<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-14376
ORACLE SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 94-2871189
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
500 ORACLE PARKWAY,
REDWOOD CITY, CALIFORNIA 94065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(415) 506-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Number of shares of registrant's common stock outstanding as of November
30, 1993: 290,028,876.
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<PAGE> 2
ORACLE SYSTEMS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at November 30, 1993 and May 31,
1993...................................................................... 3
Condensed Consolidated Statements of Operations for the three months and
six months ended November 30, 1993 and 1992............................... 4
Condensed Consolidated Statements of Cash Flows for the six months ended
November 30, 1993 and 1992................................................ 5
Notes to Condensed Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................... 10
Item 2. Changes in Securities..................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders....................... 12
Item 6. Exhibits and Reports on Form 8-K.......................................... 13
Signatures................................................................ 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ORACLE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
1993 1993
------------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 194,734 $ 284,560
Short-term cash investments...................................... 97,037 73,215
Trade receivables, net of allowance for doubtful accounts of
$33,000 and $34,634, respectively............................. 374,780 359,360
Prepaid and refundable income taxes.............................. 47,462 49,157
Other current assets............................................. 81,396 76,015
------------- ----------
Total current assets..................................... 795,409 842,307
------------- ----------
LONG-TERM CASH INVESTMENTS......................................... 16,035 31,276
PROPERTY, net...................................................... 280,655 189,238
COMPUTER SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $89,204 and $71,546, respectively................ 101,366 101,580
OTHER ASSETS....................................................... 35,847 19,619
------------- ----------
Total assets............................................. $ 1,229,312 $1,184,020
------------- ----------
------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks........................................... $ 2,044 $ 1,530
Current maturities of long-term debt............................. 7,571 9,154
Accounts payable................................................. 77,439 72,863
Income taxes..................................................... 55,746 49,729
Accrued compensation and related benefits........................ 99,919 103,099
Customer advances and unearned revenues.......................... 180,574 193,211
Value added tax and sales tax payable............................ 24,728 31,192
Other accrued liabilities........................................ 80,779 90,565
------------- ----------
Total current liabilities................................ 528,800 551,343
------------- ----------
LONG-TERM DEBT..................................................... 84,680 86,380
OTHER LONG-TERM LIABILITIES........................................ 11,441 10,035
DEFERRED INCOME TAXES.............................................. 11,285 8,223
STOCKHOLDERS' EQUITY............................................... 593,106 528,039
------------- ----------
Total liabilities and stockholders' equity............... $ 1,229,312 $1,184,020
------------- ----------
------------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
ORACLE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 1993 AND 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
-------------------- --------------------
1993 1992 1993 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Licenses and other........................... $252,119 $206,042 $468,993 $377,486
Services..................................... 200,051 147,127 381,231 282,572
-------- -------- -------- --------
Total revenues.......................... 452,170 353,169 850,224 660,058
-------- -------- -------- --------
OPERATING EXPENSES:
Sales and marketing.......................... 166,276 153,903 330,886 305,061
Cost of services............................. 116,198 84,646 216,376 164,342
Research and development..................... 45,867 34,011 92,433 64,461
General and administrative................... 31,908 29,004 63,853 58,556
-------- -------- -------- --------
Total operating expenses................ 360,249 301,564 703,548 592,420
-------- -------- -------- --------
Operating income........................ 91,921 51,605 146,676 67,638
OTHER INCOME (EXPENSE), net....................... (29) (83) 1,822 (785)
-------- -------- -------- --------
Income before provision for income taxes
and cumulative effect of change in
accounting principle.................. 91,892 51,522 148,498 66,853
PROVISION FOR INCOME TAXES........................ 29,767 18,033 49,013 23,399
-------- -------- -------- --------
Income before cumulative effect of
change in accounting principle........ 62,125 33,489 99,485 43,454
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN
SOFTWARE REVENUE RECOGNITION METHOD, NET OF
RELATED INCOME TAX EFFECTS (See Note 2)......... -- -- -- (43,470)
-------- -------- -------- --------
Net income (loss)....................... $ 62,125 $ 33,489 $ 99,485 $ (16)
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS (LOSS) PER SHARE:
Income before cumulative effect of change in
accounting principle....................... $ 0.21 $ 0.11 $ 0.34 $ 0.15
-------- -------- -------- --------
Cumulative effect of change in accounting
principle.................................. $ 0.00 $ 0.00 $ 0.00 $ (0.15)
-------- -------- -------- --------
Net income.............................. $ 0.21 $ 0.11 $ 0.34 $ 0.00
-------- -------- -------- --------
-------- -------- -------- --------
COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
(See Note 5).................................... 295,932 292,024 295,972 291,228
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
ORACLE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
-----------------------
1993 1992
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................. $ 99,485 $ (16)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of accounting change.......................... -- 43,470
Depreciation and amortization................................... 48,633 40,783
Provision for doubtful accounts................................. 14,863 10,187
(Increase) decrease in trade receivables........................ (46,703) 26,902
Decrease in prepaid and refundable income taxes................. 1,695 17,408
(Increase) decrease in other current assets..................... (5,534) 7,097
Increase (decrease) in accounts payable......................... 6,912 (5,040)
Increase (decrease) in income taxes............................. 16,480 (13,446)
Decrease in customer advances and unearned revenues............. (8,092) (28,118)
Decrease in other accrued liabilities........................... (13,742) (10,580)
Increase in other long-term liabilities......................... 1,407 966
Increase (decrease) in deferred income taxes.................... 2,336 (1,588)
--------- ---------
Net cash provided by operating activities.......................... 117,740 88,025
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in cash investments.................................... (8,582) (65,566)
Capital expenditures............................................ (122,594) (14,355)
Capitalization of computer software development costs........... (17,609) (18,979)
Increase in other assets........................................ (17,864) (2,259)
--------- ---------
Net cash used for investing activities............................. (166,649) (101,159)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on debt obligations................................ (2,679) (5,721)
Proceeds from common stock issued............................... 18,616 14,964
Repurchase of common stock...................................... (49,627) (15,576)
--------- ---------
Net cash used for financing activities............................. (33,690) (6,333)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............................. (7,227) (2,403)
--------- ---------
Net decrease in cash and cash equivalents.......................... (89,826) (21,870)
CASH AND CASH EQUIVALENTS:
Beginning of period................................................ 284,560 153,283
--------- ---------
End of period...................................................... $ 194,734 $ 131,413
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
ORACLE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended May 31, 1993.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
six months ended November 30, 1993. The results for the six month period ended
November 30, 1993 are not necessarily indicative of the results expected for the
full fiscal year.
2. SOFTWARE REVENUE RECOGNITION
Effective June 1, 1992, the Company adopted Statement of Position 91-1,
"Software Revenue Recognition," which addresses the accounting for software
revenues. The Company recorded the cumulative effect of the change in accounting
principle, net of tax, in the amount of $43,470,000 as a non-cash charge in its
statement of operations in the first quarter of fiscal 1993.
