<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1998
REGISTRATION NO. 333- -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PEACHTREE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 58-1809363
(State or other jurisdiction of (Primary standard industrial (IRS Employer
Incorporation or organization) classification code no.) Identification No.)
</TABLE>
------------------------
PEACHTREE SOFTWARE, INC.
1505 PAVILION PLACE
NORCROSS, GA 30093
(770) 724-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
RONALD F. VERNI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PEACHTREE SOFTWARE, INC.
1505 PAVILION PLACE
NORCROSS, GA 30093
(770) 724-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD S. BORISOFF, ESQ. VINCENT PAGANO, JR., ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON SIMPSON THACHER & BARTLETT
1285 AVENUE OF THE AMERICAS 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019-6064 NEW YORK, NEW YORK 10017-3954
(212) 373-3000 (212) 455-2000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share (2)............................... $140,000,000 $38,920.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Including associated preferred stock purchase rights, which will not be
evidenced by separate certificates or traded separately prior to the
occurrence of certain triggering events.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Subject to Completion, dated December 18, 1998
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
PROSPECTUS
LOGO
- Shares
PEACHTREE
Common Stock
- --------------------------------------------------------------------------------
This is an initial public offering of shares of common stock of Peachtree
Software, Inc. We are offering - shares. Automatic Data Processing, Inc. is
offering - shares. There is currently no public market for our shares.
We are a wholly owned subsidiary of ADP. Upon completion of the Offering, ADP
will beneficially
own approximately - % of the outstanding common stock ( - % if the
Underwriters'
over-allotment option is exercised in full). We will not
receive any proceeds from ADP's sale of shares.
The initial public offering price is currently anticipated to be
between $ - and $ - per share.
We have applied for quotation of the shares on the Nasdaq National Market
under the symbol "PEAC."
INVESTING IN THE SHARES INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE 5. - .
<TABLE>
<CAPTION>
Per Share Total
--------------- ------------
<S> <C> <C>
Public Offering Price.............................................................. $ $
Underwriting Discount.............................................................. $ $
Proceeds to Peachtree.............................................................. $ $
Proceeds to ADP.................................................................... $ $
</TABLE>
ADP has granted the Underwriters the right to purchase up to an additional -
shares to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Lehman Brothers expects to deliver the shares on or about - .
- --------------------------------------------------------------------------------
LEHMAN BROTHERS SALOMON SMITH BARNEY
- , 1999
<PAGE>
PEACHTREE SOFTWARE AWARDS, 1997-1998
<TABLE>
<CAPTION>
SPONSORING
ORGANIZATION/
DATE AWARD/RECOGNITION PUBLICATION PRODUCT
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
December 1998 Codie Awards Nominee SOFTWARE PUBLISHERS Office Accounting
(Best New Business ASSOCIATION
Software)
November 1998 HOC 100 Silver Award HOME OFFICE COMPUTING Office Accounting
September 1998- Win List WINDOWS Complete Accounting
August 1996
June 1998 World Class Award PC WORLD Complete Plus Time &
Billing
June 1998 Win 100 Award WINDOWS Complete Plus Time &
Billing
June 1998 Win 100 Award WINDOWS Accounting for Windows
March 1998 Codie Awards Finalist SOFTWARE PUBLISHERS Complete Plus Time &
ASSOCIATION Billing
February 1998 Top 25 Software Products SMALL BUSINESS COMPUTING Complete Plus Time &
Billing
February 1998 Readers' Choice Awards, COMPUTER CURRENTS Complete Plus Time &
runner-up Billing
February 1998 Best Buy HOME OFFICE COMPUTING Complete Plus Time &
Billing
January 1998 Analysts' Choice INFOWORLD Complete Plus Time &
Billing
December 1997 Top 100 Software Packages ACCOUNTING TODAY Complete Plus Time &
Billing
December 1997 Top 100 Software Packages ACCOUNTING TODAY One-Write Plus
November 1997 Editors' Choice Award HOME OFFICE COMPUTING Complete Plus Time &
Billing
November 1997 MVP Award Finalist PC COMPUTING Complete Plus Time &
Billing
October 1997 Best Buy PC WORLD Complete Plus Time &
Billing
July 1997 World Class Award, PC WORLD Complete Accounting
Runner-up
June 1997 Win 100 Award WINDOWS Complete Accounting
May 1997 Editors' Choice PC MAGAZINE Complete Accounting
March 1997 Codie Awards Finalist SOFTWARE PUBLISHERS Complete Accounting
ASSOCIATION
January 1997 Top 100 Software Packages ACCOUNTING TODAY Complete Accounting
January 1997 Top 100 Software Packages ACCOUNTING TODAY One-Write Plus
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 5
Special Note Regarding Forward-looking Statements.......................................................... 15
Use of Proceeds............................................................................................ 17
Dividend Policy............................................................................................ 17
Capitalization............................................................................................. 17
Dilution................................................................................................... 18
Selected Historical Financial Information.................................................................. 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 21
Business................................................................................................... 34
Management................................................................................................. 47
Principal and Selling Stockholder.......................................................................... 59
Relationship with ADP...................................................................................... 59
Description of Capital Stock............................................................................... 64
Certain Anti-takeover Provisions........................................................................... 65
Shares Eligible for Future Sale............................................................................ 67
Underwriting............................................................................................... 68
Legal Matters.............................................................................................. 70
Experts.................................................................................................... 70
Index to Financial Statements.............................................................................. F-1
</TABLE>
Accounting Works-Registered Trademark-, One-Write
Plus-Registered Trademark-, Peach-Registered Trademark-,
PeachCalc-Registered Trademark-, PeachCare-Registered Trademark-,
PeachLink-Registered Trademark-, PeachPak-Registered Trademark-,
PeachPay-Registered Trademark-, PeachTax-Registered Trademark-,
PeachText-Registered Trademark-, PeachText 5000-Registered Trademark-,
Peachtree-Registered Trademark-, Peachtree Complete-Registered Trademark-,
Peachtree Data Query-Registered Trademark-, Peachtree First
Accounting-Registered Trademark-, Peachtree Office
Accounting-Registered Trademark-, Peachtree Software-Registered Trademark-,
Peachtree Supply Source-Registered Trademark- and
PeachWare-Registered Trademark- are registered trademarks or service marks of
Peachtree, and natural peach logo, peach logo, peach device logo, "Peachtree
Software" and peach logo and "Peachtree Software" and tree logo are registered
design trademarks or service marks of Peachtree. In addition, Accounting Behind
the Screens, Accountcare, Accounting Under the Hood, EZ Add-ins, Peachtree 2000,
Peachtree Complete Plus and Peachtree Office Accounting are trademarks and
service marks of Peachtree. All other trademarks and registered trademarks and
service marks and registered service marks used in this Prospectus are the
property of their respective owners.
As used in this Prospectus, unless the context requires otherwise, "ADP"
means Automatic Data Processing, Inc., together with its subsidiaries (other
than Peachtree); "By-laws" means our Amended and Restated By-laws as in effect
at the time of the Offering; "Charter" means our Amended and Restated
Certificate of Incorporation as in effect at the time of the Offering;
"Commission" means the Securities and Exchange Commission; "Common Stock" means
the common stock, $.01 par value per share, of Peachtree; "Exchange Act" means
the Securities Exchange Act of 1934, as amended; "IDC" means International Data
Corporation; "Microsoft" means Microsoft Corporation; "Offering" means the
Offering of Common Stock contemplated by this Prospectus; "Peachtree" means
Peachtree Software, Inc. and its subsidiaries; "Securities Act" means the
Securities Act of 1933, as amended; "VAPs" means Value Added Providers; and
"VARs" means Value Added Resellers.
Unless otherwise noted, numbers and percentages of shares of Common Stock
outstanding have been adjusted to reflect a - -for-one split of the Common
Stock to be effected in connection with the Offering.
You should rely only on the information contained in this Prospectus. We
have not authorized anyone else to provide you with information that is
different. We are not making an offer of these
iii
<PAGE>
securities in any state where the offer is not permitted. You should not assume
that the information in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.
Until - , 1999 (25 days after the date of this Prospectus), all dealers
that effect transactions in these securities, whether or not participating in
this Offering, may be required to deliver a Prospectus. This is in addition to
the dealers' obligation to deliver a Prospectus when acting as Underwriters and
with respect to their unsold allotments or subscriptions.
iv
<PAGE>
PROSPECTUS SUMMARY
THIS PROSPECTUS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN THE COMMON STOCK. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, INCLUDING THE FINANCIAL STATEMENTS AND THE NOTES THERETO. YOU SHOULD
ALSO CONSIDER CAREFULLY THE INFORMATION SET FORTH UNDER THE CAPTIONS "RISK
FACTORS" AND "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS." FOR YOUR
CONVENIENCE, PEACHTREE REFERS YOU TO SPECIFIC PAGE NUMBERS IN THIS PROSPECTUS
FOR MORE DETAILED INFORMATION ON CERTAIN TERMS AND CONCEPTS USED THROUGHOUT THIS
PROSPECTUS. FOR PURPOSES OF CALCULATING THE NUMBERS AND PERCENTAGES OF SHARES
OUTSTANDING, UNLESS NOTED OTHERWISE WE HAVE ASSUMED THAT THE UNDERWRITERS HAVE
NOT EXERCISED THEIR OVER-ALLOTMENT OPTION.
PLEASE NOTE THAT CERTAIN INDUSTRY AND MARKET DATA USED IN THIS PROSPECTUS
ARE BASED ON PUBLICLY AVAILABLE REPORTS FROM IDC AND PC DATA, INC. WE BELIEVE
THAT THIS DATA IS GENERALLY RELIABLE, BUT CANNOT ASSURE YOU THAT IT IS ACCURATE
IN ALL RESPECTS.
PEACHTREE
Peachtree is a leading provider of financial and accounting software for
small businesses. For the last 20 years, Peachtree has been a technological
leader and innovator. We have achieved many retail software industry firsts,
including the first DOS accounting package, the first Microsoft Windows-based
accounting package, the first widely available accounting application seamlessly
integrated with Microsoft Office and, most recently, the first widely available
Windows 98-certified accounting package. As an established industry leader, we
enjoy strong brand recognition and customer loyalty and an excellent reputation
among accounting industry professionals. Our extensive, award-winning line of
software solutions provides the features and functionality necessary to automate
business processes, improve and standardize reporting and management of
financial data and gain better business controls at a price attractive to small
businesses. We acquire new customers through our sales of packaged software in
the retail channel, and earn the majority of our revenue from direct aftermarket
sales of upgrades, payroll tax services, business forms and support services to
our existing customers. Our growing customer base of over one million registered
small businesses represents one of the largest customer bases in the financial
and accounting software market. We view our customer base as a valuable source
of aftermarket sales and service revenue. A more detailed description of our
business begins on page - .
INDUSTRY BACKGROUND
The financial and accounting software market is well-established and growing
rapidly. According to IDC, the overall market for accounting software totaled
$5.3 billion in worldwide licensing and maintenance revenue in 1997. We focus
principally on the personal finance, small office/home office (SOHO) and small
business market as defined by IDC. Small businesses have experienced significant
growth over the past several years and are the largest source of new companies,
jobs and revenue in the U.S. economy. In 1998, this market comprised
approximately 7.4 million small businesses with 1 to 99 employees. According to
IDC, this market generated $1.0 billion in license and maintenance revenue in
1997 and is expected to grow at a compound annual growth rate of 14% to $1.9
billion in 2002. Within this market, we primarily target the approximately 3.2
million businesses with 5-99 employees where a greater opportunity exists to
sell aftermarket products and services. See page - .
New small businesses and small businesses automating for the first time
often lack in-house accounting expertise, formal business processes and
dedicated information technology support. They desire financial and accounting
software that is easy to use, inexpensive and serves a broad range of needs. As
businesses increase in size and complexity, they desire solutions that have the
following characteristics:
- are customizable and tailored to meet their needs;
1
<PAGE>
- are scalable with the ability to share information among multiple users
through a network;
- deliver greater depth and breadth of functionality than that provided by
traditional packaged solutions; and
- integrate with other business productivity software applications.
Despite these increasingly sophisticated needs, growing small businesses
require solutions that are affordable, are easy to install and set up and have
low total ownership costs. See pages - through - .
THE PEACHTREE SOLUTION
Peachtree offers a broad array of products and services designed to meet the
varied and dynamic financial and accounting needs of the small business market.
Specifically, our products and services deliver the following key benefits:
- value and depth of features;
- ease of installation, set up and use;
- improved efficiency and better business management;
- open, customizable and scalable technology; and
- extensive service and support.
See pages - through - .
In keeping with our tradition of technological leadership, in May 1998 we
introduced the first financial and accounting solution widely available at
retail based on an open architecture platform. Unlike existing packaged
accounting software, Peachtree Office Accounting allows customers to interface
seamlessly with other business productivity applications, most notably Microsoft
Office. Customers can eliminate multiple databases with redundant information as
well as tailor products to suit their business-specific and industry-specific
needs. Peachtree Office Accounting is the first product to be built on our new
Peachtree Open Architecture platform. Peachtree Open Architecture is designed to
allow us to offer open, scalable, customizable and affordable financial and
accounting solutions. In the near future, Peachtree Open Architecture products
will enable us to enter the Windows NT and client/server markets. See pages
- through - .
STRATEGY
Our strategic objective is to be the leading provider of financial and
accounting software solutions for small businesses with 5-99 employees. To
achieve this objective, we are pursuing a strategy focused on new product
initiatives based on Peachtree Open Architecture while enhancing our current
products and services. As an independent entity, we intend to devote more of our
resources to implementing our growth strategy. The key elements of our strategy
are to:
- expand and exploit Peachtree Open Architecture;
- pursue new distribution and marketing initiatives;
- target and attract larger and growing small businesses;
- leverage our large and growing registered customer base of over one
million small businesses; and
- capitalize on our strong brand recognition and retail presence.
See pages - through - .
SALES AND DISTRIBUTION
We currently sell our products through retail channels and directly to
customers. We sell our products to new customers through a broad range of retail
outlets nationwide, including Office Depot,
2
<PAGE>
Office Max, Staples, Best Buy and CompUSA. We sell most of our aftermarket
products and services through our internal marketing teams using direct mail,
telemarketing and the Internet. See pages - through - .
PEACHTREE AND ADP
ADP acquired Peachtree in 1994 and has since operated Peachtree as one of
its wholly owned subsidiaries. Following the closing of the Offering, ADP will
own approximately - % of our outstanding Common Stock. In connection with the
Offering, we intend to enter into various agreements and transactions with ADP
which will separate our business from ADP's other operations. This separation
will be governed by an Intercompany Agreement between Peachtree and ADP and
certain other agreements. Because these agreements will be entered into at a
time when Peachtree is still a wholly owned subsidiary of ADP, they will not be
the result of arm's-length negotiations between the parties. See "Relationship
with ADP" beginning on page - and "Risk Factors--Relationship with ADP;
Potential Conflicts of Interest" on page - .
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered......................... - shares (including - shares offered by
Peachtree and - shares offered by ADP)
Common Stock Outstanding
Following the Offering..................... - shares (excluding - shares to be reserved
for issuance pursuant to employee benefit and
stock option plans)
Use of Proceeds.............................. Peachtree will use the proceeds from the
Offering for working capital and other
general corporate purposes. Peachtree will
not receive any of the proceeds from the sale
by ADP of Common Stock in the Offering. See
"Use of Proceeds."
Nasdaq National Market Symbol................ PEAC
</TABLE>
Our principal executive offices are located at 1505 Pavilion Place,
Norcross, GA 30093. The main telephone number of our principal executive offices
is (770) 724-4000.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
(in thousands, except share data)
The following tables set forth summary financial data derived from the
consolidated financial statements of Peachtree. The data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
--------------------------------------------------------------- -------------
JUNE 30, JUNE 30, JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27,
1994(1) 1995 1996 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue.................................... $ 29,450 $ 34,925 $ 35,294 $ 46,908 $ 52,534 $ 9,898
Gross profit............................... 19,647 22,438 21,552 26,974 33,556 6,350
Operating expenses (2)..................... 25,923 21,809 22,800 27,830 33,424 7,571
Operating income (loss) (2)................ (6,276) 629 (1,248) (856) 132 (1,221)
Income (loss) before income taxes.......... (7,281) 724 (967) (355) 696 (1,150)
Net income (loss).......................... (4,361) 129 (946) (509) 249 (412)
Basic and diluted earnings per share (3)... $ $ $ $ $ $
Weighted average common shares
outstanding(3)...........................
<CAPTION>
SEPTEMBER 26,
1998
-------------
<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue.................................... $ 11,681
Gross profit............................... 7,471
Operating expenses (2)..................... 9,450
Operating income (loss) (2)................ (1,979)
Income (loss) before income taxes.......... (1,747)
Net income (loss).......................... 188
Basic and diluted earnings per share (3)... $
Weighted average common shares
outstanding(3)...........................
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 26, 1998
--------------------------------
ACTUAL AS ADJUSTED(4)
--------- ---------------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................................................... $ -- $
Intercompany receivable from ADP(5)..................................................... 16,147
Working capital......................................................................... 16,702
Total assets............................................................................ 57,213
Total stockholders' equity.............................................................. 37,640 $
</TABLE>
- ------------------------------
(1) ADP acquired all of the outstanding shares of Peachtree on April 5, 1994.
Due to the insignificant period of time between the acquisition date and
year-end, in the opinion of management, separate presentation of the
pre-acquisition and post-acquisition periods is not meaningful. Revenue for
the pre-acquisition and post-acquisition periods was $25,728 and $3,722. Net
income for the pre-acquisition and post-acquisition periods was $6,958 and
$(11,319).
(2) Includes acquisition-related amortization of $1,185, $4,742, $4,830, $5,620,
and $5,687 for the fiscal years ended June 30, 1994, June 30, 1995, June 29,
1996, June 28, 1997 and June 27, 1998, and $1,405 and $1,445 for the three
months ended September 27, 1997 and September 26, 1998. Excluding this
acquisition-related amortization, operating income (loss) would have been
$(5,091), $5,371, $3,582, $4,764 and $5,819 for the fiscal years ended June
30, 1994, June 30, 1995, June 29, 1996, June 28, 1997 and June 27, 1998, and
$184 and $(534) for the three months ended September 27, 1997 and September
26, 1998. See Notes 2 and 10 of Notes to Consolidated Financial Statements.
(3) See Note - of Notes to Consolidated Financial Statements for information
concerning the computation of earnings per share.
(4) Adjusted to reflect the sale by Peachtree of - shares of Common Stock
offered hereby at the public offering price of $ - per share after
deducting the underwriting discount and the estimated offering expenses
payable by Peachtree.
(5) Upon consummation of the Offering, the intercompany receivable from ADP will
be collected in cash by Peachtree.
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and other
information in this Prospectus before deciding to invest in the Common Stock.
UNCERTAINTY OF FUTURE RESULTS
Our financial prospects must be considered in light of the difficult
operating environment and risks, costs and difficulties facing companies in the
software industry generally. Significant net losses due to substantial
development and marketing costs are common in our industry. For various reasons,
we may not in the future be able to sustain the growth and profitability
achieved in the past. We currently plan increases in operating expenses relating
to research and development, sales and marketing efforts, and administrative
support in the short term. These increases may result in net losses to the
extent that they are not accompanied by increased revenue in future periods.
Earning an attractive return on some or all of these investments will depend on
many different factors, including:
- our ability to expand our distribution capabilities to include third party
channels such as VARs and VAPs;
- our ability to expand our brand and presence through our introduction of
Windows NT and client/server-based products;
- our ability to achieve market acceptance and customer satisfaction with
substantially higher priced products, including Peachtree 2000; and
- our ability to make strategic acquisitions as necessary to expand our
technological or distribution capabilities.
