<PAGE> 1
As filed with the Securities and Exchange Commission on December 24, 1998
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
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MOMENTUM BUSINESS APPLICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-3313175
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1301 HARBOR BAY BOULEVARD
ALAMEDA, CALIFORNIA 94502-6576
(510) 769-5122
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE REGISTERED EACH CLASS IS TO BE REGISTERED
NONE N/A
---- ---
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE
- --------------------------------------------------------------------------------
(Title of class)
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MOMENTUM BUSINESS APPLICATIONS, INC.
CROSS-REFERENCE SHEET
SHOWING LOCATION IN REGISTRATION STATEMENT OF INFORMATION
REQUIRED BY ITEMS ON FORM 10
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING LOCATION
<S> <C>
1. Business................................................. SUMMARY; MOMENTUM RISK FACTORS;
REASONS FOR DISTRIBUTION AND
EFFECTS ON PEOPLESOFT; BUSINESS OF
MOMENTUM; SELECTED FINANCIAL
DATA OF MOMENTUM; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS; THE AGREEMENTS
AND THE PURCHASE OPTION;
FINANCIAL STATEMENTS
2. Financial Information.................................... SUMMARY; MOMENTUM RISK FACTORS;
REASONS FOR DISTRIBUTION AND
EFFECTS ON PEOPLESOFT; BUSINESS OF
MOMENTUM; SELECTED FINANCIAL
DATA OF MOMENTUM; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS; THE AGREEMENTS
AND THE PURCHASE OPTION;
FINANCIAL STATEMENTS
3. Properties............................................... SUMMARY; MOMENTUM RISK FACTORS;
BUSINESS OF MOMENTUM
4. Security Ownership of Certain Beneficial
Owners................................................... SECURITY OWNERSHIP OF MOMENTUM
5. Directors and Executive Officers......................... MANAGEMENT OF MOMENTUM
6. Executive Compensation................................... NOT APPLICABLE
7. Certain Relationships and Related
Transactions............................................. SUMMARY; MOMENTUM RISK FACTORS;
DISTRIBUTION OF MOMENTUM CLASS A
COMMON STOCK; REASONS FOR
DISTRIBUTION AND EFFECTS ON
PEOPLESOFT; BUSINESS OF MOMENTUM;
MANAGEMENT OF MOMENTUM;
SECURITY OWNERSHIP OF MOMENTUM;
THE AGREEMENTS AND THE PURCHASE
OPTION; DESCRIPTION OF MOMENTUM
CAPITAL STOCK
</TABLE>
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<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING LOCATION
<S> <C>
8. Legal Proceedings........................................ NOT APPLICABLE
9. Market Price of and Dividends of the Registrant's
Common Equity and Related Stockholder
Matters.................................................. SUMMARY; MOMENTUM RISK FACTORS;
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT; DESCRIPTION OF
MOMENTUM CAPITAL STOCK; THE
AGREEMENTS AND THE PURCHASE
OPTION
10. Recent Sales of Unregistered Securities.................. RECENT SALES OF UNREGISTERED
SECURITIES
11. Description of Registrant's Securities to be
Registered............................................... DESCRIPTION OF MOMENTUM CAPITAL
STOCK
12. Indemnification of Directors and Officers................ INDEMNIFICATION OF OFFICERS AND
DIRECTORS
13. Financial Statements and Supplementary
Data..................................................... SUMMARY; MOMENTUM RISK FACTORS;
SELECTED FINANCIAL DATA OF
MOMENTUM; BUSINESS OF MOMENTUM;
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS;
FINANCIAL STATEMENTS; THE
AGREEMENTS AND THE PURCHASE
OPTION
14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................... NOT APPLICABLE
15. Financial Statements and Exhibits........................ FINANCIAL STATEMENTS; EXHIBITS
</TABLE>
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INFORMATION STATEMENT
RELATING TO THE SPIN-OFF OF
MOMENTUM BUSINESS APPLICATIONS, INC.
FROM PEOPLESOFT, INC.
We are sending you this information statement to describe the
distribution of shares of the Class A Common Stock of Momentum Business
Applications, Inc. to the stockholders of PeopleSoft, Inc. In this distribution,
you will receive one share of Momentum Class A Common Stock for each 50 shares
of PeopleSoft common stock owned by you at the close of business on December __,
1998. The distribution will occur on December __, 1998.
The distribution will be taxable to you as a dividend. Please read the
information set forth under the caption "Federal Income Tax Considerations"
herein and consult your tax advisor with respect to the income tax consequences
of the distribution to you.
No PeopleSoft stockholder action is necessary to make the distribution.
You do not need to surrender shares of PeopleSoft common stock to receive
Momentum Class A Common Stock in the distribution. The number of shares of
PeopleSoft Common Stock you own will not change as a result of the distribution.
The Momentum Class A Common Stock will be included for quotation on the Nasdaq
National Market under the symbol "MMTM."
Momentum was formed by PeopleSoft to develop electronic business,
analytic and industry-specific software applications outside of PeopleSoft's
traditional cross-industry enterprise resource planning applications. The
purpose of the distribution is to separate the risks associated with the
development of these new applications from the risks associated with
PeopleSoft's traditional core business. In return for a $250 million
contribution to Momentum, the grant of certain technology licenses and a
commitment to make specified payments on sales of certain products developed by
Momentum, PeopleSoft will receive an exclusive option to license any products
and technology developed by Momentum and the right, subject to certain
conditions, to purchase all of the outstanding shares of Momentum Class A Common
Stock.
This document provides you with detailed information about Momentum and
the distribution. We are enthusiastic about this opportunity for Momentum to
develop new software application products for commercialization by PeopleSoft.
We encourage you to read this document carefully to learn more about Momentum,
the distribution and Momentum's future plans.
Sincerely,
David A. Duffield
President and Chief Executive Officer
PeopleSoft, Inc.
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Summary............................................................................................. 3
Momentum Risk Factors .............................................................................. 7
Distribution of Momentum Class A Common Stock.......................................................16
Momentum Capitalization.............................................................................17
Reasons for the Distribution and Effects on PeopleSoft..............................................18
Business of Momentum................................................................................20
Where You Can Find More Information.................................................................24
Management of Momentum..............................................................................25
Security Ownership of Momentum......................................................................26
Selected Financial Data of Momentum.................................................................27
Management's Discussion and Analysis of Financial Condition and Results of Operations...............28
The Agreements and the Purchase Option..............................................................30
Federal Income Tax Considerations...................................................................36
Description of Momentum Capital Stock...............................................................39
Recent Sales of Unregistered Securities.............................................................40
Indemnification of Directors and Officers...........................................................40
Transfer Agent and Registrar........................................................................41
Index to Financial Statements.......................................................................F-1
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.......................................A-1
</TABLE>
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You should rely only on the information contained in this information
statement. Momentum and PeopleSoft have not authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. Momentum and PeopleSoft are
not making an offer to sell these securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information appearing in
this information statement is accurate as of the date on the front cover of this
information statement only. Momentum's and PeopleSoft's businesses, financial
conditions, results of operations and prospects may have changed since that
date.
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SUMMARY
This summary highlights selected information contained elsewhere in
this information statement. It is not complete and may not contain all of the
information that is important to you. To better understand the distribution and
Momentum, you should read the entire information statement carefully, including
the risk factors and financial statements.
WHY THIS INFORMATION STATEMENT WAS SENT TO YOU
This information statement is being delivered by PeopleSoft, Inc.
("PeopleSoft") to you because you were an owner of PeopleSoft Common Stock on
December __, 1998. This entitles you to receive a distribution of one share of
the Class A Common Stock of a new company, Momentum Business Applications, Inc.
("Momentum"), for each 50 shares of PeopleSoft Common Stock owned by you on
December __, 1998. Although no action is required on your part to cause this to
happen and you do not have to pay cash or other consideration to receive these
shares, the distribution of these shares to you will be taxable as a dividend,
so please read carefully the information in this information statement regarding
the tax consequences of this transaction.
This information statement describes the business of Momentum, the
relationship between PeopleSoft and Momentum, how this transaction benefits
PeopleSoft and its stockholders and provides other information to assist you in
evaluating the benefits and risks of holding or disposing of your shares of
Momentum Class A Common Stock. The Momentum Class A Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "MMTM."
BUSINESS OF MOMENTUM
PeopleSoft is a leader in the development, marketing, licensing and
support of enterprise client/server business administration software application
solutions. PeopleSoft recently formed Momentum to develop and commercialize new
software products and technology.
Momentum plans to develop products and technology based on product
plans developed in conjunction with PeopleSoft. Momentum currently expects that
these products will include:
- electronic business applications that will be intuitive,
user-focused solutions that enable people to conduct a broad
range of business processes and commercial transactions over
the Internet or a customer's intranet;
- analytic applications that will utilize information captured
by enterprise on-line transaction processing applications and
other information sources to facilitate business decisions;
and.
- software applications designed for specific industries -- such
as utilities, professional services, financial services,
retailing and health care -- that will provide information
processing capabilities for business functions required in
those industries.
Momentum anticipates that it will have limited staff and facilities. As
a result, Momentum will engage PeopleSoft and/or other firms to perform
substantially all of the research and development activities necessary to
develop its products. These products will be owned by Momentum, which will then
license, sell or grant distribution rights to these products to PeopleSoft
and/or others. Momentum may also acquire or invest in complementary companies,
products, or technologies or enter into joint ventures or
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strategic alliances with other companies as a part of its overall strategy to
accelerate or enhance product development. In addition, PeopleSoft will perform
a variety of administrative activities for Momentum under a separate services
arrangement. Please review the information set forth under the caption "Business
of Momentum" for further details about Momentum's business.
RELATIONSHIP BETWEEN PEOPLESOFT AND MOMENTUM
FORMATION AND FUNDING
Prior to the distribution of the Momentum Class A Common Stock to the
PeopleSoft stockholders (the "Distribution"), PeopleSoft will contribute $250
million in cash to Momentum to fund product development and operating expenses.
This payment will reduce the total amount of cash, cash equivalents, and
short-term and long-term investments on PeopleSoft's balance sheet by $250
million. Upon completion of the Distribution, Momentum will cease to be a
wholly-owned subsidiary of PeopleSoft, and PeopleSoft's stockholders' equity
will be reduced by $250 million. Momentum will have no assets other than the
$250 million initially contributed by PeopleSoft and the contract rights
described below. PeopleSoft does not currently intend to provide any additional
funding to Momentum. However, PeopleSoft has a right of first refusal, but not
an obligation, to provide additional funding to Momentum.
STOCK OWNERSHIP AND CORPORATE GOVERNANCE
Class A and Class B Common Stock. Momentum has two classes of Common
Stock, Class A Common Stock and Class B Common Stock. All of the Momentum Class
A Common Stock is being distributed to the PeopleSoft stockholders pursuant to
this information statement. PeopleSoft owns all of the authorized shares of the
Momentum Class B Common Stock. The Momentum Class A Common Stock is subject to
the PeopleSoft Purchase Option described below. The Momentum Class B Common
Stock is not. Under Momentum's Certificate of Incorporation, Momentum may not,
without the consent of PeopleSoft as the sole holder of the Momentum Class B
Common Stock, merge, liquidate, transfer or encumber any substantial assets,
amend its Certificate of Incorporation to change the PeopleSoft Purchase Option
or take certain other actions that could be adverse to PeopleSoft's interests as
the sole Class B Common stock holder.
Board of Directors. Momentum's Board of Directors will consist of four
directors, one selected by the holders of the Momentum Class B Common Stock and
three selected by the holders of the Momentum Class A Common Stock. Please
review the information set forth under the captions "The Agreements and the
Purchase Option -- Purchase Option" and "Description of Momentum Capital Stock"
for further details about Momentum's capital structure and matters related to
corporate governance.
PURCHASE OPTION
PeopleSoft will have the right to purchase all (but not less than all)
of the outstanding Momentum Class A Common Stock (the "Purchase Option") at any
time prior to December 31, 2002, subject to extension under certain
circumstances. If PeopleSoft exercises its Purchase Option, the exercise price
will be equal to the highest amount based on four formulas, but in no event less
than $75 million. If PeopleSoft exercises the Purchase Option, PeopleSoft will
pay the Purchase Option Exercise Price in cash. The per share purchase price of
the Momentum Class A Common Stock will be reduced if Momentum issues additional
Momentum Class A Common Stock after the date of this information statement and
prior to the date that PeopleSoft exercises the Purchase Option. Please review
the information set forth under the
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caption "The Agreements and the Purchase Option -- Purchase Option" for further
details about the Purchase Option.
CONTRACTUAL ARRANGEMENTS
PeopleSoft and Momentum have entered into a series of agreements -- a
Development and License Agreement (the "Development Agreement"), a Marketing and
Distribution Agreement (the "Marketing Agreement") and a Services Agreement (the
"Services Agreement") -- that set forth:
- the permitted uses of the funds provided by PeopleSoft;
- Momentum's rights to use certain technology of PeopleSoft;
- the development work and other services to be performed for
Momentum by PeopleSoft; and
- PeopleSoft's rights with respect to the products to be
developed by Momentum.
The terms and conditions of the Development Agreement, the Marketing
Agreement and the Services Agreement are described in detail under the caption
"The Agreements and the Purchase Option" herein.
REASONS FOR THE DISTRIBUTION
PeopleSoft and Momentum believe that an attractive business opportunity
exists to develop e-business applications, analytic applications and
industry-specific software applications. However, PeopleSoft is not in a
position to capture this opportunity because PeopleSoft does not presently have
the required expertise to develop such applications. PeopleSoft believes that
the formation of Momentum will benefit PeopleSoft stockholders by:
- separating this new business, with its own unique market
opportunity and risk/reward profile, from PeopleSoft's
traditional cross-industry ERP applications;
- enabling PeopleSoft stockholders to increase or decrease their
level of participation in this new business by varying their
level of investment in Momentum (by selling or acquiring
Momentum shares in the open market); and
- allowing PeopleSoft's financial results to continue to reflect
principally its traditional cross-industry ERP applications
business and previously existing industry initiatives.
Please review the information set forth under the caption "Reasons for
the Distribution and Effects on PeopleSoft" for further details about the
reasons for the Distribution.
THE DISTRIBUTION
Each PeopleSoft stockholder will receive one share of Momentum Class A
Common Stock for every 50 shares of PeopleSoft Common Stock held. As of October
31, 1998, PeopleSoft had 233,017,263 shares of Common Stock outstanding.
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Record Date, Distribution Date. The record date for the Distribution
will be the close of business on December __, 1998. The Distribution is expected
to take place on or about December __, 1998, subject to certain conditions.
No Fractional Shares. No fractional shares of Momentum Class A Common
Stock will be distributed. Fractional shares of Momentum Class A Common Stock
will be aggregated and sold by Momentum's transfer agent and distribution agent
for the Distribution, Boston EquiServe, L.P., to provide cash to holders in lieu
of such fractional shares.
Trading Market. The Momentum Class A Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol "MMTM."
All Shares Subject to Purchase Option. All shares of the Momentum Class
A Common Stock will be subject to the Purchase Option. PeopleSoft will decide
whether to exercise the Purchase Option based on the prevailing circumstances at
the time consideration is given to its exercise. Such circumstances include the
extent to which Momentum is successful in developing Momentum Products, the
level of market acceptance such products initially achieve (as indicated by
initial licensing activities under PeopleSoft's License Option), and whether the
Momentum Products will fit PeopleSoft's business strategies at the time of such
exercise evaluation.
FEDERAL INCOME TAX CONSIDERATIONS
It is expected that the Distribution will be taxable to each PeopleSoft
stockholder in the amount of the fair market value of the Momentum Class A
Common Stock distributed to such PeopleSoft stockholder. In early 1999, each
recipient of distributed Momentum Class A Common Stock will receive an IRS Form
1099-DIV reflecting the fair market value of the Momentum Class A Common Stock
distributed. The recipient's initial basis (for income tax purposes) in the
distributed Momentum Class A Common Stock will be the fair market value of such
shares at the time of the Distribution. Upon the sale or other disposition of
the Momentum Class A Common Stock, including the exercise by PeopleSoft of the
Purchase Option, a holder of the Momentum Class A Common Stock will have a
taxable gain or loss equal to the difference between the value of the
consideration received from PeopleSoft in such exercise and such holder's basis
in the Momentum Class A Common Stock. The Distribution, any subsequent sale of
Momentum Class A Common Stock, and the exercise or expiration of the Purchase
Option may have other federal income tax consequences to holders. See "Federal
Income Tax Considerations." Each PeopleSoft stockholder is urged to consult his
or her own tax advisors with respect to the tax consequences of this
transaction.
INVESTOR CONTACT
Momentum and PeopleSoft stockholders with questions about the
Distribution should contact Kip Meintzer at PeopleSoft's principal executive
offices at 4460 Hacienda Drive, Pleasanton, California 94588; telephone (925)
694-7151.
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MOMENTUM RISK FACTORS
You should carefully consider the risks described below when evaluating
your ownership of the Momentum Class A Common Stock. The risks and uncertainties
described below are not the only ones Momentum faces. Additional risks and
uncertainties Momentum is presently not aware of or that it currently considers
immaterial may also impair Momentum's business operations.
If any of the following risks actually occurs, Momentum's business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of the Momentum Class A Common Stock
could decline significantly.
This information statement also contains forward-looking statements. These
statements include words such as "may," "will," "expect," "believe," "intend,"
"anticipate," "estimate" or similar words. These statements are based on
Momentum's current beliefs, expectations and assumptions. Momentum's actual
results could differ materially from those anticipated in these forward-looking
statements due to certain factors, including the risks described below and
elsewhere in this information statement. Momentum undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
MOMENTUM IS A NEW COMPANY AND EXPECTS TO INCUR SUBSTANTIAL LOSSES
Momentum is a newly formed company. It faces all of the risks associated
with establishing a new business enterprise in the software industry. Momentum
will incur substantial losses for several years as it develops its products.
Momentum will be able to recover such losses only if its development efforts are
successful.
MOMENTUM MAY NOT SUCCESSFULLY SELECT OR DEVELOP PRODUCTS
Momentum has entered into the Development Agreement with PeopleSoft that
requires Momentum to use all the Available Funds in connection with the research
and development of products that PeopleSoft proposes and Momentum approves.
These products may not be the appropriate products for development. To date,
PeopleSoft has relied upon third parties to develop industry-specific software
and has obtained these products through licensing arrangements or acquisitions.
PeopleSoft, therefore, does not have substantial experience in developing
industry-specific products. In addition, neither PeopleSoft nor Momentum have
significant familiarity with the evolving markets of e-business and analytic
application products. Such inexperience and unfamiliarity may cause PeopleSoft
and Momentum to choose inappropriate products for development.
Even if PeopleSoft and Momentum choose appropriate products for
development, Momentum may not be able to successfully develop such products.
Developing any of these products involves a number of risks and uncertainties,
including:
- it may be difficult to assemble a workforce with sufficient domain
expertise;
- evolving customer demands for product functionality may require
greater resources than originally anticipated;
- Momentum may need to develop new technologies to address increased
product functionality requirements;
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- development efforts may be complex and such complexities may create a
risk that these products will not be technologically feasible; and
- any products developed may rapidly become obsolete or require
substantial resources to stay current.
Any one or all of these factors may prevent Momentum from successfully
developing any of these software application products.
Despite testing by Momentum, primarily through third-parties, software
programs as complex as those likely to be developed by Momentum are likely to
contain a number of undetected errors or "bugs" when they are first introduced.
This may result in reduced acceptance of these software products in the
marketplace. The effort and expense of developing, testing and maintaining
software product lines will increase with the increasing number of possible
combinations of: (i) vendor hardware platforms; (ii) operating systems and
updated versions; (iii) application software products and updated versions; and
(iv) RDBMS platforms and updated versions. Developing consistent software
product performance characteristics across all of these combinations could place
a significant strain on Momentum's development resources and software product
release schedules.
Momentum believes it will benefit in the area of undetected errors in
choosing to utilize third parties for its development efforts. For example, by
contracting with PeopleSoft for its product development, Momentum gains access
to testing processes which have been developed and improved over numerous
product releases. Momentum does not believe all errors will be detected through
testing or other processes, and thus may incur costs to fix these errors after
products are released.
PeopleSoft has granted Momentum a license to use PeopleSoft Technology to
develop products under the Development Agreement. However, some or all of the
products Momentum may attempt to develop under the Development Agreement may
require new technologies, or enhancements or modifications to existing
PeopleSoft Technology. Momentum may not be able to acquire or develop the
technology necessary to successfully develop its products.
MOMENTUM AND PEOPLESOFT MAY NOT BE ABLE TO MARKET MOMENTUM'S PRODUCTS
PeopleSoft or Momentum may not be able to successfully market any products
developed by Momentum. PeopleSoft may need to develop or expand its marketing
capabilities in order to commercially exploit any products it chooses to license
from Momentum, and PeopleSoft may be unable or unwilling to undertake such a
development or expansion of its marketing capabilities. If PeopleSoft does not
choose to license a product developed under the Development Agreement, Momentum
will have to identify other ways of commercially exploiting that product as
Momentum currently has no marketing capabilities. If Momentum decides to market
a product itself or through a third party, PeopleSoft may not approve Momentum's
use of Available Funds for marketing the product. Additionally, Momentum may not
have sufficient resources to fund any such marketing effort. Even if acceptable
marketing resources are available, the products developed by Momentum may be
unsuccessful in the market.
MOMENTUM WILL HAVE DIFFICULTY RAISING ADDITIONAL FUNDS
Prior to the Distribution, PeopleSoft will contribute $250 million in cash
to Momentum. PeopleSoft does not currently intend to contribute additional funds
to Momentum, although it may do so in the future. Under the Development
Agreement, Momentum must use all the Available Funds in connection with the
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research and development of Momentum Products and for related administrative
expenses. Momentum may not have sufficient funds to complete the development of
any such products.
Although Momentum is not prohibited from raising additional capital by any
of the arrangements between Momentum and PeopleSoft, PeopleSoft's Purchase
Option and its rights as the sole holder of the Momentum Class B Common Stock
may make it difficult for Momentum to raise additional capital. For example,
PeopleSoft's Purchase Option (and its ability to control certain matters as the
sole holder of the Momentum Class B Common Stock) may make it more difficult for
a third party to acquire Momentum even if a change of control could benefit
Momentum's stockholders by providing them with a premium over the then current
market price of their shares. As a result, the market value and liquidity of the
Momentum Class A Common Stock may be adversely affected.
If the Purchase Option expires unexercised, Momentum may have very little
cash, few assets and an undeterminable number of products under research and
development. Momentum may also have very little internal expertise in product
development or marketing. Under these circumstances, third parties might be
reluctant to lend money to or to invest in Momentum.
PEOPLESOFT MAY NOT EXERCISE ITS LICENSE OPTION OR PURCHASE OPTION
PeopleSoft is not obligated to exercise its License Option with respect to
any Momentum Product. If PeopleSoft elects not to exercise its License Option
with respect to a product, Momentum may be required to find alternative ways to
commercialize the product. Momentum may not be able to establish alternative
channels to commercialize its products. In addition, the Marketing Agreement
prevents Momentum from commercializing any products containing PeopleSoft
Technology through designated competitors of PeopleSoft.
PeopleSoft has sole discretion as to when, if ever, it exercises the
Purchase Option, and may choose to do so at a time when the purchase price is as
low as possible. If PeopleSoft does not exercise the Purchase Option, the
Development Agreement will expire and Momentum may need to seek alternative
research and development facilities, either independently or with a third party.
Momentum may not be able to obtain access to adequate research and development
facilities on a timely basis, on acceptable terms, or at all.
POTENTIAL CONFLICTS OF INTEREST WITH PEOPLESOFT
DEPENDENCE ON PEOPLESOFT FOR PERSONNEL AND FACILITIES. Momentum expects
that it will engage PeopleSoft to perform substantially all of the research and
development required under the Development Agreement. Momentum believes that
PeopleSoft's current and planned personnel and facilities will be adequate for
PeopleSoft to perform such work. However, PeopleSoft is not obligated to perform
any research and development for Momentum. In the event PeopleSoft agrees to
undertake any research and development projects for Momentum, PeopleSoft will be
able to allocate its personnel and facilities among its own or Momentum's
projects as it deems appropriate, subject only to its obligation to use diligent
efforts under the Development Agreement.
DEPENDENCE ON PEOPLESOFT TECHNOLOGY. Momentum expects that all of the
products it develops will to some extent incorporate PeopleSoft Technology.
PeopleSoft has licensed such technology to Momentum. However, if Momentum wants
to engage a party other than PeopleSoft to conduct research and development on
its behalf, Momentum must obtain PeopleSoft's consent before that party may use
the PeopleSoft Technology. In addition, Momentum believes that enhanced
functionality will need to be added to PeopleTools(R) in order for Momentum to
develop certain of its products. If PeopleSoft chooses
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not to develop those enhancements itself, Momentum would either have to develop
them internally or pay a third party to do so. Any enhancements to PeopleSoft
Technology by Momentum or any third party will be owned by PeopleSoft.
DEPENDENCE ON PEOPLESOFT FOR MARKETING AND DISTRIBUTION PRIOR TO GENERAL
AVAILABILITY. Prior to the commercial release of a product, software companies
typically allow selected users to use, test and comment upon the product. Such
pre-release marketing and distribution is often a critical element in the
development and refinement of a software product. Under the Development
Agreement, PeopleSoft will control the marketing and distribution of all
Momentum Products prior to such products becoming Generally Available. Though
the Development Agreement requires that PeopleSoft use commercially reasonable
efforts with respect to such marketing and distribution efforts, Momentum and
PeopleSoft may disagree about the timing, breadth and intensity of such efforts.
PEOPLESOFT'S CONTROL OVER DETERMINATION OF GENERAL AVAILABILITY. Under the
Marketing Agreement, PeopleSoft is responsible for determining when a Momentum
Product is Generally Available. Because PeopleSoft's right to exercise its
License Option with respect to a Momentum Product expires 30 days after the
product becomes Generally Available, PeopleSoft could delay its determination
that the product is Generally Available.
PEOPLESOFT'S CONTROL OVER LICENSED PRODUCTS. If PeopleSoft exercises its
License Option with respect to a Momentum Product, PeopleSoft will receive a
perpetual, worldwide, exclusive license to, among other things, market and
distribute that product. The right to market and distribute the Momentum Product
allows PeopleSoft to control the pricing of the product. PeopleSoft has no
minimum royalty obligation or any express obligation with respect to its
marketing and distribution effort. As a result, PeopleSoft may have substantial
control over the Net Revenues it receives from licensing the Momentum Product,
which may impact the Product Payments made by PeopleSoft to Momentum.
PEOPLESOFT'S APPROVAL IS REQUIRED FOR CERTAIN MOMENTUM CORPORATE ACTIONS.
PeopleSoft will own all of the authorized shares of the Momentum Class B Common
Stock. Momentum's Certificate of Incorporation prohibits Momentum from taking or
allowing any action inconsistent with, or that would in any way adversely
affect, PeopleSoft's Purchase Option. Additionally, Momentum will need
PeopleSoft's consent to merge, liquidate, transfer or encumber any substantial
portion of its assets, or amend its Certificate of Incorporation to change any
of the following:
- PeopleSoft's Purchase Option;
- the authorized capitalization of Momentum; or
- the portions of Momentum's Certificate of Incorporation governing the
Board of Directors.
PeopleSoft's ability to control the matters listed above could adversely affect
the trading price and liquidity of the Momentum Class A Common Stock. Also,
PeopleSoft may be able to delay or prevent a change of control of Momentum, even
if such a change of control would be beneficial to Momentum's stockholders. This
could limit the price that certain investors might be willing to pay for the
Momentum Class A Common Stock in the future. The special rights given to the
holder of the Momentum Class B Common Stock will expire on the same date that
the Purchase Option expires.