3. PROPERTY
In August 1993, to reduce its net facilities costs, the Company purchased
$85.1 million of 10.375% mortgage notes due July 31, 1995. These notes are the
obligations of IV Centrum Associates, a real estate limited partnership, which
owns two of the three buildings leased by the Company for its headquarters. As a
result of the note purchases, the Company has capitalized the two building
leases and the $85.1 million payment has been classified as property in the
accompanying condensed consolidated balance sheet. In December 1993, the Company
became a 74% limited partner in IV Centrum by making a capital contribution of
approximately $4 million. The Company has the right, to leave the partnership in
1996 and take full title to both buildings without making further capital
contributions.
4. NOTES PAYABLE
In December 1991, the Company entered into an $80 million subordinated debt
agreement with Nippon Steel Corporation ("NSC"). In connection with this
agreement, the Company also entered into a strategic relationship with NSC to
target major customers and industries in Japan. The subordinated debt agreement
has a final maturity date of December 9, 1998, subject to a one-time call option
that may reduce the maturity to May 1, 1995 if the strategic relationship is
terminated after May 1, 1994. Interest is charged at LIBOR plus three-quarters
of one percent, payable semi-annually in arrears. The Company is required to
maintain certain financial covenants under the agreement. Additionally, NSC
acquired warrant rights to purchase from the Company an ownership position of up
to twenty-five percent of Oracle Corporation Japan, an indirect wholly owned
subsidiary of the Company. The exercise price for the warrants is based on a
$400 million valuation of Oracle Corporation Japan if shares are purchased prior
to May 1, 1994. If NSC does not exercise this option, it may select other
options to purchase an ownership in Oracle Corporation Japan of up to
twenty-five percent at fair market value prior to December 1, 1998, subject to
potential extensions. NSC has also agreed not to acquire shares of Oracle
Corporation Japan beyond the twenty-five percent interest, nor any shares of the
Company, subject to certain exceptions.
6
<PAGE> 7
ORACLE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EARNINGS (LOSS) PER SHARE
On October 11, 1993, the Company effected a two-for-one stock split in the
form of a 100% common stock dividend distributed November 8, 1993 to
stockholders of record as of October 22, 1993. All per share data and numbers of
common shares, where appropriate, have been retroactively adjusted to reflect
the stock split.
Earnings per share was computed based on the weighted average number of
common and common equivalent shares outstanding during the period. Loss per
share was computed based only on the weighted average number of common shares
outstanding during the period. Common equivalent shares, which represent shares
issuable upon the exercise of outstanding stock options, were excluded from the
calculation of loss per share because the effect of including such shares in the
computation would be antidilutive.
6. LITIGATION
Refer to Part II, Item 1 for a description of legal proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
International revenues increased 21% in both the second quarter and first
half of fiscal 1994, as compared to the corresponding periods in fiscal 1993,
while domestic revenues increased 41% and 44% from the second quarter and first
half of fiscal 1993, respectively. International revenues were negatively
affected in the second quarter and first half of fiscal 1994 when compared to
the corresponding periods of the prior year as a result of the strengthening of
the U.S. dollar against the major international currencies. International
revenues expressed in local currency increased in the second quarter and first
half of fiscal 1994 by approximately 29% and 34%, respectively, from the
corresponding periods of fiscal 1993. International revenues constituted
approximately 61% and 64% of total revenues in the second quarters of fiscal
1994 and 1993, respectively, and 61% and 65% of total revenues in the first half
of fiscal 1994 and 1993, respectively. Management expects that the Company's
international operations will continue to provide a significant portion of total
revenues. However, international revenues will be adversely affected if the U.S.
dollar continues to strengthen against the major international currencies.
REVENUES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1993 CHANGE 1992 1993 CHANGE 1992
--------- ------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Licenses and other................... $ 252,119 22% $ 206,042 $ 468,993 24% $ 377,486
Percentage of revenues............... 55.8% 58.3% 55.2% 57.2%
Services............................. $ 200,051 36% $ 147,127 $ 381,231 35% $ 282,572
Percentage of revenues............... 44.2% 41.7% 44.8% 42.8%
Total revenues.................. $ 452,170 28% $ 353,169 $ 850,224 29% $ 660,058
</TABLE>
Licenses and Other Revenues. License revenues represent fees earned for
granting customers licenses to use the Company's software products. License
revenues also include revenues from the Company's systems integration business
and other miscellaneous revenues. Excluding systems integration and other
revenues, license revenues increased 29% and 33% from the second quarter and
first half of fiscal 1993, respectively. The Company believes that the strong
license revenue growth rate in the first and second quarters of fiscal 1994 is
primarily due to an overall increase in market demand for database and tools
products, increased market acceptance of the Company's relational DBMS, as well
as increased penetration in the financial and manufacturing applications
markets.
7
<PAGE> 8
Services Revenues. Support, consulting and education services revenues each
increased from the corresponding periods of fiscal 1993. The Company's support
revenues constituted the largest portion of services revenues in the second
quarter and first half of fiscal 1994, reflecting the continued increase in the
installed base of the Company's products under support contracts. Support,
consulting and education services revenues as a whole are expected to continue
to grow, as the Company's installed base grows and as it expands services to
assist customers in the use and implementation of applications based on the
Company's products.
OPERATING EXPENSES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1993 CHANGE 1992 1993 CHANGE 1992
-------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing.................... $166,276 8% $153,903 $330,886 8% $305,061
Percentage of revenues................. 36.8% 43.6% 38.9% 46.2%
Cost of services....................... $116,198 37% $ 84,646 $216,376 32% $164,342
Percentage of revenues................. 25.7% 24.0% 25.4% 24.9%
Research and development(1)............ $ 45,867 35% $ 34,011 $ 92,433 43% $ 64,461
Percentage of revenues................. 10.1% 9.6% 10.9% 9.8%
General and administrative............. $ 31,908 10% $ 29,004 $ 63,853 9% $ 58,556
Percentage of revenues................. 7.1% 8.2% 7.5% 8.9%
</TABLE>
- ---------------
(1) Pursuant to Statement of Financial Accounting Standards No. 86, the Company
capitalized software development costs equal to 2.0% and 2.5% of total
revenues during the second quarters of fiscal 1994 and 1993, respectively,
and 2.1% and 2.9% of total revenues in the first half of fiscal 1994 and
1993, respectively.
Similar to the trend in international revenues, the Company's international
expenses were favorably affected in the second quarter and first half of fiscal
1994 when compared to the corresponding periods in the prior year due to the
strengthening of the U.S. dollar versus the major international currencies.
