<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[_]Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SIEBEL SYSTEMS, INC.
------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X]No fee required.
[_](S) 125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5. Total fee paid:
----------------------------------------------------------------------------
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
----------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
3. Filing Party:
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4. Date Filed:
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<PAGE>
[LOGO OF SIEBEL]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1998
----------------
TO THE STOCKHOLDERS OF SIEBEL SYSTEMS, INC.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Siebel
Systems, Inc., a Delaware corporation (the "Company"), will be held on April
29, 1998 at 2:00 p.m. local time at the Company's principal executive office
at 1855 South Grant Street, San Mateo, CA 94402 for the following purposes:
1. To elect two directors to hold office until the 2001 Annual Meeting of
Stockholders.
2. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for its fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 4, 1998, as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ JAMES C. GAITHER
James C. Gaither
Secretary
San Mateo, California
April 6, 1998
----------------
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
[LOGO OF SEIBEL]
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Siebel Systems, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on April 29, 1998, at 2:00 p.m.,
local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Company's principal
executive offices at 1855 South Grant Street, San Mateo, CA 94402. This proxy
statement and accompanying proxy card were mailed on or about April 6, 1998 to
all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March 4,
1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 4, 1998 the Company had outstanding and entitled to
vote 35,916,748 shares of Common Stock. Each holder of record of Common Stock
on such date will be entitled to one vote for each share held on all matters
to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1855
South Grant Street, San Mateo, California 94402, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company not later
than November 27, 1998 in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and By-laws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board
may be filled only by persons elected by a majority of the remaining
directors. A director elected by the Board to fill a vacancy (including a
vacancy created by an increase in the Board of Directors) shall serve for the
remainder of the full term of the class of directors in which the vacancy
occurred and until such director's successor is elected and qualified.
The Board of Directors is presently composed of six members. There are two
directors in the class whose term of office expires in 1998. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 2001 annual meeting and until his
successor is elected and has qualified, or until such director's earlier
death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the two nominees named below. In the event that any nominee
should be unavailable for election as a result of an unexpected occurrence,
such shares will be voted for the election of such substitute nominee as
management may propose. Each person nominated for election has agreed to serve
if elected and management has no reason to believe that any nominee will be
unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL
MEETING
GEORGE T. SHAHEEN, age 53, has served as a Director of the Company since
October 1995. Since 1989, Mr. Shaheen has been the Managing Partner of
Andersen Consulting. Mr. Shaheen has been a partner of Andersen Consulting
since 1977 and 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.
CHARLES R. SCHWAB, age 60, has served as a Director of the Company since
October 1994. Since November 1997, he has been the Chairman and Co-Chief
Executive Officer of The Charles Schwab Corporation, a discount brokerage firm
founded in 1971 by Mr. Schwab, and served as Chairman and Chief Executive
Officer from 1987 until November 1997. 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.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH NAMED NOMINEE.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
JAMES C. GAITHER, age 60, has served as a Director of the Company since
February 1994. Since 1971, Mr. Gaither has been a Partner of the law firm
Cooley Godward LLP. Prior to beginning his law practice with the firm in 1969,
he served as 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 a 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 a director
of Amylin Pharmaceuticals, Inc., Basic American, Inc., and Levi Strauss &
Company. Mr. Gaither received a B.A. in Economics from Princeton University
and a J.D. from Stanford University.
THOMAS M. SIEBEL, age 45, has served as Chairman, Chief Executive Officer,
and President of the Company since its inception in July 1993. From July 1991
until December 1992, he served as Chief Executive Officer of Gain Technology,
a multimedia software company which merged with Sybase in December 1992. Mr.
Siebel served as President and Chief Operating Officer of Gain Technology from
May 1991 to July 1991. From January 1984 until September 1990, Mr. Siebel
worked at Oracle Corporation where he held a number of executive management
positions including Vice President Product Line Marketing, Group Vice
President Industry Marketing, Group Vice President and General Manager Direct
Marketing Division, and most recently, Group Vice President Oracle USA. Mr.
