<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SCOPUS TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
CALIFORNIA 7372 94-3134998
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION) ----------------
1900 POWELL ST., SUITE 700
EMERYVILLE, CA 94608
(510) 428-0500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MICHELE L. AXELSON
CHIEF FINANCIAL OFFICER
SCOPUS TECHNOLOGY, INC.
1900 POWELL ST., SUITE 700
EMERYVILLE, CA 94608
(510) 597-5800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JEFFREY D. SAPER, ESQ. PETER E. WILLIAMS III, ESQ.
HOWARD S. ZEPRUN, ESQ. CORI M. ALLEN, ESQ.
J. ROBERT SUFFOLETTA, ESQ. MORRISON & FOERSTER LLP
WILSON SONSINI GOODRICH & ROSATI 755 PAGE MILL ROAD
PROFESSIONAL CORPORATION PALO ALTO, CA 94304
650 PAGE MILL ROAD (415) 813-5600
PALO ALTO, CA 94304-1050
(415) 493-9300
----------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE (1)(2) FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock............ 2,300,000 shares $37.3125 $85,818,750 $26,010
===========================================================================================
</TABLE>
(1) Includes up to 300,000 shares of Common Stock which may be purchased by
the Underwriters to cover overallotments, if any.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the registration fee, based on the average high and low trading prices for
the Common Stock as reported by the Nasdaq National Market on October 30,
1996.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued November 6, 1996
2,000,000 Shares
[LOGO OF SCOPUS TECHNOLOGY]
COMMON STOCK
OF THE 2,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 1,000,000 SHARES ARE
BEING SOLD BY THE COMPANY AND 1,000,000 SHARES ARE BEING SOLD BY THE SELLING
SHAREHOLDERS. THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE
OF SHARES BY THE SELLING SHAREHOLDERS. SEE "PRINCIPAL AND SELLING
SHAREHOLDERS." THE COMPANY'S COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "SCOP." ON NOVEMBER 4, 1996, THE LAST SALE PRICE
OF THE COMMON STOCK, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS $37
7/8 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
-----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 HEREOF.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
------ ------------- --------- ------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
Total (3)......................... $ $ $ $
</TABLE>
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(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) Certain Selling Shareholders have granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 300,000 additional Shares at the price to public less
underwriting discounts and commissions for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full, the
total price to public, underwriting discounts and commissions and proceeds
to Selling Shareholders will be $ , $ and $ , respectively. See
"Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Morrison & Foerster LLP, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1996 at the offices of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
-----------
MORGAN STANLEY & CO.
Incorporated
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
UBS SECURITIES
, 1996
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
SHAREHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
The Company............................................................... 4
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Price Range of Common Stock............................................... 12
Capitalization............................................................ 13
Selected Consolidated Financial Data...................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 23
Management................................................................ 36
Certain Transactions...................................................... 42
Principal and Selling Shareholders........................................ 43
Description of Capital Stock.............................................. 45
Shares Eligible for Future Sale........................................... 46
Underwriters.............................................................. 47
Legal Matters............................................................. 48
Experts................................................................... 48
Additional Information.................................................... 48
Available Information..................................................... 49
Index to Consolidated Financial Statements................................ F-1
</TABLE>
----------------
This Prospectus contains certain registered and unregistered trademarks of
Scopus and of other entities.
Certain of the statements contained in this Prospectus are forward-looking
statements. The Company's actual results could differ materially from those in
some forward-looking statements. See "Risk Factors."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE
ACT OF 1934. SEE "UNDERWRITERS."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Scopus is a leading provider of client/server software solutions for the
customer information management market. The Company's applications, Scopus
SupportTEAM, Scopus ServiceTEAM, Scopus QualityTEAM, Scopus SalesTEAM and
Scopus Voyager automate external customer support, the product design change
process, sales and marketing activities and internal help desk support. Scopus
applications are designed to enable organizations to build a knowledgebase of
customer information that can be accessed and used by individuals throughout
the enterprise to improve the effectiveness and efficiency of customer support
in order to increase customer satisfaction. The Company's products are based on
a modular, open architecture and support a variety of client computing
platforms, industry standard relational databases and server operating systems
and operate over local area networks, intranets and the internet. Scopus
products offer customers a unique combination of built-in functionality,
customizability, adaptability and scalability. The Company also offers
consulting, training and maintenance services to facilitate the installation
and use of the Company's products.
The Company sells its software and services through a direct sales force in
North America and Europe and has relationships with independent distributors in
Europe and Asia Pacific. The Company has licensed its products to over 250
customers, including Autodesk, Bell South, Boeing, Intuit, LA Cellular,
Netscape Communications, Octel, Olivetti, Sequent Computers, Stream
International, Sun Microsystems, U.S. Robotics, VISA International and
WorldCom.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.............. 2,000,000 shares, including
1,000,000 shares by the Company and
1,000,000 shares by the Selling Shareholders
Common Stock to be outstanding
after the offering............... 12,926,521 shares (1)
Use of proceeds................... For general corporate purposes, including
working capital. See "Use of Proceeds."
Nasdaq National Market symbol..... SCOP
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------ ---------------
1992 1993 1994 1995 1996 1995 1996
----- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenues.......... $ 782 $2,704 $ 6,535 $15,250 $28,596 $12,049 $23,804
Gross margin............ 453 1,770 5,676 11,309 20,807 7,395 18,787
Income from operations.. 42 314 676 1,486 2,691 309 3,174
Net income.............. 42 201 567 973 1,990 227 2,349
Net income per share(2). $0.01 $ 0.03 $ 0.07 $ 0.10 $ 0.18 $ 0.02 $ 0.18
Number of shares used to
compute net income per
share (2).............. 6,612 7,352 8,476 9,683 10,965 10,786 12,757
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------
AS
ACTUAL ADJUSTED(3)
------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and investments...................... $28,112 $63,504
Working capital............................................. 30,547 65,939
Total assets................................................ 48,342 83,734
Shareholders' equity........................................ 37,460 72,852
</TABLE>
- -------
(1) Based on shares outstanding as of September 30, 1996. Does not include an
aggregate of (i) 1,322,606 shares issuable at a weighted average exercise
price of $7.15 per share upon the exercise of options outstanding as of
such date under the Company's 1991 Stock Option Plan (the "Option Plan"),
of which options to purchase 308,307 shares were exercisable at September
30, 1996 and (ii) 41,250 shares issuable at a weighted average exercise
price of $19.48 per share upon the exercise of options outstanding as of
such date under the Company's Director Option Plan (the "Director Plan").
See Note 10 of Notes to Consolidated Financial Statements.
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the number of shares used to compute net income per share.
(3) Reflects the sale of 1,000,000 shares of Common Stock offered by the
Company hereby at an assumed public offering price of $37 7/8 per share,
after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company.
3
<PAGE>
THE COMPANY
Scopus is a leading provider of client/server software solutions for the
customer information management market. The Company's applications, Scopus
SupportTEAM, Scopus ServiceTEAM, Scopus QualityTEAM, Scopus SalesTEAM and
Scopus Voyager, automate external customer support, the product design change
process, sales and marketing activities and internal help desk support. Scopus
applications are designed to enable organizations to build a knowledgebase of
customer information that can be accessed and used by individuals throughout
the enterprise to improve the effectiveness and efficiency of customer support
in order to increase customer satisfaction. As the knowledgebase grows,
organizations can use the resulting reservoir of customer information to
develop better products, market products more effectively and provide more
efficient and effective customer support.
Businesses and other organizations are increasingly focusing on customer
service and satisfaction as a means of gaining a competitive advantage.
Realizing that improving customer service and satisfaction can be as important
in attracting and retaining customers as product design, quality and price,
many organizations are reorienting their businesses to be more customer-
centric and more responsive to customer needs. In pursuit of improved customer
support and satisfaction, many organizations are increasingly distributing
responsibility for sales and customer service broadly throughout their
organizations. In addition, many of these organizations are extending
responsibility for sales and customer service to their "extended enterprises"
of distributors, value-added resellers and other outsourcing partners. These
trends, coupled with the proliferation of client/server computing, have fueled
the demand for software applications that automate customer information
management throughout the extended enterprise.
As a result of intense competition driven by factors such as deregulation
and technological advances, companies are becoming increasingly focused on
providing high levels of customer service to attract new customers while
retaining existing customers. In particular, high-volume call centers have
emerged as a strategic component of customer service in certain industries.
Scopus believes that its products offer a cost-effective solution for high-
volume call centers. The Company is currently targeting the call center market
and intends to continue to expend significant sales and marketing efforts in
this market.
The Company's integrated suite of client/server applications offers
organizations a unique combination of built-in functionality, customizability,
adaptability and scalability. In addition to providing a pre-packaged
solution, the Company's technology allows organizations to slightly tailor or
extensively customize Scopus applications without time consuming and costly
source code programming changes. Scopus products are designed with a modular,
open architecture which enables the applications to be integrated with one
another and with third party products, including equipment for
computer/telephony integration. The products also support a variety of client
computing platforms, industry standard relational databases and server
operating system, and operate over local area networks, intranets and the
internet. The Company also offers consulting, training and post-contract
("maintenance") support services to facilitate the installation and use of the
Company's products.
The Company sells its software and services through a direct sales force in
North America and Europe and has relationships with independent distributors
in Europe and Asia Pacific. The Company is continuing to develop relationships
with systems integrators, third party distributors and hardware and software
vendors both domestically and internationally. The Company has licensed its
products to over 250 customers, including Autodesk, Bell South, Boeing,
Intuit, LA Cellular, Netscape Communications, Octel, Olivetti, Sequent
Computers, Stream International, Sun Microsystems, U.S. Robotics, VISA
International and WorldCom.
The Company was incorporated in March 1991. The Company's principal
executive office is located at 1900 Powell Street, Suite 700, Emeryville,
California 94608 and its telephone number is (510) 597-5800. Except as
otherwise noted herein, all references to "Scopus" or the "Company" refer to
Scopus Technology, Inc., a California corporation, and its subsidiaries.
4
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Prospectus that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exhhange Act of
1934, including without limitation statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
forward looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statements. The Company's actual
results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth
in the following risk factors and elsewhere in this Prospectus. In evaluating
the Company's business, prospective investors should consider carefully the
following factors in addition to the other information set forth in this
Prospectus.
Variability of Operating Results; Uncertainty of Future Operating Results.
The Company was incorporated in March 1991 and introduced its first product in
February 1992. Although the Company has been profitable each fiscal year since
inception, there can be no assurance that the Company will be able to sustain
profitability on a quarterly or annual basis in the future. In addition, the
Company's revenues and operating results have varied substantially in the past
and are likely to vary substantially in the future due to a variety of
factors, including (i) the timing and size of the Company's individual license
transactions, and, in particular, the fact that the Company's revenues in any
quarter can be largely dependent on a limited number of large licenses, (ii)
the fact that a significant portion of the Company's revenues in any given
quarter are recognized in the last month, weeks or even days of the quarter,
(iii) the relatively long sales cycle for the Company's software products,
which is typically six to nine months, (iv) the relative proportion of total
revenues derived from license revenues and services and maintenance revenues,
(v) the timing of the introduction of new products or product enhancements by
the Company and its competitors, (vi) the extent of customization required by
any individual license transaction, which can result in deferral of
significant revenues until completion or acceptance of certain customized
portions of the software, (vii) changes in customer budgets, (viii)
seasonality of technology purchases by customers and general economic
conditions, (ix) the mix of revenues among various distribution channels and
between domestic and international customers, (x) the relative proportion of
implementation services performed by the Company for which the Company engages
independent contractors, which are typically more costly than internal
personnel and (xi) the relative proportion of license revenues derived from
third party products distributed by the Company in conjunction with its
products. Therefore, the Company believes that period to period comparisons of
its revenues and operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
During the quarter ended September 30, 1996, the Company experienced a license
revenue growth rate of 36% compared to the immediately preceding quarter. The
Company does not anticipate sustaining such sequential quarterly growth rates
in the future.
Estimating future revenues is difficult because the Company ships its
products soon after an order is received and as such does not have a
significant backlog. Thus, quarterly license revenues are heavily dependent
upon orders received and shipped within the same quarter. Moreover, the
Company has generally recorded 50% to 70% of its total quarterly revenues in
the third month of the quarter, with a concentration of these revenues in the
last half of that third month. This concentration of revenues is influenced by
customer tendencies to make significant capital expenditures at the end of a
fiscal quarter. The Company expects these revenue patterns to continue for the
foreseeable future. In addition, quarterly license revenues are dependent on
the timing of revenue recognition, which can be affected by many factors,
including the timing of customer installations, completion of customization
activity and the fulfillment of acceptance criteria. The Company has from time
to time experienced delays in recognizing revenues with respect to certain
orders. Despite the uncertainties in its revenue patterns the Company's
operating expenses are based upon anticipated revenue levels and such expenses
are incurred on an approximately ratable basis throughout the quarter. As a
result, if expected revenues are deferred or otherwise not realized in a
quarter for any reason, the Company's business, operating results and
financial condition would be materially adversely affected.
The Company intends to continue to increase its research and development
expenditures in order to pursue its strategy of developing applications
tailored to the requirements of specific additional vertical markets, and to
5
<PAGE>
continue to increase sales and marketing expenditures significantly as the
Company expands its domestic and international sales and marketing staff and
develops indirect sales and distribution channels. In addition, general and
administrative expenses have increased each quarter since the quarter ended
September 30, 1995 as the Company began to invest in the infrastructure needed
to support its growing operations. Accordingly, to the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's business, operating results and financial condition will be
materially adversely affected.
Due to all of the foregoing factors, it is likely that in some future
quarter the Company's total revenues or operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely decline, perhaps substantially. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Intense Competition. The customer information management software market is
relatively new, intensely competitive, highly fragmented, subject to rapid
change, and highly sensitive to new product introductions and marketing
efforts by industry participants. The Company competes with a variety of other
companies depending on the target market for their products. These competitors
include (i) a select number of companies, such as Clarify Inc. and The Vantive
Corporation, targeting the enterprise-wide customer information market; (ii) a
substantial number of small private companies and certain public companies,
such as Remedy Corporation, Siebel Systems, Inc., Aurum Software, Inc. and
Software Artistry, Inc., which offer products targeted at one or more specific
markets, including the customer support market, the help desk market, the
quality assurance market and the sales and marketing automation market; (iii)
professional services organizations, such as Andersen Consulting, that design
and develop custom systems; (iv) large information technology providers such
as International Business Machines Corporation ("IBM") and Computer Associates
International, Inc.; and (v) the internal information technology departments
of potential customers, which develop proprietary customer information
management applications. Among the Company's potential competitors are also a
number of large hardware and software companies that may develop or acquire
products that compete with the Company's products. In this regard, SAP AG and
Oracle Corporation have each introduced a customer support module as part of
their application suites. The Company believes that many existing competitors
and new market entrants will attempt to develop fully integrated customer
information management systems that will compete with the Company's products.
See "Business--Competition."
Current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their products to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition is likely to result in price reductions, reduced
operating margins and loss of market share, any one of which could materially
adversely affect the Company's business, results of operations or financial
condition. Many of the Company's current and potential competitors have
significantly greater financial, technical, marketing and other resources than
the Company. As a result, they may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products,
than can the Company. There can be no assurance that the Company will be able
to compete successfully against current or future competitors or that
competitive pressures will not materially adversely affect the Company's
business, operating results and financial condition.
Dependence on Implementation Relationships. The Company historically relied
on internal resources and subcontracted consultants on an as-needed basis to
provide consulting and implementation services for the Company's products. In
recent periods, the Company has sought to increase the use of third party
consultants and system integrators to provide implementation, customization
and consulting services directly to the Company's customers. The Company's
increasing reliance on such third party consultants and systems integrators
poses several risks that could have a material adverse effect on the Company's
business, operating results or financial condition. For example, there can be
no assurance that these third party providers, who will have direct
obligations to the Company's customers, will be able to provide a level of
quality of service required to meet the needs of such customers. If the
Company is unable to develop further and to maintain effective,
6
<PAGE>
long-term relationships with these third parties, or if these third parties
fail to meet the needs of the Company's customers in a timely fashion, the
Company's business, operating results and financial condition will be
materially and adversely affected. Further, there can be no assurance that
these third party providers, many of whom have significantly greater
financial, technical, personnel and marketing resources than the Company, will
not market software products that compete with the Company's products, or will
not otherwise reduce or discontinue their relationship with or support of the
Company and its products. Finally, many of these current and potential third
party providers have existing relationships or may undertake relationships
with the Company's direct competitors. The inability to recruit, or the loss
of, important third party systems integrators or professional consulting firms
would have a material adverse effect on the Company's business, operating
results and financial condition.
Rapid Technological Change; Dependence on Product Development. The market
for the Company's products is characterized by rapid technological advances,
evolving industry standards in computer hardware and software technology,
changes in customer requirements and frequent new product introductions and
enhancements. The Company is currently investing significant resources in
product development and expects to continue to do so in the future. The
Company's future success will depend on its ability to continue to enhance its
current product line and to continue to develop and introduce new products
that keep pace with competitive product introductions and technological
developments, satisfy diverse and evolving customer requirements and otherwise
achieve market acceptance. There can be no assurance that the Company will be
successful in continuing to develop and market on a timely and cost-effective
basis fully functional product enhancements or new products that respond to
technological advances by others, or that these products will achieve market
acceptance. In addition, the Company has in the past experienced delays in the
development, introduction and marketing of new and enhanced products, and
there can be no assurance that the Company will not experience similar delays
in the future. Any failure by the Company to anticipate or respond adequately
to changes in technology and customer preferences, or any significant delays
in product development or introduction, would have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business--Research and Development."
Due to the complexity and sophistication of the Company's software products,
the Company's products from time to time contain defects or "bugs" which can
be difficult to correct. Furthermore, as the Company continues to develop and
enhance its products, there can be no assurance that the Company will be able
to identify and correct defects in such a manner as will permit the timely
introduction of such products. Moreover, despite extensive testing, the
Company has from time to time discovered defects only after its products have
been used by many customers. There can be no assurance that software defects
will not cause delays in product introductions and shipments, result in
increased costs, require design modifications, or impair customer satisfaction
with the Company's products. Any such event could materially adversely affect
the Company's business, operating results and financial condition.
Expansion of Distribution Channels. The Company has historically sold its
products through its direct sales force and a limited number of distributors.
The Company's ability to achieve significant revenue growth in the future will
depend in large part on its success in recruiting and training sufficient
sales personnel and establishing relationships with distributors, resellers
and systems integrators. The Company is currently investing, and plans to
continue to invest, significant resources to expand its domestic and
international direct sales force and develop distribution relationships with
certain third party distributors, resellers and systems integrators. The
Company's existing distribution relationships are generally non-exclusive and
can be terminated by either party without cause. The Company's distributors
also sell or can potentially sell products offered by the Company's
competitors. There can be no assurance that the Company will be able to retain
or attract a sufficient number of its existing or future third party
distribution partners or that such partners will recommend, or continue to
recommend, the Company's products. The inability to establish or maintain
successful relationships with distributors, resellers or systems integrators
could have a material adverse effect on the Company's business, operating
results or financial condition. In addition, there can be no assurance that
the Company will be able to successfully expand its direct sales force or
other distribution channels. Any failure by the Company to expand its direct
sales force or other distribution channels would materially adversely affect
the Company's business, operating results and financial condition. See
"Business--Strategy" and "--Sales and Marketing."
7
<PAGE>
Expansion of International Operations; Foreign Currency Fluctuations. An
important element of the Company's strategy is to expand its international
operations. In this regard, although the Company has established subsidiaries
in the United Kingdom, Canada and France and is currently investing
significant resources in its international operations, including the
development of certain third party distributor relationships and the hiring of
additional sales representatives, international sales to date have been
limited and there can be no assurance that the Company will be successful in
expanding its international operations. In the event the Company is able to
increase international revenues increase as a percentage of total revenues,
the Company's business, operating results or financial condition could be
materially adversely affected by risks inherent in conducting business
internationally, such as changes in currency exchange rates, longer payment
cycles, difficulties in staffing and managing international operations,
problems in collecting accounts receivable, seasonal reductions in business
activity during the summer months in Europe and certain other parts of the
world, increases in tariffs, duties, price controls or other restrictions on
foreign currencies and trade barriers imposed by foreign nationalities. In
this regard, to the extent the Company's international operations expand, the
Company expects that an increasing portion of its international license
revenues will be denominated in foreign currencies. In addition, the Company
has only limited experience in developing localized versions of its products
and marketing and distributing its products internationally. There can be no
assurance that the Company will be able to successfully localize, market, sell
and deliver its products internationally. The inability of the Company to
successfully expand its international operations in a timely manner could
materially adversely affect the Company's business, operating results or
financial condition.
Management of Growth. The Company's business has grown rapidly, with total
revenues increasing from $15.3 million in fiscal 1995 to $28.6 million in
fiscal 1996 and $23.8 million in the first six months of fiscal 1997. The
growth of the Company's business and expansion of its customer base has placed
and is expected to continue to place a significant strain on the Company's
management and operations. The Company's future operating results will depend
on its ability to continue to broaden the Company's senior management group.
In this regard, certain key members of the Company's management, including its
Chief Financial Officer and Vice President, Europe have recently joined the
Company. From time to time, engineers and other employees have left the
Company for various reasons, and the Company's future success will depend on
its ability to attract, hire and retain skilled employees and to hire
replacements for employees that leave the Company. The Company's expansion has
also resulted in substantial growth in the number of its employees and the
burden placed upon its operating and financial systems, resulting in increased
responsibility for both existing and new management personnel. In addition,
the Company's ability to effectively manage and support its growth will be
substantially dependent on its ability to continue to build upon its financial
and management controls, reporting systems and procedures on a timely basis
and to expand and maintain highly trained internal and third party resources
to provide product customization, implementation, training and other support
services. The Company also expects to increase its customer support operations
to the extent the installed base of the Company's products continues to grow.
Accordingly, the Company's future operating results will depend on the ability
of its management and other key employees to continue to implement and improve
its systems for operations, financial control and information management, to
recruit, train and manage its employee base, in particular, its direct sales
force and customer support organization, and to work effectively with third
party consulting and implementation service providers. There can be no
assurance that the Company will be able to manage or continue to manage its
recent or any future growth successfully, and any inability to do so would
have a material adverse effect on the Company's business, operating results
and financial condition. There also can be no assurance that the Company will
be able to sustain the rates of revenue growth that it has experienced in the
past. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Management--Directors and Executive Officers."
Developing Markets; Product Concentration. The Company's future financial
performance will depend in large part on the growth in demand for individual
customer information management applications as well as the number of
organizations adopting comprehensive customer information systems for their
client/server computing environments. The markets for these applications are
relatively new and developing. If the demand for customer information
management applications develops more slowly than the Company currently
anticipates, it would
8
<PAGE>
have a material adverse effect on the demand for the Company's applications
and on its business, operating results and financial condition. The Company
currently markets five application products, together with related application
service modules and a customization tool which are licensed for use in
conjunction with the Company's applications. Although the Company's
application service modules and customization tool are offered separately from
the Company's applications, the Company believes it is unlikely that any
significant revenues could be derived from such modules and such tool unless
the customer is using at least one of the Company's applications. Accordingly,
in the event the Company's applications are not accepted by the marketplace,
the Company's business, operating results and financial condition would be
materially adversely affected.
Intellectual Property Rights. The Company's success is dependent on its
ability to protect its proprietary technology. The Company licenses its
products in object code form only, although it has source code escrow
arrangements with certain customers. The Company relies on a combination of
copyright, trademark and trade secret laws, as well as confidentiality
agreements and licensing arrangements, to establish and protect its
proprietary rights. The Company does not have any patents or patent
applications pending, and existing copyright, trademark and trade secret laws
afford only limited protection. In addition, the laws of certain countries do
not protect the Company's proprietary rights to the same extent as do the laws
of the United States. Accordingly, there can be no assurance that the Company
will be able to protect its proprietary rights against unauthorized third
party copying or use, which could materially adversely affect the Company's
business, operating results or financial condition.
Despite the Company's efforts to protect its proprietary rights, attempts
may be made to copy or reverse engineer aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Moreover, there can be no assurance that others will not develop products that
infringe the Company's proprietary rights, or that are similar or superior to
those developed by the Company. Policing the unauthorized use of the Company's
products is difficult. Litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.
As is common in the software industry, the Company from time to time
receives notices from third parties claiming infringement by the Company's
products of third party proprietary rights. While the Company is not currently
subject to any such claim, the Company expects its software products will
increasingly be subject to such claims as the number of products and
competitors in the Company's industry segments grows and the functionality of
products overlaps. Any such claim, with or without merit, could result in
signifiant litigation costs and require the Company to enter into royalty and
licensing agreements, which could have a material adverse effect on the
Company's business, operating results or financial condition. Such royalty and
licensing agreements, if required, may not be available on terms acceptable by
the Company or at all.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key functions. There
can be no assurance that these third party technology licenses will continue
to be available to the Company on commercially reasonable terms. The loss of
or inability of the Company to maintain any of these technology licenses could
result in delays or reductions in product shipments until equivalent
technology could be identified, licensed and integrated. Any such delays or
reductions in product shipments would materially adversely affect the
Company's business, operating results and financial condition.