Sales and Marketing Expenses. The Company continues to place significant
emphasis, both domestically and internationally, on direct sales through its own
sales force. However, the Company has also begun to place more emphasis on
marketing its products through indirect channels in order to increase market
share, while reducing distribution costs. As a percentage of total revenues,
sales and marketing expenses decreased when compared to the corresponding
periods in fiscal 1993 as a result of higher revenue levels and controls over
select operating expenses in order to improve the Company's sales margins.
Included in sales and marketing expenses is the amortization of capitalized
software development costs (see below).
Cost of Services. The cost of providing services consists largely of
consulting, education, and support personnel expenses. As a percentage of
service revenues, cost of services remained constant at 58% of revenues in both
the second quarters of fiscal 1994 and 1993, but decreased to 57% in the first
half of fiscal 1994 from 58% in the same corresponding period in fiscal 1993.
Research and Development Expenses. Research and development expenses for
the second quarters of fiscal 1994 and 1993 would have been 12.2% and 12.1%,
respectively, of revenues without the capitalization of software development
costs in accordance with Statement of Financial Accounting Standards No. 86.
Before considering the impact of software capitalization, research and
development expenses increased 28.7% from the second quarter of fiscal 1993 and
31.9% from the first half of fiscal 1993 to the corresponding periods of fiscal
1994 (34.9% and 43.4% after the adjustment for software capitalization). The
Company capitalized approximately $9,188,000 and $8,778,000 of software
development costs during the second quarters of fiscal 1994 and 1993,
respectively, and $17,609,000 and $18,979,000 in the corresponding six month
periods. Amortization of capitalized software development costs is charged to
sales and marketing expenses and totalled $9,352,000 and $5,427,000 in the
second quarters of fiscal 1993 and 1992, respectively, and $17,823,000 and
$10,984,000 in the corresponding six month periods. The Company expects the
amount of
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amortization of capitalized software development costs to continue to increase
in fiscal 1994 over fiscal 1993, as a result of the introduction of new
products, and the commencement of the related amortization. The Company believes
that research and development expenditures are essential to maintaining its
competitive position and expects these costs to continue to constitute a
significant percentage of revenues.
General and Administrative Expenses. General and administrative expenses
as a percentage of revenues decreased in the second quarter and first half of
fiscal 1994 as compared to the corresponding periods in fiscal 1993, reflecting
higher revenue levels and controls over discretionary spending.
OTHER INCOME (EXPENSE):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1993 CHANGE 1992 1993 CHANGE 1992
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Other Income (Expense).............. $(29) 65% $(83) $1,822 332% $ (785)
Percentage of revenues.............. * * 0.2% (0.1%)
</TABLE>
- ---------------
* Not meaningful
Changes in non-operating expenses primarily reflect fluctuations in
interest income and expense related to changes in cash and debt balances, as
well as other miscellaneous income and expense items.
PROVISION FOR INCOME TAXES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1993 CHANGE 1992 1993 CHANGE 1992
------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Provision for Income Taxes................. $29,767 65% $18,033 $49,013 109% $23,399
Percentage of revenues..................... 6.6% 5.1% 5.8% 3.5%
</TABLE>
The Company's estimated effective tax rate for the first half of fiscal
1994 was 33% as compared to a 35% tax rate in the corresponding period of fiscal
1993.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1993 CHANGE 1992 1993 CHANGE 1992
------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net Income Before Cumulative Effect of
Change in Accounting Principle........... $62,125 86% $33,489 $99,485 129% $43,454
Percentage of revenues..................... 13.7% 9.5% 11.7% 6.6%
Net Income (Loss).......................... $62,125 86% $33,489 $99,485 * $ (16)
Earnings (Loss) Per Share:
Income Before Cumulative Effect of Change
in Accounting Principle............... $ .21 91% $ .11 $ .34 127% $ .15
Net Income................................. $ .21 91% $ .11 $ .34 * $ .00
</TABLE>
- ---------------
* Not meaningful
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------------
NOVEMBER 30, NOVEMBER 30,
1993 CHANGE 1992
------------ ------ ------------
<S> <C> <C> <C>
Working Capital................................... $ 266,609 14% $ 233,945
Cash and short-term investments................... $ 291,771 33% $ 220,197
Long-term cash investments........................ $ 16,036 * --
Cash provided by operating activities............. $ 117,740 34% $ 88,025
Cash used for investing activities................ $ (166,649) 65% $ (101,159)
Cash used for financing activities................ $ (33,690) 432% $ (6,333)
</TABLE>
- ---------------
* Not meaningful
As discussed in Note 4 of Notes to Condensed Consolidated Financial
Statements, the Company entered into a subordinated debt agreement with NSC for
$80,000,000 in December 1991. In connection with this agreement, the Company
also entered into a strategic relationship with NSC to target major customers
and industries in Japan. The subordinated debt agreement has a final maturity
date of December 9, 1998, subject to a one-time call option that may reduce the
maturity date to May 1, 1995 if the strategic relationship is terminated after
May 1, 1994.
At November 30, 1993, the Company also had additional debt of $14,295,000
in the form of other notes payable and capital leases.
In August 1993, to reduce its net facilities costs, the Company purchased
$85.1 million of 10.375% mortgage notes due July 31,1995. These notes are the
obligations of IV Centrum Associates, a real estate limited partnership, which
owns two of the three buildings leased by the Company for its headquarters. As a
result of the note purchases, the Company has capitalized the two building
leases and the $85.1 million payment has been classified as property in the
accompanying condensed consolidated balance sheet. In December 1993, the Company
became a 74% limited partner in IV Centrum by making a capital contribution of
approximately $4 million. The Company has the right, to leave the partnership in
1996 and take full title to both buildings without making further capital
contributions.
The Company generated higher positive cash flows from operating activities
in the first six months of fiscal 1994 as compared to the corresponding period
in the prior year, primarily due to improved profitability.
Cash used for investing activities increased during the first half of
fiscal 1994 as compared to the corresponding period of the prior year primarily
due to the purchase of mortgage notes discussed above, as well as the
acquisition of an additional 60% ownership of the distribution entity for the
Company's products in Italy. The Company expects to continue to invest in
capital assets and capitalized software development activities to support its
growth.
The Company has announced plans to repurchase up to 10 million shares of
Common Stock on the open market to reduce the dilutive effect of the Company's
stock plans. During the first half of fiscal 1994, the Company repurchased
1,730,000 shares of the Company's Common Stock for approximately $49,626,000. As
of November 30, 1993, the Company has repurchased a total of 4,937,000 shares
for approximately $93,253,000.
The Company anticipates that its current cash balances as well as
anticipated cash flows from operations will be sufficient to meet its working
capital needs at least through the next twelve months.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Class action and derivative lawsuits were filed in the United States
District Court, Northern District of California, on and after March 29, 1990.