Siebel is a graduate of the University of Illinois at Urbana-Champaign from
which he holds a B.A. in History, an M.B.A. and an M.S. in Computer Science.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
ERIC E. SCHMIDT, PH.D., age 42, has served as a Director of the Company
since May 1996. Since April 1997, Dr. Schmidt has been the Chairman of the
Board and the Chief Executive Officer of Novell, Inc., a software supplier for
large networks. From 1983 to 1997, Dr. Schmidt held various positions at Sun
Microsystems, Inc., including Chief Technology Officer; Corporate Executive
Officer; President, Sun Technology Enterprises; Vice President, General
Systems Group; and Vice President and General Manager, Software Products
division. Prior to joining Sun Microsystems, Inc., Dr. Schmidt was a member of
the research staff at the Computer Science Lab at Xerox Palo Alto Research
Center (PARC). He also held positions at Bell Laboratories and Zilog. Dr.
Schmidt is a director of Geoworks, a developer of application software for
consumer computing devices. Dr. Schmidt received a B.S. in Electrical
Engineering from Princeton University, an M.S. in Electrical Engineering and a
Ph.D. in Computer Science from the University of California at Berkeley.
A. MICHAEL SPENCE, PH.D., age 54, has served as a Director of the Company
since October 1995. Since 1990, 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. and Sun Microsystems, 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.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors held
six meetings. The Board has an Audit Committee and a Compensation Committee.
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. The Audit
Committee is composed of two non-employee directors: Dr. Schmidt and Mr.
Shaheen. The Audit Committee met twice during the fiscal year ended December
31, 1997.
3
<PAGE>
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's 1996 Equity Incentive Plan and otherwise determines
compensation levels and performs such other functions regarding compensation
as the Board may delegate. The Compensation Committee is composed of three
non-employee directors: Messrs. Gaither and Schwab and Dr. Spence. It met five
times during the fiscal year ended December 31, 1997.
During the fiscal year ended December 31, 1997, all directors attended at
least 75% of the aggregate of the meetings of the Board and of the committees
on which they served, held during the period for which they were a director or
committee member, respectively, except for Dr. Spence, who attended 73% of
such meetings.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. KPMG Peat Marwick
LLP has audited the Company's financial statements since its inception in
1993. Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL 2.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of December
31, 1997 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) each of
the Company's directors, (iii) the Company's Chief Executive Officer and each
of the four most highly compensated officers for the year ended December 31,
1997; and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS NUMBER PERCENT
- ---------------------------------------------- ------------ ----------
<S> <C> <C>
Thomas M. Siebel(2)...................................... 9,802,300 27.8%
1855 South Grant Street
San Mateo, CA 94402
Andersen Consulting LLP(3)............................... 2,788,600 7.9
1661 Page Mill Road
Palo Alto, CA 94304
Fidelity Investments (FMR Corp.)(4)...................... 2,466,757 7.0
82 Devonshire Street
Boston, MA 02109
Entities Affiliated with Amerindo Investment Advisors, 1,860,000 5.4
Inc.(5).................................................
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
Patricia A. House(6)..................................... 923,024 2.6
Craig D. Ramsey(7)....................................... 624,366 1.8
Howard H. Graham(8)...................................... 126,153 *
R. David Schmaier(9)..................................... 85,167 *
James C. Gaither(10)..................................... 85,657 *
Eric E. Schmidt, Ph.D.(11)............................... 92,172 *
A. Michael Spence, Ph.D.(12)............................. 188,600 *
George T. Shaheen(13).................................... 2,790,740 7.9
Charles R. Schwab(14).................................... 655,600 1.9
All directors and executive officers as a group (11 15,362,629 41.5
persons)(15)............................................
</TABLE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") 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 35,308,298 shares of Common Stock outstanding as of December 31,
1997.
