-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GyCodqRAvh+fvOrYZ2fveFDSPhG3ZyGaepiQ5SRJSHjYjqJz0Ux4zMWCHAV07xqh 8VuPRViYsAA0nF3ldLa+xA== 0001012870-97-002213.txt : 19971114 0001012870-97-002213.hdr.sgml : 19971114 ACCESSION NUMBER: 0001012870-97-002213 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIEBEL SYSTEMS INC CENTRAL INDEX KEY: 0001006835 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943187233 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20725 FILM NUMBER: 97713177 BUSINESS ADDRESS: STREET 1: 1885 SOUTH GRANT STREET CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 4152955000 MAIL ADDRESS: STREET 1: 1885 SOUTH GRANT STREET CITY: SAN MATEO STATE: CA ZIP: 94402 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission File Number: 0-20725 SIEBEL SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-3187233 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1855 SOUTH GRANT STREET SAN MATEO, CA 94402 (Address of principal executive offices, including zip code) (650) 295-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of the registrant's common stock, par value $.001 per share, as of November 3, 1997, was 34,580,137. SIEBEL SYSTEMS, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 TABLE OF CONTENTS
Part I. Financial Information Page ---- Item 1. Financial Statements a) Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996.................................... 3 b) Consolidated Statements of Operations for the three and nine months ended September 30, 1997 and 1996................... 4 c) Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996............................. 5 d) Notes to Consolidated Financial Statements........................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 8 Part II. Other Information Item 1. Legal Proceedings................................................................. 15 Item 2. Changes in Securities and Use of Proceeds......................................... 15 Item 6. Exhibits and Reports on Form 8-K.................................................. 16 Signature......................................................................................... 17
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements
SIEBEL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) September 30, December 31, 1997 1996 ---- ---- Assets ------ (unaudited) Current assets: Cash and cash equivalents $ 22,631 $22,671 Short-term investments 53,362 49,716 Accounts receivable, net 31,330 12,855 Deferred income taxes 1,067 1,067 Prepaids and other 5,676 4,258 -------- ------- Total current assets 114,066 90,567 Property and equipment, net 10,701 8,310 Other assets 1,103 624 -------- ------- Total assets $125,870 $99,501 ======== ======= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 1,638 $ 3,107 Accrued expenses 17,831 6,768 Income taxes payable 1,050 2,018 Deferred revenue 8,200 6,212 -------- ------- Total current liabilit1es 28,719 18,105 Deferred income taxes 205 205 -------- ------- Total liabilities 28,924 18,310 Stockholders' equity: Common stock; $.001 par value; 100,000 shares authorized; 34,502 and 33,604 shares issued and outstanding, respectively 35 34 Additional paid-in-capital 80,081 77,359 Notes receivable from stockholders (406) (508) Deferred compensation (625) (1,035) Retained earnings 17,861 5,341 -------- ------- Total stockholders' equity 96,946 81,191 -------- ------- Total liabilities and stockholders' equity $125,870 $99,501 ======== =======
See accompanying notes to consolidated financial statements. 3
SIEBEL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data; unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------ ------------ 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Software $27,969 $10,235 $65,365 $21,373 Maintenance, consulting and other 4,648 936 11,251 2,053 ------- ------- ------- ------- Total revenues 32,617 11,171 76,616 23,426 Cost of revenues: Software 723 20 1,166 56 Maintenance, consulting and other 1,666 525 4,877 1,290 ------- ------- ------- ------- Total cost of revenues 2,389 545 6,043 1,346 ------- ------- ------- ------- Gross margin 30,228 10,626 70,573 22,080 Operating expenses: Product development 3,352 1,685 8,774 3,836 Sales and marketing 15,950 5,443 36,778 12,049 General and administrative 2,456 1,395 6,930 2,823 ------- ------- ------- ------- Total operating expenses 21,758 8,523 52,482 18,708 ------- ------- ------- ------- Operating income 8,470 2,103 18,091 3,372 Other income, net 726 442 2,103 671 ------- ------- ------- ------- Income before income taxes 9,196 2,545 20,194 4,043 Income tax expense 3,494 952 7,674 1,551 ------- ------- ------- ------- Net income $ 5,702 $ 1,593 $12,520 $ 2,492 ======= ======= ======= ======= Net income per share $ 0.14 $ 0.04 $ 0.31 $ 0.06 ======= ======= ======= ======= Shares used in net income per share computation 40,702 39,982 39,820 38,920 ======= ======= ======= =======
Note: All share and per share amounts for the periods ended September 30, 1996 have been restated to reflect a two-for-one stock split (effected in the form of a stock dividend) which was effective December 19, 1996. See accompanying notes to consolidated financial statements 4
SIEBEL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Nine Months Ended September 30, ------------ 1997 1996 ---- ---- Cash flows from operating activities: Net income $ 12,520 $ 2,492 Adjustments to reconcile net income to net cash provided by operating activities: Compensation related to stock options 155 171 Depreciation and amortization 2,733 624 Loss on disposal of property and equipment 297 155 Provision for doubtful accounts 383 112 Software licenses exchanged for equipment and prepaid assets - (1,156) Changes in operating assets and liabilities: Accounts receivable (18,858) (1,551) Prepaids and other (1,418) (3,194) Accounts payable (1,469) 1,591 Accrued expenses 11,063 4,862 Income taxes payable (193) 222 Deferred revenue 1,988 1,499 --------- --------- Net cash provided by operating activities 7,201 5,827 --------- --------- Cash flows from investing activities: Purchases of property and equipment (5,421) (4,638) Purchases of short-term investments (27,989) (25,210) Maturities of short-term investments 24,343 - Other assets (479) (363) --------- --------- Net cash used in investing activities (9,546) (30,211) --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock 2,203 63,212 Proceeds from issuance of preferred stock - 1,532 Issuance of stockholder notes - (507) Repayment of stockholder notes 102 12 --------- --------- Net cash provided by financing activities 2,305 64,249 --------- --------- Change in cash and cash equivalents (40) 39,865 Cash and cash equivalents, beginning of period 22,671 11,391 --------- --------- Cash and cash equivalents, end of period $ 22,631 $ 51,256 ========= ========= Supplemental disclosure of cash flows information: Cash paid for income taxes $ 7,867 $ 1,280 ========= ========= Noncash investing and financing activities: Conversion of preferred stock into common stock $ - $ 10 ========= ========= Tax benefit from exercise of stock options $ 775 $ - ========= ========= Exercise of common stock options in exchange for stockholder notes receivable $ - $ 507 ========= =========
