCUMENTATION(2) VERSION PRICE PER COPY(6)
<S> <C> <C>
Release Notes(3) v 2.0 $[***]
Installation and Upgrade Guide(3) v 2.0 [***]
Administration Guide(3) v 2.0 [***]
Database Extension Reference Manual(3),(4) v 2.0 [***]
Business Object Configuration Guide(3),(4),(5) v 2.0 [***]
</TABLE>
(2) Documentation currently available from Siebel as of the Effective Date.
Siebel reserves the right to add, delete or modify the Documentation and any
related fees at any time.
(3) Non-disclosure provisions consistent with the terms of this Agreement are
required before access or disclosure of any kind is given to Customer employees
or third parties.
(4) Available only to Customers with a Database Extensibility software license.
(5) Available only to Customers with a valid Business Object Configurator
software license.
Page 17 of 17
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.8
SIEBEL SYSTEMS, INC.
STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT
THIS STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT (the
"Agreement") is made and entered into effective as of this _____ day of
__________, 1995 (the "Effective Date"), by and between SIEBEL SYSTEMS, INC.
("Siebel"), a California corporation, on the one hand, and ITOCHU TECHNO-SCIENCE
CORPORAT ION, a corporation organized and existing under the laws of Japan, and
ITOCHU CORPORATION, a corporation organized and existing under the laws of
Japan, (Itochu Techno-Science Corporation and Itochu Corporation are hereafter
referred to collectively as "Itochu"), on the other hand.
RECITALS
A.Siebel owns and/or has rights to certain computer software programs,
known collectively as the Siebel Sales Enterprise system, that are useful in
managing, coordinating and improving product marketing and sales efforts.
B.Siebel and Itochu wish to enter into a strategic alliance under which
the parties will cooperate to promote the marketing of the Siebel Sales
Enterprise software products in Japan, Siebel will grant Itochu the right and
license to reproduce and distribute the object code of the Siebel Sales Ent
erprise software product in Japan, and Itochu will agree to make an equity
investment in Siebel.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein,
the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "ANCILLARY PROGRAMS" means those software programs listed as
"Ancillary Programs" on EXHIBIT A (Licensed Software) attached hereto, which
programs are licensed to Siebel by third parties.
1.2 "AUTHORIZED USER" means an individual authorized by the End User to
use the Licensed Software, regardless of whether such individual is using any of
the programs in the Licensed Software at any given time. The maximum number of
Authorized Users of a particular End User that may use the User P rograms
sublicensed by Itochu shall be as specified in the sublicense agreements between
Itochu and that End User.
1.3 "CO-EXCLUSIVE" means that, [ *** ]
1.4 "DOCUMENTATION" means user manuals written in English relating to
the Licensed Software.
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1.5 "DESIGNATED SYSTEM" or "DESIGNATED SYSTEMS" means the computer
hardware and operating system(s) of an End User, which act as the computer
servers for Authorized Users of the End User. Each End User shall specify the
Designated System(s) on which the Server Programs shall operate under license .
1.6 "END USER" means a third party entity that does not commercially
distribute or otherwise offer a product that is competitive with the Licensed
Software as listed in Exhibit B (Siebel Competitors) and that licenses the
Licensed Software for its ordinary and customary business purposes, and not for
redistribution or resale.
1.7 "ERROR" means a material defect or error in the Licensed Software
(other than the Ancillary Software) that causes such Licensed Software not to
operate substantially in accordance with the performance and functional
description of the Licensed Software contained in the Documentation.
1.8 "FIRST-LINE SUPPORT" means direct customer support of Licensed
Software, which includes but is not limited to installation, training, technical
assistance, and identifying and correcting or resolving as much as possible the
software errors and problems encountered by an End User in using Licen sed
Software.
1.9 "LICENSE TERM" means the period commencing on the Effective Date
and continuing until the termination or expiration of the Agreement pursuant to
Section 13 ("Term and Termination").
1.10 "LICENSED SOFTWARE" means the object code format of the Siebel
Sales Enterprise system, comprising of the software programs listed on EXHIBIT A
(Licensed Software) attached hereto (including Ancillary Programs), or any of
such software programs in object code individually or in combination. "Licensed
Software" shall include (i) both the English version of the Siebel Sales
Enterprise software products and all Japanese Localized Versions (as defined in
Section 1.11) of such products prepared by Itochu and accepted by Siebel
pursuant to Section 3.3 ("Preparation of Localized Versions") a nd (ii) Updates
(as defined in Section 1.17).
1.11 "LOCALIZATION SOURCE CODE" means such portions of the human
readable source code version of the Licensed Software (excluding the Ancillary
Programs) as are necessary for Itochu to prepare the Japanese localized version
of any program included within the Licensed Software (a "Japanese Localize d
Version"), and all associated technical documentation necessary for preparing
such Japanese Localized Version.
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<PAGE> 3
1.12 "LIST PRICE" means the then current list price for licenses of the
Licensed Software in Japan as published by Siebel from time to time during the
term of the Agreement and attached hereto as EXHIBIT C (Current Software List
Price). The List Price for a particular program in the Licensed Soft ware varies
according to the number of Authorized Users permitted under the applicable End
User license to use such program.
1.13 "NET END USER PRICE" means the gross income received by Siebel for
the license or distribution of Licensed Software to any End User for use in
Japan, less distributor discounts, stock balancing, sales and consumption taxes,
customs duties and other government charges, returns and license fee s paid by
Siebel for the Ancillary Programs included in such Licensed Software. "Net End
User Price" shall also means the gross income received by Siebel for the
provision by Siebel (or any third party appointed by Siebel) of First-Line or
Second-Line Support related to the Licensed Software licen sed to any End User
for use in Japan, less any applicable discounts, sales and consumption taxes,
customs duties and other government charges, and charges paid by Siebel to third
parties for the provision of services in connection with such First-Line or
Second-Line Support.
1.14 "SERVER PROGRAMS" shall mean those portions of the Licensed
Software that reside and operate on Designated Systems.
1.15 "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean support
provided under Siebel's policies in effect on the date Software Maintenance and
Support Services is ordered, subject to payment by Itochu of the applicable fees
for such support as set forth in Section 6.9 ("Software Maintenance a nd Support
Services") of this Agreement.
1.16 "TRAINING MATERIALS" has the meaning described in Section 3.4
("Installation and Training").
1.17 "UPDATE" means an updated or enhanced version of any of the
software programs listed on EXHIBIT A (Licensed Software), in object code
format, that is generally released by Siebel to its distributors and End Users,
which corrects Errors and/or adds such minor additional features or functions a
s Siebel, in its discretion, may choose to include in the release. Updates
typically will be designated by a change in the version number to the right of
the first decimal point. Updates shall also include new version releases that
are typically designated by a change in the version number to the left of the
first decimal point. Updates shall not include any release, option, upgrade or
future product that Siebel licenses separately or only offers for an additional
fee (above and beyond any annual maintenance or support fee).
1.18 "USER PROGRAMS" means those software programs within the Licensed
Software that reside and operate on the individual computer hardware systems
operated by the employees of a particular End User.
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<PAGE> 4
CONFIDENTIAL TREATMENT REQUESTED
2. APPOINTMENT AS CO-EXCLUSIVE DISTRIBUTOR IN JAPAN.
2.1 APPOINTMENT. Siebel hereby appoints Itochu, effective during the
License Term, as Siebel's distributor of the Licensed Software for use in Japan.
The appointment shall be Co-Exclusive during the Co-Exclusive Period as defined
in Section 6.2 ("Minimum Payment Obligations During Co-Exclusive P eriod") and
shall otherwise be non-exclusive.
2.2 LICENSE GRANT. Subject to the terms and conditions of this
Agreement, Siebel hereby grants to Itochu the following non-transferable,
limited license rights exercisable solely during the License Term:
(a) [ *** ]
(b) [ *** ]
(c) [ *** ]
(d) [ *** ]
(e) [ *** ]; and
(f) [ *** ]
The foregoing rights may not be sublicensed except as permitted in Section 2.3
("Right to Grant End User Sublicenses").
4
<PAGE> 5
2.3 RIGHT TO GRANT END USER SUBLICENSES. Subject to the terms and
conditions of this Agreement, Siebel hereby grants to Itochu the
non-transferable right, exercisable solely during the License Term, to grant to
each End User the following limited, non-transferable sublicense rights:
(a) to use the Server Programs solely for the End User's own
internal data processing and business operations on the Designated Systems
specified by such End User (or on a backup system if such Designated Systems are
inoperative); to use the User Programs solely for the End User's own internal
dat a processing and business operations for and by up to that number of
Authorized Users as provided in the license with Itochu; provided, however, that
the End User may not relicense the Licensed Software or use the Licensed
Software for third-party training, commercial time-sharing, rental or servic e
bureau use;
(b) the right to reproduce the User Programs, up to the
maximum number of Authorized Users permitted under the sublicense agreement with
such End User; provided, however, that in no event shall Itochu grant such right
to an End User if Itochu has reproduced and distributed to such End User a numbe
r of copies of the User Programs equal to such number of Authorized Users;
(c) the right to use the Documentation provided by Itochu in
support of the authorized use of the Licensed Software; and
(d) the right to copy the Licensed Software solely for
archival or backup purposes; provided, however, that User Programs may be copied
to up to one additional computer system for each Authorized User; all titles,
trademarks, and copyright and restricted rights notices shall be reproduced in
such copies; and all archival and backup copies of the Programs shall be subject
to the terms of this Agreement.
For purposes of this Agreement, an "End User" may include Itochu if Itochu
agrees to be bound by the terms and conditions of EXHIBIT E (Terms for End User
Agreement) to this Agreement and pays the amounts set forth in Section 6.2
("Itochu End User Payment").
2.4 END USER SUBLICENSE AGREEMENT. Itochu shall enter into an
End User sublicense agreement in Japanese language with each End User to whom
Itochu grants sublicense rights to use Licensed Software, which sublicense
agreement shall contain, and be at least as protective of Siebel's rights and
inte rests as, the terms and conditions for such agreement as attached hereto as
Exhibit E (Terms for End User Agreement). Such sublicense agreement shall
specify the Designated Systems on which the Server Programs may be used and the
maximum number of Authorized Users permitted to use the User Program s.
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<PAGE> 6
2.5 CO-EXCLUSIVE SIEBEL DISTRIBUTION IN JAPAN. Notwithstanding the
above, Itochu understands and agrees that during the Co-Exclusive Period (as set
forth in Section 6.4 ("Minimum Payment Obligations During Co-Exclusive Period"))
Siebel may distribute and license, and may appoint third parties to distribute
and license, the Licensed Software to End Users for use in Japan, and such
licensing shall not constitute a breach of any terms of the Agreement, provided
that Siebel pays Itochu with the amounts set forth in Section 6.5 ("Siebel
Payments") with respect to any such licenses granted.
3. MARKETING AND SUPPORT OBLIGATIONS.
3.1 MARKETING AND SALES EFFORTS. Itochu shall use best efforts to
promote and market the Licensed Software to End Users and potential End Users in
order to maximize the licensing and distribution of the Licensed Software to End
Users in Japan. Such marketing efforts shall include, without limita tion:
establishment of a marketing and sales team (the "Marketing Team") dedicated
exclusively to promoting and distributing the Licensed Software in Japan, as
provided in Section 3.2 ("Marketing Team"); advertising the Licensed Software in
Japan in a commercially appropriate and reasonable manner ; and promoting the
Licensed Software at seminars, trade shows and conferences. Itochu agrees
further that its marketing and advertising efforts with respect to the Licensed
Software will be of the highest quality and in good taste, and shall preserve
the professional image and reputation of Siebe l and the Licensed Software.
Itochu agrees that if Itochu Techno-Science Corporation or any of its
subsidiaries, divisions, joint ventures or "Affiliates" (as defined below")
promote, market, license or distribute any products which are competitive
("Competitive Products") with the Licensed Softwa re (collectively referred to
as "Itochu Competitive Activity"), the Co-Exclusive Period (and Itochu's
Co-Exclusive distribution rights) shall immediately end and the following shall
immediately occur: (i) the payments which Itochu would otherwise be entitled to
under Section 6.5 ("Siebel Payments" ) shall be of no force or effect commencing
on the date when such Itochu Competitive Activity first occurred, (ii) Itochu's
rights hereunder shall convert to a non-exclusive basis and Itochu shall retain
such rights for the rest of the License Term on such basis. For purposes of the
foregoing, the term "Affiliates" shall mean any company in which Itochu
Techno-Science Corporation or any of its subsidiaries, divisions, or joint
ventures hold an equity or other capital investment in excess of $1,000,000. The
parties agree that the products which shall be considered to be "Competitive
Product s" as of the Effective Date are listed in EXHIBIT F (Competitive
Products).
3.2 MARKETING TEAM. Itochu shall establish a full time Marketing Team
that is dedicated exclusively to marketing, promoting and selling the Licensed
Software within Japan. Itochu shall ensure that the Itochu employees on such
Marketing Team use best efforts to promote and market the Licensed Sof tware in
Japan. The Marketing Team shall include, at a minimum, the following personnel:
(a) The "Itochu Marketing Manager," who will have overall
responsibility for coordinating the marketing, promotion, and distribution
efforts by Itochu for the Licensed Software and for managing the activities of
the Itochu Technical Services Manager, the Itochu Sales Director and the Itochu
Market ing Programs Manager (as described below);
6
<PAGE> 7
(b) The "Itochu Technical Services Manager," who will have
primary responsibility for directing, coordinating and implementing the
technical services and support activities related to installations of the
Licensed Software in Japan, which activities include without limitation customer
training pro grams, customer service, integration services and technical
support;
(c) The "Itochu Sales Director," who will have primary
responsibility for the directing, coordinating and implementing the sales and
distribution of the Licensed Software by Itochu in Japan; and
(d) The "Itochu Marketing Programs Director," who will have
primary responsibility for all activities in the marketing and promotion of the
Licensed Software, including without limitation advertising, seminar
coordination, sales communication development, brochures and other marketing
materials de velopment and trade show coordination.