VOLATILITY OF QUARTERLY RESULTS; SEASONALITY
We often experience significant volatility in quarterly results. Volatility
is due to many factors, including:
- the number and timing of product introductions, enhancements, extensions
and discontinuations;
- the demand for and market acceptance of particular products and services;
- the timing of orders and spending patterns of customers;
- the duration of sales cycles;
- the effects of pricing policies;
- the timing and success of marketing programs such as direct mail
campaigns;
- the strategies of retail channel partners;
- rapidly changing technologies;
- personnel availability and cost;
- product appraisals by industry analysts or others; and
- economic conditions applicable to software sales and generally.
In general, the loss or deferral of direct sales or decrease in retail sales
to customers in a period will reduce our revenue, net income and margins in that
period. The delay of a product introduction from one quarter to the next will
generally reduce our revenue, net income and margins in the prior quarter and
increase them in the following quarter. In addition, we usually operate with
little backlog, deriving quarterly revenue largely from orders booked within the
same quarter. Therefore, results depend on the volume and timing of orders in
the quarter and on our ability to fill the orders in that quarter.
This volatility makes our quarterly results difficult to forecast and our
budgets difficult to manage. We budget for items such as personnel, sales and
marketing, which constitute the substantial majority of our expenses, based on
projected orders and revenue. Expenses often cannot quickly be reduced in line
with revenue that falls below expectations. Consequently, any shortfall in
orders from projected levels will usually reduce our revenue, net income and
margins.
5
<PAGE>
We have also experienced a degree of seasonality relating to sales of our
products to new customers and our sales of payroll tax update services. These
tend to be higher in the first and fourth calendar quarters. This seasonality
may at times cause us to experience reduced net income, or increased net losses,
in the second or third calendar quarters in any year.
For all these reasons, quarterly results often vary significantly from
quarter to quarter or from year to year. Quarterly comparisons can be difficult
to analyze or even misleading if misunderstood. As a result, the revenue, cash
flows, net income and margins that we ultimately report may often fail to match
our projections or the expectations of market analysts and investors. Any such
failure could cause the trading price of the Common Stock to fall.
RAPIDLY EVOLVING PRODUCTS; TECHNOLOGICAL CHANGE
Our markets are subject to rapid, sometimes unpredictable technological
change. This change results from various factors, including:
- rapid transformations of hardware or software standards;
- sudden or dramatic changes in marketing and sales strategies, including
pricing and service strategies;
- unexpected product innovations; and
- evolving customer requirements.
Our products and services may not always remain competitive in this
environment. To compete effectively, we must constantly react and adapt.
Adapting may require substantial additional resources. Even if we obtain and
invest such resources, we may not be able to develop and market new products and
services in a timely and cost-effective way. At the same time, products,
services or technologies developed by others may at any time render our
products, services and technologies, whether existing and under development,
uncompetitive or obsolete.
The development and marketing of products that incorporate, interact with
and rely on complex technologies is difficult, uncertain and subject to delays.
Only a few software products achieve sustained market acceptance. Existing
customers may resist or delay accepting products or services. As a result, we
may fail to identify or exploit new opportunities; we may also encounter cost,
timing or marketing problems. Such problems may increase our costs, cause our
customers or distributors to cancel or postpone orders and give rise to negative
publicity.
From time to time, Peachtree or its competitors may announce products,
capabilities or technologies that replace or shorten the life cycles of our
existing products. Such announcements may also cause our customers to defer
purchases of our products or services. See "Business--Products" and
"--Competition."
NEW PRODUCTS; SOFTWARE "BUGS"; PRODUCT LIABILITY
Complex software applications such as ours often contain undetected errors,
defects or imperfections (commonly known as "bugs") when introduced, upgraded or
adapted to new operating environments. Testing our products for bugs is
particularly challenging because they are used in a vast range of computing
environments. Despite rigorous testing, we may not always discover bugs prior to
product introduction. In addition, because our products often work seamlessly
with those of others, bugs in the software of others could also damage the
marketability and reputation of our products. A bug could be discovered at any
time. The effects could range from delays in product introduction to reduced
sales to extensive redesign, product support or product replacement cost. Any of
these could reduce our revenue, net income and margins.
Customers use many of our products to prepare payroll tax returns and to
generate inputs for income and property tax returns and other regulatory and
financial reports, to process payroll and to
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complete other functions critical to their businesses. The presence of bugs or
even the improper use of our products by customers could result in financial or
other damages to them or other third parties. Under certain circumstances, we
may be subject to claims for such damages. If sued on such a claim, we may not
prevail in the resulting litigation. The existence of any such suit may itself
damage the reputation of our products. The costs of an adverse judgment in such
case, or of merely defending such suit, may damage our operating results,
business or financial condition. We generally attempt to limit our product
liability exposure through contractual limitations on liability. These include
disclaimers in our "shrink wrap" license agreement with customers. These
limitations may not always be enforceable or adequately protect us against all
claims.
We also maintain errors and omissions insurance. Though we believe such
coverage is adequate, it may not always cover the full amount of claims made
against us in the future. Such coverage may also become unavailable on
reasonable terms in the future, or the insurer may disclaim coverage as to
specific future claims. Any successful claim for product or service liability
brought against us could have a material adverse effect upon our business,
operating results and financial condition.
COMPETITION
We face different competitors and potential competitors with respect to our
different products and services. Our packaged financial and accounting software
products compete directly with those from Intuit Inc., which has the largest
market share in the packaged financial and accounting software market.
We believe that various other software companies are competitors or
potential competitors, including: ACCPAC International, Inc. (a subsidiary of
Computer Associates International, Inc.), Clarus Corporation, Great Plains
Software, Inc., M.Y.O.B. Inc., Platinum Software Corporation, The Sage Group PLC
and Solomon Software, Inc., along with many other national, regional and niche
players. We also face competition from manual and paper-based accounting
systems, accounting professionals and personal finance software, such as
Intuit's Quicken product.
Our preprinted business forms compete with forms from a number of companies,
including Deluxe Corporation, New England Business Service, Inc. and Moore
Business Forms, Inc., as well as retail stores selling business forms. We are
now experiencing or anticipating intensifying competition from direct mail check
printers, from banks, from printers of "generic" checks and forms and from
various types of new technology.
As noted under "--Rapidly Evolving Products; Technological Change," rapid
technological and market shifts have frequently occurred in our markets. We
believe they will frequently occur in the future. Any such shift may render our
products or services unattractive or even obsolete relative to competing
products or services or make designing new or improving existing ones more
difficult or impossible for us. Alternative methods of delivering financial
management systems and accounting software, such as Internet-based products, may
also provide increased competition in the future. Any such technological or
market shift may also permit or encourage new competitors to enter our markets.
Certain competitors and potential competitors have far greater financial,
technical and marketing resources and name recognition than Peachtree. For
example, Intuit, our principal competitor in the retail channel, has far greater
market share in the retail channel and far greater financial resources than we
will have following the Offering. Current or future initiatives by Intuit could
damage our position in the retail channel. Competitors may bundle their software
with other software or enter into agreements allowing third parties to sell
their software, making their products more attractive than ours. In addition,
competitors may lower their prices, forcing us to cut our own prices and
decrease our revenue or margins. See "Business--Competition."
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RELIANCE ON MICROSOFT AND OTHER THIRD PARTY TECHNOLOGIES
Our software products are designed for Microsoft technologies, including
Windows 3.x, Windows 95, Windows 98, Windows NT and SQL Server. In addition, our
products use or will in the future use other Microsoft technologies, including
Visual Basic, Visual C++, C and Visual Basic for Applications. To that end, we
rely on several non-exclusive license agreements with Microsoft. We believe that
these technologies are and will be widely used by businesses, including our
customers. If such technologies are not widely adopted as anticipated or if
other competing technologies that we do not support achieve broad market
acceptance, we may be forced to modify our product strategy. Moreover, our
current strategy requires our products and technology to remain compatible with
new developments in Microsoft's technologies as they arise.
We also rely on non-exclusive license agreements with Microsoft, Seagate
Software, Inc., Sybase, Inc., IQ Software Corporation and others for
technologies that are distributed with our products. Our failure to retain any
of these software licenses may result in delays or reductions in product
shipments until alternative software could be identified, licensed or developed.
Such delays could reduce our revenue, net income and margins. The cost of
license agreements could also increase, thereby reducing margins. Further, in
some instances we only receive object codes from licensors, forcing us to rely
on software support services from third parties. If any of these third parties
failed to satisfy their maintenance obligations to us, we would likely fail to
satisfy our corresponding support obligations to our customers. The termination
of any such licenses or the failure of any of these licensors adequately to
maintain or update their products could delay the shipment of certain of our
products while we implement alternative software. Replacement licenses could
prove costly. In the future, we will often be forced to seek other third-party
licenses relating to our products. Such licenses may not be available on
commercially reasonable terms or at all.
YEAR 2000 COMPLIANCE
Many computer systems were not designed to accommodate dates beyond the year
1999 and will require modification in order to remain functional into the next
millennium. Because many existing programs were developed using two digits
rather than four to determine the applicable year, these programs may not
properly recognize the difference in a year that begins with "20" instead of
"19." This, along with other date processing errors, could result in system
failures, generation of erroneous data or miscalculations causing significant
disruption of normal business activities. As a result, many computer systems
and/or software applications will need to be modified to comply with such year
2000 or "Y2K" requirements. The potential effects associated with Y2K compliance
are as yet highly uncertain.
On the basis of product designs and quality assurance tests, Peachtree
believes that the most current versions of its products are Y2K compliant or Y2K
ready. Customers operating Peachtree software with non-Peachtree software or
systems, including, among other things, computer hardware and software, networks
and operating systems, will need to verify with each vendor of non-Peachtree
software or systems whether such software or systems are Y2K compliant or Y2K
ready and will continue properly to operate with the customer's Peachtree
products. The terms "Y2K compliant" or "Y2K ready" and similar expressions can
vary slightly in meaning from one company to the next. Although we generally use
these terms interchangeably when referencing Y2K issues, technically we
differentiate these terms as follows: "Y2K ready" is used when one of our
products uses Microsoft's windowing technique to determine the output of either
two-digit or four-digit years. "Y2K compliant" is used when one of our products
has been designed to accept either two-digit or four-digit years upon input to
calculate, store or display the designated output. On this basis, all of our
products currently being marketed are either Y2K ready or Y2K compliant.
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In operating our business and communicating with our customer base, we rely
heavily on in-house management information systems. We are now evaluating all of
our internal systems and products to determine whether they require
modifications to meet our operational requirements going forward, including Y2K
compliance. As a part of this ongoing process, we are now implementing a new
management information system. We expect that the new system will meet our needs
adequately for the foreseeable future and will be Y2K compliant. Any substantial
failure of our information systems to keep pace with our business, including any
failure associated with Y2K, could adversely affect our business, our customer
relationships and our operating results.
Peachtree is currently working to assess the Y2K readiness of vendors,
customers and other relevant third parties on which it relies to a material
extent. The assessment is being conducted by a search of the ADP Y2K
certification database, formal communication with vendors, customers and other
relevant third parties and a search of vendor, customer and other relevant
third-party Internet websites for certification statements. Although Peachtree
expects to obtain adequate assurances of Y2K compliance or Y2K readiness from
relevant third parties, in the event any such third parties experience
disruption of business caused by Y2K issues, Peachtree's results of operations
could be materially adversely affected.
Our products are sometimes bundled with or marketed in a package of products
offered through strategic partners. Such partners' products may not always be
Y2K compliant or Y2K ready. Y2K problems caused by our partners' products could
damage our brand or industry standing or reduce our product sales.
Our current new product line has been designed to be Y2K compliant, but some
products may not contain all necessary date code changes. We have warranted, and
may in the future warrant, to certain customers that our products are Y2K
compliant. Claims and legal costs resulting from any failure by us to fulfill
such a warranty, or lost sales due to damage to our reputation, could damage our
business and prospects. In addition, in the event that a significant number of
our customers experience Y2K-related problems, whether due to our products or
not, demand for technical support and assistance may increase dramatically. In
this case, our costs for providing technical support may rise and the quality of
our service or our ability to manage incoming requests may be impaired.
Other software companies have been sued based upon claims that the failure
of their product to be Y2K compliant or Y2K ready constitutes a breach of
warranty, a design defect or similar claims. Some of these suits have been filed
as class actions. We could be subject to such a suit based on older versions of
our products which were not Y2K compliant or Y2K ready, or if a current version
of our software experiences Y2K-related problems. If sued on Y2K-related claims,
we may not prevail in the resulting litigation. The costs of an adverse judgment
in such case, or of merely defending such suit, may damage our operating
results, business or financial condition.
We believe that Y2K issues may alter the purchasing patterns of customers
and potential customers in a variety of ways, all of which are difficult to
predict. For example, many companies are now investing significant resources to
achieve Y2K compliance. These resources may be diverted from spending that would
otherwise purchase our new products. On the other hand, customers may defer
purchases, reducing current sales in the industry, or accelerate purchases,
increasing short-term demand at the expense of longer-term demand.
Alternatively, our customers could decide to switch to other software solutions
or suppliers after a comprehensive review of their financial and accounting
software solutions initiated due to concern over Y2K issues.
We are currently in the process of developing contingency plans to address
Y2K-related failures. However, these plans may fail to mitigate Y2K-related
business disruptions that could result in loss of revenue, increased expenses or
lawsuits.
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DEPENDENCE ON RETAIL DISTRIBUTION CHANNEL
We currently sell our packaged products primarily to distributors, including
Ingram Micro Inc., Merisel, Inc. and Tech Data Corporation, for resale to
retailers and, to a lesser extent, directly to retailers, including retail
software outlets, computer superstores and general mass merchandisers.
Sales to a limited number of distributors and retailers make up a
substantial majority of our net new software sales through the retail channel.
The loss of any of our major distributors or retailers would significantly
reduce sales and revenue, at least on a short-term basis. If an account
receivable from any such entity became uncollectible, as in the case of the
bankruptcy of a distributor or retailer, the loss would likely damage our
liquidity, operating results and financial condition, at least on a short-term
basis.
The retail distribution channel has recently been characterized by rapid
changes. These changes include consolidations, serious financial difficulties of
certain distributors and retailers and the emergence of new competitors in the
market, such as general mass merchandisers. In addition, more and more sellers
of software are competing for shelf space in the retail channel. Distributors
and retailers often carry competing products. Retailers of our products have a
limited amount of shelf space and promotional resources for which there is
intense competition. Certain of our arrangements with distributors and retailers
may be terminated by either party without cause. In this environment,
distributors and retailers may discontinue carrying our products or cease to
provide us with adequate levels of shelf space and promotional support. This
environment may also require us to respond by increasing our marketing efforts
and expenditures to maintain revenues and sales growth, which could adversely
affect our margins and operating income.
RELEASE OF PERIODIC SOFTWARE UPDATES
Our financial and accounting software products are affected by changes in
laws, regulations and generally accepted accounting principles. To maintain
their compliance, our products must be updated frequently. To market our payroll
tax update service successfully, we must finalize product updates by specified
dates each year. A late release could result in a significant loss of revenue in
that fiscal year and the loss of future business. This tight development
timetable for our tax service also increases the risk of bugs in these product
updates. A bug could damage our business severely, if it increased our costs,
damaged our reputation or resulted in liability claims for incorrect tax
filings, among other things.
Significant or frequent changes in tax or other laws and regulations or in
generally accepted accounting principles will by themselves increase costs by
requiring major or frequent product modifications. In particular, our fixed
asset, accounts payable and payroll tax functions are affected by changes in
laws and regulations. They must be updated annually or periodically to maintain
their accuracy and competitiveness. Failure to release updates on a timely basis
could cause customers to seek alternative solutions and damage our reputation or
customer relationships. See "Business-- Products and Services" and "--Research
and Development."
PROPRIETARY TECHNOLOGY; THIRD-PARTY INFRINGEMENT CLAIMS
To compete successfully and to grow, we must be able to protect our own
software products and other proprietary technology and to operate without
infringing on the rights of third parties. Failure to protect our intellectual
property against infringement could result, among other things, in loss of
revenue. We would suffer both loss of revenue and a weakened competitive
position within the industry if our intellectual property became known or
independently developed by third parties. To establish and protect our
proprietary rights, we rely on the following:
- copyright, trademark and trade secret laws;
- a mandatory software customer registration mechanism on certain products;
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- confidentiality and non-disclosure agreements with certain employees;
- licensing arrangements with customers; and
- limitations on access to our proprietary information.
We have no patents or patent applications pending, and existing trade secret and
copyright laws provide only limited protection of our proprietary rights. We
currently license our packaged products under "shrink wrap" licenses that are
not signed by our licensees. These shrink wrap licenses may be unenforceable
under the laws of certain jurisdictions.
Overall, these steps may be inadequate to protect our proprietary rights or
to prevent misappropriation of our intellectual property. Our competitors may
also independently develop products or technologies that are substantially
equivalent or superior to ours.
Policing unauthorized copying and use of our products is difficult. Despite
our efforts to protect our rights, unauthorized parties may attempt to copy
aspects of our products or to obtain and use information that we regard as
proprietary. We cannot now determine the precise extent to which piracy of our
software products is occurring. Such piracy hurts sales and is difficult and
expensive to police. We expect it to be a persistent problem, especially in
light of the increasing use of the Internet.
As the number and variety of products in our market increase and the
functions and features of these products further overlap, we expect software
developers to become increasingly subject to infringement claims. Generally, our
third-party software licensors indemnify us from claims of infringement. In the
event that we are sued on a claim of infringement relating to our own software,
or our licensors are unwilling or unable fully to indemnify us, we may be
subject to time-consuming and expensive litigation. The costs of an adverse
judgment in such case, or of merely defending such suit, may damage our
operating results, business or financial condition. Any such litigation, whether
with or without merit, could also adversely affect us by:
- causing product release delays;
- requiring redesign of our products;
- requiring us to enter into royalty or license agreements, which may not be
available on acceptable terms or at all;
- diverting management attention; and
- delaying customer purchasing decisions.
DEPENDENCE ON SOFTWARE INDUSTRY PERSONNEL
Our success depends, in significant part, upon the continued services of our
technical, marketing, sales and management personnel and on our ability to
continue to attract, motivate and retain highly qualified employees. Although we
will have written employment agreements with certain key officers, they may,
like other employees, unilaterally elect to terminate their employment with us
at any time. We do not have written employment agreements with many other key
technical, marketing, sales and management personnel. Competition for qualified
and motivated software industry personnel is intense, and the process of
locating and retaining personnel with the combination of skills and attributes
required to execute our strategy can be difficult, time-consuming and expensive.
Like many of our competitors, we are now experiencing difficulty in recruiting
and retaining highly qualified and motivated personnel. For example, we have
experienced relatively high rates of turnover in our research and development
department. We may not be able to retain our key personnel or attract other
qualified personnel in the future, particularly in light of the high turnover
rate in our industry.
NEED FOR ADDITIONAL FINANCING
We expect our future liquidity and capital requirements to vary greatly from
quarter to quarter, depending on numerous factors, including:
- the cost, timing and success of product development and marketing efforts;
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- the market acceptance of our existing and new products;
- evolving technological and product developments; and
- changing competitive and marketing challenges.
