##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    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 0-24720
 Business Objects S.A.
  Republic of France
    
    98-0355777(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 157-159 rue Anatole France, 92300 Levallois-Perret, France
 (408) 953-6000
 þ o
 þ o
 o þ
  




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Business Objects S.A.
Index
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    58Item 4.
    
    Controls and Procedures
    
    
    58PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    58Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    58Item 6.
    
    Exhibits
    
    
    59SIGNATURES
    
    
    60EXHIBIT 10.65EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 BUSINESS OBJECTS S.A.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except nominal value per ordinary share)
 September 30,
    
    
    December 31,2005
    
    
    2004 (1)(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    332,464
    
    
    $
    293,485Restricted cash
    
    
    32,044
    
    
    
    14,043Short-term investments
    
    
    4,801
    
    
    
    3,831Accounts receivable, net
    
    
    200,929
    
    
    
    248,957Prepaid and other current assets
    
    
    62,775
    
    
    
    54,903Total current assets
    
    
    633,013
    
    
    
    615,219Goodwill
    
    
    1,139,014
    
    
    
    1,067,694Other intangible assets, net
    
    
    114,566
    
    
    
    124,599Property and equipment, net
    
    
    63,144
    
    
    
    64,053Deposits and other assets
    
    
    39,849
    
    
    
    51,363Total assets
    
    $
    1,989,586
    
    
    $
    1,922,928LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    40,709
    
    
    $
    40,939Accrued payroll and related expenses
    
    
    68,215
    
    
    
    84,918Income taxes payable
    
    
    77,823
    
    
    
    85,000Deferred revenues
    
    
    190,707
    
    
    
    194,366Other current liabilities
    
    
    71,461
    
    
    
    83,544Escrows payable
    
    
    24,657
    
    
    
    6,654Total current liabilities
    
    
    473,572
    
    
    
    495,421Other long-term liabilities
    
    
    13,038
    
    
    
    14,047Long-term deferred revenues
    
    
    5,401
    
    
    
    6,316Total liabilities
    
    
    492,011
    
    
    
    515,784Commitments and contingenciesShareholders equity:Ordinary shares, 0.10 nominal value ($0.12 at
September 30, 2005 and $0.14 at
December 31, 2004): authorized
122,386 and 122,334; issued 96,930 and
95,922; issued and outstanding 94,012 and 92,220;
respectively at September 30, 2005 and December 31,
2004
    
    
    10,535
    
    
    
    10,312Additional paid-in capital
    
    
    1,200,662
    
    
    
    1,167,336Treasury and Business Objects Option
LLC shares: 5,986 shares at
September 30, 2005 and 6,769 shares
at December 31, 2004
    
    
    (53,335
    )
    
    
    (53,335
    )Retained earnings
    
    
    307,432
    
    
    
    249,720Unearned compensation
    
    
    (4,720
    )
    
    
    (8,079
    )Accumulated other comprehensive income
    
    
    37,001
    
    
    
    41,190Total shareholders equity
    
    
    1,497,575
    
    
    
    1,407,144Total liabilities and shareholders equity
    
    $
    1,989,586
    
    
    $
    1,922,928
  
 (1)
    
    The balance sheet at December 31, 2004 has been derived from the audited consolidated financial
statements at that date. 3




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BUSINESS OBJECTS S.A.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per ordinary share and ADS data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(unaudited)
    
    
    (unaudited)Revenues:Net license fees
    
    $
    120,308
    
    
    $
    105,705
    
    
    $
    360,317
    
    
    $
    337,380Services
    
    
    141,073
    
    
    
    113,765
    
    
    
    412,248
    
    
    
    321,563Total revenues
    
    
    261,381
    
    
    
    219,470
    
    
    
    772,565
    
    
    
    658,943Cost of revenues:Net license fees
    
    
    7,169
    
    
    
    7,117
    
    
    
    21,586
    
    
    
    20,770Services
    
    
    54,854
    
    
    
    42,470
    
    
    
    159,016
    
    
    
    125,544Total cost of revenues
    
    
    62,023
    
    
    
    49,587
    
    
    
    180,602
    
    
    
    146,314Gross profit
    
    
    199,358
    
    
    
    169,883
    
    
    
    591,963
    
    
    
    512,629Operating expenses:Sales and marketing
    
    
    103,622
    
    
    
    96,543
    
    
    
    312,131
    
    
    
    292,995Research and development
    
    
    42,849
    
    
    
    35,339
    
    
    
    123,550
    
    
    
    111,583General and administrative
    
    
    22,799
    
    
    
    21,366
    
    
    
    69,830
    
    
    
    62,312Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,492Total operating expenses
    
    
    169,270
    
    
    
    153,248
    
    
    
    505,511
    
    
    
    468,382Income from operations
    
    
    30,088
    
    
    
    16,635
    
    
    
    86,452
    
    
    
    44,247Interest and other income (expense), net
    
    
    2,895
    
    
    
    1,137
    
    
    
    10,473
    
    
    
    (2,670
    )Income before provision for income taxes
    
    
    32,983
    
    
    
    17,772
    
    
    
    96,925
    
    
    
    41,577Provision for income taxes
    
    
    (13,416
    )
    
    
    (6,743
    )
    
    
    (39,213
    )
    