Dependence on Key Personnel. The Company's success depends to a significant
extent upon a limited number of members of senior management and other key
employees, including Ori Sasson, the Company's Chairman, President and Chief
Executive Officer. The Company does not maintain key man life insurance on any
such persons. The loss of the service of one or more key managers or other
employees could have a material adverse effect upon the Company's business,
operating results or financial condition. In addition, the Company
9
<PAGE>
believes that its future success will depend in large part upon its ability to
attract and retain additional highly skilled technical, management, sales and
marketing personnel. Competition for such personnel in the computer software
industry is intense. There can be no assurance the Company will be successful
in attracting and retaining such personnel, and, the failure to do so, could
have a material adverse effect on the Company's business, operating results or
financial condition.
Product Liability. Although the Company has not experienced any product
liability claims to date, the sale and support of products by the Company and
the incorporation of products from other companies may entail the risk of
product liability claims. The Company's license agreements with its customers
typically contain provisions intended to limit the Company's exposure to such
claims, but such provisions may not be effective in limiting the Company's
exposure. A successful product liability action brought against the Company
could have a material adverse effect upon the Company's business, operating
results or financial condition.
Volatility of Share Price. The market price for the Company's Common Stock
has been and is expected to continue to be significantly affected by factors
such as the announcement of new products or product enhancements by the
Company or its competitors, technological innovation by the Company or its
competitors, quarterly variations in the Company's results of operations or
the results of operations of the Company's competitors, changes in earnings
estimates or recommendations by securities analysts and general market
conditions. In particular, the stock prices for many companies in the
technology and emerging growth sector have experienced wide fluctuations which
have often been unrelated to the operating performance of such companies. Such
fluctuations may adversely affect the market price of the Company's Common
Stock.
Control by Officers, Directors and Affiliated Entities. Upon completion of
this offering, the Company's executive officers and directors and venture
capital funds affiliated with such directors will beneficially own in the
aggregate approximately 29.8% of the issued and outstanding shares of Common
Stock. Accordingly, such shareholders will have significant influence over the
outcome of all matters (including the election of directors and any merger,
consolidation or sale of all or substantially all of the Company's assets)
submitted to the shareholders for approval. This ownership interest in the
Company may also have the effect of making certain transactions more difficult
or impossible, absent the support of such shareholders. Such transactions
could include proxy contests, mergers involving the Company, tender offers and
open market purchase programs involving Common Stock that could give
shareholders of the Company the opportunity to realize a premium over the then
prevailing market price for their shares of Common Stock. See "Principal and
Selling Shareholders" and "Description of Capital Stock."
Effect of Antitakeover Provisions. The Company's Board of Directors has the
authority to issue up to 2,500,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of such shares without any
further vote or action by the Company's shareholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any shares of Preferred Stock that may be issued
in the future. While the Company has no present intention to issue shares of
Preferred Stock, such issuance, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. In addition, such Preferred
Stock may have other rights, including economic rights senior to the Common
Stock, and, as a result, the issuance thereof could have a material adverse
effect on the market value of the Common Stock. See "Description of Capital
Stock."
Discretionary Use of Proceeds of Offering. The Company has no current
specific plans for use of the net proceeds of this offering. As a consequence,
the Company's management will have the ability to allocate the net proceeds of
the offering in its discretion. There can be no assurance that the proceeds
will be utilized in a manner that the shareholders deem optimal or that the
proceeds can or will be invested to yield a significant return upon the
completion of the offering. Upon completion of the offering, the Company will
have more than $63.5 million of cash, cash equivalents and investments
(assuming a public offering price of $37 7/8 per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by the Company), substantially all of which will be invested
in short-term, interest bearing, investment grade obligations for an
indefinite period of time. See "Use of Proceeds."
10
<PAGE>
Shares Eligible for Future Sale. Sales of substantial numbers of shares of
Common Stock into the public market after this offering could adversely affect
the prevailing market price of the Common Stock. In addition to the 2,000,000
shares of Common Stock offered hereby and shares currently traded or available
for sale in the open market, an aggregate of approximately 5,200,000 shares of
Common Stock currently outstanding or issuable on exercise of outstanding
options will become eligible for sale 90 days after the date of this
Prospectus upon expiration of certain lock-up agreements with the Company or
the Underwriters, subject in certain cases to certain volume and other resale
restrictions under Rule 144. See "Shares Eligible for Future Sale."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$35.4 million, assuming a public offering price of $37 7/8 per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company. The principal purpose of this
offering is to obtain additional capital to fund the growth of the Company.
The proceeds of the offering are expected to be used for working capital and
other general corporate purposes, including expansion of the Company's
domestic and international sales, marketing and customer support
organizations, expected increases in research and development expenses to fund
the development of new products and product enhancements, and costs associated
with anticipated expansion and subsequent relocation of its facilities.
However, management of the Company has not allocated any specific portion of
the net proceeds to such general corporate purposes and management will have
the ability to allocate such proceeds in its discretion. See "Risk Factors--
Discretionary Use of Proceeds of Offering." A portion of the net proceeds may
also be used to acquire or invest in complementary businesses or products or
to obtain the right to use complementary technologies; however, the Company
has no present plans, agreements or commitments and is not currently engaged
in any negotiations with respect to any such transactions. Pending use of the
net proceeds, the Company intends to invest such funds in short-term,
interest-bearing, investment grade obligations. The Company will not receive
any proceeds from the sale of Common Stock by the Selling Shareholders.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock, and does not expect to pay cash dividends in the foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded publicly on the Nasdaq National Market
under the symbol "SCOP" since November 16, 1995. The Company's initial public
offering price was $12.00 per share. The following table lists the high and
low sales prices for the Company's Common Stock for the periods indicated as
reported by the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
Fiscal Year Ending March 31, 1997:
Third Quarter (through November 4, 1996)...................... $42 1/4 $ 29
Second Quarter ............................................... 32 1/2 13 3/4
First Quarter ................................................ 24 11 1/2
Fiscal Year Ending March 31, 1996:
Fourth Quarter ............................................... 25 1/4 13 7/8
Third Quarter (beginning November 16, 1995)................... 28 3/4 16 3/4
</TABLE>
On November 4, 1996, the last reported sales price of the Company's Common
Stock on the Nasdaq National Market was $37 7/8 per share. As of November 4,
1996, there were approximately 2,000 beneficial holders of the Company's
Common Stock.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 and as adjusted to give effect to the sale by the Company
of 1,000,000 shares of Common Stock offered by the Company hereby at an
assumed public offering price of $37 7/8 per share (after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Shareholders' equity:
Preferred stock, $0.01 par value; 2,500,000 shares
authorized; none issued and outstanding................ $ -- $ --
Common stock, $0.001 par value; 50,000,000 shares
authorized; 11,926,521 shares issued and outstanding,
actual; 12,926,521 shares issued and outstanding, as
adjusted(1)............................................ 12 13
Additional paid-in capital.............................. 31,509 66,900
Deferred compensation................................... (179) (179)
Cumulative translation adjustment....................... (5) (5)
Retained earnings....................................... 6,123 6,123
------- -------
Total shareholders' equity .......................... 37,460 72,852
------- -------
Total capitalization................................ $37,460 $72,852
======= =======
</TABLE>
- --------
(1) As of September 30, 1996, excludes (i) 1,322,606 shares of Common Stock
issuable upon the exercise of options outstanding under the Option Plan,
of which options to purchase 308,307 shares were exercisable at September
30, 1996, and (ii) 41,250 shares of Common Stock issuable upon the
exercise of options outstanding under the Director Plan. As of September
30, 1996, 1,033,070 shares were available for future issuance under the
Option Plan, 33,750 shares were available for future issuance under the
Director Plan and 157,920 shares of Common Stock were reserved for future
issuance under the Company's Employee Stock Purchase Plan (the "Purchase
Plan"). See Note 10 of Notes to Consolidated Financial Statements.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company set forth below
should be read in conjunction with the consolidated financial statements of
the Company, including the notes thereto, and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere
herein. The consolidated statement of operations data for the years ended
March 31, 1994, 1995 and 1996 and the consolidated balance sheet data at March
31, 1995 and 1996 are derived from the audited consolidated financial
statements included elsewhere in this Prospectus. The consolidated statement
of operations data for the years ended March 31, 1992 and 1993 and the
consolidated balance sheet data at March 31, 1992, 1993 and 1994 are derived
from audited consolidated financial statements not included in this
Prospectus. The consolidated statement of operations data for the six months
ended September 30, 1995 and 1996 and the consolidated balance sheet data at
September 30, 1996 are derived from unaudited consolidated financial
statements included elsewhere in this Prospectus. The unaudited consolidated
financial statements have been prepared by the Company on a basis consistent
with the Company's audited consolidated financial statements and in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information.
The results of operations for the six months ended September 30, 1996 are not
necessarily indicative of results that may be expected for the full fiscal
year or any future period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
----- ------ ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Licenses................ $ 369 $2,002 $5,011 $11,097 $19,753 $ 7,704 $17,424
Services and
maintenance............ 413 702 1,524 4,153 8,843 4,345 6,380
----- ------ ------ ------- ------- ------- -------
Total revenues......... 782 2,704 6,535 15,250 28,596 12,049 23,804
----- ------ ------ ------- ------- ------- -------
Cost of revenues:
Licenses................ 266 723 305 601 874 626 839
Services and
maintenance............ 63 211 554 3,340 6,915 4,028 4,178
----- ------ ------ ------- ------- ------- -------
Total cost of revenues. 329 934 859 3,941 7,789 4,654 5,017
----- ------ ------ ------- ------- ------- -------
Gross margin.............. 453 1,770 5,676 11,309 20,807 7,395 18,787
----- ------ ------ ------- ------- ------- -------
Operating expenses:
Sales and marketing..... 126 524 2,754 5,937 10,565 4,051 9,703
Research and
development............ 239 666 1,532 2,716 5,382 2,283 3,860
General and
administrative......... 46 266 714 1,170 2,169 752 2,050
----- ------ ------ ------- ------- ------- -------
Total operating
expenses.............. 411 1,456 5,000 9,823 18,116 7,086 15,613
----- ------ ------ ------- ------- ------- -------
Income from operations.... 42 314 676 1,486 2,691 309 3,174
Other income, net......... 1 7 22 59 468 51 576
----- ------ ------ ------- ------- ------- -------
Income before provision
for income taxes......... 43 321 698 1,545 3,159 360 3,750
Provision for income
taxes.................... 1 120 131 572 1,169 133 1,401
----- ------ ------ ------- ------- ------- -------
Net income................ $ 42 $ 201 $ 567 $ 973 $ 1,990 $ 227 $ 2,349
===== ====== ====== ======= ======= ======= =======
Net income per share (1).. $0.01 $ 0.03 $ 0.07 $ 0.10 $ 0.18 $ 0.02 $ 0.18
===== ====== ====== ======= ======= ======= =======
Shares used in per share
computation (1).......... 6,612 7,352 8,476 9,683 10,965 10,786 12,757
===== ====== ====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
---- ------ ------ ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash, cash equivalents and
investments.............. $147 $1,085 $ 901 $ 3,553 $29,254 $28,112
Working capital........... 228 1,143 1,755 5,671 29,891 30,547
Total assets.............. 308 2,385 5,504 11,424 41,581 48,342
Mandatorily redeemable
preferred stock.......... -- 1,000 1,400 1,400 -- --
Total shareholders'
equity................... 248 449 1,126 5,900 33,455 37,460
</TABLE>
- --------
(1) See Note 2 of Notes to Consolidated Financial Statements for an
explanation of the number of shares used to compute net income per share.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Prospectus that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exhhange Act of
1934, including without limitation statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
forward looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statements. The Company's actual
results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth
below, under "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
The Company was founded in March 1991 to develop, market and support
client/server software applications and tools for the customer information
management market. The Company has been profitable in each fiscal year since
its inception. The Company's business has grown rapidly with total revenues
increasing from $15.3 million in fiscal 1995 to $28.6 million in fiscal 1996
and from $12.0 million for the first six months of fiscal 1996 to $23.8
million for the first six months of fiscal 1997. The Company's revenues
consist of license revenues and services and maintenance revenues. License
revenues are comprised of fees for the license of the Company's products, and
services and maintenance revenues are comprised of fees for consulting,
training and post-contract support ("maintenance").
In recent periods, the Company has sought to increase the use of third party
consultants and system integrators to provide implementation, customization
and consulting services directly to the Company's customers. The Company's
increasing reliance on such third party consultants and systems integrators
poses several risks that could have a material adverse effect on the Company's
business, operating results and financial condition. For example, there can be
no assurance that these third party providers, who have direct obligations to
the Company's customers, will be able to continue to provide a level of
quality of service required to meet the needs of such customers. If the
Company is unable to develop further and to maintain effective, long-term
relationships with these third parties, or if these third parties fail to meet
the needs of the Company's customers in a timely fashion, the Company's
business, operating results and financial conditions will be materially and
adversely affected.
The Company's quarterly operating results have varied substantially in the
past and are likely to vary substantially from quarter to quarter in the
future due to a variety of factors. Estimating future revenues is difficult
because the Company ships its products soon after an order is received and as
such does not have a significant backlog. Thus, quarterly license revenues are
heavily dependent upon orders received and shipped within the same quarter.
Moreover, the Company has generally recorded 50% to 70% of its total quarterly
revenues in the third month of the quarter, with a concentration of these
revenues in the last half of that third month. This concentration of revenues
is influenced by customer tendencies to make significant capital expenditures
at the end of a fiscal quarter. The Company expects these revenue patterns to
continue for the foreseeable future. In addition, quarterly license revenues
are dependent on the timing of revenue recognition, which can be affected by
many factors, including the timing of customer installations, completion of
customization activity and the fulfillment of acceptance criteria. In this
regard the Company has from time to time experienced delays in recognizing
revenues with respect to certain orders. Despite the uncertainties in its
revenue patterns, the Company's operating expenses are based upon anticipated
revenue levels and such expenses are incurred on an approximately ratable
basis throughout the quarter. As a result, if expected revenues are deferred
or otherwise not realized in a quarter for any reason, the Company's business,
operating results and financial condition would be materially adversely
affected.
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
consolidated statement of operations data expressed as a percentage of total
revenues:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH SEPTEMBER
31, 30,
------------------- ------------
1994 1995 1996 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses................................... 76.7% 72.8% 69.1% 63.9% 73.2%
Services and maintenance................... 23.3 27.2 30.9 36.1 26.8
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Licenses................................... 4.6 3.9 3.0 5.2 3.5
Services and maintenance................... 8.5 21.9 24.2 33.4 17.6
----- ----- ----- ----- -----
Total cost of revenues................... 13.1 25.8 27.2 38.6 21.1
----- ----- ----- ----- -----
Gross margin................................. 86.9 74.2 72.8 61.4 78.9
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing........................ 42.2 38.9 37.0 33.6 40.8
Research and development................... 23.4 17.8 18.8 19.0 16.2
General and administrative................. 10.9 7.7 7.6 6.2 8.6
----- ----- ----- ----- -----
Total operating expenses................. 76.5 64.4 63.4 58.8 65.6
----- ----- ----- ----- -----
Income from operations....................... 10.4 9.8 9.4 2.6 13.3
Other income, net............................ 0.3 0.4 1.6 0.4 2.4
----- ----- ----- ----- -----
Income before provision for income taxes..... 10.7 10.2 11.0 3.0 15.7
Provision for income taxes................... 2.0 3.8 4.0 1.1 5.9
----- ----- ----- ----- -----
Net income................................... 8.7% 6.4% 7.0% 1.9% 9.8%
===== ===== ===== ===== =====
</TABLE>
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
Revenues
The Company recognizes revenue in accordance with the provisions of
Statement of Position 91-1 "Software Revenue Recognition." The Company
generates revenue primarily from licensing the rights to use its software
products to end users and to a lesser extent from sublicense fees from
resellers. The Company also generates revenues from consulting, training and
maintenance services performed for customers who license its products.
Revenues from perpetual software license agreements are recognized as
revenue upon receipt of an executed license agreement, (or an unconditional
purchase order under an existing license agreement), and shipment of the
software, if there are no significant post-delivery obligations and collection
of the receivables is probable.
Revenues from maintenance services are recognized ratably over the term of
the maintenance periods which is typically one year. If maintenance services
are included free of charge or discounted in a license agreement, such amounts
are unbundled from the license fee at their fair market value based upon the
value established by independent sales of such maintenance services to
customers.
Consulting and training revenues are generally recognized as the services
are performed. Consulting services are typically performed under separate
service agreements and are usually performed on a time and materials basis.
Such services primarily consist of implementation services related to the
installation of the Company's products and do not include significant
customization to or development of the underlying software code.
Total revenues increased 133% from $6.5 million in fiscal 1994 to $15.3
million in fiscal 1995 and increased 88% from $15.3 million in fiscal 1995 to
$28.6 million in fiscal 1996.
16
<PAGE>
Licenses. License revenues increased from $5.0 million in fiscal 1994 to
$11.1 million in fiscal 1995 and $19.8 million in fiscal 1996, representing
77%, 73% and 69% of total revenues in the respective periods. The increase in
license revenues in each period was primarily attributable to increasing
market awareness and acceptance of the Company's products, continuing
enhancement and increasing breadth of the Company's product offerings,
expansion of the Company's sales and marketing organization and increased
sales to new industry segments.
Services and Maintenance. Revenues from services and maintenance increased
from $1.5 million in fiscal 1994 to $4.2 million in fiscal 1995 and $8.8
million in fiscal 1996, representing 23%, 27% and 31% of total revenues in the
respective periods. The increases in services and maintenance revenues is
primarily the result of an increase in demand for consulting and systems
implementation services from customers purchasing the Company's products for
large scale, enterprise-wide implementations, and an increase in maintenance
revenues from a larger installed product base. In fiscal 1996, the Company
began establishing relationships with third party consulting firms to allow
those firms to work directly with the Company's customers. As a result,
services and maintenance revenues comprised a lower percentage of total
revenues in the second half of fiscal 1996 as compared to the first half of
fiscal 1996.
Cost of Revenues
Licenses. Cost of licenses consists primarily of royalty payments to third
party software vendors and costs of product media, duplication and packaging.
Cost of licenses was $305,000 in fiscal 1994, $601,000 in fiscal 1995, and
$874,000 in fiscal 1996, representing 6%, 5% and 4% of license revenues in the
respective periods.
Services and Maintenance. Cost of services and maintenance consists of costs
for personnel to provide customer support, training and consulting services,
as well as costs paid to third party consulting firms for those services. Cost
of services and maintenance was $554,000 in fiscal 1994, $3.3 million in
fiscal 1995 and $6.9 million in fiscal 1996, representing 36%, 80% and 78% of
services and maintenance revenues in the respective periods. The substantial
increase in cost of services and maintenance as a percentage of total revenues
from fiscal 1994 to 1995 was primarily due to the use of third party software
consulting organizations and employees to meet the substantial increase in
demand for product consulting and large scale implementation services and, to
a lesser extent, higher than expected costs associated with certain fixed fee
consulting arrangements.
While the cost of services and maintenance revenues as a percentage of
services and maintenance revenues decreased only slightly from fiscal 1995 to
1996, the Company realized a significant reduction in these costs as a
percentage of related service revenues between the first half and second half
of fiscal 1996 as these costs decreased from 93% to 64% of such revenues,
respectively. To make this improvement, the Company added new management,
established relationships with third party consulting firms that allow those
firms to work directly with the Company's customers, established new
procedures for estimating the scope of consulting projects and shifted the
pricing responsibility for that work to its consulting services organization.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased from $2.8
million in fiscal 1994 to $5.9 million in fiscal in 1995 and $10.6 million in
fiscal 1996, representing 42%, 39% and 37% of total revenues in the respective
periods. The increased dollar amounts of such spending are attributable to the
Company's continued expansion of its direct sales force in the U.S. and Europe
and increased marketing activities to support the Company's expanded product
line. The Company is in the process of significantly increasing direct sales
and marketing expenditures to address certain international and vertical
markets. As a result, such expenses may increase as a percentage of total
revenues in future periods.
Research and Development. Research and development expenses increased from
$1.5 million in fiscal 1994 to $2.7 million in fiscal 1995 and $5.4 million in
fiscal 1996, representing 23%, 18% and 19% of total revenues in the respective
periods. The increases in the dollar amounts of such spending were the result
of increased staffing and associated support costs of software engineers and
consultants in connection with expansion and enhancement of the Company's
product line and its quality assurance and testing organization.
17
<PAGE>
Based on the Company's research and development process, costs incurred
between the establishment of technological feasibility which has been defined
as a working model and the time the related product is offered for sale have
been insignificant and therefore have not been capitalized in accordance with
Statement of Financial Accounting Standards No. 86. All research and
development costs are expensed as incurred.
General and Administrative. General and administrative expenses increased
from $714,000 in fiscal 1994 to $1.2 million in fiscal 1995 and $2.2 million
in fiscal 1996, representing 11% of total revenues for fiscal 1994 and 8% of
total revenues for both fiscal 1995 and 1996. These increases in dollar
amounts were primarily due to increased staffing and related expenditures
required to enhance the infrastructure to support the Company's growth.
Other Income, Net. Other income, net, increased from $22,000 in fiscal 1994
to $59,000 in fiscal 1995 and $468,000 in fiscal 1996. The substantial
increase in fiscal 1996 was primarily due to investment income earned on the
proceeds from the Company's initial public offering in November 1995.
Provision for Income Taxes. The Company's effective tax rates were 19% for
fiscal 1994, and 37% for both fiscal 1995 and 1996. Income taxes are accounted
for in accordance with Statement of Financial Accounting Standards No. 109.
The effective income tax rate differs from the statutory income tax rate in
each year primarily due to the utilization of research and development
credits.
SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
Revenues
Total revenues increased 98% from $12.0 million for the six months ended
September 30, 1995 to $23.8 million for the six months ended September 30,
1996.
Licenses. License revenues increased 126% from $7.7 million for the six
months ended September 30, 1995 to $17.4 million for the six months ended
September 30, 1996, representing 64% and 73% of total revenues in the
respective periods. The increase in license revenues was primarily due to
increasing market awareness and acceptance of the Company's products,
continuing enhancement and increasing breadth of the Company's product
offerings, expansion of the Company's sales and marketing organization and
sales to new industry segments. The increase in license revenues as a
percentage of total revenues reflects the Company's continued focus on the
product side of its business and the increased use of outside third party
consulting firms to provide implementation services directly to the Company's
customers.
Services and Maintenance. Services and maintenance revenues increased 47%
from $4.3 million for the six months ended September 30, 1995 to $6.4 million
for the six months ended September 30, 1996, representing 36% and 27% of total
revenues in the respective periods. The decrease in services and maintenance
revenues as a percentage of total revenues reflects the Company's increased
use of outside third party consulting firms to provide implementation services
directly to the Company's customers and increased out of the box functionality
of the Company's products, which results in less implementation services
related to certain customer installations.
Cost of Revenues
Licenses. Cost of licenses increased from $626,000 in the six months ended
September 30, 1995 to $839,000 in the six months ended September 30, 1996,
representing 8% and 5% of license revenues in the respective periods. The
decrease in cost of licenses as a percent of license revenues was primarily
the result of a decrease in sales of third party software products which
resulted in lower royalty fees paid to third party software vendors. Although
the Company does not expect revenues and costs from the distribution of third
party software products to be significant in future periods, period to period
fluctuations in the level of such revenues may occur and the Company's gross
margins and results of operations could be materially adversely affected.
18
<PAGE>
Services and Maintenance. Cost of services and maintenance increased from
$4.0 million for the six months ended September 30, 1995 to $4.2 million for
the six months ended September 30, 1996, representing 93% and 66% of services
and maintenance revenues in the respective periods. The decrease in cost of
services as a percent of service revenues reflects improvements in
productivity and efficiencies in both the professional services and technical
support organizations. Additionally, maintenance revenues as a percentage of
total service and maintenance revenues increased during the six months ended
September 30, 1996 and the costs associated with providing maintenance
generally are lower as a percentage of revenues than the costs associated with
consulting services.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased from $4.1
million for the six months ended September 30, 1995 to $9.7 million for the
six months ended September 30, 1996, representing 34% and 41% of total
revenues in the respective periods. The increase in sales and marketing
expenses in absolute dollars and as a percentage of total revenues is
primarily the result of costs associated with the expansion of the Company's
sales and marketing organization, both domestically and internationally, and
the additional investments being made as the Company implements its vertical
market strategy.
Research and Development. Research and development expenses increased from
$2.3 million for the six months ended September 30, 1995 to $3.9 million for
the six months ended September 30, 1996, representing 19% and 16% of total
revenues in the respective periods. The increased investment in research and
development expenses in absolute dollars primarily reflects increased expenses
related to salaries and other expenses for the addition of software engineers
and reflects the Company's continued investment in enhancing existing products
and developing new product offerings.