In the past, our capital requirements have been satisfied by ADP. Following
the Offering, however, our capital needs will have to be satisfied by sources
other than ADP. See "Relationship with ADP." We currently expect that cash
generated by operations, together with cash from the collection of the
intercompany receivable from ADP on closing of the Offering and the net cash
proceeds to us from the Offering, will be sufficient to meet our operating and
capital requirements for the foreseeable future. We may, however, require
additional financing in the future. Needed financing may not be available on
attractive terms or at all. We may need to raise additional funds through public
or private financing, strategic relationships or other arrangements. Additional
equity financing may be dilutive to you as a holder of the Common Stock, and
debt financing, if available, may involve covenants that are restrictive to
Peachtree or its business. Strategic relationships, if necessary to raise
additional funds, may require that we share revenue from certain of our products
or technologies.
RELEASE, ACCEPTANCE AND SUPPORT OF NEW PRODUCTS
During 1998, we released the first product based on our Peachtree Open
Architecture platform. Market acceptance of Peachtree Open Architecture is
essential to our ability to enter new markets and distribution channels.
Anything that diminishes market acceptance of products based on our Peachtree
Open Architecture will seriously damage our prospects. The effectiveness of our
marketing and sales efforts will be a crucial factor, though market acceptance
may also depend on the availability and price of competing products and
technologies.
For the first time, in October 1998 we released a Software Developer's Kit
or "SDK." The SDK will allow third-party developers to develop and customize
their own products based on the Peachtree Open Architecture platform. We also
expect to incorporate Visual Basic for Applications (VBA) into our future
Peachtree Open Architecture products. Providing technical support for these new
products will present a challenge. We have not in the past needed to support
third-party developers or customized versions of our products. Higher technical
support costs associated with this initiative could reduce our operating income
and margins.
DILUTION
The initial public offering price of the Common Stock is substantially
higher than the net tangible book value per share of the outstanding Common
Stock immediately after this Offering. Therefore, investors in the Offering will
suffer an immediate and substantial dilution of approximately $ - in the net
tangible book value per share of Common Stock from the price you pay for such
Common Stock (based upon an assumed initial public offering price of $ - per
share). See "Dilution" beginning on page - .
RELATIONSHIP WITH ADP; POTENTIAL CONFLICTS OF INTEREST
Peachtree is a wholly owned subsidiary of ADP. After the Offering, through
its ownership of shares of Common Stock, ADP will have substantial voting power
in elections of directors of Peachtree. As such, ADP will be in a position to
influence various matters of significance to Peachtree and its stockholders,
including any decision to acquire or dispose of assets, issue capital stock or
other securities, incur debt and pay dividends. Conflicts of interest may arise
in the future between Peachtree and ADP in a number of contexts concerning past
or future relationships between them or their officers and directors, including
tax matters, registration rights, administration of benefit plans, service
arrangements, corporate opportunities, indemnification, risk management,
issuance and sale of capital stock of Peachtree and the election of directors.
Peachtree has granted ADP certain "demand" and
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"piggyback" registration rights with respect to the Common Stock owned by ADP.
Our Charter will include certain provisions relating to the allocation of
business opportunities that may be suitable for both Peachtree and ADP that
generally allow ADP freely to compete with Peachtree. See "Relationship with
ADP."
Gary C. Butler is a director of Peachtree and the Chairman of Peachtree's
Board of Directors. He is also an officer and director of ADP. See "Management."
Peachtree and ADP have entered into certain agreements defining their ongoing
relationship. As a result of ADP's ownership and control of Peachtree at the
time such agreements were entered into, the terms of such agreements were not
the result of arm's-length negotiations. Peachtree and ADP currently compete in
the provision of payroll products and services to small businesses. ADP may in
the future compete in other markets in which Peachtree operates, as a result of
an acquisition, or otherwise. See "Relationship with ADP."
DEPENDENCE ON KEY MANAGEMENT PERSONNEL
Following the closing of the Offering, Peachtree will rely on the knowledge
and experience and the continued services of existing senior management, led by
Mr. Verni, Mr. Meyer, Ms. Van Pelt, Mr. Ducker and Mr. Vasil. Our future success
and ability to manage our future growth will depend in large part upon the
efforts of these persons and on our ability to attract and retain other highly
qualified senior management personnel. Competition for such personnel is
intense. We may not succeed in attracting and retaining such personnel. Failure
to attract and retain other highly qualified personnel would damage our
prospects. We will have written employment agreements with Mr. Verni, Mr. Meyer,
Ms. Van Pelt, Mr. Ducker and Mr. Vasil. See "Management--Employment Contracts
and Termination of Employment and Change-in-Control Arrangements."
NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK
There is currently no public market for the Common Stock. We have applied
for quotation of the Common Stock on the Nasdaq National Market under the symbol
"PEAC." We do not know the extent to which investor interest in Peachtree will
lead to development of a trading market or how liquid that market might become.
In the event no active trading market develops, holders of shares may not be
able to sell them promptly or at a price they consider reasonable. You may not
be able to resell shares at or above the initial public offering price. You
should therefore consider the Common Stock a long-term investment.
The initial public offering price for the shares will be determined through
negotiations between Peachtree, ADP and the Underwriters. The Underwriters have
informed us that they intend to act as market makers for the Common Stock. They
will be under no obligation to do so and may discontinue such activities at any
time.
The marketplace will determine the trading price for the Common Stock. This
trading price will be influenced by various factors, including:
- our performance and prospects;
- our dividend and financial policy;
- the depth and liquidity of the market for the Common Stock;
- investor perception of our company;
- investor perception of the software industry;
- technological developments affecting computer software or hardware; and
- general financial and other market conditions.
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF DELAWARE LAW AND OF
THE CHARTER AND BY-LAWS
Certain provisions of the Delaware General Corporation Law and of our
Charter and By-laws may have the effect of discouraging a third party from
making an acquisition proposal for Peachtree and
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could delay, defer or prevent a transaction or a change in control of Peachtree
under circumstances that could otherwise give the holders of Common Stock the
opportunity to realize a premium over the then prevailing market prices of the
Common Stock. Certain provisions of our Charter and By-laws, as each will be in
effect as of the Offering, and of the Delaware General Corporation Law, have the
effect of making more difficult an acquisition of control of Peachtree in a
transaction not approved by the Board of Directors. These provisions include:
- a provision for a classified Board of Directors, with only approximately
one-third of the Board to be elected in any year, to serve for three-year
terms;
- a requirement that directors be removed only for cause upon the
affirmative vote of holders of at least four-fifths of the total voting
power;
- a requirement that actions of stockholders be taken at a meeting of
stockholders, rather than by written consent;
- a prohibition on the stockholders' ability to call a special meeting;
- an advance notice requirement for stockholders to make nominations of
candidates for directors or to bring other business before an annual
meeting of stockholders; and
- a requirement that certain amendments to the Charter and By-laws be
approved by the affirmative vote of at least four-fifths of the total
voting power.
We also expect to adopt a preferred stock purchase rights plan prior to the
Offering. If so adopted, certificates issued in the Offering representing Common
Stock will also initially represent an equivalent number of associated preferred
rights. This rights plan will make more difficult an acquisition of control of
Peachtree in a transaction not approved by our Board of Directors. See
"Description of Capital Stock" and "Certain Anti-takeover Provisions."
ABILITY OF PEACHTREE'S BOARD OF DIRECTORS TO CHANGE POLICIES
Our major policies, including policies with respect to technology, products,
marketing, financing, growth, operations, debt capitalization and dividends,
will be determined by our Board of Directors. Our Board of Directors may amend
or revise these and other policies at any time and from time to time at its
discretion without any vote or approval of our stockholders.
PRODUCT MIGRATION FROM DOS TO WINDOWS
Prior to fiscal 1994, substantially all of our revenue came from sales of
DOS-based products. Since 1991, when we began to introduce products based on our
Windows-based Peachtree Proprietary Architecture, we have shifted our product
focus from DOS-based to Windows-based products. We have encouraged the migration
of our DOS-based customers to our Windows-based products. A significant
percentage of our remaining installed base of DOS-based customers may never move
on to our Windows-based products. In particular, we believe that smaller
customers may be less likely to migrate because the cost may be high relative to
the benefits and because DOS-based products may adequately meet their ongoing
requirements. If we fail to move significant numbers of our remaining DOS-based
customers to our Windows-based products, whether because they choose not to
migrate to a Windows-based product, they purchase competitive products or they
encounter problems in implementing our products, the profitability of our
installed customer base will be reduced and our prospects for growth
constrained. In addition, we now expect the decrease in general demand for
DOS-based products and our change in focus to Windows-based products to reduce
and ultimately eliminate future revenue from new product sales of DOS-based
products. We will have to compensate for this absence of revenue from sales of
DOS-based products with additional revenue from Windows-based products.
LACK OF INDEPENDENT HISTORICAL FINANCIAL INFORMATION
Significant changes in our financial and operational structure will result
from the change in our relationship with ADP or our status as a separate,
stand-alone entity following the closing of the
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Offering. The historical financial information in this Prospectus does not
reflect Peachtree's results of operations as an independent entity. For example,
we have historically benefited from volume discounts under ADP's long distance
telephone carrier agreements based on ADP's size and usage. As a much smaller
stand-alone entity, we may be unable to obtain comparable arrangements. In
addition, we expect our investments in sales and marketing activities to
increase as we implement our stand-alone operating strategy. We currently expect
that our legal expenses, and possibly other administrative expenses, will
increase after our separation from ADP in connection with the Offering.
LACK OF DIVIDENDS
We anticipate that for the foreseeable future our earnings, if any, will be
retained for use in the operation of the business and that no cash dividends
will be paid on the Common Stock. Declaration of dividends on the Common Stock
will depend upon, among other things, future earnings, our operating and
financial condition, our capital and investment requirements and general
business conditions. See "Dividend Policy."
MANAGEMENT OF GROWTH
We have recently experienced significant growth, with total revenue
increasing to approximately $52.5 million in fiscal year 1998 from approximately
$35.3 million in fiscal year 1996. Rapid growth places a significant strain on
our management and operations. Our ability to manage growth will largely depend
on our success in:
- broadening the management team;
- attracting, motivating and retaining skilled employees;
- implementing improved operational, financial and management systems; and
- expanding, training and managing our employee base.
Certain members of our senior management team have arrived within the last
fiscal year. Our senior management team has limited experience managing publicly
traded companies. We are currently launching new products based on a new
platform intended to permit us to enter markets and distribution channels in
which we have not previously participated. All of these initiatives will place
additional pressures on our management resources and infrastructure. We may also
seek acquisitions of businesses, products and technologies that are
complementary to ours, or that allow us to enter new markets. Identifying,
negotiating, closing, integrating and exploiting any such acquisition will place
additional strains upon our management resources.
SHARES AVAILABLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that any future sales of
shares, or the availability of shares for future sale, will have on the market
prices for the Common Stock following the Offering. Sales of substantial amounts
of the Common Stock (including Common Stock issued in connection with
outstanding stock options) or the perception that such sales could occur could
adversely affect the prevailing market price for the Common Stock. See "Shares
Available for Future Sale."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus, including information under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Risk Factors" and "Business," constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act, and Section 21E of the Exchange Act. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performances or achievements of Peachtree to be materially
different from any future results, performances or
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achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following:
- the matters described under "Risk Factors";
- our ability to implement successfully our operating strategies;
- our ability to fund higher levels of research and development, increase
our sales and marketing efforts and expand our administrative resources in
anticipation of future growth;
- our ability to expand our distribution capabilities to include third-party
channels such as VARs and VAPs;
- our ability to make strategic acquisitions as necessary to expand our
technological or distribution capabilities; and
- our ability to expand our brand and presence "upmarket" and to achieve
market acceptance and customer satisfaction with a substantially higher
priced product such as Peachtree 2000.
These forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from these forward-looking statements. In
addition to the other risks described elsewhere under the caption "Risk
Factors," important factors to consider in evaluating such forward-looking
statements include:
- changes in external competitive market factors or in our internal
budgeting process which might affect trends in our results of operations;
- changes in economic cycles;
- intense competition from other software companies; and
- rapid, unpredictable and dramatic changes in the technological and
business environment applicable to us or the software industry generally.
Readers should carefully review the Consolidated Financial Statements and
the Notes thereto included elsewhere in this Prospectus, as well as the risk
factors described herein.
16
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
(in thousands, except share data)
The selected consolidated financial data below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus. The selected Consolidated Statements of
Operations Data set forth below for the fiscal years ended June 29, 1996, June
28, 1997 and June 27, 1998 and the Consolidated Balance Sheet Data at June 28,
1997 and June 27, 1998 have been audited by Deloitte & Touche LLP, independent
accountants, whose report thereon appears elsewhere herein. The selected
Consolidated Statements of Operations Data presented below for the fiscal years
ended June 30, 1994 and 1995 and the Consolidated Balance Sheet Data at June 30,
1994 and 1995 and June 29, 1996 are derived from unaudited financial statements
not included elsewhere in this Prospectus. The selected Consolidated Financial
Data as of and for the three months ended September 26, 1998 and September 27,
1997 have been derived from unaudited financial statements of Peachtree included
elsewhere in this Prospectus which, in the opinion of management, include all
adjustments, consisting solely of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein. The interim
period results are not necessarily indicative of the results to be expected for
any full year or for any future period.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
--------------------------------------------------------------- ---------------
JUNE 30, JUNE 30, JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27,
1994(1) 1995 1996 1997 1998 1997
----------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
License fees................................ $ 19,655 $ 24,007 $ 18,806 $ 23,757 $ 27,411 $ 4,319
Service fees................................ 9,795 10,918 16,488 23,151 25,123 5,579
----------- ----------- ----------- ----------- ----------- ------
Total revenue............................... 29,450 34,925 35,294 46,908 52,534 9,898
Cost of revenue:
Cost of license fees........................ 6,709 8,880 7,445 9,826 10,040 1,615
Cost of service fees........................ 3,094 3,607 6,297 10,108 8,938 1,933
----------- ----------- ----------- ----------- ----------- ------
Total cost of revenue....................... 9,803 12,487 13,742 19,934 18,978 3,548
----------- ----------- ----------- ----------- ----------- ------
Gross profit.............................. 19,647 22,438 21,552 26,974 33,556 6,350
Operating expenses:
Sales and marketing......................... 7,495 8,793 9,246 12,204 16,804 3,634
Research and development.................... 14,244 6,177 6,535 7,275 8,071 1,833
General and administrative.................. 2,955 2,097 2,090 2,564 2,709 665
Amortization of intangibles(2).............. 1,229 4,742 4,929 5,787 5,840 1,439
----------- ----------- ----------- ----------- ----------- ------
Total operating expenses(2)............... 25,923 21,809 22,800 27,830 33,424 7,571
----------- ----------- ----------- ----------- ----------- ------
Operating income (loss)(2).................... (6,276) 629 (1,248) (856) 132 (1,221)
Interest income (expense)..................... (1,005) 95 281 501 564 71
----------- ----------- ----------- ----------- ----------- ------
Income (loss) before income taxes............. (7,281) 724 (967) (355) 696 (1,150)
Income tax expense (benefit).................. (2,920) 595 (21) 154 447 (738)
----------- ----------- ----------- ----------- ----------- ------
Net income (loss)............................. $ (4,361) $ 129 $ (946) $ (509) $ 249 $ (412)
----------- ----------- ----------- ----------- ----------- ------
----------- ----------- ----------- ----------- ----------- ------
Basic and diluted earnings per share(3).......
Weighted average common shares outstanding(3)
<CAPTION>
SEPTEMBER 26,
1998
---------------
<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
License fees................................ $ 5,682
Service fees................................ 5,999
------
Total revenue............................... 11,681
Cost of revenue:
Cost of license fees........................ 1,943
Cost of service fees........................ 2,267
------
Total cost of revenue....................... 4,210
------
Gross profit.............................. 7,471
Operating expenses:
Sales and marketing......................... 4,901
Research and development.................... 2,331
General and administrative.................. 749
Amortization of intangibles(2).............. 1,469
------
Total operating expenses(2)............... 9,450
------
Operating income (loss)(2).................... (1,979)
Interest income (expense)..................... 232
------
Income (loss) before income taxes............. (1,747)
Income tax expense (benefit).................. (1,935)
------
Net income (loss)............................. $ 188
------
------
Basic and diluted earnings per share(3).......
Weighted average common shares outstanding(3)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
--------------------------------------------------------------- -------------
JUNE 30, JUNE 30, JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27,
1994 1995 1996 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................ $ 616 $ 2,223 $ 1,381 $ 454 $ 583 $ 2,077
Intercompany receivable from ADP(4)......... 2,236 3,799 5,867 7,791 15,152 6,190
Working capital............................. 1,601 6,654 8,996 10,500 15,221 11,544
Total assets................................ 41,231 41,843 52,968 55,649 60,161 52,099
Total stockholder's equity.................. 29,681 29,808 35,312 34,803 37,452 34,391
<CAPTION>
SEPTEMBER 26,
1998
-------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................ $ --
Intercompany receivable from ADP(4)......... 16,147
Working capital............................. 16,702
Total assets................................ 57,213
Total stockholder's equity.................. 37,640
</TABLE>
- ------------------------------
(1) ADP acquired all of the outstanding shares of Peachtree on April 5, 1994.
Due to the insignificant period of time between the acquisition date and
year-end, in the opinion of management, separate presentation of the
pre-acquisition and post-acquisition periods is not meaningful. Revenue for
the pre-acquisition and post-acquisition periods was $25,728 and $3,722. Net
income for the pre-acquisition and post-acquisition periods was $6,958 and
$(11,319).
(2) Includes acquisition-related amortization of $1,185, $4,742, $4,830, $5,620,
and $5,687 for the fiscal years ended June 30, 1994, June 30, 1995, June 29,
1996, June 28, 1997 and June 27, 1998 and $1,405 and $1,445 for the three
months ended September 27, 1997 and September 26, 1998. Excluding this
acquisition-related amortization operating income (loss) would have been
$(5,091), $5,371, $3,582, $4,764 and $5,819 for the fiscal years ended June
30, 1994, June 30, 1995, June 29, 1996, June 28, 1997 and June 27, 1998, and
$184 and $(534) for the three months ended September 27, 1997 and September
26, 1998. See Notes 2 and 10 to Notes to Consolidated Financial Statements.
(3) See Note - of Notes to Consolidated Financial Statements for information
concerning the computation of earnings per share.
(4) Upon consummation of the Offering, the intercompany receivable from ADP will
be collected in cash by Peachtree.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PEACHTREE SHOULD BE READ IN CONJUNCTION WITH PEACHTREE'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, AND OTHER FINANCIAL
INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Peachtree is a leading developer of financial and accounting software
solutions for small businesses. Peachtree sells packaged software to new
customers primarily through the retail distribution channel and is represented
in thousands of retail software locations nationwide. Peachtree derives the
majority of its revenue from direct aftermarket sales to its existing customers
of upgrades, payroll tax services, business forms and support services.
Peachtree's installed base of registered customers includes over one million
small businesses, with more than half of those having five or more employees.
ADP acquired all of the outstanding stock of Peachtree on April 5, 1994.
Since that time, Peachtree has operated as a wholly owned subsidiary of ADP. ADP
provides certain services to Peachtree, including payroll and employee benefits
administration. Management believes that the methods of billing these costs are
reasonable and that the costs charged to Peachtree are approximately that which
would be incurred on a stand-alone basis. Certain service expenses that were
incurred by ADP were not passed down to Peachtree and therefore have been
excluded from Peachtree's operating expenses and net income. Such expenses
include legal expense, certain human resource overhead costs and certain
external professional services such as auditing and tax. See "Relationship with
ADP."