    
    (15,800
    )Net income
    
    $
    19,567
    
    
    $
    11,029
    
    
    $
    57,712
    
    
    $
    25,777Basic net income per ordinary share and ADS
    
    $
    0.22
    
    
    $
    0.12
    
    
    $
    0.64
    
    
    $
    0.29Diluted net income per ordinary share and ADS
    
    $
    0.21
    
    
    $
    0.12
    
    
    $
    0.63
    
    
    $
    0.28Ordinary shares and ADSs used in computing
basic net income per ordinary share and ADS
    
    
    90,552
    
    
    
    88,495
    
    
    
    90,005
    
    
    
    88,745Ordinary shares and ADSs and equivalents
used in computing diluted net income per
ordinary share and ADS
    
    
    93,455
    
    
    
    89,792
    
    
    
    92,286
    
    
    
    91,210
  4




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BUSINESS OBJECTS S.A.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Nine Months EndedSeptember 30,2005
    
    
    2004(unaudited)Operating activities:Net income
    
    $
    57,712
    
    
    $
    25,777Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization of property and equipment
    
    
    24,016
    
    
    
    25,224Amortization of other intangible assets
    
    
    23,865
    
    
    
    23,085Stock-based compensation expense
    
    
    3,922
    
    
    
    5,309Acquired in-process research and development
    
    
    2,384
    
    
    
    Loss on retirement of property and equipment
    
    
    831
    
    
    
    Deferred income taxes
    
    
    4,030
    
    
    
    (17,456
    )Tax benefits from employee stock plans
    
    
    
    
    
    
    2,517Changes in operating assets and liabilities:Accounts receivable, net
    
    
    40,331
    
    
    
    3,549Prepaid and other current assets
    
    
    (13,340
    )
    
    
    (6,755
    )Deposits and other assets
    
    
    11,379
    
    
    
    (16,873
    )Accounts payable
    
    
    1,616
    
    
    
    (11,411
    )Accrued payroll and related expenses
    
    
    (15,645
    )
    
    
    (21,444
    )Income taxes payable
    
    
    (1,270
    )
    
    
    3,925Deferred revenues
    
    
    3,237
    
    
    
    32,671Other liabilities
    
    
    (13,111
    )
    
    
    (7,672
    )Short-term investments classified as trading
    
    
    (970
    )
    
    
    (290
    )Net cash provided by operating activities
    
    
    128,987
    
    
    
    40,156Investing activities:Purchases of property and equipment
    
    
    (22,477
    )
    
    
    (24,161
    )Business acquisitions, net of acquired cash
    
    
    (95,858
    )
    
    
    Net cash used in investing activities
    
    
    (118,335
    )
    
    
    (24,161
    )Financing activities:Issuance of shares
    
    
    30,095
    
    
    
    28,191Purchase of treasury shares
    
    
    
    
    
    
    (40,231
    )Transfer of cash (to) from restricted cash
    
    
    2
    
    
    
    (17,861
    )Payments on escrows payable
    
    
    
    
    
    
    (3,083
    )Net cash provided by (used in) financing activities
    
    
    30,097
    
    
    
    (32,984
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (1,770
    )
    
    
    4,225Net increase (decrease) in cash and cash equivalents
    
    
    38,979
    
    
    
    (12,764
    )Cash and cash equivalents, beginning of the period
    
    
    293,485
    
    
    
    235,380Cash and cash equivalents, end of the period
    
    $
    332,464
    
    
    $
    222,616
  5




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Business Objects S.A.
 
 Notes to Condensed Consolidated Financial Statements
 September 30, 2005
 1. Basis of Presentation and Significant Accounting Policies
 Basis of Presentation
    Use of Estimates
  Other Current Liabilities
  6




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Ordinary Shares, Treasury Shares and Business Objects Option LLC Shares
   Significant Accounting Policies
 Revenue Recognition
   Modification of SOP No. 97-2 with Respect
to Certain Transactions.
  7




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##### Table of Contents



Accounting for Stock-based Compensation
 Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and
Disclosure Share-Based
Payment
 8




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    

Revised
2004
    
    

Revised
2005
    
    

Revised
2004(in thousands, except per share amounts)Net income  as reported
    
    $
    19,567
    
    
    $
    11,029
    
    
    $
    57,712
    
    
    $
    25,777Add: Amortization of stock-based
compensation expense included in
reported net income, net of
estimated tax related benefits of
$389 and $1,232 for the three and
nine months ended September 30,
2005 and $578 and $2,017 for the
three and nine months ended
September 30, 2004
    
    
    708
    
    
    
    944
    
    
    
    2,224
    
    
    
    3,292Deduct: Stock-based compensation
expense determined under the
fair-value based method for all
awards, net of estimated tax
related benefits of $1,077 and
$3,159 for the three and nine
months ended September 30, 2005
and $1,679 and $5,870 for the
three and nine months ended
September 30, 2004
    
    
    (10,676
    )
    
    
    (14,419
    )
    
    
    (31,336
    )
    
    
    (49,686
    )Net income (loss)  pro forma
    
    $
    9,599
    
    
    $
    (2,446
    )
    
    $
    28,600
    
    
    $
    (20,617
    )Net income per share  as reportedBasic
    
    $
    0.22
    
    
    $
    0.12
    
    
    $
    0.64
    
    
    $
    0.29Diluted
    
    $
    0.21
    
    
    $
    0.12
    
    
    $
    0.63
    
    
    $
    0.28Net income (loss) per share  pro
formaBasic
    
    $
    0.11
    
    
    $
    (0.03
    )
    
    $
    0.32
    
    
    $
    (0.23
    )Diluted
    
    $
    0.10
    
    
    $
    (0.03
    )
    