Itochu shall appoint such other employees to the Marketing Team as are needed to
satisfy Itochu's obligation to use best efforts to market and sell the Licensed
Software in Japan.
3.3 PREPARATION OF LOCALIZED VERSIONS. Itochu shall be responsible for
utilizing the Localization Source Code to prepare the Japanese Localized
Versions of the Licensed Software (excluding the Ancillary Programs) and of any
new version thereof in accordance with a schedule to be agreed upon for e ach
such new version. Itochu's obligation in the immediately preceding sentence
shall be expressly conditioned upon Itochu's receipt from Siebel of such
technical support and assistance regarding the Licensed Software as Itochu may
reasonably request in connection with the preparation of Japanese Localized
Versions. All such localization efforts shall take place at Siebel's California
facility, at Itochu's expense. Employees and agents of Itochu will observe the
working hours, rules and holiday schedule of Siebel while working on Siebel's
premises and shall agree to such other reasonable conditions as Siebel may
require. Itochu shall also be responsible for translating the Documentation,
on-line help, and the Training Materials into Japanese, as set forth in EXHIBIT
G ("Core Documentation, Help and Training Related Materials"). Siebel will
provide ten (10) copies in hard copy and one (1) copy each in electronic format
of such Documentation, on-line help and Training Materials in the English
language no later than ten (10) consecutive business days following the
Effective Date. Itochu shall use best efforts to assure that such localized
versions are of the highest quality and faithfully and accurately translate into
Japanese the relevant information and materials in the Licensed Software, the
Documentation, on-line help and the Training Materials, and Itochu will use
commercially reasonable efforts to complete the localization of each Licensed
Software version with in sixty (60) days of the release of such version to
Itochu. In order to facilitate the localization process, Siebel agrees to
provide Itochu with beta releases of such versions as soon as they become
available in the United States. Upon completion of the development of each
Localized Version, Ito chu shall deliver a master copy of the localization to
Siebel and Siebel shall have thirty (30) business days in which to accept or
reject the same. Siebel shall own the entire right, title and interest in and to
all such localized and/or translated versions of the Licensed Software,
Documentation , on-line help and Training Materials.
7
<PAGE> 8
Itochu shall have exclusive responsibility for the development, packaging and
quality assurance of the Japanese Localized Versions. Itochu shall indemnify
Siebel from any liability, damages, costs and expenses caused by any errors in
such localizations or translations. In the event that Siebel a ccepts such
master copy of the Localized Version of the Licensed Software within the period
described above, such Localized Version shall be included within the definition
of the Licensed Software and Itochu retains such rights as set forth in Sections
2.2 ("License Grant") and 2.3 ('Right to Grant End User Sublicenses") of this
Agreement for such Localized Version. In the event that Siebel rejects any
master copy of a Localized Version, Itochu shall have no right to distribute
such version.
3.4 INSTALLATION AND TRAINING. Itochu shall be responsible for
conducting all activities required to install the Licensed Software at End User
locations in Japan and for providing training to the End Users and any systems
integrators involved in such installation. Siebel shall provide to Itochu,
promptly after the Effective Date, an English copy of all Siebel training
materials relating to the Licensed Software, and Itochu shall translate such
materials into Japanese (the English and Japanese versions of the Siebel
training materials are referred to collectively as the "Training Materials"). A
complete list of training courses, as covered by the Training Materials, that
Itochu shall utilize in training customers and integrators on the Licensed
System is set forth on EXHIBIT H (Training Courses) attached hereto. Itochu
shall provide such installation for End User customers located in Japan and
licensed by Siebel or any third parties, at Siebel's request and Itochu may
charge a reasonable fee to such End Users for such installation. Itochu shall
also conduct the training related activities for such End Users, at such End
User's request, and charge a reasonable fee to such End Users for such
training. All such installation and training shall be conducted with the highest
level of professionalism and quality.
3.5 TECHNICAL SUPPORT AND MAINTENANCE. Itochu shall be responsible for
providing First-Line Support with respect to technical questions, support
problems, and Error evaluation and correction to all End Users of Licensed
Software in Japan (including End Users licensed directly by Siebel or any thi rd
parties) who have entered into the Software Maintenance Agreement with Itochu,
as set forth in Section 6.9 ("Software Maintenance and Support Services") of
this Agreement, or an agreement with Siebel (or a third party appointed by
Siebel) for the provision of First-Line or Second-Line Support re lated to the
Licensed Software to any End User in Japan provided that Itochu shall receive
appropriate payment for such agreement as set forth in Section 6.5 ("Siebel
Payments") or such other payment as the parties may mutually agree to in the
event the Co-Exclusive Period ends; provided, however, that Siebel reserves the
right to provide (or appoint others to provide) First-Line Support to End Users
in the event Itochu does not have qualified technical personnel, Itochu is not
adequately equipped to provide such First-Line Support or Itochu is not
providing quality support to End Users. Si ebel shall be responsible for
providing to Itochu Second-Line Support with respect to any such support or
Error correction issues arising from End Users located in Japan. Such technical
support obligations are as follows:
8
<PAGE> 9
(a) First-Line Support. Itochu will provide First-Line Support
to all Licensed Software End Users located in Japan. Itochu shall provide
telephone and other appropriate contact points so that such End Users may
contact Itochu regarding technical and support questions and Errors or other
problem s regarding use of the Licensed Software. Itochu shall inform such End
Users that End Users must contact Itochu for resolution of all support,
technical questions and Error correction issues with respect to the Licensed
Software. Itochu shall use best efforts to answer all such technical and supp
ort questions promptly and accurately and to provide workaround or other
solutions to any Errors or problems reported by such End Users. If, after using
its best efforts, Itochu is not able to answer a support question or to correct
a reported material Error or problem in the Licensed Software, It ochu may
contact Siebel for Second-Line Support, as provided below.
(b) Second-Line Support. Siebel will offer second line support
to Itochu in the form of an eight (8) hours per day, five (5) days per week
telephone hot line and email support which qualified Itochu support personnel
can use after attempting to resolve support or Error correction problems relatin
g to the Licensed Software for (i) a diagnosis of problems or performance
deficiencies of the Licensed Software, and (ii) a resolution of problems or
performance deficiencies of the Licensed Software. If Itochu requests Siebel to
provide applications support or Error correction at a customer site or at
Itochu, Itochu agrees to pay Siebel for services in accordance with Siebel's
then current List Price for such services and to reimburse Siebel all its
out-of-pocket expenses, including travel and accommodations, in providing such
support.
3.6 SOFTWARE MAINTENANCE AND SUPPORT SERVICES FOR PROGRAMS OTHER THAN
LIMITED PRODUCTION PROGRAMS. Software Maintenance and Support Services shall be
provided under Siebel's Software Maintenance and Support Services policies in
effect on the date the Software Maintenance and Support Services is o rdered,
subject to the payment by Itochu of the applicable fees. Siebel reserves the
right to alter such policies from time to time, in its reasonable discretion, on
ninety (90) days' prior notice to Itochu. Itochu hereby agrees to purchase
Software Maintenance and Support Services from Siebel fo r the term of this
Agreement for all Licensed Software which is licensed to Itochu (for internal
purposes only) pursuant to this Agreement. Itochu is hereby authorized to
distribute any and all Error corrections and Updates which it receives from
Siebel as a part of Software Maintenance and Suppor t Services to all of its End
User customers and sublicensees.
3.7 END USER VISITS. Siebel may visit the End Users located in Japan
(directly licensed by Itochu) from time to time to stay abreast of customer
requirements and to evaluate features for potential future products provided
that Siebel notifies Itochu in writing in advance regarding such visits. I tochu
agrees to provide Siebel reasonable assistance in arranging such visits with End
Users.
3.8 ITOCHU WARRANTY. Itochu warrants that it maintains the facilities,
resources and experienced personnel necessary to market and distribute Licensed
Software and to perform the necessary installation, training and maintenance
services related to such Licensed Software and otherwise to fulfill i ts
obligations under this Agreement and that it is not precluded by any existing
arrangement, contractual or otherwise, from entering into this Agreement.
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<PAGE> 10
3.9 ITOCHU INDEMNITY. Itochu will indemnify Siebel for, and hold Siebel
harmless from, any loss, expense, damages, claims, demands, or liability arising
from any claim, suit, action or demand resulting from: (a) the negligence,
error, omission or willful misconduct of Itochu or its representati ves or
sublicensees; (b) the breach of any terms of this Agreement; or (c) Itochu's
non-compliance with applicable laws and regulations pursuant to Section 14
("Compliance with Laws").
3.10 SIEBEL WARRANTY. Siebel warrants and covenants that it has and
will during the License Term take all actions reasonably necessary and
appropriate to maintain the right to grant Itochu to use, reproduce, or
sublicense the Licensed Software under this Agreement.
4. DELIVERY AND ACCEPTANCE.
4.1 DELIVERY OF LICENSED SOFTWARE. Within ten (10) business days after
the Effective Date of this Agreement, Siebel shall deliver to Itochu one copy,
appropriate for reproduction, of the Licensed Software and of the Documentation
and the Training Materials, in English. In the event that Siebel de velops any
Update of the Licensed Software or creates revised or updated versions of the
Documentation and/or Training Materials, Siebel shall deliver to Itochu one (1)
copy of such Licensed Software, Documentation and/or Training Materials no later
than ten (10) business days after the commercial release of such version to its
distributors and End Users.
4.2 ACCEPTANCE. Itochu acknowledges that it is familiar with the
Licensed Software and that such Licensed Software shall therefore be deemed to
have been accepted by Itochu concurrent with delivery pursuant to Section 4.1
("Delivery of Licensed Software") above.
4.3 LOCALIZATION SOURCE CODE. The Localization Source Code will be made
available to Itochu at Siebel's California facility for the limited purpose of
preparing Japanese localizations pursuant to Section 3.3 ("Preparation of
Localized Versions"), and Itochu agrees that it will not copy such Local ization
Source Code or use it outside of Siebel's California facility.
5. COVENANTS AND RESTRICTIONS REGARDING LICENSED SOFTWARE.
5.1 LICENSE RESTRICTIONS. Itochu acknowledges that, except as
explicitly stated in this Agreement, the Agreement does not grant Itochu any
right or license under the Licensed Software or any proprietary rights therein,
and no license or other rights shall be created by implication or estoppel. I n
particular, but without limiting the generality of the foregoing, no right or
license in or to source code for the Licensed Software is granted hereunder,
except with respect to the Localization Source Code for the limited purpose of
preparing the Japanese localization. Itochu covenants that it shall not prepare,
and it shall not permit any others to prepare, any derivative works of the
Licensed Software, or otherwise modify or revise any of the software therein,
except specifically to create the Japanese localization. Itochu covenants that
it shall not use, reproduce, distribute or sell the Licensed Software in any
manner or for any purpose except as specifically permitted under this Agreement.
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5.2 PROHIBITION ON DECOMPILING. Itochu acknowledges that the Licensed
Software contains the valuable information of Siebel and its suppliers, and
Itochu agrees not to cause or permit the modification, reverse engineering,
translation, disassembly, or decompilation of, or otherwise to attempt to derive
the source code of the Licensed Software, whether in whole or in part.
5.3 LIMITATION ON DISTRIBUTION. Itochu shall use best efforts to assure
that it distributes Licensed Software only to End Users who will use the
Licensed Software, in whole or in part, in Japan.
5.4 PROPRIETARY NOTICES. In order to protect Siebel's and its
licensor's copyright and other ownership interests in the Licensed Software,
Itochu agrees that as a condition of its rights hereunder, each copy of the
Licensed Software and related documentation of Siebel reproduced by or on behalf
o f Itochu shall contain the same proprietary notices on the media, within the
code and on the Documentation which appear on the media or within the code of
the Licensed Software or on the Documentation delivered by Siebel to Itochu and
as otherwise reasonably required by Siebel.
5.5 U.S. GOVERNMENT END USER LICENSING. The Licensed Software is
"commercial computer software" and the Documentation is "commercial computer
software documentation" as such terms are used in 48 C.F.R. 12.212 (SEPT 1995).
Itochu shall only provide the Licensed Software and Documentation to agenci es
of the U.S. Government in accordance with the following:
(i) for acquisition by or on behalf of civilian agencies, Itochu shall
provide the Licensed Software and Documentation consistent with the
policy set forth in 48 C.F.R. 12.212 (SEPT 1995); or
(ii) for acquisition by or on behalf of units of the Department of
Defense, Itochu shall provide the Licensed Software and Documentation
consistent with the policies set forth in 48 C.F.R. 227.7202-1 (JUNE
1995) and 227.7202-3 (JUNE 1995).
5.6 END USERS OUTSIDE JAPAN. In the event Itochu identifies a potential
End User that desires a license granting rights to use the Licensed Software
solely at location(s) outside Japan, Itochu shall promptly identify such
potential End User to Siebel. Siebel shall have the sole right to grant su ch
End User the rights to use the Licensed Software. Itochu may license End Users
to use the Licensed Software at locations worldwide, provided that such End
Users will use the Licensed Software, in whole or in part, in Japan and provided
further that Itochu pays to Siebel the license fees require d hereunder.