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<PAGE> 14
THE PURCHASE OPTION EXERCISE PRICE. The price at which PeopleSoft can
exercise the Purchase Option was determined by PeopleSoft alone and not through
arm's-length negotiations. PeopleSoft considered the following factors in making
its determination of the purchase price:
- how the Momentum Class A Common Stock will be distributed;
- Momentum's planned business;
- the terms of the Development Agreement and the Marketing Agreement;
- the advice of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"); and
- other factors it deemed appropriate.
Until the Purchase Option expires, the market value of the Momentum Class A
Common Stock will be limited by the Purchase Option Exercise Price.
PRODUCT COMPETITION. PeopleSoft may develop and/or market for its own
benefit products that compete directly with products that Momentum develops.
LEGAL REPRESENTATION. Wilson Sonsini Goodrich & Rosati, Professional
Corporation, has acted as legal counsel to both PeopleSoft and Momentum in
connection with the transactions described in this information statement.
RELIANCE ON PEOPLESOFT FOR RESEARCH AND DEVELOPMENT
Momentum expects that substantially all of its research and development
will be performed by third party contractors, primarily PeopleSoft. Though
PeopleSoft is not obligated to provide research and development services to
Momentum, Momentum expects it will do so for so long as the Purchase Option is
in effect. However, Momentum believes that if the Purchase Option expires
without being exercised that it is unlikely that PeopleSoft will continue to
provide research and development services. In such an instance, Momentum would
have to either develop its own research and development expertise or identify
and contract with other third party developers. Either option is likely to
involve substantial expense and to delay Momentum's product development efforts.
MOMENTUM PRODUCTS BASED ON PEOPLESOFT TECHNOLOGY; NO ASSURANCE OF COMPATIBILITY
WITH OTHER TECHNOLOGIES OR PRODUCTS
Momentum expects that the Momentum Products will be designed and built to
interface and be compatible with PeopleSoft's technology and products. As a
result, Momentum's ability to market the Momentum Products is dependent on
market acceptance of PeopleSoft's technologies, products and installed base of
customers. If Momentum wishes to develop products based on technologies and/or
for products other than PeopleSoft's, Momentum may need to incur substantial
development costs to ensure compatibility with such other technologies and/or
products. Momentum anticipates that PeopleSoft will not approve the use of
Available Funds for this purpose. Even if Momentum is able to fund these
development efforts, Momentum may be unable to develop products that are
compatible with technologies other than PeopleSoft's technology.
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<PAGE> 15
MOMENTUM FACES INTENSE COMPETITION
The market for business application software is intensely competitive.
Momentum believes it will face substantial competition from the large,
established providers of enterprise-wide application software as well as from
numerous smaller, more specialized software companies. Other than PeopleSoft,
SAP AG ("SAP"), Oracle Corporation ("Oracle"), Baan Company N.V. ("Baan") and
J.D. Edwards & Company ("J.D. Edwards") are the major providers of
enterprise-wide software. Momentum believes that each of these companies has
either launched initiatives or has the technical, financial, and marketing
capability to launch initiatives to develop products which directly compete with
the products Momentum intends to develop. In addition, numerous well-established
companies specialize in e-business products, analytic applications or particular
industry-specific applications. Almost all of Momentum's competitors have
substantially greater financial, technical and marketing resources than those of
Momentum. Furthermore, although Momentum believes PeopleSoft does not intend to
compete with it, PeopleSoft is free to do so.
Momentum expects that any products developed by it will be commercialized
by other parties, most likely through PeopleSoft. Although PeopleSoft has
substantial market share in the enterprise-wide application software market, it
does not have a significant presence in the markets for e-business or analytic
application products or in any of the markets for which Momentum intends to
develop industry-specific application products. As a result, PeopleSoft may not
be able to compete successfully with the other large providers of
enterprise-wide application software or with the established specialized
software companies in these markets. Additionally, if Momentum commercializes
its products through third parties, such third parties may not have the
financial, technical and marketing resources to compete successfully with
Momentum's competitors.
RISKS ASSOCIATED WITH ACQUISITIONS
As part of its overall strategy to enhance or accelerate its product
development efforts, Momentum may acquire or invest in complementary companies,
products or technologies or enter into joint ventures or strategic alliances
with other companies. Risks commonly encountered in such transactions include
the difficulty of assimilating the operations and personnel of the combined
companies, the potential disruption of Momentum's ongoing business, the
inability to retain key technical and managerial personnel, the inability of
management to maximize the financial and strategic position of Momentum through
the successful integration of the acquired business, decreases in reported
earnings as a result of charges for in-process research and development and
amortization of acquired intangible assets, dilution of existing equity holders,
difficulty in maintaining controls, procedures and policies, and the impairment
of relationships with employees and customers as a result of any integration of
new personnel. There can be no assurances that Momentum would be successful in
overcoming these risks or any other problems encountered in connection with such
business combinations, investments or joint ventures, or that such transactions
will not have an adverse effect on Momentum's business, financial condition and
results of operations. Because of the rights of PeopleSoft set forth in
Momentum's Certificate of Incorporation, Momentum cannot effectively make any
acquisitions without the prior approval of PeopleSoft.
DISPOSITION OF SHARES BY PRINCIPAL STOCKHOLDER MAY ADVERSELY EFFECT MARKET PRICE
OF MOMENTUM CLASS A COMMON STOCK
Immediately following the Distribution, David A. Duffield, the President
and Chief Executive Officer of PeopleSoft, will beneficially own approximately
21% of the outstanding Momentum Class A Common Stock. Because of the potential
for conflicts of interest to arise between PeopleSoft and Momentum as a result
of Mr. Duffield's role as the President and Chief Executive Officer of
PeopleSoft, on one hand, and
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<PAGE> 16
as the principal stockholder of Momentum, on the other hand, Mr. Duffield has
advised Momentum that he intends to gift, sell or otherwise dispose of
approximately 16% of the outstanding shares of Momentum Class A Common Stock
shortly after the Distribution is completed. The sale of such a large block of
the Momentum Class A Common Stock by Mr. Duffield (or any of his donees or
transferees) could have a material adverse effect on the trading price of the
Momentum Class A Common Stock. Such sales could also make it more difficult for
Momentum to sell equity securities or equity-linked securities in the future at
a time and price that Momentum deems appropriate.
LIMITATION ON LICENSES TO THIRD PARTIES
Momentum has granted PeopleSoft an option to obtain a perpetual, exclusive
license to market, distribute, sublicense, support and enhance any products that
Momentum develops under the Development Agreement. PeopleSoft's option with
respect to a particular product expires 30 days after that product becomes
Generally Available. Until that time, Momentum may not license such products to
any other party. As a result, Momentum may miss opportunities to license the
products it develops to third parties for higher royalty rates than those
PeopleSoft is obligated to pay. In addition, in the event that PeopleSoft
declines to exercise its License Option, the delay in Momentum's ability to
identify and enter into a licensing arrangement with a third party may adversely
affect the terms Momentum is eventually able to obtain from that third party.
LIMITED INTERNATIONAL CAPABILITY
Products developed by Momentum may have difficulty achieving broad market
penetration outside of North America. In order to commercialize software
application products outside of North America, Momentum or its third party
licensees may need to create localized versions of these products. Neither
Momentum nor its third party licensees may have sufficient resources or funding
to create, market and license localized versions of any of the products
developed by Momentum.
In addition to the uncertainties related to commercializing Momentum's
products outside of North America, there are certain risks inherent in doing
business internationally. These risks include:
- compliance with regulatory requirements and changes in these
requirements;
- tariffs and other trade barriers;
- unfavorable pricing and price competition;
- currency fluctuations;
- longer payment cycles in some countries;
- difficulties in collecting international accounts receivable;
- difficulties in enforcing contractual obligations and intellectual
property rights;
- potentially adverse tax consequences;
- increased costs associated with maintaining international marketing
efforts and offices; and
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<PAGE> 17
- political instability.
Any one or all of these factors may adversely affect the commercialization of
Momentum's products outside of North America.
POTENTIAL INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS; LIMITED
PROTECTION OF MOMENTUM'S INTELLECTUAL PROPERTY RIGHTS
The products Momentum intends to develop may incorporate certain
technologies of PeopleSoft and other third parties. While Momentum intends to
obtain from third parties permission to use their technologies, Momentum's
activities could unintentionally infringe the patents, copyrights or other
intellectual property rights of others. Consequently, third parties may assert
infringement claims against Momentum with respect to its products. Any such
assertion could require Momentum to enter into royalty arrangements or could
result in costly litigation.
Momentum intends to rely on a combination of copyright, trade secret, and
patent laws and employee and third party non-disclosure agreements to protect
its intellectual property rights, including the features and design aspects of
its products. Such measures may not be sufficient to protect its rights, and
Momentum's competitors may independently develop technologies that are
substantially equivalent to or superior to Momentum's technology. Momentum may
from time to time become involved in litigation regarding the scope and validity
of its intellectual property rights. Any such litigation, whether or not
successful, could result in substantial costs to Momentum and diversion of
efforts by Momentum's management.
NO PRIOR TRADING MARKET FOR MOMENTUM CLASS A COMMON STOCK; STOCK PRICE MAY BE
VOLATILE
Prior to the Distribution, there has been no public market for the Momentum
Class A Common Stock. The Momentum Class A Common Stock has been approved for
quotation on the Nasdaq National Market. Momentum does not know whether investor
interest in Momentum will lead to the development of a trading market or, if a
trading market develops, how active that trading market will be. Based on the
trading patterns of other companies which became publicly traded in similar
transactions, Momentum expects that while there may be active trading in its
Class A Common Stock initially, within a month or two after the Distribution
trading will be quite limited.
A number of factors may affect the price and liquidity of the Momentum
Class A Common Stock, including:
- actual or anticipated fluctuations in Momentum's operating results;
- changes in expectations as to Momentum's future financial performance
or changes in securities analysts' financial estimates;
- the operating and stock price performance of PeopleSoft;
- the operating and stock price performance of other comparable
companies; and
- changes in investors' estimates of the likelihood, price and timing of
the possible exercise by PeopleSoft of its Purchase Option.
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<PAGE> 18
In addition, the Momentum Class A Common Stock may be followed by few, if
any, market analysts and there may be few institutions acting as market makers
for the Momentum Class A Common Stock. Either of these factors could adversely
affect the liquidity and trading price of the Momentum Class A Common Stock.
Also, the stock market in general has experienced extreme price and volume
volatility that has especially affected the market prices of securities of many
high technology companies. At times, this volatility has been unrelated to the
operating performance of particular companies. These broad market and industry
fluctuations may adversely affect the trading price of the Momentum Class A
Common Stock, regardless of Momentum's actual operating performance.
MOMENTUM IS SUBJECT TO ANTI-TAKEOVER PROVISIONS
Certain provisions of Momentum's Certificate of Incorporation and Bylaws
could make it more difficult for a third party to gain control of Momentum, even
if a change in control might be beneficial to Momentum's stockholders. This
could adversely affect the market price of the Momentum Class A Common Stock.
These provisions include:
- the elimination of the right of stockholders to act by written
consent;
- the elimination of the right of stockholders to call special meetings
of the stockholders;
- the creation of a staggered Board of Directors;
- the ability of the Board of Directors to designate and issue Preferred
Stock without stockholder consent; and
- the ability of PeopleSoft to purchase the Momentum Class A Common
Stock pursuant to the Purchase Option.
EFFECT OF YEAR 2000 IS UNCERTAIN
Momentum expects that substantially all of its research and development and
administrative activities will be performed by PeopleSoft. Momentum believes
that PeopleSoft's internal systems are Year 2000 compliant. To the extent that
Momentum purchases its own internal systems or contracts with other parties for
such services, it expects to be able to find systems and service providers which
are Year 2000 compliant. However, Momentum and PeopleSoft will be relying on a
variety of service providers, including telephone companies, utilities and
network services providers whose Year 2000 compliance is difficult to ascertain.
If any these providers were unable to provide their services to either
PeopleSoft or Momentum, Momentum's business could be adversely affected.
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DISTRIBUTION OF MOMENTUM CLASS A COMMON STOCK
The Board of Directors of PeopleSoft has declared a dividend, payable to
its stockholders, of one share of Momentum Class A Common Stock for every 50
shares of PeopleSoft Common Stock held on December __, 1998, the record date for
the Distribution. As a result of the Distribution, all of the then outstanding
Momentum Class A Common Stock will be distributed to PeopleSoft's stockholders.
After the Distribution, PeopleSoft will hold all of the authorized shares of the
Momentum Class B Common Stock. See "Description of Momentum Capital Stock."
Subject to certain conditions set forth in the Distribution Agreement
between Momentum and PeopleSoft (the "Distribution Agreement"), PeopleSoft will
effect the Distribution (expected to be on or about December __, 1998) by
delivering all of the Momentum Class A Common Stock to Boston EquiServe, L.P.,
the distribution agent for the Distribution. Commencing on or about December __,
1998, the distribution agent will begin mailing stock certificates for the
Momentum Class A Common Stock to the PeopleSoft stockholders as of the record
date.
No fractional shares will be issued as part of the Distribution. The
distribution agent will aggregate undistributed fractional shares and sell such
shares at the earliest practicable date at the then-prevailing market price.
Each person who would be otherwise entitled to receive a fractional share will
instead receive a cash payment equal to such person's proportionate share of the
net proceeds of the sale of such aggregated shares.
PeopleSoft's stockholders will not be required to pay any cash or other
consideration for the Momentum Class A Common Stock received in the
Distribution. However, the Distribution of the Momentum Class A Common Stock to
PeopleSoft stockholders is a taxable transaction under federal income tax law.
See "Federal Income Tax Considerations."
The general terms and conditions of the Distribution and the arrangements
between PeopleSoft and Momentum are set forth in the Development Agreement, the
Marketing Agreement, the Services Agreement and the Distribution Agreement. See
"The Agreements and the Purchase Option." The Distribution Agreement conditions
the Distribution on, among other things, the absence of material adverse changes
in the business, financial condition or results of operations of PeopleSoft or
Momentum. PeopleSoft will pay the costs and expenses incurred in connection with
the Distribution.
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MOMENTUM CAPITALIZATION
The following table sets forth the capitalization and certain other balance
sheet data of Momentum as of November 10, 1998, as adjusted to give effect to
the contribution by PeopleSoft of $250 million to Momentum and the issuance to
PeopleSoft of the Momentum Class A Common Stock and Class B Common Stock prior
to the Distribution. The data set forth below should be read in conjunction with
the Financial Statements and related Notes included elsewhere in this
information statement.
<TABLE>
<CAPTION>
AS ADJUSTED AS OF
NOVEMBER 10, 1998(1)
--------------------
<S> <C>
Cash ........................................................................ $250,000,000
============
Stockholders' equity:
Class A Common Stock, $0.001 par value; 10,000,000 shares authorized;
4,750,000 shares outstanding as adjusted ................................. $ 4,750
Class B Common Stock, $0.001 par value; 1,000 shares authorized; 1,000 shares
outstanding as adjusted(2) .................................................. 1
Preferred Stock, $0.001 par value, 2,000,000 shares
authorized, no shares issued and outstanding ............................. --
Additional paid-in capital .................................................. 249,995,249
------------
Total stockholders' equity .......................................... $250,000,000
============
</TABLE>
- ------------------
(1) See notes (a), (b) and (c) to Momentum's Pro Forma Balance Sheet on Page
F-6 for a description of the pro forma adjustments reflected in the
adjusted balances.
(2) All shares of Class B Common Stock, as adjusted, are held by PeopleSoft.
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REASONS FOR THE DISTRIBUTION AND EFFECTS ON PEOPLESOFT
PeopleSoft's management regularly discusses the current state of the
software industry and where future demand will be focused. Based on these
discussions, PeopleSoft believes that an attractive business opportunity exists
to develop e-business applications, analytic applications, and industry-specific
software applications. These market opportunities provide PeopleSoft with
potential growth and profitability opportunities to complement its existing
market presence in enterprise applications. However, the development of these
products requires new and different technologies and expertise, and
consequently, entails a higher level of technology and business risk to
PeopleSoft than that of its traditional OLTP products. The development of
analytic applications and e-business products may require the use of technology
unlike that utilized in PeopleSoft's current development activities. PeopleSoft
believes the potential risk of hiring individuals and acquiring or developing
technology to allow for adequate research and development in these areas is too
high for it to accept on its own.
PeopleSoft believes the formation of Momentum to develop products in
these areas, and the arrangements between PeopleSoft and Momentum, will provide
PeopleSoft with an opportunity to pursue, more quickly than would otherwise be
possible, these new businesses. PeopleSoft believes that the arrangement with
Momentum will benefit PeopleSoft stockholders by:
- - separating this new business, with its own unique market opportunity
and risk/reward profile, from PeopleSoft's traditional cross-industry
ERP applications;
- - enabling PeopleSoft stockholders to increase or decrease their level of
participation in this new business by varying their level of investment
in Momentum (by selling or acquiring Momentum shares in the open
market); and
- - allowing PeopleSoft's financial results to continue to reflect
principally its traditional cross-industry ERP applications business
and previously existing industry initiatives.
After reviewing PeopleSoft's goals and objectives and considering other
possible methods of enhancing the growth of its product commercialization
business, PeopleSoft's management and Board of Directors believe enhancing this
business through the formation of Momentum and the Distribution will benefit the
PeopleSoft stockholders. PeopleSoft's Board of Directors approved the formation
of Momentum and the Distribution based on information provided by PeopleSoft's
management and its financial advisor Merrill Lynch. See "Opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated" attached as Exhibit A to this
information statement.
PeopleSoft will pay Merrill Lynch a fee of $2.5 million for its
services in connection with the Distribution. The receipt of the fee is
contingent upon the consummation of the Distribution. Merrill Lynch will also be
reimbursed for expenses that it has incurred or will incur in rendering its
services. PeopleSoft has agreed to indemnify Merrill Lynch against certain
liabilities and expenses in connection with its services as financial advisors.
Merrill Lynch has from time to time performed various investment banking and
financial advisory services for PeopleSoft.
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Merrill Lynch, as part of its investment banking business, engages in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate and other
purposes. PeopleSoft selected Merrill Lynch as its financial advisor because it
is a nationally recognized investment banking firm that has substantial
experience in transactions similar to the Distribution.
Although Merrill Lynch participated in certain of the discussions
regarding the Distribution, the terms of the Distribution were determined by
PeopleSoft's Board of Directors.
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BUSINESS OF MOMENTUM
BACKGROUND
PeopleSoft established Momentum to select and develop certain
e-business products, analytic applications and industry-specific application
products. Prior to the Distribution, PeopleSoft will contribute $250 million to
Momentum so that Momentum will have financial resources to pursue the
development of these products. In addition, PeopleSoft and Momentum have entered
into a series of agreements relating to various matters including:
- the permitted uses of the Available Funds;
- Momentum's right to use PeopleSoft Technology;
- development work and other services which may be performed by
PeopleSoft; and
- PeopleSoft's rights with respect to the products to be
developed by Momentum.
Under the Development Agreement, Momentum may use the Available Funds
only to develop those products which PeopleSoft proposes and which Momentum
accepts for development. PeopleSoft and Momentum will jointly agree on the work
plans and cost estimates for such products. PeopleSoft has granted to Momentum
the right to use PeopleSoft Technology to develop such products. Because
Momentum is expected to have limited staff and facilities, Momentum anticipates
engaging PeopleSoft to perform substantially all of the research and development
activity related to such products. However, Momentum could engage third parties
to perform such efforts, perform them itself or acquire other technologies or
companies. Momentum currently has no plans to develop products other than those
pursuant to the Development Agreement.
Momentum expects that initially its only revenue will come from
investment income derived from the Available Funds and that it will incur
substantial losses as it expends funds pursuant to the Development Agreement.
Momentum believes it eventually will derive revenue from the commercialization
of the products it develops, most likely through PeopleSoft. However, Momentum
has made no forecasts as to when, if at all, it will be profitable or when, if
at all, meaningful revenues will be generated through this activity.
PEOPLESOFT TECHNOLOGY OVERVIEW
PeopleSoft developed PeopleTools(R), its rapid application development
environment and architecture, specifically for developing enterprise resource
planning ("ERP") application products. ERP applications are applications that
collect, summarize and store transaction data for historical record keeping
purposes across many functional areas of a company. Software developers use
PeopleTools(R) to, among other things, build and modify data tables, design and
customize user interface windows and develop varying security level
functionality. Since the introduction of PeopleTools(R) in 1988, PeopleSoft has
invested and continues to invest considerable funds and resources in the ongoing
enhancement and updating of this development environment. Using this proprietary
development environment, PeopleSoft has developed a comprehensive suite of
cross-industry administrative OLTP applications. OLTP applications are a subset
of ERP applications focused on data specific to one business function within a
company. PeopleSoft's suite of OLTP products includes applications in human
resource management, financials, distribution, manufacturing, and supply chain
optimization.
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PeopleSoft has granted Momentum a license to use PeopleTools(R) and
certain other technology to develop products under the Development Agreement.
Momentum believes that to develop industry-specific applications, PeopleSoft or
Momentum may need to develop or acquire enhanced functionality for
PeopleTools(R). In addition, Momentum may need to develop, acquire or license
additional development technologies to develop its e-business and analytic
applications. The Development Agreement allows Momentum to obtain, either
through development, acquisition or licensing, the rights to development tools
as deemed necessary to complete the products selected.
THE MOMENTUM PRODUCTS
Momentum Products are products recommended by PeopleSoft, and accepted
by Momentum, for research and development under the Development Agreement.
Momentum currently intends to develop the following types of Momentum Products:
e-business Products. Momentum currently plans to build e-business
applications that will be intuitive, user-focused solutions that enable people
to conduct a broad range of business processes and commercial transactions over
the Internet or a customer's intranet. These e-business applications will
include a new extended-enterprise class of applications that integrate content
from a customer's intranet, third party information and service providers and
PeopleSoft's traditional cross-industry ERP applications.
Analytic Application Products. PeopleSoft's OLTP products have
traditionally focused on helping companies improve the efficiency of business
processes. In contrast, analytic application products are focused on turning
stored data (created primarily by OLTP applications) into business intelligence
that can be used by companies to improve operating effectiveness. Momentum
currently plans to develop analytic application products that will deliver data
warehouse capabilities while allowing for integration and reconciliation to the
general ledger, billing, and time and labor systems. These analytic application
products are intended to enable rapid analysis and decision making while
lowering the risk of inconsistent data within an organization.
Industry-Specific Application Products. Momentum plans to develop a
series of products to address the software application needs of certain
industries. The initial target markets include utilities, professional services,
financial services, retailing and healthcare. The Momentum Products will be
designed to provide information processing capabilities for business functions
critical to each specific industry. Such industry-specific application products
typically support the core operating areas of a company.
Under the License Option, PeopleSoft has the right to obtain a
perpetual, exclusive license to market, distribute, sublicense, support and
enhance any product developed by Momentum pursuant to the Development Agreement.
This right expires 30 days after a product becomes Generally Available. The
determination of whether a product is Generally Available will be made by
PeopleSoft based upon the test procedures it uses for its own products. If
PeopleSoft exercises its rights under the License Option for a product, it will
pay Momentum a royalty on sales of that product in accordance with a formula
contained in the License Option. PeopleSoft will also then be responsible for
all upgrades, bug fixes and customer support related to the product. If
PeopleSoft does not exercise its rights under the License Option, Momentum may
commercialize the product itself or through arrangements with third parties that
are not designated competitors of PeopleSoft.
In the event Momentum successfully commercializes a product, any
revenue it receives from such commercialization will not be considered Available
Funds. Momentum will be free to use such revenue
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<PAGE> 25
for any purpose, including additional product development. PeopleSoft will have
no rights with respect to any products Momentum develops using funds other than
Available Funds.
DEVELOPMENT CYCLE
Scope and Design: Based on input from sales personnel, customers,
business partners and industry analysts, PeopleSoft will identify and prioritize
product opportunities and present such opportunities to Momentum. For each
product opportunity, high level business requirements are defined and
documented. This initial product scope is reviewed and discussed with internal
and external business process functional experts in an iterative review process
that confirms a product's conceptual framework. Once the initial product scope
is defined, the individual product features are identified and prioritized. In
addition, new technologies that would be required to build and deploy the
product are identified. For each product feature or new technology, a written
summary of its business requirements is prepared and is reviewed with
appropriate development personnel. Based on this review, product strategy and
development personnel reach an initial agreement on the product's content and
priorities for the initial release. Functional and technical designs are
developed for each planned feature. Design reviews are held with teams comprised
of product strategy, release testing, documentation, sample data and training
personnel. During the design review process, this group ensures not only that
the functional requirements are complete but also that the technical design
meets the business needs
Develop and Port: In developing a new product, the development team
will code and unit test every feature in the products to ensure that the product
created complies with the functional and technical requirements. These tasks are
conducted using a reference development platform, and the functionality is
designed to provide global capabilities based on requirements from a proxy set
of countries around the world. All development issues are identified and
addressed. At the same time, system test requirements and procedures are
developed. Test strategies, product test plans, feature test requirements and
test procedures are completed. During the development and port phase,
documentation and curriculum development personnel work closely with the
developers to design documentation and training courses. Upon substantial
completion of development, the developed product is ported to support multiple
hardware, database and operating system platforms, and release platforms are
certified.
Test and Release: The product is delivered to a select group of
Pre-General Availability customers for limited use. Pre-General Availability
customers provide feedback on the features and functions as well as ease of use.
Issues identified during this phase are generally resolved prior to the product
being released as Generally Available. In addition, the combined product
features are system tested on the primary development platform. These tests
validate that the product and its features perform according to the specified
business and functional requirements. All test failures are logged, reviewed and
addressed. Release test requirements, plans and processes are developed and
finalized. During this phase, the product is tested to validate that it is
operational on all supported platforms. The product is tested for (i) ease of
use, (ii) ease of installation, (iii) ease of upgrade, (iv) volume and (v)
performance. All incidents reported during release test are logged, reviewed and
addressed. Once the product has met system and release test exit criteria, all
sample data and documentation are finalized and incorporated into the master
production product. Final validation and acceptance tests are performed.
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POTENTIAL RESEARCH AND DEVELOPMENT EXPENDITURES
PeopleSoft has identified a number of potential products to be
developed in each of the three product areas outlined in "The Momentum Products"
section, but has not yet created specific budgets for these projects. Following
the formation of Momentum, Momentum and PeopleSoft will agree on the initial
prioritization of the products to be developed, and allocate Available Funds
accordingly. The Available Funds are expected to be expended under the
Development Agreement, over a period of three to four years. Such an estimate is
based on PeopleSoft's experience in developing software products of comparable
scope, the number of projects that are deemed manageable at any given time and
the availability of engineers with the requisite expertise. These development
efforts are currently estimated to require $40-$60 million for scope and design,
$150-$175 million for develop and port and $30-$50 million for test and release,
although these estimates may change over time as PeopleSoft and Momentum select
and develop products. Because of the rapidly changing dynamics of the computer
software industry, products currently forecasted to be undertaken by Momentum
may be reprioritized as the product areas develop. In addition, factors outside
of Momentum's control, such as customer functionality demands, competitor
product offerings, and hardware platforms, could alter the timing or amount of
estimated expenditures and the number of completed projects.