    $
    0.31
    
    
    $
    (0.23
    )
    9




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##### Table of Contents



Three Months endedSeptember 30,Employee stock option plans
    
    International Employeeand warrants
    

Stock
Purchase Plans2005
    
    2004
    
    2005
    
    2004Weighted average
expected life (in
years) (1)
    
    
    4.73
    
    
    
    3.00
    
    
    
    0.50
    
    
    
    0.50Volatility
    
    
    53%
    
    
    
    60%
    
    
    
    41%
    
    
    
    56%Risk-free interest rate
    
    
    2.9%
    
    
    
    2.9%
    
    
    
    2.2%
    
    
    
    1.0%Dividend yields
    
    
    0%
    
    
    
    0%
    
    
    
    0%
    
    
    
    0%Weighted average fair
value of stock
options, warrants/awards under IESPP
granted or purchased
during the period
    
    $
    13.82
    
    
    $
    8.07
    
    
    $
    6.51
    
    
    $
    8.26
 
 (1)
    
    The expected life of stock awards is an output of the binomial-lattice model versus an input
for the Black-Scholes model. Options and warrants.
 Employee
Stock Purchase Plans
 Recent Pronouncements
 Share-Based Payment . Share-Based Payment, an Amendment of FASB Statements No. 123 and 95
 10




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Share-Based Payment
 Accounting Changes and Error Corrections Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 Amortization Period for Leasehold Improvements . Determining the Amortization Period for Leasehold Improvements
 2. Derivative Financial Instruments
   11




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Accounting for Derivative Instruments and Hedging Activities
   Notional Amount
    
    Fair Value(in millions)U.S. dollar equivalent of derivatives not designated as hedges
    
    $
    103.0
    
    
    $
    3.6U.S. dollar equivalent of derivatives designated as cash flow
hedges
    
    $
    28.2
    
    
    $
    1.2
  3. Accounts Receivable
  12




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4. Acquisitions
 SRC Software, Inc.
     EstimatedFair Value
    
    
    Useful Life(in millions)Developed technology
    
    $
    17.2
    
    
    4-8 yearsMaintenance contracts
    
    
    3.2
    
    
    5-9 yearsConsulting relationships
    
    
    0.2
    
    
    2-3 yearsTotal amortizable intangible assets acquired
    
    $
    20.6
   Medience S.A.
    13




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##### Table of Contents



EstimatedFair Value
    
    
    Useful Life(in millions)Developed technology
    
    $
    1.5
    
    
    5 yearsMaintenance contracts
    
    
    0.2
    
    
    5 yearsTotal amortizable intangible assets acquired
    
    $
    1.7
  5. Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  September 30,
    
    
    December 31,2005
    
    
    2004Balance, beginning of the year
    
    $
    1,067,694
    
    
    $
    1,051,111Add: Goodwill acquired or adjusted during the period
    
    
    71,326
    
    
    
    16,567Impact of foreign currency fluctuations on goodwill
    
    
    (6
    )
    
    
    16Balance, end of the period
    
    $
    1,139,014
    
    
    $
    1,067,694
  14




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September 30,
    
    
    December 31,2005
    
    
    2004Developed technology
    
    $
    117,337
    
    
    $
    109,882Maintenance and support contracts
    
    
    50,037
    
    
    
    46,440Trade names
    
    
    6,136
    
    
    
    6,909Total other intangible assets, at cost
    
    $
    173,510
    
    
    $
    163,231Accumulated amortization on other intangible assets
    
    
    (58,944
    )
    
    
    (38,632
    )Other intangible assets, net
    
    $
    114,566
    
    
    $
    124,599
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(in thousands)Amortization of:Developed
technology
(included in cost
of net license
fees)
    
    $
    5,158
    
    
    $
    5,002
    
    
    $
    15,891
    
    
    $
    15,163Maintenance and
support contracts
(included in cost
of services
revenues)
    
    
    2,358
    
    
    
    2,337
    
    
    
    6,989
    
    
    
    6,989Trade names
(included in
operating
expenses)
    
    
    309
    
    
    
    311
    
    
    
    985
    
    
    
    933Total other
intangibles
amortization
expense
    
    $
    7,825
    
    
    $
    7,650
    
    
    $
    23,865
    
    
    $
    23,085
  Remainder of 2005
    
    $
    8,2712006
    
    
    33,0442007
    
    
    31,5702008
    
    
    29,0902009
    
    
    2,840Thereafter
    
    
    9,751Total
    
    $
    114,566
 15




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6. Net Income per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(in thousands, except per share data)Basic net income per share:Numerator:Net income
    
    $
    19,567
    
    
    $
    11,029
    
    
    $
    57,712
    
    
    $
    25,777Denominator:Weighted average shares outstanding
    
    
    90,552
    
    
    
    88,495
    
    
    
    90,005
    
    
    
    88,745Net income per share  basic
    
    $
    0.22
    
    
    $
    0.12
    
    
    $
    0.64
    
    
    $
    0.29Diluted net income per share:Numerator:Net income
    
    $
    19,567
    
    
    $
    11,029
    
    
    $
    57,712
    
    
    $
    25,777Denominator:Weighted average shares outstanding
    
    
    90,552
    
    
    
    88,495
    
    
    
    90,005
    
    
    
    88,745Incremental shares attributable to
shares under employee stock option
plans and share warrants (treasury
stock method)
    
    
    2,903
    
    
    
    1,297
    
    
    
    2,281
    
    
    
    2,465Weighted average shares outstanding
    
    
    93,455
    
    
    
    89,792
    
    
    