The class actions were brought by and on behalf of purchasers of the Common
Stock of the Company (and purchasers of call options for the Company's Common
Stock) during
10
<PAGE> 11
the period July 11, 1989 through September 26, 1990, and name as defendants the
Company and certain of its present and former officers and directors. Plaintiffs
in the class action allege that during the class period the defendants violated
federal securities laws and state common law by artificially inflating the price
of the Company's Common Stock (and call options for the Company's Common Stock)
through alleged misrepresentations and nondisclosures regarding the Company's
actual and prospective financial condition. The derivative lawsuits were brought
by Company stockholders, allegedly on behalf of the Company, against certain of
the Company's present and former officers and directors. The derivative suit
claims that these officers and directors breached their fiduciary duties to the
Company and its stockholders through similar alleged misrepresentations and
nondisclosures, and by selling the Company's securities while allegedly in
possession of material nonpublic information. Collectively, the plaintiffs in
the suits sought compensatory and other damages and disgorgement of profits from
the individual defendants. The plaintiffs in the derivative suit also sought to
order a new election of directors of the Company. An action against the
Company's independent auditors, containing allegations related to those alleged
in the class action, was filed on April 2, 1991 and was consolidated with the
pending class action and derivative lawsuits. The Court has conditionally
certified a plaintiff class consisting of purchasers of Common Stock (and call
options for the Common Stock) of the Company during the period from July 11,
1989 through September 26, 1990.
On February 1, 1993, all parties entered into agreements to settle the
class action and derivative lawsuits. The class agreement provides for payment
by the Company of $23.25 million in five equal installments of $4.65 million.
The first installment was paid in February 1993, the second installment was paid
in June 1993, and the third installment was paid in October 1993. Payments have
been made to a custodial account for disbursement upon order of the Court. The
remaining installments will be paid on January 15, 1994 and April 15, 1994. The
derivative agreement provides for payment by the Company of up to $750,000 in
attorney's fees if so ordered by the Court.
On August 9, 1993, the Court found that the class settlement was
"reasonable," but declined to rule on the derivative settlement until after a
special committee of the Company's Board had been advised by independent counsel
regarding the proposed derivative settlement. Because approval of the class
action settlement is contingent upon the approval of the derivative settlement
under the terms on the settlement agreements, the Court did not approve the
class settlement. The Court stated that it was prepared to approve the class
settlement if the Company were to waive the approval contingency. The parties
have agreed to extend to January 18, 1994, the Company's time within which to
waive the approval contingency should it choose to do so. In the interim, a
special committee was formed which retained independent counsel to review the
proposed derivative settlement. Upon completion of the independent counsel's
review, the special committee submitted a report to the Court on November 5,
1993 recommending that the settlement be approved as reasonable. On November 19,
1993, the Court held a status conference to consider the special committee's
report and took the matter under submission.
On September 24, 1993, the Securities and Exchange Commission concluded a
private investigation into disclosure, accounting, and trading issues at the
Company by filing a complaint in the United States District Court, Northern
District of California. The complaint alleged violations of Sections 13(a),
13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules
12b-20, 13a-1, and 13a-13 promulgated thereunder, which impose certain financial
disclosure and internal recordkeeping obligations on the Company. The Commission
alleged that the Company issued inaccurate financial reports during the period
from August 1989 through November 1990 due to inadequate internal accounting
controls. The complaint did not allege any fraud or internal wrongdoing.
Without admitting any wrongdoing, the Company agreed to conclude the matter
by consenting to entry of a final judgment enjoining future violations of those
sections and rules, and imposing a civil penalty of $100,000. The penalty was
paid on October 27, 1993. The final judgment was approved and entered by the
Court on October 20, 1993.
11
<PAGE> 12
ITEM 2. CHANGES IN SECURITIES
On December 3, 1990, the Company's Board of Directors declared a dividend
of one preferred share purchase right (a "Right") for each outstanding share of
common stock, par value $.01 per share (the "Common Stock"), of the Company. The
description and terms of such Rights were set forth in a Rights Agreement dated
December 3, 1990 (the "Rights Agreement"), between the Company and Bank of
America, N.T.&S.A., as Rights Agent. Pursuant to the terms of the Rights
Agreement, each Right entitled the registered holder to purchase from the
Company one two-thousandth (adjusted to reflect a 2-for-1 stock split of the
Common Stock) of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Shares"), of the Company at a price (the
"Purchase Price"), of $30.00 per one two-thousandth of a Preferred Share, if
certain events related to an unsolicited takeover attempt occurred. The
Preferred Shares were structured so that the value of one two-thousandth of a
Preferred Share approximated the value of one share of Common Stock.
Since December 3, 1990, the trading price of the Common Stock has
experienced a significant increase. As a result, the original Purchase Price is
currently less than the trading price. This trading price increase has caused
the anti-takeover protection provided under the Rights Agreement to become less
effective. For this reason, on January 10, 1994, the Company's Board of
Directors approved Amendment Number One (the "Amendment") to the Rights
Agreement, pursuant to which the Purchase Price was increased to $125 per one
two-thousandth of a Preferred Share. This change provides the Company with the
anti-takeover protection originally contemplated by the Rights Agreement. In
addition, the Amendment clarifies the definition of an "Acquiring Person" with
respect to Lawrence J. Ellison to permit Mr. Ellison (and his affiliates and
associates) to acquire Common Stock from the Company without Mr. Ellison
becoming an "Acquiring Person" under the Rights Agreement. The existence of an
"Acquiring Person" triggers the anti-takeover protection provided under the
Rights Agreement. A complete description of the terms of the Rights and the
Rights Agreement, prior to the amendment described above, is set forth in the
Company's Form 8-A filed with the Securities and Exchange Commission on December
10, 1990. Upon execution of such amendment, which is expected to occur in the
near future, the Company will file a Form 8-A/A describing the Rights and the
Rights Agreement, as so amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 11, 1993, the Company held its Annual Meeting of Stockholders.
At the meeting, the stockholders elected as directors Lawrence J. Ellison (with
234,351,752 affirmative votes, 24,650 broker non-votes and 1,024,634 votes
withheld), James A. Abrahamson (with 234,349,708 affirmative votes, 24,650
broker non-votes and 1,026,678 votes withheld), Donald L. Lucas (with
234,332,308 affirmative votes, 24,650 broker non-votes and 1,044,078 votes
withheld), Joseph B. Costello (with 234,371,108 affirmative votes, 24,650 broker
non-votes and 1,005,278 votes withheld) and Delbert W. Yocam (with 234,370,248
affirmative votes, 24,650 broker non-votes and 1,006,138 votes withheld).
In addition, the stockholders approved the adoption of the Company's 1993
Directors' Stock Option Plan and the reservation of 1,000,000 shares of common
stock for issuance thereunder (with 193,414,758 affirmative votes, 41,275,972
negative votes, 24,650 broker non-votes and 685,656 votes withheld).