General and Administrative. General and administrative expenses increased
from $753,000 for the six months ended September 30, 1995 to $2.1 million for
the six months ended September 30, 1996, representing 6% and 9% of total
revenues in the respective periods. This increase in expenses both in absolute
dollars and as a percentage of total revenues reflects the Company's decision
to continue its investment in the enhancement of infrastructure to support its
growth.
Other Income, Net. Other income, net, increased from $51,000 for the six
months ended September 30, 1995 to $576,000 for the six months ended September
30, 1996. The increase was primarily due to investment income earned on the
proceeds from the Company's initial public offering in November 1995.
Provision for Income Taxes. The Company's effective tax rate was 37% for
both the six months ended September 30, 1995 and 1996. While the Company does
not have any significant available tax credits at March 31, 1996, the Company
may generate additional tax credits as it develops products in the future. See
Note 5 of Notes to Consolidated Financial Statements.
19
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth the Company's statement of operations data
for each of the ten quarters in the period ended September 30, 1996, as well
as the percentage of the Company's total revenues represented by each item.
This unaudited quarterly information has been prepared on the same basis as
the annual information presented elsewhere in this Prospectus and, in
management's opinion, reflects all adjustments (consisting only of normal
recurring entries) necessary for a fair presentation of the information for
the quarters presented. This information should be read in conjunction with
the consolidated financial statements and notes thereto appearing elsewhere in
this Prospectus. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1994 1994 1994 1995 1995 1995 1995 1996 1996 1996
-------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses............... $2,046 $1,904 $3,128 $4,019 $3,667 $4,037 $5,206 $6,843 $ 7,381 $10,043
Services and mainte-
nance................. 641 801 879 1,832 2,445 1,900 2,198 2,300 2,922 3,458
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total revenues....... 2,687 2,705 4,007 5,851 6,112 5,937 7,404 9,143 10,303 13,501
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Cost of revenues:
Licenses............... 68 9 119 405 122 504 131 117 595 244
Services and mainte-
nance................. 318 513 713 1,796 2,516 1,511 1,404 1,484 1,961 2,217
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total cost of reve-
nues................ 386 522 832 2,201 2,638 2,015 1,535 1,601 2,556 2,461
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Gross margin............ 2,301 2,183 3,175 3,650 3,474 3,922 5,869 7,542 7,747 11,040
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Operating expenses:
Sales and marketing.... 1,136 1,102 1,716 1,983 1,995 2,056 2,954 3,560 4,061 5,642
Research and develop-
ment.................. 458 597 763 898 1,024 1,259 1,583 1,516 1,780 2,080
General and adminis-
trative............... 265 299 234 372 363 390 583 833 850 1,200
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total operating ex-
penses.............. 1,859 1,998 2,713 3,253 3,382 3,705 5,120 5,909 6,691 8,922
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Income from operations.. 442 185 462 397 92 217 749 1,633 1,056 2,118
Other income (expense),
net.................... (46) 35 38 32 37 14 118 299 311 265
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Income before provision
for income taxes....... 396 220 500 429 129 231 867 1,932 1,367 2,383
Provision for income
taxes.................. 146 82 185 159 48 85 320 716 519 882
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Net income.............. $ 250 $ 138 $ 315 $ 270 $ 81 $ 146 $ 547 $1,216 $ 848 $ 1,501
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
Net income per share.... $ 0.03 $ 0.01 $ 0.03 $ 0.03 $ 0.01 $ 0.01 $ 0.05 $ 0.11 $ 0.07 $ 0.12
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
Shares used in per share
computation............ 9,014 9,968 9,975 9,991 10,577 10,925 11,531 10,965 12,740 12,773
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
AS A PERCENT OF TOTAL
REVENUES:
Revenues:
Licenses............... 76.1% 70.4% 78.1% 68.7% 60.0% 68.0% 70.3% 74.8% 71.6% 74.4%
Services and mainte-
nance................. 23.9 29.6 21.9 31.3 40.0 32.0 29.7 25.2 28.4 25.6
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Cost of revenues:
Licenses............... 2.6 0.3 3.0 6.9 2.0 8.5 1.8 1.3 5.8 1.8
Services and mainte-
nance................. 11.8 19.0 17.8 30.7 41.2 25.4 19.0 16.2 19.0 16.4
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total cost of reve-
nues................ 14.4 19.3 20.8 37.6 43.2 33.9 20.8 17.5 24.8 18.2
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Gross margin............ 85.6 80.7 79.2 62.4 56.8 66.1 79.2 82.5 75.2 81.8
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Operating expenses:
Sales and marketing.... 42.3 40.7 42.8 33.9 32.6 34.6 39.9 38.9 39.4 41.8
Research and develop-
ment.................. 17.0 22.1 19.0 15.3 16.8 21.2 21.4 16.6 17.3 15.4
General and adminis-
trative............... 9.9 11.1 5.9 6.4 5.9 6.6 7.8 9.1 8.3 8.9
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total operating ex-
penses.............. 69.2 73.9 67.7 55.6 55.3 62.4 69.1 64.6 65.0 66.1
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Income from operations.. 16.4 6.8 11.5 6.8 1.5 3.7 10.1 17.9 10.2 15.7
Other income (expense),
net.................... (1.7) 1.3 0.9 0.5 0.6 0.2 1.6 3.2 3.0 2.0
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Income before provision
for income taxes....... 14.7 8.1 12.5 7.3 2.1 3.9 11.7 21.1 13.2 17.7
Provision for income
taxes.................. 5.4 3.0 4.6 2.7 0.8 1.4 4.3 7.8 5.0 6.6
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Net income.............. 9.3% 5.1% 7.9% 4.6% 1.3% 2.5% 7.4% 13.3% 8.2% 11.1%
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
</TABLE>
20
<PAGE>
License revenues have increased each quarter since the quarter ended June
30, 1995, as a result of the increased acceptance of the Company's product
offerings and expansion of the Company's sales and marketing efforts over the
past six quarters. Cost of licenses varies from period to period primarily due
to the amount of royalties payable by the Company to third-party software
suppliers.
In each of the three month periods ended March 31, 1995 and June 30, 1995,
the Company experienced significant increases in its services and maintenance
revenues due primarily to an increase in the number and complexity of its
licenses, many of which required significant levels of implementation
consulting. During these periods, cost of services and maintenance revenues
increased as the Company significantly increased its use of third party
subcontractors to augment its internal consulting organization. In addition,
the Company incurred losses on several fixed fee consulting arrangements on
which it was unable to bill customers for consulting services performed by
internal consulting personnel and third party subcontractors. As a result, the
Company realized a loss on its services and maintenance revenues for the three
months ended June 30, 1995 and a gross margin of 2% on its services and
maintenance revenues for the three months ended March 31, 1995. Beginning in
the three months ended September 30, 1995, the Company undertook efforts to
facilitate direct relationships between its customers and third party systems
integrators, implemented additional procedures to better define the scope and
pricing of consulting services and discontinued fixed fee consulting
arrangements. These efforts contributed to an increase in the gross margin on
services and maintenance revenues from 20% for the three months ended
September 30, 1995 to between 33% and 36% for each of the last four quarters,
and a decrease in services and maintenance revenues as a percentage of total
revenues from 32% for the quarter ended September 30, 1995 to between 25% and
30% for each of the last four quarters.
The Company intends to continue to increase its research and development
expenditures in order to pursue its strategy of developing applications
tailored to the requirements of specific additional vertical markets, and to
continue to increase sales and marketing expenditures significantly as the
Company expands its domestic and international sales and marketing staff and
develops indirect sales and distribution channels. In addition, general and
administrative expenses have increased each quarter since the quarter ended
September 1995 as the Company began to invest in the infrastructure needed to
support its growing operations. Accordingly, to the extent that continued
increases in such expenses are not accompanied by increased revenues, the
Company's business, operating results and financial condition will be
materially adversely affected.
Although the Company has been profitable each fiscal year since inception,
there can be no assurance that the Company will be able to sustain
profitability on a quarterly or annual basis in the future. In addition, the
Company's revenues and operating results have varied substantially in the past
and are likely to vary substantially in the future due to a variety of
factors, including (i) the timing and size of the Company's individual license
transactions, and, in particular, the fact that the Company's revenues in any
quarter can be largely dependent on a limited number of large licenses, (ii)
the fact that a significant portion of the Company's revenues in any given
quarter are recognized in the last month, weeks or even days of the quarter,
(iii) the relatively long sales cycle for the Company's software products,
which is typically six to nine months, (iv) the relative proportion of total
revenues derived from license revenues and services and maintenance revenues,
(v) the timing of the introduction of new products or product enhancements by
the Company and its competitors, (vi) the extent of customization required by
any individual license transaction, which can result in deferral of
significant revenues until completion or acceptance of certain customized
portions of the software, (vii) changes in customer budgets, (viii)
seasonality of technology purchases by customers and general economic
conditions, (ix) the mix of revenues among various distribution channels and
between domestic and international customers, (x) the relative proportion of
implementation services performed by the Company for which the Company engages
independent contractors, which are typically more costly than internal
personnel, and (xi) the relative proportion of license revenues derived from
third party products distributed by the Company in conjunction with its
products. Therefore, the Company believes that period to period comparisons of
its revenues and operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
During the quarter ended September 30, 1996 the Company experienced a license
revenue growth rate of 36% compared to the immediately preceding quarter. The
Company does not anticipate sustaining such a sequential quarterly growth rate
in the future.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In November 1995, the Company completed an initial public offering of
2,760,000 shares of its Common Stock, of which 2,225,000 shares were issued
and sold by the Company and 535,000 were sold by selling shareholders. The
Company recorded net proceeds of $23.9 million from such offering. Prior to
its initial public offering, the Company funded its operations through private
sales of equity securities and cash generated from operations.
The Company began to generate cash from operating activities during the last
half of fiscal 1995. The Company generated cash of $1.2, $3.4 and $1.0 million
from operating activities during fiscal 1995 and 1996 and for the six months
ended September 30, 1996, respectively, primarily as a result of net income
offset in part by increases in accounts receivables. From March 31, 1995 to
September 30, 1996, the Company's accounts receivables increased from $5.6
million to $11.5 million. The increase in accounts receivables resulted from
the growth in revenues during the same period. The average days sales
outstanding decreased during the same period from 87 days at March 31, 1995 to
76 days at September 30, 1996. The levels of accounts receivables at each
quarter end will be affected by the concentration of revenues in the final
weeks of each quarter and may be negatively affected by expanded international
revenues in relation to total revenues as licenses to international customers
often have longer payment terms.
During fiscal 1994 and 1995, the Company's principal uses of cash for
investing activities were the purchase of fixed assets and totaled $492,000
and $1.5 million, respectively. During fiscal 1996 and the six months ended
September 30, 1996, the Company invested $7.5 and $5.9 million, respectively,
in short term investments and invested $1.8 and $2.8 million in fixed assets,
primarily computer hardware and software to support the growing organization.
As of September 30, 1996 the Company had no significant capital commitments.
Cash provided by financing activities included $400,000 and $3.8 million
from the issuance of preferred stock in fiscal 1994 and 1995, respectively,
and in fiscal 1996 consisted primarily of $23.9 million in proceeds from the
Company's initial public offering.
The Company believes that the net proceeds from the sale of the Common Stock
offered by the Company together with cash flow from operations and existing
cash and cash investments balances will be sufficient to meet its cash needs
for at least the next 12 months.
22
<PAGE>
BUSINESS
Scopus is a leading provider of client/server software solutions for the
customer information management market. The Company's applications, Scopus
SupportTEAM, Scopus ServiceTEAM, Scopus QualityTEAM, Scopus SalesTEAM and
Scopus Voyager, automate external customer support, the product design change
process, sales and marketing activities and internal help desk support. Scopus
applications are designed to enable organizations to build a knowledgebase of
customer information that can be accessed and used by individuals throughout
the enterprise to improve the effectiveness and efficiency of customer support
in order to increase customer satisfaction. The Company's products are based
on a modular, open architecture and support a variety of client computing
platforms, industry standard relational databases and server operating
systems, and operate over local area networks, intranets and the internet.
Scopus products offer customers a unique combination of built-in
functionality, customizability, adaptability and scalability. The Company also
offers consulting, training and maintenance services to facilitate the
installation and use of the Company's products.
INDUSTRY BACKGROUND
Businesses and other organizations are increasingly focusing on customer
service and satisfaction as a means of gaining a competitive advantage.
Realizing that improving customer service and satisfaction can be as important
in attracting and retaining customers as product design, quality and price,
these organizations are reorienting their businesses to become customer-
centric and more responsive to customer needs. In pursuit of improved customer
support and satisfaction, many organizations have distributed responsibility
for sales and customer service broadly throughout their organizations. Many
organizations are also extending responsibility for sales and customer service
to their "extended enterprises" of distributors, value-added resellers and
other outsourcing partners. In addition, to more effectively manage customer
relationships and to better leverage economies of scale, companies in certain
industries have begun to consolidate customer support operations into high
volume call centers.
As a result of these trends, more individuals within an organization and its
extended enterprise are responsible for interacting with customers. To better
serve their customers, organizations need an efficient system to continually
collect and disseminate customer information. The resulting knowledgebase of
customer information enables employees and other members of the extended
enterprise to understand issues critical to the organization's success, such
as customer satisfaction, the potential for follow-on sales and customers'
future product needs. Moreover, as organizations are discovering the
competitive necessity of delivering superior support to customers who reside
outside of the organization (i.e., their clients), they are also realizing
that the same level of attention must be paid to the technological and
business needs of their customers inside the organization (i.e., their
employees).
The development of distributed client/server computing has created a
technological framework for the efficient collection of customer information
and its dissemination among employees and other members of the extended
enterprise. Client/server technology not only permits any member of an
organization to effectively collect information relating to a particular
customer, product or event, but also enables other members of the organization
in geographically dispersed locations to have rapid access to that
information. The emergence of client/server computing environments, together
with the increased emphasis on customer support and satisfaction, has created
a demand for a new generation of customer information management software
applications. In addition, the increasing complexity of client/server
computing technology has created a demand for applications that support an
organization's internal help desk.
In attempting to meet such demands, organizations have been faced with a
choice between purchasing pre-packaged applications or building custom
applications. Pre-packaged applications are often inflexible, requiring
organizations to adopt an unfamiliar approach for managing customer
information in order to conform to the process design of the application. Even
if a pre-packaged application is initially acceptable, it may not accommodate
an organization's desire to add functionality, change processes or expand
operations over time.
23
<PAGE>
On the other hand, building custom applications can be slow and costly. Today,
organizations need customer information management solutions that provide
"off-the-shelf" functionality yet can be readily customized to match their
internal processes and can be quickly and cost-effectively reconfigured as the
organizations grow and their needs evolve.
THE SCOPUS SOLUTION
Scopus is a leading provider of client/server software solutions designed to
enable organizations to efficiently capture, manage and share customer
information throughout the enterprise and the extended enterprise. The
Company's applications offer intranet and internet based solutions that
automate external customer support, the product design change process, sales
and marketing activities and internal help desk support. The Company's
products can be used individually to improve critical business operations or
can be integrated with one another and with third party applications to
provide comprehensive, enterprise-wide customer information management
solutions. Scopus applications are designed to enable organizations to build a
knowledgebase of customer information that can be accessed and used by
individuals throughout the enterprise to improve customer support and
satisfaction. As this knowledgebase grows, organizations can use the resulting
reservoir of customer information to develop better products, market products
more effectively and provide more efficient and effective customer support.
The Company's products offer customers the following benefits:
Application Customizability. Recognizing that every organization interacts
with its customers in a unique and evolving manner, the Company has designed
its technology not only to offer a pre-packaged solution but also to allow
organizations to slightly tailor or extensively customize Scopus applications
without time consuming and costly source code programming changes. As a
result, Scopus applications can be adapted to the organization's specific
processes, integrated with its existing computing environments and modified as
the organization's functional and technical requirements grow or evolve.
Scopus applications can be adapted as a customer's environment changes as a
result of growth or because of changes in technology, thereby offering the
customer long-term solutions.
Scalability and Flexibility. The Company's products allow customers to take
advantage of the benefits inherent in client/server computing, notably its
scalability and flexibility. Scopus applications enable customers to easily
add clients to new or existing servers. Organizations can also use Scopus
application service modules to incorporate additional functionality into
Scopus systems, such as remote access capabilities, telephony integration and
multi-site database replication, without costly changes to the overall
application architecture. Scopus' continued investment in open standards and
open solutions further adds to the scalability and flexibility of Scopus
applications. Some of those standards include OLE 2.0 for client
communications and third party controls and applications, ODBC for database
connectivity, and HTTP and SSI for intranet and internet access.
Integration Capabilities. The modular, open architecture of Scopus
applications and Scopus' published application programming interface ("API")
permit customers to integrate the Company's applications with a wide variety
of other computer and telephony technologies and products. As a result, Scopus
applications can be integrated with many desktop software applications and
browsers for Windows, UNIX and Macintosh clients, including popular e-mail
applications, spreadsheets and document editors, as well as existing
mainframe-based "legacy" systems, other client/server applications and
telephony equipment. Each Scopus application has also been designed to operate
with many industry standard relational database management systems, graphical
user interfaces and network protocols.
Enterprisewide Customer Care. The architecture of the Scopus system enables
an organization to extend its customer care solution across the enterprise.
The specific applications for sales and marketing, customer service and
support and product and change management all share a common architecture,
data model and workflow system so that every customer interaction can be
captured, tracked and shared throughout the enterprise.
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BUSINESS STRATEGY
The Company's objective is to become the leading supplier of enterprise
customer information management software solutions for the global marketplace.
To achieve this objective, the Company is pursuing the following strategies:
Maintain Technological Leadership Position. Scopus has established itself as
a leader in the development and use of technology for customer information
management software. Scopus believes that it was the first participant in this
market to introduce a data-driven architecture, publish an open API, provide
customers with multi-site database replication capability and integrate its
applications with telephony services. The Company's applications currently
support a variety of client/server computing technologies, including popular
client computing platforms, industry standard relational databases and server
operating systems. Scopus plans to continue to devote significant resources to
maintain its technological leadership.
Develop Industry Specific Applications. The Company believes the flexibility
inherent in its core architecture facilitates the development of applications
for targeted vertical markets. The Company believes that industry specific
applications allow for shorter sales cycles, require less customization and
offer simpler implementation while providing a higher level of industry-
specific features and functionality. Scopus originally developed its Scopus
SupportTEAM and Scopus QualityTEAM products for use in the software industry.
The Company has licensed its products to organizations in a variety of other
industries and is currently targeting the technology, telecommunications and
financial services industries with industry specific applications. The Company
intends to expand its presence in these industries and leverage that presence
into other vertical markets. The Company also is working with key customers to
develop such applications and believes that these relationships will provide
the Company with insight into the specific needs of targeted vertical markets.
Target Call Center Market. As a result of intense competition driven by
factors such as deregulation and technological advances, companies are
becoming increasingly focused on providing high levels of customer service to
attract new customers while retaining existing customers. In particular, high-
volume call centers have emerged as a strategic component of customer service
in certain industries. Scopus believes that its products offer a cost-
effective solution for high-volume call centers. The Company is currently
targeting the call center market and intends to continue to expend significant
sales and marketing efforts in this market.
Expand Relationships with Third Party Consulting Organizations. Scopus has
developed and continues to develop relationships with third party consulting
organizations to assist customers with the successful customization and
implementation of Scopus products. The Company believes that this strategy
will enable its customers to achieve efficient customization and
implementation of Scopus products, while enabling Scopus to focus on the
development, enhancement and marketing of its products. In addition, the
Company believes that, as systems integrators become increasingly familiar
with Scopus products, such organizations could become a source of
recommendations for the Company's products.
Expand International Sales. Scopus believes there is a significant
international market opportunity for its products and that it must devote
resources to expand its international sales. To that end, the Company has
begun to market localized versions of its products in Italy, Germany and
France, and a Kanji version in Japan, and plans to release a local word
language version for China. To expand its international distribution channels,
Scopus has established subsidiaries in the United Kingdom, Canada and France
and has established relationships with 14 distributors in various major
overseas markets including Europe and Asia Pacific. The Company is exploring
other distribution arrangements to broaden its domestic and international
channels, and plans to continue to expand its sales force both domestically
and internationally.
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PRODUCTS
The Company's products currently consist of a suite of five principal
applications as well as several related application service modules and a
customization tool. The Company's principal applications consist of Scopus
SupportTEAM, Scopus ServiceTEAM, Scopus QualityTEAM, Scopus SalesTEAM and
Scopus Voyager.
The following table summarizes the Company's products and their principal
functions:
<TABLE>
<CAPTION>
PRODUCT FUNCTION
------- --------
<S> <C>
APPLICATIONS
. Scopus SupportTEAM External customer support and internal help desk; problem resolution
. Scopus ServiceTEAM Sales and marketing support for service organizations
. Scopus QualityTEAM Product error and modification tracking; product design change process
. Scopus SalesTEAM Telemarketing and telesales process automation
. Scopus Voyager Field sales automation
- ---------------------------------------------------------------------------------------------
APPLICATION SERVICE
MODULES
. WebTEAM Integration to World Wide Web
. TeleTEAM Computer/telephony integration
. WorldTEAM Database replication, inter-site distribution and data reconciliation
- ---------------------------------------------------------------------------------------------
CUSTOMIZATION TOOL
. Scopus Works Workflow, business rules and customization
- ---------------------------------------------------------------------------------------------
</TABLE>
The Company's products support a variety of client/server computing
technologies, including popular client computing platforms such as Microsoft
Windows 3.1, Microsoft Windows 95, Microsoft Windows NT, Motif and Macintosh;
industry standard relational databases from Sybase, Oracle, Informix and
Microsoft; and server operating systems such as Microsoft Windows NT, Hewlett
Packard HP-UX, IBM/AIX, Sun OS and Sun Solaris and Silicon Graphics.
Scopus products may be integrated with each other and with a variety of
third party applications. For example, Scopus SupportTEAM can be used in
conjunction with Scopus QualityTEAM to integrate customer feedback with the
product design change process. Scopus QualityTEAM can accept modification
requests created from customer feedback through Scopus SupportTEAM, track the
ensuing adjustments and communicate the results back to Scopus SupportTEAM for
subsequent closure of all calls related to the modification. Additional
service modules available from Scopus significantly enhance the functionality
of all Scopus applications. For example, an embedded notification and workflow
engine can be used to drive the workflow of the modification process by
escalating calls to more senior personnel and notifying other professionals if
problems remain unsolved or other issues arise. WorldTEAM may be used to
automatically communicate critical information to databases in remote
development centers so that personnel throughout the enterprise can access the
relevant information.
All Scopus applications are currently available in localized versions in
Italian, German, Spanish, French and Japanese (Kanji) and plans to release a
localized version in Chinese.
The Company's prices for its applications and certain application service
modules depend on the number of concurrent users of such products. The
domestic list prices for Scopus applications range from approximately $12,000
to $120,000 per server and from approximately $3,000 to $3,500 per concurrent
user. The domestic list prices for the Company's application service modules
range from approximately $3,000 to $20,000 per server and from $2,000 to
$4,000 per concurrent user, and the domestic list price for Scopus Works is
approximately $18,000.
Applications
Scopus SupportTEAM. Scopus SupportTEAM is an integrated solution for
external customer support and internal help desks. Scopus SupportTEAM is
designed to automate and facilitate each step of the problem
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resolution process from the gathering of problem information to problem
resolution. It combines an intuitive problem-assignment procedure with server
problem resolution technologies, including Query-By-Example, Relevancy Search
and DataProbe, to improve the speed and productivity of customer support
professionals. Using Scopus SupportTEAM, customer support professionals can
enter data identifying the caller and the problem and search the knowledgebase
for similar problems and their solutions. As call records accumulate, the
resulting knowledgebase becomes a library of problems, resolution steps,
technical application notes and solutions. If the problem cannot be resolved
by the initial support professional, Scopus SupportTEAM can assign the call to
other support professionals. Each step in the resolution process is captured
by Scopus SupportTEAM, creating a record of resolution steps previously
performed. Scopus SupportTEAM completes the resolution process through
integration with standard report writing tools for analysis and reporting of
performance and customer satisfaction metrics.
Scopus QualityTEAM. Scopus QualityTEAM automates the product design change
process and enables organizations to log, assign, coordinate and manage
product modifications and enhancements and the correction of product defects
and non-conformance items. Often, as in the software and hardware industries,
a single defect can result in several instances of product failure and may
require the resolution of multiple related sub-defects or tasks. Moreover, as
the change process progresses, duplicate modifications may be introduced into
the system and new modification requests may be found that are related to
previously identified requests. Scopus QualityTEAM enables product developers
to break down such defects or enhancement requests into tasks, manage the
assignment of the tasks and control the change process. By using the Company's
problem resolution tools, product developers can search the database for
similar modifications or tasks and link them together to ensure the efficient
completion of all modifications.