    92,286
    
    
    
    91,210Net income per share  diluted
    
    $
    0.21
    
    
    $
    0.12
    
    
    $
    0.63
    
    
    $
    0.28
   7. Comprehensive Income
  16




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(in thousands)Net income
    
    $
    19,567
    
    
    $
    11,029
    
    
    $
    57,712
    
    
    $
    25,777Other comprehensive income:Foreign currency translation
adjustments
    
    
    (190
    )
    
    
    1,374
    
    
    
    (5,081
    )
    
    
    3,185Unrealized net gains on cash
flow hedges, net of tax
    
    
    740
    
    
    
    
    
    
    
    1,602
    
    
    
    Realized net gains on cash
flow hedges, net of tax,
reclassified into earnings
    
    
    (542
    )
    
    
    
    
    
    
    (710
    )
    
    
    Total comprehensive income
    
    $
    19,575
    
    
    $
    12,403
    
    
    $
    53,523
    
    
    $
    28,962
 8. Business Segment Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net license fees:Business Intelligence Platform
    
    $
    104,866
    
    
    $
    96,356
    
    
    $
    315,053
    
    
    $
    305,557Enterprise Performance
Management Applications
    
    
    7,884
    
    
    
    3,749
    
    
    
    25,054
    
    
    
    18,442Data Integration
    
    
    7,558
    
    
    
    5,600
    
    
    
    20,210
    
    
    
    13,381Total net license fees
    
    $
    120,308
    
    
    $
    105,705
    
    
    $
    360,317
    
    
    $
    337,380Total services revenues
    
    
    141,073
    
    
    
    113,765
    
    
    
    412,248
    
    
    
    321,563Total revenues
    
    $
    261,381
    
    
    $
    219,470
    
    
    $
    772,565
    
    
    $
    658,943
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Americas, including Canada
and Latin America
    
    $
    137,489
    
    
    $
    113,833
    
    
    $
    379,214
    
    
    $
    322,275Europe, Middle East and Africa
    
    
    104,958
    
    
    
    87,491
    
    
    
    332,619
    
    
    
    283,524Asia Pacific, including Japan
    
    
    18,934
    
    
    
    18,146
    
    
    
    60,732
    
    
    
    53,144Total revenues
    
    $
    261,381
    
    
    $
    219,470
    
    
    $
    772,565
    
    
    $
    658,943
 17




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9. Business Restructuring Charges
 Crystal Decisions, Inc.
   Restructuring Costs Expensed Related to Pre-acquisition Business Objects
 Cost Associated with Exit or Disposal Activities
  Restructuring Costs Included as a Cost of the Crystal Decisions Acquisition
 Recognition of Liabilities in
Connection with Purchase Business Combinations
   SRC Software, Inc.
 Recognition of Liabilities in Connection with Purchase Business Combinations
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Other Acquisitions
  10. Commitments and Contingencies
 Legal matters
    19




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20




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Decision Warehouse Consultoria E Importacao Ltda. Business Objects Do Brasil, Ltda.
 Business Objects Do Brasil, Ltda. Decision
Warehouse Consultoria E Importacao Ltda
 Accounting for Contingencies
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##### Table of Contents



Commitments
  11. Escrows Payable, Restricted Cash and Credit Agreement
   12. Accounting for and Disclosure of Guarantees
 Guarantors Accounting for Guarantees
  Product Warranties.
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Environmental Liabilities Accounting for Asset Retirement
Obligations
 Other Liabilities and Other Claims
 13. Income Taxes
    14. Subsequent Events
 Acquisition of Infommersion, Inc.
   Treasury shares
  23




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read together with our Condensed Consolidated
Financial Statements and the notes to those statements included elsewhere in this Quarterly Report
on Form 10-Q. This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Business Objects and our industry.
These forward-looking statements include, but are not limited to, statements concerning risks and
uncertainties. Our actual results could differ materially from those indicated in these
forward-looking statements as a result of certain factors, as more fully described in the Factors
Affecting Future Operating Results section of this Managements Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q.
We undertake no obligation to update publicly any forward-looking statements for any reason, even
if new information becomes available or other events occur.
 Overview
  Key Performance Indicators
 (In millions, except for percentages and diluted net income per
    
    Three Months Ended
    
    Nine Months Endedshare)
    
    September 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Revenues
    
    $
    261.4
    
    
    $
    219.5
    
    
    $
    772.6
    
    
    $
    658.9Growth in revenues (compared to prior year comparative period)
    
    
    19
    %
    
    
    70
    %
    
    
    17
    %
    
    
    75
    %Income from operations
    
    $
    30.1
    
    
    $
    16.6
    
    
    $
    86.5
    
    
    $
    44.2Income from operations as percentage of total revenues
    
    
    12
    %
    
    
    8
    %
    
    
    11
    %
    
    
    7
    %Diluted net income per share
    
    $
    0.21
    
    
    $
    0.12
    
    
    $
    0.63
    
    
    $
    0.28
  24




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Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Net license fees:Business Intelligence Platform
    
    
    40
    %
    
    
    44
    %
    
    
    41
    %
    
    
    46
    %Enterprise Performance Management
Applications
    
    
    3
    
    
    
    2
    
    
    
    3
    
    
    
    3Data Integration
    
    
    3
    
    
    
    2
    
    
    
    3
    
    
    
    2Total net license fees
    
    
    46
    
    
    
    48
    
    
    
    47
    
    
    
    51Services revenues:Maintenance and technical support
    
    
    40
    
    
    
    38
    
    
    