FACILITIES AND PERSONNEL
Momentum is not expected to hire a significant number of employees or
to acquire significant property or assets. However, in order to develop products
under the Development Agreement, Momentum will have to make decisions on how to
obtain adequate resources for its development efforts. Momentum currently
expects that it will contract with PeopleSoft to provide engineering personnel
and facilities to perform the development work. Momentum has the right to
perform this work directly or seek other third party providers. Momentum is
expected to use a substantial portion of the Available Funds to compensate
PeopleSoft for the research and development of Momentum Products. In addition,
Momentum has contracted with PeopleSoft to provide general administrative
support services.
COMPETITION
The market for business application software is intensely competitive.
Momentum believes it will face substantial competition from the large,
established providers of enterprise-wide application software as well as from
numerous smaller, more specialized software companies. Other than PeopleSoft,
SAP, Oracle, Baan and J.D. Edwards are the major providers of enterprise-wide
software. Momentum believes that each of these companies has either launched
initiatives or has the technical, financial, and marketing capability to launch
initiatives to develop products which directly compete with the products
Momentum intends to develop. In addition, numerous well-established companies
specialize in e-business products, analytic applications or particular
industry-specific applications. Almost all of Momentum's competitors have
substantially greater financial, technical and marketing resources than those of
Momentum. Furthermore, although Momentum believes PeopleSoft does not intend to
compete with it, PeopleSoft is free to do so.
Momentum expects that any products developed by it will be
commercialized by other parties, most likely through PeopleSoft. Although
PeopleSoft has substantial market share in the enterprise-wide application
software market, it does not have a significant presence in the markets for
e-business or analytic application products or in any of the markets for which
Momentum intends to develop industry-
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<PAGE> 27
specific application products. As a result, PeopleSoft may not be able to
compete successfully with the other large providers of enterprise-wide
application software or with the established specialized software companies in
these markets. Additionally, if Momentum commercializes its products through
third parties, such third parties may not have the financial, technical and
marketing resources to compete successfully with Momentum's competitors.
PATENTS; INTELLECTUAL PROPERTY
The products Momentum intends to develop may incorporate certain
technologies of PeopleSoft and other third parties. While Momentum intends to
obtain from third parties permission to use their technologies, Momentum's
activities could unintentionally infringe the patents, copyrights or other
intellectual property rights of others. Consequently, third parties may assert
infringement claims against Momentum with respect to its products. Any such
assertion could require Momentum to enter into royalty arrangements or could
result in costly litigation.
Momentum intends to rely on a combination of copyright, trade secret,
and patent laws and employee and third party non-disclosure agreements to
protect its intellectual property rights, including the features and design
aspects of its products. Such measures may not be sufficient to protect its
rights, and Momentum's competitors may independently develop technologies that
are substantially equivalent to or superior to Momentum's technology. Momentum
may from time to time be involved in litigation regarding the scope and validity
of its intellectual property rights. Any such litigation, whether or not
successful, could result in substantial costs to Momentum and diversion of
efforts by Momentum's management.
WHERE YOU CAN FIND MORE INFORMATION
As a result of the Distribution, the Securities Exchange Act of 1934,
as amended (the "Exchange Act") requires Momentum to file annual, quarterly and
other reports with the Securities and Exchange Commission. Momentum intends to
provide annual reports containing audited financial statements to its
stockholders in connection with its annual meetings of stockholders.
Momentum filed with the Securities and Exchange Commission a
Registration Statement, which includes certain exhibits (the "Registration
Statement"), under the Exchange Act, for the securities offered by this
information statement. This information statement contains general information
about the contents of contracts and other documents filed as exhibits to the
Registration Statement. However, this information statement does not contain all
of the information set forth in the Registration Statement and the exhibits
filed with the Registration Statement. You should read the Registration
Statement and the exhibits for further information about Momentum and the
Distribution.
You may read and copy the Registration Statement and other materials
that Momentum files with the Securities and Exchange Commission at the Public
Reference Room of the Securities and Exchange Commission, 450 Fifth Street,
Washington, D.C. 20549 and at the Securities and Exchange Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies
of these documents, upon payment of a duplication fee, by writing to the
Securities and Exchange Commission's Public Reference Section. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the Public Reference Rooms. The Securities and Exchange
Commission filings of Momentum are also available to the public on the
Securities and Exchange Commission Internet site (http://www.sec.gov).
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<PAGE> 28
MANAGEMENT OF MOMENTUM
The following table sets forth information about Momentum's executive
officer and director as of November 16, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Aneel Bhusri ....................... 32 President, Chief Financial Officer,
Secretary and Director
</TABLE>
Aneel Bhusri has been Momentum's President, Chief Financial Officer,
Secretary and sole director since Momentum's formation in November 1998. Prior
to the Distribution, Mr. Bhusri will appoint an individual who is unaffiliated
with PeopleSoft and has experience in the software industry to replace Mr.
Bhusri as the sole officer of Momentum. Mr. Bhusri joined PeopleSoft in August
1993 as Director of Strategic Planning. In April of 1995, he was appointed Vice
President of Product Strategy. In November of 1995, Mr. Bhusri was appointed
Senior Vice President of Product Strategy. In April 1997, he was appointed
Senior Vice President of Product Strategy, Business Development and Marketing.
Prior to joining PeopleSoft, Mr. Bhusri was an associate at Norwest Venture
Capital from June 1992 to March 1993. From 1988 to 1991 he was a financial
analyst in Morgan Stanley's Corporate Finance Department. Mr. Bhusri holds a
B.Sc. in Electrical Engineering and a B.A. in Economics from Brown University,
and an M.B.A. from Stanford University.
Momentum expects that prior to the Distribution, Mr. Bhusri will
appoint an individual who is unaffiliated with PeopleSoft and has experience in
the software industry to replace Mr. Bhusri as the sole officer of Momentum. The
new President will then propose two additional persons unaffiliated with
PeopleSoft and with experience in the software industry, finance or accounting
to fill the remaining two vacancies on the Board of Directors. Holders of
Momentum Class A Common Stock will not have elected any of the initial members
of Momentum's Board of Directors. Because the representatives of the Class A
Common Stock serve staggered three-year terms, the holders of Momentum's Class A
Common Stock will be able to vote on only one representative at each annual
meeting of stockholders.
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<PAGE> 29
SECURITY OWNERSHIP OF MOMENTUM
Immediately prior to the Distribution, all of the outstanding shares of
Momentum Class A Common Stock will be held by PeopleSoft. The following tables
sets forth the projected beneficial ownership of Momentum Class A Common Stock
following the Distribution by (i) the director and executive officer of Momentum
and (ii) any stockholder that will beneficially own more than 5% of the
outstanding shares of the Momentum Class A Common Stock.
<TABLE>
<CAPTION>
MOMENTUM CLASS A COMMON
---------------------------
STOCK PROJECTED TO BE
BENEFICIALLY OWNED
---------------------------
NUMBER (1)(2) PERCENT OF CLASS
------------- ---------------
<S> <C> <C>
NAME
Director and Executive Officer
Aneel Bhusri ................................ 1,066 *
Others
David A. Duffield (3) ....................... 977,834 21%
4460 Hacienda Drive
Pleasanton, CA 94588
</TABLE>
- ------------------------
* Less than 1%
(1) Except as otherwise noted, reflects, in each case, the number of shares of
PeopleSoft Common Stock beneficially owned as of October 31, 1998, divided
by 50. In addition to shares held in the individual's sole name, this
column includes shares held by the spouse and other members of the named
person's immediate household who share that household with the named
person, and shares held in family trusts.
(2) In calculating the number of shares of Momentum Class A Common Stock
projected to be owned by the individuals listed above, the calculation has
been accomplished by treating each category of ownership, direct, book
entry, street name and trust account separately and dividing each by 50,
eliminating each set of fractional shares.
(3) Mr. Duffield has informed Momentum that he plans to reduce his percentage
ownership in the Momentum Class A Common Stock shortly after the
Distribution from approximately 21% of the outstanding shares to below 5%
of the outstanding shares through the sale or other disposition of
approximately 16% of the outstanding shares.
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<PAGE> 30
SELECTED FINANCIAL DATA OF MOMENTUM
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AS OF NOVEMBER 10,
1998(1)
------------------
<S> <C>
Cash ................................................... $1,000
Stockholders' equity ................................... $1,000
</TABLE>
- -------------------
(1) Momentum was incorporated in November 1998. PeopleSoft contributed $1,000
in November 1998 in exchange for 1,000 shares of Momentum Common Stock.
Momentum currently does not have any operations and will not have any
operations prior to the Distribution.
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<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Momentum was formed on November 9, 1998. PeopleSoft will contribute a
total of $250 million in cash to Momentum prior to the Distribution.
PeopleSoft's contribution (together with interest earned thereon) is expected to
fund research and development activities for approximately three to four years.
Momentum's funds are expected to be used primarily to fund activities to be
conducted under the Development Agreement with PeopleSoft. Momentum expects to
engage PeopleSoft or other third parties to perform the development activities
on Momentum's behalf. Momentum is not expected to require significant facilities
or capital equipment of its own during the term of the Development Agreement.
Momentum's development activities are expected to focus on e-business
products, analytic application products, and industry specific applications.
PeopleSoft will propose various products to Momentum from which Momentum will
select certain products to develop. PeopleSoft believes it will identify
potential product development projects in these three product types which
collectively could require more than the $250 million Available Funds to develop
fully. Thus, Momentum will be required to evaluate and select which product
ideas to develop. Based on PeopleSoft's experience in developing other products
and the costs of those efforts, and the number of projects assumed to manageable
at any one time, and assuming availability of engineers with relevant expertise,
the Available Funds are expected to be expended in a period of approximately
three to four years.
In addition to the Available Funds, Momentum may generate additional
funds through successfully licensing its products to PeopleSoft or another
party. These funds would not be considered Available Funds and thus their use by
Momentum would not be restricted by PeopleSoft. Momentum may also obtain
additional financing through either debt or equity financing, as long as the
terms of such financings do not alter PeopleSoft's rights as a Class B Common
Stock holder. Funds raised through such financings would not be considered
Available Funds and thus their use by Momentum would not be restricted by
PeopleSoft.
There can be no assurances, particularly given the existence of the
Development Agreement, the Marketing Agreement and the Services Agreement, that
Momentum will be able to raise any additional capital. Such additional capital,
if raised, would most likely reduce the per share proceeds available to holders
of the Momentum Class A Common Stock if the Purchase Option were to be exercised
by PeopleSoft. See "The Agreements and the Purchase Option -- Purchase Option."
OPERATIONS
Prior to the Distribution, Momentum will not have conducted any
operations. After the Distribution, Momentum's operations will be conducted
largely pursuant to the Development Agreement, the Marketing Agreement and the
Services Agreement. See "The Agreements and the Purchase Option."
In its early years, Momentum's revenues are expected to consist solely
of investment income. In later years, Momentum may derive license revenues from
commercialization of Momentum Products, most likely by PeopleSoft. However,
Momentum is not expected to earn substantial revenues unless the Momentum
Products are successfully commercialized.
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<PAGE> 32
Momentum's expenses will be incurred primarily under the Development
Agreement and the Services Agreement. If Momentum engages PeopleSoft to perform
research and development work, PeopleSoft will charge Momentum 110% of its fully
burdened cost of performing such activities. Fully burdened costs include
salary, benefits and overhead allocations, but do not include certain other
costs, such as the human resources costs associated with recruiting development
personnel and pre-release testing costs. Based on its internal projections,
PeopleSoft believes that these other costs will be approximately 10% of the
fully burdened costs. Momentum will also incur certain direct costs associated
with developing Momentum Products. These costs could also include payments to
other third parties for development, royalties, or costs associated with
acquiring or investing in complementary companies, products or technology.
Under the Services Agreement, PeopleSoft will provide Momentum certain
administrative services including accounting, finance, human resources and legal
services. Momentum will pay PeopleSoft a fee of $100,000 per quarter for such
services. This fee is based on PeopleSoft's internal projections of the
incremental costs it will incur to provide these services. Momentum will also
incur direct costs such as professional services, insurance, taxes and
regulatory fees.
As a result of its need to incur substantial development expenses prior
to receiving significant revenue, Momentum anticipates that it will incur
substantial losses which will likely be recurring.
Momentum's future cash flow obligations will derive largely from the
Development Agreement and the Services Agreement. Momentum is required to expend
the Available Funds only to acquire or develop Momentum Products and related
technologies and for related administrative expenses. The rate at which
Available Funds are expended will derive from work plans and cost estimates
approved by Momentum.
YEAR 2000 DISCLOSURE
Momentum expects that substantially all of its research and development
and administrative activities will be performed by PeopleSoft. Momentum believes
that PeopleSoft's internal systems are Year 2000 compliant. To the extent that
Momentum purchases its own internal systems or contracts with other parties for
such services, it expects to be able to find systems and service providers which
are Year 2000 compliant. However, Momentum and PeopleSoft will be relying on a
variety of service providers, including telephone companies, utilities and
network services providers whose Year 2000 compliance is difficult to ascertain.
If any these providers were unable to provide their services to either
PeopleSoft or Momentum, Momentum's business could be adversely affected.
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<PAGE> 33
THE AGREEMENTS AND THE PURCHASE OPTION
Set forth below are summary descriptions of the Development Agreement,
the Marketing Agreement and the Services Agreement entered into between Momentum
and PeopleSoft. These summaries are intended to provide you with an
understanding of the key terms and conditions of these agreements as well as the
rights and obligations of Momentum and PeopleSoft under the agreements. It is
important that you take the time to understand these agreements, because they
have a direct influence on the development of Momentum's business, Momentum's
ability to finance its business, the development of Momentum's products, the
cost of product development, how Momentum products may be marketed and other key
factors relating to the direction, independence and viability of Momentum.
DEVELOPMENT AND LICENSE AGREEMENT
Momentum and PeopleSoft have entered into a Development and License
Agreement (the "Development Agreement") for the selection and development of
software application products including (i) e-business applications, (ii)
analytic applications, and (iii) industry-specific software application
products.
Pursuant to the Development Agreement, the parties have agreed to the
following terms:
PeopleSoft has granted to Momentum a perpetual, worldwide,
non-exclusive license to use PeopleSoft Technology solely for internal use
purposes connected with the Development Agreement and solely in conjunction with
Momentum's development, support, demonstration, testing (and all other related
tasks) of the Momentum Products.
PeopleSoft will propose to Momentum that it develop particular software
products and related technologies. If Momentum agrees to develop such products,
PeopleSoft and Momentum will agree upon timetables, budgets and specifications
for each product. Products recommended by PeopleSoft and approved by Momentum
for development are called "Momentum Products."
Momentum has agreed to use diligent efforts to research and develop
Momentum Products in accordance with agreed upon budgets and timetables.
Momentum expects that it will undertake research and development by contracting
with a third party, as it does not expect to have the staffing or facilities to
do such research and development itself. Momentum currently expects that
substantially all of the research and development relating to Momentum Products
will be performed by PeopleSoft. However, PeopleSoft is not obligated to provide
any such services to Momentum, and Momentum may choose to hire other third party
providers. If Momentum chooses to engage PeopleSoft, it will pay PeopleSoft one
hundred and ten percent (110%) of PeopleSoft's fully burdened costs relating to
the research and development provided by PeopleSoft. PeopleSoft will recognize
such reimbursement amounts as product development revenues. If a third party is
hired to conduct research and development relating to Momentum Products, any
agreement between Momentum and such third party must include appropriate
provisions for the protection of PeopleSoft Technology and PeopleSoft's rights
under the Development Agreement, the Marketing Agreement, and the Services
Agreement and as a holder of the Momentum Class B Common Stock.
Momentum may develop or acquire (through licensing or otherwise) third
party software toolsets ("Developed Technology") for the purpose of developing
Momentum Products. To the extent Momentum has the right, Momentum will grant
PeopleSoft an irrevocable, worldwide, non-exclusive
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<PAGE> 34
license to use, market, manufacture, reproduce, copy, sublicense, distribute
(through PeopleSoft's then current worldwide channel distribution system),
create derivative works, enhance and modify the Developed Technology. For a
period of ten (10) years from the date the Developed Technology is acquired or
first identified as part of the work plan related to the development of a
Momentum Product, PeopleSoft will pay a royalty of one percent (1%) of net
revenue on products (other than Momentum Products) developed by PeopleSoft using
Developed Technology. In order to develop certain products using Developed
Technology, PeopleSoft may need to acquire licenses or enter into other
arrangements with third parties. For purposes of calculating royalties due to
Momentum for the use of Developed Technology in these products, net revenue will
be reduced by the amount of license fees or similar payments due to third
parties from PeopleSoft with respect to such product.
PeopleSoft will own all rights with respect to any enhancements made by
Momentum to PeopleTools(R) or other software products contributed by PeopleSoft.
PeopleSoft will not be obligated to make any royalty or other payments with
respect to such technology or enhancements. Momentum will own the Developed
Technology and the Momentum Products subject to PeopleSoft's license rights as
described in the Development Agreement and the Marketing Agreement.
Momentum may use the Available Funds only to develop or acquire
Momentum Products and related technologies and for related administrative
expenses. It is anticipated that Momentum will spend the Available Funds over a
period of approximately three to four years. Prior to expenditure, Momentum will
be required to invest the Available Funds in high quality marketable securities.
Any such investment earnings shall become a part of the Available Funds.
Momentum may not encumber, pledge or otherwise take any action with respect to
Available Funds that could prevent the full expenditure of such funds under the
Development Agreement. Under certain circumstances, PeopleSoft will have the
right to require Momentum to make an affirmative pledge of the Available Funds
to performance under the Development Agreement. Other than PeopleSoft's rights
under the Purchase Option, there are no restrictions on Momentum's use of funds
it generates or receives, that are not Available Funds, to conduct its business
as it determines.
The Development Agreement will automatically terminate upon the
expiration of the Purchase Option; provided, however, PeopleSoft's obligation to
pay royalties on Developed Technology will continue until the expiration of the
respective royalty terms. Either party may terminate the Development Agreement
if the other party breaches a material obligation thereunder and such breach
continues uncured for thirty (30) days after written notice by the terminating
party.
In the event the Development Agreement or the Marketing Agreement is
terminated by PeopleSoft in connection with Momentum's breach of a material
obligation under the Development Agreement or the Marketing Agreement,
PeopleSoft shall be entitled to receive, as liquidated damages, the Available
Funds. If PeopleSoft reasonably believes that such liquidated damages are
inadequate, then PeopleSoft will be entitled to specific performance of
Momentum's obligations under the Development Agreement or the Marketing
Agreement in connection with such breach.
MARKETING AND DISTRIBUTION AGREEMENT
Under the Marketing and Distribution Agreement (the "Marketing
Agreement"), Momentum has granted PeopleSoft the exclusive license to market and
distribute pre-General Availability versions of each Momentum Product (the
"Pre-General Availability License") and an option to obtain a perpetual,
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<PAGE> 35
worldwide, exclusive license to market, distribute, sublicense, support and
enhance any post-General Availability versions of each Momentum Product (the
"License Option").
Under the Pre-General Availability License, PeopleSoft has an exclusive
license with respect to each Momentum Product to market and distribute the
Momentum Product for the period from which Momentum accepts the relevant product
proposal from PeopleSoft until the earlier of: (i) the exercise or expiration of
PeopleSoft's License Option with respect to the Momentum Product; or (ii) the
expiration of the Purchase Option. PeopleSoft shall pay Momentum royalties of
six percent (6%) of Net Revenues from the license of each Momentum Product.
PeopleSoft has agreed to use commercially reasonable efforts to promptly market
each pre-General Availability Momentum Product to a limited group of customers
in accordance with PeopleSoft's standard practices.
Under the License Option, PeopleSoft may obtain a perpetual, worldwide,
exclusive license (with the right to sublicense through multiple tiers) to
market, distribute, support and enhance each Momentum Product. PeopleSoft may
exercise the License Option with respect to any Momentum Product at any time
from the date on which Momentum agrees to develop the product until the earlier
of: (i) thirty (30) days after the product becomes Generally Available; or (ii)
the expiration of the Purchase Option. A Momentum Product will be deemed to be
Generally Available upon successful completion of the release testing model
which PeopleSoft uses for its own products with the level of functionality
originally agreed to by PeopleSoft and Momentum. Upon exercise of the License
Option with respect to a Momentum Product (a "Licensed Product"), PeopleSoft
will assume full responsibility for any product development, support, training,
consulting, bug fixes, modifications and enhancements with respect to such
Licensed Product. If PeopleSoft does not exercise the License Option with
respect to a Momentum Product, PeopleSoft will retain the right and obligation
to support any customers to whom it licensed such Momentum Product pursuant to
its Pre-General Availability License. These rights and obligations will survive
the termination of the Marketing Agreement.
PeopleSoft will make Product Payments to Momentum with respect to each
Licensed Product equal to the sum of (i) one percent (1%) of Net Revenues plus
(ii) an additional one-tenth of one percent (0.1%) of Net Revenue for each one
million dollars ($1,000,000) of Development Costs of the Licensed Product that
were incurred by Momentum, up to a maximum royalty rate of six percent (6%) of
Net Revenue. Net Revenues for a particular quarter are end user license fees
received by PeopleSoft for licensing or sub-licensing each Licensed Product less
the value of bundled services and development expenses incurred by PeopleSoft on
such Licensed Product for that quarter. Net Revenues will include all user
license fees paid with respect to each Licensed Product, regardless of whether
PeopleSoft directly licenses such Licensed Product, or indirectly licenses such
Licensed Product through a reseller, distributor, or other third party. Subject
to PeopleSoft's Product Payment Buy-Out Option described below, Product Payments
will be payable by PeopleSoft to Momentum for ten (10) years after General
Availability of the Licensed Product. PeopleSoft will retain all support
services and maintenance fees with no royalty-sharing or payment obligation to
Momentum. PeopleSoft's royalty obligations will survive the termination of the
Marketing Agreement.
PeopleSoft has the option to buy out Momentum's right to receive
Product Payments for any Licensed Product. The Product Payment Buy-Out Option
may be exercised for any Licensed Product at any time beginning twelve (12)
months after the Licensed Product is declared Generally Available. The buy-out
price will be fifteen (15) times the payment made by or due from PeopleSoft to
Momentum with respect to licenses of such Licensed Product for the four (4)
quarters immediately preceding the quarter in which the Product Payment Buy-Out
Option is exercised (payment will be annualized for any such Licensed Product
that has not been a Licensed Product for all of each of such four (4) quarters).
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<PAGE> 36
If PeopleSoft does not exercise the License Option with respect to a
Momentum Product, Momentum will be free to commercialize that Momentum Product
itself or with the assistance of a third party. To the extent that any such
Momentum Product contains PeopleSoft Technology, PeopleSoft has granted Momentum
a license with respect to PeopleSoft Technology allowing Momentum to enhance,
license, use and distribute the product provided that Momentum may not contract
with certain entities that PeopleSoft reasonably believes and identifies as
competitors of PeopleSoft. This license will survive the termination of the
Marketing Agreement.
During the term of the Marketing Agreement, PeopleSoft will provide
quarterly reports to Momentum detailing payments due for such period with
respect to the relevant Momentum Product or Licensed Product, as the case may
be. Such reports will be due thirty (30) days after the end of each calendar
quarter and will indicate the quantity and dollar amount of Net Revenues
relating to each Momentum Product or Licensed Product, as the case may be, or
other consideration in respect of Net Revenues, during the quarter covered by
such report. No more than once in each calendar year upon at least five (5)
business days notice and during regular business hours, at Momentum's expense,
PeopleSoft is required to make available for inspection by Momentum such records
of PeopleSoft as may be necessary to verify the accuracy of reports and payments
made under the Marketing Agreement. PeopleSoft must provide similar reports and
records with respect to all Developed Technology Products.
The Marketing Agreement terminates upon the earlier to occur of: (i)
the exercise of the Purchase Option by PeopleSoft; or (ii) the end of the
thirtieth (30th) day after the expiration of the Purchase Option. The Marketing
Agreement may be terminated by either party in the event that the other party
(i) breaches any material obligation under the Marketing Agreement (which breach
continues for a period of thirty (30) days after written notice to the
defaulting party) or (ii) enters into any proceeding, voluntary or involuntary,
in bankruptcy, reorganization or similar arrangement for the benefit of its
creditors.
SERVICES AGREEMENT
Pursuant to the Services Agreement, PeopleSoft will provide Momentum
with certain services relating to administration, including accounting, finance,
human resources and legal services. Momentum has agreed to pay PeopleSoft a fee
of $100,000 per quarter for such services. Momentum will also incur direct costs
such as professional services, insurance, taxes and regulatory fees. The
Services Agreement remains in force until December 31, 2002 and thereafter is
automatically renewed for one-year terms.
DISTRIBUTION AGREEMENT
Under the Distribution Agreement, PeopleSoft will contribute $250
million in cash to Momentum in exchange for approximately 4,750,000 shares of
Momentum Class A Common Stock and 1,000 shares of Momentum Class B Common Stock.
PeopleSoft will then dividend such shares of Momentum Class A Common Stock to
the PeopleSoft stockholders in connection with the Distribution. Under the
Distribution Agreement, PeopleSoft has agreed to indemnify Momentum's officers
and directors to the same extent such persons are entitled to indemnification
under Momentum's Certificate of Incorporation if PeopleSoft exercises the
Purchase Option.
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<PAGE> 37
PURCHASE OPTION
The Purchase Option is set forth in Momentum's Certificate of
Incorporation. Pursuant to the Purchase Option, PeopleSoft has an exclusive,
irrevocable option to purchase all, but not less than all, of the issued and
outstanding Momentum Class A Common Stock. PeopleSoft may exercise the Purchase
Option by written notice to Momentum at any time during the period beginning
immediately after the Distribution until December 31, 2002; provided that such
date will be extended for successive six month periods if, as of any June 30 or
December 31 beginning with June 30, 2002, Momentum has not paid or accrued
expenses for all but $15 million of the Available Funds as of such date. In any
event, the Purchase Option will terminate on the sixtieth (60th) day after
Momentum provides PeopleSoft with a statement that, as of the end of any
calendar month, there are less than $2.5 million of Available Funds remaining.
All certificates evidencing Momentum Class A Common Stock will bear a legend
indicating that the Momentum Class A Common Stock is subject to the Purchase
Option.
If the Purchase Option is exercised, the exercise price (the "Purchase
Option Exercise Price") will be the greatest of:
(1) 15 times the sum of (i) the actual worldwide payments made by
or due from PeopleSoft to Momentum with respect to all
Licensed Products and Developed Technology for the four
calendar quarters immediately preceding the quarter in which
the Purchase Option is exercised (the "Base Period"); plus
(ii) such payments as would have been made during the Base
Period by, or due from, PeopleSoft to Momentum if PeopleSoft
had not previously exercised its Product Payment Buy-Out
Option with respect to any Momentum Product (for purposes of
the calculations in (i) and (ii), payments will be annualized
for any product that has not been a Licensed Product for all
of each of the four calendar quarters in the Base Period);
minus
any amounts previously paid to exercise any Product
Payment Buy-Out Option for such Momentum Product;
(2) the fair market value of six hundred thousand (600,000) shares
of PeopleSoft Common Stock, adjusted in the event of a stock
split or dividend, as of the date PeopleSoft exercises its
Purchase Option;
(3) three hundred million dollars ($300,000,000) plus any
additional funds contributed to Momentum by PeopleSoft, less
the aggregate of all amounts paid or incurred to develop the
Momentum Products or pursuant to the Services Agreement as of
the date the Purchase Option is exercised; or
(4) seventy-five million dollars ($75,000,000).