Scopus ServiceTEAM. Scopus ServiceTEAM combines contract management
capability with the functionality of Scopus SalesTEAM allowing sophisticated
sales and support for organizations that sell services in addition to or
instead of products. The information managed by Scopus ServiceTEAM can then be
linked with Scopus SupportTEAM so that customer representatives can
immediately know the level of support that is contractually required in any
product support situation.
Scopus SalesTEAM. Scopus SalesTEAM manages integrated marketing and sales
cycles. With Scopus SalesTEAM, organizations can manage every phase of the
sales cycle from the design and execution of marketing campaigns and the
generation of qualified leads to order fulfillment and tracking of existing
and potential accounts. Scopus SalesTEAM has direct marketing and telesales
components, which support data-based marketing efforts and facilitate the
collection of potential customer data, the qualification of leads and the
tracking of such leads to sale closure. Scopus SalesTEAM allows organizations
to simultaneously pursue multiple opportunities in which group selling efforts
are needed, manage employee to-do lists and enforce the requirements of each
step of the selling process including lead generation, prospecting, cost
estimation, quote generation, order booking, fulfillment, billing and return.
Scopus Voyager. Scopus Voyager, commercially introduced in the first quarter
of fiscal 1996, is a sales automation solution aimed at the mobile sales
professional. Voyager is a complete lead management, account management and
opportunity management system and is integrated with the entire suite of
Scopus customer care products. In addition, the system includes integrated
time management, quote management and other marketing functions. Voyager
enables a team-selling approach by enabling field sales professionals to share
the latest account and opportunity information with their telesales,
telemarketing and customer service organizations. For example, leads qualified
in telemarketing can automatically be forwarded to the correct field sales
representative for follow-up. All information associated with the lead can
then be tracked throughout the entire sales cycle as leads turn into
opportunities, closed opportunities become accounts, and accounts in turn
generate new opportunities. Voyager allows both mobile and office-resident
professionals to independently modify sales information and then automatically
synchronizes the information each time the mobile professional reconnects to
the central Scopus system.
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<PAGE>
Application Service Modules
The Company has developed application service modules that can be combined
with any Scopus application to enhance functionality and create integrated
customer information management solutions.
WebTEAM provides users with read and write access to the Scopus database
over the World Wide Web. This product has allowed many of Scopus' customers to
provide to their own customers access to a Scopus database in order to speed
problem resolution through self-service or to enable direct requests for
support.
TeleTEAM permits telephony services, such as automatic call distributors
(ACDs) and interactive voice response units (IVRs), to be integrated with
Scopus applications to improve call center productivity. Through this
integration, TeleTEAM synchronizes incoming calls with the creation of a
computer screen containing information about the caller. This capability
eliminates the need to query the database for caller information as the
operator receives the call, facilitating rapid responses to customer
inquiries. These screens can be transferred with the call to other system
users when necessary.
WorldTEAM is a database replication program that manages the replication,
inter-site distribution and reconciliation of customer information. WorldTEAM
can be configured to automatically replicate specified subsets of information
at given intervals and at specific sites. WorldTEAM also incorporates
mechanisms to ensure that data integrity across sites is preserved during
replication.
Customization Tool
Scopus Works. Scopus offers a drag-and-drop configuration and customization
environment that allow users to personalize all Scopus applications, including
presentation logic, business rules and application servers. Scopus Works is an
integrated tool set that business process experts can utilize throughout the
entire lifecycle for all Scopus applications.
SERVICES
The Company believes that high quality customer service and support are
integral components of the application solutions it offers. Accordingly, the
Company offers a range of fee-based training, consulting and maintenance
services to facilitate the installation and use of the Company's products. The
Company uses its own products to provide many of its customer services. As of
September 30, 1996, the Company employed 21 persons in its consulting services
organization and 58 persons in its support organization which offers customer
service, training and documentation services.
Consulting Services. The Company employs its own implementation personnel
and works with third party consulting organizations and systems integrators to
offer on-site project design and implementation services. These consulting
services include the installation and implementation of Scopus products,
integration of such products with other existing and planned communications
and information systems, project management and process reengineering. To meet
future requirements for large scale consulting projects, the Company has
established relationships with third party systems integrators and
professional consulting firms to facilitate direct relationships between such
firms and the Company's customers.
Software Maintenance and Support. The Company's support organization offers
a variety of support services to its customers. Customers have the option of
purchasing the Company's standard support package or its extended support
package. Through its standard support package, the Company provides its
customers with 12-hour weekday hotline support, 24-hour electronic support
through use of the Company's WebTEAM or CommLink Server products or Scopus'
electronic news group service, and periodic product updates and maintenance
releases. Annual fees for the Company's standard support package are typically
15% of the license fee for the underlying software. For an additional fee, a
customer can purchase the extended support package
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<PAGE>
which complements the services available in the standard support package with
24-hour phone support, priority escalation and the opportunity to have a
support representative assigned to the customer's account. To date,
substantially all of the Company's expiring maintenance contracts have been
renewed.
CUSTOMERS
As of September 30, 1996, the Company had licensed its products to over 250
customers. No customer accounted for 10% or more of total revenues for fiscal
1995, 1996 or the first six months of fiscal 1997. The following is a
representative list of the Company's customers:
<TABLE>
<CAPTION>
COMPUTER SOFTWARE COMPUTER/ELECTRONICS TELECOMMUNICATIONS FINANCIAL/ACCOUNTING
<S> <C> <C> <C>
Aspen Technology Acer America AT&T Bankers Trust
Autodesk Advanced Micro Devices Alcatel Systems E*Trade
Cadence Design Systems Boeing Computer Services Ascend Communications Instinet
Computervision Honeywell Bay Networks Lehman Brothers
FileNet Intel Bell Atlantic Nynex Mobile Lexis-Nexis
Informix National Semiconductor Bell South Morgan Stanley
Intuit Packard Bell Deutsche Telekom NationsBank
Landmark Graphics Philips Semiconductor Lucent Technologies Principal Financial
Mentor Graphics Sequent Computer Systems Nortel U.S. Bank
Seagate Technology Silicon Graphics Octel Communications Visa International
SunSoft Sun Microsystems PCS Primeco Wells Fargo
Sybase U.S. Robotics Siemens/Rolm
Synopsys VLSI Technologies US Long Distance OUTSOURCING SERVICES
Viewlogic WorldCom Fujitsu
WRQ INTERNET SERVICES Olivetti Worldwide
Wall Data @Home OTHER Stream International
Netcom Polaroid Towers Perrin
Netscape Yamaha
</TABLE>
SALES AND MARKETING
The Company sells its software and services in North America primarily
through a direct sales force. To support its sales force, the Company conducts
marketing programs which include direct mail, trade shows, public relations,
advertising and ongoing customer communication programs. While the sales cycle
varies from customer to customer, it typically ranges from six to nine months.
The North American sales organization is based at the Company's corporate
headquarters in the San Francisco Bay Area and at ten additional field sales
offices in the metropolitan areas of Atlanta, Boston, Chicago, Dallas, Denver,
Los Angeles, New York, Seattle, Toronto and Washington D.C. The Company
markets and sells its software and services outside North America through the
direct sales force of its subsidiaries in Europe and has relationships with
independent distributors located in other major geographic areas including
Europe and Asia. The Company's international distributors typically provide
first line technical support and services to their customers.
The Company has increased its domestic and international sales force from 43
sales managers, sales representatives and applications engineers at March 31,
1996 to 78 sales managers, sales representatives and applications engineers at
October 31, 1996. The Company intends to continue to expand its direct sales
force and to diversify its sales channels by adding third party distributors
both domestically and internationally. The Company's ability to achieve
significant revenue growth in the future will depend in large part on its
success in recruiting and training sufficient sales personnel and establishing
relationships with distributors, resellers and systems integrators. The
Company is currently investing, and plans to continue to invest, significant
resources to expand its domestic and international direct sales force and
develop distribution relationships with third party distributors, resellers
and systems integrators. The Company's existing distribution relationships are
generally non-exclusive and can be terminated by either party without cause.
The Company's distributors also sell or can
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<PAGE>
potentially sell products offered by the Company's competitors. There can be
no assurance that the Company will be able to retain or attract a sufficient
number of its existing or future third party distribution partners or that
such partners will recommend, or continue to recommend the Company's products.
The inability to further establish or to maintain successful relationships
with distributors, resellers or system integrators could have a material
adverse effect on the Company's business, operating results or financial
condition. In addition, there can be no assurance that the Company will be
able to successfully expand its direct sales force or other distribution
channels. Any failure by the Company to expand its direct sales force or other
distribution channels would materially and adversely affect the Company's
business, operating results and financial condition.
An important element of the Company's strategy is to expand its
international operations. In this regard, although the Company has established
subsidiaries in the United Kingdom, Canada and France and is currently
investing significant resources in its international operations, including the
development of third party distributor relationships and the hiring of
additional sales representative. International sales to date have been
limited, and there can be no assurance that the Company will be successful in
expanding its international operations. In the event the Company is able to
increase international revenues as a percentage of total revenues, the
Company's business, operating results or financial condition could be
materially adversely affected by risks inherent in conducting business
internationally, such as changes in currency exchange rates, longer payment
cycles, difficulties in staffing and managing international operations,
problems in collecting accounts receivable, seasonal reduction in business
activity during the summer months in Europe and certain other parts of the
world, increases in tariffs, duties, price controls or other restrictions on
foreign currencies and trade barriers imposed by foreign nationalities. In
this regard, to the extent the Company's international operations expand, the
Company expects that an increasing portion of its international license
revenues will be denominated in foreign currencies. In addition, the Company
has only limited experience in developing localized versions of its products
and marketing and distributing its products internationally. There can be no
assurance that the Company will be able to successfully localize, market, sell
and deliver its products internationally. The inability of the Company to
successfully expand its international operations in a timely manner could
materially adversely affect the Company's business, operating results or
financial condition.
TECHNOLOGY
Each of the Company's applications is built on a common core architecture
that is designed to efficiently leverage the performance and scalability of
client/server computing. The core technology was developed by Scopus to
facilitate the development and customization of enterprise applications for a
wide variety of customers. Since all Scopus applications share this
technology, they all communicate with the database server in the same manner
and can be easily integrated with one another to provide custom solutions. The
Company believes that its product architecture provides it with a competitive
advantage by allowing it to craft tailored solutions for its customers and by
simplifying and facilitating new product development.
The Company's core technology has the following attributes:
Distributed Processing
The Company partitions its applications into multiple, independent tasks and
allocates these tasks to the computing resource most suited to process such
tasks in order to fully take advantage of the scalability, flexibility and
performance offered by client/server environments. By reducing a typical
application into a set of computing processes that function most efficiently
as client processes, application services and agent services (i.e., data
services, computer/telephony integration services), the Company's products
enable its customers to effectively and efficiently utilize their computing
resources (such as data server processing and network bandwidth). Moreover,
this distribution of computing tasks enables the Company to leverage
technological improvements in any area of the client/server system and to
incorporate new functionality into its suite of products.
Data-Driven Architecture
The Company's products utilize a data-driven architecture that enables users
to build and efficiently customize Scopus applications in distributed
processing environments. The Company has designed its
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<PAGE>
applications to reference and interpret data that defines a set of application
functions (metadata) and is stored in the database. These functions determine
the look and feel of the graphical user interface (GUI), the workflow of the
applications and the required processing. Since the metadata exists
independent from the source code of the foundation and the applications,
customers can extensively customize the GUI and processes of each of the
applications to meet their diverse internal requirements without the need to
make costly changes to product source code. These customizations can include
changes to notification and escalation rules, additions of forms, buttons and
fields and the development of entirely new screens. Customers make these
changes either by using the Scopus design tool, ScopusWorks, by using a
scripting language compliant with Microsoft's Visual Basic for Applications or
by using another standard fourth generation scripting language, Tcl. The use
of metadata enables the Company to efficiently customize its application logic
whether that logic is executed as client processes, application services or
agent services. Additionally, even customers with different client platforms
only need to make changes to the metadata once at the server level. All
clients will then automatically receive the changes. The management of
software is therefore easier than attempting to manage software changes on a
large number of different client machines.
Open API Technology
The Company's customers can also customize their Scopus applications through
the use of the Company's published and open API, which is used to invoke the
functionality of a wide array of third party applications by either the client
processes, applications services or agents, thereby further distributing
application processing, increasing flexibility and enhancing functionality.
Since the Company's API can be used within each component of the Company's
architecture, the Company can integrate with third party applications at the
most efficient component. The Company's core technology also enables its
applications to share a set of application service modules, which coordinate
the flow of information and processes within the Scopus system. These
application service modules, which can be deployed as customer needs mandate,
also support an efficient distribution of computing services. Data-based
programmability, efficient use of its application service modules and the API
provide the Company with multiple design points to customize its applications.
Common Customer Information Database
In addition to sharing common core technologies and customization
capabilities, Scopus applications share a common normalized table format which
utilizes industry standard relational databases (Sybase, Oracle, Informix and
Microsoft SQL). This database is designed to maintain information, such as
customer profiles, site identifications, user preferences and permissions,
cases and accumulated experience necessary to operate the applications and
thereby support customer requirements. Customer profiles include basic
customer information such as name and address, as well as site identification
and group affiliations. An organization's common customer database contains
information on the status of each case, including case origination, case work
assignments and open issues. In the Scopus system, a case can be a call, a
defect, or a potential sales transaction. Attachments, technical notes and
tasks can be associated with each case through bi-directional cross
referencing or through support for Microsoft's Object Linking and Embedding
(OLE) to facilitate the problem resolution process. As cases accumulate in the
database, a common knowledgebase of cases and associated information is
created, which allows support representatives and sales personnel to service
new cases more effectively and with greater speed.
Problem Resolution Technologies
Each of the Company's applications can employ a set of problem resolution
technologies to search the common customer information database. These
technologies include:
Query-By-Example. Query-By-Example ("QBE") enables Scopus users to launch a
query to the database to search for information similar to that entered into a
field or a combination of fields. QBE can therefore be used to identify
information specific to a given user or locate solutions with entries
identical to those of the instant case.
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Relevancy Search. Relevancy Search enables users to search for cases that
are most similar to the current case by computing a numerical ranking to each
solution returned by a QBE search. This ranking is based on the prevalence of
certain keywords in each of the solutions.
DataProbe. DataProbe is a powerful query tool that enables users to
construct intelligent Boolean queries based on any field, form or topic in the
common customer information database. These queries can be constructed either
directly through SQL statements or indirectly through the application
interface. DataProbe also permits uses to include automatically generated
keywords in the search.
Case-Based Reasoning Integration. An integration with CasePoint by Inference
Corporation provides customers with an additional level of problem resolution
capabilities. CasePoint features a question and answer methodology that helps
refine user queries. Through CasePoint, users can compare the instant case to
other known solutions and transfer the results back into the Scopus
knowledgebase.
Third Party Knowledgebase Integration. The Company's problem resolution
technologies also can be combined with pre-packaged knowledgebases to offer
customers a means to supplement the cases accumulated through their own
experience.
Full-Text Retrieval Integration. An integration with Verity's Full-text
Retrieval Engine provides customers with an additional level of problem
resolution capabilities. Verity features many document formats, such as
Microsoft Office and HTML, for intelligent Boolean queries based on any field,
in any language, including multi-byte languages. These queries can be
constructed through SQL statements or directly through an API.
RESEARCH AND DEVELOPMENT
As of September 30, 1996, the Company's research and development staff
consisted of 48 persons. The Company's research and development expenditures
in fiscal 1996 and the six months ended September 30, 1996 were $5.4 million
and $3.9 million, respectively, representing 19% and 16% of total revenues,
respectively, during such periods.
The Company has historically developed and expects to continue to develop
its products in conjunction with its existing and potential customers. The
Company's current development initiatives include the enhancement of the
features and functionality of existing products, the development of
complementary products and the development of integrated packages of its
products tailored to the requirements of certain market segments.
The market for the Company's products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company is currently investing significant
resources in product development and expects to continue to do so in the
future. The Company's future success will depend on its ability to continue to
enhance its current product line and to continue to develop and introduce new
products that keep pace with competitive product introductions and
technological developments, satisfy diverse and evolving customer requirements
and otherwise achieve market acceptance. There can be no assurance that the
Company will be successful in continuing to develop and market on a timely and
cost-effective basis fully functional product enhancements or new products
that respond to technological advances by others, or that its enhanced and new
products will achieve market acceptance. In addition, the Company has in the
past experienced delays in the development, introduction and marketing of new
or enhanced products, and there can be no assurance that the Company will not
experience similar delays in the future. Any failure by the Company to
anticipate or respond adequately to changes in technology and customer
preferences, or any significant delays in product development or introduction,
would have a material adverse effect on the Company's business, operating
results and financial condition.
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Due to the complexity and sophistication of the Company's software products,
the Company's products from time to time contain defects or "bugs" which can
be difficult to correct. Furthermore, as the Company continues to develop and
enhance its products, there can be no assurance that the Company will be able
to identify and correct defects in such a manner as will permit the timely
introduction of such products. Moreover, despite extensive testing, the
Company has from time to time discovered defects only after its systems have
been used by many customers. There can be no assurance that software defects
will not cause delays in product introductions and shipments, result in
increased costs, require design modifications, or impair customer satisfaction
with the Company's products. Any such event could materially and adversely
affect the Company's business, operating results and financial condition.
COMPETITION
The customer information management software market is relatively new,
intensely competitive, highly fragmented, subject to rapid change, and highly
sensitive to new product introductions and marketing efforts by industry
participants. The Company competes with a variety of other companies depending
on the target market for their products. These competitors include (i) a
select number of companies, such as Clarify Inc. and The Vantive Corporation,
targeting the enterprise-wide customer information market; (ii) a substantial
number of small private companies and certain public companies, such as Remedy
Corporation, Siebel Systems, Inc., Aurum Software, Inc. and Software Artistry,
Inc., which offer products targeted at one or more specific markets, including
the customer support market, the help desk market, the quality assurance
market and the sales and marketing automation market; (iii) professional
services organizations, such as Andersen Consulting, that design and develop
custom systems; (iv) large information technology providers such as IBM and
Computer Associates International, Inc.; and (v) the internal information
technology departments of potential customers which develop proprietary
customer information management applications. Among the Company's potential
competitors are also a number of large hardware and software companies that
may develop or acquire products that compete with the Company's products. In
this regard, SAP AG and Oracle Corporation have each introduced a customer
support module as part of their application suites. The Company believes that
many existing competitors and new market entrants will attempt to develop
fully integrated customer information management systems that will compete
with the Company's products.
Current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their products to address the needs of the Company's
prospective customer. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition is likely to result in price reductions, reduced
operating margins, and loss of market share, any one of which could materially
adversely affect the Company's business, results of operations or financial
condition. Many of the Company's current and potential competitors have
significantly greater financial, technical, marketing and other resources than
the Company. As a result, they may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products
than can the Company. There can be no assurance that the Company will be able
to compete successfully against current or future competitors or that
competitive pressures will not materially adversely affect the Company's
business, operating results and financial condition.
The Company believes that the principal competitive factors affecting its
market include product features such as adaptability, scalability, ability to
integrate with third party products, functionality, ease of use, product
reputation, quality, performance, price, customer service and support,
effectiveness of sales and marketing efforts and company reputation. Although
the Company believes that it currently competes favorably with respect to such
factors, there can be no assurance that the Company can maintain its
competitive position against current and potential competitors, especially
those with greater financial, marketing, service, support, technical, and
other resources than the Company.
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INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
The Company's success is dependent on its ability to protect its proprietary
technology. The Company licenses its products in object code form only,
although it has source code escrow arrangements with certain customers. The
Company relies on a combination of copyright, trademark and trade secret laws,
as well as confidentiality agreements and licensing arrangements, to establish
and protect its proprietary rights. The Company does not have any patents or
patent applications pending, and existing copyright, trademark and trade
secret laws afford only limited protection. In addition, the laws of certain
countries do not protect the Company's proprietary rights to the same extent
as do the laws of the United States. Accordingly, there can be no assurance
that the Company will be able to protect its proprietary rights against
unauthorized third party copying or use, which could materially adversely
affect the Company's business, operating results or financial condition.
Despite the Company's efforts to protect its proprietary rights, attempts
may be made to copy or reverse engineer aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Moreover, there can be no assurance that others will not develop products that
infringe the Company's proprietary rights, or that are similar or superior to
those developed by the Company. Policing the unauthorized use of the Company's
products is difficult. Litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.
As is common in the software industry, the Company from time to time
receives notices from third parties claiming infringement by the Company's
products of third party proprietary rights. While the Company is not currently
subject to any such claim, the Company expects its software products will
increasingly be subject to such claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products overlaps. Any such claim, with or without merit, could result in
significant litigation costs and require the Company to enter into royalty and
licensing agreements, which could have a material adverse effect on the
Company's business, operating results or financial condition. Such royalty and
licensing agreements, if required, may not be available on terms acceptable by
the Company or at all.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key functions. There
can be no assurance that these third party technology licenses will continue
to be available to the Company on commercially reasonable terms. The loss of
or inability of the Company to maintain any of these technology licenses could
result in delays or reductions in product shipments until equivalent
technology could be identified, licensed and integrated. Any such delays or
reductions in product shipments would materially adversely affect the
Company's business, operating results and financial condition.
EMPLOYEES
As of September 30, 1996, the Company employed 214 persons, including 65 in
sales and marketing, 21 in its consulting services organization, 58 in
customer support, 48 in research and development and 22 in finance and
administration. Of these, 16 are located in Europe and the remainder are
located in North America. None of the Company's employees is represented by a
labor union. The Company has experienced no work stoppages and believes its
relationship with its employees is good. Competition for qualified personnel
in the Company's industry is intense. The Company believes that its future
success will depend in part on its continued ability to attract, hire and
retain qualified personnel.
34
<PAGE>
FACILITIES
The Company's principal administrative, engineering, manufacturing,
marketing and sales facilities total approximately 45,000 square feet, and are
located in a single building in Emeryville, California under a lease which
expires in October 1999. In addition, the Company leases offices in the
metropolitan areas of Atlanta, Boston, Chicago, Dallas, Denver, London, Los
Angeles, New York, Paris, Seattle, Toronto and Washington, D.C. The Company is
in the process of searching for additional space to support its expanded
operations. The Company intends to relocate a portion of its operations in the
next six to nine months and eventually to consolidate all corporate operations
in a new, larger facility. The Company expects that suitable additional space
will be available on commercially reasonable terms.
35
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and certain information
about them as of October 31, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ori Sasson........................ 34 Chairman of the Board, Chief Executive
Officer, President and Director
Michele L. Axelson................ 45 Senior Vice President and Chief Financial
Officer
A. Aaron Omid..................... 37 Vice President, Sales and Secretary
Mark J. Barrenechea............... 31 Vice President, Product Development
Jeffrey G. Bork................... 39 Vice President, Marketing
Steven Jacob...................... 41 Vice President, Europe
Lyle D. York...................... 55 Vice President, Customer Services
J. Michael Cline(1)(2)............ 36 Director
Christopher R. Gibbons(1)......... 48 Director
Ronald Abelmann(1)................ 59 Director
Max D. Hopper(2).................. 62 Director
</TABLE>
- --------
(1) Member of audit committee.
(2) Member of compensation committee.
Ori Sasson is a co-founder of the Company and has served as the Company's
Chairman of the Board since the Company's inception in March 1991. Mr. Sasson
has also served as the Company's Chief Executive Officer and President since
February 1994 and as Secretary from March 1991 to February 1992. From January
1990 to March 1991 and from September 1986 to January 1989, Mr. Sasson was an
independent software design consultant. From January 1989 to January 1990, Mr.
Sasson was a software engineer at Sybase Corporation, a client/server
relational database management software company. From December 1984 to August
1986, Mr. Sasson was a support engineer at Hewlett Packard Company, a
manufacturer of computers and related products. Mr. Sasson earned a B.A.
degree in Computer Science and a M.S.C. degree in Engineering both from the
University of California at Berkeley.
Michele L. Axelson has served as the Company's Senior Vice President and
Chief Financial Officer since July 1996. From 1979 until 1996, Ms. Axelson
held various positions at Arthur Anderson LLP, an international public
accounting firm, and was a partner of that firm from 1989 until she joined the
Company in July 1996. Ms. Axelson is a Certified Public Accountant and earned
a B.S. degree in Business Administration from San Jose State University. Ms.
Axelson is also a director of Novadigm, Inc.
A. Aaron Omid is a co-founder of the Company and has served as the Company's
Vice President, Sales since March 1991, and as Secretary since February 1992.
Mr. Aaron Omid also served as President of the Company from March 1991 to
October 1991, and as a director of the Company from March 1991 to October
1992. From August 1990 to February 1991, Mr. Aaron Omid was Vice President,
Sales of North America at Opus Systems, a computer hardware manufacturer. From
May 1986 to August 1990, he held various marketing and sales positions at Sun
Microsystems, a workstation manufacturer, most recently serving as Sales
Manager. Mr. Aaron Omid earned a B.S. degree in Electrical Engineering from
the University of London.