Peachtree acquired the rights to the One-Write Plus product ("OWP") on March
22, 1996. Peachtree acquired all of the outstanding stock of Micro Associates,
Inc. ("MICA") on January 13, 1998. Both acquisitions were funded by ADP and
contributed to Peachtree. The results of operations of both of these
acquisitions were included in the financial statements from the date of
acquisition.
REVENUE. Peachtree's revenue is derived from two principal sources:
software license fees, including product sales to new customers primarily
through the retail distribution channel and sales of upgrades to existing
customers primarily via direct marketing ("license fees") and service fees for
providing high quality pre-printed business forms, payroll tax update services,
technical service and support and shipping and handling charged to customers
("service fees"). License fees, net of reserves and deferrals, are generally
recognized at the time of shipment, provided that no significant vendor
obligations remain and collection of the resulting receivable is deemed
probable. Peachtree maintains reserves against accounts receivable for returns
distributors have notified Peachtree are in process as well as for estimated
stock balancing returns (the return of old versions of a product by distributors
upon receipt of the new version) and end user returns. Certain of Peachtree's
sales are made to distributors subject to rights of return and price protection
on unsold merchandise. Accordingly, Peachtree defers revenue on shipments into
the retail distribution channel until sale of the product to the small business
customer is deemed reasonably assured. License fees earned on products designed
for Microsoft Windows technologies were 90% of total license fees in 1998, 86%
of total license fees in 1997 and 70% of total license fees in 1996. Service
fees related to customer maintenance and support are recognized ratably over the
term of the software support services agreement, which is typically twelve
months. Service fees related to payroll tax update services are recognized in
proportion to the associated expenses. Business forms revenue represents
Peachtree's share of payments by customers to a third party vendor and is
recognized on a net commission basis.
COST OF REVENUE. Cost of license fees is composed primarily of media,
printing, warranty support and royalties. Cost of license fees fluctuates as a
percentage of license fees due to Peachtree's policy of expensing direct product
costs (media and printing) at the time of product shipment into the distribution
channel while deferring revenue until sale of the product to the small business
customer is
21
<PAGE>
deemed reasonably assured. Cost of service fees includes support services
associated with paid support and freight costs. Since Peachtree recognizes as
revenue only the net commission on sales of pre-printed business forms, this
revenue has the highest margin, followed by tax updates, while support fees
generally contribute a lower margin.
OPERATING EXPENSES. Peachtree's sales expense consists primarily of
promotional spending in the retail channel to attract new customers, costs to
fulfill direct orders, customer rebates and operating infrastructure, along with
compensation and other costs relating to sales personnel. Marketing expense
includes personnel, direct mail and marketing programs, new customer tracking
programs, advertising, customer registration, public relations and other
expenses. Research and development expense consists primarily of compensation
and infrastructure costs of development, project management, quality assurance,
technical writing and product management personnel, as well as costs incurred
for contract development services on an as-needed basis. Research and
development costs are expensed as incurred. General and administrative expense
consists primarily of salaries of executive, financial and information services
personnel and corporate infrastructure costs. To reflect fully total personnel
costs in the sales, marketing, development and support areas, depreciation and
certain facility-related costs are allocated to each functional area based on
headcount. For this reason, general and administrative expense may fluctuate as
headcount moves up or down. Amortization of intangibles expense consists of the
amortization of goodwill, trademarks, purchased software and other intangibles
related to acquisitions, as well as the amortization of software purchased for
use in internal operations. The majority of the amortization expense relates to
the ADP acquisition of Peachtree.
INTEREST INCOME. As a subsidiary of ADP, Peachtree has not invested its own
cash balances, but has remitted all cash to ADP. Cash is swept out of
Peachtree's account on a regular basis by ADP, and interest income therefore
reflects interest earned, at 6.0%, on balances due from ADP. Interest income
from the date of the Offering will be determined by market rates on actual cash
balances.
INCOME TAXES. Peachtree's results of operations historically have been
included in the consolidated income tax returns of ADP. The income tax
provisions included in the Consolidated Statements of Operations of Peachtree
have been determined as if Peachtree were a separate taxpayer. Following the
Offering, Peachtree will file income taxes as an independent entity.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenue represented by certain items reflected in Peachtree's consolidated
income statement.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998
----------- ----------- ----------- --------------- ---------------
Revenue:
License fees................................. 53.3% 50.6% 52.2% 43.6% 48.6%
Service fees................................. 46.7 49.4 47.8 56.4 51.4
----- ----- ----- ----- -----
Total revenue.................................. 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of license fees......................... 21.1 21.0 19.1 16.3 16.6
Cost of service fees......................... 17.8 21.5 17.0 19.5 19.4
----- ----- ----- ----- -----
Total cost of revenue.......................... 38.9 42.5 36.1 35.8 36.0
----- ----- ----- ----- -----
Gross profit................................... 61.1 57.5 63.9 64.2 64.0
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.......................... 26.2 26.0 32.0 36.7 42.0
Research and development..................... 18.5 15.5 15.4 18.5 20.0
General and administrative................... 5.9 5.5 5.2 6.7 6.4
Amortization of intangibles.................. 14.0 12.3 11.0 14.6 12.5
----- ----- ----- ----- -----
Total operating expenses....................... 64.6 59.3 63.6 76.5 80.9
----- ----- ----- ----- -----
Operating income (loss)........................ (3.5) (1.8) 0.3 (12.3) (16.9)
Interest income................................ 0.8 1.0 1.1 0.7 1.9
----- ----- ----- ----- -----
Income (loss) from operations before income
taxes........................................ (2.7) (0.8) 1.4 (11.6) (15.0)
Income tax expense (benefit)................... 0.0 0.3 0.9 (7.4) (16.6)
----- ----- ----- ----- -----
Net income (loss).............................. (2.7)% (1.1)% 0.5% (4.2)% 1.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED SEPTEMBER 26, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
27, 1997
REVENUE
Total revenue increased 18.0% to $11.7 million for the three months ended
September 26, 1998 from $9.9 million for the three months ended September 27,
1997.
LICENSE FEES. License fees increased 31.6% to $5.7 million for the three
months ended September 26, 1998 from $4.3 million for the three months ended
September 27, 1997. License fees from product sales to new customers increased
quarter over quarter due to higher unit sales and the inclusion of the
higher-priced Peachtree 2000 product. Sales of upgrades to existing customers
increased significantly for the three months ended September 26, 1998 due to the
benefit of sales of the Peachtree 2000 product into Peachtree's customer base
and a unit increase due to numerous product releases in the preceding quarter,
and a change in product mix in favor of the higher priced Peachtree products.
SERVICE FEES. Service fees increased 7.5% to $6.0 million for the three
months ended September 26, 1998 from $5.6 million for the three months ended
September 27, 1997 due primarily to additional support revenue and higher sales
of pre-printed business forms offset by lower revenue from tax update service
sales due to the timing of direct marketing programs.
23
<PAGE>
COST OF REVENUE
Cost of revenue increased 18.7% to $4.2 million for the three months ended
September 26, 1998 from $3.5 million for the three months ended September 27,
1997. As a percentage of revenue, cost of revenue was 36.0% for the three months
ended September 26, 1998 and 35.8% for the three months ended September 27,
1997.
COST OF LICENSE FEES. Cost of license fees as a percentage of license fees
decreased to 34.2% for the three months ended September 26, 1998, from 37.4% for
the three months ended September 27, 1997. Cost of license fees decreased as a
percentage of license fees quarter over quarter due to a decrease in the costs
relating to warranty support and lower materials cost as a result of reduction
of deferred revenue attributable to distribution channel inventory. These
benefits were partially offset by an increase in materials cost due to
distribution of evaluation copies of the Peachtree 2000 product, distribution of
no-charge Y2K compliant versions of certain Peachtree products to certain
customers, and a write-off of obsolete inventory in the normal course of
business.
COST OF SERVICE FEES. Cost of service fees as a percentage of service fees
increased to 37.8% for the three months ended September 26, 1998 from 34.6% for
the three months ended September 27, 1997. In the three months ended September
26, 1998 compared with the three months ended September 27, 1997, higher margin
payroll tax updates represented a smaller percentage of service fees due to the
timing of direct marketing programs to generate this revenue, which increased
overall cost as a percentage of revenue.
SALES AND MARKETING EXPENSE
Sales and marketing expense increased 34.9% to $4.9 million for the three
months ended September 26, 1998 from $3.6 million for the three months ended
September 27, 1997. As a percentage of revenue, sales and marketing expense was
42.0% for the three months ended September 26, 1998, and 36.7% for the three
months ended September 27, 1997. Sales and marketing expense rose quarter over
quarter due to increases in direct mail program, media and advertising, and
headcount associated with Peachtree 2000 as well as to manage expanded sales and
marketing programs. Sales and marketing expense increased as a percentage of
revenue in support of Peachtree's long term efforts to expand its revenue base
and the cost of mail notifications to a portion of the customer base related to
the issue of Y2K compliance.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased 27.2% to $2.3 million for the
three months ended September 26, 1998 from $1.8 million for the three months
ended September 27, 1997. As a percentage of revenue, research and development
expense was 20.0% for the three months ended September 26, 1998, and 18.5% for
the three months ended September 27, 1997. Research and development spending
increased both in absolute dollars and as a percentage of revenue quarter over
quarter due to increases in compensation costs of technical personnel, increased
development headcount due to expansion of Peachtree's product line, and the
impact of the acquisition of MICA.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense was $0.7 million for the three months
ended September 26, 1998 and for the three months ended September 27, 1997. As a
percentage of revenue, general and administrative expense was 6.4% for the three
months ended September 26, 1998, and 6.7% for the three months ended September
27, 1997.
24
<PAGE>
AMORTIZATION OF INTANGIBLES EXPENSE
Amortization of intangibles expense was $1.5 million for the three months
ended September 26, 1998 and $1.4 million for the three months ended September
27, 1997. The increase in amortization expense reflects the acquisition of MICA
in January, 1998 and increases in software purchased for internal use.
INTEREST INCOME
Interest income was $0.2 million for the three months ended September 26,
1998 and $0.1 million for the three months ended September 27, 1997. The
increase in interest income reflects higher average balances due from ADP
quarter over quarter.
INCOME TAX EXPENSE (BENEFIT)
Peachtree's effective tax rate varies considerably from statutory rates
primarily due to non-deductible amortization of intangibles expense, slightly
offset by research tax credits. Income tax benefit for the three months ended
September 26, 1998 was booked at the 110.8% estimated effective tax rate for the
full fiscal year.
FISCAL YEAR ENDED JUNE 27, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 28, 1997
REVENUE
Total revenue increased 12.0% to $52.5 million in 1998 from $46.9 million in
1997.
LICENSE FEES. License fees increased 15.4% to $27.4 million in 1998 from
$23.8 million in 1997. License fees from product sales to new customers remained
constant in 1998 from 1997 as an increase in average selling price offset a
moderate decrease in unit sales. Upgrades increased significantly in 1998 from
1997 due to three factors: the benefit of partial year sales of the
higher-priced Peachtree 2000 product, a change in the mix of upgrades of
existing Peachtree products toward higher priced products, and price increases.
SERVICE FEES. Service fees increased 8.5% to $25.1 million in 1998 from
$23.2 million in 1997. The increase was due primarily to increases in payroll
tax update revenue and sales of preprinted business forms. Support revenue
remained flat in 1998.
COST OF REVENUE
Cost of revenue declined 4.8% to $19.0 million in 1998 from $19.9 million in
1997. As a percentage of total revenue, cost of revenue decreased to 36.1% in
1998 from 42.5% in 1997.
COST OF LICENSE FEES. Cost of license fees as a percentage of license fees
decreased to 36.6% in 1998 from 41.4% in 1997. The cost of license fees
decreased as a percentage of license fees in 1998 from 1997 due to the
increasing use of compact disks over diskettes and a decrease in the cost of
warranty support. This was partially offset by an increase in royalty costs due
to a change in sales mix toward products on which Peachtree pays higher royalty.
COST OF SERVICE FEES. Cost of service fees as a percentage of service fees
decreased to 35.6% in 1998 from 43.7% in 1997. The change in margin was largely
due to changes in the sales mix. Support fees decreased and payroll tax update
revenue increased as a percentage of total service fees in 1998 from 1997. In
addition, margins on support revenue improved due to operational efficiencies.
25
<PAGE>
SALES AND MARKETING EXPENSE
Sales and marketing expense increased 37.7% to $16.8 million in 1998 from
$12.2 million in 1997. As a percentage of revenue, sales and marketing expense
increased to 32.0% in 1998 from 26.0% in 1997. Sales and marketing expense
increased in 1998 due to sizable increases in direct mail programs, increased
spending on promotions in the retail channel and increased headcount to manage
expanded sales and marketing programs.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased 10.9% to $8.1 million in 1998
from $7.3 million in 1997. As a percentage of revenue, research and development
expense decreased to 15.4% in 1998 from 15.5% in 1997. Research and development
expense increased in absolute dollars due to development of the Peachtree Open
Architecture platform, increased compensation costs of technical personnel,
increased development headcount due to expansion of Peachtree's product line,
and the acquisition of MICA in 1998.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense remained relatively constant at $2.7
million in 1998 compared with $2.6 million in 1997 and decreased as a percentage
of revenue to 5.2% in 1998 from 5.5% in 1997. While absolute spending on
infrastructure, depreciation and other administrative categories increased in
line with revenue, headcount increases in sales and marketing, research and
development and support resulted in a higher percentage of these costs being
allocated to these functions.
AMORTIZATION OF INTANGIBLES EXPENSE
Amortization of intangibles expense was $5.8 million in both 1998 and 1997,
remaining constant due to the relatively small amount of amortization related to
the acquisition of MICA in January 1998.
INTEREST INCOME
Interest income was $0.6 million in 1998 and $0.5 million in 1997. The
increase in interest income reflects higher average balances due from ADP year
over year.
INCOME TAX EXPENSE (BENEFIT)
Peachtree's effective tax rate varies considerably from statutory rates
primarily due to non-deductible amortization of intangibles expense slightly
offset by research tax credits. A reconciliation of Peachtree's effective tax
rate to the U.S. federal statutory rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JUNE 28, JUNE 27,
1997 1998
-------------------- --------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Statutory income tax (benefit)................................................. $ (121) (34.0)% $ 237 34.0%
Nondeductible goodwill......................................................... 301 84.8 323 46.4
State and local income tax expense (benefit), net of federal benefit........... 14 3.9 50 7.2
Utilization of tax credits..................................................... (80) (22.5) (80) (11.5)
Deferred tax adjustment for the effects of changes in state tax rates.......... -- -- (94) (13.5)
Additional federal tax due to graduated rates.................................. 29 8.2 -- --
Other nondeductible expenses................................................... 11 3.0 11 1.6
--------- --------- --------- ---------
Income tax expense (benefit)............................................... $ 154 43.4% $ 447 64.2%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
26
<PAGE>
FISCAL YEAR ENDED JUNE 28, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 29, 1996
REVENUE
Total revenue increased 32.9% to $46.9 million in 1997 from $35.3 million in
1996.
LICENSE FEES. License fees increased 26.3% to $23.8 million in 1997 from
$18.8 million in 1996. License fees from product sales to new customers
increased in 1997 from 1996 due to an increase in unit sales, an increase in the
average price of the Windows products, and the full year impact of the OWP
acquisition. Upgrade sales increased in 1997 over 1996 due to the full year
impact of the OWP acquisition partially offset by a decrease in sales of add-on
products due to add-on features being incorporated into new versions of the main
products.
SERVICE FEES. Service fees increased 40.4% in 1997 to $23.2 million from
$16.5 million in 1996. The 1997 increase in service fees consists of an increase
in support revenue due predominantly to the full year impact of the acquisition
of OWP, whose service fees are heavily weighted to support, as well as to
increases in sales of pre-printed business forms and payroll tax update revenue.
COST OF REVENUE
Cost of revenue increased 45.1% to $19.9 million in 1997 from $13.7 million
in 1996. As a percentage of total revenue, cost of revenue increased to 42.5% in
1997 from 38.9% in 1996.
COST OF LICENSE FEES. Cost of license fees as a percentage of license fees
increased to 41.4% in 1997 from 39.6% in 1996 due to a substantial increase in
warranty support costs related to the full year impact of the OWP acquisition,
partially offset by a reduction in materials cost.
COST OF SERVICE FEES. Cost of service fees as a percentage of service fees
increased to 43.7% in 1997 from 38.2% in 1996 due to the full year impact of the
acquisition of OWP, whose service fees are heavily weighted toward lower margin
support revenue.
SALES AND MARKETING EXPENSE
Sales and marketing expense increased 32.0% to $12.2 million in 1997 from
$9.2 million in 1996. As a percentage of revenue, sales and marketing expense
remained relatively constant at 26.0% in 1997 compared with 26.2% in 1996. Sales
and marketing expense in 1997 increased in absolute dollars from 1996 in support
of higher revenue.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased 11.3% to $7.3 million in 1997
from $6.5 million in 1996. As a percentage of revenue, research and development
expense decreased to 15.5% in 1997 from 18.5% in 1996 due to hiring delays in
1997 and the release of additional products based on a single product platform
which increased development efficiencies. Research and development expense
increased in absolute dollars due to increases in compensation costs of
technical personnel, increased development headcount and the full year impact of
OWP in 1997.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense increased 22.7% to $2.6 million in 1997
from $2.1 million in 1996. As a percentage of revenue, general and
administrative expense decreased to 5.5% in 1997 from 5.9% in 1996. The absolute
dollar increase in 1997 was due to a full year of expense from the OWP
acquisition.
27
<PAGE>
AMORTIZATION OF INTANGIBLES EXPENSE
Amortization of intangibles expense increased 17.4% to $5.8 million in 1997
from $4.9 million in 1996. Increases year over year reflect the acquisition of
OWP in March 1996, as well as increases in software purchased for internal use.
INTEREST INCOME
Interest income rose to $0.5 million in 1997 from $0.3 million in 1996. The
increase in interest income reflects higher average balances due from ADP year
over year.