    39
    
    
    
    35Professional services
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    14Total services fees
    
    
    54
    
    
    
    52
    
    
    
    53
    
    
    
    49Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Cost of net license fees
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Cost of services
    
    
    21
    
    
    
    19
    
    
    
    20
    
    
    
    19Total cost of revenues
    
    
    24
    
    
    
    22
    
    
    
    23
    
    
    
    22Gross margin
    
    
    76
    
    
    
    78
    
    
    
    77
    
    
    
    78Operating expenses:Sales and marketing
    
    
    40
    
    
    
    44
    
    
    
    41
    
    
    
    44Research and development
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    17General and administrative
    
    
    9
    
    
    
    10
    
    
    
    9
    
    
    
    9Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    65
    
    
    
    70
    
    
    
    66
    
    
    
    70Income from operations (operating margin)
    
    
    11
    
    
    
    8
    
    
    
    11
    
    
    
    7Interest and other income (expense), net
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )Income before provision for income taxes
    
    
    12
    
    
    
    8
    
    
    
    12
    
    
    
    6Provision for income taxes
    
    
    (5
    )
    
    
    (3
    )
    
    
    (5
    )
    
    
    (2
    )Net income
    
    
    7
    %
    
    
    5
    %
    
    
    7
    %
    
    
    4
    %
 Impact of Foreign Currency Exchange Rate Fluctuations on Results of Operations
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Revenues
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net license fees:Business Intelligence Platform
    
    $
    104.9
    
    
    $
    96.4
    
    
    $
    315.1
    
    
    $
    305.6Enterprise Performance Management
Applications
    
    
    7.8
    
    
    
    3.7
    
    
    
    25.0
    
    
    
    18.4Data Integration
    
    
    7.6
    
    
    
    5.6
    
    
    
    20.2
    
    
    
    13.4Total net license fees
    
    $
    120.3
    
    
    $
    105.7
    
    
    $
    360.3
    
    
    $
    337.4Services revenues:Maintenance and technical support
    
    
    103.4
    
    
    
    84.4
    
    
    
    304.2
    
    
    
    233.8Professional services
    
    
    37.7
    
    
    
    29.4
    
    
    
    108.1
    
    
    
    87.7Total services revenues
    
    
    141.1
    
    
    
    113.8
    
    
    
    412.3
    
    
    
    321.5Total revenues
    
    $
    261.4
    
    
    $
    219.5
    
    
    $
    772.6
    
    
    $
    658.9
 Net License Fees .
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Services Revenues .
 Maintenance and technical support.
 Professional Services
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Geographic Revenues Mix
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Americas
    
    $
    137.5
    
    
    $
    113.8
    
    
    $
    379.3
    
    
    $
    322.3Europe, Middle East and Africa (EMEA)
    
    
    105.0
    
    
    
    87.6
    
    
    
    332.6
    
    
    
    283.5Asia Pacific, including Japan
    
    
    18.9
    
    
    
    18.1
    
    
    
    60.7
    
    
    
    53.1Total revenues
    
    $
    261.4
    
    
    $
    219.5
    
    
    $
    772.6
    
    
    $
    658.9
    Cost of Revenues
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Cost of revenues:Net license fees
    
    $
    7.2
    
    
    $
    7.1
    
    
    $
    21.6
    
    
    $
    20.8Services
    
    
    54.9
    
    
    
    42.5
    
    
    
    159.0
    
    
    
    125.5Total cost of revenues
    
    $
    62.1
    
    
    $
    49.6
    
    
    $
    180.6
    
    
    $
    146.3
 Cost of net license fees .
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Cost of services revenues .
  Operating Expenses
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Sales and marketing
    
    $
    103.6
    
    
    $
    96.5
    
    
    $
    312.1
    
    
    $
    293.0Research and development
    
    
    42.8
    
    
    
    35.3
    
    
    
    123.6
    
    
    
    111.6General and administrative
    
    
    22.8
    
    
    
    21.4
    
    
    
    69.8
    
    
    
    62.3Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Total operating expenses
    
    $
    169.2
    
    
    $
    153.2
    
    
    $
    505.5
    
    
    $
    468.4
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Sales and Marketing Expenses .
 Research and Development Expenses .
 General and Administrative Expenses .
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Restructuring Costs .
 Interest and Other Income (Expense), Net
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net interest income
    
    $
    2.5
    
    
    $
    0.8
    
    
    $
    6.2
    
    
    $
    2.5Patent infringement settlement income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6Net foreign exchange gains (losses)
    
    
    0.3
    
    
    
    0.3
    
    
    
    4.8
    
    
    
    (8.7
    )Other income
    
    
    0.1
    
    
    
    
    
    
    
    (0.5
    )
    
    
    Interest and other income (expense), net
    
    $
    2.9
    
    
    $
    1.1
    
    
    $
    10.5
    
    
    $
    (2.6
    )
 Net interest income
 Patent infringement settlement income
 Net foreign exchange gains (losses)
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Income Taxes
  Liquidity and Capital Resources
  Nine Months Ended(in millions)
    
    September 30,2005
    
    
    2004Cash flow provided by operating activities
    
    $
    129.0
    
    
    $
    40.2Cash flow used in investing activities
    
    
    (118.3
    )
    
    
    (24.2
    )Cash flow provided by (used in) financing activities
    
    
    30.1
    
    
    
    (33.0
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (1.8
    )
    
    
    4.2Net increase (decrease) in cash and cash equivalents
    
    $
    39.0
    
    
    $
    (12.8
    )
  Operating Activities .
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Investing Activities .
 Financing Activities
 Future Liquidity Requirements
   