5.7 FOREIGN GOVERNMENT AGREEMENTS. Itochu will take all reasonable
steps in making proposals and agreements with foreign governments other than the
United States which involve the Licensed Software and/or related documentation
to ensure that Siebel's proprietary rights in such Licensed Software a nd
related documentation receive the maximum protection available from such foreign
government for commercial computer software and related documentation developed
at private expense.
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CONFIDENTIAL TREATMENT REQUESTED
6. PAYMENTS.
6.1 ITOCHU LICENSE PAYMENTS. [ *** ] of the licensing revenues received
for distribution and sublicensing of Licensed Software by Itochu in Japan will
accrue to the benefit of Itochu, subject to Itochu's obligation to pay Siebel
license fees as provided herein. For each copy of Licensed Software distributed
to, or produced by, an End User for use in Japan pursuant to an agreement with
Itochu, Itochu shall pay Siebel a license fee of [ *** ] of the appropriate List
Price for the specific programs in the Licensed Software, and for each copy of
Licensed Software distributed to, or produced by, an End User for use outside of
Japan, Itochu shall pay Siebel a license fee of [ *** ] of its receipts (but in
no event less than the appropriate List Price for the specific programs in the
Licensed Software), as determined according to the schedule on EXHIBIT C
(Current Software List Price) with respect to the relevant category for the
number of Authorized Users permitted in the specific license to the End User.
Such license fee obligation will accrue upon the delivery, or reproduction, of
the Licensed Software to or by the End User. Itochu also shall pay [ *** ] for
each copy of the Training Materials (either English or Japanese version)
distributed to a customer. This [ *** ] fee shall be due for each set of
Training Materials distributed to a customer or third party for training or
educational purposes of any kind, including without limitation, a set of
Training Materials distributed to each student in any training class. Siebel
retains the right to amend the current list price for the specific programs in
the Licensed Software attached hereto as Exhibit C (Current Software List Price)
upon ninety (90) days prior written notice to Itochu. In the event of any price
increase, Siebel shall be bound to honor any orders placed at the prices in
effect prior to the effective date of the subject price increase (which
effective date shall be the 91st day following Siebel's written notice des
cribed in the immediately proceeding sentence), and in the event of any price
decrease, unfulfilled orders for the Licensed Software affected by the price
reduction shall be adjusted to reflect the price decrease.
6.2 ITOCHU END USER PAYMENT. In the event that Itochu licenses the
Licensed Software for its own internal data processing and business operations,
it shall pay Siebel a license fee equal to [ *** ] of the List
Price, as determined according to the Schedule in EXHIBIT C (Current Software
List Price).
6.3 AMOUNTS DUE FROM ITOCHU TO SIEBEL. Amounts due from Itochu to
Siebel pursuant to Section 6.1 ("Itochu License Payments") or 6.2 ("Itochu End
User Payments") shall be payable within thirty (30) days after the end of each
calendar quarter when such distributions or license occurred, subject to an
applicable credit in the aggregate amount of all minimum payments actually made
as provided in Section 6.4 ("Minimum Payment Obligations During Co-Exclusive
Period") below.
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CONFIDENTIAL TREATMENT REQUESTED
6.4 MINIMUM PAYMENT OBLIGATIONS DURING CO-EXCLUSIVE PERIOD.
6.4.1 In consideration for the Co-Exclusive rights granted to
Itochu under this Agreement during the first year of this Agreement commencing
on the Effective Date and ending December 31, 1996 (the initial "Co-Exclusive
Period"), Itochu also agrees to pay to Siebel, subject to the credits provided b
elow, the following irrevocable and non-refundable minimum license amounts (the
"Minimum Co-Exclusive Fees") on the indicated dates provided that Itochu shall
have received from Siebel appropriate invoices therefor (i) immediately upon the
Effective Date for the first payment, and (ii) no later tha n thirty (30) days
prior to the due date for the subsequent payments:
<TABLE>
<CAPTION>
Payment Amount Due Date
- -------------- --------
<C> <C>
$[***] Within thirty (30) days after the Effective Date
but not later than December 22, 1995 \
$[***] March 15, 1996
$[***] June 15, 1996
</TABLE>
6.4.2 By the mutual written agreement of both Siebel and
Itochu, the parties may extend the Co-Exclusive Period for an additional one (1)
year term ending December 31, 1997. The parties agree to use their collective
reasonable efforts to reach such mutual agreement to extend the Co-Exclusive
Perio d by no later than October 30, 1996. In the event the Co-Exclusive Period
is so extended, Itochu agrees to pay Siebel, subject to the credits provided
below, the following irrevocable and non-refundable minimum license amounts (the
"Additional Minimum Co-Exclusive Fees") on the indicated dates pro vided that
Itochu shall have received from Siebel an appropriate invoice no later than
thirty (30) days prior to the due date for the subsequent payments:
<TABLE>
<CAPTION>
Payment Amount Due Date
- -------------- --------
<C> <C>
$[***] December 15, 1996
$[***] March 15, 1997
$[***] June 15, 1997
</TABLE>
In the event the parties agree to extend the Co-Exclusive Period to include
calendar year 1998, then the parties shall also agree upon the minimum license
amounts to be paid by Itochu to Siebel with respect to calendar year 1998.
In the event the parties do not extend the Co-Exclusive Period beyond December
31, 1996, then: (i) the payments which Itochu would otherwise be entitled to
under Section 6.5 ("Siebel Payments") shall be of no force or effect commencing
January 1, 1997, (ii) Itochu's rights hereunder shall convert to a non-exclusive
basis and Itochu shall retain such rights for the rest of the License Term on
such basis. For purposes of clarification, if the Co-Exclusive Period ends,
Itochu shall be free to promote, market, license or distribute any Competitive
Products.
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CONFIDENTIAL TREATMENT REQUESTED
6.4.3 Itochu shall be entitled to credit against a specific
Minimum Co-Exclusive Fee (and the Additional Minimum Co-Exclusive Fee, if
applicable) owed to Siebel all license fees paid to Siebel under Section 6.1
("Itochu License Payments") prior to the due date of such Minimum Co-Exclusive
Fee (or the Additional Minimum Co-Exclusive Fee, if applicable) payment (the
"Prior License Fees"), to the extent such license fees have not been credited
against any earlier Minimum Co-Exclusive Fee (or the Additional Minimum
Co-Exclusive Fee, if applicable) payment.
6.4.4 To the extent that any portion of a Minimum Co-Exclusive
Fee(or the additional Co-Exclusive Fee, if applicable) remains after deducting
Prior License Fees therefrom, Itochu shall have the right to carry forward and
apply all of such remaining portion as a credit against all future fees payable
by Itochu pursuant to section 6.1 above, subject to the restrictions contained
in Section 6.4.5 and 6.4.6 below:
6.4.5 For purposes of clarification, any portion of the
aggregate U.S. [***] Minimum Co-Exclusive Fee amount which has not been
credited against license fees owed pursuant to Section 6.1 ("Itochu License
Payments") as of the expiration of the initial Co-Exclusive Period shall be
applied as a credit against license fees otherwise payable to Siebel thereafter
whether or not Itochu has exercised the right to extend the Co-Exclusive Period
described in Section 6.4.2 above; provided, however, that in no event shall such
credit be carried forward longer than December 31, 1997.
6.4.6 For purposes of clarification, any portion of the
aggregate U.S. [***] Additional Minimum Co-Exclusive Fee amount (if
Itochu exercises such right described in Section 6.4.2) which has not been
credited against license fees owed pursuant to Section 6.1 ("Itochu License
Payments") as of the expiration of the succeeding Co-Exclusive Period shall
be applied as a credit against license fees otherwise payable to Siebel
thereafter; provided, however, that in no event shall such credit be carried
forward longer than December 31, 1998.
6.5 SIEBEL PAYMENTS. During any Co-Exclusive Period of this Agreement,
in the event that (i) Siebel or any third party licenses the Licensed Software
to any End User for use in Japan ("Siebel Japanese License Agreement"), or (ii)
Siebel (or any third party appointed by Siebel) enters into an agreement for
the provision by Siebel (or any third party appointed by Siebel) of First-Line
or Second-Line Support related to the Licensed Software to any End User in Japan
("Siebel Japanese Support Agreement"), Siebel shall pay Itochu a credit equal to
[***] of Siebel's Net End User Price for such Siebel Japanese License
Agreements and Siebel Japanese Support Agreements ("Siebel Payment
Amounts"). Such Siebel Payment Amounts shall not be due and payable to Itochu
unless and until Siebel has received payment of the applicable Net End User
Price. Siebel shall wire transfer the Siebel Payment Amounts to Itochu's
designated bank account within 30 days following the month when the later of the
following two events has occurred: (i) Siebel has received payment of the
applicable Net End User Price, or (ii) the date Siebel has shipped the Licensed
Software to the applicable End User for use in Japan. With respect to Siebel
Japanese Support Agreements, no payments will be due and payable by Siebel with
respect to any contract where Siebel has reasonably determined that Itochu does
not have qualified technical personnel Itochu is not adequately equipped to
provide such First-Line Support with respect to such End User or
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<PAGE> 15
Itochu is not providing quality support to End Users. Siebel will keep
and maintain, for a period of three (3) years, proper records and books of
account relating to such Siebel Japanese License Agreements and Siebel Japanese
Support Agreements. I tochu may inspect, or have an independent audit firm
inspect on its behalf, any such records to verify Siebel's compliance with its
payments obligations hereunder. Any such inspection will be conducted during
regular business hours at the recordholder's offices in a manner that does not
unreasonab ly interfere with the recordholder's business activities. Such
inspection shall be at Itochu's cost and expense, unless the inspection reveals
that Siebel underpaid the amount actually owing by Five Percent (5%) or more, in
which case Siebel shall pay such costs and expenses. Such audits may be c
onducted no more than once in any twelve (12) month period. In the event that
Itochu wishes to inspect such books and records, the recordholder will make all
relevant records available. For the End Users which Siebel grants the right to
reproduce the User Programs, Siebel shall use commercially r easonable efforts
to compel such End Users to permit Itochu to inspect the records of such
sublicensee as provided in this Section. Siebel shall owe interest at the rate
of Two Percent (2%) per month or the highest legal interest rate, whichever is
lower, on any past due balances pursuant to this Section 6 ("Payments").
6.6 REPORTS. Within fifteen (15) days of the end of each calendar
quarter within the License Term, (i) Itochu shall render a statement to Siebel
showing in detail the number of units of Licensed Software and Training
Materials distributed by Itochu or sublicensed for reproduction by an End User s
ublicensee of Itochu during the previous calendar quarter, the amount owing
Siebel therefor, the names and locations of the End Users, and (ii) Siebel shall
render a statement to Itochu showing in detail the number of units of Licensed
Software distributed by Siebel or any third party during the previous month,
Siebel's gross receipts, the Net End User Price thereof, and the names and
locations of the End Users, and the amount and due date for the transaction.
6.7 TAXES. Itochu shall pay any sales, use, property, license, value
added, withholding, excise or similar tax or duty, or any tax imposed by the
Government of Japan on the income of Siebel from any payments pursuant hereto,
whether federal, state or local, that may be imposed upon or with respec t to
the Licensed Software, exclusive of taxes on Siebel's net income. Siebel
acknowledges and agrees that Itochu's payments to Siebel pursuant to this
Agreement to be paid by Itochu under this Agreement may be subject to
withholding income tax based on the income tax laws of Japan (the "USA/Japan Tax
Convention"). Notwithstanding anything to the contrary to the foregoing, in the
event withholding tax payments must be made under the USA/Japan Tax Convention
or such other applicable laws, Itochu shall: (i) withhold such tax on behalf of
Siebel, and (ii) pay such required tax to the Japane se tax authority on behalf
of Siebel, and (iii) transmit to Siebel an official tax receipt issued by the
Japanese tax authority after such tax payment. For this purposes, Siebel shall
execute and deliver to Itochu an appropriate form and Itochu shall execute such
application form and file it with a competent tax office in Japan in order to
reduce an applicable tax rate of withholding income tax in accordance with the
USA/Japan Tax Convention.
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<PAGE> 16
CONFIDENTIAL TREATMENT REQUESTED
Siebel shall pay any sales, use, property, license, value added,
withholding, excise or similar tax or duty, or any tax imposed by the Government
of United States on the income of Itochu from any payments pursuant hereto,
whether federal, state or local, that may be imposed upon or with respect to the
Licensed Software, exclusive of taxes on Itochu's net income. Notwithstanding
anything to the contrary to the foregoing, in the event withholding tax payments
must be made under the income tax laws of the United States or such other
applicable laws, Siebel shall: (i) withhold such tax on beh alf of Itochu, and
(ii) pay such required tax to the tax authority on behalf of Itochu, and (iii)
transmit to Itochu an official tax receipt issued by the tax authority after
such tax payment.
6.8 RECORDS AND INSPECTION RIGHTS. Itochu will keep and maintain, for a
period of three (3) years, proper records and books of account relating to its
distribution and sublicensing of Licensed Software to End Users. Siebel may
inspect, or have an independent audit firm inspect on its behalf, any such
records to verify Itochu's compliance with its payments obligations hereunder.
Any such inspection will be conducted during regular business hours at the
recordholder's offices in a manner that does not unreasonably interfere with the
recordholder's business activities. Such inspection shall be at Siebel's cost
and expense, unless the inspection reveals that Itochu underpaid the amount
actually owing by [ *** ] or more, in which case Itochu shall pay
such costs and expenses. Such audits may be conducted no more than once in any
twelve (12) month period. In the event that Siebel wishes to inspect such books
and records, the recordholder will make all relevant records available. For the
End Users which Itochu grants the right to reproduce the User programs in
accordance with Section 2.3 (b), Itochu shall use commercially reasonable
efforts to compel such End Users t o permit Siebel to inspect the records of
such sublicensee as provided in this Section. Itochu shall owe interest at the
rate of Two Percent (2%) per month or the highest legal interest rate, whichever
is lower, on any past due balances pursuant to this Section 6 ("Payments").