Mark J. Barrenechea has served as the Company's Vice President, Product
Development since September 1995. From December 1994 to September 1995, Mr.
Barrenechea founded and served as Chief Technical Officer at New View, Inc., a
company which provides managed Internet access. From October 1993 to December
1994, Mr. Barrenechea was Vice President, Tools and Technology at Tesseract
Corporation, a client/server software company. From October 1991 to October
1993, he held various positions at Microway, Inc., a software development
company, most recently serving as President and Managing Director of Microway
(Europe) Ltd. Mr. Barrenechea earned a B.A. degree in Computer Science from
Saint Michael's College and a M.S. degree in Engineering from Boston
University.
36
<PAGE>
Jeffrey G. Bork has served as the Company's Vice President, Marketing since
September 1995. From December 1992 to September 1995, he was a marketing
consultant and from December 1991 to December 1992, he was Vice President,
Product Management at Slate Corporation, a software company. From April 1989
to June 1991, he was Vice President, Marketing at Informix Software, Inc., a
client/server relational database management software company. Mr. Bork earned
a B.S. degree in Electrical Engineering from the University of Michigan.
Steven Jacob has served as the Company's Vice President, Europe, since April
1996. From August 1994 to April 1996 he served as the Vice President Europe,
Africa, and the Middle East for Landmark Graphics Corporation, a software
company. From June 1988 to July 1994 he served as the U.K. Sales Director for
Ingras U.K. Ltd. Mr. Jacob earned a B.Ed. degree from the University of
London.
Lyle D. York has served as the Company's Vice President, Customer Services
since February 1994. From June 1993 to February 1994, he was President of York
and Associates, a customer support consulting firm. From January 1991 to June
1993, Mr. York served as Vice President, Software Services at Integraph
Corporation, a manufacturer of interactive computer graphics systems. From
January 1984 to January 1991, Mr. York held various positions at
Daisy/Cadnetix, Inc., a supplier of computer aided design software and
hardware systems, most recently serving as Vice President, Customer Support
Division.
J. Michael Cline has been a director of the Company since June 1994. Mr.
Cline has been a general partner at General Atlantic Partners ("GAP"), a
private investment firm, since September 1989. Mr. Cline is also a director of
Digital Tools, Inc. and Management Information Technology, Inc. Mr. Cline
earned a B.S. degree in Business from Cornell University and a M.B.A. degree
from Harvard Business School.
Christopher R. Gibbons has been a director of the Company since September
1995. Mr. Gibbons has been the Chief Information Officer at Microsoft
Corporation, a packaged software developer, [since July 1993.] From December
1989 to June 1993, Mr. Gibbons was Senior Vice President and Chief Information
Officer at Promus Companies, an operator of hotels, casinos and related
service providers. Mr. Gibbons earned a B.A. degree in Economics from Lawrence
University, and a M.S. degree in Accounting and Information Systems from the
J.L. Kellogg Graduate School of Management at Northwestern University.
Ronald Abelmann has been a director of the Company since October 1996. Mr.
Abelmann has been the President and Chief Executive Officer of WindRiver
Systems since March 1994. Prior to March 1994, he was the founding Chief
Executive Officer of Vantage Analysis Systems. Prior to founding Vantage
Analysis Systems, Mr. Abelmann was Group Vice President and General Manager of
the Instrument Division of Varian Associates. Mr. Abelmann holds B.S. and M.S.
degrees in Applied Physics from University of California at Los Angeles, and
an M.B.A. from Stanford University.
Max D. Hopper has been a director of the Company since April 1995. From
November 1985 to January 1995, Mr. Hopper served in various positions at
American Airlines, a subsidiary of AMR Corporation, an international travel
provider, most recently serving as Senior Vice President, Information Systems
and Chairman, The SABRE Group. Mr. Hopper is also a director of BBN Planet,
Computer Language Research, Convex Corporation, Gartner Group, Inc., Gupta
Corporation, USDATA Corporation and VTEL Corporation. Mr. Hopper earned a B.S.
degree in Mathematics from the University of Houston.
All directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers serve at the
discretion of the Board. Ori Sasson and A. Aaron Omid are brothers. There are
no other family relationships among any of the executive officers or directors
of the Company.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for the
37
<PAGE>
Company's officers and employees and administers the Company's Option Plan and
Employee Stock Purchase Plan. The Audit Committee reviews the results and
scope of the audit and other accounting related services and reviews and
evaluates the Company's internal audit and control functions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Cline and Hopper, neither of whom is an officer or employee of the Company. No
member of the Compensation Committee or executive officer of the Company has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
DIRECTOR COMPENSATION
Directors receive no cash remuneration for serving on the Board. Non-
employee directors are entitled to participate in the Company's Director Plan.
See "Management--Employee Benefit Plans--Director Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the past
two fiscal years ended March 31, 1995 and March 31, 1996, respectively, to the
Company's Chief Executive Officer and each of the Company's other most highly
compensated executive officers whose total annual salary and bonus exceeded
$100,000, and who were serving as executive officers at the end of the 1996
fiscal year, including the Company's former Chief Financial Officer
(collectively, the "Named Executive Officers"). The Company does not presently
have an employment agreement with any of the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
------------------ ------------
FISCAL OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) GRANTED
--------------------------- ------ --------- -------- ------------
<S> <C> <C> <C> <C>
Ori Sasson 1996 $96,000 $40,000 150,000
Chairman, Chief Executive Officer
and President 1995 96,000 5,000 --
William C. Leetham(4) 1996 115,008 15,000 50,000
Former Chief Financial Officer 1995 5,000 -- --
A. Aaron Omid 1996 96,000 60,000 --
Vice President, Sales and Secretary 1995 96,000 5,000 --
Lyle D. York 1996 96,000 23,000 15,000
Vice President, Customer Service 1995 91,696 5,000 --
</TABLE>
- --------
(1) Excludes certain perquisites and other personal benefits, such as life
insurance premiums paid by the Company. These amounts, in the aggregate,
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus for each executive officer.
(2) The current annual salaries for Messrs. Sasson, Omid and York are
$150,000, $150,000 and $125,000, respectively.
(3) Includes bonus amounts earned in the fiscal year indicated even though
such bonus amounts may be paid in a subsequent fiscal year.
(4) Mr. Leetham joined the Company in March 1995 and left the Company in
September 1996.
38
<PAGE>
Option Grants and Exercises in Last Fiscal Year
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during fiscal 1996, as well
as options held by such officers as of March 31, 1996, the last day of the
Company's 1996 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ANNUAL RATES
INDIVIDUAL GRANTS(1) OF STOCK PRICE
------------------------------------------------- APPRECIATION
% OF TOTAL OPTIONS FOR OPTION
GRANTED TO EXERCISE OR TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ------- ------------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ori Sasson.............. 50,000 4.5% $ 7.48 9/13/05 $235,207 $596,060
Ori Sasson.............. 100,000 8.9 0.898 4/12/05 56,475 143,118
William C. Leetham...... 50,000 4.5 0.816 4/12/05 25,659 65,025
A. Aaron Omid........... -- -- -- -- -- --
Lyle D. York............ 15,000 1.3 4.00 8/31/05 37,734 95,625
</TABLE>
- --------
(1) Each of these options was granted pursuant to the Company's Option Plan
and is subject to the terms of such plan.
(2) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), shown are the hypothetical gains or "options spreads"
that would exist for the respective options. These gains are based on
assumed rates of annual compounded stock price appreciation of 5% and 10%
from the date the option was granted over the full option term. The 5% and
10% assumed rates of appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection of
future increases in the price of its Common Stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUE
---------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
ACQUIRED END: FISCAL YEAR END(1):
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ori Sasson.............. -- -- 33,333 116,667 $470,062 $1,316,138
William C. Leetham...... -- -- 12,500 37,500 177,300 531,900
A. Aaron Omid........... -- -- -- -- -- --
Lyle D. York............ 5,000 70,920 15,833 34,167 224,575 436,865
</TABLE>
- --------
(1) The values for "in-the-money" options represent the difference between the
exercise price of the respective options and the closing price of the
Company's Common Stock on March 31, 1996, which was $15.00 per share.
EMPLOYEE BENEFIT PLANS
1991 Stock Option Plan
The Company's 1991 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and the shareholders in November 1991 and amended in
October 1992, April 1995, September 1995 and May 1996. An aggregate of
3,700,000 shares of Common Stock have been reserved for issuance under the
Option Plan. The Option Plan provides for the grant to employees of the
Company of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for the grant of
nonstatutory stock options to employees and consultants of the Company. The
Option Plan may be administered by the Board or a committee approved by the
Board in a manner that complies with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Currently, the Option Plan is
administered
39
<PAGE>
by the Compensation Committee of the Board, which determines the terms of
options and rights granted, including the exercise price, number of shares
subject to the option or right and the exercisability thereof.
Options granted under the Option Plan are not transferable other than by will
or the laws of descent or distribution, and each option is exercisable during
the lifetime of the recipient only by such person. The exercise price of all
incentive stock options granted under the Option Plan must be at least equal to
the fair market value of the shares of Common Stock on the date of grant. With
respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of stock of the Company, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the maximum term of the option must not exceed five
years. The term of all other options granted under the Option Plan may not
exceed ten years.
Director Option Plan
The Company's Director Option Plan (the "Director Plan") provides for the
grant of nonstatutory stock options to nonemployee directors of the Company.
The Director Plan was approved by the Board and the shareholders in September
1995, at which time a total of 75,000 shares of Common Stock were authorized
for issuance thereunder. The Director Plan is currently administered by the
Board of Directors. Under the Director Plan, on the date of each nonemployee
director's annual reelection to the Board, each director who has been a
nonemployee director for at least six months will automatically receive a
nonstatutory option to purchase 3,750 shares of the Company's Common Stock. In
addition, each new nonemployee director is automatically granted a nonstatutory
option to purchase 15,000 shares of Common Stock on the date upon which such
person first becomes a nonemployee director.
Options granted under the Director Plan have a term of ten years unless
terminated sooner upon termination of the optionee's status as a director or
otherwise pursuant to the Director Plan. Such options are not transferable by
the optionee other than by will, to members of the optionee's family (or a
trust for the benefit of the optionee or members of the optionee's family) or
in certain other limited circumstances of transfer, and each option is
exercisable during the lifetime of the director only by such director or a
permitted transferee. The exercise price of each option granted under the
Director Plan is equal to the fair market value of the Common Stock on the date
of grant. The initial 15,000 share option grant vests as to 25% of the shares
on the first anniversary of the date of grant and as to an additional 1/48th of
the shares subject to such option each month thereafter. The 3,750 share annual
grant vests in full four years following the grant date. In August, 1996,
Messrs. Cline, Gibbons and Hopper were each granted options to purchase 3,750
shares under the Director Plan at an exercise price of $18.00 per share and in
October 1996, Mr. Abelmann was granted an option to purchase 15,000 shares
under the Director Plan at an exercise price of $39.25 per share.
In the event of merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change in control transaction
involving the Company, each option under the Director Plan may be assumed by
the successor corporation, and in the event the successor corporation does not
assume each option, the option shall become fully vested and exercisable for at
least 30 days after written notice to the holder of the change in control
event. Unless terminated sooner, the Director Plan will terminate in 2005. The
Board has authority to amend or terminate the Director Plan, provided no such
action may impair the rights of any optionee without the optionee's consent.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan was adopted by the Board and the
shareholders in September 1995, and became effective in November 1995. As of
September 30, 1996, a total of 42,080 shares of Common Stock have been issued
under the Purchase Plan and 157,920 shares of Common Stock have been reserved
for issuance under the Purchase Plan. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, permits multiple overlapping offering
periods of up to 27 months each, each of which may consist of one or more
purchase periods. The Purchase Plan was implemented with overlapping offering
periods of approximately 12 months duration, with two purchase periods of
approximately six months each within any
40
<PAGE>
offering period. The Purchase Plan is administered by the Compensation
Committee of the Board of Directors. The Compensation Committee has the
authority to change the commencement date of future offering periods. All
individuals employed by the Company or its subsidiaries on the commencement
date of an offering period are eligible to participate in the Purchase Plan if
they are employed by the Company for at least 20 hours per week and more than
five months per calendar year, provided that any individual who holds 5% or
more of the Company's Common Stock (directly or upon the exercise of options)
is not eligible to participate. The Purchase Plan permits eligible employees
to purchase Common Stock through payroll deductions, which may not exceed 10%
of an employee's total compensation, including bonuses and sales commissions
(or, if lower, $25,000 in any calendar year), at a price equal to 85% of the
lower of the closing sale price for the Common Stock reported on the Nasdaq
National Market at the beginning of the offering period and the end of each
respective purchase period within the offering period. Employees may end their
participation in the offering any time during the offering period, and
participation ends automatically upon termination of employment with the
Company. Unless terminated sooner, the Purchase Plan will terminate ten years
from its effective date.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company shall indemnify its officers
and directors and may indemnify its employees and other agents to the fullest
extent provided by California law, including those circumstances where
indemnification would otherwise be discretionary under California law. The
Company believes that indemnification under its Bylaws covers at least
negligence on the part of indemnified parties. The Bylaws authorize the use of
indemnification agreements and the Company has entered into such agreements
with each of its directors and officers. The Company plans to obtain officer
and director liability insurance with respect to certain matters, including
matters arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. At
present, there is no pending litigation or proceeding involving any director
or officer, employee or agent of the Company where indemnification will be
required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
41
<PAGE>
CERTAIN TRANSACTIONS
In June 1994, the Company sold shares of its Series B-1 Preferred Stock at
$3.00 per share to the following investors: 914,033 shares to GAP 13; 85,967
shares to GAP Coinvestment; 16,667 shares to Bahram Nour-Omid and Iraj
Barkohanai, as tenants in common; and 13,333 shares to the Imperial Trust, as
Custodian for Iraj Barkohanai. Michael Cline, a director of the Company, is a
general partner of GAP 13 and GAP Coinvestment.
In June 1994, in connection with the Series B-1 Preferred Stock financing,
the Company issued to the Series B-1 Preferred Stock investors warrants to
purchase shares of Series B-2 Preferred Stock at an exercise price of $4.00
per share. Specifically, GAP 13, GAP Coinvestment, Bahram Nour-Omid and Iraj
Barkohanai, as tenants in common, and the Imperial Trust, as Custodian for
Iraj Barkohanai, received warrants to acquire up to 228,508 shares, 21,492
shares, 4,167 shares and 3,333 shares of Series B-2 Preferred Stock,
respectively. The warrants were exercised in full in November 1995.
Each share of Series A, Series B-1 and Series B-2 Preferred Stock converted
into one share of Common Stock upon the closing of the Company's initial
public offering in November 1995. Certain holders of the Common Stock issued
upon conversion of the Series A, Series B-1 and Series B-2 Preferred Stock are
entitled to certain rights to have their shares registered under the
Securities Act. See "Description of Capital Stock--Registration Rights."
The Company and Microsoft Corporation are parties to a software license
agreement dated January 1, 1995. In fiscal 1996, the Company recognized
approximately $465,000 of revenues from such contract. Christopher Gibbons, a
director of the Company, is an officer of Microsoft Corporation.
42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 1996,
and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, by (i) each person (or group of affiliated persons) who is known by
the Company to own beneficially 5% or more of the Company's Common Stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers,
(iv) all directors and officers as a group and (v) each Selling Shareholder.
Except as indicated in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR NUMBER OWNERSHIP AFTER
TO OFFERING OF OFFERING(1)
5% BENEFICIAL OWNERS, DIRECTORS ----------------- SHARES -----------------
AND NAMED EXECUTIVE OFFICERS NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------------- ------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Ori Sasson(2)(3)(4)............... 1,324,582 11.0% 197,750 1,126,832 8.7%
A. Aaron Omid(2)(4)(5)............ 998,000 8.4 197,750 800,250 6.2
Sharam Sasson(4)(6)(7)............ 1,035,000 8.7 197,750 837,250 6.5
Bahram Nour-Omid(4)(8)(9)......... 851,704 7.0 197,750 653,954 5.1
David C. Schwab(10)(11)........... 695,000 5.8 50,000 645,000 5.0
Lyle D. York(2)................... -- * -- -- --
General Atlantic Partners(12)
125 East 56th Street
New York, NY 10022
J. Michael Cline................. 2,366,666 18.0 150,000 2,216,666 15.7
Christopher R. Gibbons............ -- * -- -- --
Ronald Abelmann................... -- * -- -- *
Max D. Hopper(13)................. 10,937 * -- 10,937 *
William C. Leetham................ 563 * -- 563 *
All executive officers and
directors as a group
(11 persons)(14)................. 4,287,579 35.7 404,500 3,883,079 29.8
OTHER SELLING SHAREHOLDERS
- --------------------------
Mark J. Barrenechea(15)........... 53,333 * 7,500 45,833 *
Jeffrey G. Bork(16)............... 105,728 * 1,500 104,228 *
</TABLE>
- --------
* Less than one percent.
(1) Assumes no exercise of the underwriters' over-allotment option. If the
over-allotment option is exercised in full, certain shareholders will
sell an aggregate of 300,000 shares of Common Stock. Specifically, (i)
Ori Sasson will sell 60,000 shares and beneficially own 1,066,832 shares,
or 8.2% of the Company's outstanding Common Stock, after completion of
the offering, (ii) A. Aaron Omid will sell 60,000 shares and beneficially
own 740,250 shares, or 5.7% of the Company's outstanding Common Stock,
after completion of the offering, (iii) Sharam Sasson will sell 60,000
shares and beneficially own 777,250 shares, or 6.0% of the Company's
outstanding Common Stock, after completion of the offering, (iv) Bahram
Nour-Omid will sell 60,000 shares and beneficially own 593,954 or 4.6% of
the Company's outstanding Common Stock, (v) General Atlantic Partners
("GAP") will sell 60,000 shares and beneficially own 2,156,666 shares, or
15.2% of the Company's outstanding Common Stock, after completion of the
offering.
(2) The shareholder's address is c/o Scopus Technology, Inc., 1900 Powell
Street, Suite 700, Emeryville, CA 94608.
(3) Includes 290,000 shares subject to options held by GAP and 64,582 shares
issuable upon the exercise of options held by Mr. Ori Sasson which are
exercisable within 60 days of September 30, 1996. Also includes 570,000
held by Mr. Ori Sasson and Ms. Susan Sasson as trustees for their own
benefit and 400,000 shares held in trust by Mr. Ori Sasson as trustee for
the benefit of Mr. Sharam Sasson's minor children. Excludes 400,000
shares held in trust for the benefit of Mr. Ori Sasson's minor children.
Mr. Sharam Sasson is the trustee of such trust and Mr. Ori Sasson
disclaims beneficial ownership of such shares.
43
<PAGE>
(4) Messrs. Ori Sasson, A. Aaron Omid, Sharam Sasson and Bahram Nour-Omid are
brothers.
(5) Includes 290,000 shares subject to options held by GAP.
(6) Mr. Sharam Sasson's address is c/o At Large Software, Inc., 5801 Christie
Avenue, Suite 590, Emeryville, CA 94608.
(7) Includes 290,000 shares subject to options held by GAP. Also includes
345,000 shares held in trust by Mr. Sharam Sasson and Ms. Fariba Sasson
as trustees for their own benefit and 400,000 shares held in trust by Mr.
Sharam Sasson as trustee for the benefit of Mr. Ori Sasson's minor
children. Excludes 400,000 shares held in trust for the benefit of Mr.
Sharam Sasson's minor children. Mr. Ori Sasson is the trustee of such
trust and Mr. Sharam Sasson disclaims beneficial ownership of such
shares.
(8) Dr. Bahram Nour-Omid's address is 101 Lombard Street #207W, San
Francisco, CA 94596.
(9) Includes 290,000 shares subject to options held by GAP and 14,583 shares
issuable upon the exercise of options held by Dr. Nour-Omid which are
exercisable within 60 days of September 30, 1996. Excludes 450,000 shares
held in trust for the benefit of Dr. Nour-Omid's minor children. Mr. Iraj
Barkohanai is the trustee of such trust and Dr. Nour-Omid disclaims
beneficial ownership of such shares.
(10) Mr. David C. Schwab's address is c/o Sierra Ventures, 3000 Sand Hill
Road, Building 4, Suite 210, Menlo Park, CA 94025.
(11) Includes 40,000 shares subject to options held by GAP.
(12) Includes 1,066,371 shares held by General Atlantic Partners 13, L.P. and
100,295 shares held by GAP Coinvestment Partners, L.P. Includes 1,200,000
shares transferable to GAP upon the exercise of options held by funds
affiliated with GAP. The general partner of General Atlantic Partners 13,
L.P. is General Atlantic Partners, a New York general partnership. The
general partners of General Atlantic Partners are Steven A. Denning,
David C. Hodgson, Stephen P. Reynolds, J. Michael Cline, William O. Grabe
and William E. Ford. The same individuals are the general partners of GAP
Coinvestment Partners, L.P. Mr. Cline disclaims beneficial ownership of
shares owned by General Atlantic Partners 13, L.P., GAP Coinvestment
Partners, L.P. and the other GAP funds except to the extent of his
pecuniary interest therein.
(13) Includes 5,937 shares issuable upon the exercise of options held by Mr.
Hopper which are exercisable within 60 days of September 30, 1996.
(14) Includes 105,413 shares issuable upon the exercise of options which are
exercisable within 60 days of September 30, 1996 and 1,200,000 shares
transferable to GAP from shareholders of the Company who are not officers
or directors upon the exercise of options held by funds affiliated with
GAP.
(15) Includes 8,333 shares issuable upon the exercise of options held by Mr.
Barrenechea which are exercisable within 60 days of September 30, 1996.
(16) Includes 18,228 shares issuable upon the exercise of options held by Mr.
Bork which are exercisable within 60 days of September 30, 1996.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $0.001 par value, and 2,500,000 shares of Preferred Stock, $0.01
par value.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the shareholders, and are entitled to cumulative
voting with respect to the election of directors. Subject to preferences that
may be applicable to outstanding shares of Preferred Stock, if any, the
holders of Common Stock are entitled to receive ratably such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior
liquidation rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are fully paid and non-
assessable, and the shares of Common Stock to be outstanding upon completion
of this offering will be fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue 2,500,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated preferred stock and to fix the number of
shares constituting any series and the designations of such series, without
any further vote or action by the shareholders. The Board of Directors,
without shareholder approval, can issue Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.
REGISTRATION RIGHTS
Pursuant to the Amended and Restated Rights Agreement dated as of June 10,
1994 among the Company and certain holders of its securities (the "Rights
Agreement"), the holders of approximately 2.2 million shares of Common Stock
(the "Registrable Securities"), including certain shares which may be sold by
Selling Shareholders upon exercise in full of the Underwriters' over-allotment
option, are entitled to certain rights with respect to the registration of the
Registrable Securities under the Securities Act. Under the Rights Agreement,
if the Company proposes to register any of its securities under the Securities
Act, either for its own account or the account of other shareholders, the
holders of Registrable Securities are entitled to notice of such registration
and are entitled to include their Registrable Securities therein. In addition,
if the Company receives a request from holders of at least 25% of the
Registrable Securities (or such lesser amount if the offering size would
exceed $5 million), the Company is obligated to cause such shares to be
registered under the Securities Act. Holders of Registrable Securities have
the right to cause two such demand registrations. Further, holders of
Registrable Securities may require the Company to register all or a portion of
their Registrable Securities on Form S-3, provided such form is available for
use by the Company, subject to certain conditions and limitations. The
holders' rights with respect to all such registrations are subject to certain
conditions, including the right of the underwriters to limit the number of
shares included in any such registration. With respect to all registrations
other than those on Form S-3, the Company has agreed to pay all expenses
related thereto, except for underwriting discounts and commissions and stock
transfer taxes.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Boston Equiserve.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
12,926,521 shares of Common Stock (assuming no exercise of options after
September 30, 1996). Of these shares, in addition to the 2,000,000 shares sold
in this offering and shares currently traded or available for sale in the open
market, an aggregate of approximately 5,200,000 shares will become eligible
for sale 90 days after the date of this Prospectus upon the expiration of
certain lock-up agreements with the Company and the Underwriters, subject in
certain cases to certain volume and other resale restrictions under Rule 144.
The holders of approximately 5,200,000 shares of the Company's Common Stock,
including all of the Company's officers, directors and each of the Selling
Shareholders, have agreed with the Company or the Representatives that, until
90 days after the Effective Date, they will not sell, offer to sell, contract
to sell or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of Common Stock, any options or warrants to purchase
shares of Common Stock, or any securities convertible or exchangeable for
shares of Common Stock, owned directly by such holders or with respect to
which they have power of disposition. The Company has also agreed not to sell,
offer to sell, contract to sell, grant any option to purchase or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or any rights to acquire Common
Stock for a period of 90 days after the Effective Date without the prior
written consent of Morgan Stanley & Co. Incorporated, subject to certain
limited exceptions. The lock-up agreements may be released at any time as to
all or any portion of the shares subject to such agreements at the sole
discretion of Morgan Stanley & Co. Incorporated.