  33




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Contractual Obligations
  Guarantees
 Guarantors Accounting for Guarantees
  Product Warranties
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Environmental Liabilities Accounting for Asset Retirement Obligations
 Other Liabilities and Other Claims
 Off-Balance Sheet Arrangements
 Employers Accounting for Pensions Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No.
51 Employers Disclosures about Pensions and Other Postretirement benefit  an
amendment of FASB Statements No. 87, 88, and 106
 Critical Accounting Policies
  
    
    Recognition of revenues
    
    Business combinations
    
    Restructuring accruals
    
    Impairment of goodwill, intangible assets and long-lived assets
    
    Derivative financial instruments
    
    Contingencies and litigation
    
    Accounts receivable, including allowances for doubtful accounts
    
    Consolidated tax provision, including accruals, and deferred income tax assets and liabilities
    
    Accounting for stock-based compensation
 Managements
Discussion and Analysis of Financial Condition and Results of Operations
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Recent Pronouncements
 Share-Based Payment . Share-Based Payment, an Amendment of FASB Statements No. 123 and 95
  Share-Based Payment
 Accounting Changes and Error Corrections Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial
Statements
 Amortization Period for Leasehold Improvements. Determining the Amortization Period for Leasehold
Improvements
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Factors Affecting Future Operating Results
 We operate in a rapidly changing environment that involves numerous uncertainties and risks. The
following section describes some, but not all, of these risks and uncertainties that may
adversely affect our business, financial condition or results of operations. This section should
be read in conjunction with the unaudited condensed consolidated financial statements and the
accompanying condensed notes thereto, and the other parts of Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this Form 10-Q. Additional
factors and uncertainties not currently known to us or that we currently consider immaterial
could also harm our business, operating results and financial condition. We may make
forward-looking statements from time to time, both written and oral. We undertake no obligation
to revise or publicly release the results of any revisions to these forward looking statements
based on circumstances or events which occur in the future. Our actual results may differ
materially from those projected in any such forward looking statements due to a number of
factors, including those set forth below and elsewhere in this Form 10-Q.
 Risks Related to Our Business
 Our quarterly operating results have been and will continue to be subject to fluctuations.
  
    
    we typically receive a substantial amount of our revenues in the last weeks of the last
month of a quarter, rather than evenly throughout the quarter;
    
    our customers typically wait until their fourth quarter, the end of their annual budget
cycle, before deciding whether to purchase new software;
    
    economic activity in Europe generally slows during the summer months;
    
    customers may delay purchase decisions in anticipation of (i) changes to our product
line, (ii) new products or platforms, (iii) product enhancements or (iv) in response to
announced pricing changes by us or our competitors;
    
    our revenues typically vary based on the mix of products and services and the amount of
consulting services that our customers order, and we expect this trend to continue for the
foreseeable future;
    
    we depend, in part, on large orders and any delay in closing a large order may result in
the realization of potentially significant net license fees being postponed from one
quarter to the next; and
    
    our revenues are typically sensitive to the timing of offers of new products that
successfully compete with our products on the basis of functionality, price or otherwise,
and we expect this trend to continue for the foreseeable future.
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We may be unable to sustain or increase our profitability.
  Our revenues may be unpredictable due to the recent release of our BusinessObjects XI product,
which integrates our existing Business Objects and Crystal Decisions product lines, and the
expected end of life of our separate, existing Business Objects and Crystal Decisions products.
     Charges to earnings resulting from our acquisitions of Crystal Decisions and SRC and additional
restructuring and operating expenses may adversely affect the market value of our shares.
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If we overestimate revenues, and are unable to sufficiently reduce our expenses in any quarter, our
quarterly results of operations could be negatively impacted.
   Changes to current accounting policies could have a significant effect on our reported financial
results or the way in which we conduct our business.
 Bulletin des Annonces Légales Obligatoires Autorité des Marchés Financiers Document de Référence
 
    
    software revenue recognition;
    
    accounting for stock-based compensation;
    
    accounting for variable interest entities;
    
    accounting for business combinations;
    
    accounting for goodwill and other intangible assets;
    
    accounting for uncertain tax positions; and
    
    earnings per share.
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The requirement to expense stock options in our income statement could have a significant adverse
effect on our reported results, and we do not know how the market will react to reduced earnings.
    Our market is highly competitive, which could harm our ability to sell products and services and
could thereby reduce our market share.
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Some of our competitors may have greater financial, technical, sales, marketing and other resources
than we do. In addition, acquisitions of or other strategic transactions by our competitors could
weaken our competitive position or reduce our revenues.
   We may pursue strategic acquisitions and investments that could have an adverse effect on our
business if they are unsuccessful.
  We
have strategic relationships with Microsoft Corporation, SAP AG and Oracle Corporation which, if terminated, could reduce
our revenues and harm our operating results.
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We sell products only in the Business Intelligence software market; if sales of our products in
this market decline, our operating results will be harmed.
  If the market in which we sell Business Intelligence software does not grow as anticipated, our
future profitability could be negatively affected.
  
    
    not fully value the benefits of using Business Intelligence products;
    
    not achieve favorable results using Business Intelligence products;
    
    experience technical difficulty in implementing Business Intelligence products; or
    
    use alternative methods to solve the problems addressed by Business Intelligence software.
  Our software may have defects and errors that could lead to a loss of revenues or product liability
claims.
  