In each case, the amount payable as the Purchase Option Exercise Price
will be reduced (but not to less than the total par value of the outstanding
Momentum Class A Common Stock) to the extent, if any, that Momentum's
liabilities at the time of exercise (other than liabilities under the
Development Agreement, the Marketing Agreement and/or the Services Agreement)
exceed Momentum's cash and cash equivalents, and short-term and long-term
investments (excluding the amount of Available Funds remaining at such time).
For this purpose, liabilities will include, in addition to liabilities required
to be reflected on Momentum's financial statements under generally accepted
accounting principles, certain contingent liabilities relating to guarantees and
similar arrangements.
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<PAGE> 38
If PeopleSoft exercises the Purchase Option, PeopleSoft will pay the
Purchase Option Exercise Price in cash. For the purpose of determining the
Purchase Option Exercise Price, the fair market value of PeopleSoft Common Stock
shall be deemed to be the average of the closing sales price of PeopleSoft
Common Stock on the Nasdaq National Market (or such other securities exchange on
which PeopleSoft is then listed) for the twenty (20) trading days ending with
the trading day that is two trading days prior to the date of determination. The
per share purchase price of Momentum Class A Common Stock will be reduced if
Momentum issues additional shares after the Distribution.
The closing of the acquisition of the Momentum Class A Common Stock
pursuant to exercise of the Purchase Option will take place on a date selected
by PeopleSoft, but no later than sixty (60) days after the exercise of the
Purchase Option unless, in the judgment of PeopleSoft, a later date is required
to satisfy any applicable legal requirements or to obtain required consents.
Between the time of exercise of the Purchase Option and the time of closing of
the acquisition of the Momentum Class A Common Stock, Momentum may not, without
PeopleSoft's consent, incur additional debt, dispose of assets, pay or declare
any dividends or operate its business other than in the ordinary course.
At PeopleSoft's election, Momentum may redeem on such closing date the
Momentum Class A Common Stock for an aggregate redemption price equal to the
final Purchase Option Exercise Price. Any such redemption would be in lieu of
PeopleSoft paying the final Purchase Option Exercise price directly to holders
of Momentum Class A Common Stock, and would be subject to PeopleSoft providing
the final Purchase Option Exercise Price to Momentum to allow Momentum to pay
the redemption price.
In the event that prior to PeopleSoft's exercise of the Purchase
Option, the number of outstanding shares of PeopleSoft Common Stock is increased
by virtue of a stock split or a dividend payable in PeopleSoft Common Stock or
the number of such shares is decreased or changed by virtue of a combination or
reclassification of such shares, then the number of shares of PeopleSoft Common
Stock used to compute the Purchase Option Exercise Price (if the Purchase Option
Exercise Price is the fair market value of 600,000 shares of PeopleSoft Common
Stock) shall be increased or decreased, as the case may be, in proportion to
such increase or decrease in the number of outstanding shares of PeopleSoft
Common Stock.
Under Momentum's Certificate of Incorporation, Momentum will be
prohibited from taking or permitting any action inconsistent with, or which
would in any way alter, PeopleSoft's rights under the Purchase Option. Momentum
may not, without consent of PeopleSoft as the sole holder of the Momentum Class
B Common Stock, merge, liquidate, sell any substantial assets, or amend its
Certificate of Incorporation to (i) alter the Purchase Option, (ii) change
Momentum's authorized capitalization, or (iii) alter the provisions governing
the Board of Directors. To the extent Rule 13e-3 ("Rule 13e-3") under the
Exchange Act dealing with going private transactions by certain issuers or their
affiliates is applicable at the time of any exercise of the Purchase Option,
PeopleSoft and Momentum will comply with their respective obligations under Rule
13e-3, subject to any available exemptions from such obligations.
-35-
<PAGE> 39
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation with respect to certain material
federal income tax considerations under the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to the shares of Momentum Class A Common
Stock, cash in lieu of fractional shares of Momentum Class A Common Stock, or
both shares of Momentum Class A Common Stock and cash distributed to
PeopleSoft's stockholders in the Distribution. THIS DISCUSSION DOES NOT ADDRESS
THE TAX CONSEQUENCES OF THE ACQUISITION OF SHARES OF MOMENTUM CLASS A COMMON
STOCK BY PURCHASE OR MEANS OTHER THAN THE DISTRIBUTION. In addition, this
discussion is intended only to provide general information regarding PeopleSoft
stockholders that are subject to United States federal income tax; it may not
address all relevant federal income tax consequences to such persons or to other
categories of PeopleSoft stockholders, e.g., foreign persons, dealers in
securities, and stockholders that are exempt from federal income tax. This
discussion is based upon the Code, Treasury Regulations (including proposed
Treasury Regulations) promulgated thereunder, rulings, official pronouncements
and judicial decisions all as in effect on the date hereof and all of which are
subject to change or different interpretations by the Internal Revenue Service
("IRS") or the courts, any of which changes or interpretations may have
retroactive effect. Wilson Sonsini Goodrich & Rosati, Professional Corporation,
has disclaimed any undertaking to advise as to any change in the law that may
affect its opinion, including changes that may be made under currently pending
legislative proposals, and has expressed no opinion as to the laws of any
jurisdictions other than the federal income tax laws of the United States of
America. An opinion of counsel does not bind the IRS, which could take a
contrary position, but represents only counsel's judgment as to the likely
outcome if the issues involved were properly presented to a court of competent
jurisdiction. This discussion assumes that the shares of Momentum Class A Common
Stock will at all relevant times constitute capital assets of the stockholders.
This discussion does not address state, local, or foreign tax considerations.
PEOPLESOFT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
TAXABILITY OF THE DISTRIBUTION TO HOLDERS OF PEOPLESOFT COMMON STOCK
The fair market value of shares of Momentum Class A Common Stock, plus
the cash intended to represent the fair market value of a fractional share of
Momentum Class A Common Stock (together, the "Taxable Amount"), distributed to a
holder of PeopleSoft Common Stock will constitute a dividend taxable as ordinary
income to the extent that PeopleSoft has current or accumulated "earnings and
profits" as of the end of the taxable year in which the Distribution occurs that
are allocable to the Distribution for federal income tax purposes. Assuming that
there will be a public market for the shares of Momentum Class A Common Stock at
the time of the Distribution, the fair market value of a share of Momentum Class
A Common Stock to a PeopleSoft stockholder for this purpose is expected to be
the average of the high and low trading price on the date of the Distribution or
if such date is not a trading day, on the first trading day following the
Distribution. If the Taxable Amount exceeds the stockholder's allocable share of
PeopleSoft's current and accumulated earnings and profits for federal income tax
purposes determined as of the end of PeopleSoft's fiscal year ending December
31, 1998, the excess will generally be treated first as a tax-free return of
capital to the extent of the stockholder's basis in the stockholder's PeopleSoft
Common Stock, and after this basis is reduced to zero, as capital gain, which
will be taxed in the manner discussed in the "Sale of Shares of Momentum Class A
Common Stock" section below. PeopleSoft's management has advised that, based on
the information currently available, PeopleSoft's accumulated earnings and
profits at December 31, 1998 is expected to be such that the Taxable Amount will
not exceed the PeopleSoft stockholder's allocable share of such earnings and
profits.
-36-
<PAGE> 40
No later than February 1, 1999, PeopleSoft will issue to each holder of
PeopleSoft Common Stock receiving shares of Momentum Class A Common Stock in the
Distribution an IRS Form 1099-DIV reflecting the fair market value of the shares
of Momentum Class A Common Stock (and any amount of cash received in lieu of
fractional shares of Momentum Class A Common Stock) distributed to such holder,
as well as any portion of the Taxable Amount exceeding such holder's allocable
share of PeopleSoft's current and accumulated earnings and profits.
To the extent that the Taxable Amount constitutes ordinary income, it
will generally be subject to back up withholding with respect to PeopleSoft
stockholders who, before the Distribution, have not provided their correct
taxpayer identification numbers to PeopleSoft on an IRS Form W-9 or a substitute
therefor. Although this discussion does not generally address tax consequences
of the Distribution to foreign holders of PeopleSoft Common Stock, such holders
should note that distribution of the Taxable Amount (to the extent of such
foreign holder's allocable share of PeopleSoft's current and accumulated
earnings and profits) will generally be subject to U.S. withholding tax at the
rate of 30%. This rate may be reduced by income tax treaties to which the United
States is a party. Nonresident alien individuals, foreign corporations and other
foreign holders of PeopleSoft Common Stock are urged to consult their own tax
advisors regarding the availability of such reductions and the procedures for
claiming them.
For corporate holders of PeopleSoft Common Stock, the Taxable Amount
(to the extent treated as ordinary income) will be eligible for a
"dividends-received" deduction, subject to limitations and exclusions provided
by the Code, if the Purchase Option is "significantly out of the money" for at
least 46 days during the 90-day period beginning 45 days before the PeopleSoft
Common Stock becomes ex-dividend with respect to the Distribution. However, for
corporate holders of PeopleSoft Common Stock, the Taxable Amount will be subject
to the Code's extraordinary dividend rules, which could reduce a corporate
holder's basis in its PeopleSoft Common Stock by the amount of the deduction, if
the Taxable Amount equals at least 10% of the holder's basis. Moreover, to the
extent that the untaxed distribution exceeds the corporate holder's basis, gain
will be recognized.
SALE OF SHARES OF MOMENTUM CLASS A COMMON STOCK
Upon the sale of shares of Momentum Class A Common Stock, the
PeopleSoft stockholder will have a capital gain or loss equal to the difference
between the sale price and the stockholder's basis in the shares of Momentum
Class A Common Stock sold. This gain or loss will be long-term capital gain or
loss if the shares of Momentum Class A Common Stock have a holding period of
more than one year on the sale date. The maximum stated federal income tax rate
for long-term capital gain is 20% for noncorporate holders. In addition, the
combination of the shares of Momentum Class A Common Stock and the Purchase
Option may be deemed a "straddle," with the result that the holding period of
shares of Momentum Class A Common Stock would not begin until such date as the
Purchase Option is exercised or expires. There is presently no difference in
federal income tax rates between ordinary income and capital gains of
corporations. Limitations may apply to deduction of capital loss.
A PeopleSoft stockholder's initial basis in shares of Momentum Class A
Common Stock received in the Distribution will be the fair market value of those
shares of Momentum Class A Common Stock at the time of the Distribution, which
fair market value will be determined in the manner set forth in the "Taxability
of the Distribution to Holders of PeopleSoft Common Stock" section above.
-37-
<PAGE> 41
EXERCISE OF PURCHASE OPTION
If PeopleSoft exercises its Purchase Option, holders of shares of
Momentum Class A Common Stock will have a capital gain or loss due to such
exercise equal to the difference between (a) the cash (and any other deemed
consideration) received and (b) the holder's basis in the shares of Momentum
Class A Common Stock surrendered. Gain or loss due to the exercise of the
Purchase Option will be long-term capital gain or loss if the shares of Momentum
Class A Common Stock have been held for more than one year at the time of the
closing of the exercise of the Purchase Option. However, the combination of the
shares of Momentum Class A Common Stock and the Purchase Option may be deemed a
"straddle," with the result that the holding period of shares of Momentum Class
A Common Stock would not begin until such date as the Purchase Option is
exercised and that capital gain or loss upon exercise of the Purchase Option
would be short-term. Limitations may apply to deduction of capital loss.
EXPIRATION OF PURCHASE OPTION
If the Purchase Option expires unexercised, each holder of shares of
Momentum Class A Common Stock on the date it expires may have short-term capital
gain in the amount of the fair market value of the portion of the Purchase
Option covering the holder's shares of Momentum Class A Common Stock on the date
of the Distribution; any such gain would increase the holder's basis in the
shares of Momentum Class A Common Stock. PeopleSoft believes that the fair
market value of the Purchase Option is not readily ascertainable. Each holder of
shares of Momentum Class A Common Stock should consult his or her own tax
adviser as to what amount, if any, should be reported as gain if the Purchase
Option expires unexercised.
-38-
<PAGE> 42
DESCRIPTION OF MOMENTUM CAPITAL STOCK
At the time of the Distribution, Momentum's authorized capital stock
will consist of (i) 10,000,000 shares of Momentum Class A Common Stock, (ii)
1,000 shares of Momentum Class B Common Stock (together with Momentum Class A
Common Stock, the "Momentum Common Stock"), and (iii) 2,000,000 shares of
undesignated Preferred Stock.
Holders of Momentum Common Stock will be entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. Available Funds may not be used to pay dividends. In the
event of a liquidation, dissolution or winding up of Momentum, holders of
Momentum Common Stock will be entitled to receive, pro rata, all remaining
assets of Momentum available for distribution to stockholders.
No preemptive rights, conversion rights or sinking fund provisions will
be applicable to Momentum Class A Common Stock. Upon completion of this
Distribution, all outstanding Momentum Class A Common Stock will be fully paid
and nonassessable. The Momentum Class A Common Stock will be subject to the
Purchase Option and certificates representing such shares and book-entry account
statements will bear a legend to that effect. See "The Agreements and the
Purchase Option -- Purchase Option."
No preemptive rights or sinking fund provisions will be applicable to
the Momentum Class B Common Stock. Each share of the Momentum Class B Common
Stock, all of which are held by PeopleSoft, will automatically convert into one
share of Class A Momentum Stock upon such date as the Purchase Option expires.
Until the expiration of the Purchase Option, PeopleSoft, as the sole
holder of the Momentum Class B Common Stock, will be entitled to vote separately
as a class with respect to any merger or liquidation of Momentum, the sale,
lease, exchange, transfer or other disposition of any substantial asset of
Momentum, and any amendments to the Certificate of Incorporation of Momentum
that would alter the Purchase Option, Momentum's authorized capitalization, or
the provisions of the Certificate of Incorporation governing Momentum's Board of
Directors. Accordingly, PeopleSoft could preclude the holders of the Momentum
Class A Common Stock from taking any of the foregoing actions during such
period. Prior to exercise of the Purchase Option, the holders of the Momentum
Class B Common Stock, voting as a separate class, will be entitled to elect one
director, and the holders of the Momentum Class A Common Stock will be entitled
to elect up to three directors. Upon exercise of the Purchase Option,
PeopleSoft, as the sole holder of the Momentum Class B Common Stock, will have
the right to elect all of the Momentum directors and to remove directors with or
without cause. On all other matters, holders of the Momentum Class A Common
Stock and Momentum Class B Common Stock will vote together as a single class.
Holders of Momentum Common Stock will have one vote for each share of Momentum
Common Stock held by them. Subject to compliance with securities laws, the Class
B Common Stock is freely transferable.
Only the Momentum Board of Directors, the Chairman of the Board or the
President may call special meetings of the Momentum stockholders. The approval
of the holder of the Momentum Class B Common Stock is required to amend the
provisions of Momentum's Certificate of Incorporation and bylaws governing the
number and classification of the Board of Directors and certain related matters.
The provisions of Momentum's Certificate of Incorporation granting special
voting rights to the holder or
-39-
<PAGE> 43
holders of the Momentum Class B Common Stock and eliminating the right of
Momentum stockholders to call special meetings of stockholders or act by written
consent may inhibit a change in control of Momentum.
Momentum has authorized 2,000,000 shares of Preferred Stock. Shares of
Preferred Stock may be issued without stockholder approval. The Board of
Directors is authorized to issue such shares in one or more series and to fix
the designations, powers, preferences, rights, qualifications, limitations and
restrictions thereof, including dividend rights and rates, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series of the designation of such
series without any vote or action by the stockholders. However, any Preferred
Stock issued must be subject to the Purchase Option and the approval of the
holders of a majority of the Momentum Class B Common Stock is required to create
any series of Preferred Stock with powers, preferences or rights superior to or
pari passu with the Momentum Class B Common Stock.
RECENT SALES OF UNREGISTERED SECURITIES
In November 1998, Momentum sold 1,000 shares of its Common Stock to
PeopleSoft for an aggregate cash purchase price of $1,000 in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof. In connection with the Distribution contemplated by this
Registration Statement, the 1,000 shares of Momentum Common Stock held by
PeopleSoft will be converted into 1,000 shares of Momentum Class B Common Stock
in a transaction exempt from the registration requirements of the Securities Act
pursuant to Section 3(a)(9) thereof.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, both Momentum and
PeopleSoft have included in their Certificates of Incorporation a provision to
eliminate the personal liability of their directors for monetary damages for
breach or alleged breach of their fiduciary duties as directors, subject to
certain exceptions. In addition, the Bylaws of Momentum and PeopleSoft require
the companies to (i) indemnify their officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and (ii) advance expenses to their officers and
directors as incurred in connection with proceedings against them for which they
may be indemnified. Momentum and PeopleSoft have entered into indemnification
agreements with their officers and directors containing provisions that are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements may require
the companies, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms. Momentum
and PeopleSoft believe that its charter provisions and the indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
Momentum and PeopleSoft understand that the staff of the Securities and
Exchange Commission is of the opinion that statutory, charter and contractual
provisions as are described above have no effect on claims arising under the
federal securities laws.
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<PAGE> 44
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Momentum Class A Common Stock
is Boston EquiServe, L.P., 289 S. San Antonio Road, Suite 100, Los Altos,
California 94022; telephone: (650) 947- 3800.
-41-
<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................................................... F-2
Momentum Business Applications, Inc. Balance Sheet and Notes to Balance Sheet.......................... F-3
Momentum Business Applications, Inc. Pro Forma Balance Sheet and Notes to Pro Forma Balance
Sheet (unaudited)............................................................................... F-6
</TABLE>
F-1
<PAGE> 46
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the accompanying balance sheet of Momentum Business
Applications, Inc. as of November 10, 1998. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
a reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluation of the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Momentum Business Applications,
Inc. as of November 10, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
San Jose, California
November 11, 1998
F-2
<PAGE> 47
MOMENTUM BUSINESS APPLICATIONS, INC.
BALANCE SHEET
NOVEMBER 10, 1998
<TABLE>
<S> <C>
ASSETS
Cash ............................................................ $1,000
======
STOCKHOLDERS' EQUITY (NOTE 3)
Common Stock, $0.001 par value, 1,000 shares
authorized, 1,000 shares issued and outstanding ............. $ 1
Additional paid-in capital ...................................... 999
------
Total stockholders' equity .............................. $1,000
======
</TABLE>
F-3
<PAGE> 48
MOMENTUM BUSINESS APPLICATIONS, INC.
NOTES TO BALANCE SHEET
1. Organization and Ownership
Momentum Business Applications, Inc. (the "Company" or "Momentum") was
incorporated on November 9, 1998, in the state of Delaware for the purposes of
selecting and developing certain software applications and for commercializing
such products, most likely through licensing to PeopleSoft, Inc.
("PeopleSoft").
The Company has not yet commenced significant operations, and its only
activity to date has been the initial funding provided by PeopleSoft, which owns
all of the Company's outstanding Common Stock. Accordingly, no statement of
operations or statement of cash flows is presented.
2. Certain Transactions with PeopleSoft (unaudited)
On November 10, 1998, the Board of Directors of Momentum authorized the
Company to enter into certain agreements with PeopleSoft including a Development
and License Agreement (the "Development Agreement"), a Services Agreement (the
"Services Agreement") and a Marketing and Distribution Agreement (the "Marketing
Agreement"). In addition, under the Company's Certificate of Incorporation,
PeopleSoft will have an option, for a specified amount of time, to purchase all
of the outstanding shares of the Momentum Class A Common Stock.
Under the proposed terms of the Development Agreement, PeopleSoft will
grant to Momentum, at no charge, a worldwide license to use its PeopleTools(R)
rapid application development environment and architecture solely to develop
products accepted for development under the Development Agreement.
Under the proposed terms of the Development Agreement, Momentum will be
required to spend all of the funds contributed by PeopleSoft for the development
and acquisition of software products and related technologies under the
Development Agreement and for related administrative expenses. Momentum is not
expected to have staffing or facilities to perform under the Development
Agreement on its own. Momentum is expected to spend most of these funds to pay
PeopleSoft for the costs of these activities. PeopleSoft will charge Momentum
110% of PeopleSoft's fully-burdened costs of these services (salaries and
benefits, plus overhead).
Under the proposed terms of the Services Agreement, PeopleSoft will
provide Momentum with administrative services, including accounting, finance,
human resource and legal services for a set fee of $100,000.00 per quarter.
3. Common Stock (unaudited)
Prior to the Distribution contemplated by this information statement,
the Company intends to restate its Certificate of Incorporation to provide for
two classes of common stock, Class A Common Stock and Class B Common Stock. The
common stockholders of PeopleSoft will receive one share of Momentum Class A
Common Stock for each 50 shares of PeopleSoft common stock held on the record
date. The shares of Momentum Common Stock held by PeopleSoft on the record date
will be converted into 1,000 shares of Momentum Class B Common Stock.
F-4
<PAGE> 49
4. Preferred Stock (unaudited)
Prior to the Distribution contemplated by this information statement,
the Company intends to restate its Certificate of Incorporation to provide for
2,000,000 shares of Preferred Stock. The Board of Directors is authorized to
issue such shares in one or more series and to fix the rights, preference,
privileges, qualifications, limitations and restrictions thereof, including
dividend rights and rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series of the designation of such series.
F-5
<PAGE> 50
MOMENTUM BUSINESS APPLICATIONS, INC.
PRO FORMA BALANCE SHEET
NOVEMBER 10, 1998
(UNAUDITED)
The following pro forma balance sheet should be read in conjunction
with the audited balance sheet and notes of Momentum Business Applications, Inc.
as of November 10, 1998. The pro forma balance sheet is presented to show the
financial position of Momentum following the receipt of the remainder of
$250,000,000 in cash contributed by PeopleSoft, the conversion of 1,000 shares
of Momentum's Common Stock owned by PeopleSoft into 1,000 shares of Momentum's
Class B Common Stock, and the issuance to PeopleSoft of shares of Momentum Class
A Common Stock prior to the Distribution.
ASSETS
<TABLE>
<CAPTION>
As Adjusted As
Pro Forma of November 10,
Unadjusted Adjustments 1998
------------- ------------- --------------
<S> <C> <C> <C>
Cash ........................................................................... $ 1,000 $ 249,999,000(a) $ 250,000,000
============= ============= =============
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 1,000 shares authorized,
1,000 shares issued and outstanding (none as adjusted) .................... $ 1 $ (1)(b) $--
Class A Common Stock, $0.001 par value, 10,000,000
shares authorized, 4,750,000 shares to be issued and
outstanding as adjusted .................................................. -- 4,750(c) 4,750
Class B Common Stock, $0.001 par value, 1,000 shares authorized, 1,000 shares to
be issued and outstanding
as adjusted .............................................................. -- 1(b) 1
Preferred Stock, $0.001 par value, 2,000,000 shares
authorized, no shares issued and outstanding ................................ -- -- --
Additional paid-in capital ..................................................... 999 (4,750)(c) 249,995,249
249,999,000(a)
------------- ------------- -------------
Total stockholders' equity ................................................ $ 1,000 $ 249,999,000 $ 250,000,000
============= ============= =============
</TABLE>
- -------------------
(a) To reflect the receipt of the remainder of the $250,000,000
contribution from PeopleSoft.
(b) To reflect the conversion of 1,000 shares of Momentum's Common Stock
held by PeopleSoft into 1,000 shares of Momentum Class B Common Stock.
(c) To reflect the issuance of 4,750,000 shares of Momentum Class A Stock
to the stockholders of PeopleSoft.
F-6
<PAGE> 51
EXHIBIT A
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
[Merrill Lynch Letterhead]
December ___, 1998
Board of Directors
PeopleSoft, Inc.
4460 Hacienda Drive
Pleasanton, CA 94588
Gentlemen:
You have advised us that PeopleSoft, Inc. ("PeopleSoft") intends to distribute
(the "Distribution") to its stockholders shares of Class A Common Stock (the
"Momentum Shares") of Momentum Business Applications, Inc. ("Momentum"). The
Distribution is described in detail in the information statement (the
"Information Statement"), filed as part of a registration statement on Form 10
(Reg. No. __________), which is to be sent to PeopleSoft stockholders in
connection with the Distribution. You have asked us for our opinion as to
whether or not, from a financial point of view, the Distribution is fair to the
stockholders of PeopleSoft. Each capitalized term used but not defined herein
shall have the meaning ascribed thereto in the Information Statement.
In arriving at the opinion set forth below, we have, among other things:
- - reviewed the Information Statement including the following items as
presented or referred to therein: (i) the terms and conditions of the
Distribution, (ii) the Marketing Agreement, (iii) the Development Agreement,
(iv) the Services Agreement, (v) the Distribution Agreement and (vi) the
Certificate of Incorporation of Momentum including the Purchase Option;
- - conducted discussions with members of the senior management of
PeopleSoft with respect to the businesses and prospects of PeopleSoft and
Momentum and the strategic objectives of each;
- - conducted discussions concerning the Distribution with other
representatives and advisors of PeopleSoft, including its independent public
accountants;
- - reviewed the financial and other information concerning PeopleSoft
(with and without Momentum) that was publicly available or furnished to us by
PeopleSoft, including information provided during discussions with the senior
management of PeopleSoft;
- - reviewed historical trading prices and volume of the Common Stock of
PeopleSoft (the "PeopleSoft Common Stock"); and
A-1
<PAGE> 52
- - reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available (including the
information contained in the Information Statement), and we have not assumed any
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of the assets or liabilities of
PeopleSoft (with or without Momentum) or been furnished with any such evaluation
or appraisal. In addition, we have not assumed any obligation to conduct, nor
have we conducted, any physical inspection of the properties or facilities of
PeopleSoft. With respect to the financial forecast information furnished to or
discussed with us by PeopleSoft, we have assumed it has been reasonably prepared
and reflects the best currently available estimates and judgment of PeopleSoft's
management as to the expected future financial performance of PeopleSoft and
Momentum.
We have also assumed that: (i) the Distribution will occur as described in the
Information Statement, and (ii) after the Distribution, Momentum will be
accounted for as an entity independent of PeopleSoft.
Our opinion is necessarily based upon market, economic and other conditions,
including but not limited to generally accepted accounting principles, as they
exist and can be evaluated on, and on the information made available to us as
of, the date hereof. It is further understood that this Opinion does not
consider any future changes to such conditions that may occur following the date
of this Opinion which may adversely affect PeopleSoft's ability to pursue its
financial and strategic objectives. We note that trading in the PeopleSoft
Common Stock and the Momentum Shares for a period following completion of the
Distribution may be characterized by a redistribution of the shares of the
PeopleSoft Common Stock and the Momentum Shares among existing PeopleSoft
stockholders and other investors and, accordingly, during such period, the
PeopleSoft Common Stock and the Momentum Shares may trade at prices below those
at which they would trade on a fully distributed basis. We are not expressing
any opinion herein as to the price at which the PeopleSoft Common Stock will
actually trade after the announcement date of the Distribution or the price at
which the Momentum Shares will actually trade after the Distribution. In
addition, this opinion does not address the valuation or future performance of
Momentum as an independent public company following the Distribution, nor does
it address the adequacy of defensive measures included (A) in the Certificate of
Incorporation (as amended or restated) or the Bylaws of Momentum with respect to
(i) the rights of the holders of Momentum Shares or (ii) the rights of
PeopleSoft as holder of shares of the Class B Common Stock of Momentum, or (B)
in the agreements between PeopleSoft and Momentum entered into in connection
with the Distribution. We express no opinion as to whether the funds contributed
by PeopleSoft to Momentum will be adequate to accomplish the objective of
successfully developing the intended software products.