INCOME TAX EXPENSE (BENEFIT)
Peachtree's effective tax rate varies considerably from statutory rates
primarily due to non-deductible amortization of intangibles expense and research
tax credits. A reconciliation of Peachtree's effective tax rate to the U.S.
federal statutory rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
<S> <C> <C> <C> <C>
JUNE 29, JUNE 28,
1996 1997
-------------------- --------------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Statutory income tax (benefit)..................................................... $ (329) (34.0)% $ (121) (34.0)%
Nondeductible goodwill............................................................. 301 31.1 301 84.8
State and local income tax expense (benefit), net of federal benefit............... (1) (0.1) 14 3.9
Utilization of tax credits......................................................... -- -- (80) (22.5)
Deferred tax adjustment for the effects of changes in state tax rates.............. -- -- -- --
Additional federal tax due to graduated rates...................................... -- -- 29 8.2
Other nondeductible expenses....................................................... 8 0.8 11 3.0
--------- --------- --------- ---------
Income tax expense (benefit)................................................... $ (21) (2.2)% $ 154 43.4%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
28
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly results of operations of
Peachtree for each of the quarters of the fiscal years ended June 28, 1997 and
June 27, 1998, as well as the quarter ended September 26, 1998. In management's
opinion, this unaudited information has been prepared on the same basis as the
audited financial statements and includes all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
information for the quarters presented, when read in conjunction with
Peachtree's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPTEMBER 28, DECEMBER 28, MARCH 29, JUNE 28, SEPTEMBER 27, DECEMBER 27,
1996 1996 1997 1997 1997 1997
--------------- --------------- ----------- ----------- --------------- ---------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License fees............ $ 4,882 $ 7,395 $ 7,053 $ 4,427 $ 4,319 $ 5,501
Service fees............ 5,203 6,946 6,060 4,942 5,579 7,148
------- ------ ----------- ----------- ------ ------
Total revenue............. 10,085 14,341 13,113 9,369 9,898 12,649
------- ------ ----------- ----------- ------ ------
Cost of revenue:
Cost of license fees.... 1,937 2,975 2,471 2,443 1,615 2,561
Cost of service fees.... 2,161 2,695 2,895 2,357 1,933 2,267
------- ------ ----------- ----------- ------ ------
Total cost of revenue..... 4,098 5,670 5,366 4,800 3,548 4,828
------- ------ ----------- ----------- ------ ------
Gross profit.............. 5,987 8,671 7,747 4,569 6,350 7,821
------- ------ ----------- ----------- ------ ------
Operating expenses:
Sales and marketing..... 2,928 3,861 2,757 2,658 3,634 4,024
Research and
development........... 1,905 1,798 1,778 1,794 1,833 2,022
General and
administrative........ 540 692 755 577 665 502
Amortization of
intangibles........... 1,446 1,446 1,446 1,449 1,439 1,449
------- ------ ----------- ----------- ------ ------
Total operating
expenses................ 6,819 7,797 6,736 6,478 7,571 7,997
------- ------ ----------- ----------- ------ ------
Operating income (loss)... (832) 874 1,011 (1,909) (1,221) (176)
Interest income........... 68 161 163 109 71 117
------- ------ ----------- ----------- ------ ------
Income (loss) before
income taxes............ (764) 1,035 1,174 (1,800) (1,150) (59)
Income tax expense
(benefit)............... 330 (447) (508) 779 (738) (38)
------- ------ ----------- ----------- ------ ------
Net income (loss)......... $ (1,094) $ 1,482 $ 1,682 $ (2,579) $ (412) $ (21)
------- ------ ----------- ----------- ------ ------
------- ------ ----------- ----------- ------ ------
<CAPTION>
<S> <C> <C> <C>
MARCH 28, JUNE 27, SEPTEMBER 26,
1998 1998 1998
----------- ----------- ---------------
<S> <C> <C> <C>
Revenue:
License fees............ $ 6,286 $ 11,305 $ 5,682
Service fees............ 6,653 5,743 5,999
----------- ----------- ------
Total revenue............. 12,939 17,048 11,681
----------- ----------- ------
Cost of revenue:
Cost of license fees.... 2,206 3,658 1,943
Cost of service fees.... 2,641 2,097 2,267
----------- ----------- ------
Total cost of revenue..... 4,847 5,755 4,210
----------- ----------- ------
Gross profit.............. 8,092 11,293 7,471
----------- ----------- ------
Operating expenses:
Sales and marketing..... 5,058 4,088 4,901
Research and
development........... 2,032 2,184 2,331
General and
administrative........ 689 853 749
Amortization of
intangibles........... 1,475 1,477 1,469
----------- ----------- ------
Total operating
expenses................ 9,254 8,602 9,450
----------- ----------- ------
Operating income (loss)... (1,162) 2,691 (1,979)
Interest income........... 161 215 232
----------- ----------- ------
Income (loss) before
income taxes............ (1,001) 2,906 (1,747)
Income tax expense
(benefit)............... (643) 1,866 (1,935)
----------- ----------- ------
Net income (loss)......... $ (358) $ 1,040 $ 188
----------- ----------- ------
----------- ----------- ------
</TABLE>
29
<PAGE>
The following table sets forth unaudited quarterly results of operations as
a percentage of revenue for each of the quarters of the fiscal years ended June
28, 1997 and June 27, 1998, as well as the quarter ended September 26, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPTEMBER 28, DECEMBER 28, MARCH 29, JUNE 28, SEPTEMBER 27, DECEMBER 27,
1996 1996 1997 1997 1997 1997
--------------- --------------- ----------- ----------- --------------- ---------------
Revenue:
License fees................. 48.4% 51.6% 53.8% 47.3% 43.6% 43.5%
Service fees................. 51.6 48.4 46.2 52.7 56.4 56.5
----- ----- ----- ----- ----- -----
Total revenue.................. 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of license fees......... 19.2 20.7 18.8 26.0 16.3 20.3
Cost of service fees......... 21.4 18.8 22.1 25.2 19.5 17.9
----- ----- ----- ----- ----- -----
Total cost of revenue.......... 40.6 39.5 40.9 51.2 35.8 38.2
----- ----- ----- ----- ----- -----
Gross profit................... 59.4 60.5 59.1 48.8 64.2 61.8
----- ----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.......... 29.0 26.9 21.0 28.4 36.7 31.8
Research and development..... 18.9 12.5 13.6 19.1 18.5 16.0
General and administrative... 5.4 4.8 5.8 6.2 6.7 4.0
Amortization of intangibles.. 14.3 10.2 11.0 15.5 14.6 11.4
----- ----- ----- ----- ----- -----
Total operating expenses....... 67.6 54.4 51.4 69.2 76.5 63.2
----- ----- ----- ----- ----- -----
Operating income (loss)........ (8.2) 6.1 7.7 (20.4) (12.3) (1.4)
Interest income................ 0.7 1.1 1.2 1.2 0.7 0.9
----- ----- ----- ----- ----- -----
Income (loss) before income
taxes........................ (7.5) 7.2 8.9 (19.2) (11.6) (0.5)
Income tax expense (benefit)... 3.3 (3.1) (3.9) 8.3 (7.4) (0.3)
----- ----- ----- ----- ----- -----
Net income (loss).............. (10.8)% 10.3% 12.8% (27.5)% (4.2)% (0.2)%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
<CAPTION>
<S> <C> <C> <C>
MARCH 28, JUNE 27, SEPTEMBER 26,
1998 1998 1998
----------- ----------- ---------------
Revenue:
License fees................. 48.6% 66.3% 48.6%
Service fees................. 51.4 33.7 51.4
----- ----- -----
Total revenue.................. 100.0 100.0 100.0
Cost of revenue:
Cost of license fees......... 17.1 21.5 16.6
Cost of service fees......... 20.4 12.3 19.4
----- ----- -----
Total cost of revenue.......... 37.5 33.8 36.0
----- ----- -----
Gross profit................... 62.5 66.2 64.0
----- ----- -----
Operating expenses:
Sales and marketing.......... 39.1 24.0 42.0
Research and development..... 15.7 12.8 20.0
General and administrative... 5.3 5.0 6.4
Amortization of intangibles.. 11.4 8.7 12.5
----- ----- -----
Total operating expenses....... 71.5 50.5 80.9
----- ----- -----
Operating income (loss)........ (9.0) 15.7 (16.9)
Interest income................ 1.2 1.3 1.9
----- ----- -----
Income (loss) before income
taxes........................ (7.8) 17.0 (15.0)
Income tax expense (benefit)... (5.0) 10.9 (16.6)
----- ----- -----
Net income (loss).............. (2.8)% 6.1% 1.6%
----- ----- -----
----- ----- -----
</TABLE>
Participants in the software industry, including Peachtree, generally
experience significant volatility in quarterly operating results. Quarterly
operating results vary widely due to many factors, including demand for
particular products, the timing of orders from customers, marketing programs,
the duration of sales cycles, spending patterns of customers, the timing of
product introductions, enhancements or extensions, pricing policies, rapidly
changing technologies, personnel shortages, the publication of product
appraisals by industry analysts or others, and economic conditions applicable to
software sales. In general, the loss or deferral of a large number of orders
could have a material adverse effect on current operating results and could
cause significant fluctuations in revenue and earnings from quarter to quarter.
See "Risk Factors--Volatility of Quarterly Operating Results; Seasonality."
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $1.0 million for the three months
ended September 26, 1998 compared to $0.2 million for the three months ended
September 27, 1997. Cash provided by operations increased for the three months
ended September 26, 1998 due to higher profitability, higher collections of
accounts receivable and an increase in accounts payable due largely to inventory
purchases late in the preceding quarter due to the number of product releases,
offset by a relative decline in deferred revenue.
Cash provided by operating activities was $9.4 million in 1998, $2.9 million
in 1997 and $0.4 million in 1996. The increase in cash provided by operations in
1998 as compared to 1997 was primarily due to an increase in net income (after
adjusting for non-cash charges), a leveling of net accounts receivable balances,
and net increases in accounts payable and accrued expenses. The increase in cash
provided by operations in 1997 as compared to 1996 was primarily due to a
relative increase in deferred revenue.
30
<PAGE>
Certain service expenses incurred by ADP were not passed down to Peachtree
and therefore have been excluded from Peachtree's net earnings and cash flow
from operations. Such expenses include but are not limited to legal expense,
certain human resource overhead costs and certain external professional services
such as auditing and tax.
Cash used in investing activities was $0.6 million for the three months
ended September 26, 1998, $1.9 million in 1998, $1.9 million in 1997, and $1.1
million in 1996, which in all periods related predominantly to capital
expenditures. Although Peachtree does not currently have any material
commitments for capital expenditures, it does intend to continue to invest in
property and equipment, particularly computer and communications equipment and
software purchased for internal use.
As of September 26, 1998, Peachtree had a net receivable from ADP of $16.1
million and a zero cash balance. As of June 27, 1998, Peachtree had a net
receivable from ADP of $15.2 million and cash of $0.6 million. As of the closing
date of the Offering, the balance due from ADP is expected to approximate $
million which will be settled with cash by ADP on the closing date.
Peachtree's future liquidity and capital requirements are expected to vary
greatly from quarter to quarter, depending on numerous factors, including, among
others, the cost, timing and success of product development and marketing
efforts, the market acceptance of Peachtree's existing and new technologies and
competing technological and market developments. In the past, ADP has satisfied
Peachtree's capital requirements. Following the Offering, Peachtree will be
required to meet its own cash needs separate from ADP. ADP will have no
obligation to assist Peachtree. See "Risk Factors-- Volatility of Quarterly
Operating Results; Seasonality."
Peachtree currently anticipates that cash generated by its operations,
together with the net cash proceeds Peachtree receives from the Offering and the
settlement of the receivable from ADP, will be sufficient to meet its operating
and capital needs for the foreseeable future. It is possible, however, that
Peachtree might require additional financing in the future. Needed capital may
not be available on terms attractive to Peachtree, or at all. Any failure of
Peachtree to raise capital when needed could have a material adverse effect on
Peachtree's business, operating results and financial condition. See "Risk
Factors--Need for Additional Financing" and "--Volatility of Quarterly Operating
Results; Seasonality."
NEW ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants has issued a
Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended
by SOP 98-4. SOP 97-2 supersedes SOP 91-1 "Software Revenue Recognition," and is
effective for Peachtree for transactions entered into after June 27, 1998.
Peachtree adopted SOP 97-2 in the first quarter of fiscal year 1999. The
adoption of the standards in the statement did not have a material impact on
Peachtree's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standard ("SFAS") 130, "Reporting Comprehensive Income."
SFAS 130 is designed to improve the reporting of changes in equity from period
to period. Peachtree adopted SFAS 130 in the first quarter of fiscal year 1999.
As Peachtree has no components of other comprehensive income, adoption of the
standards in the statement did not have a significant impact on Peachtree's
financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS 131 requires that an enterprise
disclose certain information about operating segments. Peachtree adopted the
provisions of SFAS 131 in the first quarter of fiscal 1999. Peachtree currently
has only one operating segment and therefore adoption of the provisions of SFAS
131 did not have an impact on the Company's financial statements.
31
<PAGE>
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 establishes standards for derivative
instruments and hedging activities and requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. Peachtree has
not determined what effect, if any, this statement will have on Peachtree's
financial statements.
YEAR 2000
Many computer systems were not designed to accommodate dates beyond the year
1999 and will require modification in order to remain functional into the next
millennium. Because many existing programs were developed using two digits
rather than four to determine the applicable year, these programs may not
properly recognize the difference in a year that begins with "20" instead of
"19." This, along with other date processing errors, could result in system
failures, generation of erroneous data or miscalculations causing significant
disruption of normal business activities. Peachtree has established a
comprehensive Y2K compliance program as part of the larger Y2K readiness program
of ADP. The compliance program is designed to assess and resolve Y2K issues
associated with Peachtree's products, its internal systems and its key vendors
and service providers.
On the basis of product designs and quality assurance tests, Peachtree
believes that the most current versions of its products are Y2K compliant or Y2K
ready. See "Risk Factors--Year 2000." For customers who are running product
versions that are not Y2K compliant or Y2K ready, Peachtree has made Y2K update
solutions available. Customers using earlier versions of the Peachtree products,
generally those sold prior to January 1, 1997, have been encouraged to upgrade
to current product versions, which are already Y2K compliant or Y2K ready.
Although the most current versions of Peachtree's products have all undergone
Peachtree's normal quality testing procedures, Peachtree's current products or
its Y2K update solutions may contain undetected errors or defects associated
with Y2K date functions. Any such errors or defects may result in material costs
to Peachtree. In addition, because Peachtree's products are used in systems
composed of third-party hardware and software, customers may experience Y2K
failures related to these systems.
Despite Peachtree's best efforts to provide customers with Y2K compliant or
Y2K ready software, additional risks exist associated with potential litigation
and additional support burdens. Due to the unprecedented nature of the Y2K
problem, it is uncertain whether or to what extent the Company may be affected
by such risks. While Peachtree has not been subject to any Y2K claims or
lawsuits to date, the costs of defending and resolving disputes related to Y2K
failures could have a material adverse effect on the company's business,
financial condition, and results of operations.
Peachtree is also taking steps to prepare its internal systems for the Y2K
date change. The company has completed an assessment of its infrastructure
(e.g., computer and telephone systems) and business systems (e.g., revenue,
sales and marketing and finance functions) and completed much of the work
necessary to make these systems Y2K compliant or Y2K ready. Peachtree expects
conversion efforts to be substantially completed by the end of fiscal 1999 (June
1999). Peachtree believes it has identified suitable upgrade or replacement
solutions to ensure that its outstanding list of non-conforming applications are
Y2K compliant or Y2K ready. However, Peachtree could still experience serious
unanticipated consequences or material costs caused by undetected errors or
defects in the technology used in its internal systems.
Peachtree is currently working to assess the Y2K readiness of vendors,
customers and other relevant third parties on which it relies to a material
extent. The assessment is being conducted by a search of the ADP Y2K
certification database, formal communication with vendors, customers and other
relevant third parties and a search of vendor, customer and other relevant
third-party Internet websites
32
<PAGE>
for certification statements. Although Peachtree expects to obtain adequate
assurances of Y2K compliance or Y2K readiness from relevant third parties, in
the event any such third parties experience disruption of business caused by Y2K
issues, Peachtree's results of operations could be materially adversely
affected.
In addition, Peachtree believes that the purchasing patterns of customers
and potential customers may be affected by Y2K compliance or Y2K readiness
issues. Some companies may reevaluate their needs and switch software providers,
while others may choose either to delay or accelerate software purchases to
avoid Y2K compliance problems. Any change in historical purchasing patterns and
trends could possibly result in a material adverse effect on Peachtree's
business, operating results and financial condition.
Peachtree estimates that its total cost of achieving Y2K compliance or Y2K
readiness will be approximately $2.1 million, most of which has already been
expensed. These costs, as well as the schedule for Y2K modification, are based
on management's current estimates. Peachtree has actively communicated with much
of its customer base with respect to Y2K issues through mailings to customers,
information posted on Peachtree's Internet website and other communications.
Unforeseen circumstances could cause delays or significant additional expense in
achieving Y2K compliance or Y2K readiness.
In an effort to mitigate potential disruptions in business operations,
management is formulating contingency plans in the event of a Y2K-related
failure. Peachtree continues to identify areas where it is most vulnerable and
plans to refine its contingency plans in advance of experiencing potential
failures.
INFLATION
The rate of inflation has not had a material effect on the revenue or
operating results of Peachtree during the three most recent fiscal years.
33
<PAGE>
BUSINESS
Peachtree is a leading provider of financial and accounting software for
small businesses. Throughout its history, Peachtree has won numerous major
awards in the financial and accounting software industry. Peachtree sells
packaged software to new customers primarily through the retail distribution
channel and is represented in thousands of retail software locations nationwide.
Peachtree derives a majority of its revenue from direct aftermarket sales to its
existing customers of upgrades, payroll tax services, business forms and support
services. Peachtree's base of registered customers includes over one million
small businesses, with the majority of those having five or more employees.
Peachtree's extensive software product line provides a total financial and
accounting solution for small businesses of various sizes and complexity.
Peachtree, with its 20-year history, has been a technology leader and innovator
with many retail software industry firsts, including the first DOS accounting
package, the first Windows accounting package, the first widely available
accounting application seamlessly integrated with Microsoft Office and, most
recently, the first widely available Windows 98-certified accounting platform.
As a result of this proven technological leadership and innovation, Peachtree
enjoys strong brand recognition, customer loyalty and an excellent reputation
among accounting industry professionals.
Peachtree was acquired by ADP in 1994 and has since operated as a wholly
owned subsidiary of ADP. Peachtree has continued to invest in its marketing,
sales and development, expanded its product offerings, both through internal
development and through selective acquisitions, and assembled a senior
management team with extensive industry experience. As an independent entity,
Peachtree intends to devote more of its financial resources to implementing the
growth strategy described in this Prospectus. See "Relationship with ADP."
INDUSTRY BACKGROUND
OVERVIEW
Increasing competitive pressures and rapidly changing market conditions are
forcing businesses to improve operating efficiencies and their understanding of
key drivers of profitability. Businesses of all sizes are rapidly adopting
information technology (IT) software solutions to automate business processes,
improve and standardize the reporting and management of data and gain better
cost controls. In particular, businesses are employing IT software solutions to
automate and streamline their mission-critical financial, accounting and
operational functions. This has resulted in significant and increasing demand
for financial and accounting software. Financial and accounting software
automates repetitive accounting and bookkeeping tasks, standardizes the
collection, processing and reporting of critical business data, and provides
useful controls over business processes. Financial and accounting software
increases the reliability, accessibility and timeliness of important financial
and business information.
According to IDC, the financial and accounting software market can generally
be grouped into three segments: (1) the personal finance, small office/home
office (SOHO) and small business market (the "Small Business Market"); (2) the
corporate or middle market (the "Middle Market"); and (3) the enterprise or
high-end market (the "Enterprise Market"). These market segments are
differentiated by size of business as measured by number of employees, price and
channels of distribution.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
MARKET EMPLOYEES PRODUCT PRICE BUSINESSES
<S> <C> <C> <C>
Small Business 1 to 99 $50 to $5,000 7,400,000
$5,000 to
Middle 100 to 2,499 $100,000 92,000
Enterprise 2,500+ $100,000+ 1,700
</TABLE>
SOURCE: IDC
34
<PAGE>
Distribution in the Small Business Market is accomplished primarily through
the retail channel, direct sales and numerous third-party vendors such as VARs,
VAPs, consultants, accounting and financial professionals and systems
integrators. In-house direct sales efforts are typically limited to
telemarketing, direct mail and Internet sales efforts. In the Middle and
Enterprise Markets, distribution is largely dependent upon third-party vendors
and upon direct channels of distribution, including an in-house direct sales
force. The retail channel is typically not employed to sell in the Middle and
Enterprise Markets.
The financial and accounting software market is well-established and growing
rapidly. According to IDC, the overall market for accounting software totaled
$5.3 billion in worldwide licensing and maintenance revenue in 1997. The Small
Business Market, which generated $1.0 billion in revenue in 1997, is expected to
grow at a compound annual growth rate of 14% to $1.9 billion in 2002.