46
<PAGE>
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below, for whom Morgan
Stanley & Co. Incorporated, Montgomery Securities, Donaldson, Lufkin &
Jenrette Securities Corporation and UBS Securities LLC are serving as
Representatives, have severally agreed to purchase, and the Company and the
Selling Shareholders have agreed to sell to the Underwriters, severally, the
respective number of shares of Common Stock set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...............................
Montgomery Securities ..........................................
Donaldson, Lufkin & Jenrette Securities Corporation.............
UBS Securities LLC..............................................
---------
Total......................................................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel, and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the over-allotment option described below) if any such shares
are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the public offering price set
forth on the cover page hereof and part to certain dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. Any Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share to other Underwriters or to certain
other dealers.
Certain Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional 300,000 shares of Common Stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions.
The Underwriters may exercise such option to purchase solely for the purpose
of covering over-allotments, if any, incurred in the sale of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to the
total number of shares of Common Stock offered hereby.
The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
47
<PAGE>
The Company has agreed not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
or enter into any swap or similar agreement that transfers, in whole or in
part, the economic risk of ownership of the Common Stock, for a period of 90
days after the date of this Prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated, subject to certain limited exceptions.
See "Shares Eligible for Future Sale" for a description of certain
arrangements by which the Selling Shareholders, officers and directors of the
Company have agreed not to sell or otherwise transfer the Common Stock or
convertible securities of the Company held by them for up to 90 days after the
date of this Prospectus, without the prior written consent of Morgan Stanley &
Co. Incorporated.
Morgan Stanley & Co. Incorporated, Montgomery Securities and UBS Securities
LLC were the representatives of the several underwriters in the Company's
initial public offering of 2,760,000 shares of Common Stock in November 1995,
for which they received customary underwriting discounts and commissions.
In connection with the offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market, may engage in passive market
making transactions in the Common Stock of the Company on the Nasdaq National
Market in accordance with Rule 10b-6A under the Securities Exchange Act of
1934, as amended, during the two business day period before commencement of
offers or sales of the Common Stock. The passive market making transactions
must comply with applicable price and volume limits and be identified as such.
In general, a passive market maker may display its bid at a price not in
excess of the highest independent bid for the securities. If all independent
bids are lowered below the passive market maker's bid, however, such bid of
the passive market maker must then be lowered when certain purchase limits are
exceeded. Net purchases by a passive market maker on each day are generally
limited to a specified percentage of the passive market maker's average daily
trading volume in the Common Stock during a price period and must be
discontinued when such limit is reached. Passive market making may stabilize
the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by
Morrison & Foerster LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of March 31, 1995 and 1996 and the
consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended March 31, 1996, included in
this Prospectus, have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
such firm as experts in auditing and accounting.
48
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
with respect to the Company and such Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part of the Registration Statement. Statements contained in this Prospectus
concerning the contents of any contract or any other document referred to are
not necessarily complete, and reference is made in each instance to the copy
of such contract or document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference
to such exhibit. A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied (at prescribed rates) at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as the New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048, and the Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601. In
addition, the Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov. Quotations relating to the Company's Common Stock
appear on the Nasdaq National Market and such reports, proxy statements and
other information concerning the Company can also be inspected at the offices
of the Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
49
<PAGE>
SCOPUS TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Coopers & Lybrand L.L.P., Independent Accountants................ F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Scopus Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Scopus
Technology, Inc. and Subsidiaries as of March 31, 1995 and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Scopus
Technology, Inc. and Subsidiaries as of March 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Oakland, California
April 30, 1996
F-2
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
--------------- SEPTEMBER 30,
ASSETS 1995 1996 1996
------ ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 3,001 $21,792 $17,411
Investments................................... 552 7,462 10,701
Accounts receivable, net of allowance for
doubtful accounts of $349, $665 and $1,300
for March 31, 1995 and 1996 and
September 30, 1996, respectively............. 5,653 7,530 11,453
Prepaid expenses and other.................... 236 648 761
Deferred income taxes......................... 321 574 1,103
------- ------- -------
Total current assets........................ 9,763 38,006 41,429
Property and equipment, net..................... 1,658 2,734 5,306
Other assets.................................... 3 841 1,607
------- ------- -------
Total assets................................ $11,424 $41,581 $48,342
======= ======= =======
<CAPTION>
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND SHAREHOLDERS' EQUITY
------------------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable.............................. $ 733 $ 1,561 $ 2,779
Accrued liabilities........................... 1,558 2,544 3,601
Income taxes payable.......................... 273 740 839
Deferred revenue.............................. 1,528 3,270 3,663
------- ------- -------
Total current liabilities................... 4,092 8,115 10,882
Deferred tax liabilities........................ 32 11 --
------- ------- -------
Total liabilities........................... 4,124 8,126 10,882
------- ------- -------
Commitments
Mandatorily redeemable convertible preferred
stock, Series A, $0.01 par value; issued and
outstanding 1,590,910 shares for March 31, 1995
and none at March 31 and September 30, 1996.... 1,400 -- --
------- ------- -------
Shareholders' equity:
Convertible preferred stock, Series B, $0.01
par value; issued and outstanding 1,263,333
shares at March 31, 1995 and none at March 31
and September 30, 1996........................ 13 -- --
Preferred stock, $0.01 par value; 2,500,000
shares authorized; none issued and
outstanding................................... -- -- --
Common stock, $0.001 par value; authorized
50,000,000; issued and outstanding, 6,313,718,
11,705,557 and 11,926,521 shares at March 31,
1995 and 1996, and September 30, 1996,
respectively.................................. 6 12 12
Additional paid-in capital..................... 4,096 29,944 31,509
Deferred compensation.......................... -- (271) (179)
Cumulative translation adjustment.............. 1 (4) (5)
Retained earnings.............................. 1,784 3,774 6,123
------- ------- -------
Total shareholders' equity.................. 5,900 33,455 37,460
------- ------- -------
Total liabilities, mandatorily redeemable
preferred stock and shareholders' equity... $11,424 $41,581 $48,342
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------ ----------------
1994 1995 1996 1995 1996
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses......................... $5,011 $11,097 $19,753 $ 7,704 $17,424
Services and maintenance......... 1,524 4,153 8,843 4,345 6,380
------ ------- ------- ------- -------
Total revenues................. 6,535 15,250 28,596 12,049 23,804
------ ------- ------- ------- -------
Cost of revenues:
Licenses......................... 305 601 874 626 839
Services and maintenance......... 554 3,340 6,915 4,028 4,178
------ ------- ------- ------- -------
Total cost of revenues......... 859 3,941 7,789 4,654 5,017
------ ------- ------- ------- -------
Gross margin....................... 5,676 11,309 20,807 7,395 18,787
------ ------- ------- ------- -------
Operating expenses:
Sales and marketing.............. 2,754 5,937 10,565 4,051 9,703
Research and development......... 1,532 2,716 5,382 2,283 3,860
General and administrative....... 714 1,170 2,169 752 2,050
------ ------- ------- ------- -------
Total operating expenses....... 5,000 9,823 18,116 7,086 15,613
------ ------- ------- ------- -------
Income from operations......... 676 1,486 2,691 309 3,174
Interest expense................... (33) (16) (22) (6) --
Interest income.................... 55 139 515 63 605
Other nonoperating expense......... -- (64) (25) (6) (29)
------ ------- ------- ------- -------
Income before income taxes..... 698 1,545 3,159 360 3,750
Provision for income taxes......... 131 572 1,169 133 1,401
------ ------- ------- ------- -------
Net income..................... $ 567 $ 973 $ 1,990 $ 227 $ 2,349
====== ======= ======= ======= =======
Net income per share............... $ 0.07 $ 0.10 $ 0.18 $ 0.02 $ 0.18
====== ======= ======= ======= =======
Weighted average common and common
equivalent shares................. 8,476 9,683 10,965 10,786 12,757
====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT NUMBERS OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
SERIES B
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------ ----------------- PAID-IN DEFERRED TRANSLATION RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION ADJUSTMENT EARNINGS EQUITY
---------- ------ ---------- ------ ---------- ------------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31,
1993.................. -- $ -- 5,246,743 $ 5 $ 200 $ -- $-- $ 244 $ 449
Common shares issued
for cash upon exercise
of options............ -- -- 1,028,999 1 109 -- -- -- 110
Net income............. -- -- -- -- -- -- -- 567 567
---------- ---- ---------- --- ------- ----- --- ------ -------
Balances at March 31,
1994.................. -- -- 6,275,742 6 309 -- -- 811 1,126
Common shares issued
for cash upon exercise
of options............ -- -- 37,976 -- 31 -- -- -- 31
Preferred stock issued
for cash at $3.00 per
share, net of issuance
costs of $21.......... 1,263,333 13 -- -- 3,756 -- -- -- 3,769
Net income............. -- -- -- -- -- -- -- 973 973
Translation adjustment. -- -- -- -- -- -- 1 -- 1
---------- ---- ---------- --- ------- ----- --- ------ -------
Balances at March 31,
1995.................. 1,263,333 13 6,313,718 6 4,096 -- 1 1,784 5,900
Common shares issued
for cash upon exercise
of options............ -- -- 90,653 -- 74 -- -- -- 74
Issuance of Common
Stock in public
offering, net of
issuance costs of
$968.................. -- -- 2,225,000 2 23,861 -- -- -- 23,863
Conversion of
mandatorily redeemably
preferred stock,
Series A.............. -- -- 1,590,910 2 1,398 -- -- -- 1,400
Conversion of Series B
preferred stock....... (1,263,333) (13) 1,263,333 1 12 -- -- -- --
Common stock issued for
cash on exercise of
Series B-2 warrants... -- -- 34,167 -- 137 -- -- -- 137
Common stock issued on
non-cash exercise of
Series B-2 warrants... -- -- 187,776 1 (1) -- -- -- --
Issuance of stock
options below fair
value................. -- -- -- -- 367 (367) -- -- --
Amortization of
deferred compensation
related to stock
options............... -- -- -- -- -- 96 -- -- 96
Net income............. -- -- -- -- -- -- -- 1,990 1,990
Translation adjustment. -- -- -- -- -- -- (5) -- (5)
---------- ---- ---------- --- ------- ----- --- ------ -------
Balances at March 31,
1996.................. -- -- 11,705,557 12 29,944 (271) (4) 3,774 33,455
Common shares issued
for cash upon
exercising of options
(unaudited)........... -- -- 178,884 -- 225 -- -- -- 225
Issuance of stock under
Employee Stock
Purchase Plan
(unaudited)........... -- -- 42,080 -- 429 -- -- -- 429
Tax benefit of
disqualifying
dispositions
(unaudited)........... -- -- -- -- 955 -- -- -- 955
Cancellation of stock
options issued below
fair value (unaudited) -- -- -- -- (44) 44 -- -- --
Amortization of
deferred compensation
in relation to stock
options (unaudited)... -- -- -- -- -- 48 -- -- 48
Net income (unaudited). -- -- -- -- -- -- -- 2,349 2,349
Translation adjustments
(unaudited)........... -- -- -- -- -- -- (1) -- (1)
---------- ---- ---------- --- ------- ----- --- ------ -------
Balances at September
30, 1996 (unaudited).. -- -- 11,926,521 $12 $31,509 $(179) $(5) $6,123 $37,460
========== ==== ========== === ======= ===== === ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30
----------------------- -----------------
1994 1995 1996 1995 1996
------ ------ ------- -------- --------
(UNAUDITED)
-----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income....................... $ 567 $ 973 $ 1,990 $ 227 $ 2,349
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization.... 187 519 947 399 830
Noncash charges (credits), net... (216) 193 (126) (151) 429
Changes in assets and
liabilities:
(Increase) decrease in
receivables.................... (2,375) (2,322) (1,882) (2,438) (3,923)
Decrease (increase) in prepaid
expenses and other............. (261) 71 (1,167) (171) (893)
Decrease (increase) in deferred
income taxes................... (148) (138) (357) 24 (526)
Increase in accounts payable.... 371 286 828 248 1,218
Increase in accrued liabilities. 456 875 986 153 1,057
Increase (decrease) in income
taxes payable.................. 187 17 467 (207) 99
Increase in deferred revenue.... 679 686 1,742 1,043 393
------ ------ ------- ------- --------
Net cash provided by (used in)
operating activities............ (553) 1,160 3,428 (873) 1,033
------ ------ ------- ------- --------
Cash flows used in investing
activities:
Purchase of investments.......... (42) -- (7,466) -- (5,944)
Proceeds from sale of
investments..................... 450 -- 555 555 2,700
Payments for purchase of fixed
assets.......................... (492) (1,516) (1,815) (605) (2,828)
Proceeds from disposal of fixed
assets.......................... -- 14 15 3 4
------ ------ ------- ------- --------
Net cash used in investing
activities...................... (84) (1,502) (8,711) (47) (6,068)
------ ------ ------- ------- --------
Cash flows from financing
activities:
Proceeds from exercise of common
stock options and purchases
under employee stock plans...... 110 31 74 11 654
Proceeds from issuance of
preferred stock................. 400 3,769 -- -- --
Proceeds from initial public
offering, net................... -- -- 23,863 -- --
Proceeds from exercise of
warrants........................ -- -- 137 -- --
(Repayments) borrowings under
line of credit, net............. 350 (750) -- -- --
------ ------ ------- ------- --------
Net cash provided by financing
activities...................... 860 3,050 24,074 11 654
------ ------ ------- ------- --------
Net increase (decrease) in cash
and cash equivalents............ 223 2,708 18,791 (909) (4,381)
Cash and cash equivalents at
beginning of period............... 70 293 3,001 3,001 21,792
------ ------ ------- ------- --------
Cash and cash equivalents at end of
period............................ $ 293 $3,001 $21,792 $ 2,092 $ 17,411
====== ====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Scopus Technology, Inc. and its subsidiaries (the "Company") is a leading
provider of client/server software solutions for the customer information
management market. The Company's applications that automate external customer
support, the product design change process, sales and marketing activities and
internal help desk support. The Company's applications are designed to enable
organizations to build a customer information knowledgebase that can be
accessed and utilized by individuals throughout the enterprise to improve the
effectiveness and efficiency of customer support in order to increase customer
satisfaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements of the Company include the accounts of
Scopus Technology, Inc. and its wholly-owned subsidiaries, Scopus Technology
U.K. Limited, Scopus Technology Canada Inc. and Scopus Technology France SARL.
All significant intercompany accounts and transactions are eliminated in
consolidation.
Unaudited Interim Financial Information:
The consolidated financial statements as of and for the six month periods
ended September 30, 1995 and 1996 are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the results for such periods.
The results of operations for the six months ended September 30, 1996 are not
necessarily indicative of results to be expected for the full fiscal year.
Revenue Recognition:
The Company recognizes revenue in accordance with the provisions of
Statement of Position 91-1 "Software Revenue Recognition." The Company
generates revenue primarily from licensing the rights to use its software
products to end users and to a lesser extent from sublicense fees from
resellers. The Company also generates revenues from consulting, training and
post-contract support ("maintenance") services performed for customers who
license its products.
Revenues from perpetual software license agreements are recognized as
revenue upon receipt of an executed license agreement, (or an unconditional
purchase order under an existing license agreement), and shipment of the
software, if there are no significant post-delivery obligations and collection
of the receivables is probable.
Revenues from maintenance are recognized ratably over the term of the
maintenance period, which is typically one year. If maintenance services are
included free of charge or discounted in a license agreement, such amounts are
unbundled from the license fee at their fair market value based upon the value
established by independent sales of such maintenance to customers.
Consulting and training revenues are generally recognized as the services
are performed. Consulting services are typically performed under separate
service agreements and are usually performed on a time and materials basis.
Such services primarily consist of implementation services related to the
installation of the Company's products and do not include significant
customization to or development of the underlying software code.
F-7
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cost of Revenues:
Cost of licenses includes the cost of media, product packaging,
documentation and other production costs, and third-party royalties.
Cost of services consists primarily of salaries, benefits and allocated
overhead costs related to consulting, training and customer support personnel,
including cost of services provided by third party consultants engaged by the
Company.
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The Company's cash
and cash equivalents are maintained with a bank and a brokerage institution.
Investments:
At March 31 and September 30, 1996, the Company's investments consisted
primarily of treasury notes and municipal notes and bonds. Remaining
maturities at the time of purchase are generally less than one year. At March
31, 1995, the Company's investments consisted of shares of a mutual fund which
invests in securities guaranteed by the U.S. government or its agencies with
an average remaining maturity of not more than five years.
Effective April 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." This statement requires that securities be
classified as "held to maturity," "available for sale" or "trading," and the
securities in each classification be accounted for at either amortized cost or
fair market value, depending upon their classification. The Company has the
intent and ability to hold all investments until maturity. Therefore, all such
investments are classified as held to maturity investments and carried at
amortized cost in the accompanying financial statements. At March 31, 1996,
the amortized cost of the Company's investments approximated fair value.
As of March 31, 1996, the Company's investments consisted of the following
(in thousands):
<TABLE>
<CAPTION>
MATURITY OF
AMORTIZED SECURITIES
COST WITHIN ONE
BASIS YEAR
--------- -----------
<S> <C> <C>
Municipal debt securities........................... $6,462 $6,462
U.S. Treasury debt securities....................... 1,000 1,000
------ ------
$7,462 $7,462
====== ======
</TABLE>
Software Development Costs:
The Company anticipates capitalizing eligible software development costs
upon the establishment of technological feasibility which the Company has
defined as completion of a working model. The period of time beginning with
the establishment of a working model and ending when a product is offered for
sale is typically very short. Accordingly, costs which were eligible for
capitalization were insignificant and, thus the Company has charged all
software development costs to research and development expense in the
accompanying consolidated statements of operations.
F-8
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment:
Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of two to three years
for computer hardware and software, five years for furniture and fixtures, and
over the remaining term of the principal facility lease for leasehold
improvements.
When assets are sold or retired, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
included in operations. Maintenance and repairs are charged to operations as
incurred.
Income Taxes:
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109).
Under SFAS No. 109, deferred income tax liabilities and assets are determined
based on the difference between the financial reporting amounts and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates in effect for the years in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and
liabilities.
Foreign Currency Translations and Transactions:
The accounts of the Company's U.K., Canadian and French subsidiaries are
translated into U.S. dollars at period end rates of exchange. Revenues and
expenses are translated at average rates for the period. The resultant
translation adjustments are shown as a separate component of shareholders'
equity. Gains and losses from foreign currency transactions are included in
the determination of net income and are not material.
Computation of Earnings Per Share:
Net income per common share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during each period.
Fully diluted and primary earnings per common share are the same amounts for
each of the periods presented. Dilutive common equivalent shares consist of
stock options and warrants (using the treasury stock method) and convertible
preferred stock. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common shares issued by the Company during the
twelve months immediately preceding an offering date, plus the number of
common equivalent shares which became issuable during the same period pursuant
to the grant of stock options (using the treasury stock method and the
proposed public offering price), have been included in the calculation of
common and common equivalent shares as if they were outstanding for all
periods presented. Convertible preferred stock issued and outstanding is
treated as if converted to common stock on their respective dates of original
issuance.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Accounting for Stock-Based Compensation:
In October 1995, Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," (FAS 123) was issued and is
effective for the Company's 1997 fiscal year. The Company intends to continue
to account for employee stock options in accordance with APB Opinion No. 25
and will make the pro forma disclosures required by FAS 123 in fiscal 1997.
F-9
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade receivables. The Company has investment policies that
limit the amount of credit exposure to any one issuer and restrict placement
of these investments to issuers evaluated as credit worthy. The Company's
customer base consists primarily of large, well established companies. Five
customers accounted for approximately 40%, 41% and 36% of net accounts
receivable as of March 31, 1995 and 1996 and September 30, 1996, respectively.
The Company provides reserves for credit losses which have not been
significant to date. In fiscal 1994, one customer accounted for 12% of total
revenues. In fiscal 1995 and 1996 and for the six month periods ended
September 30, 1995 and 1996, there were no customers that accounted for
greater than 10% of revenues.
4. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
--------------- 1996
1995 1996 (UNAUDITED)
------ ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Computer equipment and software....... $1,742 $ 3,484 $ 6,363
Furniture and fixtures................ 493 740 1,095
Leasehold improvements................ 43 70 236
------ ------- -------
2,278 4,294 7,694
Less accumulated depreciation and
amortization......................... (620) (1,560) (2,388)
------ ------- -------
Total property and equipment, net... $1,658 $ 2,734 $ 5,306
====== ======= =======
</TABLE>
5. INCOME TAXES:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH
31,
--------------------
1994 1995 1996
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current........................................... $ 240 $ 565 $1,200
Deferred.......................................... (120) (130) (335)
----- ----- ------
120 435 865
----- ----- ------
State:
Current........................................... 39 129 283
Deferred.......................................... (28) (8) (22)
----- ----- ------
11 121 261
----- ----- ------
Foreign--current.................................... -- 16 43
----- ----- ------
Provision for income taxes........................ $ 131 $ 572 $1,169
===== ===== ======
</TABLE>
F-10
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effective income tax rate differs from the statutory federal income tax
rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-----------------
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate...................... 34.0% 34.0% 34.0%
States taxes, net of federal income tax benefit........ 6.1 6.1 6.1
Utilization of research and development credits........ (18.0) (7.6) (4.1)
Other.................................................. (3.3) 4.5 1.0
----- ---- ----
18.8% 37.0% 37.0%
===== ==== ====
</TABLE>
Significant components of the Company's deferred tax balances are as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------
1995 1996
----- -----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Current:
Accrued employee benefits............................... $ 81 $ 161
Allowance for doubtful accounts......................... 140 267
Deferred rent........................................... 52 30
States taxes............................................ 48 94
Capital loss carryforward............................... -- 22
Noncurrent--prepaid royalties............................. -- 83
----- -----
Total deferred tax assets............................. 321 657
----- -----
Deferred tax liabilities:
Noncurrent--property and equipment...................... (32) (11)
----- -----
Total deferred tax liabilities........................ (32) (11)
----- -----
Net deferred tax assets............................... $ 289 $ 646
===== =====
</TABLE>
6. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
------------- 1996
1995 1996 (UNAUDITED)
------ ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Employee compensation......................... $ 389 $ 994 $1,278
Commissions................................... 423 842 1,392
Sales and use tax............................. 105 98 340
Consulting.................................... 303 -- --
Royalties..................................... -- 134 211
Other......................................... 338 476 380
------ ------ ------
Total....................................... $1,558 $2,544 $3,601
====== ====== ======
</TABLE>
F-11
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LINE OF CREDIT:
As of March 31, 1996, the Company had a $4,000,000 line of credit agreement
with a bank under which there were no amounts outstanding. Advances under the
line accrued interest at the bank's prime rate plus 1.0% per annum and were
collateralized by substantially all of the Company's assets. The line of
credit agreement contained restrictive covenants, including minimum
profitability levels and maintenance of specified levels of tangible net worth
and certain financial ratios. The line of credit agreement also prohibited the
payment of cash dividends without the consent of the bank. The line expired in
September 1996 and the Company has not renewed it.
8. COMMITMENTS:
Leases:
The Company leases administrative and sales offices under noncancellable
operating leases and subleases expiring through March 2001. Total rent expense
for the years ended March 31, 1994, 1995 and 1996 and the six month periods
ended September 30, 1995 and 1996 (unaudited) aggregated $217,000, $648,000,
$859,000, $356,000 and $693,000, respectively. Minimum future rental payments
under these operating leases as of March 31, 1996, are as follows (in
thousands):
<TABLE>
<S> <C>
Fiscal years ending March 31:
1997............................................................ $ 910
1998............................................................ 789
1999............................................................ 788
2000............................................................ 460
2001............................................................ 79
------
$3,026
======
</TABLE>
9. PREFERRED STOCK:
At March 31, 1996, the Company was authorized to issue 2,500,000 shares of
preferred stock. No preferred stock was issued or outstanding as of September
30, 1996.
In November 1992, the Company had issued 1,590,910 shares of Series A
preferred stock for gross proceeds of $1,400,000.
In June 1994, 1,263,333 shares of Series B-1 preferred stock were issued at
a price of $3.00 per share for proceeds of $3,768,684, net of issuance costs
of $21,315. In conjunction with this issuance, the purchasers received
warrants to purchase up to 315,833 shares of Series B-2 preferred stock. The
warrants were exercisable, at an exercise price of $4.00 per share. In
connection with the initial public offering of the Company's common stock,
warrants to purchase 34,167 shares of Series B-2 preferred stock were
exercised for cash and 187,776 shares of Series B-2 preferred stock were
issued upon the cashless exercise of the remaining 281,666 warrants. All
outstanding shares of Series A preferred stock and Series B preferred stock
were automatically converted into common stock upon the initial public
offering.