We are acting as financial advisor to PeopleSoft in connection with the
Distribution and will receive a fee for our services, which fee is contingent
upon the consummation of the Distribution. In addition, PeopleSoft has agreed to
indemnify us for certain liabilities arising out of our engagement. We may
continue to provide financial advisory or financing services to PeopleSoft and
may receive fees for the rendering of such services. In addition, in the
ordinary course of our business, we may actively trade PeopleSoft common stock,
and we may, in the future trade Momentum Shares for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of PeopleSoft.
A-2
<PAGE> 53
On the basis of and subject to the foregoing, as of the date hereof, it is our
opinion that, from a financial point of view, the Distribution is fair to the
stockholders of PeopleSoft. Our conclusions are based on information available
to us as of the date of this letter.
Very truly yours,
A-3
<PAGE> 54
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ----------------------------------------------------------------
<S> <C>
3.1+ Certificate of Incorporation of Momentum
3.2+ Bylaws of Momentum
3.3 Form of Restated Certificate of Incorporation of Momentum (to be
effective prior to the Distribution)
10.1 Form of Development and License Agreement between PeopleSoft and
Momentum
10.2 Form of Marketing and Distribution Agreement between PeopleSoft
and Momentum
10.3+ Form of Services Agreement between PeopleSoft and Momentum
10.4 Form of Distribution Agreement between PeopleSoft and Momentum
10.5+ Form of Officers' and Directors' Indemnification Agreement
</TABLE>
- ---------------
+ Incorporated by reference to Amendment No. 1 to the Registration
Statement on Form S-1 (Reg. No. 333-67363) filed with the Commission on
November 25, 1998.
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, Momentum Business Applications, Inc. has duly caused this
Registration Statement on Form 10 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pleasanton, State of California on
December 24, 1998.
MOMENTUM BUSINESS APPLICATIONS, INC.
By: /s/ ANEEL BHUSRI
-------------------------------
Aneel Bhusri,
President
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ----------------------------------------------------------------
<S> <C>
3.1+ Certificate of Incorporation of Momentum
3.2+ Bylaws of Momentum
3.3 Form of Restated Certificate of Incorporation of Momentum (to be
effective prior to the Distribution)
10.1 Form of Development and License Agreement between PeopleSoft and
Momentum
10.2 Form of Marketing and Distribution Agreement between PeopleSoft
and Momentum
10.3+ Form of Services Agreement between PeopleSoft and Momentum
10.4 Form of Distribution Agreement between PeopleSoft and Momentum
10.5+ Form of Officers' and Directors' Indemnification Agreement
</TABLE>
- ---------------
+ Incorporated by reference to Amendment No. 1 to the Registration
Statement on Form S-1 (Reg. No. 333-67363) filed November 25, 1998.
<PAGE> 1
Exhibit 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
MOMENTUM BUSINESS APPLICATIONS, INC.
(Originally incorporated under the same name on November 9, 1998)
FIRST: Name. The name of this corporation is Momentum Business Applications,
Inc. (the "corporation").
SECOND: Registered Office; Registered Agent. The address of the registered
office of this corporation in the State of Delaware is Corporation Trust Center,
1209 Orange Street, in the City of Wilmington, County of New Castle, zip code
19801. The name of the registered agent of this corporation at such address is
The Corporation Trust Company.
THIRD: Purpose. The purpose of this corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Authorized Capital Stock.
(A) This corporation is authorized to issue three classes of shares,
which shall be known as Class A Common Stock ("Class A Common Stock"), Class B
Common Stock ("Class B Common Stock"), and Preferred Stock ("Preferred Stock").
The total number of shares of stock of all classes that this corporation is
authorized to issue is 12,001,000. The total number of shares of Class A Common
Stock which this corporation is authorized to issue is 10,000,000. The total
number of shares of Class B Common Stock which this corporation is authorized to
issue is 1,000. The total number of shares of Preferred Stock which this
corporation is authorized to issue is 2,000,000. Each share of Class A Common
Stock shall have a par value of $0.001, and each share of Class B Common Stock
shall have a par value of $0.001 and each share of Preferred Stock shall have a
par value of $0.001. Effective immediately upon the filing of this Restated
Certificate of Incorporation, each share of Common Stock, par value $0.001 per
share, of this corporation outstanding immediately prior to such filing shall be
converted into and reclassified as one share of Class B Common Stock.
(B) The powers, designations, preferences, and relative,
participating, optional or other special rights granted to, and the
qualifications, limitations and restrictions imposed upon, the Class A Common
Stock and Class B Common Stock and the respective holders thereof are as
follows:
(1) Redemption. The shares of Class A Common Stock are
redeemable and may be redeemed as provided in (but only as provided in) Article
FIFTH, Section (F).
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<PAGE> 2
(2) Dividends. The holders of shares of Class A Common Stock and
Class B Common Stock shall be entitled to receive per share and without
preference such dividends as may be declared by the Board of Directors from time
to time out of funds legally available therefor. No dividend may be declared on
the Class A Common Stock unless the same per share dividend is declared on the
Class B Common Stock, and no dividend may be declared on the Class B Common
Stock unless the same per share dividend is declared on the Class A Common
Stock. Dividends may not be declared, nor may shares of Class A Common Stock or
Class B Common Stock be repurchased, or redeemed (other than pursuant to Section
(F) of Article FIFTH), if, after payment of such dividend, or after effecting
such repurchase or redemption, the amount of this corporation's cash, cash
equivalents and short-term and long-term investments would be less than the
amount of Available Funds remaining after expenditures pursuant to the
Development Agreement, as of the date of such dividend, repurchase or
redemption.
(3) Liquidation. In the event of voluntary or involuntary
liquidation of this corporation, the holders of the Class A Common Stock and
Class B Common Stock of the corporation shall be entitled to receive, on a pro
rata per share basis and without preference, all of the remaining assets of this
corporation available for distribution to its stockholders.
(4) Voting Rights. Except as otherwise required by law or
provided herein, the holders of Class A Common Stock and Class B Common Stock
shall vote together as a single class. Each holder of Class A Common Stock and
Class B Common Stock shall have one vote for each share standing in his or her
name on all matters submitted to a vote of holders of the common shares. At any
meeting of the stockholders of this corporation, the determination of a quorum
shall be based upon the presence of shares of Class A Common Stock and Class B
Common Stock representing a majority of the voting power of all of the shares of
Class A Common Stock and Class B Common Stock. This corporation shall not,
without the affirmative vote of the holders of a majority of the issued and
outstanding shares of Class B Common Stock, voting separately and as a class,
(a) alter or change the powers, designations, preferences and relative,
participating, optional or other special rights granted to, or the
qualifications, limitations and restrictions imposed upon, the Class A Common
Stock or the Class B Common Stock, (b) alter or change this Article FOURTH or
any of Articles FIFTH, SIXTH or SEVENTH of this Restated Certificate of
Incorporation, or otherwise make any amendment to this Restated Certificate of
Incorporation that would alter the rights of the holders of the Class B Common
Stock, (c) authorize the creation or issuance of any additional class or series
of stock, which would have powers, preferences or rights superior to or pari
passu with the Class B Common Stock, (d) undertake the voluntary dissolution,
liquidation or winding up of this corporation, (e) merge or consolidate this
corporation with or into any other corporation or entity, (f) sell, lease,
exchange, transfer or otherwise dispose of any substantial asset of this
corporation (other than a grant of a license with respect to a product or
technology) or (g) alter the bylaws of this corporation in a manner described in
the last sentence of Article EIGHTH. Furthermore, from and after the Purchase
Option Exercise Date, as defined in Article FIFTH, (i) the Board of Directors of
this corporation shall cease to be classified and the holders of Class B Common
2
<PAGE> 3
Stock shall be entitled to remove directors with or without cause; (ii) the
number of directors of this corporation shall be increased to a number equal to
(a) two times the maximum number of directors then authorized pursuant to
Article SEVENTH, Section (A) (counting for this purpose both directors in office
and vacant directorships), plus (b) one; and (iii) the holders of the Class B
Common Stock shall have the sole right to elect the directors of this
corporation, including directors to fill the new directorships created pursuant
to clause (ii). No new directorships created as a result of the increase in the
size of the Board of Directors pursuant to the preceding sentence shall be
filled other than by the holders of the Class B Common Stock. From and after the
Purchase Option Exercise Date all directors shall be elected to one year terms;
provided, however, that the term of any director then in office shall not be
reduced.
(5) Conversion. The Class B Common Stock shall automatically
convert into fully paid and non-assessable shares of Class A Common Stock of
this corporation at 12:01 a.m. California time on the day immediately following
the expiration of the Purchase Option without exercise granted in Article FIFTH.
The Class B Common Stock shall convert into Class A Common Stock at the rate of
one share of Class A Common Stock for each share of Class B Common Stock.
(C) The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article FOURTH (including Article
FOURTH Section (B)(4)), to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof.
The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(3) Whether that series shall have voting rights in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(4) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such privileges, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the
3
<PAGE> 4
terms and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount per share payable on case
of redemption, which amount may vary under different conditions and at different
redemption dates;
(6) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, of any, of payment of shares
of that series; and
(8) Any other relative rights, preferences and limitations of
that series.
provided that any shares so authorized shall be subject to the
Purchase Option.
FIFTH: Purchase Option.
(A) Definitions. For purposes of this Restated Certificate of
Incorporation, the following terms shall have the following definitions:
(1) PeopleSoft means PeopleSoft, Inc. and its successors or
assigns of the Purchase Option.
(2) PeopleSoft Common Stock means the Common Stock of PeopleSoft
or, if such Common Stock is converted into or exchanged for another class or
series of stock of PeopleSoft or any other corporation, such other class or
series of stock.
(3) Available Funds means, as of any date of determination, $250
million (contributed by PeopleSoft on or about December 30, 1998), plus any
investment income earned thereon, less the aggregate amount spent by this
corporation under the Development Agreement.
(4) Momentum Product means a product that has been recommended
by PeopleSoft and accepted by the Board of Directors of this corporation for
development as such under the Development Agreement.
(5) Developed Technology means development tools (other than
PeopleSoft's PeopleTools) which are developed or otherwise acquired by this
corporation for the purpose of developing Momentum Products.
(6) Developed Technology Royalties means the royalties
PeopleSoft will pay to this corporation on any software product (other than a
Momentum Product) licensed by PeopleSoft to end users that was developed by
PeopleSoft using Developed Technology.
4
<PAGE> 5
(7) Development Agreement means the Development and License
Agreement between PeopleSoft and this corporation, dated as of December 30,
1998, as such agreement may be amended or modified from time to time by
amendments approved by PeopleSoft and the Board of Directors of this
corporation.
(8) Fair Market Value means, with reference to PeopleSoft Common
Stock, (a) if PeopleSoft Common Stock is listed on the Nasdaq National Market
System or any other securities exchange reporting closing sales prices
(including without limitation the New York Stock Exchange), the average of the
closing sales price of PeopleSoft Common Stock on such exchange (which shall be
the Nasdaq National Market System or, if PeopleSoft Common Stock is not then
traded on such exchange, on the principal exchange on which PeopleSoft Common
Stock is then traded), for the twenty trading days ending with the trading day
that is two trading days prior to the date of determination, (b) if PeopleSoft
Common Stock is not listed on any securities exchange described in clause (a)
but is quoted on Nasdaq or another quotation system providing bid prices, the
average (over the twenty day period described in clause (a)) of the bid prices
for each day in such period on Nasdaq (or, if PeopleSoft Common Stock is not
then quoted on Nasdaq, the largest quotation system on which PeopleSoft Common
Stock is then quoted), and (c) if PeopleSoft Common Stock is not listed on any
exchange or quoted on any quotation system, the value thereof as determined in
good faith by PeopleSoft's board of directors.
(9) Final Purchase Option Exercise Price means the Purchase
Option Exercise Price minus the amount by which this corporation's Liabilities
existing at the Purchase Option Exercise Date (other than liabilities under the
Development Agreement, Services Agreement and Marketing Agreement) exceed the
aggregate of this corporation's then existing cash, cash equivalents and
short-term and long-term investments (but excluding from such cash, cash
equivalents and short-term and long-term investments the amount of Available
Funds determined as of the Purchase Option Exercise Date which have not, as of
such date, been paid by this corporation in accordance with the Development
Agreement).
(10) Liabilities means, with respect to this corporation, (a) all
liabilities required to be reflected or reserved against in this corporation's
financial statements under generally accepted accounting principles consistently
applied ("GAAP"), (b) any guaranty of any indebtedness of another person and (c)
any reimbursement or similar obligation with respect to any letter of credit
issued for the account of this corporation or as to which this corporation is
otherwise liable. Liabilities of the type described in (b) and (c) shall be
valued at the full amount of the potential liability of the corporation thereon.
(11) Licensed Product means a Momentum Product as to which the
License Option (as defined in the Marketing Agreement) has been exercised by
PeopleSoft.
(12) Product Payments means payments made by PeopleSoft to this
corporation under the Marketing Agreement with respect to Licensed Products.
5
<PAGE> 6
(13) Purchase Option Exercise Date means the date upon which
PeopleSoft notifies this corporation in writing of its exercise of the Purchase
Option as provided in Section (C) of this Article FIFTH.
(14) Purchase Option Exercise Price means the greatest of the
following:
(a)(i) 15 times the sum of (i) actual worldwide Product
Payments and Developed Technology Royalties made by or due from PeopleSoft to
this corporation with respect to all Licensed Products and Developed Technology
for the four calendar quarters immediately preceding the calendar quarter in
which the Purchase Option is exercised (the "Base Period") plus (ii) such
Product Payments as would have been made by or due from PeopleSoft to this
corporation if PeopleSoft had not previously exercised its payment buy-out
option (as described in the Marketing Agreement) with respect to any such
Licensed Product for the four calendar quarters immediately preceding the
quarter in which the Purchase Option is exercised (for the purpose of (i) and
(ii), payment will be annualized for any product that was not a Licensed Product
for all of each of the four quarters in the Base Period), minus any amounts
previously paid to exercise any payment buy-out option for any Licensed Product
pursuant to the Marketing Agreement.
(b) the Fair Market Value of Six Hundred Thousand (600,000)
shares of PeopleSoft Common Stock (which number of shares shall be
proportionately adjusted for any stock dividend, split-up, combination or
reclassification of the PeopleSoft Common Stock) determined as of the Purchase
Option Exercise Date;
(c) $300 million plus any additional funds contributed to
this corporation by PeopleSoft, less the total amount paid by or due from this
corporation under the Development Agreement and the Services Agreement, as of
the Purchase Option Exercise Date; and
(d) $75 million.
(15) Purchase Option Expiration Time means 11:59 p.m. California
time on December 31, 2002; provided that such date will be extended for
successive six month periods if, as of any June 30 or December 31 date beginning
with June 30, 2002, this corporation has not paid or accrued expenses for all
but $15 million of the Available Funds as of such date. Notwithstanding the
foregoing sentence, the Purchase Option Expiration Time will in no event occur
later than 11:59 p.m. California time on the 60th day after this corporation
provides PeopleSoft with a statement that, as of the end of any calendar month,
there are less than $2.5 million of Available Funds remaining after expenditures
pursuant to the Development Agreement, accompanied by a report of this
corporation's independent auditors stating that nothing has come to their
attention indicating that there are $2.5 million or more of Available Funds
remaining at that date.
6
<PAGE> 7
(16) Services Agreement means the Services Agreement between
PeopleSoft and this corporation, dated as of December 30, 1998, as such
agreement may be amended or modified from time by amendments approved by
PeopleSoft and the Board of Directors of this corporation.
(17) Status Statement means, as of any date, a balance sheet
prepared by this corporation and delivered to PeopleSoft dated as of such date,
together with (a) a statement and brief description of all other liabilities of
this corporation constituting Total Liabilities as of such date not reflected on
such balance sheet, (b) a statement of the amount of Available Funds remaining
as of such date, and (c) a statement of the total amounts paid by and due from
this corporation pursuant to the Development Agreement through such date.
(18) Marketing Agreement means the Marketing and Distribution
Agreement between PeopleSoft and this corporation, dated as of December 30,
1998, as such agreement may be amended or modified from time to time by
amendments approved by PeopleSoft and the Board of Directors of this
corporation.
(19) Total Liabilities means (a) all Liabilities, plus (b) any
other debts, liabilities or obligations, absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, including all costs and expenses relating thereto, and
including those debts, liabilities and obligations arising under any law, rule
or regulation, or under any pending or threatened action, suit or proceeding, or
any order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
(B) Grant of Option. PeopleSoft is hereby granted an exclusive
irrevocable purchase option to purchase all issued and outstanding shares of
Class A Common Stock (and any shares of Preferred Stock issued pursuant to
Article FOURTH Section (D)) of this corporation for the Final Purchase Option
Exercise Price (the "Purchase Option"). The Purchase Option, if exercised, must
be exercised as to all, but not less than all, issued and outstanding shares of
Class A Common Stock and may be exercised at any time at or prior to the
Purchase Option Expiration Time. The Final Purchase Option Exercise Price must
be paid in cash. The Purchase Option, together with the other rights of
PeopleSoft under this Article FIFTH and Article SIXTH, may, at PeopleSoft's
option, be assigned or otherwise transferred to any person or entity, including
this corporation.
(C) Manner of Exercise. The Purchase Option shall be exercised, if at
all, at or before the Purchase Option Expiration Time by written notice (the
"Exercise Notice") from PeopleSoft to this corporation stating that the Purchase
Option is being exercised and setting forth (1) the Purchase Option Exercise
Price and (2) a closing date (the "Closing Date") on which all of the issued and
outstanding shares of Class A Common Stock will be purchased. The Purchase
Option shall be deemed to be exercised as of the date of mailing by first class
mail of the Exercise Notice to this corporation at its principal offices.
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<PAGE> 8
(D) Closing.
(1) Closing Date; Cooperation. Except as set forth below, the
Closing Date shall be the date specified as such in the Exercise Notice, which
date specified shall be no later than 60 days after the Purchase Option Exercise
Date. The Closing Date may be extended by PeopleSoft if, in the judgment of
PeopleSoft, an extension of the Closing Date is necessary to obtain any
governmental or third party consent to the purchase of the Class A Common Stock,
to permit any necessary registration statement or similar filing to be declared
effective, or to permit the expiration prior to the Closing Date of any
statutory or regulatory waiting period. PeopleSoft may extend the Closing Date
for the reasons set forth in the preceding sentence by delivering written notice
of such extension to this corporation on or prior to the previously specified
Closing Date. This corporation shall cooperate with PeopleSoft to effect the
closing of the Purchase Option, including without limitation seeking any
required third party or governmental consents, and filing any applications,
notifications, registration statements or the like which may be necessary to
effect the closing.
(2) Certain Restrictions Following Purchase Option Exercise
Date. From the Purchase Option Exercise Date until the Closing Date, this
corporation will not take any of the following actions (or permit any such
actions to be taken on its behalf) except with the prior written consent of
PeopleSoft:
(a) borrow money, or mortgage, remortgage, pledge,
hypothecate or otherwise encumber any of its assets;
(b) sell, lease, lend, exchange or otherwise dispose of any
of its assets, other than sales of inventory in the ordinary course of business;
(c) pay or declare any dividends or make any distributions
on or in respect of any shares of its capital stock;
(d) default in its obligations under any material contract,
agreement, commitment or undertaking of any kind or enter into any material
contract, agreement, purchase order or other commitment; or
(e) enter into any other transaction or agreement or
arrangement, or incur any liabilities, not in the ordinary course of this
corporation's business.
(3) Determination of Final Purchase Option Exercise Price. Not
later than 15 business days following the Purchase Option Exercise Date, this
corporation shall deliver a final Status Statement to PeopleSoft prepared as of
the Purchase Option Exercise Date. Following receipt of such Status Statement
and completion of any other investigation as PeopleSoft shall deem necessary or
appropriate, and prior to the Closing Date, PeopleSoft shall determine the Final
Purchase Option Exercise Price by making the adjustments to the Purchase Option
Exercise
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<PAGE> 9
Price contemplated by Section (A)(10) of this Article FIFTH and shall notify
this corporation of such determination.
(4) Payment of Final Purchase Option Exercise Price. On or
before the Closing Date, PeopleSoft shall deposit the full amount of the Final
Purchase Option Exercise Price with a bank or banks or similar entities
designated by PeopleSoft (which may include PeopleSoft's transfer agent if
shares of PeopleSoft Common Stock are being delivered) to pay, on PeopleSoft's
behalf, the Final Purchase Option Exercise Price (the "Payment Agent"). Funds
deposited with the Payment Agent shall be delivered in trust for the benefit of
the holders of Class A Common Stock, and PeopleSoft shall provide the Payment
Agent with irrevocable instructions to pay, on or after the Closing Date, the
Final Purchase Option Exercise Price for the shares of Class A Common Stock to
the holders of record thereof determined as of the Closing Date. Payment for
shares of Class A Common Stock shall be mailed to each holder at the address set
forth in this corporation's records or at the address provided by each holder
or, if no address is set forth in this corporation's records for a holder or
provided by such holder, to such holder at the address of this corporation. As
soon as is practicable upon PeopleSoft's request, this corporation shall
provide, or shall cause its transfer agent to provide, to PeopleSoft or to the
Payment Agent, free of charge, a complete list of the record holders of shares
of Class A Common Stock, as of a specified date, including the number of shares
of Class A Common Stock held of record and the address of each record holder as
set forth in the records of this corporation's transfer agent.
(E) Transfer of Title. Transfer of title to all of the issued and
outstanding shares of Class A Common Stock shall be deemed to occur
automatically on the Closing Date and thereafter this corporation shall be
entitled to treat PeopleSoft as the sole holder of all of the issued and
outstanding shares of its Class A Common Stock, notwithstanding the failure of
any holder of Class A Common Stock to tender the certificates representing such
shares to the Payment Agent, whether or not such tender is required or requested
by the Payment Agent. This corporation shall instruct its transfer agent not to
accept any shares of Class A Common Stock for transfer on and after the Closing
Date. This corporation shall take all actions reasonably requested by PeopleSoft
to assist in effectuating the transfer of shares of Class A Common Stock in
accordance with this Article FIFTH.
(F) Redemption of Class A Common Stock. At PeopleSoft's election
(which election may be made at any time, provided it is made, by delivery of
written notice thereof to this corporation, not less than five days prior to the
Closing Date), this corporation shall, subject to applicable restrictions in the
Delaware General Corporation Law, redeem on the Closing Date all issued and
outstanding shares of Class A Common Stock for an aggregate redemption price
equal to the Final Purchase Option Exercise Price. Such redemption shall be in
lieu of PeopleSoft paying the Final Purchase Option Exercise Price directly to
the stockholders of this corporation, and shall be subject to PeopleSoft
providing the Final Purchase Option Exercise Price to this corporation to allow
this corporation to pay the redemption price.
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<PAGE> 10
SIXTH: Protective Provisions.
(A) Legend. Certificates evidencing shares of Class A Common Stock
and preferred Stock issued by or on behalf of this corporation shall bear a
legend in substantially the following form:
"The shares of Momentum Business Applications, Inc. evidenced hereby
are subject to an option in favor of PeopleSoft, Inc., as described in the
Restated Certificate of Incorporation of Momentum Business Applications, Inc. to
purchase such shares at a purchase price determined in accordance with Article
FIFTH thereof exercisable by notice delivered to this corporation at or prior to
the Purchase Option Expiration Time (as defined in the Restated Certificate of
Incorporation of Momentum Business Applications, Inc.). Copies of the Restated
Certificate of Incorporation of Momentum Business Applications, Inc. are
available at the principal place of business of Momentum Business Applications,
Inc. at 1301 Harbor Bay Boulevard, Alameda, California 94502, and will be
furnished to any stockholder on request and without cost."
(B) No Conflicting Action. This corporation shall not take, nor
permit any other person or entity within its control to take, any action
inconsistent with PeopleSoft's rights under Article FIFTH. This corporation
shall not enter into any arrangement, agreement or understanding, whether oral
or in writing, that is inconsistent with or limits or impairs the rights of
PeopleSoft and the obligations of this corporation hereunder, including without
limitation any arrangement, agreement or understanding that imposes any
obligation upon this corporation, or deprives this corporation of any material
rights, as a consequence of the exercise of the Purchase Option or the
acquisition of the outstanding Class A Common Stock pursuant thereto.
(C) Inspection and Visitation Rights; Status Statements. PeopleSoft
shall have the right to inspect and copy, on reasonable notice and during
regular business hours, the books and records of this corporation. PeopleSoft
shall also have the right to request from time to time (but not more frequently
than monthly) a Status Statement as of such date as PeopleSoft may request. Each
Status Statement shall be sent within seven days of request by PeopleSoft.
PeopleSoft shall also have the right to send a non-voting representative to
attend all meetings of this corporation's Board of Directors and any committees
thereof. Any representative, if designated in writing by PeopleSoft as such,
shall receive notice of all meetings of this corporation's Board of Directors
and each committee thereof, as well as copies of all documents and other
materials provided to any directors of this corporation in connection with any
such meeting not later than the time such materials are provided to other
directors. Such representative shall also be provided with copies of all
resolutions adopted or proposed to be adopted by unanimous written consent not
later than the time such resolutions are provided to other directors.
SEVENTH: Board of Directors.
(A) The number of directors which shall constitute the whole Board of
Directors of this corporation shall initially be four (4), but may be increased
or decreased from time to time
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<PAGE> 11
by a resolution duly adopted by the Board of Directors and shall be
automatically increased as provided in Article FOURTH, Section (B)(4).
(B) Nomination of candidates for election to the Board of Directors
shall be made as provided in the bylaws of this corporation. Election of
directors need not be by written ballot.
(C) Subject to Article FOURTH, Section (B)(4), the Board of Directors
shall be and is divided into three classes: Class I, Class II and Class III.
Each director shall serve for a term ending on the date of the third annual
meeting of stockholders following the annual meeting at which the director was
elected; provided, however, that each initial director in Class I shall hold
office until the annual meeting of stockholders in 1999; each initial director
in Class II shall hold office until the annual meeting of stockholders in 2000;
and each initial director in Class III shall hold office until the annual
meeting of stockholders in 2001. Notwithstanding the foregoing provisions of
this Article SEVENTH, each director shall serve, until his or her successor is
duly elected and qualified or until his or her death, resignation,
disqualification or removal.
(D) In the event of any increase or decrease in the authorized number
of directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
(E) Except as otherwise provided in Article FOURTH, Section (B)(4), or
as required by law, newly created directorships resulting from any increase in
the number of directors and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office (and not by the stockholders), even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
(F) The name and mailing address of each person who is to serve as a
director until the annual meeting of the stockholders entitled to vote for the
class of that director or until a successor is elected or appointed and
qualified are as follows:
NAME MAILING ADDRESS CLASS
EIGHTH: Bylaws. In furtherance and not in limitation of the powers conferred
by statute, and subject to the next sentence, the Board of Directors and the
stockholders of this corporation are each expressly authorized to adopt, amend
or repeal the bylaws of this corporation subject to any particular provisions
concerning amendments set forth in this Restated Certificate of
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<PAGE> 12
Incorporation or the bylaws of this corporation. No amendment to the bylaws may
be adopted by the stockholders without the approval of holders of a majority of
the Class B Common Stock voting separately as a class if such amendment would
affect the classification of the Board of Directors, or would otherwise regulate
the conduct of the Board's affairs or the manner in which it may act.
NINTH: Stockholder Meetings.
(A) Special Meetings. Special meetings of the stockholders for any
purpose or purposes whatsoever may be called at any time only by the Board of
Directors, the Chairman of the Board or the President of this corporation.
(B) No Action Without Meeting. At any time when this corporation has
more than one stockholder of any class of capital stock, no action required to
be taken or which may be taken at any annual or special meeting of the
stockholders may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied. Notwithstanding the foregoing, the holder or holders of the
Class B Common Stock may take any action permitted to be taken by such holders
as a class by written consent without a meeting.