TARGET MARKET
Peachtree focuses principally on the Small Business Market, which, according
to IDC, is comprised of approximately 7.4 million small businesses in the 1-99
employee segment. Within the Small Business Market, Peachtree focuses primarily
on small businesses with 5-99 employees. These businesses are estimated by IDC
to number approximately 3.2 million and have markedly more sophisticated
accounting software needs than smaller businesses. Generally, small businesses
have experienced significant growth over the past several years and are the
largest source of new companies, jobs and revenue in the U.S. economy. As new
businesses commence operations and as established companies expand, they each
require a range of accounting software systems to operate, manage and grow their
businesses.
In today's market, small businesses are enjoying increasing computing power
at declining costs. Inexpensive financial and accounting software solutions are
becoming more widely available, more sophisticated and easier to use. A number
of factors are expected to continue to drive growth in the Small Business Market
for financial and accounting software, including: (1) new businesses entering
the market at an increasing rate; (2) the continued rapid adoption of computers
and the automation of financial accounting and operational functions (IDC
estimates that only 53% of small businesses now use financial and accounting
software); (3) the migration of businesses from older, purchased or
custom-developed solutions to more current packaged solutions which are
Windows-based and/or Y2K compliant; (4) the increasing level of sophistication
required by small businesses; and (5) the rapid and widespread adoption of
Windows and NT platforms, servers and databases by a broader universe of
business users.
TARGET MARKET NEEDS
New small businesses and small businesses automating for the first time
often lack technological sophistication, in-house accounting expertise and
formal business processes. They desire financial and accounting software that is
easy to use, inexpensive and serves a broad set of needs. Typically, they
purchase packaged financial and accounting solutions that are available in the
retail channel. According to PC Data, in the twelve months ending June 30, 1998,
over 1,000,000 financial and accounting software units were sold at U.S. retail
outlets.
Peachtree believes that customers in the Small Business Market with more
complex needs desire financial and accounting solutions that combine the
features and functionality of solutions currently available to the Middle Market
with a lower cost of ownership and shorter implementation time. Specifically,
they desire solutions that: (1) are customizable and tailored to meet their
needs, (2) are scalable with the ability to share information among multiple
users, (3) deliver greater depth and breadth of functionality than that provided
by traditional packaged solutions and (4) integrate with other business
productivity software applications. Small businesses that have outgrown the
capabilities
35
<PAGE>
of their existing packaged solutions are often unwilling to make the substantial
capital and time commitment necessary to purchase and implement a Middle Market
solution. At the same time, traditional vendors serving the Middle Market are
generally attempting to move upstream into the Enterprise Market and are
reluctant to lower pricing to meet the cost objectives of the Small Business
Market. As a result, Peachtree believes that the higher end of the Small
Business Market is distinctly underserved by existing financial and accounting
software vendors.
THE PEACHTREE SOLUTION
Peachtree offers a broad array of products and services designed to meet the
varied and dynamic financial and accounting needs of the Small Business Market.
Peachtree's products provide the value and full functionality combined with ease
of use and scalability that small businesses desire when selecting a financial
and accounting software solution. Peachtree's products and services provide the
following key benefits:
VALUE AND DEPTH OF FEATURES. Peachtree's award-winning software products are
used by small businesses in virtually every type of industry because of
their exceptional value, heritage of reliability and depth and breadth of
functionality. They generally sell for under $250, offering a cost-effective
alternative to far more expensive Middle Market solutions. Peachtree's
packaged software products include many sophisticated features, such as
multi-user capabilities, detailed job costing, sales order processing,
inventory control and fixed asset tracking. These products contain specific
features which are particularly attractive to construction, manufacturing,
retail, distribution and professional service businesses. Peachtree's range
of products satisfies the needs of customers ranging from the small business
owner with little accounting knowledge to the larger business with in-house
accounting expertise desiring solid audit logs, high levels of security and
accounting controls. Peachtree's excellent reputation among accountants as
one of the most comprehensive and robust packaged solutions available to
small businesses makes Peachtree one of the most highly recommended
solutions among accountants.
EASE OF INSTALLATION, SET UP AND USE. Peachtree designs all of its products
to be easy to install, set up and use by novice computer users. The products
make extensive use of multimedia help functions and intelligent defaults to
provide for rapid installation and set up. Product installation and set up
typically takes hours or days rather than weeks or months, and can generally
be completed by the customer without third-party assistance. After
installation and set up, Peachtree products require minimal software
administration, allowing the customer to focus on operating the business
rather than maintaining the technology.
IMPROVED EFFICIENCY AND BETTER BUSINESS MANAGEMENT. Peachtree's products are
designed to maximize the productivity of small businesses, resulting in
savings of time and money. Its software products provide for improved
accuracy through the elimination of manual systems and the rekeying of data.
They also provide better access to critical financial and customer data with
built-in reporting and analytical tools which results in better overall
understanding of fundamental business processes and more informed
decision-making. Peachtree's products allow for fast data entry, short
learning curves and the quick automation of routine accounting tasks. They
also help to create a financial and accounting structure that improves and
standardizes business processes and procedures. Peachtree's payroll tax
services improve small business compliance with frequently changing payroll
tax laws. Peachtree's branded business forms are fully compatible with its
software products and allow its customers to create a more professional
image.
OPEN, CUSTOMIZABLE AND SCALABLE TECHNOLOGY. Recently, Peachtree introduced
the first product based on its new software platform, Peachtree Open
Architecture. Peachtree Open Architecture is a customizable platform
designed to allow seamless integration with other software packages (such as
Microsoft Office), enabling customers to eliminate multiple databases of
redundant information.
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Customers can also tailor Peachtree Open Architecture products to their
specific needs and third-party vendors can integrate their applications with
the product's accounting functionality. In contrast, many other existing
packaged financial and accounting software products are based on closed and
proprietary architectures which make exchanging data with other business
productivity applications impractical, if not impossible.
EXTENSIVE SERVICE AND SUPPORT. Peachtree's products are easy to use, but
deal with complex business processes and accounting, tax and regulatory
issues. Therefore, Peachtree offers technical and procedural support through
telephone, Internet-based and fax response services. Peachtree's technical
service professionals have accounting backgrounds and are knowledgeable in
complex computer operations and procedures. Peachtree is currently investing
to expand its Internet-based "self-service" technologies that will allow it
to improve the quality of its technical support while reducing the overall
cost of delivering support services.
THE PEACHTREE STRATEGY
Peachtree's objective is to be the leading provider of financial and
accounting software solutions for small businesses with 5-99 employees. To
achieve this objective, Peachtree is pursuing new product initiatives based on
Peachtree Open Architecture while enhancing its current products and services.
As an independent entity, Peachtree intends to devote more of its resources to
implementing its growth strategy. Specifically, Peachtree plans to:
EXPAND AND EXPLOIT PEACHTREE OPEN ARCHITECTURE. Products based on Peachtree
Open Architecture provide small businesses a cost-effective, core financial
and accounting functionality that can be customized and extended to satisfy
the specific requirements of businesses in a variety of industries. To
encourage and support third-party development based on the Peachtree Open
Architecture platform, Peachtree has introduced and is marketing a software
development kit or "SDK." The SDK allows third-party providers to integrate
their own software solutions with products based on Peachtree Open
Architecture. The Peachtree Open Architecture platform provides Peachtree
with a significant technological advantage over alternative packaged
financial and accounting products because it enables Peachtree to: (1)
facilitate the creation of product extensions customized to specific
industry needs by VAPs, VARs or other third-party providers, (2) provide a
technology platform that is comparable to Middle Market solutions and
leverages Microsoft technologies such as Visual Basic for Applications
(VBA), Component Object Model (COM), Open Database Connectivity (ODBC) and
Windows NT and client/server-based platforms at a very attractive price, and
(3) offer Peachtree's own specialized applets, called EZ Add-ins, that
extend product functionality.
PURSUE NEW DISTRIBUTION AND MARKETING INITIATIVES. Peachtree is developing
relationships with strategic partners to create leveraged distribution and
marketing opportunities and to improve market penetration:
- VALUE ADDED PROVIDERS. Peachtree Open Architecture is ideally positioned
to work with Microsoft platforms, including Windows NT, Microsoft Office
and SQL Server. Peachtree Open Architecture therefore enables Peachtree to
align itself closely with Microsoft's small business marketing initiatives
to VAPs.
- VERTICAL SOLUTION PROVIDERS. Peachtree Open Architecture's open design,
flexibility and scalability will enable vertical solution providers to
integrate their applications with core accounting functions to create
attractively priced, industry-specific solutions. Peachtree Open
Architecture will also enable Peachtree to leverage special sales and
marketing opportunities with vertically oriented associations and
influencers.
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TARGET AND ATTRACT LARGER AND GROWING SMALL BUSINESSES. Peachtree targets
larger and growing small businesses with 5-99 employees. Peachtree believes
that these businesses are more likely to purchase aftermarket products and
services, and therefore represent higher potential lifetime value as
customers. Peachtree's product line offers a migration path for these
businesses as they grow and develop new and more sophisticated accounting
needs. In addition, the technical capabilities of Peachtree's products, such
as double-entry bookkeeping, clear audit logs, secure controls and other
features useful for compliance with Generally Accepted Accounting Principles
("GAAP"), are critical to these target customers.
LEVERAGE PEACHTREE'S LARGE AND GROWING CUSTOMER BASE. Peachtree has a
customer base of more than one million registered small businesses, most of
which are using Windows-based technology. Peachtree received the majority of
its total revenue in the last fiscal year from aftermarket sales to its
existing customers, which offer relatively higher margins than sales to new
customers. Peachtree obtains comprehensive customer contact information by
means of its mandatory customer registration process. Peachtree maintains
contact with its customers over time through its direct-mail and
telemarketing campaigns and its Internet website. Peachtree also maintains
substantial ongoing contact with its customers in providing them with
important and timely information relating to tax, accounting and regulatory
changes and offering them aftermarket products and services. Peachtree seeks
increasing revenue and margins by expanding this installed customer base and
by broadening and deepening the overall penetration of products and services
to this base. In pursuit of this goal, Peachtree has recently expanded its
investment in people, systems and infrastructure with a view to increasing
sales of aftermarket products and services.
CAPITALIZE ON PEACHTREE'S BRAND RECOGNITION AND RETAIL PRESENCE. Peachtree
enjoys strong brand recognition developed over two decades and retail
presence in thousands of locations nationwide. Peachtree intends to expand
and accelerate its established programs for selling its products through the
retail channel. Peachtree believes that it can increase unit and dollar
sales by capitalizing on the Peachtree brand, strong customer and accountant
references, increased advertising expenditures within the channel and
continued solid growth in the market for new financial and accounting
software and services. This effort will include increased in-store marketing
and merchandising, expanded print advertising, increased public relations
activity directed at key opinion-makers in the industry and focused
marketing to accounting professionals.
PRODUCTS AND SERVICES
Peachtree offers a full line of award-winning packaged personal computing
software solutions that provide Small Business Market customers with
comprehensive, cost-effective functionality that addresses their financial and
accounting needs. The principal purpose of Peachtree's products is to automate
and streamline the complex and time-consuming operations required by financial
and accounting processes. Peachtree also offers various services targeted to the
Small Business Market.
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PRODUCT LINE
Peachtree's broad product line offers customers a high degree of
functionality at an affordable price as well as a migration path as business
needs develop and grow. Peachtree's software products generally can be installed
and set up by customers in hours or days without third-party assistance and are
easy to use.
The core functions of the Peachtree product line are accounts receivable,
accounts payable, inventory tracking, payroll, general ledger, project tracking
and business and financial reporting.
The following table illustrates positioning and target customer for
Peachtree's Windows-based products:
<TABLE>
<CAPTION>
PEACHTREE PEACHTREE
PEACHTREE FIRST PEACHTREE COMPLETE COMPLETE PLUS
ONE-WRITE PLUS ACCOUNTING ACCOUNTING ACCOUNTING TIME AND BILLING PEACHTREE 2000
<S> <C> <C> <C> <C> <C> <C>
FIRST RELEASE December 1995 February 1995 April 1991 May 1996 May 1997 January 1998
LATEST RELEASE May 1998 February 1996 December 1997 May 1998 May 1998 January 1998
TARGET CUSTOMER Businesses Businesses using Businesses that Businesses that Businesses that Businesses that
using the accounting want accounting sell products provide services are larger and
paper software for the plus business or bill for more
one-write first time management their time sophisticated
system
SUGGESTED RETAIL $69 $69 $129 $199 $249 $1,999-$3,499
PRICE
SINGLE USER/ Single User Single User Multi-user Multi-user Multi-user Multi-user
MULTI-USER
<CAPTION>
PEACHTREE OFFICE
<S> <C>
FIRST RELEASE June 1998
LATEST RELEASE June 1998
TARGET CUSTOMER Businesses using
Microsoft Office
SUGGESTED RETAIL $99
PRICE
SINGLE USER/ Single User
MULTI-USER
</TABLE>
- ONE-WRITE PLUS is targeted toward small businesses converting from manual
accounting. Based on the popular "one-write" manual bookkeeping system,
this easy-to-use software is designed to look and feel like paper-based
systems including on-screen images of checks, invoices, and registers.
- PEACHTREE FIRST ACCOUNTING is aimed at small businesses seeking to
automate their accounting for the first time and incorporates the added
functionality of inventory costing. Peachtree First Accounting enables
small businesses to start with basic functions and add capabilities over
time with easy upgrades to more robust Peachtree products. The product
also includes 75 industry-specific charts of accounts, smart guides that
offer context-sensitive help throughout the product and graphical
navigation aids.
- PEACHTREE ACCOUNTING is an easy-to-use, full-featured accounting solution
for small businesses that require business management tools as well as
accounting features. It includes all of the features of Peachtree First
Accounting plus multi-user capabilities, sales and purchase order
functions with backorder capability, graphical analysis tools, business
contact management, a custom financial report writer and a custom forms
design tool.
- PEACHTREE COMPLETE ACCOUNTING meets the needs of small businesses with
more complex accounting requirements such as detailed job costing, fixed
asset tracking, screen level security and solid audit logs in addition to
all of the functions of Peachtree Accounting. Especially well suited for
inventory-based businesses, the functionality of Peachtree Complete
Accounting is often compared with that offered in Middle Market solutions
costing thousands of dollars.
- PEACHTREE COMPLETE ACCOUNTING PLUS TIME & BILLING adds powerful time and
billing features to Peachtree Complete Accounting. It allows small
businesses to track employee time and expenses and use this information
automatically to pay employees and generate client invoices. This product
is especially well suited for small businesses that provide services or
bill for their time.
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Management believes Peachtree Complete Accounting Plus Time & Billing is
the most powerful accounting solution widely available through the retail
channel.
- PEACHTREE 2000, a recent product acquisition, is a powerful accounting
software solution with a feature set and performance usually offered by
Middle Market solutions costing tens of thousands of dollars. This product
is ideal for larger and more sophisticated small businesses that have
outgrown the capabilities of their existing packaged solution. Peachtree
2000 contains high-end features, including multi-user capabilities,
multiple warehouse inventory, detailed job costing, sales and purchase
order processing with backorder capability and serialized costing.
Peachtree has priced Peachtree 2000 beginning at less than $2,000 to
deliver a highly competitive alternative to more costly Middle Market
solutions.
Peachtree 2000 is particularly well suited for inventory-based small
businesses such as retail, manufacturing, construction and
wholesale/distribution. The product is modular in design, is geared toward
accounting/bookkeeping professionals and features fast data entry
capabilities. The functionality of Peachtree 2000 is especially attractive
to customers migrating from a DOS-based platform to a Windows-based
solution.
- PEACHTREE OFFICE ACCOUNTING is Peachtree's first product built on the
Peachtree Open Architecture platform. Peachtree Office Accounting
exchanges data seamlessly with the Microsoft Office suite of business
productivity applications offering customers the ability to use, modify
and analyze their accounting data in products such as Excel, Word and
Outlook. The product is extremely flexible and easy to use and, while it
does not require the use of Microsoft Office, is targeted specifically to
those small businesses that use Microsoft Office as a productivity tool.
AFTERMARKET PRODUCTS
As part of a total solution, Peachtree provides its customers with a
comprehensive set of aftermarket products. Substantially all aftermarket sales
are made through direct marketing, which generally provides higher margins than
sales through the retail channel.
PRODUCT UPGRADES. Peachtree consistently offers its customers a migration
path through the introduction of new versions of existing products or new
products on a regular basis. Peachtree generates significant aftermarket revenue
by direct marketing of new versions of its products to its customer base. New
versions of products also help to keep the products competitive in the retail
channel.
PRODUCT EXTENSIONS. Peachtree is creating a library of its own specialized
applets, called EZ Add-ins, that increase the specific functions available to
the customer of its Peachtree Open Architecture-based products. For example, EZ
Add-ins can perform time card entry, expense report management, broadcast
invoicing and sales commission calculations. Peachtree is working with third-
party developers to create and market an entire library of these product
extensions that are available for download from the Internet. While some EZ
Add-ins are free, most will be licensed to customers for a fee.
AFTERMARKET SERVICES
Peachtree markets a range of services to its target Small Business Market.
Substantially all services revenue is generated through direct marketing to the
existing registered customer base.
PEACHTREE BUSINESS FORMS. Peachtree offers high quality pre-printed
business forms such as checks, invoices, purchase orders and statements.
Business forms are branded as Peachtree Forms and are marketed to Peachtree
customers as part of a total solution. Peachtree Forms offer guaranteed
compatibility with Peachtree software products, as well as reliability,
convenience and a professional
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image. Peachtree Forms are produced and sold through strategic contractual
partnerships with leading forms printers, such as John H. Harland Company and
New England Business Service, Inc.
PAYROLL TAX UPDATE SERVICES. Peachtree provides a tax update service for
customers, updating payroll, accounts payable and fixed assets tax information
in their Peachtree solutions. Particularly popular among customers using the
payroll module, the tax service easily updates the software programs with
federal, state and social security tax changes and changes in tax filing forms.
This service offers substantial time savings and increased accuracy for small
businesses that seek assistance in keeping up with frequently changing tax laws.
ELECTRONIC COMMERCE. Peachtree offers PeachLink, combining a web site
creation tool, web-hosting service and an on-line catalog with a secure Internet
order-taking system that interfaces with Peachtree accounting products. Using
PeachLink, a small business can quickly and easily create a multi-page business
web site with on-line ordering capabilities. Orders placed on the Internet can
be easily added as accounting transactions to several Peachtree products.
PeachLink is typically bundled free of charge with Peachtree accounting
products, and Peachtree shares in revenue generated by its web hosting partner,
Harbinger Corporation. Peachtree offers various other electronic commerce
products, including electronic bill payment and electronic banking.
TRAINING AND EDUCATION. Peachtree offers a variety of training and
educational products and services for customers and dealers. These products and
services include locally offered Peachtree University courses at authorized
training centers, courses at select CompUSA training facilities throughout the
U.S., self-paced study guides and a monthly newsletter.
TECHNICAL SERVICE AND SUPPORT. Peachtree offers a variety of free and
fee-based support options including Internet-based service, fax response
service, phone support for new customers, annual support plans offering blocks
of prepaid phone support minutes, pay per minute phone support and flat-fee fax
and e-mail support.
PRODUCT PLATFORMS AND TECHNOLOGY
Peachtree employs two distinct architectural approaches in serving the needs
of its customers: Peachtree Proprietary Architecture for products such as
Peachtree Accounting and Peachtree 2000; and Peachtree Open Architecture for
products such as Peachtree Office Accounting.