10. STOCK OPTIONS:
In December 1991, the Company adopted the 1991 Stock Option Plan (the
"Plan") under which eligible employees, directors, and consultants can receive
options to purchase shares of the Company's common stock at a price generally
not less than 100% and 85% of the fair value of the common stock on the date
of the grant of
F-12
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
incentive stock options and nonstatutory stock options, respectively. Stock
purchase rights may also be granted under the Plan. The Plan, as amended in
July 1996, allows for the issuance of a maximum of 3,700,000 shares of the
Company's common stock. This number of shares of common stock has been
reserved for issuance under the Plan. The options granted under the Plan are
exercisable over a maximum term of ten years from the date of grant and
generally vest in various installments over a four-year period. Shares sold
under the Plan are subject to various restrictions as to resale and right of
repurchase by the Company.
A summary of the activity under the Plan is set forth below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ------------------------
AVAILABLE NUMBER OF EXERCISE
FOR GRANT SHARES PRICE
---------- ---------- ------------
<S> <C> <C> <C>
Balance at March 31, 1993................. 1,273,281 855,000 $0.008-0.816
Granted................................. (834,000) 834,000 0.816
Exercised............................... -- (1,028,999) 0.008-0.816
Forfeited............................... 398,250 (398,250) 0.570-0.816
---------- ---------- ------------
Balance at March 31, 1994................. 837,531 261,751 0.816
Granted................................. (351,750) 351,570 0.816
Exercised............................... -- (37,976) 0.816
Forfeited............................... 106,381 (106,381) 0.816
---------- ---------- ------------
Balance at March 31, 1995................. 592,162 469,144 0.816
Authorized.............................. 1,063,907 -- --
Granted................................. (1,119,675) 1,119,675 0.816-14.50
Exercised............................... -- (90,653) 0.816
Forfeited............................... 147,473 (147,473) 0.816-12.00
---------- ---------- ------------
Balance at March 31, 1996................. 683,867 1,350,693 $0.816-14.50
Authorized (unaudited).................. 500,000 -- --
Granted (unaudited)..................... (270,550) 270,550 13.00-18.00
Exercised (unaudited)................... -- (178,884) 0.816-6.80
Forfeited (unaudited)................... 119,753 (119,753) 0.816-16.25
---------- ---------- ------------
Balance at September 30, 1996 (unaudited). 1,033,070 1,322,606 $0.816-18.00
========== ========== ============
Exercisable at September 30, 1996
(unaudited).............................. 308,307 $0.816-14.75
========== ============
</TABLE>
In compliance with the terms of the Plan, the Company entered into a
restricted stock purchase agreement in March 1994 with one of its executives.
The executive had previously been granted options to purchase an aggregate of
850,000 shares of common stock of the Company. Pursuant to the March
agreement, the executive exercised all the options, subject to the original
vesting schedule. At September 30, 1996, all of such shares were vested.
The Company has recorded deferred compensation of $367,000 for options
granted during the year ended March 31, 1996. This deferred compensation is
amortized ratably over the vesting period of the related options.
In September 1995, the Company adopted a stock option plan for non-employee
members of its Board of Directors pursuant to which 75,000 shares of the
Company's common stock have been reserved for issuance. As of September 30,
1996, 15,000 options were granted and outstanding under the plan.
F-13
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In September 1995, the Company adopted the 1995 Employee Stock Purchase Plan
(the "Purchase Plan"). A total of 200,000 shares of the Company's common stock
has been reserved for issuance under the Purchase Plan. The Purchase Plan
enables eligible employees to purchase common stock at 85% of the lesser of
the fair market value of the Company's common stock on (i) the date of the
participant's entry into a one-year offering period, or (ii) the end of the
applicable six-month purchase segment within such offering period. As of
September 30, 1996, 42,080 shares were issued under this plan.
11. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In conjunction with the initial public offering, all shares of Series A and
B preferred stock were automatically converted into common stock.
Additionally, 281,666 Series B-2 warrants were exercised on a net exercise
basis of 187,776 shares of common stock.
Other supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------- -------------
1994 1995 1996 1995 1996
---- ---- ---- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid during the year for:
Interest................................ $32 $ 16 $ 22 $ 1 $ --
=== ==== ====== ====== ======
Income taxes............................ $92 $702 $1,071 $ 321 $ 874
=== ==== ====== ====== ======
</TABLE>
12. 401(K) SAVINGS PLAN:
The Company adopted a 401(k) plan for employees on April 1, 1994. All
employees who meet certain service requirements are eligible to participate.
Matching contributions are at the discretion of the Company. As of September
30, 1996, the Company had not elected to make any discretionary contributions.
F-14
<PAGE>
LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All amounts are
estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
REGISTRANT
------------
<S> <C>
SEC Registration Fee....................................... $ 26,010
NASD Filing Fee............................................ 9,082
Nasdaq National Market Fee For Additional Shares........... 17,500
Printing................................................... 85,000
Legal Fees and Expenses.................................... 150,000
Accounting Fees and Expenses............................... 60,000
Blue Sky Fees and Expenses................................. 10,000
Custodial Fees............................................. 2,000
Transfer Agent and Registrar Fees.......................... 1,000
Miscellaneous.............................................. 39,408
--------
Total.................................................. $400,000
========
</TABLE>
- --------
The Registrant intends to pay all expenses of registration, issuance and
distribution, excluding underwriter's discounts, commissions and stock
transfer taxes with respect to shares being sold by the Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court to award,
or a corporation's Board of Directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article IV of the Registrant's Restated Articles of
Incorporation (Exhibit 3.1 hereto) and Article VI of the Registrant's Bylaws
(Exhibit 3.2 hereto) provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the California
Corporations Code. In addition, the Registrant has entered into
Indemnification Agreements (Exhibit 10.1 hereto) with its officers and
directors. Reference is also made to Section 9 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, which provides for the indemnification of
officers, directors and controlling persons of the Registrant against certain
liabilities and Section 11 of the Amended and Restated Rights Agreement
(Exhibit 10.5 hereto), which provides for the cross indemnification of certain
of the Company shareholders and the Company, its officers and directors
against certain liabilities under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years prior to the effective date of this Registration
Statement, the Registrant has issued and sold the following unregistered
securities:
(1) Between November 1, 1993 and November 17, 1995, the Registrant issued
and sold an aggregate of 1,095,086 shares of Common Stock to an aggregate of
27 employees and non-employee consultants pursuant to the exercise of stock
options under its 1991 Stock Option Plan for an aggregate cash consideration
of approximately $1,028,210.
(2) In June 1994, the Registrant issued and sold an aggregate of 1,263,333
shares of Series B-1 Preferred Stock to five venture capital funds, a trust
and two individuals, as tenants in common, for aggregate cash consideration of
$3,789,999.
II-1
<PAGE>
(3) In June 1994, the Registrant issued and sold warrants exercisable for an
aggregate of 315,833 shares of Series B-2 Preferred Stock to five venture
capital funds, a trust and two individuals, as tenants in common, at an
exercise price per share of $4.00.
There were no underwriters involved in connection with the transactions set
forth above. The issuances of the securities set forth in this Item 15 were
deemed to be exempt from registration under the Securities Act in reliance
upon Rule 701 promulgated under the Securities Act or pursuant to Section 4(2)
of the Securities Act.
ITEM 16. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1(1) Restated Articles of Incorporation of Registrant.
3.2(2) Bylaws of Registrant.
4.1(2) Specimen Common Stock Certificate of Registrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(2) Form of Indemnification Agreement.
10.2 1991 Stock Option Plan and Form of Stock Option Agreement, as
amended.
10.3(2) Employee Stock Purchase Plan and Form of Subscription Agreement,
as amended.
10.4(2) Director Stock Option Plan.
10.5(2) Amended and Restated Rights Agreement dated as of June 10, 1994 by
and among the Registrant and certain investors.
10.6(2) Watergate Office Lease between Watergate Tower Associates and the
Registrant dated as of August 22, 1994, as amended by Amendment
thereto dated April 1995.
10.7(2) Business Loan Agreement between the Registrant and Silicon Valley
Bank dated as of August 7, 1992, as amended by Loan Modification
Agreement dated as of
September 19, 1995.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in
Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
(b) Financial Statement Schedule (see page S-2).
- --------
(1) Incorporated by reference to the Company's annual report on Form 10-K for
the fiscal year ended March 31, 1996 (Commission File No. 0-26948).
(2) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (No. 33-97674-LA), declared effective on November 16, 1995.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of this prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF EMERYVILLE, STATE OF
CALIFORNIA, ON NOVEMBER 5, 1996.
Scopus Technology, Inc.
/s/ Michele L. Axelson
By: _________________________________
Michele L. Axelson
Senior Vice President and Chief
Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ori Sasson and Michele L. Axelson, and
each of them, his or her true and lawful agent, proxy and attorney-in-fact,
with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all amendments
(including post-effective amendments) to this registration statement together
with all schedules and exhibits thereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, together with all schedules and exhibits thereto, (ii) act on, sign
and file such certificates, instruments, agreements and other documents as may
be necessary or appropriate in connection therewith, (iii) act on and file any
supplement to any prospectus included in this registration statement or any
such amendment or any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and (iv) take any and all
actions which may be necessary or appropriate to be done, as fully for all
intents and purposes as he or she might or could do in person, hereby
approving, ratifying and confirming all that such agent, proxy and attorney-
in-fact or any of his substitutes may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ori Sasson Chairman, Chief Executive November 5, 1996
- ------------------------------------ Officer (Principal
Ori Sasson Executive Officer) and
Director
/s/ Michele L. Axelson Senior Vice President and November 5, 1996
- ------------------------------------ Chief Financial Officer
Michele L. Axelson (Principal Financial and
Accounting Officer)
/s/ J. Michael Cline
- ------------------------------------ Director November 5, 1996
J. Michael Cline
/s/ Christopher R. Gibbons
- ------------------------------------ Director November 5, 1996
Christopher R. Gibbons
/s/ Ronald Abelmann
- ------------------------------------ Director November 5, 1996
Ronald Abelmann
/s/ Max D. Hopper
- ------------------------------------ Director November 5, 1996
Max D. Hopper
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
Scopus Technology, Inc.:
In connection with our audits of the consolidated financial statements of
Scopus Technology, Inc. and Subsidiaries as of March 31, 1995 and 1996, and
for each of the three years in the period ended March 31, 1996, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Oakland, California
April 30, 1996
S-1
<PAGE>
SCOPUS TECHNOLOGY, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for Doubtful Accounts (in thousands):
<TABLE>
<CAPTION>
ADDITIONS
-----------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE AT
BEGINNING AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1994..... -- $196 -- $(46) $150
Year Ended March 31, 1995..... $150 551 -- (352) 349
Year Ended March 31, 1996..... 349 1,072 -- (756) 665
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation
10.2 1991 Stock Option Plan and Form of Stock Option
Agreement, as amended.
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P., Independent
Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 1.1
2,000,000 SHARES
SCOPUS TECHNOLOGY, INC.
COMMON STOCK, $0.001 PAR VALUE PER SHARE
November ___, 1996
<PAGE>
November ___, 1996
Morgan Stanley & Co. Incorporated
Montgomery Securities
UBS Securities Inc.,
Donaldson Lufkin & Jenrette Securities Corporation
as Representatives of the several Underwriters
named in Schedule II hereto
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Scopus Technology, Inc., a California corporation (the "Company"), proposes
to issue and sell to the several Underwriters named in Schedule II hereto (the
"Underwriters"), and certain shareholders of the Company (the "Selling
Shareholders") named in Schedule I hereto severally propose to sell to the
several Underwriters, an aggregate of 2,000,000 shares of the Common Stock,
$0.001 par value per share, of the Company (the "Firm Shares"), of which
1,200,000 shares are to be issued and sold by the Company and 800,000 shares are
to be sold by the Selling Shareholders, each Selling Shareholder selling the
amount set forth opposite such Selling Shareholder's name in Schedule I hereto.
The Selling Shareholders also propose to sell to the several Underwriters
not more than an aggregate of 300,000 additional shares of Common Stock, $0.001
par value per share, of the Company (the "Additional Shares") if and to the
extent that you, as Managers of the offering, shall have determined to exercise,
on behalf of the Underwriters, the right to purchase such shares of Common Stock
granted to the Underwriters in Section 3 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares." The
shares of Common Stock, $0.001 par value per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "Common Stock." The Company and the Selling Shareholders are
hereinafter sometimes collectively referred to as the "Sellers."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of the Shares is hereinafter referred to as the
"Prospectus." If the Company files a
1
<PAGE>
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act for such registration statement to become
effective upon filing with the Commission (the "Rule 462 Registration
Statement"), then any reference to the "Registration Statement" shall be deemed
to refer to both the registration statement referred to above (Commission File
Number 333-___________) and such Rule 462 Registration Statement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
---------------------------------------------
and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Company has filed in a timely manner each document or
report required to be filed by it pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations thereunder
within the twelve (12) month period preceding the date hereof, (ii) each such
document complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations thereunder, (iii) each
part of the Registration Statement, when such part became effective, did not
contain and each such part, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iv) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (v) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph 1(b)
do not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of California, has the
corporate power and authority to own and lease its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business as a foreign corporation under the laws of, and is in good standing as
such, in each jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and the Subsidiary (as defined below), taken as a
whole.
(d) Scopus Technology UK Ltd., an English corporation ("Subsidiary"),
has been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own and lease its property and to conduct its
business as described in the Prospectus and is duly qualified to
2
<PAGE>
transact business as a foreign corporation under the laws of, and is in good
standing as such, in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and the Subsidiary, taken as a whole.
All of the issued and outstanding shares of capital stock of the Subsidiary have
been duly and validly authorized and issued, are fully paid and non-assessable,
and owned directly by the Company, free and clear of all liens, encumbrances,
equities or claims. Except for the Subsidiary, the Company does not own,
directly or indirectly, an interest in any corporation, partnership, business,
trust or other entity required to be set forth in Exhibit 21 to the Registration
Statement.
(e) This Agreement has been duly authorized, executed and delivered by
the Company.
(f) The authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof contained in
the Prospectus.
(g) The shares of Common Stock (including the Shares to be sold by the
Selling Shareholders) outstanding prior to the issuance of the Shares to be sold
by the Company have been duly authorized and are validly issued, fully paid and
non-assessable. All outstanding shares of capital stock, options and other
rights to acquire capital stock of the Company were not issued in contradiction
of any preemptive rights, rights of first refusal or similar rights.
(h) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive rights, rights of first refusal or
similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the Articles of Incorporation or Bylaws of the
Company or any agreement or other instrument binding upon the Company or the
Subsidiary that is material to the Company and the Subsidiary, taken as a whole,
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or the Subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and the Subsidiary, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
3
<PAGE>
(k) There are no legal or governmental proceedings pending or, to the
Company's best knowledge, threatened to which the Company or the Subsidiary is a
party or to which any of the properties of the Company or the Subsidiary is
subject that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 or Rule 462 promulgated under the Securities Act, complied
when so filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(m) The Company is not, and after giving effect to the issuance and
sale of the Shares by the Company will not be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(n) The Company and the Subsidiary (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect on the
Company and the Subsidiary, taken as a whole.
(o) Except as set forth in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company or, except with
respect to rights granted thereunder that have been satisfied or validly waived,
to require the Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(p) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(q) Each of the Company and the Subsidiary has all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus,
4
<PAGE>
except to the extent that the failure to obtain or file such, would not have a
material adverse effect on the Company and the Subsidiary, taken as a whole.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Each of the Company and the Subsidiary owns or possesses all
trademarks, trade names, service marks, service names, copyrights, license
rights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other intellectual property rights, and all patent and patent rights, necessary
to carry on its business in all material respects as described in the Prospectus
and, neither the Company nor the Subsidiary has received any notice of
infringement of or conflict with asserted, unresolved rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of any unfavorable decision, ruling or finding, would result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and the Subsidiary, taken as a
whole.
(t) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company and the
Subsidiary have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business, (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than pursuant to the Company's stock option plan
upon termination of employment of the optionee in accordance with the terms of
such plan and (iii) there has not been any material change in the capital stock,
short-term debt or long-term debt of the Company or the Subsidiary, except in
each case as described in or contemplated by the Prospectus.
(u) The Company and the Subsidiary have good and marketable title in
fee simple to all real property (if applicable) and good and marketable title to
all personal property owned by them which is material to the business of the
Company and the Subsidiary, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and the
Subsidiary. Any real property and buildings held under lease by the Company and
the Subsidiary are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and the
Subsidiary.
5
<PAGE>
(v) No material labor dispute with the employees of the Company or the
Subsidiary exists or is imminent and the Company is not aware of any existing,
threatened or imminent labor disturbance by the employees of any of its
principal suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and the Subsidiary, taken as a
whole.
(w) Each of the Company and the Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the business in which it is engaged.
Neither the Company nor the Subsidiary has been refused any insurance coverage
sought or applied for, and neither the Company nor Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and the Subsidiary, taken as a whole.
(x) Neither the Company nor the Subsidiary is in material violation of
any federal or state law or regulation relating to occupational safety and
health. The Company and the Subsidiary have received all permits, licenses or
other approvals required of them under applicable federal and state occupational
safety and health laws and regulations to conduct their respective businesses,
and the Company and the Subsidiary are in compliance with all terms and
conditions of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, singly or in the aggregate, result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and the Subsidiary, taken as a
whole.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each of
----------------------------------------------------------
the Selling Shareholders, severally and not jointly, represents and warrants to
and agrees with each of the Underwriters, except with respect to Section 2(g)
below as to which only ____________ represents and warrants to and agrees with
each of the Underwriters, that:
(a) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, this Agreement
and the Custody Agreement and Power of Attorney signed by such Selling
Shareholder and The First National Bank of Boston, as Custodian, relating to
the deposit of the Shares to be sold by such Selling Shareholder and the
appointment of certain individuals as such Selling Shareholder's attorneys-in-
fact to the extent set forth therein, relating to the transactions contemplated
hereby and by the Registration Statement (the "Custody Agreement and Power of
Attorney") will not contravene any provision of applicable law, or the
certificate of incorporation or by-laws of such Selling Shareholder (if such
Selling Shareholder is a corporation), or any agreement or
6
<PAGE>
other instrument binding upon such Selling Shareholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by such Selling Shareholder of its obligations under this Agreement
or the Custody Agreement and Power of Attorney of such Selling Shareholder,
except such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(c) Such Selling Shareholder has, and on the Closing Date (as defined
below) and the Option Closing Date (as defined below), as the case may be, will
have, valid title to the Shares to be sold by such Selling Shareholder and has
the legal right and power, and all authorization and approval required by law,
to enter into this Agreement and the Custody Agreement and Power of Attorney and
to sell, transfer and deliver the Shares to be sold by such Selling Shareholder.
(d) The Custody Agreement and Power of Attorney has been duly
authorized, executed and delivered by such Selling Shareholder and is the valid
and binding agreement of such Selling Shareholder.
(e) Delivery of the Shares to be sold by such Selling Shareholder
pursuant to this Agreement will pass title to such Shares free and clear of any
security interests, claims, liens, equities and other encumbrances.
(f) All information furnished in writing by on or behalf of such
Selling Shareholder and relating to such Selling Shareholder for use in the
Registration Statement and Prospectus is, and on the Closing Date and the Option
Closing Date, as the case may be, will be, true, correct and complete, and does
not, and on the Closing Date and the Option Closing Date, as the case may be,
will not, contain any untrue statement of a material fact or omit to state any
material fact necessary to make such information not misleading.
(g) To the best of ____________ knowledge, (i) each part of the
Registration Statement, when such part became effective, did not contain and
each such part, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 2(g) do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon (x) information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein or (y)
information relating to any other Selling Shareholder furnished by or on behalf
of such Selling Shareholder expressly for use therein.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and not
-------------------------------
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the
7
<PAGE>
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from such
Seller at $_______ a share (the "Purchase Price") the number of Firm Shares
(subject to adjustment to eliminate fractional shares as you may determine) that
bears the same proportion to the number of Firm Shares to be sold by such Seller
as the number of Firm Shares set forth in Schedule II hereto opposite the name
of such Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions each Selling Shareholder
agrees to sell to the several Underwriters, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, at the Purchase Price up
to the number of Additional Shares as to which such right has been exercised
(subject to adjustment to eliminate fractional shares as you may determine) that
bears the same proportion to the number of Additional Shares to be sold by such
Selling Shareholder as the number of Additional Shares set forth in Schedule II
hereto opposite the name of such underwriter bears to the total number of
Additional Shares. If you, on behalf of the Underwriters, elect to exercise such
option, you shall so notify the Company in writing not later than 30 days after
the date of this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the Underwriters and the date on which such shares are
to be purchased. Such date may be the same as the Closing Date but not earlier
than the Closing Date nor later than ten business days after the date of such
notice. Additional Shares may be purchased as provided in Section 5 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. If any Additional Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule II hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
Each Seller hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, directly or
indirectly, (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (b) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership of the Common
Stock (whether any such transaction described in clause (a) or (b) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise), otherwise than (x) as a bona fide gift or gifts, provided the donee
or donees thereof agree in writing to be bound by the restrictions contained in
this paragraph or (y) as a distribution to limited partners or stockholders of
such Seller, provided that the distributees thereof agree in writing to be bound
by the restrictions contained in this paragraph. The foregoing sentence shall
not apply to (i) the Shares to be sold hereunder or (ii) the issuance by the
Company or sale by a Selling Shareholder of any shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof as described in the Prospectus.
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The Company has furnished or will furnish to you "lock-up" letters in
form and substance satisfactory to you signed by each of its current executive
officers and directors and each other Selling Shareholder.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that the
------------------------
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at
$______ a share (the "Public Offering Price") and to certain dealers selected by
you at a price that represents a concession not in excess of $_____ a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of $0.10 a share, to any
Underwriter or to certain other dealers.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by each
--------------------
Seller shall be made by certified or official bank check or checks payable to
the order of such Seller in New York Clearing House funds at the office of
Wilson, Sonsini, Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto,
California, 94304-1050, at 7:00 A.M., local time, on November ___, 1996 or at
such other time on the same or such other date, not later than November ___,
1996 as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made by certified or official
bank check or checks payable to the order of such Seller in New York Clearing
House funds at the office of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, 94304-1050, at 7:00 A.M., local time, on the date
specified in the notice described in Section 3 or on such other date, in any
event not later than December ___, 1996 as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
-------------------------------------------
Sellers to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
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(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and the
Subsidiary, taken as a whole, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date. The officer
signing and delivering such certificate may rely upon the best of his knowledge
as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Wilson, Sonsini, Goodrich & Rosati, P.C., counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
California, has the corporate power and authority to own and lease its property
and to conduct its business as described in the Prospectus and is duly qualified
to transact business as a foreign corporation under the corporation laws of, and
is in good standing as such, in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and the Subsidiary,
taken as a whole;
(ii) to such counsel's knowledge, the Company does not have
any significant subsidiaries as defined in Rule 1-02(v) of Regulation S-X;
(iii) the authorized capital stock of the Company conforms in
all material respects as to legal matters to the description thereof contained
in the Prospectus;
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(iv) the shares of Common Stock (including the Shares to be
sold by the Selling Shareholders) outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are validly
issued, fully paid and non-assessable;
(v) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive right, or to such
counsel's knowledge, rights of first refusal or similar rights;
(vi) all outstanding shares of capital stock, options and
other rights to acquire capital stock of the Company were not issued in
contradiction of any preemptive rights, or, to such counsel's knowledge, rights
of first refusal or similar rights;
(vii) no shares of Common Stock are required pursuant to any
agreement or other right to be registered under the Registration Statement, nor
does any person or entity have any right to cause any shares of Common Stock to
be registered under the Registration Statement, which rights have not been
satisfied or validly waived;
(viii) this Agreement has been duly authorized, executed
and delivered by the Company;
(ix) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the Articles of Incorporation or
Bylaws of the Company or, to such counsel's knowledge, any agreement or other
instrument binding upon the Company or the Subsidiary that is filed as an
exhibit to the Registration Statement or any document incorporated by reference
therein, to such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or the
Subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except such
as have been obtained or as may be required by the securities or Blue Sky laws
of the various states in connection with the offer and sale of the Shares;
(x) the statements (A) in the Prospectus under the captions
"Risk Factors--Shares Eligible for Future Sale," "--Effect of Antitakeover
Provisions," "Management--Limitation of Liability and Indemnification Matters,"
"Shares Eligible for Future Sale," "Description of Capital Stock" and
"Underwriters" and (B) in the Registration Statement in Items 24 and 26, in each
case insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(xi) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or the Subsidiary is a
party or to which any of the properties of the Company or the Subsidiary is
subject that are required to be
11
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described in the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not described or
filed as required;
(xii) the Company is not, and after giving effect to the
issuance and sale of the Shares by the Company will not be, an "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended;
(xiii) each document, if any, filed pursuant to the Exchange
Act and incorporated by reference in the Registration Statement and the
Prospectus (except for financial statements and schedules and other financial
data derived therefrom included therein as to which such counsel need not
express any opinion) complied when so filed as to form in all material respects
with the Exchange Act, and the applicable rules and regulations of the
Commission thereunder;
(xiv) the Registration Statement and Prospectus (except for
financial statements and schedules and other financial and statistical data
derived therefrom and stated therein, as to which such counsel need not express
any opinion) comply as to form in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel that leads them to believe that the
Registration Statement (except as to the financial statements and schedules and
other financial and statistical data derived therefrom and stated therein, as to
which such counsel need not express any opinion or belief), at the effective
date of the Registration Statement, contained any untrue statement of a material
fact required to be stated therein or necessary to make a statement therein not
misleading, or that the Prospectus (except as to the financial statements and
schedules and other financial and statistical data derived therefrom and stated
therein, as to which such counsel need not express any opinion or belief), as of
its date or at the Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Wilson, Sonsini, Goodrich & Rosati, P.C., counsel for the Selling
Shareholders, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders;
(ii) the execution and delivery by each Selling Shareholder
of, and the performance by such Selling Shareholder of its obligations under,
this Agreement and the Custody Agreement and Power of Attorney of such Selling
Shareholder will not contravene any
12
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provision of applicable law, or the certificates of incorporation or by-laws of
such Selling Shareholder (if such Selling Shareholder is a corporation), or, to
such counsel's knowledge, any agreement or other instrument binding upon such
Selling Shareholder or, to such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by such Selling Shareholder of its obligations under this Agreement
and the Custody Agreement and Power of Attorney of such Selling Shareholder,
except such as have been obtained or as may be required by the securities or
Blue Sky laws of the various states in connection with offer and sale of the
Shares;
(iii) each Selling Shareholder has the legal right and power,
and all authorization and approval required by law, to enter into this Agreement
and the Custody Agreement and Power of Attorney of such Selling Shareholder and
to sell, transfer and deliver the Shares to be sold by such Selling Shareholder
hereunder;
(iv) the Custody Agreement and Power of Attorney of each
Selling Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is the valid and binding agreement of such Selling
Shareholder; and
(v) upon delivery of and payment for the Shares to be sold by
the Selling Shareholders as provided in this Agreement, the Underwriters will
have marketable title to such Shares, free and clear of any security interests,
claims, liens, equities and other encumbrances, assuming for the purposes of
this opinion that the Underwriters are purchasing such Shares in good faith and
without notice of any adverse claim or defect in the title of any such Selling
Shareholder to the Shares being purchased from such Selling Shareholder.