See accompanying notes to consolidated financial statements 5 SIEBEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared on substantially the same basis as the audited consolidated financial statements, and in the opinion of management include all adjustments, consisting only of normal recurring adjustments, necessary for their fair presentation. The interim results presented are not necessarily indicative of results for any subsequent quarter or for the year ending December 31, 1997. For information as to the significant accounting policies followed by the Company and other financial and operating information, see the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 1997 (the "Form 10-K"). These consolidated financial statements should be read in conjunction with the consolidated financial statements included in that Annual Report. The Financial Accounting Standards Board recently issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." These new accounting standards are not expected to have a material effect on the Company's consolidated financial statements. 2. NET INCOME PER SHARE Net income per share is computed based on the weighted average number of common and preferred (on an "as if converted" basis) shares outstanding and is adjusted for shares issuable upon the exercise of stock options (unless antidilutive) using the treasury stock method. The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 requires the presentation of basic earnings per share ("EPS") and, for companies with potentially dilutive securities, such as options, diluted EPS. SFAS No. 128 is effective for annual and interim periods ending after December 15, 1997. Had SFAS No. 128 been effective for the quarter ended September 30, 1997, basic EPS and diluted EPS would have been $0.17 and $0.14 per share, respectively. 3. CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Short-term investments generally consist of highly liquid municipal securities with original maturities in excess of 90 days. The Company has classified its investments in certain debt and equity securities as "available for sale." Such investments are carried at fair value, with gross unrealized gains and losses reported as a separate component of stockholders' equity. As of September 30, 1997, gross unrealized gains and losses have not been material.
September 30, December 31, (In thousands) 1997 1996 - ----------------------------------------------------------------------------- (unaudited) Certificates of deposit $ - $ 1,325 Municipal securities 53,362 48,391 - ------------------------------------------------------------------------------ $53,362 $49,716 - ------------------------------------------------------------------------------
6 4. SUBSEQUENT EVENTS In October 1997, the Company purchased privately held InterActive WorkPlace, Inc. ("Interactive"), a developer of intranet-based business intelligence software technology. The transaction is valued at approximately $15 million and will be accounted for as a purchase. The Company expects to record a substantial portion of the purchase price as a charge for acquired in-process technology in the fourth quarter of 1997. Under the terms of the agreement, InterActive's securityholders received or will receive up to approximately 428,000 shares of the Company's common stock in exchange for all outstanding shares in Interactive. Additionally, Interactive optionees will receive options to purchase an aggregate of approximately 32,000 shares of common stock in exchange for their options to purchase Interactive common stock. In November 1997, the Company purchased privately held Nomadic Systems, Inc. ("Nomadic"), a provider of innovative business solutions to pharmaceutical sales forces. The transaction is valued at approximately $11 million and will be accounted for as a purchase. The Company expects to record a substantial portion of the purchase price as a charge for acquired in-process technology in the fourth quarter of 1997. Under the terms of the agreement, Nomadic's securityholders received approximately 300,000 shares of the Company's common stock in exchange for all outstanding shares of Nomadic. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN AND UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--RISK FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K. ANY SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE SUCH STATEMENTS ARE MADE AND THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO THESE FORWARD-LOOKING STATEMENTS. OVERVIEW Siebel Systems, Inc. ("Siebel" or the "Company") is the global market leader in enterprise-class sales, marketing, and customer service information systems for global organizations focused on increasing sales and service effectiveness in field sales, service organizations, telesales, telemarketing, call centers, and third-party resellers. The Company designs, develops, markets, and supports Siebel Enterprise Applications, a leading Internet-enabled, object oriented client/server application software product family designed to meet the sales, marketing and customer service information system requirements of even the largest multi-national organizations. The Company currently expects that license revenues from Siebel Enterprise Applications will continue to account for a substantial majority of the Company's revenues for the remainder of 1997 and for the foreseeable future. As a result, factors adversely affecting the pricing of or demand for Siebel Enterprise Applications could have a material adverse effect on the Company's business, operating results and financial condition. Most of the Company's revenues to date have been derived from one-time license fees from customers who have received a perpetual license to the Company's products. The Company's remaining revenues are primarily attributable to lower margin maintenance and other revenues, including consulting and training revenues. A relatively small number of customers account for a significant percentage of the Company's license revenues. For the fiscal year ended 1996 and the first nine months of 1997, sales to the Company's ten largest customers accounted for 59% and 51% of total revenues, respectively. The Company expects that licenses of its products to a limited number of customers will continue to account for a large percentage of revenue for the foreseeable future. The license of the Company's software products is often an enterprise-wide decision by prospective customers and generally requires the Company to provide a significant level of education to prospective customers regarding the use and benefits of the Company's products. In addition, the implementation of the Company's products involves a significant commitment of resources by prospective customers and is commonly associated with substantial reengineering efforts which may be performed by the customer or third-party system integrators. The cost to the customer of the Company's product is typically only a portion of the related hardware, software, development, training and integration costs of implementing a large-scale sales, marketing and customer service information system. For these and other reasons, the sales and implementation cycles associated with the license of the Company's products is often lengthy (ranging to date from between two and twenty-four months from initial contact to product implementation) and is subject to a number of significant delays over which the Company has little or no control. Given these factors and the expected customer concentration, the loss of a major customer or any reduction or delay in sales to or implementations by such customers could have a material adverse effect on the Company's business, operating results, and financial condition. As of September 30, 1997, many of the Company's customers were in the pilot phase of implementation of Siebel Enterprise Applications. Several of the Company's customers have completed a significant portion of their enterprise- wide development and deployment of Siebel Enterprise Applications, however, many have only recently commenced such development and deployment. As a result, the Company's products are currently being used by only a limited number of sales, marketing and customer service professionals. If any of the Company's customers are not able to customize and deploy Siebel Enterprise Applications successfully and on a timely basis to the number of anticipated users, the Company's reputation could be significantly damaged, which could have a material adverse effect on the Company's business, operating results and financial condition. 