6.9 SOFTWARE MAINTENANCE AND SUPPORT SERVICES. Itochu shall use
commercially reasonable efforts to enter into Software Maintenance agreements
with End Users (including End Users licensed directly by Siebel or by third
parties). Such Software Maintenance agreements shall provide for services subs
tantially equivalent to the Siebel Maintenance and Support Services Schedule
attached hereto as EXHIBIT I (Siebel Maintenance and Support Services Schedule)
as may be modified by Siebel from time to time during the term of this Agreement
to revise, delete and add Maintenance and Support related ser vices. Itochu
agrees to pay Siebel [ *** ] of initial maintenance and any renewal maintenance
fees which it received from its End Users (excluding consumption tax), but in no
event will it pay Siebel less than [ *** ] of the cumulative aggregate List
Price of all Licensed Software which it has distributed to End Users from the
Effective Date during each twelve (12) month period of this Agreement. If, at
the end of each twelve (12) month period, the fees actually paid to Siebel are
less than [ *** ] of the cumulative aggregate List Price of all Licensed
Software which Itochu has distributed to End Users from the Effective Date (the
"[ *** ]"), Itochu shall promptly remit the difference to Siebel. Such fees
will be paid by Itochu to Siebel on a quarterly basis as they accrue to Itochu
within thirty (30) days of the end of the quarter in U.S. Dollars calculated at
the exchange rate between U.S. Dollar and Japanese Yen, of which, exchange rate
shall be the T/T selling rate announced by the bank of Tokyo at the last day of
the respective calendar quarter. In consideration of such payment by Itochu,
Siebel shall provide Second Line support as described in Section 3.5 (b) to
Itochu.
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CONFIDENTIAL TREATMENT REQUESTED
6.10 SPECIAL PRICING TRANSACTIONS. The parties agree and acknowledge
that there may occur individual cases where a potential End User of Itochu may
seek to acquire the right to use the Licensed Software or maintenance and
support for the Licensed Software under special circumstances where it is n ot
economically feasible for Itochu to provide Licensed Software or maintenance and
support for the Licensed Software under the discounts or payment related
provisions set forth in this Agreement. When Itochu identifies such a
transaction, Itochu shall present such opportunity to Siebel, along with a
detailed written proposal to Siebel including the discounts Itochu proposes to
provide to such End User. If, in Siebel's reasonable discretion, Itochu's
proposal is accepted, the parties shall confirm their agreement in writing which
shall, among other things, specify that: (i) the parties shall split all of the
license, maintenance and support fees or other related fees due under the
transaction on an [ *** ] basis, and (ii) the [ *** ] set forth in
Section 6.9 shall not apply with respect to such transaction.
6.11 ITOCHU TECHNOLOGY INC. to Act as Agent for Itochu. The parties
agree that Itochu shall appoint Itochu Technology Inc. ("ITI"), located at 3100
Patrick Henry Drive, Santa Clara, California, 95054, a Delaware corporation and
subsidiary of Itochu Corporation, to act as an agent for and on behal f of
Itochu with Itochu's full authority to conduct the following activities: (i) to
receive shipments from Siebel, (ii) to place orders with Siebel, and (iii) to
make payments to Siebel. Itochu agrees and acknowledges that Itochu shall be
responsible for any acts or omissions of ITI with respect to any of these
activities.
7. LIMITED RIGHT TO USE TRADEMARKS.
7.1 GRANT OF LICENSE. Siebel hereby grants to Itochu under the terms
hereinafter set forth a non-exclusive license to use the trademarks and trade
names set forth in EXHIBIT J (Trademarks) hereto (the "Trademarks"), solely in
connection with the marketing, distribution and support of the Licensed Software
in Japan and only in the manner prescribed in this Agreement. Any other proposed
use of the Trademarks must be approved in writing by Siebel in advance of such
use. Itochu shall use the Trademarks in accordance with the terms of Siebel's
Trademark Use Policy as amended by Siebel from ti me-to-time, which contains
Siebel's policies and procedures describing the proper usage of the Trademarks
and other intellectual property. As Siebel revises this policy, it shall provide
an up-to-date copy to Itochu.
7.2 FORM OF USE. Itochu shall only use the Trademarks in the form(s)
approved in writing by Siebel, including the O symbol (and, upon registration of
the Licensed Mark, the (R) symbol), and an indication that Siebel is the owner
of the Trademarks.
7.3 NO USE OF IDENTICAL OR SIMILAR NAMES. Itochu shall not use as its
company name or a component thereof or on other products a mark or name
identical with or confusingly similar to the Trademarks except as permitted
herein.
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<PAGE> 18
7.4 REGISTRATION OF TRADEMARK. Siebel shall use reasonable efforts to
register in Japan the Trademarks. Itochu shall not attempt to register on its
behalf, or for its benefit, Trademarks.
7.5 PRIOR SUBMISSION OF SAMPLES. Upon periodic requests by Siebel,
Itochu shall submit to Siebel samples of advertising or other items bearing the
Trademarks prior to the use of such advertising or other items. Siebel shall
have the right to make reasonable objections to any such sample within f ifteen
(15) days of its submission on the grounds that Siebel believes in good faith
that the use of such advertising or other items by Itochu will be damaging to
the recognition value or reputation for quality associated with the Trademarks
or that the advertising or other items do not meet the st andards of quality
required by Siebel. In the event of such an objection, Itochu shall modify the
advertising or other items in accordance with the objection of Siebel prior to
the use of such advertising or other items.
7.6 NO OBJECTIONS TO VALIDITY. Itochu agrees not to raise or cause to
be raised any objections to the validity of the Trademarks or to the respective
rights of Siebel.
7.7 NOTIFICATION OF ADVERSE USE. Itochu shall promptly notify Siebel of
any adverse use by a third party of any of the Trademarks or of a mark or name
confusingly similar to any of the Trademarks and agrees to take no action of any
kind with respect thereto except with the prior written authoriza tion of
Siebel. Itochu further agrees to provide full cooperation with any legal or
equitable action by Siebel to protect its rights, title and interest in the
Trademarks.
7.8 INFRINGEMENT PROCEEDINGS. In the event of infringement of the
Trademarks by a third party, Siebel shall have the sole right to bring
proceedings (including notifications to the Customs Department objecting to the
importation of infringing goods) against the infringing party and to retain any
damages recovered in such proceedings. Itochu shall cooperate with Siebel in the
prosecution of any such infringement proceedings. Siebel shall indemnify and
hold harmless Itochu against any proceeding brought by a third party on a claim
that the Trademarks infringes upon the trademark or other i ntellectual property
rights of such third party. Itochu shall promptly notify Siebel in writing of
any such proceeding and shall provide complete authority, information and
assistance to Siebel in connection with such proceeding. Siebel shall have the
sole and exclusive authority and obligation t o defend and/or settle any
proceeding with respect to the Trademarks.
8. SOURCE CODE.
8.1 SOURCE CODE ESCROW. Siebel has placed, or will place within thirty
(30) days of the commencement of the License Term, documented and working order
copies of the source code of the User Programs and Server Programs under the
control of an escrow agent pursuant to the terms of an escrow agreeme nt which
provides for the release of the source code for such programs to Itochu in the
event one or more of the following conditions exists and is uncorrected for a
period of thirty (30) days: entry of an order as to Siebel under Title 11 of the
United States Code, the making by Siebel of a gener al assignment for the
benefit of creditors, the appointment of a general receiver or trustee in
bankruptcy of Siebel's business or
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property, or action by Siebel under any state insolvency or similar law
for the purpose of Siebel's bankruptcy, reorganization or liquidation.
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8.2 LICENSE. Effective solely in the event Itochu obtains the Licensed
Software source code pursuant to Section 8.1 ("Source Code Escrow"), Siebel
hereby grants to Itochu the right and license (subject to Itochu's payment
obligations under this Agreement) solely to use the Licensed Software sour ce
code for maintenance of the Licensed Software licensed to End Users in Japan.
8.3 PROTECTION OF SOURCE CODE. In the event of release of the Licensed
Software source code to Itochu, Itochu will protect the Licensed Software source
code with the same care and using the precautions which it uses to protect its
own source code. Itochu will limit access to the Licensed Softwar e source code
to its employees with a need to know which have agreed in writing to maintain
the confidentiality of such source code.
9. OWNERSHIP AND PROPRIETARY RIGHTS.
9.1 OWNERSHIP. Siebel and its suppliers shall retain all title,
copyright and other proprietary rights in and to the Licensed Software. Itochu
does not acquire any rights, express or implied, in the Licensed Software, other
than those specified in this Agreement. In the event that Itochu makes s
uggestions to Siebel regarding new features, functionality or performance that
Siebel adopts for the Licensed Software, such new features, functionality or
performance shall become the sole and exclusive property of Siebel, free from
any restriction imposed upon Siebel by the provisions of Section 15.1
("Non-disclosure").
9.2 ASSIGNMENT OF RIGHTS IN LOCALIZATIONS. Itochu hereby assigns to
Siebel any and all right and title, including without limitation copyright, it
may have in the Japanese translations and/or Localized Versions of the Licensed
Software, the Documentation, on-line help and the Training Materials a s
prepared by Itochu hereunder, including but not limited to any previous work
performed by Itochu pursuant to the Proprietary Information and Inventions
Agreement dated September 1, 1994. If Itochu has any rights, including without
limitation moral rights, in such Localized Versions or translatio ns that cannot
be assigned to Siebel, Itochu unconditionally and irrevocably waives enforcement
of such rights and all claims and causes of action of any kind against Siebel
and any of its licensees and customers with respect to such rights. Itochu
further agrees, at Siebel's request and expense, to consent to and join in any
action to enforce such rights. If Itochu has any rights, including without
limitation moral rights, in such Localized Versions and/or translations that
cannot be assigned to Siebel or waived by Itochu, Itochu hereby unconditionally
and irrevocably grants to Siebel dur ing the term of such rights the exclusive,
perpetual, worldwide, fully paid and royalty-free right and license, with the
right to sublicense through multiple tiers of sublicensees, to reproduce, create
derivative works or, distribute, perform, display, make, use and sell such
rights or any product claimed or covered by such rights.
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<PAGE> 21
9.3 SIEBEL'S RIGHTS IN FUTURE DEVELOPMENT WORKS. Itochu agrees and
hereby assigns all right, title and interest in any derivative works including
enhancements, new software modules or product options (collectively such future
versions of the Licensed Software and any derivative works including
enhancements, new software modules or product options shall be referred to as
"Future Development Work(s)"). For purposes this Section, any Itochu software
engineer or any other Itochu employee or independent contractor providing
assistance in connection with such Future Development Works shall be referred to
as "Itochu Development Personnel. If any Itochu or any Itochu Development
Personnel have any rights, including without limitation moral rights, in Future
Development Works that cannot be assigned to Siebel, Itochu (and any such Itochu
Development Personnel in their individual capaciti es, as may be necessary)
unconditionally and irrevocably waive enforcement of such rights and all claims
and causes of action of any kind against Siebel and any of its licensees and
customers with respect to such rights. Itochu and any such Itochu Development
Personnel (in their individual capacit ies, as may be necessary) further agree,
at Siebel's request and expense, to consent to and join in any action to enforce
such rights. If Itochu or any Itochu Development Personnel have any rights,
including without limitation moral rights, in such Future Development Works that
cannot be assigned to Siebel or waived by Itochu, Itochu and any Itochu
Development Personnel hereby unconditionally and irrevocably grant to Siebel
during the term of such rights the exclusive, perpetual, worldwide, fully paid
and royalty-free right and license, with the right to sublicense through
multiple tiers of sublicensees, to reproduce, create derivative works or,
distribute, perform, display, make, use and sell such rights or any product
claimed or covered by such rights. In the event that Itochu Development
Personnel have personal rights in the Future Development Works, Itochu agrees to
use its bes t efforts to cause such Itochu Development Personnel to execute such
documents as are necessary to grant Siebel the rights sought under this Section.
10. INFRINGEMENT INDEMNITY.
To the best of Siebel's knowledge, no portion of the Licensed Software
(excluding the Ancillary Program) infringes any third party intellectual
property rights. Siebel shall defend and indemnify Itochu against any and all
costs, liabilities, damages and expenses finally awarded against Itochu by a
court of competent jurisdiction (including settlement) arising out of a claim by
a third party that the Licensed Software infringes a copyright, patent or other
intellectual property rights of the United States or Japan, provided that: (a)
Itochu notifies Siebel in writing within thirty (30) days of the Itochu's
initial learning of a potential claim; (b) Siebel has sole control of the
defense of such claim and all related settlement negotiations; and (c) Itochu
provides Siebel, at Siebel's reasonable expense, with the assistance,
information and authority necessary to perform Siebel's obli gations under this
Section. Notwithstanding the foregoing, Siebel shall have no liability for any
claim of infringement based on (i) use of a superseded or altered release of
Licensed Software if the infringement would have been avoided by the use of a
current unaltered release of the Licensed Sof tware, which Siebel provided to
Itochu, or (ii) use of the Licensed Software in combination with any other
software, hardware or data where in the absence of such combination the Licensed
Software would not have been infringing.