    
    potential customers may delay purchases;
    
    customers may react negatively, which could reduce future sales;
    
    our reputation in the marketplace may be damaged;
    
    we may have to defend product liability claims;
    
    we may be required to indemnify our customers, distributors, original equipment
manufacturers or other resellers;
    
    we may incur additional service and warranty costs; and
    
    we may have to divert additional development resources to correct the defects and
errors, which may result in the delay of new product releases or upgrades.
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We may have difficulties providing and managing large scale deployments, which could cause a
decline or delay in recognition of our revenues and an increase in our expenses.
   Business disruptions could seriously harm our operations and financial condition and increase our
costs and expenses.
      We cannot be certain that our internal control over financial reporting will be effective or
sufficient in the future.
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The software market in which we operate is subject to rapid technological change and new product
introductions, which could negatively affect our product sales.
  
    
    adapting third-party technology, including open source software;
    
    successful education and training of sales, marketing and consulting personnel;
    
    effective marketing and market acceptance;
    
    proper positioning and pricing; and
    
    product quality, including possible defects.
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We are currently a party to several lawsuits with MicroStrategy. The prosecution of these lawsuits
could have a substantial negative impact on our business. Should MicroStrategy prevail, we may be
required to pay substantial monetary damages or be prevented from selling some of our products.
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We are a party to litigation with Vedatech Corporation and, in the event of an adverse judgment
against us, we may have to pay damages, which could adversely affect our financial position and
results of operations.
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We are a party to litigation with Informatica and, in the event of an adverse judgment against us,
we may have to pay damages or be prevented from selling some of our products, either of which could
adversely affect our financial position and results of operations.
   We are a party to litigation with Decision Warehouse. The prosecution of this lawsuit could have a
substantial negative impact on our business. Should Decision Warehouse prevail, we may be required
to pay substantial monetary damages.
 Decision Warehouse Consultoria E Importacao Ltda. Business Objects Do Brasil, Ltda.
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Business Objects Do Brasil, Ltda. Decision
Warehouse Consultoria E Importacao Ltda.
 We have committed to undertake certain internal practices in connection with handling of employee
information.
  The protection of our intellectual property rights is crucial to our business and, if third parties
use our intellectual property without our consent, our business could be damaged.
  
    
    policing unauthorized copying or use of our products is difficult and expensive;
    
    software piracy is a persistent problem in the software industry;
    
    our patents may be challenged, invalidated or circumvented; and
    
    our shrink-wrap licenses may be unenforceable under the laws of certain jurisdictions.
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Third parties have asserted that our technology infringes upon their proprietary rights, and others
may do so in the future, which has resulted, and may in the future result, in costly litigation and
could adversely affect our ability to distribute our products.
   
    
    we would need to commit management resources in defense of the claim;
    
    we may incur substantial litigation costs in defense of the claim;
    
    we may have to expend significant development resources to redesign our products;
    
    we may be required to enter into royalty and licensing agreements with such third party
under unfavorable terms; and
    
    we could be forced to cease selling or delay shipping our products should an adverse
judgment be rendered against us.
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Our loss of rights to use software licensed from third parties could harm our business.
  We depend on strategic relationships and business alliances for continued growth of our business.
    Our executive officers and key employees are crucial to our business, and we may not be able to
recruit, integrate and retain the personnel we need to succeed.
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We have multinational operations that are subject to risks inherent in international operations.
  
    
    technical difficulties and costs associated with product localization;
    
    challenges associated with coordinating product development efforts among geographically
dispersed development centers;
    
    potential loss of proprietary information due to piracy, misappropriation, or laws that
may be less protective of our intellectual property rights;
    
    lack of experience in certain geographic markets;
    
    longer payment cycles for sales in certain foreign countries;
    
    seasonal reductions in business activity in the summer months in Europe and certain
other countries;
    
    the significant presence of some of our competitors in some international markets;
    
    potentially adverse tax consequences;
    
    import and export restrictions and tariffs;
    
    foreign laws and other government controls, such as trade and employment restrictions;
    
    management, staffing, legal and other costs of operating an enterprise spread over
various countries;
    
    political instability in the countries where we are doing business; and
    
    fears concerning travel or health risks that may adversely affect our ability to sell
our products and services in any country in which the business sales culture encourages
face-to-face interactions.
  Fluctuations in exchange rates between the euro, the U.S. dollar and the Canadian dollar, as well
as other currencies in which we do business, may adversely affect our operating results.
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Our effective tax rate may increase or fluctuate, which could increase our income tax expense and
reduce our net income.
  
    
    changes in forecasted annual operating income;
    
    changes in relative proportions of revenues and income before taxes in the various
jurisdictions in which we operate;
    
    changes to the valuation allowance on net deferred tax assets;
    
    changes to actual or forecasted permanent differences between book and tax reporting,
including the tax effects of purchase accounting for acquisitions and non-recurring charges
which may cause fluctuations between reporting periods;
    
    impacts from any future tax settlements with state, federal or foreign tax authorities;
    
    impacts from changes in tax laws, regulations and interpretations in the jurisdictions
in which we operate, as well as the requirements of certain tax rulings; or
    
    impacts from new FASB or IFRS requirements.
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We are subject to frequent tax audits, where the ultimate resolution may result in additional
taxes.
   We have been named as a party to several class action lawsuits and shareholder derivative actions
which could result in significant management time and attention, result in significant legal
expenses and have a material adverse effect on our business, financial condition, results of
operations and cash flows.
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Risks Related to Ownership of Our Ordinary Shares or ADSs
 New SAC and certain of its affiliates own a substantial percentage of our shares and their
interests could conflict with those of our other shareholders.
  Additional sales of our shares by New SAC and certain of its affiliates, our employees or issuances
by us in connection with future acquisitions could adversely affect the market price of our shares.
  Provisions of our articles of association and French law could have anti-takeover effects and could
deprive shareholders who do not comply with such provisions of some or all of their voting rights.
 1 2
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
    Holders of our shares have limited rights to call shareholders meetings or submit shareholder
proposals, which could adversely affect their ability to participate in governance of our company.
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##### Table of Contents