(2) Includes 8,628,562 shares held as trustee under the Siebel Living Trust
u/a/d 7/27/93 and 293,738 shares held by Siebel Asset Management, L.P.
of which Mr. Siebel is a limited partner. Also includes 80,000 shares
held by the Thomas and Stacey Siebel Foundation to which Mr. Siebel
disclaims beneficial ownership. Also includes 800,000 shares issuable to
Mr. Siebel upon exercise of outstanding options exercisable within 60
days of December 31, 1997.
(3) Mr. Shaheen, a director of the Company, is the Managing Partner of
Andersen Consulting LLP. Mr. Shaheen disclaims beneficial ownership of
such shares held by Andersen Consulting LLP except to the extent of his
partnership interest therein. Also includes 176,000 shares issuable to
Mr. Shaheen upon early exercise of options subject to vesting through
February 2001 and 12,600 shares issuable upon exercise of outstanding
options exercisable within 60 days of December 31, 1997.
5
<PAGE>
(4) Based solely on information contained on Schedule 13G filed with the
SEC.
(5) Based solely on information contained on Schedule 13G filed with the
SEC.
(6) Includes 127,142 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1997.
(7) Includes 280,000 shares subject to a right of repurchase that expires
ratably through March 2000, 320,000 shares issuable upon the early
exercise of options vesting through March 2000 and 14,285 shares
issuable upon exercise of outstanding options exercisable within 60 days
of December 31, 1997. Also includes 4,200 shares held by Mr. Ramsey's
wife.
(8) Includes 126,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1997.
(9) Includes 38,285 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1997.
(10) Includes 11,000 shares which are subject to a right of repurchase in
favor of the Company which expires on March 9, 1998. Also includes 6,000
shares issuable upon exercise of outstanding options exercisable within
60 days of December 30, 1997.
(11) Includes 70,172 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1997.
(12) Includes 132,000 shares which are subject to a right of repurchase in
favor of the Company which expires ratably through October 2000. Also
includes 12,600 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1997. Also includes 43,325 shares held by
A. Michael Spence, Trustee or Successor Trustee under The A. Michael
Spence Revocable Trust u/a/d October 26, 1996. Also includes 225 shares
held by A. Michael Spence TTEE by James Graham Spence Trust, 225 shares
held by A. Michael Spence TTEE by Cathy B. Spence Irrevocable Trust and
225 shares held by A. Michael Spence TTEE by Marya W. Spence Irrevocable
Trust.
(13) Includes 2,600,000 shares held by Andersen Consulting LLP. Mr. Shaheen,
the Managing Partner of Andersen Consulting, disclaims beneficial
ownership of such shares, except to the extent of his partnership
interest therein. Also includes 176,000 shares issuable upon early
exercise of options subject to vesting through February 2001, 12,600
shares issuable upon exercise of outstanding options exercisable within
60 days of December 31, 1997 and 2,140 shares held by the Shaheen
Revocable Trust.
(14) Includes 180,000 shares which are subject to a right of repurchase in
favor of the Company which expires ratably through October 1999. Also
includes 12,600 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1997. Also includes 100,000
shares held by the Schwab Family Foundation to which Mr. Schwab
disclaims beneficial ownership and 8,000 shares held by Mr. Schwab's
children.
(15) Includes 2,600,000 shares held by Andersen Consulting LLP. See footnotes
(2) and (13) above. Also includes 1,715,684 shares issuable upon
exercise of options held by all executive officers and directors
exercisable within 60 days of December 31, 1997. See footnotes (2), (3)
and (6) through (12).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that one
report on Form 4 was filed late by Mr. Schwab regarding two separate sales of
Common Stock.