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In the event the Licensed Software is held or believed by Siebel to
infringe, Siebel shall have the option, at its expense, to (a) modify the
Licensed Software to be non-infringing provided that Siebel maintains the
overall functionality of the Licensed Software; (b) obtain for Itochu and/or End
Users a license to continue using the Licensed Software; or (c) terminate this
Agreement with respect to the infringing Licensed Software and refund the
license fees paid for such Licensed Software, such amount to be reduced by
Twenty Percent (20%) for each year of each Itochu End User's use thereo f. This
Section states Siebel's entire liability and Itochu's exclusive remedy for
infringement.
11. LIMITED WARRANTIES AND DISCLAIMERS.
11.1 LIMITED PROGRAM WARRANTY. Siebel warrants for a period of one (1)
year from the date on which the Licensed Software is first delivered to Itochu
pursuant to Section 4.1 ("Delivery of Licensed Software") hereunder, that the
unmodified version of the Licensed Software will perform in all mater ial
respects the functions described in the Documentation when operated on a
platform which is supported by Siebel.
11.2 LIMITED MEDIA WARRANTY. Siebel warrants that the tapes, diskettes
or other media upon which Licensed Software is delivered by Siebel to Itochu to
be free of defects in materials and workmanship under normal use for ninety (90)
days from the date of delivery by Siebel.
11.3 LIMITED SERVICES WARRANTY. Siebel warrants that any services
contracted to be performed by Siebel pursuant to this Agreement shall be
performed in a manner consistent with generally accepted industry standards.
This warranty shall be valid for ninety (90) days from performance of service.
11.4 DISCLAIMERS. Siebel does not warrant that the Licensed Software
will meet Itochu's requirements, that the Licensed Software will operate in the
combinations which Itochu may select for use, that the operation of the Licensed
Software will be uninterrupted or error-free, or that all Program e rrors will
be corrected. Limited Production Licensed Software, pre-production releases of
Licensed Software, and computer-based training products are distributed "AS IS".
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED OR STATUTORY, INCLUDING WIT HOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11.5 EXCLUSIVE REMEDIES. Itochu must report any breach of the
warranties contained in this Section 11 to Siebel during the relevant warranty
period, and Itochu's exclusive remedy and Siebel's entire liability for such
breach shall be:
(a) FOR LICENSED SOFTWARE. To correct or provide a workaround
for reproducible Errors that cause breach of this warranty.
(b) FOR MEDIA. The replacement of defective media, provided
that Itochu shall acquire an RMA number from Siebel before returning defective
media to Siebel.
22
<PAGE> 23
(c) FOR SERVICES. The reperformance of the services, or if
Siebel is unable to perform the services as warranted, Itochu shall be entitled
to recover the fees paid to Siebel for the unsatisfactory services.
12. LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF
PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN
ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN A DVISED OF THE
POSSIBILITY OF SUCH DAMAGES. Notwithstanding the foregoing, Siebel's lost
revenue caused by a breach by Itochu shall constitute a direct damage. Except as
provided for under Section 10 ("Infringement Indemnity") of this Agreement,
Siebel's liability for damages hereunder shall in no event exceed the amount of
fees paid by Itochu under this Agreement, and if such damages result from
Itochu's use of the Licensed Software or services, such liability shall be
limited to fees paid for the relevant Program or services giving rise to the
liability.
The provisions of this Agreement allocate the risks between Siebel and
Itochu. Siebel's pricing reflects this allocation of risk and the limitation of
liability specified herein.
13. TERM AND TERMINATION.
13.1 TERM. This Agreement shall commence on the Effective Date and
shall continue in force for an initial term through December 31, 1998 (the
"Initial Term"). The Agreement may be extended after the Initial Term for
successive one (1) year terms by mutual agreement of the parties. Siebel shall h
ave no obligation to renew or extend the term of the Agreement, and no payments,
liabilities or damages shall be due Itochu, or shall be imposed upon Siebel, for
its decision to terminate or not to renew the Agreement.
13.2 TERMINATION FOR CAUSE. Either party may terminate this Agreement,
by written notice to the other party: (a) upon the material failure of the other
party to observe, keep or perform any of the covenants, terms or conditions
herein (including the failure to pay sums owed to the other party wh en due), if
such default continues for thirty (30) days after written notice by the other
party, (b) upon the institution by or against either party of insolvency,
receivership or bankruptcy proceedings or any other proceedings for the
settlement of its debts, (c) upon either party's assignment for the benefit of
creditors, or (d) upon either party's dissolution or ceasing to do business.
23
<PAGE> 24
CONFIDENTIAL TREATMENT REQUESTED
13.3 PAYMENT OF DAMAGES FOR TERMINATION BY SIEBEL FOR CAUSE. In the
event Siebel, during the first year of the Co-Exclusive Period, terminates the
Agreement for cause under Section 13.2 ("Termination for Cause"), Itochu shall
immediately thereafter pay to Siebel the difference between [***] and the
total license fees paid to Siebel by Itochu prior to such termination under the
Agreement (if less than [***]). In the event Siebel, during the second year
of the Co-Exclusive Period, terminates the Agreement for cause under Secti on
13.2 ("Termination for Cause"), Itochu shall immediately pay to Siebel the
difference between [***] and the total license fees paid to Siebel by Itochu
prior to such termination under the Agreement (if less than [***]). The
parties acknowledge and agree that the damage to Siebel due to the early
termination of the Agreement by Siebel for cause cannot readily be measured but
will, in any event, be significant, and that the remedy for such damages set
forth in this Section provides a reasonable and efficient method of compensa
ting Siebel for such damages. Itochu's payment of such amount shall be Siebel's
sole and exclusive remedy for a termination of this Agreement by Siebel for
cause under Section 13.2; provided; however, that Siebel reserves all other
rights and remedies available under copyright, patent, trademark, trade secret
and other applicable laws for a breach by Itochu of its obligations under
Section 5 ("Covenants and Restrictions Regarding Licensed Software") and Section
15.1 ("Non-disclosure").
13.4 PAYMENT OF DAMAGES FOR TERMINATION by Itochu for Cause.
Notwithstanding any provision to the contrary contained in Sections 6.4.1 or
6.4.2, in the event Itochu during the term of this Agreement, terminates this
Agreement for cause under Section 13.2 ("Termination for Cause") due to Siebel,
S iebel shall immediately thereafter pay to Itochu any portion of the Minimum
Co-Exclusive Fees (or the Additional Minimum Co-Exclusive Fee, if applicable) as
incurred pursuant to Section 6.4.4 above) which has not been credited against
license fees owed pursuant to Section 6.1 ("Itochu License Payme nt") as of the
termination of this Agreement. Siebel's payment of such amount shall be Itochu's
sole and exclusive remedy for a termination of this Agreement by Itochu for
cause under Section 13.2.
13.5 EFFECTS OF TERMINATION. Upon expiration or termination of this
Agreement: (a) all licenses and rights granted to the parties shall terminate,
except as set forth below or in Section 13.7 ("Survival"); (b) each party shall
refrain from representing themselves as a party to this Agreement; (c) any End
User sublicenses granted hereunder will not be affected; and (d) any other
rights of either party which may have accrued up to the date of termination
shall not be affected.
13.6 LIMITATION OF LIABILITY ON TERMINATION. Notwithstanding the
foregoing, upon expiration or termination, neither party will be liable to the
other party, because of such termination, for compensation (except for accrued
compensation and except as provided in Section 13.3 ("Payment of Damages f or
Termination by Siebel for Cause") or Section 13.4 ("Payment of Damages for
Termination by Itochu for Cause")), reimbursement or damages on account of the
loss of prospective profits or anticipated sales or on account of expenditures,
inventory, investments, leases or commitments in connection wi th the business
or goodwill of Siebel or Itochu.
24
<PAGE> 25
13.7 SURVIVAL. Sections 3.9 ("Itochu Indemnity"), 5.2 ("Prohibition on
Decompiling"), 6 ("Payments") except that Section 6.4 shall not survive in the
event of a termination of this Agreement by Itochu for cause under Section 13.4,
7.8 ("Infringement Proceedings"), 9 ("Ownership and Proprietary Ri ghts"), 10
("Infringement Indemnity"), 12 ("Limitation of Liability") and 15
("Miscellaneous") shall survive the termination of this Agreement; provided,
however, that Section 15.1 ("Non-disclosure") shall survive expiration or
termination of this Agreement for five years. In the event that Siebel obtains a
release of the Licensed Software source code from escrow pursuant to Section 8
("Source Code") at or prior to such termination, the provisions of Paragraphs
8.2 ("License") and 8.3 ("Protection of Source Code") shall also survive into
perpetuity. In addition, the confidentiality and non -disclosure provisions
EXHIBIT D shall also survive into perpetuity.
14. COMPLIANCE WITH LAWS.
14.1 COMPLIANCE WITH LAW AND REGULATIONS. Itochu shall act in strict
compliance with all applicable laws, ordinances, regulations and other
requirements of any government authority pertaining to Itochu's activities under
the Agreement and shall provide, pay for, and keep in good standing all perm
its, licenses or other consents necessary for such activities.
14.2 EXPORT CONTROL. The parties agree that the export of Licensed
Software is subject to the export control laws of the United States of America
and each party agrees to abide by all such export control laws and regulations,
including without limitation any regulations promulgated by the Departm ent of
Commerce (or its successors) or the Department of Treasury.
15. MISCELLANEOUS.
15.1 NON-DISCLOSURE. By virtue of this Agreement, the parties may have
access to information that is confidential to one another ("Confidential
Information"). Siebel's Confidential Information shall include the Licensed
Software, the source code for the Licensed Software, formulas, methods,
know-how, processes, designs, new products, developmental work, marketing
requirements, marketing plans, customer names, prospective customer names, the
terms and pricing under this Agreement, and all information clearly identified
in writing at the time of disclosure as confidential. In the event of o ral
disclosure only the information disclosed which is reduced to writing,
designated as confidential and transmitted to Itochu within thirty (30) days of
such oral disclosure shall be deemed the Confidential Information and subject to
this Section 15.1.
A party's Confidential Information shall not include information that
(a) is or becomes a part of the public domain through no act or omission of the
other party; (b) was in the other party's lawful possession prior to the
disclosure and had not been obtained by the other party either directly or
indirectly from the disclosing party; (c) is lawfully disclosed to the other
party by a third party without restriction on disclosure; or (d) is
independently developed by the other party. Itochu shall not disclose the
results of any performance tests of the Licensed Software to any third party wi
thout Siebel's prior written approval.
25
<PAGE> 26
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of five (5) years
after termination of this Agreement; provided, however, that with respect to the
source code for the Licensed Software, the nondisclosure obligations s et forth
in this Agreement and the escrow agreement shall survive into perpetuity. The
parties agree, unless required by law, not to make each other's Confidential
Information available in any form to any third party or to use each other's
Confidential Information for any purpose other than in the performance of this
Agreement. Each party agrees to take all reasonable steps to ensure that
Confidential Information is not disclosed or distributed by its employees or
agents in violation of the terms of this Agreement.
15.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the United States of America and the State of California as such
laws are applied to agreements entered into and to be performed entirely within
California between California residents. This Agreement is prepared and executed
in the English language only and any translation of this Agreement into any
other language shall have no effect. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods is specifically
excluded from application to this Agreement.
15.3 ATTORNEYS FEES. In the event any proceeding or lawsuit is brought
by Siebel, its suppliers or Itochu in connection with this Agreement, the
prevailing party in such proceeding shall be entitled to receive its costs,
expert witness fees and reasonable attorneys' fees, including costs and fees on
appeal.
15.4 ARBITRATION; Choice of Forum and Venue. Any dispute, controversy
or claim arising out of or relating to this Agreement, or the breach,
termination, or invalidity thereof, shall be settled by arbitration held in San
Francisco, California, United States of America , in accordance with the UNCIT
RAL Arbitration Rules in effect on the date of this Agreement and, to the extent
different from such rules the following rules and provisions:
(a) The arbitrator(s) shall apply the laws of the United
States of America and the State of California, United States of America, to
decide the dispute. The language of the arbitration shall be English. At the
first arbitration hearing, each party shall be entitled to submit a written list
of cat egories of documents to be produced to it by the other party relating to
the subject matter of the dispute. The arbitrator or arbitrators shall resolve
at the first hearing any dispute between the parties regarding the documents to
be produced. The arbitration hearings shall then be recessed for a reasonable
period of time to be determined by the arbitrator or arbitrators to allow the
parties to produce the requested categories of documents to each other. The
parties shall also be entitled to discovery as provided in Sections 1283.5 and
1283.1 of the Code of Civil Procedure of the State of California, whether or not
the California Arbitration Act is deemed to apply to such arbitration.
(b) If the dispute at issue involves a claim for money damages
only and in amount less than One Million U.S. Dollars ($1,000,000), exclusive of
attorneys' fees and costs of the arbitration, then the parties shall choose, by
mutual agreement, one (1) neutral arbitrator to hear the dispute. If the dispute
involves a claim for equitable relief and/or money damages in excess of One
Million U.S. Dollars ($1,000,000), exclusive of attorneys' fees and costs of the
arbitration, the parties shall designate three (3) neutral arbitrators. In the
event the parties cannot agree on the selection of the arbitrator(s) within
thirty (30) days after a demand for arbitration has been served, the
arbitrator(s) shall be selected by the American Arbitration Association.
26
<PAGE> 27
(c) The award shall be made promptly by the arbitrator(s) and,
unless otherwise agreed by the parties, no later than thirty (30) days from the
date of closing of the hearing, or if oral hearings have been waived, from the
date of transmittal of final statements and proofs to the arbitrator(s). If the
arbitrator(s) fails to reach a decision within thirty (30) days, the
arbitrator(s) shall be discharged, and new arbitrator(s) shall be appointed and
shall proceed in the same manner, and the process shall be repeated until a
decision is finally reached.