8 The Company markets its products in the United States through its direct sales force and internationally through its sales force and distributors in Japan. International revenues accounted for 11% and 31% of total revenues in the fiscal year ended 1996 and the first nine months of 1997, respectively. The Company is increasing its international sales force and is seeking to establish distribution relationships with appropriate strategic partners and expects international revenues will continue to account for a substantial portion of total revenues in the future. As a result, failure to cost-effectively maintain or increase international sales could have a material adverse effect on the Company's business, operating results and financial condition. The Company's limited operating history makes the prediction of future operating results difficult. Prior growth rates in the Company's revenue and net income should not be considered indicative of future operating results. Future operating results will depend upon many factors, including the demand for the Company's products, the level of product and price competition, the length of the Company's sales cycle, the size and timing of individual license transactions, the delay or deferral of customer implementations, the Company's relationships with systems integrators, the Company's success in expanding its direct sales force, indirect distribution channels and customer support organization, the timing of new product introductions and product enhancements, the mix of products and services sold, levels of international sales, activities of and acquisitions by competitors, the timing of new hires, changes in foreign currency exchange rates, the costs of establishing and maintaining international operations, the ability of the Company to develop and market new products and control costs and the ability to attract and retain key personnel. There can be no assurance that the Company's business or strategies will be successful or that the Company will be able to sustain profitability on a quarterly or annual basis. The Company's sales generally reflect a relatively high amount of revenue per order. The loss or delay of individual orders, therefore, can have a significant impact on the revenues and quarterly results of the Company. The timing of license revenue is difficult to predict because of the length of the Company's sales cycle, which to date has ranged from two to eighteen months from initial contact to the execution of a license agreement. Because the Company's operating expenses are based on anticipated revenue trends and because a high percentage of the Company's expenses are relatively fixed, a delay in the recognition of revenue from a limited number of license transactions could cause significant variations in operating results from quarter to quarter and could result in losses. To the extent such expenses precede, or are not subsequently followed by, increased revenues, the Company's operating results would be materially adversely affected. As a result of these and other factors, revenues for any quarter are subject to significant variation, and the Company believes that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. It is likely that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would likely be adversely affected. To date, the Company has not experienced significant seasonality of operating results. The Company expects that future revenues for any period may be affected by the fiscal or quarterly budget cycles of its customers. RECENT DEVELOPMENTS In October 1997, the Company purchased privately-held InterActive WorkPlace, Inc. ("Interactive"), a developer of intranet-based business intelligence software technology. The transaction is valued at approximately $15 million and will be accounted for as a purchase. The Company expects to record a substantial portion of the purchase price as a charge for acquired in-process technology in the fourth quarter of 1997. Under the terms of the agreement, InterActive's securityholders received or will receive up to approximately 428,000 shares of the Company's common stock in exchange for all outstanding shares in Interactive. Additionally, Interactive optionees will receive options to purchase an aggregate of approximately 32,000 shares of common stock in exchange for their options to purchase Interactive common stock. In November 1997, the Company purchased privately held Nomadic Systems, Inc. ("Nomadic"), a provider of innovative business solutions to pharmaceutical sales forces. The transaction is valued at approximately $11 million and will be accounted for as a purchase. The Company expects to record a substantial portion of the purchase price as a charge for acquired in-process technology in the fourth quarter of 1997. Under the terms of the agreement, Nomadic's securityholders received approximately 300,000 shares of the Company's common stock in exchange for all outstanding shares of Nomadic. 9 RESULTS OF OPERATIONS REVENUES Software. License revenues increased to $27,969,000 for the three months ended September 30, 1997 from $10,235,000 for the three months ended September 30, 1996 and decreased as a percentage of total revenues to 86% in the fiscal 1997 period from 92% in the fiscal 1996 period. For the nine months ended September 30, 1997, license revenues increased to $65,365,000 from $21,373,000 for the nine months ended September 30, 1996 and decreased as a percentage of total revenues to 85% in the fiscal 1997 period from 91% in the fiscal 1996 period. License revenues increased in absolute dollar amount during these periods from the respective prior year periods due to an increase in the number of licenses of Siebel Enterprise Applications to new and existing customers. This increase in the number of licenses was primarily due to continued demand by new and existing customers for products in the Siebel Enterprise Applications family both in the United States and internationally. In December 1996, the Company introduced Siebel Service Enterprise, its customer service applications suite. Increases in revenues during the 1997 periods were due in part to new and existing customers licensing Siebel Service Enterprise to manage their customer service functions. The decrease in license revenues as a percentage of total revenues was primarily due to increased levels of maintenance, consulting and other revenues as discussed below. Maintenance, Consulting and Other. Maintenance, consulting and other revenues increased to $4,648,000 for the three months ended September 30, 1997 from $936,000 for the three months ended September 30, 1996 and increased as a percentage of total revenues to 14% in the fiscal 1997 period from 8% in the fiscal 1996 period. For the nine months ended September 30, 1997, maintenance, consulting and other revenues increased to $11,251,000 from $2,053,000 for the nine months ended September 30, 1996 and increased as a percentage of total revenues to 15% in the fiscal 1997 period from 9% in the fiscal 1996 period. These increases in absolute dollar amount and as a percentage of total revenues were due to the widespread licensing of products to customers pursuant to agreements with a maintenance component, maintenance renewals from products licensed in prior periods and one customer obtaining implementation services for the Siebel Enterprise Application through the Company. The Company expects that maintenance, consulting and other revenues will remain the same or increase as a percentage of total revenues due to maintenance components of new and existing license agreements. COST OF REVENUES Software. Cost of software license revenues includes product packaging, documentation and production. Cost of license revenues through September 30, 1997 have averaged less than 2% of software license revenues. All costs incurred in the research and development of software products and enhancements to existing products have been expensed as incurred, and, as a result, cost of license revenues includes no amortization of capitalized software development costs. These costs are expected to remain the same or increase as a percentage of total revenues. Maintenance, Consulting and Other. Cost of maintenance, consulting and other revenues consists primarily of personnel, facility and systems costs incurred in providing customer support. Cost of maintenance, consulting and other revenues increased to $1,666,000 for the three months ended September 30, 1997 from $525,000 for the three months ended September 30, 1996 and remained constant as a percentage of total revenues at 5% in both the fiscal 1997 and the fiscal 1996 periods. For the nine months ended September 30, 1997, cost of maintenance, consulting and other revenues increased to $4,877,000 from $1,290,000 for the nine months ended September 30, 1996 and remained constant as a percentage of total revenues at 6% in both the fiscal 1997 and the fiscal 1996 periods. The increases in the absolute dollar amount reflect the effect of fixed costs resulting from the Company's expansion of its maintenance and support organization and the costs of one customer obtaining implementation services for the Siebel Enterprise Application through the Company. The Company expects that maintenance, consulting and other costs will continue to increase in absolute dollar amount as the Company expands its customer support organization to meet anticipated customer demands in connection with product implementation. These costs are expected to remain the same or increase as a percentage of total revenues. 