PEACHTREE PROPRIETARY ARCHITECTURE
Products based on Peachtree Proprietary Architecture, built for the Windows
environment, provide high functionality while retaining ease of use, which suits
the needs of small businesses from single user to those requiring peer-to-peer
multi-user solutions. Peachtree Proprietary Architecture products provide a
complete solution requiring no specialized customization and offer exceptional
breadth and depth of features. Peachtree Proprietary Architecture includes:
- RETAIL PRODUCTS. Retail products based on Peachtree Proprietary
Architecture include Peachtree First Accounting, Peachtree Accounting,
Peachtree Complete Accounting and Peachtree Complete Accounting Plus Time
and Billing. These retail products share the same "look and feel" and
allow for easy data migration. Peachtree has invested years of development
effort to make this robust platform easier for customers to use. Written
in Microsoft C and utilizing a Btrieve database engine, this 16-bit
platform runs on Windows 3.x, Windows 95, Windows 98 and Windows NT. This
platform is currently being ported to 32-bit to take advantage of new
features in the Windows operating systems. Since the introduction in 1991
with Peachtree Accounting, products based on this platform have been sold
to hundreds of thousands of small businesses and are the leading
multi-user accounting family of products in the U.S. based on site
installations.
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- PEACHTREE 2000. Written in Microsoft Visual Basic and utilizing a Btrieve
database engine, Peachtree 2000 runs on Windows 3.x, Windows 95, Windows
98 and Windows NT. Peachtree 2000 has an established peer-to-peer network
architecture that offers high transaction throughput and performance.
Peachtree 2000 is offered in configurations of up to 25 concurrent users
and is primarily targeted to Peachtree's DOS-based customers as a
migration path to a Windows-based solution.
PEACHTREE OPEN ARCHITECTURE
Peachtree Open Architecture is a next-generation accounting platform that is
designed to be the financial and accounting operating "backbone" of a small
business. This architecture is scalable and will serve as Peachtree's entry into
the Windows NT and client/server market. Unlike existing packaged accounting
software, Peachtree Open Architecture allows customers to interface seamlessly
with other business productivity applications. Customers can eliminate multiple
databases with redundant information thereby increasing efficiency and accuracy
in their business. Customers and third parties can tailor Peachtree Open
Architecture products to suit their specific needs which creates an ideal
platform for industry-specific solutions. Peachtree Office Accounting, released
in May 1998, is the first product developed using this platform.
Peachtree Open Architecture is a native 32-bit platform developed using
Microsoft C++ with Microsoft Foundation Classes, Sybase SQL Anywhere database
and Crystal Reports, which is an industry standard report writer. Peachtree Open
Architecture supports Open Database Connectivity (ODBC) for data access and the
Component Object Model (COM) for exchanging data with other applications, and is
fully Internet-enabled through the integration of Microsoft's Internet Explorer
for navigation and Internet access. Peachtree Open Architecture's use of
object-oriented programming techniques and intelligent business objects allows
third parties to access or create financial data without compromising security
or data integrity. Future versions of the platform will embed Microsoft Visual
Basic for Applications (VBA) for custom programming capabilities and integrate
with Microsoft SQL Server for increased scalability and transaction throughput.
RESEARCH AND DEVELOPMENT
The research and development organization, with approximately 100 highly
skilled professionals, is focused on providing products that meet customer needs
through a collaborative approach between the Product Management and Product
Development groups. Peachtree employs a product development process which
achieves high predictability and high repeatability on schedule and within
budget. The Product Management group has overall product responsibility and
solicits and incorporates customer feedback through product managers and
business analysts. The Product Development group's software engineers, quality
assurance experts, project managers and technical writers have overall
responsibility for implementation, quality and timeliness of product releases.
Peachtree's development process emphasizes up-front customer input and
involvement through customer visits, ongoing customer research, customer
generated enhancement requests and usability testing at an in-house lab and
external facilities. Every release is designed to meet new customer needs, add
new functionality for existing customers, gain competitive advantage and
leverage advances in technology to benefit the customer. The development cycle
for a major product release is approximately one year. In the past twelve
months, Peachtree introduced the first product based on Peachtree Open
Architecture and new versions of six existing products. Peachtree is currently
developing upgrades to several of its existing products and creating its first
product built specifically for the Windows NT and client/server environment.
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MARKETING, SALES AND DISTRIBUTION
Peachtree's products are widely available at thousands of retail stores
nationwide. The retail channel provides broad visibility, easy access and low
prices that are attractive to small businesses of various sizes. Peachtree
markets product upgrades and aftermarket services directly to its customers
through direct mail, telemarketing and increasingly through the Internet.
Existing customers can choose to purchase Peachtree products through the retail
channel or directly from Peachtree, by phone, fax, mail, or the Internet.
MARKETING
The Marketing Group is responsible for creating and executing Peachtree's
positioning and communication strategy. Its responsibilities include public
relations, marketing communications, market research, direct marketing programs
and promotions, in-box merchandising and key influencers/ recommenders programs.
Peachtree believes that these initiatives and programs increase the value of its
existing customer base and results in higher product and brand awareness helping
to stimulate new product sales and sales of aftermarket products and services.
SALES AND DISTRIBUTION
Peachtree currently sells its products and services through the retail
channel and directly to its customers. Most of Peachtree's new product sales are
made through the retail channel, while most sales of aftermarket products and
services are made through direct sales.
- RETAIL CHANNEL. Peachtree is a pioneer in the retail channel for financial
and accounting software and has earned an excellent reputation within the
industry during the last twenty years. Peachtree is marketed and
merchandised in thousands of retail outlets in the U.S. that sell
financial and accounting software. Peachtree's products are sold primarily
to distributors, including Ingram Micro Inc., Merisel, Inc. and Tech Data
Corporation. These distributors resell Peachtree's products to retail
software outlets, computer superstores, office superstores and general
mass merchandisers, including Office Depot, Office Max, Staples, Best Buy
and CompUSA. To support the retail channel, area directors provide key
reseller account management at the headquarters level. Peachtree's sales
and management teams have strong, long-term relationships with the major
retailers and distributors, including their senior management,
merchandising managers and buyers.
- DIRECT SALES. Peachtree's internal direct marketing and telemarketing
groups generate significant revenue promoting and selling aftermarket
products and services to Peachtree's customer base by direct mail,
telemarketing and over the Internet. Peachtree invests significant
resources in maintaining ongoing contact with its customers while
providing them with important and timely information relating to tax,
accounting and regulatory changes. Peachtree seeks increasing revenue and
margins by expanding this customer base and by broadening and deepening
the overall penetration of products and services to this base. In pursuit
of this goal, Peachtree has recently expanded its investment in people,
systems and infrastructure with a view to increasing sales of aftermarket
products and services.
- STRATEGIC PARTNERS. Peachtree is developing relationships with strategic
partners to create leveraged distribution and marketing opportunities and
to improve market penetration with Microsoft solutions providers and
vertical solution providers. Peachtree Open Architecture is ideally
positioned to work with Microsoft platforms, including Windows NT,
Microsoft Office and SQL Server, enabling Peachtree to align itself
closely with Microsoft's small business marketing initiatives. Peachtree
Open Architecture's open design, flexibility and scalability will also
enable (i) vertical solution providers to integrate their applications
with core accounting functions to
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create attractively priced industry-specific solutions and (ii) Peachtree
to leverage special sales and marketing opportunities with vertically
oriented associations and influencers.
- PEACHTREE SUPPORT CENTERS. Peachtree maintains relationships with
approximately 80 independent businesses located throughout the country.
These support centers generally provide Peachtree customers with various
services, including technical support, training and on-site installation
and service.
TECHNICAL SUPPORT
Peachtree employs approximately 140 full-time professionals that provide
technical support, training and education. The in-house staff is augmented
during peak seasons to handle volume increases. Peachtree outsources niche
services for increased quality and efficiency.
Peachtree generates revenue from its technical and procedural support
services to customers. Peachtree's fee-based support services include annual
support plans offering blocks of prepaid phone support and flat-fee fax and
e-mail support. Over 50,000 requests are handled in an average month with the
number exceeding 80,000 during the peak season. Peachtree is currently
developing and implementing Internet support and anticipates advances in this
area over the next three to five years. The technical support group also
provides customer service and sales assistance when needed.
PRODUCT ASSEMBLY, PRODUCTION AND DISTRIBUTION
Peachtree primarily outsources its product assembly and production. The
various components consisting of computer media, boxes, manuals and collateral
materials are purchased directly, warehoused in Peachtree's Logistics Center
located in Norcross, Georgia, then dispersed for assembly as needed. Finished
goods are returned to the Peachtree Logistics Center where Peachtree performs
distribution. Orders are generally processed within 24 hours.
COMPETITION
Peachtree currently competes on the basis of the quality and value offered
by its products and services, including ease of use, features, reliability,
performance and price, the quality of its sales and marketing network and the
quality of its service and technical support. Peachtree believes that it
currently competes favorably overall with respect to these factors.
Peachtree faces different competitors and potential competitors with respect
to its different products and services. For example, Peachtree's packaged
software products compete directly with those from Intuit Inc., which has the
largest market share in the packaged financial and accounting software market.
Various other companies are competitors or potential competitors in the
financial and accounting software market, including ACCPAC International, Inc.
(a subsidiary of Computer Associates International, Inc.), Clarus Corporation,
Great Plains Software, Inc., M.Y.O.B. Inc., Platinum Software Corporation, The
Sage Group PLC and Solomon Software, Inc. Competitors or potential competitors
in the financial and accounting software market include a very large number of
other national, regional and niche players, as well as manual and paper-based
accounting systems, accounting professionals and "personal finance" software,
such as Intuit's Quicken product.
Peachtree's preprinted business forms compete with forms from a number of
business forms companies, such as Deluxe Corporation, New England Business
Service, Inc. and Moore Business Forms, Inc. Peachtree now sees increasing
competition from direct mail check printers offering computer checks and from
banks. Competition may be further increased by optical readers not requiring
magnetic ink and the trend toward generic forms. Online bill payment services
from a variety of companies may also offer a competitive alternative to printed
checks. At present, Peachtree is
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experiencing increasing pricing pressures from printers of "generic" checks and
forms and from various types of new technology. This trend could reduce revenue,
profitability and/or margins in its forms business.
As Peachtree expands into new markets, develops new marketing and
distribution channels and introduces new products and services, it expects to
encounter new or intensified competitive challenges. For example, Peachtree Open
Architecture will enable Peachtree to: (1) offer product extensions customized
to specific industry needs, (2) provide a technology platform that is comparable
to Middle Market solutions and leverages Microsoft technologies such as Visual
Basic for Applications (VBA), Component Object Model (COM), and Open Database
Connectivity (ODBC) at a very attractive price, and (3) offer its own
specialized applets, called EZ Add-ins, that extend product functionality.
Products based on Peachtree Open Architecture are expected to generate sales and
marketing opportunities with VAPs, VARs, vertically oriented associations and
other third-party vendors. As such, initiatives based on Peachtree Open
Architecture will likely bring Peachtree into competition with vendors of more
sophisticated products and services more typical of the Middle Market than those
traditionally available through the retail channel. See "Risk
Factors--Competition."
INTELLECTUAL PROPERTY RIGHTS AND LICENSES
Peachtree regards certain features of its internal operations, software and
documentation as its proprietary intellectual property and relies on a
combination of copyright, trademark and trade secret laws, a mandatory software
customer registration mechanism for certain products, confidentiality and
nondisclosure agreements with its employees, licensing arrangements with its
customers and limitations on access to and distribution of its proprietary
information. Peachtree has no patents or patent applications pending. Peachtree
has registered a number of U.S. copyrights. Nevertheless, Peachtree believes
that, because of the rapid pace of technological change in the computer software
industry, trade secret and copyright protection are less significant to
Peachtree's competitive position than factors such as the knowledge, ability and
experience of Peachtree's employees, frequent product enhancements and the
timeliness and quality of support services. Peachtree's basic policy is to file
for protection of its basic trademarks and service marks in the United States.
Currently, Peachtree has applied for or registered a number of U.S. trademarks.
For most products, individual licenses are not negotiated, but Peachtree relies
instead on "shrink-wrap" licenses that are not signed by licensees. These
shrink-wrap licenses may be unenforceable under the laws of certain
jurisdictions. See "Risk Factors--Proprietary Technology; Third-Party
Infringement Claims."
Peachtree also relies on non-exclusive license agreements with Microsoft,
Seagate Software, Inc., Sybase, Inc., IQ Software Corporation and others for
technologies that are distributed with its products. Failure to retain any of
these software licenses may result in delays or reductions in product shipments
until alternative software could be identified, licensed or developed. The
termination of any such licenses or the failure of any of these licensors
adequately to maintain or update their products could delay the shipment of
certain of Peachtree's products while Peachtree implemented alternative
software. Replacement licenses could prove costly. In the future, Peachtree will
often be forced to seek other third-party licenses relating to its products.
Such licenses may not be available on commercially reasonable terms or at all.
EMPLOYEES
As of November 30, 1998, Peachtree had a total of approximately 340
full-time and 70 part-time and temporary employees, all of whom are based in the
United States. Of the total, approximately 100 are engaged in research and
development, approximately 100 are engaged in marketing and sales, approximately
140 are engaged in technical support and training, and approximately 70 are
engaged in administrative and operational functions. None of Peachtree's
employees is represented by a labor
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union or is subject to a collective bargaining agreement. Peachtree has not
experienced any work stoppages and considers its relations with its personnel to
be good.
FACILITIES
Peachtree currently occupies three facilities. Corporate headquarters is
located at 1505 Pavilion Place, Norcross, Georgia 30093 and consists of
approximately 58,000 square feet of office space under a lease expiring in
September 1999. Peachtree has the right to renew the existing lease for an
additional term of five years. Management is currently reviewing its options
with respect to this facility.
The Peachtree Logistics Center, located at 4366B Shackleford Road, Norcross,
Georgia 30093, is a 30,987 square foot manufacturing, distribution and
warehousing facility occupied under a lease expiring March 31, 2001.
The third Peachtree location at 2349 Memorial Boulevard in Port Arthur,
Texas 77640 comprises approximately 7,500 square feet of office space acquired
in conjunction with the purchase of MICA Software.
LEGAL PROCEEDINGS
From time to time, Peachtree is involved in litigation arising out of
operations in the normal course of business. As of the date of this Prospectus,
Peachtree is not a party to any legal proceedings the adverse outcome of which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Peachtree's business, financial condition and results
of operations.
AVAILABLE INFORMATION
Following the Offering, Peachtree will be subject to the informational
requirements of the Exchange Act, and in accordance therewith will file reports,
proxy statements and other information with the Commission. Copies of such
reports, proxy statements and other information filed with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the following Regional Offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at
prescribed rates. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. Peachtree
will file information electronically with the Commission. The Commission
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission. The address of the Commission's Internet site is
http://www.sec.gov.
Peachtree has filed with the Commission a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act, relating to the Offering and the shares of
Common Stock that will be issued in connection with the Offering. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto filed by Peachtree with the Commission,
certain portions of which are omitted in accordance with the rules and
regulations of the Commission. Such additional information is available for
inspection and copying at the offices of the Commission. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
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<PAGE>
MANAGEMENT
THE BOARD OF DIRECTORS
Peachtree's Charter and By-laws are expected initially to require the number
of directors on the Board of Directors to be not less than two nor more than
fifteen (as fixed from time to time by resolution of a majority of the Board of
Directors) and require the division of the Board of Directors into three
separate classes with staggered terms of three years each. Two Class II
Directors with terms expiring in 2000 and one Class III Director with a term
expiring in 2001 are expected to be elected to the Board of Directors prior to
the Offering.
As of the date of this Prospectus, the following individuals are directors
of Peachtree:
<TABLE>
<CAPTION>
WILL SERVE AS
A
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND BUSINESS EXPERIENCE BEGINNING AGE
- ---------------------------------------------------------------------------------------------- --------------- ---
<S> <C> <C>
CLASS I DIRECTORS WITH TERMS EXPIRING IN 2002:
Gary C. Butler................................................................................ 1998 51
Mr. Butler is Chairman of the Board of Directors of Peachtree. Mr. Butler has been the
President and Chief Operating Officer of ADP since April 1998. Prior thereto, he was Group
President of ADP's Employee Services Group since January 1995. Prior to that he had been
Group President of ADP's Dealer Services Group for more than five years. He has served on
ADP's Board of Directors continuously since 1996.
Ronald F. Verni............................................................................... 1998 50
Mr. Verni has served as Peachtree's President and Chief Executive Officer since July 1996.
Prior to that, he was Vice President of Marketing, Sales and Product Management. From April
1989 to June 1994 Mr. Verni was with New England Business Service, Inc. and served in a
number of capacities including President of NEBS Software, Inc., Vice President-General
Manager of the Computer Forms and Software division and corporate director. From 1984 to
1988 Mr. Verni was General Manager of the ASTEC Software division of Micros Systems, Inc.
From 1980 to 1984 Mr. Verni was President and Chief Executive Officer of ASTEC, Inc., a
vertical market software company that he founded and subsequently sold to Micros Systems,
Inc. Mr. Verni has a Bachelor of Science from Clarkson University.
</TABLE>
BOARD COMMITTEES
The Board of Directors will initially have two committees: an Audit
Committee and a Compensation Committee.
The Audit Committee will consist of two directors who are not employees of
Peachtree ("Independent Directors"). The Audit Committee will be responsible for
making recommendations concerning the engagement of independent auditors,
reviewing with the independent auditors the plans and results of the audit
engagement, approving professional services provided by the independent
auditors, reviewing the independence of the independent auditors, considering
the range of audit and non-audit fees and reviewing the adequacy of Peachtree's
internal accounting controls.
The Compensation Committee will also consist of two Independent Directors.
The Compensation Committee will be responsible for the determination of
compensation of Peachtree's executive officers and the administration of
Peachtree's employee incentive plans.
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<PAGE>
The entire Board of Directors of Peachtree will act as the nominating
committee for directors of Peachtree and will consider nominations by
stockholders for directors. The Board of Directors would be pleased to receive
suggestions from stockholders about persons it should consider as possible
members of the Board of Directors. Any such suggestion should be mailed to the
Secretary of Peachtree by - .
COMPENSATION OF DIRECTORS
Independent Directors of Peachtree will be paid an annual fee of $5,000. In
addition, each Independent Director will be paid $500 for attendance at each
meeting of the Board and $1,000 annually for service as a member of a committee
of the Board. Directors who are employees of Peachtree will not receive any fees
for their service on the Board or a committee thereof. Peachtree will reimburse
directors for their out-of-pocket expenses in connection with their service on
the Board. Non-employee directors will be granted options pursuant to the
Directors Plan (as defined). See "Stock Option Plan for Directors."
STOCK OPTION PLAN FOR DIRECTORS
PURPOSES. The purposes of the Peachtree Software, Inc. Stock Option Plan
for Non-Employee Directors (the "Directors Plan") is to secure for Peachtree the
benefits of the additional incentive inherent in the ownership of Company Common
Stock by non-employee directors of Peachtree and to help Peachtree secure and
retain the services of such non-employee directors. Only directors of Peachtree
who are not employees of Peachtree may participate in the Directors Plan
("Eligible Directors").
ADMINISTRATION/ELIGIBLE PARTICIPANTS. The Directors Plan is intended to be
a largely self-governing formula plan. The Directors Plan requires minimal
discretionary action by any administrative body with regard to any transaction
under the Plan, other than certain discretionary awards which may be made by the
Board of Directors to eligible directors of Peachtree. To the extent that
questions of administration arise under the Directors Plan, they shall be
resolved by the Board of Directors and the Board of Directors shall have
authority to interpret the Directors Plan, to prescribe, amend and rescind the
rules and regulations relating to it and to make all other determinations deemed
necessary and advisable for its administration.