Interests of our shareholders will be diluted if they are not able to exercise preferential
subscription rights for our shares.
 droits préférentiels de
souscription
  It may be difficult for holders of our ADSs rather than our ordinary shares to exercise some of
their rights as shareholders.
  Fluctuation in the value of the U.S. dollar relative to the euro may cause the price of our
ordinary shares to deviate from the price of our ADSs.
  We have not distributed dividends to our shareholders and do not anticipate doing so in the near
future.
  56




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The market price of our shares is susceptible to changes in our operating results and to stock
market fluctuations.
  
    
    quarterly variations in our results of operations;
    
    announcements of technological innovations or new products by us, our customers or competitors;
    
    announcements of our quarterly operating results and expected results of the future periods;
    
    our failure to achieve the operating results anticipated by analysts or investors;
    
    sales or the perception in the market of possible sales of a large number of our shares
by our directors, officers, employees or principal shareholders;
    
    announcements of our competitors or customers quarterly operating results, and expected
results of future periods;
    
    addition of significant new customers or loss of current customers;
    
    international political, socioeconomic and financial instability, including instability
associated with military action in Afghanistan and Iraq or other conflicts;
    
    releases or reports by or changes in security and industry analysts recommendations; and
    
    developments or disputes concerning patents or proprietary rights or other events.
  57




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and
Qualitative Disclosures About Market Risk
 
 Item 4. Controls and Procedures
   
 Part II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 58




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##### Table of Contents



Item 6. Exhibits
 ExhibitNo.
    
    Description2.1 1
    
    Agreement and Plan of Merger dated July 20, 2005 by and among Business Objects S.A.,
Sodium Acquisition Corporation, SRC Software, Inc., Vista Equity Fund II LP, Andrew
Ferguson, Stephen Reiff and Philip Sandstrom.2.1.12
    
    SRC Software, Inc. Form of Retention Bonus Plan.3.1 3
    
    Amended and Restated Bylaws of
Business Objects S.A., as amended November 2, 2005.10.1 4 +
    
    Business Objects S.A. 2001 Stock Incentive Plan, adopted on February 6, 2001 and amended
on August 26, 2003, December 11, 2003, June 10, 2004, August 20, 2004, August 12,
2005, and October 20, 2005 (English translation).10.65 +*
    
    Employment Agreement of John G. Schwarz dated September 9, 2005.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.32.1
    
    Certification of Chief Executive Officer and of Chief Financial Officer furnished
pursuant to Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350).
 
 1
    
    Incorporated by reference to Exhibit 2.1 filed with our Current Report on Form 8-K
filed with the SEC on July 25, 2005.2
    
    Incorporated by reference to Exhibit 2.1.1 filed with our Current Report on Form 8-K
filed with the SEC on July 25, 2005.3
    
    Incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K
filed with the SEC on November 8, 2005.4
    
    Incorporated by reference to Exhibit 10.1 filed with our Current Report on Form
8-K filed with the SEC on October 26, 2005.+
    
    Denotes a management contract or compensatory plan or arrangement.*
    
    Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission. 59




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##### Table of Contents



SIGNATURES
  Business Objects S.A.(Registrant)Date:  November 9, 2005
    By:
    /s/ John G. SchwarzJohn G. SchwarzChief Executive Officer Date:  November 9, 2005
    By:
    /s/ James R. TolonenJames R. TolonenChief Financial Officer and
Senior Group Vice President 60




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description2.1 1
    
    Agreement and Plan of Merger dated July 20, 2005 by and among Business Objects S.A.,
Sodium Acquisition Corporation, SRC Software, Inc., Vista Equity Fund II LP, Andrew
Ferguson, Stephen Reiff and Philip Sandstrom.2.1.12
    
    SRC Software, Inc. Form of Retention Bonus Plan.3.1 3
    
    Amended and Restated Bylaws of
Business Objects S.A., as amended November 2, 2005.10.1 4 +
    
    Business Objects S.A. 2001 Stock Incentive Plan, adopted on February 6, 2001 and amended
on August 26, 2003, December 11, 2003, June 10, 2004, August 20, 2004, August 12,
2005, and October 20, 2005 (English translation).10.65 +*
    
    Employment Agreement of John G. Schwarz dated September 9, 2005.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.32.1
    
    Certification of Chief Executive Officer and of Chief Financial Officer furnished
pursuant to Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350).
 
 1
    
    Incorporated by reference to Exhibit 2.1 filed with our Current Report on Form 8-K
filed with the SEC on July 25, 2005.2
    
    Incorporated by reference to Exhibit 2.1.1 filed with our Current Report on Form 8-K
filed with the SEC on July 25, 2005.3
    
    Incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K
filed with the SEC on November 8, 2005.4
    
    Incorporated by reference to Exhibit 10.1 filed with our Current Report on Form
8-K filed with the SEC on October 26, 2005.+
    
    Denotes a management contract or compensatory plan or arrangement.*
    
    Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.