TENTH: Limitation of Liability. A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived any improper personal benefit, and to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as the same exists or may hereafter be amended. If the Delaware
General Corporation Law is amended after the filing of this Restated Certificate
of Incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Neither the adoption or repeal of this Article, nor the adoption of any
provision of this Restated Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
IN WITNESS WHEREOF, the undersigned officer has executed this Restated
Certificate of Incorporation on December ___, 1998, and does hereby certify that
this Restated Certificate of Incorporation, which restates and integrates, and
also further amends, the provisions of this
12
<PAGE> 13
corporation's Certificate of Incorporation, was duly adopted by the stockholders
of this corporation in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
Momentum Business Applications, Inc.
By:
-----------------------------------
President
13
<PAGE> 1
Exhibit 10.1
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement ("Agreement") is entered into as of
__________, 1998 ("Effective Date") by and between PEOPLESOFT, INC.
("PEOPLESOFT"), a Delaware corporation with a place of business at 4460 Hacienda
Drive, Pleasanton, California 94588 and MOMENTUM BUSINESS APPLICATIONS, INC.
("MOMENTUM"), a Delaware corporation with a principal place of business at 1301
Harbor Bay Blvd., Alameda, California 94502. PeopleSoft and Momentum shall be
collectively referred to herein as the "Parties."
Whereas, the Parties intend to work together to develop software application
products which shall be known as the Momentum Products, and which may be based
on PeopleSoft's PeopleTools technology as set forth herein;
Whereas, the Parties also entered into the Marketing and Distribution Agreement
("Marketing Agreement") on the Effective Date for PeopleSoft's possible
distribution of the proposed Momentum Products;
Whereas, the Parties have also entered into the Services Agreement ("Services
Agreement") as of the Effective Date whereby PeopleSoft will provide Momentum
various services, primarily of an administrative nature, as more completely
specified therein;
Whereas, this Agreement, the Services Agreement and the Marketing Agreement are
separate, yet interdependent agreements in the context of the
PeopleSoft/Momentum business relationship; and
Whereas, this Agreement sets forth the manner in which Momentum can use
Available Funds.
The Parties agree as follows:
DEFINITIONS
"Available Funds" means the Two Hundred and Fifty Million dollars ($250,000,000)
in cash funding that PeopleSoft contributed to Momentum in furtherance of the
formation of Momentum plus any accrued investment income, less any amounts
expended under this Agreement and for related administrative expenses (inlcuding
expenses under the Services Agreement).
"Contract Developer" shall mean PeopleSoft, or a third party developer, either
of which may be contracted by Momentum to develop a particular Momentum Product.
"Contributed Technology" means any PeopleSoft software products or other
technology that PeopleSoft agrees to provide to Momentum during the work plan
and cost estimate approval process.
"Development Costs" means the fully burdened costs incurred by a Contract
Developer for the purpose of developing a Momentum Product. Such development
costs shall include all reasonable development related expenses including: i)
the salaries, benefits, occupancy, and information technology costs incurred by
personnel performing development activities defined under the work plan; ii)
other reasonable out of pocket expenses, including third party consulting
expenses incurred by the Contract Developer in the normal course of performing
the development activities defined under the work plan; iii) the salaries,
benefits, occupancy and information technology costs of full time development
management; and iv) the allocated costs of development support activities such
as testing and release management. "Developed Technology" means development
tools or other core technologies (other than PeopleTools) which are developed or
otherwise acquired by Momentum for the purpose of developing Momentum Products.
"Developed Technology Royalties" mean the royalties that PeopleSoft will pay to
Momentum on any software product (other than a Momentum Product) licensed by
PeopleSoft to end users that was developed by PeopleSoft using all or any part
of the Developed Technology.
"Documentation" means only technical publications relating to the use of the
PeopleSoft Technology, such as reference, user, installation, systems
administrator and technical guides, and training curriculum delivered by
PeopleSoft to Momentum.
"Momentum Products" means the software applications, including pre-release
versions, and associated documentation that are proposed by PeopleSoft and
accepted by Momentum for development under this Agreement.
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<PAGE> 2
"Net License Fees" means the actual amount of license fees charged by PeopleSoft
for an end user's use of any product containing Developed Technology, net of
sales, technology witholding or VAT taxes, imputed fees for Support Services
(such as bundled maintenance), consulting, and any third party royalties.
"Net Revenues" means the aggregate amount of Net License Fees received by
PeopleSoft during any calendar quarter less the actual fully burdened
development costs related to the Developed Technology which are incurred by
PeopleSoft during the same quarter.
"PeopleSoft Technology" means PeopleTools, Documentation and all other
Contributed Technology provided by PeopleSoft to Momentum and all corrections or
updates thereto. PeopleSoft Technology includes all third-party software
included in PeopleTools and any Contributed Technology that PeopleSoft has the
right to provide and agrees to provide to Momentum. Technology acquired by
PeopleSoft after the date of this Agreement shall not be considered PeopleSoft
Technology unless such technology is expressly included in PeopleTools or
provided to Momentum as Contributed Technology.
"PeopleTools" means all or any portion of the underlying technology in object or
source code format, tools and documentation delivered by PeopleSoft to Momentum
under this Agreement and any related extensions or future enhancements all of
which serves as the foundation for all PeopleSoft software products.
"Purchase Option" means PeopleSoft's option to acquire all (but not less than
all) of the outstanding callable Class A common stock of Momentum as set forth
in Momentum's Restated Certificate of Incorporation.
"Support Services" means PeopleSoft's then current technical support and
maintenance services for the PeopleSoft Technology. Support Services for general
customers as of the Effective Date are as set forth in Exhibit B attached
hereto. The Support Services initially provided by PeopleSoft to Momentum under
this Agreement shall be substantially similar to those specified in Exhibit B
and may be modified as required for purposes consistent with this Agreement.
1. LICENSE GRANTS
1.1 PeopleSoft grants Momentum a perpetual (subject to the section
entitled "Default and Termination"), worldwide, non-exclusive,
nontransferable license to use a reasonable number of copies of the
PeopleSoft Technology solely for internal use purposes connected with
this Agreement and solely in conjunction with Momentum's development,
support, demonstration, and testing (and any related tasks) of the
Momentum Products. In addition, Momentum may, with PeopleSoft's
consent, sublicense third parties to use the PeopleSoft Technology for
the same purposes.
1.2 To the extent that it has, or in the future obtains, the right to do
so, Momentum hereby grants PeopleSoft a perpetual, non-exclusive,
irrevocable, unrestricted, worldwide right to use, market,
manufacture, reproduce, copy, sublicense, distribute through
PeopleSoft's then current worldwide channel distribution system (under
the PeopleSoft name or otherwise pursuant to PeopleSoft's then current
general licensing policies and methodologies), create derivative
works, enhance and modify the Developed Technology.
1.3 PeopleSoft shall provide Momentum with one copy of PeopleSoft
Technology, with rights to make additional copies as reasonably
necessary for the uses set forth in section 1.1. PeopleSoft shall also
provide Momentum with one printed set of Documentation and Momentum
shall have the option to acquire additional sets of Documentation at
PeopleSoft's then current rates
2. LICENSE EXCLUSIONS
2.1 Except as expressly authorized herein, or subsequently approved in
writing by PeopleSoft, Momentum shall not:
a. copy or modify the PeopleSoft Technology other than as set forth
in section 1.1;
b. use PeopleSoft Technology to develop any software application
products that compete with PeopleSoft Technology;
c. cause or permit reverse compilation or reverse assembly of all or
any portion of the PeopleSoft Technology;
d. distribute, disclose, market, rent, lease or transfer to any
third party any portion of the PeopleSoft Technology or the
Documentation, or use the PeopleSoft Technology or Documentation
in any service
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<PAGE> 3
bureau arrangement or third party training other than to third
party consultants under agreement and non-disclosure as mutually
agreed upon between the Parties in writing;
e. disclose the results of PeopleSoft Technology performance
benchmarks to any third party without PeopleSoft's prior written
notice;
f. export PeopleSoft Technology in violation of U.S. Department of
Commerce export administration regulations; and
g. invoke support libraries other than through documented API calls.
2.2 No license, right, or interest in any PeopleSoft trademarks, trade
name, or service mark is granted hereunder.
3. DEVELOPMENT OF MOMENTUM PRODUCTS
3.1 Defining development projects: PeopleSoft shall propose the
development of certain Momentum Products to Momentum and shall submit
work plans and cost estimates for such development initiatives using
Exhibit A as a general outline. Momentum may approve all or any
portion of a proposed work plan and cost estimate or may determine not
to approve any proposed work plan and cost estimate. Notwithstanding
the foregoing, Momentum shall not be obligated to fund development of
Momentum Products in excess of amounts reflected in approved work
plans and cost estimates.
3.2 (a) Situations wherein PeopleSoft develops:
If Momentum and PeopleSoft agree that PeopleSoft will do research and
development work with respect to a Momentum Product, Momentum will pay
PeopleSoft 110% of PeopleSoft's Development Costs incurred with
respect to such product. PeopleSoft shall not be required to undertake
activities that would result in Development Costs exceeding those
reflected in approved work plans and cost estimates. Except as agreed
to by the Parties, PeopleSoft shall not be required to devote any
specific amount of time or resources to research and development
activities under this Agreement.
(b) Situations wherein Third Parties develop:
The Parties intend that they will discuss and agree upon the possible
use of third parties to develop Momentum Products during the budget
proposal and approval process. Any agreements between Momentum and
third parties relating to Momentum Products or Developed Technology
must include appropriate provisions for the protection of PeopleSoft
Technology and PeopleSoft's rights under this Agreement, the Marketing
Agreement, and the Services Agreement and as a holder of the Momentum
Class B Common Stock. Subject to the foregoing, the amount and nature
of work to be performed by third parties will be determined by
Momentum.
3.3 Momentum hereby grants PeopleSoft a right of first refusal with
respect to any future financing proposed to be conducted by Momentum.
If at any time, Momentum intends to raise more than $100,000 of
capital in a transaction or series of transactions, Momentum shall
provide PeopleSoft with notice of the proposed transaction including a
summary of terms of the proposed transaction. If PeopleSoft desires to
provide Momentum with the financing on the terms proposed by Momentum,
it may do so by giving Momentum notice within 15 days of its receipt
of the notice of the proposed financing. If PeopleSoft does not
exercise its rights hereunder, Momentum shall have 60 days from the
expiration of the foregoing 15 day period to complete the financing on
the terms contained in the notice provided to PeopleSoft. If Momentum
does not complete the financing within said 60 day period,
PeopleSoft's rights hereunder shall be deemed to be revived.
3.4 Momentum shall use diligent efforts to research and develop Momentum
Products in accordance with approved work plans and cost estimates
agreed to by the Parties pursuant to this Agreement. As of the
Effective Date, the Parties contemplate the development of the
following Momentum Products: electronic business, analytic
applications and industry-specific software applications.
3.5 The Parties intend to discuss and agree upon the use of Available
Funds during the work plan and cost estimate approval process.
Momentum may use the Available Funds only to develop or acquire
Momentum Products and related technologies and for related
administrative expenses. There are no restrictions on Momentum's use
of its funds other than Available Funds to conduct its business as it
determines.
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<PAGE> 4
3.6 Momentum will invest the Available Funds in high quality marketable
securities. Momentum may not encumber, pledge or otherwise take any
action with respect to the Available Funds that could prevent the full
expenditure of such funds under this Agreement. If PeopleSoft
reasonably believes Momentum has or intends to use the Available Fund
for purposes other than those allowed by this Agreement, PeopleSoft
will have the right to require Momentum to make an affirmative pledge
of the Available Funds to performance under this Agreement.
3.7 Except with respect to Contributed Technology, PeopleSoft agrees to
sublicense to Momentum any required third party software in which
PeopleSoft has applicable distribution rights. Momentum shall be
responsible for the payment of any technology access fees or royalties
due third parties for the use of such third party software. Such
payments shall constitute an authorized use of Available Funds, and
shall be included in the determination of the total cost to develop
Momentum Products.
4. FEES AND PAYMENT TERMS / DEVELOPMENT COSTS
4.1 Unless agreed otherwise by the parties with respect to Contributed
Technology, PeopleSoft Technology shall be provided by PeopleSoft to
Momentum under this Agreement at no license fee or royalty obligation.
4.2 PeopleSoft shall pay Developed Technology Royalties to Momentum equal
to one percent (1%) of Net Revenues on products (other than Momentum
Products) sold or licensed by PeopleSoft that were developed by
PeopleSoft using Developed Technology. If products for which a
Developed Technology Royalty are due and products for which a
Developed Technology Royalty are not due, are licensed under the same
license agreement as a packaged solution for use by an End User, the
Net License Fee computation will be appropriately pro-rated based on
the associated weight of each product's respective list price .
Developed Technology royalties shall be paid on a quarterly basis
forty five (45) days after the end of each quarter.PeopleSoft's
obligation to pay Developed Technology Royalties to Momentum shall
cease ten (10) years after the Developed Technology is acquired or
first identified as part of a work plan related to the development of
a Momentum Product.
4.3 PeopleSoft will invoice Momentum monthly for amounts due under section
3.2(a) and Momentum shall pay PeopleSoft such amounts within 30 days
of invoice date.
5. SUPPORT SERVICES
5.1 During the period that this Agreement and the Marketing Agreement are
in effect and provided that Momentum is current on all payment
obligations under the Services Agreement, at no fee to Momentum,
PeopleSoft shall provide Momentum with Support Services as more
specifically defined in Exhibit C.
6. TITLE AND PROTECTION / NON-DISCLOSURE
6.1 PeopleSoft (or its third-party providers) retains title to all
portions of the PeopleSoft Technology. Any modifications to the
PeopleSoft Technology made by Momentum or any of its subcontractors
(including PeopleSoft) to develop a Momentum Product in accordance
with this Agreement shall be owned by PeopleSoft. PeopleSoft will not
be obligated to make any royalty or other payments with respect to
such PeopleSoft Technology or modifications.
6.2 Title to the Momentum Products shall vest in Momentum, subject to
PeopleSoft's underlying right, title and interest to PeopleSoft
Technology. Title to the Developed Technology shall vest in Momentum,
subject to PeopleSoft's license to use the Developed Technology as set
forth in section 1.2 herein. Except as may be otherwise expressly set
forth in this Agreement, title to any technology developed pursuant to
this Agreement will vest in both PeopleSoft and Momentum and each will
have full right to make, use, license and sublicense such technology
without any obligation to the other.
6.3 Title to the physical media for the PeopleSoft Technology vests in
Momentum upon delivery. The PeopleSoft Technology contains valuable
proprietary information, and Momentum shall not disclose the
PeopleSoft Technology to anyone other than those of its employees or
consultants under nondisclosure obligations who have a need to know
for purposes consistent with this Agreement. Momentum shall affix, to
each full or partial copy of
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<PAGE> 5
PeopleSoft Technology made by Momentum, all copyright and proprietary
information notices as affixed to the original.
6.4 All information clearly marked "confidential" or which should be
reasonably understood to be confidential by either party under this
Agreement and provided to the other party shall be treated as
confidential and shall not be disclosed, orally or in writing by the
receiving party to any third party without the prior written consent
of the disclosing party.
6.5 The obligations set forth in this section entitled "Title and
Protection / Non-disclosure" shall survive termination of this
Agreement.
7. LIMITED WARRANTY
7.1 PeopleSoft represents that the PeopleSoft Technology does not infringe
any patent, copyright or other third party intellectual property
rights when used in accordance with the published specifications.
PeopleSoft represents that the PeopleSoft Technology and all
subsequent major releases thereon will perform substantially in
accordance with the corresponding documentation for a period of one
(1) year from the date of installation. PeopleSoft does not represent
that the PeopleSoft Technology is error-free. In the event the
PeopleSoft Technology does not perform substantially in accordance
with the published specifications, PeopleSoft's sole obligation is
limited to repair or replacement of the defective PeopleSoft
Technology in accordance with its then current Support Services terms
and conditions, provided Momentum notifies PeopleSoft of the
deficiency within the one-year period and provided Momentum has
installed all PeopleSoft Technology updates provided by PeopleSoft's
Support Services.
7.2 PEOPLESOFT DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
8. DISCLAIMER OF CONSEQUENTIAL DAMAGES / LIMITATION OF LIABILITY
8.1 PEOPLESOFT WILL NOT BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOST DATA OR LOST
PROFITS, HOWEVER ARISING, EVEN IF IT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8.2 EXCLUDING DAMAGES INCURRED UNDER THE ARTICLE ENTITLED
"INDEMNIFICATION", PEOPLESOFT'S LIABILITY FOR DAMAGES UNDER THIS
AGREEMENT SHALL IN NO EVENT EXCEED THE THEN CURRENT STANDARD LIST
PRICE FOR A LICENSE TO PEOPLETOOLS. THE PARTIES AGREE TO THE
ALLOCATION OF LIABILITY RISK THAT IS SET FORTH IN THIS SECTION.
9. INDEMNIFICATION
9.1 PeopleSoft shall indemnify and defend Momentum against any claims that
the PeopleSoft Technology infringes any patent, copyright or trade
secret; provided that PeopleSoft is given prompt notice of such claim
and is given information, reasonable assistance, and authority to
defend or settle the claim. In the defense or settlement of the claim,
PeopleSoft may obtain for Momentum the right to continue using the
PeopleSoft Technology or replace or modify PeopleSoft Technology so
that it becomes noninfringing while giving substantially equivalent
performance. PeopleSoft shall have no liability if the alleged
infringement is based on: (i) a modification of PeopleSoft Technology
by anyone other than PeopleSoft; or (ii) the use of PeopleSoft
Technology other than in accordance with the Documentation.
9.2 Momentum shall indemnify and defend PeopleSoft against any claims that
the components of the Momentum Products or Developed Technology, that
are developed by Momentum in furtherance of this Agreement and the
Marketing Agreement infringes any patent, copyright or trade secret;
provided that Momentum is given prompt notice of such claim and is
given information, reasonable assistance, and authority to defend or
settle the claim. In the defense or settlement of the claim, Momentum
may obtain for PeopleSoft the right to continue using and marketing
the Momentum Products or Developed Technology or replace or modify the
Momentum Products or Developed Technology so that it becomes
noninfringing while giving substantially equivalent performance.
Momentum shall have no liability if the alleged infringement is based
on: (i) a modification of the Momentum
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<PAGE> 6
Product or Developed Technology by anyone other than Momentum or its
subcontractors, if any; or (ii) the use of the Momentum Product or
Developed Technology other than in accordance with the documentation
provided by Momentum. To the extent Momentum elects to provide
PeopleSoft with modifications to the PeopleSoft Technology, in every
case and simultaneous with the delivery of such PeopleSoft Technology
modifications, Momentum shall provide written notice to PeopleSoft
that such PeopleSoft Technology modifications are provided "as-is" and
"without any indemnification for third party infringement claims."
9.3 The obligations set forth in this section entitled "Indemnification"
shall survive the termination of this Agreement.
9.3.1 Any expenditure of funds by Momentum to protect or defend its
intellectual property against third parties other than PeopleSoft
shall be considered an authorized use of Available Funds.
10. DEFAULT AND TERMINATION
10.1 Any of the following shall constitute an event of default:
a. Momentum fails to perform any of its obligations under the
sections entitled "License Exclusions" or "Title and Protection /
Non-disclosure"; or
b. Either party fails to perform any other material obligation under
this Agreement and such failure remains uncured for more than
thirty (30) days after receipt of written notice thereof.
10.2 If an event of default occurs, the nondefaulting party, in addition to
any other rights available to it under law or equity, may terminate
this Agreement and all licenses granted hereunder by written notice to
the defaulting party. Remedies shall be cumulative and there shall be
no obligation to exercise a particular remedy. In the event this
Agreement is terminated by PeopleSoft in connection with Momentum's
breach of a material obligation under this Agreement, PeopleSoft shall
be entitled to receive, as liquidated damages, the Available Funds. If
PeopleSoft reasonably believes that such liquidated damages are
inadequate, then PeopleSoft will be entitled to specific performance
of Momentum's obligations under this Agreement in connection with such
breach.
10.3 This Agreement will automatically terminate upon the expiration of the
Purchase Option; provided, however that PeopleSoft's obligation to pay
Developed Technology Royalties will continue until the expiration of
the respective royalty terms, even if the Purchase Option expires
unexercised.
10.4 Within fifteen (15) days after termination of this Agreement, except
for copies of PeopleSoft Technology for use solely in connection with
an agreed upon transition plan, Momentum shall certify in writing to
PeopleSoft that all copies of the PeopleSoft Technology in any form,
including partial copies within modified versions, have been destroyed
or returned to PeopleSoft. The Parties shall also meet, discuss in
good faith and agree to a transition plan (which shall not exceed two
(2) years) to enable Momentum to transition the Momentum Products and
customers using Momentum Products from PeopleTools technology to a
different technology.
11. NOTICES
All notices shall be in writing and hand-delivered or sent by first class
mail, overnight mail, courier, or transmitted by facsimile (if confirmed by
such mailing), to the addresses indicated on the first page of this
Agreement, or such other address as either party may indicate by at least
ten (10) days prior written notice to the other party. Notices to
PeopleSoft shall be addressed to the Legal Department.
12. ASSIGNMENT
Momentum may not assign this Agreement (by operation of law or otherwise)
or sublicense PeopleSoft Technology without the prior written consent of
PeopleSoft or as set forth in the event of certain contingencies as
expressed in the Marketing Agreement, and any prohibited assignment or
sublicense shall be null and void.
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13. GENERAL
13.1 This Agreement is made in and shall be governed by the laws of the
State of California, excluding choice of law principles. Any actions
brought to enforce any of the provisions of this Agreement shall be
fully and finally resolved by binding arbitration conducted by a
mutually acceptable independent third party. Except for actions for
breach of PeopleSoft's proprietary rights in PeopleSoft Technology or
Momentum's proprietary rights in the Momentum Products, no action
regardless of form, arising out of this Licensing Agreement may be
brought by either party more than one year after the cause of action
has accrued.
13.2 The section headings herein are provided for convenience only and have
no substantive effect on the construction of this Agreement. If any
provision of this Agreement is held to be unenforceable, this
Agreement shall be construed without such provision.
13.3 The failure by a party to exercise any right hereunder shall not
operate as a waiver of such party's right to exercise such right or
any other right in the future. Neither party shall be liable to the
other for any failure to perform due to causes beyond its reasonable
control.
13.4 No agency, partnership or employment is created by this Agreement.
Momentum shall not use the name of PeopleSoft in any advertising,
public relations or media release without the prior written consent of
PeopleSoft.
13.5 This Agreement replaces and supersedes any prior verbal
understandings, written communications, and constitutes the entire
agreement between the Parties concerning this subject matter. This
Agreement may be amended only by a written document executed by a duly
authorized representative of each of the Parties. This Agreement may
be executed in counterparts.
This Agreement is made as of the Effective Date.
MOMENTUM BUSINESS APPLICATIONS, INC. PEOPLESOFT, INC.
- ------------------------------------ ------------------------------------
Authorized Signature Authorized Signature
- ------------------------------------ ------------------------------------
Printed Name and Title Printed Name and Title
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<PAGE> 8
EXHIBIT A
OVERVIEW OF THE DEVELOPMENT EFFORT TO CREATE MOMENTUM PRODUCTS
PHASE 1. PROJECT INITIATION/GENERAL ARCHITECTURE.
(a) DURATION. The approximate duration of Phase 1 shall be the first
several months commencing on the Effective Date.
(b) OBJECTIVES DURING PHASE 1: Based on input from sales personnel,
customers, business partners and industry analysts, PeopleSoft will identify and
prioritize product opportunities and present such opportunities to Momentum. For
each product opportunity, high level business requirements are defined and
documented. This initial product scope is reviewed and discussed with internal
and external business process functional experts in an iterative review process
that confirms a product's conceptual framework. Once the initial product scope
is defined, the individual product features are identified and prioritized. In
addition, new technologies that would be required to build and deploy the
product are identified. For each product feature or new technology, a written
summary of its business requirements is prepared and is reviewed with
appropriate development personnel. Based on this review, product strategy and
development personnel reach an initial agreement on the product's content and
priorities for the initial release. Functional and technical designs are
developed for each planned feature. Design reviews are held with teams comprised
of product strategy, release testing, documentation, sample data and training
personnel. During the design review process, this group ensures not only that
the functional requirements are complete but also that the technical design
meets the business needs
PHASE 2. DETAILED DESIGN AND PROTOTYPING.
(a) DURATION. The Parties anticipate that Phase 2 may overlap with Phase 1
and shall commence during the month of the Project and end, depending on
Momentum Product within months of the commencement of the project.
(b) OBJECTIVES DURING PHASE 2
In developing a new product, the development team will code and unit
test every feature in the products to ensure that the product created complies
with the functional and technical requirements. These tasks are conducted using
a reference development platform, and the functionality is designed to provide
global capabilities based on requirements from a proxy set of countries around
the world. All development issues are identified and addressed. At the same
time, system test requirements and procedures are developed. Test strategies,
product test plans, feature test requirements and test procedures are completed.
During the development and port phase, documentation and curriculum development
personnel work closely with the developers to design documentation and training
courses. Upon substantial completion of development, the developed product is
ported to support multiple hardware, database and operating system platforms,
and release platforms are certified.
PHASE 3. DEVELOPMENT.
(a) DURATION. The Parties anticipate that Phase 3 shall commence in the
month of the project and end upon General Availability of the Momentum Product.
(b) OBJECTIVES DURING PHASE 3 The product is delivered to a select group
of Pre-General Availability customers for limited use. Pre-General Availability
customers provide feedback on the features and functions as well as ease of use.
Issues identified during this phase are generally resolved prior to the product
being released as Generally Available. In addition, the combined product
features are system tested on the primary development platform. These tests
validate that the product and its features perform according to the specified
business and functional requirements. All test failures are logged, reviewed and
addressed. Release test requirements, plans and processes are developed and
finalized. During this phase, the product is tested to validate it is
operational on all supported platforms. The product is tested for (i) ease of
use, (ii) ease of installation, (iii) ease of upgrade, (iv) volume and (v)
performance. All incidents reported during release test are logged, reviewed and
addressed. Once the product has met system and release test exit criteria, all
sample data and documentation are finalized and incorporated into the master
production product. Final validation and acceptance tests are performed.
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<PAGE> 9
EXHIBIT B
MOMENTUM PRODUCT DEVELOPMENT PLAN
Product Name:
-----------------------------------------------------------------
Description of Product:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Target Market Indication:
Targeted geography: Targeted industries:
------------------ ------------------
Current Year market size $ CAGR # of entities
-------- ------- -----------
Estimated Development costs and Timetable:
<TABLE>
<CAPTION>
Yr # of FTEs Direct Costs Indirect Costs Total Costs
<S> <C> <C> <C> <C>
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- ----- ------------ -------------- -------------- ------------------
- ----- ------------ -------------- -------------- ------------------
Totals ============== -------------- ------------------
</TABLE>
Detailed list of features, functions, business processes and reports to be
included in the Generally Available Version:
<TABLE>
<S> <C> <C>
Agreed to by: Momentum Business Applications, Inc. PeopleSoft, Inc.
------------------------------- ----------------------------------
</TABLE>
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<PAGE> 10
EXHIBIT C
SOFTWARE SUPPORT SERVICES TERMS AND CONDITIONS
Software Support Services Terms and Conditions ("SUPPORT SERVICES") are
referenced in and incorporated into the Software License and Services Agreement
("Agreement") between PeopleSoft and Licensee. Capitalized terms have the same
meaning as they do in the Agreement.