6
<PAGE>
EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings. On January 10, 1997, Dr. Spence, Dr. Schmidt and Messrs. Gaither,
Shaheen and Schwab each received an option to purchase 30,000 shares of the
Company's Common Stock at an exercise price per share of $23.25; and on
January 10, 1997, Mr. Siebel received an option to purchase 700,000 shares of
the Company's Common Stock at an exercise price per share of $23.25.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31, 1995,
1996 and 1997, the compensation earned by the Company's Chief Executive
Officer and the four most highly compensated executive officers during such
periods whose salary and bonus for the fiscal year ended December 31, 1997
were in excess of $100,000 for services rendered in all capacities to the
Company for that fiscal year (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------------
SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS($) UNDERLYING OPTIONS
- --------------------------- ---- --------- ---------- ------------------
<S> <C> <C> <C> <C>
Thomas M. Siebel 1997 $180,000 $140,000 700,000
Chairman and Chief Executive 1996 180,000 140,000 2,000,000
Officer 1995 180,000 50,000 --
Patricia A. House 1997 150,000 160,000 400,000
Executive Vice President and 1996 142,500 140,000 400,000
Chief Operating Officer 1995 120,000 30,000 --
Craig T. Ramsey(1) 1997 115,000 331,000(5) 100,000
Senior Vice President, 1996 97,308 120,000(4) 640,000
Worldwide Operations 1995 -- -- --
R. David Schmaier(2) 1997 90,000 200,000 100,000
Vice President, Product 1996 90,000 80,000 90,000
Marketing 1995 90,000 30,000 20,000
Howard H. Graham(3) 1997 170,000 70,000 200,000
Senior Vice President, Finance 1996 -- -- 480,000
and Administration and Chief 1995 -- -- --
Financial Officer
</TABLE>
- --------
(1) Mr. Ramsey joined the Company in March 1996.
(2) Mr. Schmaier joined the Company in March 1994.
(3) Mr. Graham joined the Company in January 1997.
(4) Represents commissions earned in 1996.
(5) Represents commissions earned in 1997.
7
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1996 Equity
Incentive Plan (the "1996 Plan"). As of December 31, 1997, options to purchase
a total of 12,418,364 shares were outstanding under the 1996 Plan and options
to purchase 6,233,364 shares remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1997,
certain information regarding options granted to, exercised by, and held at
year end by, the Named Executive Officers:
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE OR FOR OPTION TERM (5)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION -----------------------
GRANTED(#) IN 1997(3) ($/SH) DATE 5% 10%
---------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Siebel........ 700,000(1) 15.4% $23.25 01/09/07 $10,253,250 $25,877,250
Patricia A. House....... 400,000(1) 8.8% 23.25 01/09/07 5,859,000 14,787,000
Craig T. Ramsey......... 100,000(1) 2.2% 23.25 01/09/07 1,464,750 3,696,750
R. David Schmaier....... 100,000(1) 2.2% 23.25 01/09/07 1,464,750 3,696,750
Howard H. Graham........ 200,000(2) 4.4% 23.25 01/09/07 2,929,500 7,393,500
</TABLE>
- --------
(1) Options vest at a rate of 3.57% per quarter and have a term of 10 years.
(2) Options vest at a rate of 20% as of January 1, 1998 and 5% per quarter
thereafter and have a term of 10 years. Vesting is accelerated to 20% of
total grant upon other than a voluntary termination prior to January 1,
1998 or to 100% of total grant upon a change of control.
(3) Based on an aggregate of 4,557,044 shares subject to options granted to
employees pursuant to the Company's 1996 Plan in the fiscal year ended
December 31, 1997, including grants to the Named Executive Officers.
(4) The potential realizable value is calculated based on the term of the
option at the time of grant (10 years). Stock price appreciation of 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.
8
<PAGE>
AGGREGATED OPTIONS EXERCISED IN 1997 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, 1997 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at
December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1997 (#) AT DECEMBER 31, 1997(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) RECEIVED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Siebel........ -- -- 675,000 2,025,000 $24,829,688 $66,289,063
Patricia A. House....... -- -- 102,857 697,143 3,217,283 20,092,717
Craig T. Ramsey......... -- -- 330,714 89,286 13,114,879 1,657,371
Howard H. Graham........ 34,000 $650,500 126,000 520,000 2,080,875 8,572,500
R. David Schmaier....... -- -- 34,714 175,286 1,172,379 4,955,746
</TABLE>
- --------
(1) Based on the fair market value of the Company's Common Stock on the
exercise date, minus the exercise price, multiplied by the number of
shares exercised.