10 OPERATING EXPENSES Product Development. Product development expenses include expenses associated with the development of new products, enhancements of existing products and quality assurance activities, and consist primarily of employee salaries, benefits, consulting costs and the cost of software development tools. Product development expenses increased to $3,352,000 for the three months ended September 30, 1997 from $1,685,000 for the three months ended September 30, 1996 and decreased as a percentage of total revenues to 10% in the fiscal 1997 period from 15% in the fiscal 1996 period. For the nine months ended September 30, 1997, product development expenses increased to $8,774,000 from $3,836,000 for the nine months ended September 30, 1996 and decreased as a percentage of total revenues to 11% in the fiscal 1997 period from 16% in the fiscal 1996 period. The increases in the dollar amount of product development expenses were primarily attributable to costs of additional personnel in the Company's product development operations. The Company anticipates that it will continue to devote substantial resources to product development. The Company expects product development expenses to increase in absolute dollar amount but remain at a similar percentage of total revenues as the first nine months of 1997. Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions and bonuses earned by sales and marketing personnel, field office expenses, travel and entertainment and promotional expenses. Sales and marketing expenses increased to $15,950,000 for the three months ended September 30, 1997 from $5,443,000 for the three months ended September 30, 1996 and remained constant as a percentage of total revenues at 49% in both the fiscal 1997 and the fiscal 1996 periods. For the nine months ended September 30, 1997, sales and marketing expenses increased to $36,778,000 from $12,049,000 for the nine months ended September 30, 1996 and decreased as a percentage of total revenues to 48% in the fiscal 1997 period from 51% in the fiscal 1996 period. The increases in the dollar amount of sales and marketing expenses reflect primarily the hiring of additional sales and marketing personnel and, to a lesser degree, costs associated with expanded promotional activities. The Company expects that sales and marketing expenses will continue to increase in absolute dollar amount as the Company continues to expand its sales and marketing efforts, establishes additional sales offices in the United States and internationally and increases promotional activities. These expenses are expected to remain at a similar percentage of total revenues as the first nine months of 1997. General and Administrative. General and administrative expenses consist primarily of salaries and occupancy costs for administrative, executive and finance personnel. General and administrative expenses increased to $2,456,000 for the three months ended September 30, 1997 from $1,395,000 for the three months ended September 30, 1996 and decreased as a percentage of total revenues to 8% in the fiscal 1997 period from 12% in the fiscal 1996 period. For the nine months ended September 30, 1997, general and administrative expenses increased to $6,930,000 from $2,823,000 for the nine months ended September 30, 1996 and decreased as a percentage of total revenues to 9% in the fiscal 1997 period from 12% in the fiscal 1996 period. The increases in the absolute dollar amount of general and administrative expenses were primarily due to increased staffing and associated expenses necessary to manage and support the Company's increased scale of operations. The Company believes that its general and administrative expenses will continue to increase in absolute dollar amount as a result of the continued expansion of the Company's administrative staff and facilities to support growing operations and the expenses associated with being a public company. The Company anticipates that its general and administrative expenses as a percentage of total revenues should remain at a similar percentage as the first nine months of 1997. OPERATING INCOME AND OPERATING MARGIN Operating income increased to $8,470,000 for the three months ended September 30, 1997 from $2,103,000 for the three months ended September 30, 1996 and operating margin increased to 26% in the fiscal 1997 period from 19% in the fiscal 1996 period. For the nine months ended September 30, 1997, operating income increased to $18,091,000 from $3,372,000 for the nine months ended September 30, 1996 and operating margin increased to 24% in the fiscal 1997 period from 14% in the fiscal 1996 period. These increases in operating income and margin were due to increases in license revenues without a proportional increase in cost, particularly costs associated with the hiring of new personnel. The Company does not expect operating margins to remain as high as the level of the operating margin for the first nine months of 1997. OTHER INCOME, NET Other income, net is primarily comprised of interest income earned on the Company's cash and cash equivalents and short-term investments and reflects earnings on increasing cash and cash equivalents and short-term investment balances. PROVISION FOR INCOME TAXES Income taxes have been provided at an effective rate of approximately 38%, which is comprised primarily of federal and state taxes. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." 11 NET INCOME The Company had net income (after provision for income taxes) of $5,702,000 for the three months ended September 30, 1997 compared to net income of $1,593,000 for the three months ended September 30, 1996. Net income per share increased to $0.14 per share in the third quarter of 1997 from $0.04 in the comparable period in 1996. Net income increased as a percentage of total revenues to 17% in the three months ended September 30, 1997 from 14% in the three months ended September 30, 1996. The Company had net income of $12,520,000 for the nine months ended September 30, 1997, compared to net income of $2,492,000 for the nine months ended September 30, 1996. Net income per share increased to $0.31 per share for the nine months ended September 30, 1997 from $0.06 in the comparable period in 1996. Net income increased as a percentage of total revenues to 16% in the nine months ended September 30, 1997 from 11% in the nine months ended September 30, 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and short-term investments increased to $75,993,000 as of September 30, 1997 from $72,387,000 as of December 31, 1996, representing approximately 60% of total assets. This increase was primarily attributable to net income and increases in accrued expenses and deferred revenue and issuances of common stock, partially offset by increases in accounts receivable and purchases of property and equipment. The Company believes that the anticipated cash flows from operations, cash, cash equivalents and short-term investments, will be adequate to meet its cash needs for working capital and capital expenditures for at least the next twelve months. FACTORS AFFECTING OPERATING RESULTS Limited Operating History. The Company commenced operations in July 1993 and shipped version 1.0 of Siebel Sales Enterprise in April 1995 and version 2.2 of Siebel Service