The stockholders approved an amendment to the Company's 1991 Long-Term
Equity Incentive Plan increasing the number of shares of common stock reserved
for issuance thereunder by 8,000,000 shares (with 174,370,488 affirmative votes,
59,796,658 negative votes, 26,650 broker non-votes and 1,207,240 votes
withheld).
The stockholders approved an amendment to the Company's Employee Stock
Purchase Plan (1992) increasing the number of shares of common stock reserved
for issuance thereunder by 4,000,000 shares (with 228,223,026 affirmative votes,
6,559,726 negative votes, 24,650 broker non-votes and 593,634 votes withheld).
The stockholders approved an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of the Company's common
stock to 400,000,000 (with 225,343,190 affirmative votes, 9,477,996 negative
votes, 24,650 broker non-votes and 555,200 votes withheld).
12
<PAGE> 13
The stockholders also ratified the appointment of Arthur Andersen & Co. as
the Company's independent public accountants for fiscal year 1994 (with
235,063,186 affirmative votes, 94,794 negative votes, 4,650 broker non-votes and
238,406 votes withheld).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.09 Certificate of Amendment to Oracle Systems Corporation
Certificate of Incorporation dated November 4, 1993.
10.13 1993 Oracle Corporation Deferred Compensation Plan.
(b) Reports on Form 8-K
None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Oracle
Systems Corporation has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ORACLE SYSTEMS CORPORATION
Dated: January 11, 1994 By: LAWRENCE J. ELLISON
Lawrence J. Ellison,
President and Chief Executive
Officer
Dated: January 11, 1994 By: JEFFREY O. HENLEY
Jeffrey O. Henley,
Executive Vice President and
Chief Financial Officer
Dated: January 11, 1994 By: THOMAS A. WILLIAMS
Thomas A. Williams,
Chief Accounting Officer
14
<PAGE> 15
ORACLE SYSTEMS CORPORATION
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT TITLES PAGE
- --------- ---------------------------------------------------------------- ----------------
<C> <S> <C>
3.09 Certificate of Amendment to Oracle Systems Corporation
Certificate of Incorporation dated November 4, 1993. ...........
10.13 1993 Oracle Corporation Deferred Compensation Plan. ............
</TABLE>
15
<PAGE> 1
EXHIBIT 3.09
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Oracle Systems Corporation, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Oracle Systems Corporation, and the
date of filing of its original Certificate of Incorporation with the
Secretary of State was October 29, 1986.
2. Article 4 of the Certificate of Incorporation is amended to read,
in full, as follows:
"The total number of shares of stock of all classes which the
Corporation has the authority to issue is 401,000,000, consisting of
400,000,000 shares of Common Stock with a par value of $0.01 per share,
and 1,000,000 shares of Preferred Stock with a par value of $0.01 per
share."
3. This Certificate of Amendment of Certificate of Incorporation has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Oracle Systems Corporation has caused this Certificate
to be signed and attested by its duly authorized officers as of this 4th day of
November, 1993.
ORACLE SYSTEMS CORPORATION,
a Delaware corporation
By: RAYMOND L. OCAMPO, JR.
Raymond L. Ocampo, Jr.,
Senior Vice President, General
Counsel
& Corporate Secretary
ATTEST:
By: L. PATRICIA MONCADA
L. Patricia Moncada, Assistant
Secretary
<PAGE> 1
EXHIBIT 10.13
ORACLE CORPORATION
1993 DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PLAN PROVISIONS PAGE
- -------------------------------------------------------------------------------------- -----
<S> <C>
Section 1 - Definitions............................................................... (1)
Section 2 - Eligibility............................................................... (2)
Section 3 - Deferred Compensation..................................................... (2)
Section 4 - Designation of Beneficiary................................................ (4)
Section 5 - Change in Control......................................................... (4)
Section 6 - Trust Provisions.......................................................... (5)
Section 7 - Amendment and Termination................................................. (5)
Section 8 - Administration............................................................ (5)
Section 9 - General and Miscellaneous................................................. (5)
APPENDICES
- --------------------------------------------------------------------------------------
Appendix 1 - Acknowledgment........................................................... (7)
Appendix 2 - Distribution Election.................................................... (8)
Appendix 3 - Election of Deferral..................................................... (9)
Appendix 4 - Beneficiary Designation.................................................. (10)
</TABLE>
<PAGE> 3
ORACLE CORPORATION
1993 DEFERRED COMPENSATION PLAN
Oracle Corporation, a California Corporation (referred to hereafter as the
"Employer") hereby establishes an unfunded plan for the purpose of providing
deferred compensation for a select group of management and highly compensated
employees.
RECITALS
WHEREAS, those employees identified by the Compensation Committee of the
Board of Directors of the Employer or any other committee designated by the
Board of Directors of the Employer to administer this Plan in accordance with
Section 8 hereof (hereinafter referred to as the "Committee") as eligible to
participate in this Plan (each of whom are referred to hereafter as the
"Employee" or collectively as the "Employees") are employed by Employer; and
WHEREAS, Employer desires to adopt an unfunded deferred compensation plan
and the Employees desire the Employer to pay certain deferred compensation
and/or related benefits to or for the benefit of Employees, or a designated
Beneficiary, or both;
NOW THEREFORE, the Employer hereby establishes this deferred compensation
plan.
SECTION 1
DEFINITIONS
1.1 "Account" shall mean the separate account(s) established under this
Plan and the Trust for each participating Employee. Employer shall furnish each
participant with an annual statement of his or her account balance.
1.2 "Actuary" shall mean the actuaries (if any) for the Plan as selected
by the Committee. Any Actuary shall be required to be an enrolled actuary, as
that term is used in Section 3042 of the Employee Retirement Income Security Act
of 1974, as amended.
1.3 "Beneficiary" shall mean the Beneficiary designated by the Employee to
receive Employee's deferred compensation benefits in the event of his or her
death.
1.4 "Change in Control" shall have the meaning set forth in Section 5.1 of
the Plan.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and the rules and regulations promulgated thereunder.
1.6 "Committee" shall mean the Compensation Committee of the Board of
Directors of the Employer or any other committee designated by the Board of
Directors of the Employer to administer this Plan in accordance with Section 8
hereof.
1.7 "Effective Date" shall mean the date of execution of the Plan.
1.8 "Employee" shall mean each employee of Employer designated by Employer
to be entitled to deferred compensation pursuant to this Plan; references to
Employee herein shall include references to an Employee's Beneficiary where the
context so requires.
1.9 "Employer" shall mean Oracle Corporation, a California Corporation,
and any successor organization thereto.
1.10 "Hardship" shall have the meaning set forth in Section 3.5 of the
Plan.