(d) The award rendered by the arbitrator(s) shall include
costs of the arbitration, reasonable attorneys' fees and reasonable costs for
experts and other witnesses. The award of the arbitrator shall be final,
non-appealable and binding upon the parties and their respective successors and
assigns . Judgment on the award may be entered in any court having jurisdiction.
(e) The parties agree that the arbitrator(s) shall have the authority
to issue interim orders for provisional relief, including, but not limited to,
orders for injunctive relief, attachment or other provisional remedy, as
necessary to protect either party's name, proprietary information, trade se
crets, know-how or any other proprietary right. The parties agree that any
interim order of the arbitrator(s) for any injunctive or other preliminary
relief shall be enforceable in any court of competent jurisdiction. In addition,
nothing in this Agreement shall be deemed as preventing either part y from
seeking provisional relief from any court of competent jurisdiction, in order to
protect that party's name or proprietary rights.
15.5 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission, or by certified or
registered mail, return receipt requested, and shall be deemed given upon person
al delivery, five (5) days after deposit in the mail, or upon acknowledgment of
receipt of electronic transmission. Notices sent to Siebel shall be sent to the
following address:
Siebel Systems, Inc.
4005 Bohannon Drive
Menlo Park, California 94025
Attention: President
Fax: (415) 329-6524
with a copy to the Vice President, Legal, at the same address.
Notices sent to Itochu shall be sent to the following address:
Itochu Techno-Science Corporation
16-7 Komazawa 1-Chome,
Setagaya-Ku
Tokyo, 154 Japan
Fax: 03-3419-9099
Either party may change the above addresses by written notice to the other.
27
<PAGE> 28
15.6 INJUNCTIVE RELIEF. It is expressly agreed that a breach of this
Agreement by Itochu will cause irreparable harm to Siebel and that a remedy at
law would be inadequate. Therefore, in addition to any and all remedies
available at law, Siebel will be entitled to an injunction or other equitabl e
remedies in all legal proceedings in the event of any threatened or actual
violation of any or all of the above provisions. In the event that Itochu or any
Itochu customer continues to distribute the Licensed Software or any portion
thereof, after its right to do so has terminated or expired, Si ebel shall also
be entitled to injunctive relief, including, without limitation, an order
directing that any copies of the Licensed Software, or any portion thereof,
which Itochu or any direct or indirect customers of Itochu attempt to distribute
be seized, impounded and destroyed by appropriate of ficials in order to prevent
such distribution.
15.7 INDEPENDENT CONTRACTOR. The parties are independent contractors
under this Agreement and nothing in this Agreement shall be construed to create
a partnership, franchise, joint venture, agency or employment relationship
between Siebel and Itochu. Neither party has any right, power or authori ty to
assume or create any obligation on behalf of the other party.
15.8 FORCE MAJEURE. Neither party shall be liable hereunder by reason
of any failure or delay in the performance of its obligations hereunder (except
for the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, acts of God, war, governmental ac tion, labor
conditions, earthquakes, material shortages, or any other cause which is beyond
the reasonable control of such party.
15.9 WAIVER. The failure of either party to require performance by the
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver o f the
provision itself.
15.10 SEVERABILITY. In the event that any provision of this Agreement
shall be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity shall not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
15.11 HEADINGS. The paragraph headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe,
or describe the scope or extent of such paragraph, or in any way affect this
Agreement.
28
<PAGE> 29
15.12 ASSIGNMENT. Neither this Agreement nor any rights or obligations
of Itochu hereunder may be assigned by Itochu in whole or in part without the
prior written approval of Siebel. For the purposes of this Section, a change in
the persons or entities who control Fifty Percent (50%) or more of the equity
securities or voting interest of Itochu shall be considered an assignment of
Itochu's rights. Siebel's rights and obligations, in whole or in part, under
this Agreement may be assigned by Siebel. Siebel may exercise full transfer and
assignment rights in any manner at Siebel's discretion and specifically may
sell, pledge or otherwise transfer its right to receive royalties under this
Agreement.
15.13 EXPORT. Itochu acknowledges that the laws and regulations of the
United States restrict the export and re-export of commodities and technical
data of United States origin, including the Siebel Support Information. Itochu
agrees that it will not export or re-export any Siebel Support Informa tion in
any form, without the appropriate United States and foreign governmental
licenses. Itochu agrees that its obligations pursuant to this Section shall
survive and continue after any termination or expiration of rights under this
Agreement.
15.14 FULL POWER. Each party warrants that it has full power to enter
into and perform this Agreement, and the person signing this Agreement on such
party's behalf has been duly authorized and empowered to enter into this
Agreement. Itochu further acknowledges that it has read this Agreement, und
erstands it, and agrees to be bound by it.
15.15 EARLIER TERMINATION -- GOVERNMENTAL OVERSIGHT. This Agreement is
subject to all necessary approvals and/or authorizations or other required
procedures of the Governments of Japan and the United States having been
obtained or completed. Siebel will be responsible for obtaining any U.S. Gove
rnment approvals and Itochu will be responsible for obtaining any Japanese
Government approvals. In the event that a recommendation or order for
modification or suspension of the terms and conditions of this Agreement or the
acts contemplated hereunder is made by either of the above-mentioned Gove
rnments, this Agreement shall only become or continue to be effective if an
amendment is executed in writing by the parties. Failure by the parties to reach
agreement shall result in this Agreement being deemed null and void ab initio,
and all rights, duties and obligations of each party to the ot her shall no
longer exist, except as otherwise provided in Section 15.1 ("Non-disclosure")
and Itochu shall return to Siebel the Licensed Software delivered by Siebel
pursuant to Section 4.1 ("Delivery of Licensed Software"). In the event of such
termination, any expenses which either party may ha ve incurred in respect to
this Agreement and the subject matter of this Agreement shall be for the account
of the party having incurred them, but Siebel shall retain any amounts
previously paid to Siebel by Itochu.
15.16 CONFIDENTIAL AGREEMENT. Neither party will disclose any terms or
the existence of this Agreement, except pursuant to a mutually agreeable press
release or as otherwise required by law.
15.17 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be considered an original, but all
of which together will constitute one and the same instrument.
29
<PAGE> 30
15.18 ENTIRE AGREEMENT. This Agreement, together with the referenced
and attached Exhibits, completely and exclusively states the agreement of the
parties regarding its subject matter. It supersedes, and its terms govern, all
prior and contemporaneous proposals, negotiations, representations, ag reements,
or other communications between the parties, written or oral, regarding the
subject matter hereof. This Agreement shall not be modified except by a
subsequently dated written amendment or appendix signed on behalf of Siebel and
Itochu by their duly authorized representatives and any prov ision of a purchase
order purporting to supplement or vary the provisions hereof shall be void.
15.19 BINDING EFFECT. This agreement is binding upon and inures to the
benefit of the parties and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
SIEBEL SYSTEMS, INC. ITOCHU TECHNO-SCIENCE CORPORATION
By: By:
----------------------------------- -----------------------------
Name: Name:
----------------------------------- -----------------------------
Title: Title:
----------------------------------- -----------------------------
Date: Date:
----------------------------------- -----------------------------
ITOCHU CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
30
<PAGE> 31
EXHIBIT A
LICENSED SOFTWARE
(1) Server Programs:
SYSTEM MANAGEMENT SOFTWARE(1)
<TABLE>
<CAPTION>
SOFTWARE VERSION
<S> <C>
Marketing Administration Manager v 2.0
Sales Administration Manager v 2.0
Data Replication Manager v 2.0
Enterprise Integration Manager v 2.0
Database Extension Manager v 2.0
</TABLE>
(1) Version 1.2 operates on Oracle 7.1, Sybase System 10, Informix
On-line 7.1 and Version 2.0 operates on Oracle 7.2 but such software does not
include any Oracle, Sybase, Informix or MS SQL Server DBMS Server licenses.
(2) User Programs:
SALES MANAGEMENT SOFTWARE LICENSING(2)
<TABLE>
<CAPTION>
END-USER SOFTWARE VERSION
<S> <C>
SIEBEL SALES ENTERPRISE V 2.0
PRODUCT OPTIONS:
Marketing Encyclopedia v 2.0
Correspondence System v 2.0
Quote Generation System v 2.0
Revenue Forecasting System v 2.0
Product Forecasting System v 2.0
Reportwriter w/ Standard Reports v 2.0
Field Sales Synchronization v 2.0
Tele-Business Extensions v 2.0
Business Object Configurator v 2.0
Executive Information System v 2.0
</TABLE>
(2) Minimum system requirements include Microsoft Windows 3.1 or
Windows 95, 486 66 MHz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate
DBMS-specific remote connectivity hardware and network software.
<PAGE> 32
(3)Ancillary Programs:
<TABLE>
<CAPTION>
PRODUCT VERSION
<S> <C>
Watcom SQL Database Runtime v4.0
MS Access Runtime v2.0
Adobe Exchange LE v2.x
Adobe Type Manager v3.01
MS ODBC Text Driver v2.0
</TABLE>
(4)Description of Documentation:
<TABLE>
<CAPTION>
DOCUMENT VERSION
<S> <C>
Release Notes(3) v 2.0
Installation and Upgrade Guide(3) v 2.0
Administration Guide(3) v 2.0
Database Extension Reference Manual(4) v 2.0
Data Model Reference Manual(5) v 2.0
Business Object Configuration Guide(4) v 2.0
</TABLE>
(3) A Non-disclosure agreement reasonably acceptable to Siebel is
required before access or disclosure of any kind is given to Itochu customers or
third parties.
(4) A Non-disclosure agreement reasonably acceptable to Siebel is
required before access or disclosure of any kind is given to Itochu employees,
customers or third parties.
(5) Available on an limited, as needed basis; special Non-disclosure
agreement and Siebel's CEO approval required before access or disclosure of any
kind is given to Itochu employees, customers or third parties.
<PAGE> 33
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
SIEBEL COMPETITORS
[***]
Siebel reserves the right to add additional companies (who commercially
distribute or otherwise offer a product that is competitive with the Licensed
Software) to this list from time to time during this Agreement with the consent
of Itochu which consent shall not be unreasonably withheld or delayed . For
purposes of adding additional companies to this EXHIBIT B after the Effective
Date, the above listed companies are illustrative of the type of companies who
commercially distribute or otherwise offer a product that is competitive with
the Licensed Software.
<PAGE> 34
EXHIBIT C
CURRENT SOFTWARE LIST PRICE
<PAGE> 35
CONFIDENTIAL TREATMENT REQUESTED
SIEBEL
- --------------------------------------------------------------------------------
SIEBEL SALES ENTERPRISE INTERNATIONAL PRICE LIST
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (1)
<TABLE>
<CAPTION>
PRICE PER NAMED USER
END-USER SOFTWARE PART NO. LIST PRICE
<S> <C> <C>
SIEBEL SALES ENTERPRISE SSEOMS001 [***]
PRODUCT OPTIONS:
Marketing Encyclopedia SSEMES001 [***]
Correspondence System SSECOR001 [***]
Quote Generation System SSEQUO001 [***]
Revenue Forecasting System SSERFOR001 [***]
Product Forecasting System SSEPFOR001 [***]
Reportwriter w/Standard Reports SSEREP001 [***]
Field Sales Synchronization SSEFSS001 [***]
Tele-Business Extensions SSETEL001 [***]
Business Object Configurator SSEBOBJ001 [***]
</TABLE>
(1) Minimum system requirements include Microsoft Windows 3.1 or Windows 95, 486
66 Mhz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate DBMS-specific
remote connectivity hardware and network software.
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (2)
<TABLE>
<CAPTION>
PRICE PER NAMED USER
(UP TO [**] USERS)
END-USER SOFTWARE PART NO. LIST PRICE
<S> <C> <C>
Marketing Administration Manager SSEDMADM001 [***]
Sales Administration Manager SSEDSADM001 [***]
Data Replication Manager SSEDREP001 [***]
Enterprise Integration Manager SSEINT001 [***]
Database Extension Manager SSEDBEX001 [***]
</TABLE>
(2) Does not include Oracle, Sybase, Informix or MS SQL Server DBMS Server
license.
SIEBEL SYSTEMS, INC. CONFIDENTIAL -
PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE PAGE 1
NOVEMBER 10, 1995 PART #9003-001-00
<PAGE> 36
CONFIDENTIAL TREATMENT REQUESTED
SIEBEL
FOR INTERNAL USE ONLY
- --------------------------------------------------------------------------------
SIEBEL SALES ENTERPRISE INTERNATIONAL GUIDELINES
- --------------------------------------------------------------------------------
SALES MANAGEMENT SOFTWARE LICENSING (1)
<TABLE>
<CAPTION>
QUANTITY DISCOUNT GUIDELINES
PRICE PER NAMED USER
(BY NUMBER OF USERS)
---------------------------------------------------------------------------
END-USER SOFTWARE PART NO. 1-49 50-99 100-249 250-499 500-999 1000+
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIEBEL SALES ENTERPRISE SSEOMS001 [***] [***] [***] [***] [***] [***]
PRODUCT OPTIONS:
Marketing Encyclopedia SSEMES001 [***] [***] [***] [***] [***] [***]
Correspondence System SSECOR001 [***] [***] [***] [***] [***] [***]
Quote Generation System SSEQUO001 [***] [***] [***] [***] [***] [***]
Revenue Forecasting System SSERFOR001 [***] [***] [***] [***] [***] [***]
Product Forecasting System SSEPFOR001 [***] [***] [***] [***] [***] [***]
Reportwriter w/Standard Reports SSEREP001 [***] [***] [***] [***] [***] [***]
Field Sales Synchronization SSEFSS001 [***] [***] [***] [***] [***] [***]
Tele-Business Extensions SSETEL001 [***] [***] [***] [***] [***] [***]
Business Object Configurator SSEBOBJ001 [***] [***] [***] [***] [***] [***]
</TABLE>
(1) Minimum system requirements include Microsoft Windows 3.1 or Windows 95, 486
66 Mhz PC, 500mb hard disk, 16mb of RAM, MS Word and appropriate DBMS-specific
remote connectivity hardware and network software.