1. COVERAGE
PeopleSoft provides Licensee with Support Services for the Software at the
Site in exchange for payment of the applicable Support Services fees. Only
designated Licensee employees may contact PeopleSoft for the provision of
Support Services. Licensee may acquire Support Services for additional
Licensee sites by paying PeopleSoft the applicable annual secondary site
Support Services fee.
2. SOFTWARE MAINTENANCE
PeopleSoft will periodically issue the following technical and functional
improvements to Software:
(1) Fixes to Errors; (2) Updates; and (3) Enhancements
3. PRIORITY LEVEL OF ERRORS
PeopleSoft shall address Errors in accordance with the following protocols:
Priority 1-Critical Level: PeopleSoft promptly: (1) designates PeopleSoft
specialist(s) to correct Error; (2) provides expanded communication on
correction status; and (3) escalates troubleshooting a Workaround or
Fix.
Priority 2-Urgent Level: PeopleSoft promptly: (1) designates PeopleSoft
specialist(s) to correct Error; (2) provides ongoing communication on
correction status; and (3) initiates troubleshooting a Workaround or
Fix.
Priority 3-Standard Level: PeopleSoft: (1) assigns PeopleSoft specialist(s)
to commence correction of Error; and (2) exercises all commercially
reasonable efforts to include the Fix for Error in the next Update.
Priority 4-Base Level: PeopleSoft: (1) assigns Error to case management and
tracking; and (2) may include the Fix for Error in the next Update.
4. TELEPHONE SUPPORT
PeopleSoft provides telephone support concerning Software installation and
use. Except for designated holidays, standard telephone support hours are
Monday through Friday, 4:00 a.m. to 6:30 p.m., Pacific Time. Telephone
Support is also available 24-hours-a-day, 7-days-a-week for in-production
customers who need to resolve critical production problems outside of
standard support hours.
5. ACCOUNT MANAGER
PeopleSoft assigns an account manager to assist with the support
relationship between PeopleSoft and Licensee. Licensee will reimburse
PeopleSoft for the reasonable travel and living expenses of the account
manager for on-site support activity.
6. PEOPLESOFT CUSTOMER CONNECTION
a. PeopleSoft Customer Connection is an on-line, self-service system that
features postings by PeopleSoft and customers regarding technical and
non-technical topics of interest. Licensee may access PeopleSoft
Customer Connection via Internet access at its own expense.
b. Software Updates, Enhancements, and Fixes may be delivered to Licensee
through PeopleSoft Customer Connection, or by mail from PeopleSoft on
Licensee's written request. PeopleSoft information posted to Customer
Connection is confidential and proprietary and shall only be used in
connection with Licensee's use of the Software and informational
communications with other PeopleSoft Customer Connection participants.
PeopleSoft shall have the right to publish, modify and distribute any
information or software provided by Licensee to Customer Connection in
all languages. Licensee shall not use PeopleSoft Customer Connection
for advertising or public relations purposes and shall only submit
information to PeopleSoft Customer Connection that Licensee owns or
has permission to use in such manner.
c. To diminish exposure to software viruses, PeopleSoft tests and scans
all information entered by PeopleSoft for software viruses prior to
submitting it to PeopleSoft Customer Connection. Licensee shall also
use a reliable virus detection system on any software or information
posted to PeopleSoft Customer Connection, utilize back-up procedures,
monitor access to PeopleSoft Customer Connection, promptly notify
PeopleSoft of any virus detected within Licensee's systems associated
with PeopleSoft Customer Connection and generally exercise a
reasonable degree of caution when utilizing information from
PeopleSoft Customer Connection. PeopleSoft does not warrant that
PeopleSoft Customer Connection will operate without interruption or
without errors. PeopleSoft reserves the right to modify or suspend
PeopleSoft
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<PAGE> 11
Customer Connection service in connection with PeopleSoft's provision
of Support Services. PeopleSoft assumes no responsibility for anything
posted by anyone other than PeopleSoft, including, but not limited to,
information about PeopleSoft software, modification code, or portions
thereof.
7. FEES
The initial period of Support Services for the Site is indicated in the
Schedule and included in the Software license fee; thereafter, in the event
Licensee elects to continue to receive Support Services, Licensee shall pay
PeopleSoft the annual Support Services fee as set forth in the Schedule.
Support Services are billed on an annual basis, payable in advance. Unless
Licensee has provided proof of tax-exempt status, Licensee is responsible
for all taxes associated with Support Services, excluding taxes based on
PeopleSoft's income. Licensee's payment shall be due within thirty (30)
days of receipt of the PeopleSoft invoice. Should Licensee elect not to
renew Support Services and subsequently requests Support Services,
PeopleSoft shall reinstate Support Services only after Licensee pays
PeopleSoft the annual then-current fee plus all cumulative fees that would
have been payable had Licensee not suspended Support Services.
8. TERM AND TERMINATION
Unless otherwise expressly set forth in the Agreement, Support Services
shall be provided for a period of one (1) year from the Schedule Effective
Date, and shall be extended each additional year unless terminated by
either party. Each one (1) year term shall commence on the anniversary of
the Schedule Effective Date.
Either party may terminate the Support Services provisions at the end of
any support term by giving the other party written notice at least ninety
(90) days prior to the end of the term.
If Licensee fails to make payment pursuant to the section titled "Fees", or
Licensee breaches the Support Services provisions and such breach has not
been cured within thirty (30) days of receipt of written notice of breach,
PeopleSoft may suspend or cancel Support Services.
9. EXCLUSIONS
PeopleSoft shall have no obligation to support:
a. Substantially altered, damaged or modified Software;
b. Software that is not the then-current release, or a Previous
Sequential Release;
c. Errors caused by Licensee's negligence, hardware malfunction, or
other causes beyond PeopleSoft's reasonable control;
d. Software installed in a hardware or operating environment not
supported by PeopleSoft; and
e. Third party software not licensed through PeopleSoft.
10. GENERAL
All Updates, Enhancements and Fixes provided to Licensee are subject to the
terms and conditions of the Agreement. PeopleSoft may modify Support
Services on an annual basis to reflect current market condition upon
reasonable notice.
11. DEFINITIONS
"ENHANCEMENT" means a technical or functional addition to the Software
delivered with a new Software release to improve functionality and/or
operations.
"ERROR" means a Software malfunction that degrades the use of the Software.
"FIX" means the repair or replacement of source, object or executable code
Software versions to remedy an Error.
"PREVIOUS SEQUENTIAL RELEASE" means a Software release for a particular
operating environment that has been replaced by a subsequent Software
release in the same operating environment. PeopleSoft will support a
Previous Sequential Release for a period of eighteen (18) months after
release of the subsequent release. Multiple Previous Sequential Releases
may be supported at any given time.
"PRIORITY 1" means an Error that renders the Software inoperative or causes
the Software to fail catastrophically.
"PRIORITY 2" means an Error that affects performance of the Software and
prohibits Licensee's use of the Software.
"PRIORITY 3" means an Error that affects performance of the Software, but
does not prohibit Licensee's use of the Software.
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<PAGE> 12
"PRIORITY 4" means an Error that causes only a minor impact on the use of
the Software.
"UPDATE" means all published revisions to the Documentation and one (1)
copy of the new Software release not designated by PeopleSoft as new
products or functionality for which it charges separately.
"WORKAROUND" means a change in the procedures followed or data supplied to
avoid an Error without significantly impairing Software performance.
Page 12 of 12
<PAGE> 1
Exhibit 10.2
MARKETING AND DISTRIBUTION AGREEMENT
This marketing and distribution agreement ("Marketing Agreement") is made as of
December ___, 1998 ("Effective Date") by and between PeopleSoft, Inc.
("PEOPLESOFT"), a Delaware corporation having its principal place of business at
4460 Hacienda Drive, Pleasanton, California 94588 and Momentum Business
Applications, Inc., ("Momentum") a Delaware corporation having its principal
place of business at 1301 Harbor Bay Boulevard, Alameda California 94502.
Whereas the parties have entered into a development and license agreement (the
"DEVELOPMENT AGREEMENT") pursuant to which PeopleSoft has licensed PeopleSoft
Technology to Momentum for the development by Momentum of certain products,
including electronic business applications, analytic applications and
industry-specific applications; and
Whereas, the parties desire to set forth the various marketing and support
requirements for the marketing and distribution of the Momentum Products by
PeopleSoft as set forth herein.
The parties agree as follows:
1. DEFINITIONS
"Development Costs" means the costs incurred by Momentum in developing any
Momentum Product.
"Developed Technology" shall have the meaning assigned to it in the
Development Agreement.
"Documentation" shall have the meaning assigned to it in the Development
Agreement.
"End User" means any end customer using the Momentum Products.
"Enhancement Costs" means the fully burdened costs (including any costs
incurred for third party contractors hired by PeopleSoft) that PeopleSoft
incurs in the course of developing enhancements, fixes, updates or
improvements which improve the functionality, utility, performance and/or
operation of a Licensed Product.
"Excluded Parties" means those entities that, at the end of the License
Option Term, PeopleSoft reasonably believes are competitors of PeopleSoft.
PeopleSoft shall provide a list of Excluded Parties to Momentum at such
time.
"First-Line Support" means only the routing of Momentum Products technical
support telephone inquiries to the Second-Line Support organization.
First-Line Support includes responsibility for handling all PeopleTools
technical support inquiries received from End Users.
"Generally Available Product" means a Momentum Product, which has
successfully completed PeopleSoft release testing (in accordance with
PeopleSoft's then current PeopleSoft release model) with the level of
functionality specified in such product's work plan and which becomes
commercially available for production use.
"License Option" means PeopleSoft's right to acquire an exclusive license
for the commercialization of a Momentum Product pursuant to the section
entitled "License Option" hereof.
"License Option Term" means the period from which a work plan for a product
is approved by Momentum pursuant to the Development Agreement until the end
of the earlier of (i) the thirtieth (30th) day after such Momentum Product
becomes a Generally Available Product or (ii) the expiration of the
Purchase Option.
"Licensed Product" means a Momentum Product for which PeopleSoft has
exercised its License Option.
"Momentum Products" shall have the meaning assigned to it in the
Development Agreement.
"Net License Fees" means the actual amount of license fees received by
PeopleSoft, either from an End User or from a third party reseller, for an
end user's use of a Momentum Product or Licensed Product and any Upgrades
and Updates thereto, less sales, technology witholding or VAT taxes,
imputed fees for Support Services (such as bundled maintenance and
training), and any third party royalties.
Page 1 of 13
<PAGE> 2
"Net Revenues" means the aggregate amount of Net License Fees received by
PeopleSoft during any given calendar quarter, less the Enhancement Costs
related to the Momentum Product which are incurred by PeopleSoft during
that same quarter.
"PeopleSoft Technology" shall have the meaning assigned to it in the
Development Agreement.
"PeopleTools" shall have the meaning assigned to it in the Development
Agreement.
"Pre-Release License" means the license granted by Momentum to PeopleSoft
in the section entitled Pre-Release Marketing and Distribution License/
Responsibilities.
"Pre-Release Royalty" means the royalties payable by PeopleSoft as set
forth in Exhibit A (section 2) for any Momentum Product commercialized by
PeopleSoft prior to the exercise of the License Option.
"Pre-Release Term" means the period from which a work plan for a product is
approved by Momentum pursuant to the Development Agreement until the
earlier of (1) PeopleSoft's exercise of the License Option, or (2) the end
of the License Option Term.
"Pricing Addendum" means the separately executed addendum to this Marketing
Agreement which states the commercial terms of this Agreement. The Pricing
Addendum is attached as Exhibit A and is hereby incorporated herein as part
of this Marketing Agreement.
"Product Payments" means the royalties payable by PeopleSoft as set forth
in Exhibit A (section 3(a)) for any Licensed Product.
"Purchase Option" means PeopleSoft's option to acquire all (but not less
than all) of the outstanding Class A Common Stock of Momentum as set forth
in Momentum's Restated Certificate of Incorporation.
"Second-Line Support" means the general level of Support Services without
First-Line Support obligations.
"Support Services" means PeopleSoft's then current technical support and
maintenance services for the PeopleSoft Technology. Support Services for
general customers as of the Effective Date are as set forth in Exhibit B
attached hereto.
"Term" shall mean the exercise or expiration of the Purchase Option.
"Upgrade" means the right to use the Momentum Products on a designated
computer with increased processing power or an increase in the number of
users to the next pricing increment and generally in each case a
requirement for a payment of applicable Upgrade fees to PeopleSoft.
"Updates" means one (1) copy of all published revisions and corrections to
the printed documentation and one (1) copy of corrections and new releases
of the Momentum Products.
2. PRE-RELEASE MARKETING AND DISTRIBUTION LICENSE/ RESPONSIBILITIES
2.1 For the Pre-Release Term, Momentum grants to PeopleSoft the exclusive
license to market and distribute pre-release versions of the Momentum
Products to any End Users through its then current worldwide channel
distribution system under the PeopleSoft name or otherwise pursuant to
PeopleSoft's then current general licensing policies and
methodologies. PeopleSoft shall use commercially reasonable efforts to
promptly market and distribute such pre-release versions of Momentum
Products to select customers in accordance with its standard
practices. Any customers licensed by PeopleSoft during the Pre-Release
Term must be reasonably acceptable to Momentum.
2.2 PeopleSoft shall have the right to use a reasonable number of copies
of the Momentum Products, at no royalty to Momentum, for training,
marketing, sales and support purposes.
Page 2 of 13
<PAGE> 3
2.3 PeopleSoft shall have complete responsibility, at its expense, for all
marketing, pre-sales and sales activities associated with the Momentum
Products.
2.4 PeopleSoft shall establish all then-current commercially reasonable
local country suggested list prices for the Momentum Products and
associated services.
3. ROYALTIES/PAYMENTS FOR PRE-RELEASE TERM
3.1 For each pre-release copy of Momentum Products licensed by PeopleSoft
to an End User, PeopleSoft shall pay Momentum a royalty (the
"Pre-Release Royalty") as set forth in the Pricing Addendum.
PeopleSoft may license a reasonable number of royalty-free copies of
the Momentum Products for End User evaluation purposes.
3.2 PeopleSoft shall pay to Momentum all royalties and fees due to
Momentum under this Marketing Agreement within forty-five (45) days of
the end of the calendar quarter in which the Net Revenues are recorded
by PeopleSoft.
4. SUPPORT SERVICES FOR PRE-RELEASE TERM
4.1 Momentum and PeopleSoft shall work together to provide joint
post-sales support to End Users. Momentum shall provide limited Second
Line Support for the Momentum Products through its Contract
Developers.
4.2 PeopleSoft shall provide all support for PeopleTools to End Users,
commensurate with PeopleSoft's then current standard Support Services
terms and conditions. A copy of the Support Services terms and
conditions as of the Effective Date is included as Exhibit B.
4.3 PeopleSoft shall provide the End User with First-Line Support for the
Momentum Products and shall retain all associated support revenues.
PeopleSoft's responsibility to provide Updates and enhancements to End
Users is limited only to the distribution of any releases, Updates and
enhancements provided to PeopleSoft by Momentum, as well as the
distribution to End Users of any new releases, Updates or enhancements
of PeopleTools.
5. SUPPORT SERVICES FEES FOR PRE-RELEASE TERM
5.1 As of the Effective Date, PeopleSoft incorporates the first year of
Support Services fees into the license fee. Currently, Support
Services fees are listed at eighteen percent (18%) of the software
license fee.
5.2 As set forth in Exhibit A, PeopleSoft shall retain all revenues from
the provision of Support Services, which are detailed more completely
in Exhibit B.
6. LICENSE OPTION
6.1 Momentum hereby grants to PeopleSoft a License Option to acquire a
license to exclusively commercialize each Momentum Product . This
License Option shall be exercisable on a worldwide basis at any time
during the License Option Term. Upon exercise of the License Option,
PeopleSoft shall obtain a perpetual, exclusive license (with the right
to sublicense through multiple tiers of sublicensors) to develop,
make, have made, use, support, market, enhance and distribute the
Licensed Product subject to the obligation to make Product Payments as
set forth in Exhibit A (section 3 (a)) hereto. PeopleSoft shall also
have the right to buyout the Product Payments as set forth in Exhibit
A (Section 3 (b)).
6.2 Upon exercise of the License Option with respect to a Momentum
Product, sections 2, 3, 4 and 5 above shall no longer apply with
respect to such Momentum Product and PeopleSoft shall assume sole and
full responsibility for any product development, support, training,
consulting, bug fixes, modifications and enhancements with respect to
the Licensed Product.
6.3 At the end of the License Option Term for a Momentum Product, if
PeopleSoft has not exercised its License Option with respect to said
Momentum Product, (1) PeopleSoft shall grant to Momentum a perpetual,
nonexclusive license to market, distribute and sublicense the
PeopleSoft Technology, only to the
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<PAGE> 4
extent incorporated into such Momentum Product, to all third parties
that are not then Excluded Parties, subject to the terms and
conditions of PeopleSoft's then-standard end user license agreement.
The royalty rate payable by Momentum to PeopleSoft for such
distribution shall be substantially similar to PeopleSoft's then
current royalty rates which PeopleSoft receives from third parties
marketing PeopleSoft Technology; and (2) Momentum shall grant to
PeopleSoft a perpetual, royalty-free, non-exclusive license to (a)
license the then most recent version of such Momentum Product, and any
new releases, Updates or enhancements thereto, to any End Users
granted licenses by PeopleSoft pursuant to the Pre-Release License,
and (b) use a reasonable number of copies of Momentum Products and any
new releases, Updates or enhancements thereto, for internal use,
training and support purposes.
7. DISTRIBUTION LIMITATION
Regardless of whether PeopleSoft exercises the License Option, PeopleSoft
warrants that it will not, without the prior written consent, if required,
of the U.S. Department of Commerce, export directly or indirectly Momentum
Products to any prohibited country specified in then current U.S.
Department of Commerce Export Administration Regulations.
With regard to the license grant in section 6.3(2) above, Momentum warrants
that it will not, without the prior written consent, if required, of the
U.S. Department of Commerce, export directly or indirectly PeopleSoft
Technology incorporated into Momentum Products to any prohibited country
specified in then current U.S. Department of Commerce Export Administration
Regulations.
8. LICENSE TO USE MOMENTUM TRADEMARKS AND TRADENAMES
Regardless of whether PeopleSoft exercises the License Option, Momentum
provides to PeopleSoft a royalty-free license to use Momentum's tradenames
and trademarks which relate to the Momentum Products in connection with
PeopleSoft's distribution of the Momentum Products or marketing materials
associated with this Marketing Agreement, provided PeopleSoft clearly
identifies Momentum's ownership of such names or marks.
9. TERM
9.1 This Marketing Agreement shall expire at the Term.
9.2 This Marketing Agreement shall automatically terminate in the event
PeopleSoft acquires all ownership interest to Momentum.
10. RECORDS AND REPORTS/PAYMENTS
10.1 PeopleSoft shall keep full, true and accurate records and accounts in
accordance with generally accepted accounting practices to show the
amount of fees payable to Momentum. These records and accounts shall
include for each copy of Momentum Products distributed:
a. the name and address of the End User;
b. the date of shipment and receipt of payments from End Users;
c. the computation of the net licenses fee; and
d. a copy of each signed end user license agreement.
10.2 PeopleSoft shall keep these records at PeopleSoft's principal place of
business. Momentum shall have the right to conduct an audit of such
records once per calendar year upon the giving of at least five (5)
business days prior written notice to PeopleSoft to determine
PeopleSoft's compliance with this Marketing Agreement. Momentum shall
bear the expenses of the audit, however, in the event any such audit
reveals that PeopleSoft has understated the amount of fees that
PeopleSoft is obligated to pay Momentum under this Marketing Agreement
by more than five percent (5%), PeopleSoft shall pay, in addition to
any fees contractually due, all reasonable costs and fees associated
with the audit.
10.3 Forty Five (45) days after the end of each calendar quarter,
PeopleSoft shall develop, implement and provide Momentum with a
quarterly royalty report in accordance with its standard reporting
practices that is structured as a summary report with availability to
detailed backup information. The expectation is that
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<PAGE> 5
key information concerning the Momentum Products module(s) licensed,
customer name, ship date, quantity, standard list price, actual fee
received, reductions for bundled services, Net License Fee and actual
royalty rate will be provided in the quarterly report provided to
Momentum. In addition, such report shall detail the computation of Net
Revenues, including the summarization of Net License Fees, and the
deduction of appropriate Enhancement Costs incurred during the
reporting period. The report shall also provide a summary of such
Enhancement Costs.
10.4 All payments shall be made in U.S. dollars.
11. TITLE AND PROTECTION / NON DISCLOSURE
11.1 All right, title and interest to the Momentum Products shall vest in
Momentum, subject to PeopleSoft's underlying right, title and interest
in and to the PeopleSoft Technology.
11.2 PeopleSoft shall affix, to any media containing a copy of all or any
portion of the Momentum Products and to each whole or partial copy of
documentation, all copyright, proprietary information notices and
restricted rights legends as were affixed to the original media or
documents. All Momentum Products Distributed to the federal government
shall contain the correct "Restricted Rights" legend as defined in
DFAR 52.227-7013 (c) (1) (ii) or pertinent subsequent citation.
11.3 Title to the physical media for the Momentum Products vests in
PeopleSoft upon delivery. The Momentum Products contains valuable
proprietary information, and other than as set forth herein,
PeopleSoft shall not disclose any such information to anyone other
than those of its employees or consultants under nondisclosure
obligations who have a need to know for purposes consistent with this
Marketing Agreement. PeopleSoft shall affix, to each full or partial
copy of Momentum Products made by PeopleSoft, all copyright and
proprietary information notices as affixed to the original.
11.4 All information (1) clearly marked "confidential" by either party
under this Marketing Agreement and provided to the other party, or (2)
which should reasonably be understood to be confidential in nature by
the receiving party, shall be treated as confidential and shall not be
disclosed, orally or in writing by the receiving party to any third
party without the prior written consent of the disclosing party.
12. LIMITED WARRANTY
12.1 Momentum represents that each of the Momentum Products does not
infringe any patent, copyright or other third party intellectual
property rights when used in accordance with the published
specifications for such Momentum Product. Momentum represents that
each of the Momentum Products and all subsequent major releases
thereon will perform substantially in accordance with the
corresponding documentation for such Momentum Product for a period of
one (1) year from the date of installation. Momentum does not
represent that any of the Momentum Products is error-free. In the
event that any of the Momentum Products does not perform substantially
in accordance with the published specifications for such Momentum
Product, Momentum's sole obligation is limited to repair or
replacement of such defective Momentum Product in accordance with its
then current support services terms and conditions, provided
PeopleSoft notifies Momentum of the deficiency within the one-year
period and provided PeopleSoft has installed all Momentum Products
updates provided by Momentum's support services.
12.2 MOMENTUM DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
12.3 PeopleSoft represents that the PeopleSoft Technology does not infringe
any patent, copyright or other third party intellectual property
rights when used in accordance with the published specifications.
PeopleSoft represents that the PeopleSoft Technology and all
subsequent major releases thereon will perform substantially in
accordance with the corresponding documentation for a period of one
(1) year from the date of installation at Momentum. PeopleSoft does
not represent that the PeopleSoft Technology is error-free. In the
event the PeopleSoft Technology does not perform substantially in
accordance with the published specifications, PeopleSoft's sole
obligation is limited to repair or replacement of the defective
PeopleSoft Technology in accordance with its then current Support
Services terms and conditions,
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<PAGE> 6
provided Momentum notifies PeopleSoft of the deficiency within the
one-year period and provided Momentum has installed all PeopleSoft
Technology updates provided by PeopleSoft's Support Services.
12.4 PEOPLESOFT DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE
13. DISCLAIMER OF CONSEQUENTIAL DAMAGES / LIMITATION OF LIABILITY
13.1 NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL,
SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOST
DATA OR LOST PROFITS, HOWEVER ARISING, EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
13.2 EXCLUDING DAMAGES INCURRED UNDER THE ARTICLE ENTITLED
"INDEMNIFICATION", EACH PARTY'S LIABILITY FOR DAMAGES UNDER THIS
MARKETING AGREEMENT SHALL IN NO EVENT EXCEED THE AMOUNT OF ROYALTIES
THAT PEOPLESOFT HAS PAID TO MOMENTUM IN THE PRECEDING TWELVE (12)
MONTHS. THE PARTIES AGREE TO THE ALLOCATION OF LIABILITY RISK WHICH IS
SET FORTH IN THIS SECTION.
14. INDEMNIFICATION
14.1 Momentum shall indemnify and defend PeopleSoft against any claims that
the components of the Momentum Products (excluding PeopleSoft
Technology) infringes any patent, copyright or trade secret; provided
that Momentum is given prompt notice of such claim and is given
information, reasonable assistance, and authority to defend or settle
the claim. In the defense or settlement of the claim, Momentum may
obtain for PeopleSoft the right to continue using and marketing the
Momentum Products or replace or modify Momentum Products so that it
becomes noninfringing while giving substantially equivalent
performance. Momentum shall have no liability if the alleged
infringement is based on: (i) a modification of Momentum Products by
anyone other than Momentum or its subcontractors, if any; or (ii) the
use of the Momentum Products other than in accordance with the
documentation provided by Momentum.
14.2 PeopleSoft shall indemnify and defend Momentum against any claims that
the PeopleSoft Technology infringes any patent, copyright or trade
secret; provided that PeopleSoft is given prompt notice of such claim
and is given information, reasonable assistance, and authority to
defend or settle the claim. In the defense or settlement of the claim,
PeopleSoft may obtain for Momentum the right to continue using the
PeopleSoft Technology or replace or modify PeopleSoft Technology so
that it becomes noninfringing while giving substantially equivalent
performance. PeopleSoft shall have no liability if the alleged
infringement is based on: (i) a modification of PeopleSoft Technology
by anyone other than PeopleSoft; or (ii) the use of PeopleSoft
Technology other than in accordance with the Documentation.
15. DEFAULT
15.1 It shall be an event of default ifeither party (1) fails to perform
any of its material obligations (including any payment obligations)
under this Marketing Agreement or otherwise materially breaches this
Marketing Agreement and such material breach remains uncured for more
than thirty (30) days after receipt of written notice specifying the
material breach thereof, or (2) enters into any proceeding, voluntary
or involuntary, in bankruptcy, reorganization or similar arrangement
for the benefit of its creditors.
15.2 If an event of default occurs, the nondefaulting party in addition to
any other rights available to it under law or equity, may terminate
this Marketing Agreement by written notice to the defaulting party. In
the event this Marketing Agreement is terminated by PeopleSoft in
connection with Momentum's breach of a material obligation under this
Marketing Agreement, PeopleSoft shall be entitled to receive, as
liquidated damages, the Available Funds. If PeopleSoft reasonably
believes that such liquidated damages are inadequate, then PeopleSoft
will be entitled to specific performance of Momentum's obligations
under this Marketing Agreement in connection with such breach.
Remedies shall be cumulative and there shall be no obligation to
exercise a particular remedy.
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16. TERMINATION
16.1 Any licenses granted pursuant to Sections 6.1, 6.3 and 8 and any
sublicenses granted pursuant to Section 2.1 shall survive the
termination of this Agreement.
16.2 Within thirty (30) days of termination, PeopleSoft shall pay Momentum
all sums due under this Marketing Agreement.
16.3 Prior to termination, the parties shall meet, discuss and agree on a
transition plan to address technical support plans for existing End
Users and then-current commercially reasonable payments from Momentum
to PeopleSoft for continuing PeopleTools Support Services from
PeopleSoft directly to Momentum.