(2) Based on the fair market value of the Company's Common Stock as of
December 31, 1997 ($41.8125 per share), minus the exercise price,
multiplied by the number of shares underlying the options.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION/(1)/
The Board of Directors of the Company (the "Board") has delegated to the
Compensation Committee of the Board (the "Committee") the authority to
establish and administer the Company's compensation programs. The Compensation
Committee is comprised of three non-employee directors: James C. Gaither,
Charles R. Schwab and A. Michael Spence. The Committee is responsible for: (i)
determining the most effective total executive compensation strategy, based
upon the business needs of the Company and consistent with stockholders'
interests; (ii) administering the Company's executive compensation plans,
programs and policies; (iii) monitoring corporate performance and its
relationship to compensation of executive officers; and (iv) making
appropriate recommendations concerning matters of executive compensation. The
Board of Directors has also established a Subcommittee of the Committee
composed of Mr. Schwab and Dr. Spence for the purpose of granting stock
options to persons subject to Section 16 of the 1934 Act.
COMPENSATION PHILOSOPHY
The policies of the Committee with respect to executive officers, including
the Chief Executive Officer, are to provide compensation sufficient to
attract, motivate and retain executives of outstanding ability and potential.
To emphasize sustained performance of the Company's executive officers, the
Committee has adopted policies to align executive compensation with the
creation of stockholder value as measured in the equity markets. These
policies are implemented using a mix of the following key elements:
1. The Company pays base salaries that are generally competitive with
other leading computer software companies with which the Company
competes for talent. To ensure that its salaries are sufficient to
attract and retain highly qualified executives and other key
employees, the Company regularly compares its salaries with those of
its competitors and sets salary parameters based on this review;
2. The Company pays cash bonuses based on the achievement of specific
operating goals and high levels of performance; and
3. The Company provides significant equity-based incentives pursuant to
the Company's 1996 Equity Incentive Plan and Employee Stock Purchase
Plan to ensure that the Company's executive officers and key
employees are motivated to achieve the Company's long term goals.
BASE SALARY
The Committee recognizes the importance of maintaining compensation
practices and levels of compensation competitive with other leading computer
software companies with which the Company competes for personnel. Base salary
represents the fixed component of the executive compensation program. The
Company's philosophy regarding base salaries is conservative, with the goal of
maintaining salaries at or below the comparable industry median. Base salary
levels are established based on an annual review of published executive salary
levels at software companies with comparable revenues and on the basis of
individual performance. The industry group index shown on the Company's
Performance Measurement Comparison Graph includes the larger software
companies included in the Company's compensation survey. Periodic increases in
base salary are the result of individual contributions evaluated against
established annual and long-term performance objectives and an annual salary
survey of software companies with comparable revenues. While base salaries for
most executives were increased during 1997, they generally remain below the
median for comparable companies surveyed.
- --------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended (the "1933 Act") or
the 1934 Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
10
<PAGE>
CASH BONUSES
Cash bonus awards are another component of the Company's compensation
program and are designed to reward the Company's executives and other senior
managers for assisting the Company in achieving its operational goals through
exemplary individual performance. Bonuses, if any, are linked to both the
achievement of specified individual and corporate goals as well as a review of
personal performance which is determined at the discretion of the Committee.