Enterprise in December 1996. The Company has only a limited operating history, and its prospects must be evaluated in light of the risks and uncertainties encountered by a company in its early stage of development. The new and evolving markets in which the Company operates make these risks and uncertainties particularly pronounced. To address these risks, the Company must, among other things, successfully implement its sales and marketing strategy, respond to competitive developments, attract, retain, and motivate qualified personnel, continue to develop and upgrade its products and technologies more rapidly than its competitors, and commercialize its products and services incorporating these enhanced technologies. The Company expects to continue to devote substantial resources to its product development and sales and customer support and, as a result, will need to generate significant quarterly revenues to achieve and maintain profitability. The Company's limited operating history makes it difficult to predict accurately future operating results. There can be no assurance that any of the Company's business strategies will be successful or that the Company will be profitable in any future quarter or period. Reliance on Andersen Consulting and Other Relationships; Dependence on System Integrators. The Company has established strategic relationships with a number of organizations that it believes are important to its worldwide sales, marketing and support activities and the implementation of its products. The Company believes that its relationships with such organizations provide marketing and sales opportunities for the Company's direct sales force and expand the distribution of its products. These relationships also assist the Company in keeping pace with the technological and marketing developments of major software vendors, and, in certain instances, provide it with technical assistance for its product development efforts. In particular, the Company has established a non-exclusive strategic relationship with Andersen Consulting, a principal stockholder of the Company. In 1996 and the first nine months of 1997, approximately 46% and 39%, respectively, of the revenues of the Company were derived from customers for which Andersen Consulting had been engaged to provide system integration services. Any deterioration of the Company's relationship with Andersen Consulting could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company has relationships with Itochu Corporation and Itochu Techno-Science Corporation, among others. The failure by the Company to maintain its existing relationships, or to establish new relationships in the future, could have a material adverse effect on the Company's business, results of operations and financial condition. The Company's customers and potential customers frequently rely on Andersen Consulting, as well as other third-party system integrators to develop, deploy 12 and/or manage Siebel Enterprise Applications. If the Company is unable to train adequately a sufficient number of system integrators or, if for any reason such integrators do not have or devote the resources necessary to facilitate implementation of the Company's products or if such integrators adopt a product or technology other than Siebel Enterprise Applications, the Company's business, operating results and financial condition could be materially and adversely affected. Limited Deployment. Many of the Company's customers are in the pilot phase of implementing the Company's software. There can be no assurance that enterprise- wide deployments by such customers will be successful. The Company's customers frequently contemplate the deployment of its products commercially to large numbers of sales, marketing and customer service personnel, many of whom have not previously used application software systems, and there can be no assurance of such end-users' acceptance of the product. The Company's products are being deployed on a variety of computer hardware platforms and used in connection with a number of third-party software applications and programming tools. Such deployments present significant technical challenges, particularly as large numbers of sales, marketing and customer service personnel attempt to use the Company's product concurrently. If any of the Company's customers are not able to customize and deploy Siebel Enterprise Applications successfully and on a timely basis to the number of anticipated users, the Company's reputation could be significantly damaged, which could have a material adverse effect on the Company's business, operating results and financial condition. In addition to revenues from new customers, the Company expects that a significant percentage of any future revenues will be derived from sales to existing customers. However, such customers are not contractually committed in all cases to purchase additional licenses. If existing customers have difficulty further deploying Siebel Enterprise Applications or for any other reason are not satisfied with Siebel Enterprise Applications, the Company's business, operating results and financial condition would be materially and adversely affected. Competition. The market for the Company's products is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. The Company's products are targeted at the emerging market for sales, marketing and customer service information systems, and the Company faces competition primarily from customers' internal information technology departments and systems integrators, as well as from other application software providers that offer a variety of products and services to address this market. Many of the Company's customers and potential customers have in the past attempted to develop sales, marketing and customer service information systems, in-house either alone or with the help of systems integrators and there can be no assurance that the Company will be able to compete successfully against such internal development efforts. The Company relies on a number of systems consulting and systems integration firms, particularly Andersen Consulting, for implementation and other customer support services, as well as recommendations of its products during the evaluation stage of the purchase process. Although the Company seeks to maintain close relationships with these service providers, many of them have similar, and often more established, relationships with the Company's competitors. If the Company is unable to develop and retain effective, long- term relationships with these third parties, the Company's competitive position could be materially and adversely affected. Further, there can be no assurance that these third parties, many of which have significantly greater resources than the Company, will not market software products in competition with the Company in the future or will not otherwise reduce or discontinue their relationships with, or support of, the Company and its products. A large number of personal, departmental and other products exist in the sales, marketing and customer service information systems market. Some of the Company's current and potential competitors and their products include Symantec (ACT!), Borealis Corporation (Arsenal), Early Cloud & Co. (CallFlow), Clarify, Inc. (ClearSales, ClearSupport), IMA (EDGE), Marketrieve Company (Marketrieve PLUS), Oracle Corporation (Oracle Sales and Marketing), Pivotal Software, Inc. (Relationship), SalesBook Systems (SalesBook), SalesKit Software Corporation (SalesKit), Scopus Technology, Inc. (SalesTEAM, ServiceTEAM, Voyager), Aurum Software, Inc. (SalesTrak) (recently acquired by Baan Company N.V.), Saratoga Systems (SPS for Windows), Brock International (Take Control Sales), and The Vantive Corporation (Vantive Enterprise). Some of these competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, significantly greater name recognition and a larger installed base of customers than the Company. In addition, many competitors have well- established relationships with current and potential customers of the Company. As a result, these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, 13 promotion and sale of their products, than can the Company. It is also possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. The Company also expects that competition will increase as a result of consolidation in the software industry. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect the Company's business, operating results and financial condition. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that competitive pressures faced by the Company will not materially and adversely affect its business, operating results and financial condition. Management of Growth; Dependence upon Key Personnel. In the event that the significant growth of the Company's revenues continues, such growth may place a significant strain upon the Company's management systems and resources. The Company's ability to compete effectively and to manage future growth, if any, will require the Company to continue to improve its financial and management controls, reporting systems and procedures on a timely basis and expand, train and manage its employee work force. There can be no assurance that the Company will be able to do so successfully. The Company's failure to do so could have a material adverse effect upon the Company's business, operating results and financial condition. The Company's future performance depends in significant part upon the continued service of its key technical, sales and senior management personnel, particularly Thomas M. Siebel, the Company's Chairman and Chief Executive Officer, none of whom has entered into an employment agreement with the Company. The loss of the services of one or more of the Company's executive officers could have a material adverse effect on the Company's business, operating results and financial condition. The Company's future success also depends on its continuing ability to attract and retain highly qualified technical, customer support, sales and managerial personnel. Competition for such personnel is intense, and there can be no assurance that the Company will be able to retain its key technical, sales and managerial employees or that it can attract, assimilate or retain other highly qualified technical, sales and managerial personnel in the future. International Operations. The Company's sales are primarily to large multi- national companies. To service the needs of such companies, both domestically and internationally, the Company must provide worldwide product support services. As a result, the Company has expanded and intends to continue to expand its international operations and enter additional international markets, which will require significant management attention and financial resources and could adversely affect the Company's operating margins and earnings, if any. Revenues from international sales accounted for approximately 31% of the Company's total revenues in the first nine months of 1997. The Company believes that in order to increase sales opportunities and profitability it will be required to expand its international operations. The Company has committed and continues to commit significant management time and financial resources to developing direct and indirect international sales and support channels. There can be no assurance, however, that the Company will be able to maintain or increase international market demand for Siebel Enterprise Applications. To the extent that the Company is unable to do so in a timely manner, the Company's international sales will be limited, and the Company's business, operating results and financial condition could be materially and adversely affected. The growth in the Company's revenues from international sales is expected to continue to subject a portion of the Company's revenues to the risks associated with international sales, including foreign currency fluctuations, economic or political instability, shipping delays and various trade restrictions, any of which could have a significant impact on the Company's ability to deliver products on a competitive and timely basis. Future imposition of, or significant increases in the level of, customs duties, export quotas or other trade restrictions, could have an adverse effect on the Company's business, financial condition and results of operations. As the Company develops an international sales force, it expects to be more directly subject to foreign currency fluctuations. To the extent such direct sales are denominated in foreign currency, any such fluctuation may adversely affect the Company's business, financial condition and results of operations. Finally, the laws of certain foreign countries do not protect the Company's intellectual property rights to the same extent as do the laws of the United States. 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is engaged in certain legal proceedings as disclosed in the Company's Annual Report on Form 10-K and in the Company's Form 10-Q for the quarter ended June 30, 1997. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The effective date of the Company's first registration statement, filed on Form S-1 filed under the Securities Act of 1933 (No. 333-12061), was June 27, 1996 (the "Registration Statement"). The class of securities registered was Common Stock. The offering commenced on June 27, 1996 and all securities were sold in the offering. The managing underwriters for the offering were Hambrecht & Quist LLC, Montgomery Securities and Robertson, Stephens, & Company LLC. Pursuant to the Registration Statement, the Company sold 2,094,450 shares of its Common Stock for its own account, for an aggregate offering price of $33,113,000, and 163,000 shares of its Common Stock for the account of certain selling stockholders, for an aggregate offering price of $2,577,030. The Company incurred expenses of approximately $1,125,000. All such expenses were direct or indirect payments to others. The net offering proceeds to the issuer after total expenses was $31,988,000. The Company has not used any of the net proceeds from the offering. All net proceeds have been invested in U.S. Government obligations and certificates of deposit. The use of the proceeds from the offering does not represent a material change in the use of the proceeds described in the prospectus. 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description of Document ------ ----------------------- (3)3.3 Restated Certificate of Incorporation of the Registrant, as amended. (1)3.4 Bylaws of the Registrant. (1)(3)4.1 Reference is made to Exhibits 3.3 and 3.4. (1)4.2 Specimen Stock Certificate. (1)4.3 Restated Investor Rights Agreement, dated December 1, 1995, between the Registrant and certain investors, as amended April 30, 1996 and June 14, 1996. (5)4.4 Form of Registration Rights Agreement, dated October 1, 1997 between the Registrant and certain stockholders. (6)4.5 Form of Registration Rights Agreement, dated November 1, 1997 between the Registrant and certain stockholders. (3)10.1 Registrant's 1996 Equity Incentive Plan, as amended. (3)10.2 Registrant's Employee Stock Purchase Plan, as amended. (1)10.3 Form of Indemnity Agreement entered into between the Registrant and its officers and directors. (4)10.4 Registrant's Deferred Compensation Plan, dated January 10, 1997. (1)(2)10.6 Master Alliance Agreement, dated March 17, 1995, between the Registrant and Andersen Consulting LLP. (1)10.9 Assignment Agreement, dated September 20, 1995, by and between the Registrant and Thomas M. Siebel. (1)10.10 Lease Agreement, dated June 4, 1996, by and between the Registrant and Crossroad Associates and Clocktower Associates. (5)10.11 InterActive Workplace, Inc. 1996 Stock Option Plan. (6)11.1 Statement Regarding Computation of Net Income Per Share. (6)27.1 Financial Data Schedule. (1) Incorporated by reference to the Company's Registration Statement on Form S-1 (No. 333-03751), as amended. (2) Confidential treatment has been granted with respect to portions of this exhibit. (3) Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 333-07983), as amended. (4) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (5) Incorporated by reference to the Company's Registration Statement on Form S-3 (No. 333-36967), as amended. (6) Filed herewith. (b) Reports on Form 8-K None.