- --------------------------------------------------------------------------------
SYSTEM MANAGEMENT SOFTWARE LICENSING (2)
<TABLE>
<CAPTION>
QUANTITY DISCOUNT GUIDELINES
PRICE PER NAMED USER
END-USER SOFTWARE (BY NUMBER OF USERS)
----------------------------------------------------------------------------
PART NO. 1-49 50-99 100-249 250-499 500-999 1000+
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marketing Administration Manager SSEDMADM001 [***] [***] [***] [***] [***] [***]
Sales Administration Manager SSEDSADM001 [***] [***] [***] [***] [***] [***]
Data Replication Manager SSEDREP001 [***] [***] [***] [***] [***] [***]
Enterprise Integration Manager SSEINT001 [***] [***] [***] [***] [***] [***]
Database Extension Manager SSEDBEX001 [***] [***] [***] [***] [***] [***]
</TABLE>
(2) Does not include Oracle, Sybase, Informix or MS SQL Server DBMS Server
license.
FOR INTERNAL USE ONLY
SIEBEL SYSTEMS, INC. CONFIDENTIAL -
PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE PAGE 1
NOVEMBER 10, 1995 PART #9003-001-00
<PAGE> 37
EXHIBIT A
ORDER FORM
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 38
EXHIBIT D
ACCESS LOG OF EMPLOYEES OF ITOCHU
GRANTED ACCESS TO
SIEBEL SYSTEMS INC.'S SOURCE CODE
By signing below, you agree to the following:
(1) To protect any and all portions of that component of Siebel's source code
known as "Microsoft AppStudio Resource Files (.rc files)" ("Source Code")
including, but not limited to, all versions thereof (whether in a electronic or
hard copy formats) against unauthorized use, dissemination, or disc losure;
(2) To protect any and all portions of such Source Code" including, but not
limited to, all versions thereof (whether in a electronic or hard copy formats)
consistent with the security measures which apply to Itochu's highly sensitive
proprietary technical data and information;
(3) To maintain the strictest confidence of Siebel's Source Code
forever regardless of the status of my employment relationship with Itochu.
<TABLE>
<CAPTION>
Printed Name of Authorized Employee Signature Date
<S> <C> <C>
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
- ----------------------------------- ----------------------- ------------
</TABLE>
<PAGE> 39
MINIMUM TERMS OF END USER AGREEMENT
FOR
SIEBEL SALES ENTERPRISE
Itochu agrees that its agreements with End Users will contain the
following minimum terms and conditions, and that such agreements will not
include any additional terms and conditions which are inconsistent with such
minimum terms and conditions.
1. DEFINITIONS,
1.1. "ANCILLARY PROGRAM" shall mean the third party software specified
in one or more Order Forms issued pursuant to this Agreement and which
are delivered with or embedded in the Programs and are necessary for
the operation of the Programs.
1.2. "COMMENCEMENT DATE" of each Program License shall mean the date on
which End User and Itochu enter into an Order Form pursuant to which
End User purchases Program Licenses for such Program(s).
1.3. "DESIGNATED SYSTEM" or "DESIGNATED SYSTEMS" shall mean the
computer hardware and operating system(s) designated on the Order
Form(s).
1.4. "LIMITED PRODUCTION PROGRAM" shall mean a Program which is not
generally licensed for commercial use by Itochu or which is not listed
in Itochu's generally available marketing literature or which is
designated as a Limited Production Program by Itochu.
1.5. "ORDER FORM" shall mean the document by which End User orders
Program Licenses and which is executed by the parties. Each Order Form
shall reference the Effective Date of this Agreement and shall, upon
signature by both parties, be deemed to have been added to the Software
Licenses and Services Agreement. A blank copy of the Order Form is
attached hereto as Exhibit A.
1.6. "PROGRAM" or "PROGRAMS" shall mean the User Programs and the
Server Programs, all as described in one or more Order Forms issued
pursuant to this Agreement; the media upon which such software is
delivered to End User; the guides and manuals for use of such software
("Documentation"); and Updates. Unless specifically set forth to the
contrary or unless the context clearly requires otherwise, "Programs"
shall also include the Ancillary Programs described in such Order
Form(s).
1.7. "SERVER PROGRAMS" shall mean those Programs specified in one or
more Order Forms issued pursuant to the Software License and Services
Agreement and which reside and operate on the Designated System.
1.8. "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean Program
support provided under Itochu's policies in effect on the date Software
Maintenance and Support Services is ordered, subject to the payment by
End User of the applicable fees for such support. Itochu reserves the
right to alter such policies from time to time using reasonable
discretion.
1.9. "UPDATE" shall mean a subsequent release of the Program which is
generally made available for Program Licenses receiving Software
Maintenance and Support Services, at no additional charge other than
media and handling charges. Updates shall not include any release,
option or future product which Siebel Systems Incorporated ("Siebel")
licenses separately or only offers for an additional fee or any upgrade
in features, functionality or performance of the Programs which Itochu
licenses separately or only offers for an additional fee.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 40
1.10. "USER" or "USERS" shall mean a named individual or individuals
authorized by End User to use specified Programs, regardless of whether
the individual is actively using the Programs at any given time. The
maximum number of Users that may use the User Programs or access the
Server Programs consistent with the terms of Program Licenses granted
herein is specified in the Order Form(s).
1.11. "USER PROGRAMS" shall mean those Programs specified in one or
more Order Form issued pursuant to this Agreement and which reside and
operate on User Systems.
1.12. "USER SYSTEM" shall mean the computer hardware and operating
systems operated by Users in the course of their employment with End
User, including notebook and portable computers.
2. PROGRAM LICENSE,
2.1. RIGHTS GRANTED,
A. Subject to the terms and conditions of this Agreement
and effective as of the applicable Commencement Date of each
Program License, Itochu grants to End User a worldwide,
nontransferable, nonexclusive sublicense to use the Programs
which the End User obtains under this Agreement, including a
worldwide, nontransferable, nonexclusive sublicense to use
the Ancillary Programs, as follows:
I) To use the Server Programs solely for End
User's own internal data processing operations on the
Designated Systems or on a backup system if the
Designated Systems are inoperative, up to any
applicable maximum number of designated Users set
forth in the Order Form(s); to use the User Programs
solely for End User's own internal data processing
operations for, and by up to, the number of
designated Users indicated in the Order Form(s);
provided, however, that End User may not relicense
the Programs or use the Programs for third-party
training, commercial time-sharing, rental or service
bureau use;
II) To use the Documentation provided with the
Programs in support of End User's authorized use of
the Programs;
III) To reproduce, exactly as provided by Itochu,
and distribute the Server Programs, the Ancillary
Programs and up to that number of copies of the User
Programs specified in the Order Form(s) to End User
for use by End User, provided that (a) each User
Program may be copied to up to one additional User
System for each designated User; (b) Programs may be
copied for archival or backup purposes; (c) all
titles, trademarks, and copyright and restricted
rights notices shall be reproduced in such copies;
and (d) all archival and backup copies of the
Programs shall be subject to the terms of this
Agreement; and
IV) To use the Programs in conjunction with other
software products.
Except as set forth herein, no other copies shall be made
without Itochu's prior written consent. For purposes of this
Agreement, "Program License" shall constitute each sublicense
granted to End User pursuant hereto to use a Server Program on
a single Server System and each sublicense granted to End
User for a User to use a User Program as specified in one or
more Order Forms.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 41
B. End User recognizes and agrees that the source code of
the Program contains valuable confidential information
belonging to Siebel, and End User therefore agrees not to
cause or permit the reverse engineering, disassembly or
decompilation of the Programs.
C. Siebel and its suppliers shall retain all title,
copyright and other proprietary rights in and to the Programs.
End User does not acquire any rights, express or implied, in
the Programs, other than those specified in this Agreement.
D. To use a User Program or a Server Program, End User may
need to use an Ancillary Program. The Ancillary Program may be
used only in combination with Programs for the purpose of
installing or operating Programs as described on the Order
Form or Documentation, and for no other purpose. End User
shall have no right to use Ancillary Programs in connection or
combination with any other software programs.
E. As an accommodation to End User, Itochu may supply End
User with pre-production releases of Programs (which may be
labeled "Alpha" or "Beta"). End User acknowledges that these
products may not be suitable for general use.
F. The Program is comprised of "commercial computer
software" and "commercial computer software documentation" as
such terms are used in 48 C.P.R. 12.212 (SEPT 1995).
Government End Users acquire the Program under the following
terms:
i) for acquisition by or on behalf of
civilian agencies, consistent with the
policy set forth in 48 C.F.R. 12.212 (SEPT
1995); or
ii) for acquisitions by or on behalf of
units of the Department of Defense,
consistent with the policies set forth in 48
C.F.R. 227.7202-1 (JUN 1995) and 227.7202-3
(JUN1995)
The contractor/manufacturer is: Siebel Systems Incorporated,
4005 Bohannon Drive, Menlo Park, California 94025.
2.2 TRANSFER AND ASSIGNMENT
A. End User may, upon written notice to Itochu and payment
of any then-applicable transfer fee, transfer a Program within
its organization from the Designated System to another
computer system; provided, however, that if End User transfers
the Program to a hardware and/or software platform which is
not supported by Itochu at the time of such transfer, Itochu
shall continue to provide Updates to End User which operate on
the Designated System and Itochu shall have no further
obligation to fix errors which occur when the Program is run
on an unsupported platform, Notwithstanding the foregoing, End
User shall remain obligated to pay for Software Maintenance
and Support Services ordered by End User prior to such
transfer.
B. Neither this Agreement nor any rights granted
hereunder, nor the use of any of the Programs, may be sold,
leased, assigned, or otherwise transferred, in whole or in
part, by End User, and any such attempted assignment shall be
void and of no effect; provided, however, that each End User
may assign this Agreement in connection with a merger,
acquisition or sale of all or substantially all of its assets
unless the surviving entity is a direct competitor of Siebel.
For purposes of this Agreement, "Direct Competitor" shall mean
company which offers an opportunity management system, a
personal information management system or a marketing
encyclopedia system or otherwise engaged in sales force
automation.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 42
2.3 VERIFICATION, Itochu is hereby notified that Siebel Systems
Incorporated, a California corporation located at 4005 Bohannon Drive,
Menlo Park, California 94025 is a third-party beneficiary to this
Agreement and that the provisions of this Agreement related to End
User's use of the Programs are made expressly for the benefit of Siebel
and are enforceable by Siebel in addition to Licensor. At Siebel's
written request, not more frequently than annually, End User shall
furnish Siebel with a certificate executed by an officer of End User
(a) verifying that the Programs are being used pursuant to the
provision of the Agreement, including any User and other limitations,
and that End User is not in breach of any other license restrictions;
(b) providing a list of Users by name; and (c) listing the locations,
types and serial numbers of the Designated Systems on which the Server
Programs are run.
Itochu or Siebel may, at its expense, and upon thirty (30) days prior
written notice to End User, audit End User's use of the Programs. Any
such audit shall be conducted during regular business hours at End
User's facilities and shall not unreasonably interfere with End User's
business activities. If an audit reveals that End User has underpaid
fees to Itochu as a result of unauthorized use or copying of the
Programs, End User shall pay to Itochu such underpaid fees based on the
Program License fees incurred by End User for such Programs plus
interest thereon at the prevailing U.S. dollar prime rate from the
initial date of the unauthorized use. If the amount of the underpayment
exceeds Five Percent (5%) of the license fees paid, then End User shall
also pay Itochu's or Siebel's reasonable costs of conducting the audit.
Audits shall be conducted no more than once annually.
3. TERM AND TERMINATION,
3.1 TERM. Each Program License granted under this Agreement shall
commence on the applicable Commencement Date and shall remain in effect
perpetually unless such Program License or this Agreement is terminated
as provided in Section 3.2 (Termination by Itochu).
3.2 TERMINATION BY ITOCHU. Itochu may terminate this Agreement or
any Program License upon written notice if End User breaches this
Agreement and fails to correct the breach within thirty (30) days
following written notice from Itochu specifying the breach.
3.3 HANDLING OF PROGRAMS UPON TERMINATION. If a Program License
granted under this Agreement terminates, End User shall (a) cease using
the applicable Programs, and (b) certify to Itochu within thirty (30)
days after termination that End User has destroyed , or has returned to
Itochu, the Programs and all copies thereof. This requirement applies
to copies in all forms, partial and complete, in all types of media and
computer memory, and whether or not modified or merged into other
materials. Before returning Programs to Itochu, End User shall acquire
a Return Material Authorization ("RMA") number from Itochu.
4. GENERAL TERMS,
4.1 NONDISCLOSURE. By virtue of this Agreement, the parties may
have access to information that is confidential to one another
("Confidential Information"). Itochu's Confidential Information shall
include the Programs, formulas, methods, know-how, processes, designs,
new products, developments work, marketing requirements, marketing
plans, customer names, prospective customer names, the terms and
pricing under this Agreement, and all information clearly identified in
writing at the time of disclosure as confidential.