Target bonus levels for 1997 were established based in part on an annual
review of published executive total compensation levels at software companies
with comparable revenues. Corporate performance goals upon which 1997 bonuses
were based included: the execution of license agreements with a number of
significant new customers; continuation of high customer satisfaction levels;
expansion of a worldwide sales and marketing infrastructure; the introduction
of additional products and the improvement of the Company's existing products;
completion of several strategic acquisitions; and the meeting of quarterly and
annual revenue, profitability and other financial goals, including an increase
in annual revenue from $39.2 million in 1996 to $118.8 million in 1997. In
January 1998, the Committee reviewed the Company's 1997 corporate performance
goals and determined that all of the goals had been achieved. Based on such
achievement, the Committee awarded bonuses to most of its executive officers
(including all Named Executive Officers), which equaled or exceeded targeted
bonus levels. Bonuses to executive officers ranged from 41% to 222% of 1997
base compensation. Commissions totaling 288% of base compensation were paid to
the Company's Senior Vice President Worldwide Operations based on the
achievement of certain specified sales goals.
EQUITY COMPENSATION
The 1996 Equity Incentive Plan and Employee Stock Purchase Plan offered by
the Company have been established to provide all employees of the Company,
including executive officers, with an opportunity to share, along with the
stockholders of the Company, in the long-term performance of the Company. The
Committee strongly believes that a primary goal of the compensation program
should be to provide key employees who have significant responsibility for the
management, growth and future success of the Company with an opportunity to
increase their ownership of the Company and potentially gain financially from
Company stock price increases. The interests of stockholders, executives and
employees should thereby be closely aligned. Executives are eligible to
receive stock options at the discretion of the Committee, giving them the
right to purchase shares of Common Stock of the Company in the future at a
price equal to fair market value at the date of grant. All grants must be
exercised according to the provisions of the Company's 1996 Equity Incentive
Plan. All outstanding options held by executive officers vest over a period of
not less than four years and expire ten years from the date of grant.
As total cash compensation for executive officers of the Company is targeted
to be in the lower range for software companies with comparable revenues, the
Company has used stock options as the primary incentive to attract and
motivate its executive officers. The goal of the Committee is to provide
equity compensation for executive officers, including the Chief Executive
Officer, which equals levels at comparable companies. Within such range,
option amounts are based on salary grade within the Company and the
achievement of overall Company and individual performance goals as discussed
above. After considering the criteria relating to awarding stock options, the
Committee determined that all executive officers, including the Chief
Executive Officer, would receive option grants in fiscal 1997. All such
options vest over either a five-year or seven-year period, with vesting
commencing upon the date of grant. See "Option Grants in Last Fiscal Year."
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may
be deducted if it is "performance-based compensation" within the meaning of
the Code. The Committee has determined to satisfy the requirements for
"performance-based compensation" with respect to compensation awarded to its
Named Executive Officers whenever possible and to the extent then practicable.
11
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same procedures described above in setting the annual
salary, bonus and stock option awards for Thomas M. Siebel, the Company's
Chief Executive Officer. Mr. Siebel's base salary for 1997 was unchanged from
the levels for 1996. During 1997, the Company achieved all its corporate
objectives. The Committee concluded that Mr. Siebel was a very significant
contributor in accomplishing these objectives. For 1997, the Committee awarded
Mr. Siebel a bonus of approximately 78% of his base salary. This amount was
equal to the target bonus established for him for the year. Despite the bonus
granted, based on a survey by the Company in 1997, the total cash compensation
paid to Mr. Siebel in 1997 was below the average for chief executive officers
of comparable software companies. Under the Company's executive compensation
program, the total compensation mix for senior executives emphasizes longer-
term rewards in the form of stock options. In early 1997, Mr. Siebel received
an option grant to purchase 700,000 shares of the Company's Common Stock at
the fair market value of the Common Stock on the date of grant. Such option
vests over a seven year period from the date of grant. In determining such
grant, the Committee reviewed the stock option positions provided to chief
executive officers of comparable software companies in connection with their
employment services. This grant was intended to continue to maintain the
overall competitiveness of Mr. Siebel's compensation package and strengthen
the alignment of Mr. Siebel's interests with those of the stockholders during
a crucial phase of the Company's development.
SUMMARY
The Committee believes that the compensation of executives by the Company is
appropriate and competitive with the compensation programs provided by other
leading software companies with which the Company competes for executives and
employees. The Committee believes its compensation strategy, principles and
practices result in a compensation program tied to stockholder returns and
linked to the achievement of annual and longer-term financial and operational
results of the Company on behalf of the Company's stockholders.