1.11 "Plan" shall mean Oracle Corporation 1993 Deferred Compensation Plan.
<PAGE> 4
1.12 "Permanent Disability" shall mean that the Employee is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or otherwise meets the definition of "Permanent Disability" as set forth
in the Employer's Long Term Disability Plan. An Employee will not be considered
to have a Permanent Disability unless he or she furnishes proof of such
condition sufficient to satisfy the Employer, in its sole discretion.
1.13 "Trust" or "Trust Agreement" shall mean Oracle Corporation 1993
Deferred Compensation Plan Trust Agreement, including any amendments thereto,
entered into between the Employer and the Trustee to carry out the provisions of
the Plan.
1.14 "Trust Fund" shall mean the cash and other properties held and
administered by Trustee pursuant to the Trust to carry out the provisions of the
Plan.
1.15 "Trustee" shall mean the designated Trustee acting at any time under
the Trust.
1.16 "Year of Employment" shall mean any twelve (12) consecutive month
period in which an Employee is employed by Employer for more than 1,000 hours of
service, commencing with the Employee's date of hire.
SECTION 2
ELIGIBILITY
2.1 Eligibility. Excepting the first year of the Plan, eligibility to
participate in the Plan shall be limited to Employees of the Employer whose (i)
base salary during the calendar year in which compensation is to be deferred or
(ii) wages reported on the employee's Wage and Tax Statement on Form W-2 for the
calendar year previous to such calendar year equals or exceeds $150,000, except
that the Committee (or its designee) may select such other employees as it deems
appropriate. For purposes of this Section 2.1 and Appendix 3 hereto, "base
salary" means an Employee's regular annual compensation for a calendar year,
determined as of the first day of that year, excluding bonuses, commissions,
overtime, incentive payments, non-monetary awards, and other special
compensation, before reduction for compensation deferred pursuant to all
qualified and non-qualified plans of the Employer. The Committee shall designate
Employees who shall be covered by this Plan in a separate Acknowledgment (in the
form attached hereto as Appendix 1) for each such Employee. Participation in the
Plan shall commence as of the date such Acknowledgment is signed by the Employee
and delivered to the Employer, provided that deferral of compensation under the
Plan shall not commence until the Employee has complied with the election
procedures set forth in Section 3.3. Nothing in the Plan or in this
Acknowledgment should be construed to require any contributions to the Plan on
behalf of the Employee by Employer.
SECTION 3
DEFERRED COMPENSATION
3.1 Deferred Compensation. Each participating Employee may elect, in
accordance with Section 3.3 of this Plan, to defer annually the receipt of a
portion of the compensation otherwise payable to him or her by Employer during
each year or portion of a year that the Employee shall be employed by the
Employer. Any compensation deferred pursuant to this Section shall be recorded
by the Employer in an Account, maintained in the name of the Employee, which
Account shall be credited with a dollar amount equal to the total amount of
compensation deferred during each calendar year under the Plan together with
earnings thereon credited in accordance with Section 3.7. The amount or
percentage of compensation that Employee elects to defer under this Section 3.1
will remain constant until suspended or modified by the filing of another
election with the Employer by the Employee in accordance with Section 3.3 of the
Plan. All deferrals pursuant to this Section 3.1 shall be fully vested at all
times. No election will be permitted that provides for deferral of an amount (or
a percentage which the Committee determines will result in deferral of an
amount) less than $5,000 during any calendar year.
(2)
<PAGE> 5
3.2 Payment Of Account Balances. (a) The Employee shall elect whether he
or she will receive distribution of his or her entire Account (i) upon reaching
age 59 1/2, or (ii) upon termination of employment of Employee with Employer.
Such election shall be made at the time that the Employee elects to participate
in the Plan and no modifications to such election shall be permitted thereafter.
The Employee shall determine whether Employee will receive distribution of all
amounts payable to him or her in a lump sum or in installments over a designated
period of years, pursuant to the provisions of paragraph (d) of this Section.
(b) Upon termination of Employee's employment with Employer by reason of
death or Permanent Disability prior to the date when payment of Account balances
otherwise would commence under the provisions of Section 3.2(a), Employee or
Employee's designated Beneficiary will be entitled to receive all amounts
credited to the Account(s) of Employee as of the date of his or her death or
Permanent Disability (notwithstanding any election to receive distributions
under clause (i) of Section 3.2(a)). Upon termination of Employee's employment
with Employer by reason other than death or Permanent Disability prior to the
date when payment of Account balances otherwise would commence under the
provisions of Section 3.2(a), the Employer may, in the sole discretion of the
Committee, distribute to Employee or Employee's designated Beneficiary all
amounts credited to the Employee's Account as of the date of such termination
(notwithstanding any election to receive distributions under clause (i) of
Section 3.2(a)). Said amounts shall be payable in a lump sum or in installments
over a designated period of years, pursuant to the provisions of paragraph (d)
of this Section.
(c) Upon the death of Employee prior to complete distribution to him or her
of the entire balance of his or her Account (and after the date of termination
of employment with Employer), the balance of his or her Account(s) on the date
of death shall be payable to Employee's designated Beneficiary pursuant to
paragraph (d) of this Section.
(d) The Employer shall distribute or direct distribution of the amounts
credited to Employee's Account, including earnings (if any) credited thereto
pursuant to Section 3.7, in a lump sum, or in installments over a period of five
(5) years or ten (10) years as Employee shall designate. Distribution shall be
made or commence on the first day of the month next following (i) the date
specified in clause (i) of Section 3.2(a), if the Employee has elected to
receive distribution under such clause, (ii) the date upon which Employee's
employment with Employer terminates in the event of a distribution pursuant to
paragraphs (a) or (b) of this Section 3.2 (other than a distribution governed by
clause (i)), or (iii) the date of Employee's death in the event of a
distribution pursuant to paragraph (c) of this Section 3.2. Subsequent
installments, if any, shall be made on each quarter-annual anniversary date of
the date of the first installment as determined by Employee. Each such
installment, if any, shall include interest or other earnings credited to the
Employee's balance of the Account remaining unpaid. The Employee's distribution
election shall be in the form attached hereto as Appendix 2.