A party's Confidential Information shall not include information that
(a) is or becomes a part of the public domain through no act or
omission of the other party; (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party;
(c) is lawfully disclosed to the other party by a third party without
restriction on disclosure; or (d) is independently developed by the
other party. End User shall not disclose the results of any
performance tests of the Programs to any other third party without
Siebel's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of five
(5) years after termination of this Agreement. The parties agree,
unless
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 43
required by law, not to make each other's Confidential Information
available in any form to any third party or to use each other's
Confidential Information for any purpose other than in the performance
of this Agreement. Each party agrees to take all reasonable steps to
ensure that Confidential Information is not disclosed or distributed
by its employees or agents in violation of the terms of this Agreement.
4.2 DISCLAIMER OF IMPLIED WARRANTIES. END USER ACKNOWLEDGES AND
AGREES THAT SIEBEL MAKES NO EXPRESS OR IMPLIED WARRANTIES TO END USER,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
4.3 EXPORT. End User will not export or re-export the Programs
without the appropriate United States or foreign government permits or
licenses and will take no actions in violation of U.S. export control,
embargo, or foreign corrupt practice laws and regulations.
Minimum Terms of End User Agreement for
Siebel Sales Enterprise
(Itochu)
<PAGE> 44
EXHIBIT E
TERMS FOR END USER AGREEMENT
<PAGE> 45
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT F
COMPETITIVE PRODUCTS
<TABLE>
<CAPTION>
COMPETITIVE PRODUCT(1) COMPANY (2)
<S> <C>
[***]
</TABLE>
<PAGE> 46
CONFIDENTIAL TREATMENT REQUESTED
[ *** ]
<PAGE> 47
CONFIDENTIAL TREATMENT REQUESTED
[ *** ]
(1) Siebel reserves the right to add additional products to this list
from time to time during this Agreement with the consent of Itochu which consent
shall not be unreasonably withheld or delayed. For purposes of adding additional
companies to this Exhibit B after the Effective Date, the above lis ted products
are illustrative of the type of products which are considered by the parties as
competitive with the Licensed Software as of the Effective Date.
(2) The list of companies is simply to identify the company which
either developed the Competitive Product or, to the best of Siebel's knowledge,
is currently the primary licensor of such Competitive Product.
<PAGE> 48
EXHIBIT G
CORE DOCUMENTATION, HELP AND TRAINING RELATED MATERIALS
CORE DOCUMENTATION SHIPPED WITH EVERY LICENSE OF SIEBEL SALES ENTERPRISE
- - Siebel Sales Enterprise Administration Guide
- - Siebel Sales Enterprise Release Notes
- - Siebel Sales Enterprise Installation and Upgrade Guide
HELP FILES SHIPPED WITH EVERY LICENSE OF SIEBEL SALES ENTERPRISE
- - On-Line Help RTF
- - End-User On-Line Help
TRAINING RELATED MATERIALS
- - Using Siebel Sales Enterprise
- - Marketing Administration
- - Application Administration
- - Docking Administration
- - Configuration and Customization
Siebel reserves the right to add additional documentation, help, and the
training related materials (which materials are important to a complete
understanding of the proper use and operation of the Licensed Software) to this
list from time to time during this Agreement with the consent of Itochu wh ich
consent shall not be unreasonably withheld or delayed.
<PAGE> 49
EXHIBIT H
TRAINING COURSES
Current Training Courses
- - Using Siebel Sales Enterprise
- - Marketing Administration
- - Application Administration
- - Docking Administration
- - Configuration and Customization
<PAGE> 50
EXHIBIT I
MAINTENANCE AND SUPPORT SERVICES SCHEDULE
SIEBEL SYSTEMS, INC.
SOFTWARE MAINTENANCE AND SUPPORT SERVICES SCHEDULE
At any given time, Siebel shall provide support for (a) the
then-current version of the Programs enumerated in Order Forms executed pursuant
to an applicable Software License and Services Agreement and (b) the immediately
preceding version of such Programs, but only for a period of six (6) months
following the release of the then-current version. Such Programs are referred to
in this Schedule as the "Supported Programs."
1. MAINTENANCE.
1.1 SOFTWARE MAINTENANCE COVERS SUPPORTED PROGRAMS. Siebel will use
reasonable commercial efforts to cure, as described below,
reported and verifiable errors in Supported Programs so that
such Programs operate as specified in the associated
Documentation. Siebel recognizes three error levels:
- HIGH SEVERITY ERROR: A high severity error is an error
which halts the operation of a Program and for which there
is no work-around. Siebel will begin work on the error
within two hours of notification during normal business
hours and will engage development staff until an
acceptable work-aro und is achieved.
- LOW SEVERITY ERROR: A low severity error may halt
operation of a Program but has a work-around available.
Siebel will begin work on the error within a day of
notification and will engage development staff.
- INCONVENIENCE: An error which exhibits incorrect
functionality but does not halt operation of a Program.
Siebel will use its best efforts to deliver a fix or a
work-around in a subsequent Program Update.
Siebel will provide Customer with a single copy of the fix or
work-around on suitable media. Customer will distribute the fix
or work-around to User Systems or Server Systems as necessary.
<PAGE> 51
2. UPDATES.
2.1 Siebel shall, from time to time, in its sole discretion make
Updates to Supported Programs available to Customer at no
additional charge except for media and handling charges. Updates
shall mean a subsequent release of the such Programs which is
generally made available at no additional charge for Program
Licenses receiving Software Maintenance and Support Services.
Updates shall not include any release, option, or future product
which Siebel licenses separately or offers for an additional
fee, or any upgrade in features, functionality or performance of
such Programs which Siebel licenses separately or offers for an
additional fee (above and beyond any annual maintenance or
support fee).
3. SUPPORT.
3.1 Customer shall establish and maintain the organization and
processes to provide "First Line Support" for the Supported
Programs directly to Users. First Line Support shall include but
not be limited to (a) a direct response to Users with respect to
inquiries concerning the performance, functio nality or
operation of the Supported Programs, (b) a direct response to
Users with respect to problems or performance deficiencies with
the Supported Programs, (c) a diagnosis of problems or
performance deficiencies of the Supported Programs and (d) a
resolution of problems or performance deficienc ies of the
Supported Programs.
3.2 If after reasonable commercial efforts Customer is unable to
diagnose or resolve problems or performance deficiencies of the
Supported Programs, Customer shall contact Siebel for "Second
Line Support" and Siebel shall provide support for the Supported
Programs in accordance with Siebel's then c urrent policies and
procedures for Second Line Support.
3.3 Siebel shall establish and maintain the organization and
processes to provide Second Line Support for the Supported
Programs to Customer. Second Line Support shall be provided to
Customer only if, after reasonable commercial efforts, Customer
is unable to diagnose and/or resolve problems or pe rformance
deficiencies of the Programs. Second Line Support shall be
provided to up to two designated representatives of Customer.
Siebel shall not provide Second Line Support directly to Users.
<PAGE> 52
CONFIDENTIAL TREATMENT REQUESTED
3.4 Second Line Support shall include but not be limited to (i) a
diagnosis of problems or performance deficiencies of the
Supported Programs and (ii) a resolution of problems or
performance deficiencies of the Supported Programs, in each case
via telephone.
3.5 Second Line Support shall be provided via telephone by Siebel
from 8:30 a.m. Pacific Time to 6:00 p.m. Pacific time on regular
U.S. business days, holidays excepted.
4. MAINTENANCE AND SUPPORT FEES.
4.1 ANNUAL FEES for software maintenance, update and support
services as described herein shall be equal to [ *** ] of the
then current list price of Program Licenses times the number of
Program Licenses for Supported Programs purchased by Customer.
Such fees shall be payable annuall y, in advance, with the first
payment due thirty (30) days from applicable Commencement Date
and the payment every year thereafter due in advance. In the
event Customer acquires additional Program Licenses, maintenance
fees for such additional Programs will be payable on the same
terms except, how ever, that the first installment shall be
pro-rated for the balance of the annual period referenced above
such that all subsequent fees for maintenance, updates and
support shall be payable on the same anniversary date for all
Program Licenses granted pursuant to the Agreement.
4.2 REINSTATEMENT. Siebel may, at its sole option, reinstate lapsed
Software Maintenance and Support Services in accordance with its
then current policies upon payment by Customer of the applicable
reinstatement fee.
5. Excluded Services. The following services are outside the scope of Siebel's
Software Maintenance and Support Services:
5.1 Service for Programs which have been subject to unauthorized
modification by Customer.
5.2 Service which becomes necessary due to:
(i)Failure of computer hardware or equipment or programs not
covered by this schedule;
(ii)Catastrophe, negligence of Customer or any third party,
operator error, improper use of hardware or software or
attempted maintenance by unauthorized persons;
(iii)Services at the Customer's site.
<PAGE> 53
6. OTHER TERMS. Except as stated in this Schedule, services shall
be subject to the terms and conditions of the applicable
Software License and Services Agreement between Siebel and
Customer.
<PAGE> 54
EXHIBIT J
TRADEMARKS
TSQ(R) (registered in the United States)
Siebel(TM)
Siebel Sales Enterprise(TM)
Virtual Selling(TM)
<PAGE> 1
EXHIBIT 10.9
ASSIGNMENT AGREEMENT
Whereas Thomas M. Siebel ("Siebel") and Michael S. Malone ("Malone") entered
into an agreement dated May 15, 1994 to write a sales automation book ("Book
Agreement");
Whereas Siebel and Malone entered into a publishing agreement with The Free
Press, a division of Simon & Schuster, Inc. ("Publisher") dated December 13,
1994 ("Publishing Agreement");
Whereas Siebel now wishes to assign his rights to any royalty proceeds pursuant
to the Publishing Agreement to Siebel Systems, Inc. ("Assignee") in
consideration for Assignee assuming all of Siebel's payment obligations pursuant
to the Book Agreement;
Now, therefore, in consideration of the mutual promises below, Siebel and
Assignee hereby agree as follows:
1. Pursuant to the terms of the Book Agreement, Siebel is
entitled to certain payments made by Publisher pursuant to the
Publishing Agreement. Effective December 13, 1994, Siebel
assigned and transferred to Assignee all of his rights to
receive any advances, royalty payments or other proceeds
payable to him pursuant to the Publishing Agreement, in each
case less amounts due Don Congdon of Don Congdon Associates in
respect of his services, which assignment is hereby
acknowledged and agreed.
2. Effective May 15, 1994, Assignee assumed all of Siebel's
payment obligations to Malone pursuant to the Book Agreement,
which assumption is hereby acknowledged and agreed.
3. Nothing herein shall effect any rights, title or interest
which Siebel may have in any book, manuscript, literary work,
or other intellectual property of any type which is produced
by any party pursuant to the Book Agreement or Publishing
Agreement.
NAME: THOMAS M. SIEBEL NAME: SIEBEL SYSTEMS, INC.
SIGNATURE: BY:
------------------------ -----------------------
DATE: TITLE:
------------------------ -----------------------
DATE:
-----------------------
1.
<PAGE> 1
EXHIBIT 11.1
SIEBEL SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF PRO FORMA NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTH THREE MONTH
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1995 MARCH 31, 1995 MARCH 31, 1996
----------------- -------------- --------------
<S> <C> <C> <C>
Net income (loss)................................. $ 317 $ (720) $ 198
------- ------- -------
Weighted average number of shares of common stock
outstanding
Common stock.................................... 8,074 8,102 8,359
Preferred stock, as if converted................ 3,858 2,635 4,907
Number of common stock equivalents as a result of
stock options outstanding using the treasury
stock method.................................... 594 -- 539
Number of common stock issued and stock options
granted in accordance with SAB No. 83........... 3,814 3,905 3,054
------- ------- -------
Total................................... 16,340 14,642 16,859
======= ======= =======
Pro forma net income (loss) per share............. $ 0.02 $ (0.05) $ 0.01
======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
FORM OF CONSENT OF INDEPENDENT AUDITORS
WHEN THE TRANSACTION REFERRED TO UNDER "REINCORPORATION" IN NOTE 7 OF NOTES
TO FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE IN A POSITION TO RENDER
THE FOLLOWING CONSENT.
KPMG PEAT MARWICK LLP
The Board of Directors
Siebel Systems, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
San Jose, California
May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
SIEBEL SYSTEMS, INC. FINANCIAL STATEMENTS AT DECEMBER 31, 1995 AND FOR THE YEAR
THEN ENDED AND AT MARCH 31, 1996 AND FOR THE 3 MONTHS ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS INCLUDED IN THE
SIEBEL SYSTEMS, INC. REGISTRATION STATEMENT ON FORM S-1.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<EXCHANGE-RATE> 1 1
<CASH> 11,391 9,757
<SECURITIES> 0 0
<RECEIVABLES> 3,066 3,112
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,211 13,581
<PP&E> 1,086 2,354
<DEPRECIATION> 223 348
<TOTAL-ASSETS> 16,091 15,609
<CURRENT-LIABILITIES> 6,129 5,267
<BONDS> 0 0
0 0
5 5
<COMMON> 8 9
<OTHER-SE> 9,921 10,300
<TOTAL-LIABILITY-AND-EQUITY> 16,091 15,609
<SALES> 7,636 4,402
<TOTAL-REVENUES> 8,038 4,709
<CGS> 41 26
<TOTAL-COSTS> 426 369
<OTHER-EXPENSES> 7,240 4,129
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7 5
<INCOME-PRETAX> 528 330
<INCOME-TAX> 211 132
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 317 198
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0.02 0.01
</TABLE>