16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIEBEL SYSTEMS, INC. Date: November 12, 1997 By: /s/ Howard H. Graham ----------------------------- Howard H. Graham Senior Vice President Finance and Administration and Chief Financial Officer EX-4.5 2 REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.5 SIEBEL SYSTEMS, INC. Registration Rights Agreement November 1, 1997 Article 1. General................................. 1 1.1 Definitions............................. 1 Article 2. Registration; Restrictions on Transfer.. 2 2.1 Restrictions on Transfer................ 2 2.2 Automatic S-3 Registration.............. 3 2.3 Expenses of Registration................ 4 2.4 Obligations of the Company.............. 4 2.5 Termination of Registration Rights...... 5 2.6 Delay of Registration................... 5 2.7 Indemnification......................... 5 2.8 No Assignment of Registration Rights.... 7 Article 3. Miscellaneous........................... 7 3.1 Governing Law........................... 7 3.2 Successors and Assigns.................. 7 3.3 Separability............................ 7 3.4 Amendment and Waiver.................... 7 3.5 Delays or Omissions..................... 7 3.6 Notices................................. 7 3.7 Titles and Subtitles.................... 8 3.8 Counterparts............................ 8 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of the 1st day of November 1997, by and among SIEBEL SYSTEMS, INC., a Delaware corporation (the "Company"), and the persons and entities set forth on Exhibit A attached hereto. Such persons and entities shall be referred to hereinafter as the "Purchasers" and each individually as a "Purchaser." RECITALS WHEREAS, the Company has entered into an Agreement and Plan of Merger and Reorganization with Nomadic Systems, Inc. ("Nomadic") and certain stockholders of Nomadic, dated as of October 13, 1997 (the "Acquisition Agreement"), pursuant to which the Company will issue shares (the "Shares") of the Company's Common Stock, par value of $.001 per share ("Common Stock"), to the stockholders of Nomadic (the "Stockholders") in connection with the merger of a subsidiary of the Company with and into Nomadic; and WHEREAS, the Acquisition Agreement provides that the Stockholders be granted certain registration rights with respect to the Shares as set forth in the Agreement; NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement and in the Acquisition Agreement, the parties mutually agree as follows: ARTICLE 1 General 1.1 DEFINITIONS. As used in this Agreement the following terms shall have the following respective meanings: "FORM S-3" means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. "HOLDER" means any person owning of record Registrable Securities. "REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. "REGISTRABLE SECURITIES" means (i) the Shares and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Shares. Notwithstanding the foregoing, Registrable Securities shall not include (i) any securities sold by a person to the public either pursuant to a registration statement or Rule 144 or sold in a private transaction (other than as a result of any transfer pursuant to Section 2.1(iii) hereof) or (ii) any securities which may be sold by a Holder under Rule 144 during any ninety (90) day period. "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in complying with Section 2.2 hereof, including, without limitation, all registration and filing fees, printing expenses, fees 1. and disbursements of counsel for the Company, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). "SEC" OR "COMMISSION" means the Securities and Exchange Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SELLING EXPENSES" shall mean all underwriting discounts and selling commissions applicable to the sale. ARTICLE 2 REGISTRATION; RESTRICTIONS ON TRANSFER 2.1 RESTRICTIONS ON TRANSFER. (a) Each Holder agrees not to make any disposition of all or any portion of the Registrable Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 2.1, provided and to the extent such Section is then applicable. This Section shall not be applicable if: (i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) (A) Such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (B) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such Shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144; or (iii) There is a transfer by a Holder which is (A) a partnership to its partners in accordance with partnership interests, or (B) to the Holder's family member or trust for the benefit of an individual Holder, provided the transferee will be subject to the terms of this Section 2.1 to the same extent as if he were an original Holder hereunder (it being agreed that the Company will not require opinions of counsel for such transfers). (b) Each certificate representing the Shares shall (unless otherwise permitted by the provisions of the Agreement) be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws or as provided elsewhere in the Agreement): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE 2. SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. (c) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend. (d) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. 2.2 AUTOMATIC S-3 REGISTRATION. 2.2.1 The Company will file a Form S-3 registration statement covering Registrable Securities as provided in the Acquisition Agreement. In accordance with the Acquisition Agreement, the Company has agreed to use its best efforts to cause such registration statement to become effective as soon as practicable after the release of the Company's financial results for the quarter ending September 30, 1997, and, in any event, not later than November 15, 1997. Subject to Section 2.2.2, the Company agrees to keep such registration statement effective until the earlier of: (i) one (1) year (or such longer period in the event of a blackout period as described in Section 2.2.2) or (ii) such time as all shares of Common Stock covered by such Registration Statement are no longer Registrable Securities. Except as otherwise provided in this Section 2.2, the registration statement covered by this Section 2.2 shall be subject to the provisions of this Agreement. 2.2.2 Notwithstanding any other provision of this Agreement, the Holders understand that there may be periods during which the Company's Board of Directors may determine, in good faith, that it is in the best interest of the Company and its stockholders to defer disclosure of non-public information until such information has reached a more advanced stage and that during such periods sales of Registrable Securities and the effectiveness of any registration statement covering Registrable Securities may be suspended or delayed. Each Holder agrees by acquisition of such Registrable Securities that upon receipt of any notice from the Company of the development of any non-public information, such Holder will forthwith discontinue such Holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder's receipt of copies of an appropriately supplemented or amended prospectus and, if so directed by the Company, such Holder will use its best efforts to deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the applicable time period during which a Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of a Registrable Security covered by such registration statement shall have received the copies of the appropriate supplemented or amended prospectus. 2.2.3 A registration filed pursuant to this Section 2.2 will not be deemed to have been effected unless it has become effective; provided that if, after it has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court which prevents the 3. successful completion of such offering and which was not caused by the actions of any Holder, such registration will be deemed not to have been effected. 2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration pursuant to Section 2.2 shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2, which has been subsequently withdrawn at the request of the Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to forfeit their right to registration pursuant to Section 2.2 in which event such right shall be forfeited by all Holders. If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) subject to such registration in proportion to the number of shares for which registration was sought. If the Company is required to pay the Registration Expenses of a withdrawn, then the Holders shall not forfeit their rights to a registration pursuant to Section 2.2. 