3.3 Election To Defer Compensation. The Employee's election to defer
compensation as provided in Section 3.1 of this Plan shall be in writing, signed
by the Employee, and delivered to Employer, together with all other documents
required under the preceding provisions of this Plan to be submitted herewith,
at least twenty (20) days prior to January 1 of the calendar year in which the
compensation to be deferred is otherwise payable to Employee; provided, however,
that Employee shall have thirty (30) days from the date that this Plan is
adopted within which to make an election in calendar year 1993 (which election
shall be effective commencing twenty (20) days following receipt by the Employer
of Employee's election and all other documents required under the preceding
provisions of this Plan to be submitted herewith). Such election (and any
subsequent election) will continue until suspended or modified in writing
delivered by Employee to Employer, which new election shall only apply to
compensation otherwise payable to Employee after the end of the calendar year in
which such election is delivered to Employer. Any deferral election made by
Employee shall be irrevocable with respect to any compensation covered by such
election, including the compensation payable in the calendar year in which the
election suspending or modifying the prior deferral election is delivered to
Employer. Absent a suspension or modification election, such original election
shall remain in effect from year to year until the date for distribution of the
Employee's Account elected under Section 3.1. The Employer shall withhold the
amount or percentage of base salary specified to be deferred in equal amounts
for each payroll period and shall withhold the amount or percentage of cash
bonus specified to be
(3)
<PAGE> 6
deferred at the time or times such bonus is or otherwise would be paid to the
Employee. The election to defer compensation shall be in the form attached as
Appendix 3.
3.4 Payment Upon Change in Control. Notwithstanding any other provisions
of this Plan, the aggregate balance credited to and held in the Employee's
Account shall be distributed to the Employee in a lump sum within thirty (30)
days of Change in Control, as defined in Section 5.1.
3.5 Hardship. An Employee shall be entitled to distributions from his or
her Account to the extent that the Employee demonstrates to the reasonable
satisfaction of the Committee that he or she needs the funds due to Hardship.
For purposes of this Section 3.5, a distribution is made on account of Hardship
only if the distribution is made on account of an immediate and heavy financial
need of the Employee, is necessary to satisfy the financial need, and if the
financial need was not reasonably foreseeable by the Employee. Whether an
Employee has an immediate and heavy financial need shall be determined by the
Committee based on all relevant facts and circumstances, and shall include, but
not be limited to: the need to pay funeral expenses of a family member; the need
to pay expenses for medical care for Employee, the Employee's spouse or any
dependent of Employee; or payments necessary to prevent the eviction of Employee
from Employee's principal residence or foreclosure on the mortgage on that
residence.
3.6 Employee's Rights Unsecured. The right of the Employee or his or her
designated Beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Employer, and neither the Employee nor
his or her designated Beneficiary shall have any rights in or against any amount
credited to his or her Account or any other specific assets of the Employer,
except as otherwise provided in the Trust.
3.7 Investment of Contribution. (a) All amounts credited to an Account
shall be credited with the actual earnings (hereinafter and previously sometimes
referred to as "interest or other earnings") generated by such amounts, from
investments made by the Trustee, until the Account has been fully distributed to
the Employee or to the Beneficiary designated by the Employee in a writing
delivered to the Employer.
(b) Employer shall credit interest or other earnings on investment of
amounts in any and all Accounts to the respective Account on the date received
until final distribution of the Account.
SECTION 4
DESIGNATION OF BENEFICIARY
4.1 Designation of Beneficiary. Employee may designate a Beneficiary or
beneficiaries to receive any amount due hereunder by Employee via written notice
thereof to Employer at any time prior to his or her death and may revoke or
change the Beneficiary designated therein without the Beneficiary's consent by
written notice delivered to Employer at any time and from time to time prior to
Employee's death, provided that any such designation or change of designation
naming a Beneficiary other than the Employee's spouse shall be effective in the
case of an Employee resident in a community property state only if spousal
consent is provided. If Employee shall have failed to designate a Beneficiary,
or if no such Beneficiary shall survive him or her, then such amount shall be
paid to his or her estate. Designations of beneficiaries shall be in the form
attached hereto as Appendix 4.
SECTION 5
CHANGE IN CONTROL
5.1 Change in Control. For purposes of this Plan, a Change in Control
shall mean the purchase or other acquisition by any person, entity, or group of
persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange
Act of 1934 ("Act"), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 50
percent of more of either the outstanding shares of common stock or the combined
voting power of Employer's then outstanding voting securities entitled to vote
generally, or the approval by the stockholders of Employer of a reorganization,
(4)
<PAGE> 7
merger, or consolidation, in each case, with respect to which persons who were
stockholders of Employer immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50 percent of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated Employer's then outstanding securities,
or a liquidation or dissolution of Employer or of the sale of all or
substantially all of Employer's assets.
SECTION 6
TRUST PROVISIONS
6.1 Trust Agreement. The Employer may establish the Trust for the purpose
of retaining assets set aside by Employer pursuant to the Trust Agreement for
payment of all or a portion of the amounts payable pursuant to the Plan. Any
benefits not paid from the Trust shall be paid from Employer's general funds,
and any benefits paid from the Trust shall be credited against and reduce by a
corresponding amount the Employer's liability to Employees under the Plan. All
Trust Funds shall be subject to the claims of general creditors of the Employer
in the event the Employer is Insolvent as defined in Section 3 of the Trust
Agreement. The obligations of the Employer to pay benefits under the Plan
constitute an unfunded, unsecured promise to pay and Employees shall have no
greater rights than general creditors of the Employer.
SECTION 7
AMENDMENT AND TERMINATION
7.1 Amendment. The Committee shall have the right to amend this Plan at
any time and from time to time, including a retroactive amendment. Any such
amendment shall become effective upon the date stated therein, and shall be
binding on all Employees, except as otherwise provided in such amendment;
provided, however, that said amendment shall not affect benefits adversely to
the affected Employee without the Employee's written approval. Benefits accruing
to an Employee pursuant to any employment agreement in effect between Employer
and Employee which entitles the Employee to participate in and to certain rights
under this Plan shall not be affected by an amendment of this Plan.
SECTION 8
ADMINISTRATION
8.1 Administration. The Committee shall administer and interpret this
Plan in accordance with the provisions of the Plan and the Trust Agreement. Any
determination or decision by the Committee shall be conclusive and binding on
all persons who at any time have or claim to have any interest whatever under
this Plan.
8.2 Liability of Committee, Indemnification. To the extent permitted by
law, the Committee shall not be liable to any person for any action taken or
omitted in connection with the interpretation and administration of this Plan
unless attributable to his or her own bad faith or willful misconduct.
8.3 Expenses. The costs of the establishment of the Plan and the adoption
of the Plan by Employer, including but not limited to legal and accounting fees,
shall be borne by Employer. The expenses of administering the Plan shall be
borne by the Trust; provided, however, that Employer shall bear, and shall not
be reimbursed by, the Trust for any tax liability of Employer associated with
the investment of assets by the Trust.
SECTION 9
GENERAL AND MISCELLANEOUS
9.1 Rights Against Employer. Except as expressly provided by the Plan, the
establishment of this Plan shall not be construed as giving to any Employee or
to any person whomsoever, any legal, equitable or other
(5)
<PAGE> 8
rights against the Employer, or against its officers, directors, agents or
shareholders, or as giving to any Employee or Beneficiary any equity or other
interest in the assets, business or shares of Employer stock or giving any
Employee the right to be retained in the employment of the Employer. All
Employees shall be subject to discharge (with or without cause) to the same
extent they would have been if this Plan had never been adopted. The rights of
an Employee hereunder shall be solely those of an unsecured general creditor of
the Employer.