Compensation Committee
James C. Gaither
Charles R. Schwab
A. Michael Spence
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of James C.
Gaither, A. Michael Spence and Charles R. Schwab.
See "Certain Transactions" for a description of transactions between the
Company, members of the Compensation Committee and/or entities affiliated with
members of the Compensation Committee.
13
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on June 28, 1996 for (i) the Company's Common Stock, (ii) The
Nasdaq Stock Market--U.S. Index (the "Nasdaq Index") and (iii) the Hambrecht &
Quist Software Sector Index (the H&Q Software Index ) All values assume
reinvestment of the full amount of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SIEBEL SYSTEMS, NASDAQ U.S. AND H&Q
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period SIEBEL NASDAQ
(Fiscal Year Covered) SYSTEMS U.S. H&Q
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-06/28/96 $100 $100 $100
FYE 09/30/96 $244.8 $105.3 $104
FYE 12/31/96 $317.6 $110.5 $103.2
FYE 03/31/97 $197.1 $104.5 $ 94.2
FYE 06/30/97 $379.4 $123.6 $111.9
FYE 09/30/97 $500.7 $144.5 $134.1
FYE 12/31/97 $491.9 $135.5 $124.8
</TABLE>
- --------
(1) This Section is not soliciting material, is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
(2) The Nasdaq Stock Market Index is calculated by the Center for Research in
Securities Prices. The H&Q Software Index is calculated by Hambrecht &
Quist LLC.
(3) The Company's initial public offering commenced on June 28, 1996 and the
Company's 1997 fiscal year ended December 31, 1997.
(4) Assumes that $100.00 was invested on June 28, 1996 in the Company's
Common Stock at the Company's initial public offering price of $8.50 per
share and at the closing sales price for each index on that date and that
all dividends were reinvested. No cash dividends have been declared on
the Company's Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder returns.
14
<PAGE>
CERTAIN TRANSACTIONS
The Company and Andersen Consulting LLP have entered into a Master Alliance
Agreement, dated March 17, 1995, pursuant to which Andersen Consulting LLP
provides Siebel related professional services to the Company's customers, and
a Software License and Services Agreement, dated January 1, 1995, pursuant to
which Andersen Consulting LLP made payments of $613,992 to Siebel in fiscal
1997.
James C. Gaither, a director of the Company, is a partner of Cooley Godward
LLP, which has provided legal services to the Company since its inception.
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided
for therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party
be reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's By-laws.
The Company believes that the foregoing transactions were on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
15
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ JAMES C. GAITHER
James C. Gaither
Secretary
April 6, 1998
16
<PAGE>
SIEBEL SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1998
The undersigned hereby appoints Thomas M. Siebel and Howard H. Graham and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Siebel Systems, Inc., which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Siebel Systems, Inc. to be held at 1855 South Grant Street, San Mateo, CA 94402
on Wednesday, April 29, 1998 at 2:00 p.m. (local time, and at any and all
postponements, continuations and adjournments thereof), with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
---
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE
---
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS
ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
<PAGE>
Please mark [X]
your vote
as indicated
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
---
PROPOSAL 1: To elect two directors to hold office until the 2001 Annual Meeting
of Stockholders.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed below.
below).
NOMINEES: George T. Shaheen and Charles R. Schwab
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE WRITE SUCH NOMINEE'S NAME BELOW:
_______________________________________________________________________________
_______________________________________________________________________________
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
---
PROPOSAL 2: To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for its fiscal year ending December 31,
1997.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed on other side)
DATED ______________, 1998 ______________________________________________
______________________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon.
If the stock is registered in the names of two
or more persons, each should sign. Executors,
administrators, trustees, guardians and
attorneys-in-fact should add their titles. If
signer is a corporation, please give full
corporate name and have a duly authorized
officer sign, stating title. If signer is a
partnership, please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