(e) The Underwriters shall have received on the Closing Date an
opinion of Morrison & Foerster LLP, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (v), (viii), (x)
(but only as to the statements in the Prospectus under "Description of Capital
Stock" and "Underwriters") and (xiv) of paragraph (c) above and the last
subparagraph of paragraph (c) above.
With respect to the last subparagraph of paragraph (c) above, Wilson,
Sonsini, Goodrich & Rosati, P.C., may, and with respect to the opinion of
counsel for the Underwriters pursuant to paragraph (e) above as it relates to
the last subparagraph of paragraph (c) above, Morrison & Foerster LLP may, state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (other than documents incorporated by reference) and review
and discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to paragraph (d) above, Wilson,
Sonsini, Goodrich & Rosati, P.C., may rely upon an opinion or opinions of
counsel for any Selling Shareholders and, to the extent such counsel deems
appropriate, as to factual matters, upon the representations of each Selling
Shareholder contained herein and in the Custody Agreement, the Lock-up
Agreement, and Power of Attorney of such Selling Shareholder and in other
documents and instruments; provided that
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(A) each such counsel for the Selling Shareholders is reasonably satisfactory to
your counsel, (B) a copy of each opinion so relied upon is delivered to you and
is in form and substance reasonably satisfactory to your counsel, (C) copies of
such Custody Agreements and Powers of Attorney and of any such other documents
and instruments shall be delivered to you and shall be in form and substance
reasonably satisfactory to your counsel and (D) Wilson, Sonsini, Goodrich &
Rosati, P.C., shall state in their opinion that they have no reason to believe
that you are not justified in relying on each such other opinion, Custody
Agreement and Power of Attorney or other document or instrument.
The opinions of Wilson, Sonsini, Goodrich & Rosati described in
paragraphs (c) and (d) above (and any opinions of counsel for any Selling
Shareholder referred to in the immediately preceding paragraph) shall be
rendered to the Underwriters at the request of the Company or one or more of the
Selling Shareholders, as the case may be, and shall so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters, from
Coopers & Lybrand LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in, or incorporated by reference into, the Registration
Statement and the Prospectus; provided, that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.
(g) The lock-up agreements, each substantially in the form of
Exhibit A hereto, between you and the current executive officers and directors
of the Company and each other Selling Shareholder relating to sales and certain
other dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force and effect
on the Closing Date.
(h) The Company shall have complied with Section 7(a) hereof
with respect to the furnishing of Prospectuses on the business day next
succeeding the date of this Agreement.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares, other matters related to the issuance of the Additional Shares and
opinions of counsel in form and substance satisfactory to counsel for the
Underwriters.
7. COVENANTS OF THE COMPANY. In further consideration of the agreements
------------------------
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish you, without charge, four (4) signed copies of the
Registration Statement (including exhibits thereto and documents incorporated by
reference therein) and to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto but including documents
incorporated by reference therein) and, during the period
14
<PAGE>
mentioned in paragraph (c) below, as many copies of the Prospectus and documents
incorporated by reference therein, and any supplements and amendments thereto or
to the Registration Statement as you may reasonably request. The terms
"supplement" and "amendment" or "amend" as used in this Agreement shall include
all documents subsequently filed by the Company with the Commission pursuant to
the Exchange Act, that are deemed to be incorporated by reference in the
Prospectus. In the case of the Prospectus, to furnish copies of the Prospectus
in New York City, prior to 5:00 p.m., on the business day following the date of
this Agreement, in such quantities as you reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the Shares as in the opinion of counsel for the Underwriters the Prospectus
is required by law to be delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided, however, that the Company shall not be required to register
or qualify as a foreign corporation or to take any action which would subject it
to the service of process in any jurisdiction where it is not now so subject.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-month
period ending December 31, 1997 that satisfies the provisions of Section 11(a)
of the Securities Act and the rules and regulations of the Commission
thereunder.
(f) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in
15
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connection with the registration and delivery of the Shares under the Securities
Act and all other fees or expenses in connection with the preparation and filing
of the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 7(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and disbursements
of counsel to the Underwriters incurred in connection with the review and
qualification of the offering by the National Association of Securities Dealers,
Inc., (v) all costs and expenses incident to listing the Shares on the Nasdaq
National Market, (vi) the cost of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent, registrar or depository,
(viii) the costs and expenses of the Company relating to investor presentations
on any "road show" undertaken in connection with the marketing of the offering,
including, without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expense of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 9 and the last paragraph of Section 11, the
Underwriters will pay all of their costs and expenses, including fees and
disbursements of their counsel, stock transfer taxes payable on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
8. EXPENSES OF SELLING SHAREHOLDERS. Each Selling Shareholder, severally
--------------------------------
and not jointly, agrees to pay or cause to be paid (i) all taxes, if any, on the
transfer and sale of the Shares being sold by such Selling Shareholder and (ii)
such Selling Shareholder's pro rata share (determined by dividing the number of
Shares sold by such Selling Shareholder by the total number of Shares sold by
all Sellers) of all costs and expenses incident to the performance of the
obligations of the Selling Shareholders and the Company under this Agreement,
including, but not limited to, all expenses incident to the delivery of the
Shares, the fees and expenses of counsel and accountants for the Selling
Shareholders and the Company, the costs and expenses incident to the
preparation, printing and filing of the Registration Statement (including all
exhibits thereto) and the Prospectus and any amendments or supplements thereto,
the expenses of qualifying the Shares under the securities or Blue Sky laws of
various jurisdictions, all fees payable in connection with any review of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
and the cost of furnishing to the Underwriters the required copies of the
Registration Statement and Prospectus and any amendments or supplements thereto.
16
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9. INDEMNITY AND CONTRIBUTION.
--------------------------
(a) The Company and, severally and not jointly, each Selling
Shareholder, agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Underwriter
or any such controlling person in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (but, with respect to each Selling Shareholder other than
___________, only with reference to information relating to such Selling
Shareholder furnished in writing by or on behalf of such Selling Shareholder
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto), except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter, or any person controlling such
Underwriter, from whom the person asserting any such losses, claims, damages, or
liabilities purchased Shares which are the subject thereof, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplement) would have cured the
defect given rise to such loss, claim, damage or liability, unless the failure
to send or give the Prospectus to such person is the result of noncompliance by
the Company with Section 7(a) or 7(c). Notwithstanding the foregoing provisions
of this Section 9(a), each Underwriter agrees with ___________ that any claim
for indemnity pursuant to this Section 9(a) and arising out of information other
than that relating to ___________ that is furnished in writing by or on behalf
of _________ expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto, shall first
be satisfied by the Company and shall only then be satisfied by __________ if,
and to the extent that, such claim for indemnity has not been satisfied in full
by the Company. The foregoing limitation shall not prohibit the Underwriters
from proceeding concurrently against the Company and ______________ but shall
only prohibit the Underwriters from recovering from _____________ until the
Underwriters have requested indemnification in writing from the Company and the
Company shall have failed for a period of thirty (30) days after such written
request to provide such indemnification.
(b) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement
17
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and each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with reference
to information relating to such Selling Shareholder furnished in writing by or
on behalf of such Selling Shareholder expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholders, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a), (b) or (c) of this Section 9, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
18
<PAGE>
jurisdiction, be liable for (i) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Underwriters and all persons, if
any, who control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company within the meaning of either such Section and
(iii) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Selling Shareholders and all persons, if any, who control
any Selling Shareholder within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred. In the case of
any such separate firm for the Underwriters and such control persons of
Underwriters, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate firm for
the Selling Shareholders and such controlling persons of Selling Shareholders,
such firm shall be designated in writing by the persons named as attorneys-in-
fact for the Selling Shareholders under the Powers of Attorney referenced in
Section 2(b) hereof. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(e) To the extent the indemnification provided for in paragraph (a),
(b) or (c) of this Section is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as
19
<PAGE>
well as any other relevant equitable considerations. The relative benefits
received by the Sellers on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by each Seller and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Sellers on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Sellers or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters respective obligations to
contribute pursuant to this Section 9 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to Section 9(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (e) of this Section. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (e) of this Section 9
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 9 and the representations, warranties and other statements of the
Company and the Selling Shareholders contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter, any Selling Shareholder or any person
controlling any Selling Shareholder, or the Company, its officers or directors
or any person controlling the Company and (iii) acceptance of and payment for
any of the Shares.
(h) The liability of each Selling Shareholder under such Selling
Shareholder's representations and warranties contained in Section 2 hereof and
under the
20
<PAGE>
provisions of this Section 9 shall be limited to an amount equal to the Purchase
Price of the Shares to be sold by such Selling Shareholder to the Underwriters
hereunder.
10. TERMINATION. This Agreement shall be subject to termination by notice
-----------
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
--------------------------------------
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule II bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 11 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you, the Company and
the Selling Shareholders for the purchase of such Firm Shares are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Shareholders. In any such case either you or the relevant Sellers shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. If, on the Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such
21
<PAGE>
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out of pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
--------------
accordance with the internal laws of the State of New York.
22
<PAGE>
14. HEADINGS. The headings of the sections of this Agreement have been
--------
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
SCOPUS TECHNOLOGY, INC.
By
--------------------------------
Name:
Title:
The Selling Shareholders named in Schedule I
hereto, acting severally
By
-------------------------------
Attorney-in-Fact
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Montgomery Securities
UBS Securities Inc.
Donaldson Lufkin & Jenrette
Securities Corporation
Acting severally on behalf
of themselves and the
several Underwriters named
herein.
By Morgan Stanley & Co. Incorporated
By
-------------------------
Name:
Title:
23
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Additional
Selling Shareholder to Be Sold Shares to Be Sold
- ------------------- ---------- -----------------
<S> <C> <C>
----------- ----------
Total
--------------- =========== ==========
</TABLE>
24
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
- ----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated
Montgomery Securities
UBS Securities Inc.
Donaldson Lufkin & Jenrette Securities Corporation
__________
Total ==========
</TABLE>
25
<PAGE>
EXHIBIT A
---------
[FORM OF LOCK-UP AGREEMENT]
---------------------------
_________________, 1996
Morgan Stanley & Co. Incorporated
Montgomery Securities
UBS Securities, Inc.
Donaldson Lufkin & Jenrette Securities Corporation
As Representatives of the several Underwriters
c/o Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, NY 10020
Dear Sirs:
The undersigned understands that you, as Representatives of the several
Underwriters, propose to enter into an Underwriting Agreement with Scopus
Technology, Inc., a California corporation (the "Company") providing for the
public offering (the "Public Offering") by the several Underwriters, including
yourselves, of shares (the "Shares") of the Common Stock, no par value, of the
Company (the "Common Stock").
In consideration of the Underwriters' agreement to purchase and make the
Public Offering of the Shares, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, it will not, during the period ending 90 days after the
date of the Prospectus, (1) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are now owned by the undersigned or are hereafter acquired), or
(2) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to the Shares to be sold pursuant to the
Public Offering. In addition, the undersigned agrees that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 90 days after the date of
the Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
26
<PAGE>
The undersigned confirms that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's legal representatives,
successors and assigns. The undersigned agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of securities of the Company held by the undersigned except in
compliance with the terms and conditions of this Agreement.
Very truly yours,
---------------------------------------------
(Name)
---------------------------------------------
(Address)
Accepted as of the date
first set forth above:
Morgan Stanley & Co. Incorporated
Montgomery Securities
UBS Securities Inc.
Donaldson Lufkin & Jenrette Securities Corporation
As Representatives of the several Underwriters
By: Morgan Stanley & Co. Incorporated
By:
----------------------------------
27
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
November 4, 1996
Scopus Technology, Inc.
1900 Powell Street, Suite 900
Emeryville, CA 94608
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 to be filed by you
with the Securities and Exchange Commission (the "Commission") on or about
November 5, 1996 (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of 2,300,000 shares
of Common Stock, par value $0.001 per share, of Scopus Technology, Inc., a
California corporation (the "Shares"), 1,200,000 shares of which are authorized
but heretofore unissued and up to 1,100,000 shares of which will be sold by
certain selling shareholders (including 300,000 shares subject to an
over-allotment option to be granted to the underwriters). The Shares are to be
sold to the underwriters for resale to the public as described in the
Registration Statement and pursuant to the Underwriting Agreement filed as an
exhibit thereto. As your counsel, we have examined the proceedings proposed to
be taken in connection with said sale of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the sale of the
Shares, the Shares, when issued and/or sold in the manner described in the
Registration Statement and the Underwriting Agreement, will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT 10.2
SCOPUS TECHNOLOGY, INC.
1991 STOCK OPTION PLAN
(AS AMENDED MAY 1996)
1. Purposes of the Plan. The purposes of this 1991 Stock Option Plan are
--------------------
to attract and retain qualified personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries, and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of Directors
---------
in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Scopus Technology, Inc., a California corporation.
-------
(g) "Consultant" means any person, including an advisor, who is engaged
----------
by the Company or any Parent or Subsidiary to render services and is compensated
for such services. The term Consultant shall not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the absence
----------------------------------------------
of any interruption or termination of the Optionee's relationship as an Employee
or Consultant with the Company or any Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of (i)
sick leave taken by an Employee; (ii) military leave taken by an Employee (iii)
any other leave of absence approved by the Administrator; provided in any such
--------
case that such leave is for a period of not more than ninety (90) days unless
(A) in the case of termination of employment, reemployment upon the expiration
of such leave is guaranteed by contract or statute, or (B) otherwise provided
pursuant to Company policy adopted from time to
<PAGE>
time; or (iv) in the case of transfers between locations of the Company or
between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sale
price for such stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
-----------------------
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not on
the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer, but selling prices are not reported, its Fair Market Value
shall be the mean between the closing bid and asked prices for the Common Stock
as reported in The Wall Street Journal or such other source as the Administrator
-----------------------
deems reliable, or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option not intended to qualify as
----------------------
an Incentive Stock Option.
(m) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as a Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
------
(o) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(p) "Optionee" means an Employee or Consultant who receives an Option.
--------
(q) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
-2-
<PAGE>
(r) "Plan" means this Scopus Technology, Inc. 1991 Stock Option Plan.
----
(s) "Restricted Stock" means Shares acquired pursuant to a grant of
----------------
Stock Purchase Rights under Section II of the Plan.
(t) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be placed under
option and sold under the Plan is 3,700,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided , however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors,
officers who are not directors, and Employees who are neither directors nor
officers.
(ii) Administration With Respect to Directors and Officers Subject
-------------------------------------------------------------
to Section 16(b). With respect to Option or Stock Purchase Right grants made to
- ----------------
Employees who are also officers or directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue
-3-
<PAGE>
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Persons. With respect
to Option or Stock Purchase Right grants made to Employees or Consultants who
are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted to satisfy Applicable Laws. Once appointed, such
committee shall serve in its designated capacity until otherwise directed by the
Board. The Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan,
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the price per Share and any restriction or limitation regarding any
Option or other award and the Shares relating thereto, based in each case on
such factors as the Administrator shall determine, in Its sole discretion),
-4-
<PAGE>
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option shall have declined since the date the Option was granted; and
(x) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options and Stock Purchase Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options. No
option shall be void or voidable solely for the reason that the Option is not
expressly designated in the written option agreement as an Incentive Stock
Option or Nonstatutory Stock Option.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
-5-
<PAGE>
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 250,000 Shares.
(ii) In connection with his or her initial employment, an Employee
may be granted Options and Stock Purchase Rights to purchase up to an additional
250,000 Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iv) If an Option or Stock Purchase Right is cancelled in the same
fiscal year of the Company in which it was granted (other than in connection
with a transaction described in Section 12), the cancelled Option or Stock
Purchase Right will be counted against the limits set forth in subsections (i)
and (ii) above. For this purpose, if the exercise price of an Option or Stock
Purchase Right is reduced, the transaction will be treated as a cancellation of
the Option or Stock Purchase Right and the grant of a new Option or Stock
Purchase Right.
(e) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
-6-
<PAGE>
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
Section 8(a)(i)(A), the per Share exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator at the time of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds required to pay the
exercise price, (6) any combination of the foregoing methods of payment or (7)
such other consideration and method of payment for the issuance of Shares as may
be permitted under applicable laws. In making its determination as to the type
of consideration to accept, the Administrator shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise: Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder
-7-
<PAGE>
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
----------------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three (3) months following the Optionee's termination. In the
case of an Incentive Stock Option, such period of time for exercise shall not
exceed three (3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise the Optionee's entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
With respect to the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, the Optionee's
Continuous Status as an Employee or Consultant shall not be deemed to have
terminated solely as a result of such change in status. However, in the event of
an Optionee's change in status from Employee to Consultant, any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option
three months and one day following such change of status.
(c) Disability of Optionee. Notwithstanding the provisions of Section
- ----------------------
9(b) above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his disability, Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified,
the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the
-8-
<PAGE>
Option by bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
----------
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
------------------
in addition to, or in tandem with other awards granted under the Plan or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid, and the time within which such person must accept such
offer, which shall in no event exceed sixty (60) days from the date upon which
the Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock purchase agreement in
the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the
-----------------
Restricted Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at such rate as the Committee may determine.
(c) Other Provisions. The restricted stock purchase agreements used in
----------------
connection with the Plan need not be the same as one another, and all such
agreements shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion.
-9-
<PAGE>
(d) Rights as a Shareholder. Once a Stock Purchase Right is exercised,
-----------------------
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
------------------------------------------------------------------------
Sale.
- ----
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, to the extent that an Option or Stock Purchase
Right has not been previously exercised, it will terminate immediately prior to
the consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option or Stock Purchase
Right shall terminate as of a date fixed by the Board and give each Optionee the
right to exercise his or her Option or Stock Purchase Right as to all or any
part of the Optioned Stock, including Shares as to which the Option or Stock
Purchase Right would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
--------------------
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or stock purchase
right, the Optionee shall have the right to exercise the Option or Stock
Purchase Right as to all of the Optioned Stock, including Shares as to which it
would not otherwise be
-10-
<PAGE>
exercisable. If an Option or Stock Purchase Right is exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option or Stock Purchase Right
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Time of Granting Options or Stock Purchase Rights. The date of grant of an
-------------------------------------------------
Option or Stock Purchase Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Stock Purchase
Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant .
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made without his consent. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with
Section 422 of the Code (or any other applicable law or regulation, including
the requirements of the NASD or an established stock exchange), the Company
shall obtain shareholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
-11-
<PAGE>
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
----------------------------------
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, the requirements of any stock exchange upon which the
Shares may then be listed and any rule under Part 207 of Title 124 of the Code
of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve
Board, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan, will at
---------------------
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to approval
--------------------
by the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
degree and manner required under applicable state and federal law.
-12-
<PAGE>
SCOPUS TECHNOLOGY, INC.
STOCK OPTION AGREEMENT TERMS AND CONDITIONS
1. Grant of Option. Scopus Technology, Inc., a California corporation (the
---------------
"Company"), has granted to the Optionee (the "Optionee") named in the Notice
portion of this Stock Option Agreement (the "Notice of Grant"), an option (the
"Option") to purchase a total number of shares of Common Stock (the "Shares")
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price") subject to the terms, definitions and
provisions of the Scopus Technology, Inc. 1991 Stock Option Plan (the "Plan"),
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this Option.
If designated as an Incentive Stock Option in the Notice of Grant, this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term in
------------------
accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option may not be exercised for a fraction of a share.
(b) In the event of Optionee's death, disability or other termination
of Optionee's consulting relationship or Continuous Status as an Employee, the
exercisability of the Option is governed by Section 9 of the Plan, subject to
the limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by delivery of
------------------
an Exercise Notice and Stock Purchase Agreement (the "Purchase Agreement") in
the form attached as Exhibit A, which shall state the number of Shares in
---------
respect of which the Option is being exercised, and such other representations
and agreements as to the holder's investment intent with respect to such shares
of Common Stock as may be required by the Company pursuant to the provisions of
the Plan. Such Purchase Agreement shall be signed by the Optionee and, if the
Optionee is married, the Optionee's spouse, and shall be delivered in person or
by certified mail to the Secretary of the Company. The Purchase Agreement shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such fully executed Purchase
Agreement accompanied by the Exercise Price.
1
<PAGE>
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by cash, check
-----------------
or a combination thereof.
4. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(i) Exercise of Incentive Stock Option. If this Option qualifies as an
----------------------------------
Incentive Stock Option ("ISO"), there will be no regular federal income tax
liability or California income tax liability upon the exercise of the Option,
although the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(ii) Exercise of Nonqualified Stock Option ("NSO"). If this Option does
---------------------------------------------
not qualify as an ISO, there may be a regular federal income tax liability and a
state income tax liability upon the exercise of the Option. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the Shares
on the date of exercise over the Exercise Price. If Optionee is an employee,
the Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and state income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and state income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price.
2
<PAGE>
(iv) Notice of Disqualifying Disposition of ISO Shares. If the Option
------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after transfer of such Shares to the Optionee upon exercise of the ISO, the
Optionee shall immediately notify the Company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax withholding by the
Company on the compensation income recognized by the Optionee from the early
disposition by payment in cash or out of the current earnings paid to the
Optionee.
BY ACCEPTING THIS OPTION GRANT, OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING
CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE
COMPANY'S 1991 STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE,
SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT
OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY
AT ANY TIME, WITH OR WITHOUT CAUSE.
3
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Scopus Technology, UK Ltd.
Company Incorporated under the laws of England.
2. Scopus Technology Canada, Inc.
Company Incorporated under the laws of Canada.
3. Scopus Technology France S.A.R.L.
Company Incorporated under the laws of France.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated April 30, 1996, on our audits of the financial statements of
Scopus Technology, Inc. and subsidiaries and of our report dated April 30,
1996, on our audit of the financial statement schedule of the Company. We also
consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
November 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,411
<SECURITIES> 10,701
<RECEIVABLES> 12,753
<ALLOWANCES> 1,300
<INVENTORY> 0
<CURRENT-ASSETS> 41,429
<PP&E> 7,694
<DEPRECIATION> 830
<TOTAL-ASSETS> 48,342
<CURRENT-LIABILITIES> 10,882
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 37,448
<TOTAL-LIABILITY-AND-EQUITY> 48,342
<SALES> 23,804
<TOTAL-REVENUES> 23,804
<CGS> 5,017
<TOTAL-COSTS> 20,630
<OTHER-EXPENSES> 576
<LOSS-PROVISION> 456
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,750
<INCOME-TAX> 1,401
<INCOME-CONTINUING> 2,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,349
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