16.4 In addition to this section, the sections entitled "Distribution
Limitation," "Royalties/Payments," "Records and Reports/Payments,"
"Title and Protection / Non-disclosure," "Limited Warranty,"
"Disclaimer of Consequential Damages/Limitation of Liability," and
"Indemnification," shall survive termination of this Marketing
Agreement.
17. NOTICES
All notices shall be in writing and hand-delivered or sent by first class
mail, overnight mail, courier, or transmitted by facsimile (if confirmed by
such mailing), to the addresses indicated on the first page of this
Agreement, or such other address as either party may indicate by at least
ten (10) days prior written notice to the other party. Notices to
PeopleSoft shall be addressed to the Office of the General Counsel,
Corporate Legal Department.
18. GENERAL
18.1 This Marketing Agreement is made in and shall be governed by the laws
of the State of California, excluding choice of law principles. Any
actions brought to enforce any of the provisions of this Marketing
Agreement shall be fully and finally resolved by binding arbitration
under the rules of the American Arbitration Association conducted by a
mutually acceptable independent third party in San Francisco,
California.. Except for actions for breach of PeopleSoft's proprietary
rights in PeopleSoft Technology, or Momentum's proprietary rights in
the Momentum Products or Developed Technology, no action regardless of
form, arising out of this Marketing Agreement may be brought by either
party more than one year after the cause of action has accrued.
18.2 The section headings herein are provided for convenience only and have
no substantive effect on the construction of this Marketing Agreement.
If any provision of this Marketing Agreement is held to be
unenforceable, this Marketing Agreement shall be construed without
such provision.
18.3 The failure by a party to exercise any right hereunder shall not
operate as a waiver of such party's right to exercise such right or
any other right in the future. Neither party shall be liable to the
other for any failure to perform due to causes beyond its reasonably
foreseeable control.
18.4 Neither party shall assign this Marketing Agreement, delegate any duty
or assign any right hereunder without the prior written consent of the
other (such consent not to be unreasonably withheld) and any such
attempted assignment or delegation shall be void.
18.5 No agency, partnership or employment is created by this Marketing
Agreement. Momentum shall not use the name of PeopleSoft in any
advertising, public relations or media release without the prior
written consent of PeopleSoft.
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<PAGE> 8
18.6 This Marketing Agreement replaces and supersedes any prior verbal
understandings, written communications, and constitutes the entire
agreement between the parties concerning the subject matter hereof.
This Marketing Agreement may be amended only by a written document
executed by a duly authorized representative of each of the parties.
This Marketing Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties have executed this Marketing Agreement as of the
Effective Date.
MOMENTUM BUSINESS APPLICATIONS, INC. PEOPLESOFT, INC.
- ------------------------------------ ------------------------------------
Authorized Signature Authorized Signature
- ------------------------------------ ------------------------------------
Printed Name and Title Printed Name and Title
Page 8 of 13
<PAGE> 9
EXHIBIT A
PRICING ADDENDUM
TO
MARKETING AND DISTRIBUTION AGREEMENT
This pricing addendum ("Pricing Addendum") is part of the Marketing and
Distribution Agreement ("Marketing Agreement") between PeopleSoft and Momentum.
1. DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this Pricing
Addendum shall have the same meaning as those referenced in the Marketing
Agreement.
2. PRE-RELEASE ROYALTY
THE FOLLOWING SECTION SHALL APPLY ONLY TO MOMENTUM PRODUCTS COMMERCIALIZED
BY PEOPLESOFT PRIOR TO ITS EXERCISE OF THE LICENSE OPTION.
PeopleSoft shall establish competitive list prices for the Momentum
Products in accordance with then-current market conditions.
For each Momentum Product commercialized by PeopleSoft or its channel
partners for use by End Users, prior to the exercise or the License Option
with respect to such Momentum Product, PeopleSoft shall pay Momentum SIX
PERCENT (6%) of Net Revenues.
If PeopleSoft products and Momentum Products are licensed under the same
license agreement as a packaged solution for use by an End User, the Net
Revenues payable to Momentum will be appropriately pro-rated based on the
associated weight of each component's respective list price.
3. PRODUCT PAYMENTS AND PRODUCT PAYMENTS BUYOUT OPTION
THE FOLLOWING SECTION SHALL APPLY ONLY TO MOMENTUM PRODUCTS COMMERCIALIZED
BY PEOPLESOFT SUBSEQUENT TO ITS EXERCISE OF THE LICENSE OPTION.
(a) Product Payments.
PeopleSoft will make Product Payments to Momentum with respect to each
Licensed Product equal to the sum of (i) 1% of Net Revenues plus (ii)
an additional 0.1% of such Net Revenues for each $1 million of
Development Costs with respect to such Licensed Product; provided,
however, that the royalty rate shall not exceed six per cent (6%) of
Net Revenues. Subject to PeopleSoft's product payment buy-out option
described in section 3(b) below, Product Payments will be payable
until 10 years after General Availability of the Licensed Product.
The parties agree that if PeopleSoft chooses to have a third
party distribute a Licensed Product, the parties will negotiate an
appropriate increase in the royalty rate paid by PeopleSoft.
(b) Product Payments Buyout Option
PeopleSoft will have the right to buy-out Momentum's right to receive
Product Payments for any Licensed Product. The buy-out option may be
exercised for any Licensed Product at any time beginning twelve months
after the Licensed Product is declared a Generally Available Product.
The buy-out price will be 15 times the payment made by or due from
PeopleSoft to Momentum with respect to sales of such Licensed Product
for the four quarters immediately preceding the quarter in which the
buy-out option is exercised or, in the event that such Licensed
Product has not been a License Product for all of each of such four
quarters, the buy-out price will be 15 times the annualized payment
for such Licensed Product.
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<PAGE> 10
4. SUPPORT SERVICES FEES
As of the Effective Date, the parties' expectation is that as PeopleSoft
collects Support Services revenue from its End Users, (either on a
stand-alone basis or as part of the license fee revenue) and PeopleSoft
retains all such revenues.
5. PRECEDENCE AND AMENDMENT
In the event of conflict, this Pricing Addendum shall take precedence over
the Marketing Agreement. This Pricing Addendum and the Marketing Agreement
and associated Exhibits are the entire agreement between the parties
concerning the subject matter herein and may only be modified by a written
amendment executed by the parties authorized signatories. This Pricing
Addendum is effective as of the Effective Date.
MOMENTUM BUSINESS APPLICATIONS, INC. PEOPLESOFT, INC.
- ------------------------------------ ------------------------------------
Authorized Signature Authorized Signature
- ------------------------------------ ------------------------------------
Printed Name and Title Printed Name and Title
Page 10 of 13
<PAGE> 11
EXHIBIT B
SOFTWARE SUPPORT SERVICES TERMS AND CONDITIONS
Software Support Services Terms and Conditions ("SUPPORT SERVICES") are
referenced in and incorporated into the Software License and Services Agreement
("Agreement") between PeopleSoft and Licensee. Capitalized terms have the same
meaning as they do in the Agreement.
1. COVERAGE
PeopleSoft provides Licensee with Support Services for the Software at the
Site in exchange for payment of the applicable Support Services fees. Only
designated Licensee employees may contact PeopleSoft for the provision of
Support Services. Licensee may acquire Support Services for additional
Licensee sites by paying PeopleSoft the applicable annual secondary site
Support Services fee.
2. SOFTWARE MAINTENANCE
PeopleSoft will periodically issue the following technical and functional
improvements to Software:
(1) Fixes to Errors; (2) Updates; and (3) Enhancements
3. PRIORITY LEVEL OF ERRORS
PeopleSoft shall address Errors in accordance with the following protocols:
Priority 1-Critical Level: PeopleSoft promptly: (1) designates PeopleSoft
specialist(s) to correct Error; (2) provides expanded communication on
correction status; and (3) escalates troubleshooting a Workaround or
Fix.
Priority 2-Urgent Level: PeopleSoft promptly: (1) designates PeopleSoft
specialist(s) to correct Error; (2) provides ongoing communication on
correction status; and (3) initiates troubleshooting a Workaround or
Fix.
Priority 3-Standard Level: PeopleSoft: (1) assigns PeopleSoft specialist(s)
to commence correction of Error; and (2) exercises all commercially
reasonable efforts to include the Fix for Error in the next Update.
Priority 4-Base Level: PeopleSoft: (1) assigns Error to case management and
tracking; and (2) may include the Fix for Error in the next Update.
4. TELEPHONE SUPPORT
PeopleSoft provides telephone support concerning Software installation and
use. Except for designated holidays, standard telephone support hours are
Monday through Friday, 4:00 a.m. to 6:30 p.m., Pacific Time. Telephone
Support is also available 24-hours-a-day, 7-days-a-week for in-production
customers who need to resolve critical production problems outside of
standard support hours.
5. ACCOUNT MANAGER
PeopleSoft assigns an account manager to assist with the support
relationship between PeopleSoft and Licensee. Licensee will reimburse
PeopleSoft for the reasonable travel and living expenses of the account
manager for on-site support activity.
6. PEOPLESOFT CUSTOMER CONNECTION
a. PeopleSoft Customer Connection is an on-line, self-service system that
features postings by PeopleSoft and customers regarding technical and
non-technical topics of interest. Licensee may access PeopleSoft
Customer Connection via Internet access at its own expense.
b. Software Updates, Enhancements, and Fixes may be delivered to Licensee
through PeopleSoft Customer Connection, or by mail from PeopleSoft on
Licensee's written request. PeopleSoft information posted to Customer
Connection is confidential and proprietary and shall only be used in
connection with Licensee's use of the Software and informational
communications with other PeopleSoft Customer Connection participants.
PeopleSoft shall have the right to publish, modify and distribute any
information or software provided by Licensee to Customer Connection in
all languages. Licensee shall not use PeopleSoft Customer Connection
for advertising or public relations purposes and shall only submit
information to PeopleSoft Customer Connection that Licensee owns or
has permission to use in such manner.
c. To diminish exposure to software viruses, PeopleSoft tests and scans
all information entered by PeopleSoft for software viruses prior to
submitting it to PeopleSoft Customer Connection. Licensee shall also
use a reliable virus detection system on any software or information
posted to PeopleSoft Customer Connection, utilize back-up procedures,
monitor access to PeopleSoft Customer Connection, promptly notify
PeopleSoft of any virus detected within Licensee's systems associated
with PeopleSoft Customer Connection and generally exercise a
reasonable degree of caution when utilizing information from
PeopleSoft Customer Connection. PeopleSoft does not warrant that
PeopleSoft Customer Connection will operate without interruption or
without errors.
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<PAGE> 12
PeopleSoft reserves the right to modify or suspend PeopleSoft Customer
Connection service in connection with PeopleSoft's provision of Support
Services. PeopleSoft assumes no responsibility for anything posted by
anyone other than PeopleSoft, including, but not limited to, information
about PeopleSoft software, modification code, or portions thereof.
7. FEES
The initial period of Support Services for the Site is indicated in the
Schedule and included in the Software license fee; thereafter, in the event
Licensee elects to continue to receive Support Services, Licensee shall pay
PeopleSoft the annual Support Services fee as set forth in the Schedule.
Support Services are billed on an annual basis, payable in advance. Unless
Licensee has provided proof of tax-exempt status, Licensee is responsible
for all taxes associated with Support Services, excluding taxes based on
PeopleSoft's income. Licensee's payment shall be due within thirty (30)
days of receipt of the PeopleSoft invoice. Should Licensee elect not to
renew Support Services and subsequently requests Support Services,
PeopleSoft shall reinstate Support Services only after Licensee pays
PeopleSoft the annual then-current fee plus all cumulative fees that would
have been payable had Licensee not suspended Support Services.
8. TERM AND TERMINATION
Unless otherwise expressly set forth in the Agreement, Support Services
shall be provided for a period of one (1) year from the Schedule Effective
Date, and shall be extended each additional year unless terminated by
either party. Each one (1) year term shall commence on the anniversary of
the Schedule Effective Date.
Either party may terminate the Support Services provisions at the end of
any support term by giving the other party written notice at least ninety
(90) days prior to the end of the term.
If Licensee fails to make payment pursuant to the section titled "Fees", or
Licensee breaches the Support Services provisions and such breach has not
been cured within thirty (30) days of receipt of written notice of breach,
PeopleSoft may suspend or cancel Support Services.
9. EXCLUSIONS
PeopleSoft shall have no obligation to support:
a. Substantially altered, damaged or modified Software;
b. Software that is not the then-current release, or a Previous
Sequential Release;
c. Errors caused by Licensee's negligence, hardware malfunction, or other
causes beyond PeopleSoft's reasonable control;
d. Software installed in a hardware or operating environment not
supported by PeopleSoft; and
e. Third party software not licensed through PeopleSoft.
10. GENERAL
All Updates, Enhancements and Fixes provided to Licensee are subject to the
terms and conditions of the Agreement. PeopleSoft may modify Support
Services on an annual basis to reflect current market condition upon
reasonable notice.
11. DEFINITIONS
"ENHANCEMENT" means a technical or functional addition to the Software
delivered with a new Software release to improve functionality and/or
operations.
"ERROR" means a Software malfunction that degrades the use of the Software.
"FIX" means the repair or replacement of source, object or executable code
Software versions to remedy an Error.
"PREVIOUS SEQUENTIAL RELEASE" means a Software release for a particular
operating environment that has been replaced by a subsequent Software
release in the same operating environment. PeopleSoft will support a
Previous Sequential Release for a period of eighteen (18) months after
release of the subsequent release. Multiple Previous Sequential Releases
may be supported at any given time.
"PRIORITY 1" means an Error that renders the Software inoperative or causes
the Software to fail catastrophically.
"PRIORITY 2" means an Error that affects performance of the Software and
prohibits Licensee's use of the Software.
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<PAGE> 13
"PRIORITY 3" means an Error that affects performance of the Software, but
does not prohibit Licensee's use of the Software.
"PRIORITY 4" means an Error that causes only a minor impact on the use of
the Software.
"UPDATE" means all published revisions to the Documentation and one (1)
copy of the new Software release not designated by PeopleSoft as new
products or functionality for which it charges separately.
"WORKAROUND" means a change in the procedures followed or data supplied to
avoid an Error without significantly impairing Software performance.
Page 13 of 13
<PAGE> 1
Exhibit 10.4
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made as of the __ day of
December 1998 between PeopleSoft, Inc., a Delaware corporation ("PeopleSoft"),
and Momentum Business Applications, Inc. a Delaware corporation ("Momentum").
B A C K G R O U N D
A. PeopleSoft is the holder of all of the issued and outstanding shares
of capital stock of Momentum. PeopleSoft intends to contribute $250 million to
Momentum, to license certain technology to Momentum, and to make other
arrangements in order to establish Momentum as a separate enterprise for the
purpose of developing certain software products and commercializing such
products, most likely through licensing to PeopleSoft.
B. PeopleSoft intends to distribute all of the Momentum Shares (as
defined below) to the holders of its Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
1.1 "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
1.2 "Agent" shall mean Boston EquiServe, L.P., as distribution agent,
appointed by PeopleSoft to distribute certificates representing the Momentum
Shares pursuant to the Distribution.
1.3 "PeopleSoft/Momentum Agreements" shall mean this Agreement, the
Development Agreement, the Marketing Agreement, the Services Agreement and the
Purchase Option.
1.4 "PeopleSoft Common Stock" shall mean the Common Stock, par value
$0.01 per share, of PeopleSoft.
1.5 "Commission" shall mean the Securities and Exchange Commission.
1.6 "Momentum Shares" shall mean the Class A Common Stock, par value
$0.001 per share, of Momentum.
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<PAGE> 2
1.7 "Development Agreement" shall mean the Development and License
Agreement dated as of the date hereof between PeopleSoft and Momentum.
1.8 "Distribution" shall mean the distribution of Momentum Shares to
holders of record on December __, 1998 of PeopleSoft Common Stock immediately
following completion of the transactions contemplated in Sections 2 and 3
hereof.
1.9 "Distribution Date" shall mean the proposed date of effecting the
Distribution, which is anticipated to occur on or about December __, 1998.
1.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.11 "Marketing Agreement" shall mean the Marketing and Distribution
Agreement dated as of the date hereof between PeopleSoft and Momentum.
1.12 "Momentum Registration Statement" shall mean the registration
statement on Form 10 registering the issuance of Momentum Shares pursuant to the
Distribution.
1.13 "Information Statement" shall mean the Information Statement to
be distributed to the holders of PeopleSoft Common Stock in connection with the
Distribution relating to the PeopleSoft Registration Statement and the Momentum
Registration Statement.
1.14 "Purchase Option" shall mean that certain option contained in
Momentum's Restated Certificate of Incorporation pursuant to which PeopleSoft
has the right to purchase all, but not less than all, of the outstanding
Momentum Shares.
1.15 "Record Date" shall mean the close of business on December __,
1998 or such other date as is determined by the PeopleSoft Board of Directors or
any committee thereof.
1.16 "Services Agreement" shall mean the Services Agreement dated as
of the date hereof between PeopleSoft and Momentum.
1.17 "Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Preliminary Action.
2.1 Registration Statement and Information Statement. Momentum has
prepared and filed the Momentum Registration Statement with the Commission.
Subject to the conditions set forth herein, PeopleSoft and Momentum shall use
reasonable efforts to cause the Momentum registration statements to become
effective under the Exchange Act. Momentum and PeopleSoft have prepared, and
PeopleSoft shall cause to be mailed, the Information Statement to the record
holders on the Record Date of PeopleSoft Common Stock and PeopleSoft.
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<PAGE> 3
2.2 Blue Sky. Momentum shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States in connection with the Distribution
to permit the Momentum Shares to be distributed as described in the Information
Statement.
2.3 Listing. Momentum has prepared and filed an application to effect
the listing of the Momentum Shares on the Nasdaq National Market. Momentum shall
use reasonable efforts to cause the Momentum Shares to be so listed.
2.4 No Representations or Warranties; Consents. Each party hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any agreements or the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable laws. Notwithstanding the foregoing, the
parties shall use reasonable efforts to obtain all consents and approvals, to
enter into all agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings or
consents under federal or state laws and all necessary consents, approvals,
agreements, filings and applications.
3. Issue and Sale of Momentum Shares.
3.1 Purchase of Momentum Class A Common Stock. Prior to the
Distribution Date, in consideration of, among other things, a $250 million
capital contribution to Momentum by PeopleSoft, Momentum will issue to
PeopleSoft that number of Momentum Shares such that PeopleSoft may distribute to
holders of PeopleSoft Common Stock one Momentum Share for every 50 shares of
PeopleSoft Common Stock held on the Record Date. PeopleSoft and Momentum
acknowledge that all of the Momentum Shares held by PeopleSoft will be
distributed by PeopleSoft to the holders of outstanding shares of PeopleSoft
Common Stock.
4. The Distribution.
4.1 The Distribution. Momentum shall take all steps required by
PeopleSoft or the Agent to effect the Distribution. Prior to the Distribution,
and upon receipt of the capital contribution described in Section 3 hereof,
Momentum shall cause to be issued to PeopleSoft a certificate or certificates
representing a sufficient number of Momentum Shares so that PeopleSoft may
distribute one Momentum Share for every 50 shares of PeopleSoft Common Stock
held on the Record Date.
4.2 Expenses of Distribution. All expenses related in any way to the
Distribution, including without limitation all legal, financial advisory and
accounting fees of PeopleSoft and Momentum, shall be borne by PeopleSoft.
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5. Additional Assurances: Indemnification.
5.1 Mutual Assurances. PeopleSoft and Momentum agree to cooperate
with respect to the implementation of the PeopleSoft/Momentum Agreements and to
execute such further documents and instruments as may be necessary to confirm
the transactions contemplated thereby.
5.2 Indemnification. If PeopleSoft exercises the Purchase Option,
from and after such exercise, PeopleSoft shall indemnify, defend and hold
harmless Momentum's officers and directors to the same extent as provided in
Momentum's Restated Certificate of Incorporation.
5.3 Notice. Any person entitled to indemnification pursuant to
Section 5.2 shall give PeopleSoft prompt notice in writing, in the manner set
forth in Section 7.7 below, of any claim or demand made against such person for
which such person may be entitled to indemnification under Section 5.2.
6. Conditions to Effectiveness of Distribution. The Distribution shall be
subject to the satisfaction or waiver by PeopleSoft of the following conditions
and the satisfaction or waiver by Momentum of the conditions in Sections 6.8 and
6.9:
6.1 Board Approval. The PeopleSoft/Momentum Agreements (including
exhibits and schedules) shall have been approved by the Board of Directors of
PeopleSoft and Momentum and shall have been executed and delivered by
appropriate officers of PeopleSoft and Momentum, and the PeopleSoft Board of
Directors (or a committee thereof) shall have declared a dividend of the
Momentum Shares as of the Record Date to the holders of record of the PeopleSoft
Common Stock.
6.2 Securities Law Compliance. The transactions contemplated hereby
shall be in compliance with applicable federal and state securities laws, and
the Momentum Registration Statement and PeopleSoft Registration Statement shall
have been declared effective and no stop orders shall have been instituted with
respect thereto under the Exchange Act.
6.3 Restated Certificate of Incorporation. The Restated Certificate
of Incorporation of Momentum shall have been adopted by the Board of Directors,
approved by PeopleSoft as sole stockholder of Momentum, and filed with the
Delaware Secretary of State.
6.4 Listing Application Approved. The Momentum Shares shall be
approved for quotation on the Nasdaq National Market.
6.5 Fairness Opinion. PeopleSoft shall have received an opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, investment advisor to
PeopleSoft, in form and substance satisfactory to PeopleSoft, to the effect that
(i) from a financial point of view, the Distribution provides a reasonable
structure to pursue the financial objectives described in the Information
Statement of PeopleSoft and (ii) from a financial point of view, the
Distribution is fair to the stockholders of PeopleSoft.
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6.6 Permits and Licenses. Momentum shall have received such permits
and licenses as may be necessary for the purpose of commencing operations
contemplated by the PeopleSoft/Momentum Agreements.
6.7 Consents. Each of PeopleSoft and Momentum shall have received
such consents, and shall have received executed copies of such agreements or
amendments of agreements, as it shall deem necessary in connection with the
completion of the transaction contemplated by this Agreement.
6.8 Other Instruments. All actions and other documents and
instruments deemed necessary or advisable in connection with the transactions
contemplated hereby shall have been taken or executed, as the case may be, in
form and substance satisfactory to PeopleSoft and Momentum.
6.9 Legal Proceedings. No legal proceedings affecting or arising out
of the transactions contemplated hereby or which could otherwise affect
PeopleSoft or Momentum in a materially adverse manner shall have been commenced
or threatened against PeopleSoft, Momentum or the directors or officers of
either PeopleSoft or Momentum.
6.10 Material Changes. No material adverse change shall have occurred
with respect to PeopleSoft or Momentum, the securities markets (either generally
or with respect to PeopleSoft or Momentum) or general economic or financial
conditions which shall, in the reasonable judgment of PeopleSoft, make the
transactions contemplated by this Agreement inadvisable.
6.11 Other Conditions. Such other conditions as may be set by the
PeopleSoft Board of Directors or any committee thereof in the resolutions
authorizing the Distribution shall have been satisfied.
7. Miscellaneous.
7.1 Waiver, Remedies and Amendment. Any waiver by either party hereto
of a breach of any provisions of this Agreement shall not be implied and shall
not be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of such term or condition for any other term.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
7.2 Assignment. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that PeopleSoft may assign
such rights and obligations hereunder to an
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<PAGE> 6
Affiliate of PeopleSoft or to an Affiliate of PeopleSoft or to any person or
entity with which PeopleSoft is merged or consolidated or which acquires all or
substantially all of the assets of PeopleSoft.
7.3 Arbitration.
(a) All disputes which may arise under, out of or in connection
with this Agreement shall be settled by arbitration conducted in the city of San
Francisco, state of California, in accordance with the then existing rules of
the American Arbitration Association, and judgment upon the award rendered by
the Arbitrators may be entered in any court having jurisdiction thereof. The
parties hereby agree that service of any notices in the course of such
arbitration at their respective addresses as provided for in Section 7.7 of this
Agreement shall be valid and sufficient.
(b) In any arbitration pursuant to this Section 7.3, the award
shall be rendered by a majority of the members of a board of arbitration
consisting of three members who shall be appointed by the parties jointly, or if
the parties cannot agree as to three arbitrators within 30 days after the
commencement of the arbitration proceeding, then one arbitrator shall be
appointed by PeopleSoft and one arbitrator shall be appointed by Momentum within
60 days after the commencement of the arbitration proceeding. The third
arbitrator shall be appointed by mutual agreement of such two arbitrators. In
the event of failure of the two arbitrators to agree within 75 days after
commencement of the arbitration proceeding upon the appointment of the third
arbitrator, the third arbitrator shall be appointed by the American Arbitration
Association in accordance with its then existing rules. Notwithstanding the
foregoing, in the event that any party shall fail to appoint an arbitrator it is
required to appoint within the specified time period, such arbitrator and the
third arbitrator shall be appointed by the American Arbitration Association in
accordance with its then existing rules. For purposes of this Section 7.3, the
"commencement of the arbitration proceeding" shall be deemed to be the date upon
which a written demand for arbitration is received by the American Arbitration
Association from one of the parties.
7.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
7.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of California as applied to residents
of that state entering into contracts to be performed in that state.
7.6 Headings. The headings set forth at the beginning of the various
sections of this Agreement are for convenience and form no part of the Agreement
between the parties.
7.7 Notices. Notices required under this Agreement shall be in
writing and sent by registered or certified mail, postage prepaid.
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If to PeopleSoft: PeopleSoft, Inc.
4660 Hacienda Drive
Pleasanton, California 94588
Attention: General Counsel
If to Momentum: Momentum Business Applications, Inc.
1301 Harbor Bay Blvd.
Alameda, California 94502
Attention: President
All notices shall be deemed to be effective five days after the
date of mailing. Either party may change the address at which notice is to be
received by written notice pursuant to this Section 7.7.
7.8 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, it shall be
modified, if possible, to the minimum extent necessary to make it valid and
enforceable or, if such modification is not possible, it shall be stricken and
the remaining provisions shall remain in full force and effect.
7.9 Relationship of the Parties. For all purposes of this Agreement,
Momentum and PeopleSoft shall be deemed to be independent contractors and
anything in this Agreement to the contrary notwithstanding, nothing herein shall
be deemed to constitute Momentum and PeopleSoft as partners, joint venturers,
co-owners, an association or any entity separate and apart from each party
itself, nor shall this Agreement constitute any party hereto an employee or
agent, legal or otherwise, of the other party for any purposes whatsoever.
Neither party hereto is authorized to make any statements or
representations on behalf of the other party or in any way to obligate the other
party, except as expressly authorized in writing by the other party. Anything in
this Agreement to the contrary notwithstanding, no party hereto shall assume nor
shall be liable for any liabilities or obligations of the other party, whether
past, present or future.
7.10 Survival. The provisions of Sections 1, 5, 7.1, 7.3, 7.5, 7.7,
7.8 and this Section 7.10 shall survive the termination for any reason of this
Agreement. Any payments due under this Agreement with respect to any period
prior to its termination shall be made notwithstanding the termination of this
Agreement. Neither party shall be liable to the other due to the termination of
this Agreement as provided herein, whether in loss of good will, anticipated
profits or otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PEOPLESOFT, INC.
By:
-------------------------------------
Title:
----------------------------------
MOMENTUM BUSINESS APPLICATIONS, INC.
By:
-------------------------------------
Title:
----------------------------------
8