2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: 2.4.1 Prepare (and provide the Holders an opportunity to review) and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to the earlier of: (i) one (1) year (or such longer period in the event of a blackout period as described in Section 2.2.2) or (ii) such time as all shares of Common Stock covered by such registration statement are no longer Registrable Securities. 2.4.2 Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. 2.4.3 Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 2.4.4 Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 2.4.5 Notify each Holder covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 4. 2.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted under this Article II shall terminate and be of no further force and effect at such time as the obligations of the Company under Section 2.2 have been satisfied. 2.6 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article II. 2.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under Section 2.2: 2.7.1 To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, (the "1934 Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation") by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Securities Act, the 1934 Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, officer or director, or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.7.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder. 2.7.2 To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; 5. provided, however, that the indemnity agreement contained in this Section 2.7.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.7 exceed the net proceeds from the offering received by such Holder. 2.7.3 Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7. 2.7.4 If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 2.7.5 The foregoing indemnity agreements of the Company and Holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the registration statement in question becomes effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any indemnified party if a copy of the Final Prospectus was furnished to the indemnified party, the indemnified party had an obligation to furnish such Final Prospectus to the person asserting the loss, liability, claim or damage and the indemnified party did not so furnish the Final Prospectus to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. 2.7.6 The obligations of the Company and Holders under this Section 2.7 shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. 6. 2.8 NO ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Article II may not be assigned by a Holder to any transferee of Registrable Securities (other than a transferee under a transfer made pursuant to Section 2.1(iii) hereof). ARTICLE 3 MISCELLANEOUS 3.1 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware. 3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. 3.3 SEPARABILITY. In case any provision of the Agreement shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 3.4 AMENDMENT AND WAIVER. 3.4.1 Except as otherwise expressly provided, this Agreement may be amended or modified only upon the written consent of the Company and the holders of at a majority of the then outstanding Registrable Securities. 3.4.2 Except as otherwise expressly provided, the obligations of the Company and the rights of the Holders under this Agreement may be waived only with the written consent of the holders of at least a majority of the Registrable Securities. 3.5 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any Holder, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any Holder's part of any breach, default or noncompliance under the Agreement or any waiver on such Holder's part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not alternative. 3.6 NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature page or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto. 7. 3.7 TITLES AND SUBTITLES. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 3.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8. IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date set forth in the first paragraph hereof. SIEBEL SYSTEMS, INC. PURCHASERS: By: /s/ Howard H. Graham /s/ Young A. Sohn ---------------------------------- ------------------------------------- YOUNG A. SOHN Title: Senior Vice President, Finance and Address: 2 Orchard Ct. ---------------------------------- -------------------------- Administration and Chief Financial Montclair, NJ 07042 ---------------------------------- -------------------------- Officer Facsimile: ---------------------------------- -------------------------- /s/ Woon Chul Bak -------------------------------------- Address: WOON CHUL BAK 1855 South Grant Street Address: 16 Angela Ct. San Mateo, CA 94402 -------------------------- East Hanover, NJ 07936 -------------------------- Facsimile: --------------------------- /s/ Jin Soo Chang -------------------------------------- JIN SOO CHANG Address: 193 Waterside Dr. --------------------------- Little Ferry, NJ 07643 --------------------------- Facsimile: --------------------------- /s/ Jae Joon Ahn -------------------------------------- JAE JOON AHN Address: 31 Ridge Road --------------------------- Norwood, NJ 07648 --------------------------- Facsimile: --------------------------- /s/ Mark Armenante -------------------------------------- MARK ARMENANTE Address: 27450 Edgerton Road --------------------------- Los Altos Hills, CA 94022 --------------------------- Facsimile: --------------------------- /s/ Raymond Li -------------------------------------- RAYMOND LI Address: 707 Palmer Ave. --------------------------- Holmdel, NJ 07733 --------------------------- Facsimile: --------------------------- /s/ Jack Boyle -------------------------------------- JACK BOYLE Address: 22 Marlo Road --------------------------- Wayne, NJ 07470 --------------------------- Facsimile: ---------------------------
9. REGISTRATION RIGHTS AGREEMENT SCHEDULE OF PURCHASERS
Name of Purchaser NUMBER OF SHARES - --------------------------------------------------------------- Young Sohn 85,811 - --------------------------------------------------------------- Woon Chul Bak 63,564 - --------------------------------------------------------------- Jin Soo Chang 63,564 - --------------------------------------------------------------- Jae Joon Ahn 63,564 - --------------------------------------------------------------- Mark Armenante 12,712 - --------------------------------------------------------------- Raymond Li 7,945 - --------------------------------------------------------------- Jack Boyle 3,178 - ---------------------------------------------------------------
EX-11.1 3 STATEMENT REGARDING NET INCOME PER SHARE EXHIBIT 11.1 SIEBEL SYSTEMS, INC. STATEMENTS REGARDING COMPUTATION OF NET INCOME PER SHARE (In thousands, except per share data; unaudited)
Three Months Ended Nine Months Ended September 30 September 30 --------------------- -------------------- 1997 1996 1997 1996 -------- --------- -------- -------- Net income $ 5,702 $ 1,593 $ 12,520 $ 2,492 ======== ======== ======== ======== Weighted average number of shares outstanding Common stock 34,457 31,582 34,215 21,913 Preferred stock, as if converted - 334 - 6,724 Number of common stock equivalents as a result of stock options outstanding using the treasury stock method 6,245 8,066 5,605 6,368 Number of common stock issued and stock options granted in accordance with SAB No. 83 - - - 3,915 -------- -------- -------- -------- Shares used in net income per share computation 40,702 39,982 39,820 38,920 ======== ======== ======== ======== Net income per share $ 0.14 $ 0.04 $ 0.31 $ 0.06 ======== ======== ======== ========
Note: All share and per share amounts for the periods ended September 30, 1996 have been restated to reflect a two-for-one stock split (effected in the form of a stock dividend) which was effective December 19, 1996. EX-27.1 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS DEC-31-1997 DEC-31-1996 JUL-01-1997 JUL-01-1996 SEP-30-1997 SEP-30-1996 22,631 22,671 53,362 49,716 31,330 12,855 0 0 0 0 114,066 90,567 10,701 8,310 0 0 125,870 99,501 28,719 18,105 0 0 0 0 0 0 35 34 96,911 81,157 125,870 99,501 27,969 10,235 32,617 11,171 2,389 545 21,758 8,523 726 442 0 0 0 0 9,196 2,545 3,494 952 0 0 0 0 0 0 0 0 5,702 1,593 0.14 0.04 0.14 0.04
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