9.2 Assignment or Transfer. No right, title or interest of any kind in the
Plan shall be transferable or assignable by any Employee or Beneficiary or be
subject to alienation, anticipation, encumbrance, garnishment, attachment,
execution or levy of any kind, whether voluntary or involuntary, nor subject to
the debts, contracts, liabilities, engagements, or torts of the Employee or
Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer,
assign, pledge, garnish, attach or otherwise subject to legal or equitable
process or encumber or dispose of any interest in the Plan shall be void.
9.3 Severability. If any provision of this Plan shall be declared illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable, and this Plan
shall be construed and enforced as if said illegal or invalid provision had
never been inserted herein.
9.4 Construction. The article and section headings and numbers are
included only for convenience of reference and are not to be taken as limiting
or extending the meaning of any of the terms and provisions of this Plan.
Whenever appropriate, words used in the singular shall include the plural or the
plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.
9.5 Governing Law. The validity and effect of this Plan and the rights and
obligations of all persons affected hereby shall be construed and determined in
accordance with the laws of the State of California unless superseded by federal
law, which shall govern correspondingly.
9.6 Payment Due to Incompetence. If the Committee receives evidence that
an Employee or Beneficiary entitled to receive any payment under the Plan is
physically or mentally incompetent to receive such payment, the Committee may,
in its sole and absolute discretion, direct the payment to any other person or
Trust which has been legally appointed by the courts.
9.7 Taxes. All amounts payable hereunder shall be reduced by any and all
federal, state, and local taxes imposed upon Employee or his or her Beneficiary
which are required to be paid or withheld by Employer. The determination of
Employer regarding applicable income and employment tax withholding requirements
shall be final and binding on Employee.
9.8 Insurance. In the event that any Employee elects, in his or her sole
discretion, to independently purchase an insurance policy covering the inability
of the Plan or the Trust to make any payments to which Employee is entitled
under the Plan or the Trust, the Employer shall use its best efforts to
facilitate the payment by Employee of any excise taxes which become due as the
result of the payment of premiums under such policy. Nothing contained herein
shall be construed as an endorsement by the Employer of the purchase of such a
policy or a recommendation by the Employer that the purchase of such a policy is
necessary or desirable as the result of Employee's participation in the Plan.
9.9 Attorney's Fees. Employer shall pay the reasonable attorney's fees
incurred by any Employee in an action brought against Employer to enforce
Employee's rights under the Plan, provided that such fees shall only be payable
in the event that the Employee prevails in such action.
(6)
<PAGE> 9
APPENDIX 1
ACKNOWLEDGMENT
The undersigned Employee hereby acknowledges that Employer has selected him
or her as a participant in Oracle Corporation 1993 Deferred Compensation Plan,
subject to all terms and conditions of the Plan, a copy of which has been
received, read, and understood by the Employee in conjunction with executing
this Acknowledgment. Employee acknowledges that he or she has had satisfactory
opportunity to ask questions regarding his or her participation in the Plan and
has received satisfactory answers to any questions asked. Employee also
acknowledges that he or she has sufficient knowledge and experience in financial
and business matters to be capable of evaluating the merits and risks of
participation in the Plan. Employee understands that his or her participation in
the Plan shall not begin until this Acknowledgment has been signed by Employee
and returned to Employer.
Please check the box if the following statement is true:
/ / My income exceeded $200,000 (or my joint income with my spouse
exceeded $300,000) in each of the calendar years 1991 and 1992,
and I reasonably expect $200,000 of income in calendar year 1993
(or $300,000 of joint income with my spouse), or my net worth (or
my joint net worth with my spouse) exceeds $1,000,000.
Dated:
Signed:
Employee
Dated:
Oracle Corporation
Signed:
[Officer]
(7)
<PAGE> 10
APPENDIX 2
DISTRIBUTION ELECTION
Pursuant to Section 3.3 of the Oracle Corporation 1993 Deferred
Compensation Plan (the "Plan"), I hereby elect to have all amounts credited to
my Account, together with any interest or other earnings credited thereon,
distributed to me on the terms elected below:
I elect to have any distributions of money covered by this Plan paid to me:
/ / upon reaching age 59 1/2
/ / upon termination of employment
I elect to have any distribution of money covered by an election to receive
distribution paid to me in:
/ / A lump sum
/ / An annuity of twenty (20) quarter-annual installments determined
as of each installment date by dividing the entire amount in my
Account (including interest and other earnings) by the number of
installments then remaining to be paid.
/ / An annuity of forty (40) quarter-annual installments determined as
of each installment date by dividing the entire amount in my
Account (including interest and other earnings) by the number of
installments then remaining to be paid.
Dated:
Signed:
(8)
<PAGE> 11
APPENDIX 3
ELECTION OF DEFERRAL
I elect, pursuant to Section 3.1 of the Oracle Corporation 1993 Deferred
Compensation Plan (the "Plan"), to make the following deferral with respect to
compensation earned following the date of this election:
<TABLE>
<S> <C>
% of base salary, net of any employee stock purchase plan contributions,
401(k) plan contributions, and any applicable employment taxes, payable
to me by Oracle Corporation (Employer), but in no event less than $5,000,
or
$ of base salary payable to me by Employer and/or
% of any cash bonus paid to me by Employer.
</TABLE>
This election shall take effect for each calendar year. It may be
terminated by me only with written notice. If termination is not submitted by
the last day of any calendar year, the election shall take effect for the
calendar year following the year in which such termination is submitted, and
shall remain in effect for the calendar year following the year in which such
termination is submitted. The deferral of compensation hereby elected is subject
to all of the terms and conditions of the Plan and of the Oracle Corporation
1993 Deferred Compensation Plan Trust Agreement, copies of which I have been
given by the Employer, and which I have read and understood.
Dated:
Signed:
(9)
<PAGE> 12
APPENDIX 4
BENEFICIARY DESIGNATION
In the event I should die prior to the receipt of all money accrued to my
credit under this election, I elect to have the balance paid to the following
named individual(s) in the following percentages(s):
<TABLE>
<S> <C>
----% ------------------------------------------
----% ------------------------------------------
----% ------------------------------------------
Dated:
------------------------------------------
Signed:
------------------------------------------
</TABLE>
TO BE COMPLETED ONLY WHERE ANY ABOVE NAMED BENEFICIARY IS NOT MY SPOUSE:
I, as the spouse of , do hereby consent to
designation of any beneficiary that might in any way impair my rights under
applicable state law, including but not limited to, laws relating to Community
Property, Wills, Trusts, and Intestacy.
(10)