NUMBER OF SHARES AUTHORIZED UNDER THE DIRECTORS PLAN. A maximum
of - shares of Common Stock may be made subject to options granted under the
Directors Plan, of which - shares may be granted at the discretion of the
Board of Directors ("Discretionary Options").
TERMS AND CONDITIONS OF AWARDS UNDER THE DIRECTORS PLAN. The Directors Plan
provides for the nondiscretionary grant of options to Eligible Directors (i)
with respect to - shares of Common Stock ("Initial Options") to each Eligible
Director when such person first becomes an Eligible Director, (ii) with respect
to - shares of Common Stock ("Special Options") on the effective date of the
Directors Plan to each Eligible Director who had not previously been awarded any
options to acquire Common Stock under any other plan, program or agreement with
Peachtree and (iii) with respect to - shares of Common Stock ("Annual
Options") on February 1 of each year, beginning February 1, 2000.
Directors Options are granted at a purchase price equal to the Fair Market
Value (as defined in the Directors Plan) of Common Stock subject to such Options
on the date of grant. Initial and Special Options vest in one-third increments
on each of the first, second and third anniversaries of the date of grant,
provided that the Eligible Director is in the service of Peachtree as a director
on such date. Annual Options vest in full on the first anniversary of the date
of grant, provided that the Eligible Director is in the service of Peachtree as
a director on such date. Discretionary Options are subject to
48
<PAGE>
such vesting conditions as may be established by the Board of Directors and
provided in the award agreement evidencing the award of such options.
The unexercised portion of any option granted under the Directors Plan shall
automatically terminate on the earlier of (i) the expiration of ten years from
the date on which such option was granted or (ii) the expiration of one year
from the date of termination of the Eligible Director's service with Peachtree.
TRANSFERABILITY. No option granted under the Directors Plan or any right
evidenced thereby shall be transferable in any manner other than by will or the
laws of descent and distribution, and, during the lifetime of an Eligible
Director, only the Eligible Director (or the Eligible Directors' court-appointed
legal representative) may exercise an option granted under the Directors Plan.
EXECUTIVE OFFICERS
The following table sets forth the name, age, expected title and business
experience for each person who is expected to serve as an executive officer of
Peachtree. For information concerning the business experience of Ronald F.
Verni, who is a member of the Board of Directors, see "The Board of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Ronald F. Verni...................................... 50 President, Chief Executive Officer and Director
Douglas G. Meyer..................................... 33 Executive Vice President, Business Operations and
Secretary
Janet M. Van Pelt.................................... 34 Senior Vice President, Treasurer and Chief Financial
Officer
James B. Ducker...................................... 42 Senior Vice President of Marketing
John J. Vasil........................................ 52 Senior Vice President of Sales
</TABLE>
Douglas G. Meyer has served as Peachtree's Executive Vice President,
Business Operations since June 1998 and is Peachtree's Secretary. He has
responsibility for Research and Development, Product Management, Technical
Support and New Initiatives. From June 1996 to May 1998, Mr. Meyer served as
Vice President, Product Management of Peachtree. From September 1991 to June
1996, Mr. Meyer served in a variety of Product Management and Marketing roles
for Peachtree. From June 1990 to September 1991, Mr. Meyer served as a Product
Manager for NCR Corporation, responsible for point-of-sale solutions targeted to
the restaurant and mass merchandise retail industries. Mr. Meyer earned a Master
of Science in Management from the Georgia Institute of Technology and a Bachelor
of Science in Engineering from the University of Central Florida.
Janet M. Van Pelt has served as Peachtree's Senior Vice President and Chief
Financial Officer since joining Peachtree in February of 1998 and is Peachtree's
Treasurer. From November 1997 to January 1998, Ms. Van Pelt served as Senior
Vice President, Mergers and Acquisitions for The Hartsfield Group, Inc., an
investment banking firm. From October 1994 to January 1997, Ms. Van Pelt served
as Chief Financial Officer and Vice President of Operations of MicroHelp,
Incorporated, a software company. Prior to that, Ms. Van Pelt served as
Divisional Controller for Lotus Development Corporation after its acquisition of
Samna Corporation, a publicly-traded software company of which Ms. Van Pelt had
been the Corporate Controller. Ms. Van Pelt is a Certified Public Accountant and
has a Master of Business Administration in Finance from Georgia State
University.
James B. Ducker has served as Senior Vice President of Marketing for
Peachtree since joining Peachtree in October 1996. From December 1994 to
September 1996, Mr. Ducker was President of The
49
<PAGE>
Marketing Partners, a marketing services company. From 1980 to 1994, Mr. Ducker
held numerous positions, including Vice President of Marketing, at Hunt Wesson
Foods, where he managed such brands as Healthy Choice Soup, LaChoy Chinese Food,
Hunt's Ketchup, and Orville Redenbacher's Popcorn, among others. Mr. Ducker
earned a Master of Business Administration from Harvard University and a
Bachelor of Arts degree in Economics from Michigan State University.
John J. Vasil has served as Peachtree's Senior Vice President of Sales since
July 1996. Mr. Vasil has responsibility for retail channel sales, inbound and
outbound telemarketing and sales processing. Mr. Vasil joined Peachtree from
NEBS Software, Inc., where he was Vice President of Sales from 1993 to 1996.
From 1991 to 1993, Mr. Vasil was the Eastern Area Director for the Desktop
Systems Group at Novell, Inc. From 1988 to 1991, Mr. Vasil was National Sales
Manager at Applix, Inc. Mr. Vasil earned a Bachelor of Science degree from Wayne
State University.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1998, Peachtree did not have a Compensation Committee or any other
committee serving a similar function. Decisions as to the compensation of
executive officers of Peachtree were made by ADP. See "Board Committees."
EXECUTIVE COMPENSATION
Following the Offering, the executive officers and all other employees of
Peachtree will be employed solely by Peachtree. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" and "Relationship
with ADP." The following table sets forth the compensation that was paid by
Peachtree or ADP during the fiscal year ending on June 27, 1998 with respect to
the Chief Executive Officer and the four most highly compensated executive
officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES
YEAR UNDERLYING
NAME AND ENDED OPTIONS ALL OTHER
PRINCIPAL POSITION JUNE 27, SALARY BONUS GRANTED(1) COMPENSATION(2)
- ------------------------------------------------- ----------- ---------- --------- ----------- -----------------
Ronald F. Verni.................................. 1998 $ 187,308 $ 47,000 10,000 $ 4,500
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Douglas G. Meyer................................. 1998 $ 120,965 $ 30,000 4,800 --
EXECUTIVE VICE PRESIDENT, BUSINESS OPERATIONS AND
SECRETARY
Janet M. Van Pelt................................ 1998 $ 150,000 $ 15,000 10,000 $ 3,300
SENIOR VICE PRESIDENT, TREASURER AND CHIEF
FINANCIAL OFFICER
James B. Ducker.................................. 1998 $ 148,727 $ 28,000 6,000 $ 3,300
SENIOR VICE PRESIDENT OF MARKETING
John J. Vasil.................................... 1998 $ 107,308 $ 92,766 4,000 --
SENIOR VICE PRESIDENT OF SALES
</TABLE>
- ------------------------
(1) Represents options to purchase ADP common stock.
(2) Includes auto allowance.
50
<PAGE>
ADP STOCK OPTION GRANTS
The following table sets forth certain information regarding to the options
with respect to ADP common stock granted to the Named Executive Officers during
the fiscal year ending on June 27, 1998.
OPTION GRANTS FROM ADP IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO EMPLOYEES
UNDERLYING IN FISCAL
OPTIONS YEAR EXERCISE
GRANTED 1998 PRICE EXPIRATION GRANT DATE
NAME (1) (%) ($/SHARE) DATE VALUE(2)
- ------------------------------------------------ ----------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Ronald F. Verni................................. 10,000 * $ 27.31 11/11/2007 $ 69,429
Douglas G. Meyer................................ 4,800 * $ 27.31 11/11/2007 $ 33,326
Janet M. Van Pelt............................... 10,000 * $ 32.03 05/18/2008 $ 82,950
James B. Ducker................................. 6,000 * $ 27.31 11/11/2007 $ 41,658
John J. Vasil................................... 4,000 * $ 27.31 11/11/2007 $ 27,772
</TABLE>
- ------------------------
* Less than 1%.
(1) All options were granted pursuant to ADP's the 1990 incentive stock plan.
The options were granted at an exercise price equal to the fair market value
of the ADP common stock on the date of grant. The options were granted for
terms of ten years, and vest during periods of five years subsequent to the
date of the grant.
(2) The grant date values were calculated on the basis of the Black-Scholes
option pricing model. Options were assumed to be exercised 6.2 years after
the date of the grant, based on historical experience. A risk-free interest
rate of 5.91%, stock price volatility of 15.56% and the dividend yield of
1.03% were used in the calculations for the option grants to Verni, Meyer,
Ducker and Vasil. A risk-free interest rate of 5.67%, stock price volatility
of 17.35% and the dividend yield of 1.01% were used in the calculations for
the option grant to Van Pelt. A discount factor of 0.9135 was applied to the
calculated values to reflect the risk of forfeiture during the option term.
The actual value of the options will depend on the market value of the ADP
common stock on the date the options are exercised. No realization of value
from the options is possible without an increase in the price of the ADP
common stock.
51
<PAGE>
ADP OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR ENDED JUNE 27, 1998
OPTION VALUES AS OF JUNE 27, 1998
The following table sets forth certain information concerning option
exercises relating to ADP stock options and common stock during the last fiscal
year by the Named Executive Officers and unexercised options held by such
officers at the end of the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE # $ YEAR
NAME AND ON EXERCISE REALIZED ---------------------------- -------------------------- ENDED
PRINCIPAL POSITION # $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE JUNE 27,
- ------------------------- ----------------- ------------- ------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald F. Verni.......... 9,600 $ 124,788 2,000 32,400 $ 34,380 $ 561,388 1998
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Douglas G. Meyer......... -- -- 7,600 12,320 $ 176,939 $ 195,823 1998
EXECUTIVE VICE PRESIDENT,
BUSINESS OPERATIONS AND
SECRETARY
Janet M. Van Pelt........ -- -- 0 10,000 0 $ 31,563 1998
SENIOR VICE PRESIDENT,
TREASURER AND CHIEF
FINANCIAL OFFICER
James B. Ducker.......... -- -- 4,000 22,000 $ 61,135 $ 299,320 1998
SENIOR VICE PRESIDENT OF
MARKETING
John J. Vasil............ -- -- 1,200 8,800 $ 18,341 $ 109,882 1998
SENIOR VICE PRESIDENT OF
SALES
</TABLE>
PEACHTREE LONG-TERM INCENTIVE PLAN
PURPOSES. The purposes of the Peachtree Software, Inc. 1998 Long-Term
Incentive Plan (the "LTIP") are to promote the interests of Peachtree and its
stockholders by (1) attracting and retaining exceptional officers and other key
employees of the Company and its subsidiaries; (2) motivating such individuals
by means of performance-related incentives to achieve longer-range performance
goals; and (3) enabling such individuals to participate in the long-term growth
and financial success of Peachtree.
ADMINISTRATION/ELIGIBLE PARTICIPANTS. The LTIP is administered by a
committee (the "LTIP Committee") which shall either be the Board or a committee
of two or more members of the Board designated by the Board to administer the
LTIP, each of whom is expected, but not required, to be a "Non-Employee
Director" (within the meaning of Rule 16b-3 promulgated under the Exchange Act)
and an "outside director" (within the meaning of Section 162(m) of the Internal
Revenue Code (the "Code")) to the extent Rule 16b-3 and Section 162(m) of the
Code, respectively, are applicable to Peachtree and the LTIP. However, the mere
fact that a LTIP Committee member shall fail to qualify as a Non-Employee
Director or outside director will not invalidate any award made by the LTIP
Committee which award is otherwise validly made under the LTIP.
Any officer or other key employee of Peachtree or any of its subsidiaries
who is not a member of the LTIP Committee shall be eligible to be designated a
participant under the LTIP.
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<PAGE>
As of December 31, 1998, Peachtree and its subsidiaries had
approximately - officers and - key employees, each of whom is eligible to
be granted awards by the LTIP Committee under the LTIP. The LTIP Committee has
the sole and complete authority to determine the participants to whom awards
shall be granted under the LTIP. However, the LTIP Committee may delegate to one
or more officers of Peachtree the authority to grant awards to participants who
are not officers or directors of Peachtree subject to Section 16 of the Exchange
Act, or "covered employees" within the meaning of Section 162(m) of the Code.
NUMBER OF SHARES AUTHORIZED UNDER THE LTIP. The LTIP authorizes the grant
of awards to participants with respect to a maximum of - shares of Common
Stock ("Shares"), subject to adjustment to avoid dilution or enlargement of
intended benefits in the event of certain significant corporate events, which
awards may be made in the form of (1) nonqualified stock options; (2) stock
options intended to qualify as incentive stock options under section 422 of the
Code; (3) stock appreciation rights; (4) restricted stock and/or restricted
stock units; (5) performance awards and (6) other stock based awards; PROVIDED
that the maximum number of Shares with respect to which stock options and stock
appreciation rights may be granted to any participant in the LTIP in any
calendar year may not exceed - and the maximum number of Shares which may be
paid to a participant in the LTIP in connection with the settlement of any
award(s) designated as a "Performance Compensation Award" (as defined below) in
respect of a single performance period shall be - or, in the event such
Performance Compensation Award is paid in cash, the equivalent cash value
thereof. If, after the effective date of the LTIP, any Shares covered by an
award granted under the LTIP, or to which such an award relates, are forfeited,
or if an award has expired, terminated or been canceled for any reason
whatsoever (other than by reason of exercise or vesting), then the Shares
covered by such award shall again be, or shall become, Shares with respect to
which awards may be granted under the LTIP.
SUBSTITUTE AWARDS. Awards may be made under the LTIP in assumption of, or
in substitution for, outstanding awards previously granted by Peachtree or its
affiliates or a company acquired by Peachtree or with which Peachtree combines.
The number of shares underlying any such assumed or substitute awards shall be
counted against the aggregate number of Shares which are available for grant
under awards made under the LTIP.
TERMS AND CONDITIONS OF AWARDS UNDER THE LTIP. Non-qualified and incentive
stock options granted under the LTIP shall be subject to such terms, including
exercise price and the conditions and timing of exercise, as may be determined
by the LTIP Committee and specified in the applicable award agreement or
thereafter; PROVIDED that stock options which are intended to qualify as
incentive stock options will be subject to terms and conditions that comply with
such rules as may be prescribed by Section 422 of the Code. Payment in respect
of the exercise of an option granted under the LTIP may be made in cash, or its
equivalent (or, if so determined by the LTIP Committee, with the proceeds of a
loan advanced by Peachtree for the purposes of paying the exercise price), or,
if and to the extent permitted by the LTIP Committee, by exchanging Shares owned
by the optionee (which are not the subject of any pledge or other security
interest and which have been owned by such optionee for at least 6 months) or,
subject to such rules as may be established by the LTIP Committee, through
delivery of irrevocable instructions to a broker to sell the Shares being
acquired upon exercise of the option and to deliver promptly to Peachtree an
amount equal to the aggregate exercise price, or by a combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the fair market value of such Shares so tendered to Peachtree as of the date of
such tender is at least equal to the aggregate exercise price of the option.
Stock appreciation rights granted under the LTIP shall be subject to such
terms, including grant price and the conditions and limitations applicable to
exercise thereof, as may be determined by the LTIP Committee and specified in
the applicable award agreement or thereafter. Stock appreciation rights may be
granted in tandem with another award, in addition to another award, or
freestanding and
53
<PAGE>
unrelated to another award. A stock appreciation right shall entitle the
participant to receive an amount equal to the excess of the fair market value of
a Share on the date of exercise of the stock appreciation right over the grant
price thereof. The LTIP Committee shall determine whether a stock appreciation
right shall be settled in cash, Shares or a combination of cash and Shares.
Restricted stock and restricted stock units granted under the LTIP shall be
subject to such terms and conditions including, without limitation, the duration
of the period during which, and the conditions, if any, under which, the
restricted stock and restricted stock units may be forfeited to Peachtree, as
may be determined by the LTIP Committee. Each restricted stock unit shall have a
value equal to the fair market value of a Share. Restricted stock units shall be
paid in cash, Shares, other securities or other property, as determined by of
the LTIP Committee, upon the lapse of the restrictions applicable thereto, or
otherwise in accordance with the applicable award agreement. Dividends paid on
any Shares of restricted stock may be paid directly to the participant, withheld
by Peachtree subject to vesting of the restricted shares, or may be reinvested
in additional Shares of restricted stock or in additional restricted stock
units, as determined by the LTIP Committee.
Performance awards granted under the LTIP shall consist of a right which is
denominated in cash or Shares, valued, as determined by the LTIP Committee, in
accordance with the achievement of such performance goals during such
performance periods as the LTIP Committee shall establish, and payable at such
time and in such form as the LTIP Committee shall determine. Subject to the
terms of the LTIP and any applicable award agreement, the LTIP Committee shall
determine the performance goals to be achieved during any performance period,
the length of any performance period, the amount of any performance award and
the amount and kind of any payment or transfer to be made pursuant to any
performance award. Performance awards may be paid in a lump sum or in
installments following the close of the performance period or, in accordance
with procedures established by the LTIP Committee, on a deferred basis.
In addition to the foregoing types of awards the LTIP Committee shall have
authority to grant to participants an "other stock-based award", which shall
consist of any right which is not a stock option, stock appreciation right,
restricted stock or restricted unit award or performance award and an award of
Shares or an award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as deemed by the LTIP Committee
to be consistent with the purposes of the LTIP; PROVIDED that any such rights
must comply, to the extent deemed desirable by the LTIP Committee, with Rule
16b-3 and applicable law. Subject to the terms of the LTIP and any applicable
award agreement, the LTIP Committee shall determine the terms and conditions of
any such other stock-based award, including the price, if any, at which
securities may be purchased pursuant to any other stock-based award granted
under the LTIP.
In addition, in the sole and complete discretion of the LTIP Committee, an
award, whether made as an other stock-based award or as any other type of award
issuable under the LTIP, may provide the participant with dividends or dividend
equivalents, payable in cash, Shares, other securities or other property on a
current or deferred basis.
In addition to the foregoing, the LTIP Committee shall have the discretion
to designate any award as a "Performance Compensation Award." While awards in
the form of stock options and stock appreciation rights are intended to qualify
as "performance-based compensation" under Section 162(m) of the Code provided
that the exercise price or grant price, as the case may be, is established by
the Committee to be equal to the fair market value per Share as of the date of
grant, this form of award enables the LTIP Committee to treat certain other
awards under the LTIP as "performance-based compensation" and thus preserve
deductibility by Peachtree for Federal income tax purposes of such awards which
are made to individuals who are "covered employees" as defined in Section 162(m)
of the Code.
54
<PAGE>
Each Performance Compensation Award shall be payable only upon achievement
over a specified performance period of a duration of at least one year of a
pre-established objective performance goal established by the LTIP Committee for
such period. The LTIP Committee may designate one or more performance criteria
for purposes of establishing a performance goal with respect to Performance
Compensation Awards made under the LTIP. The performance criteria that will be
used to establish such performance goals will be based on attainment of specific
levels of performance of Peachtree (or a subsidiary, affiliate, division or
operational unit of Peachtree) and will be limited to the following: return on
net assets, return on stockholders' equity, return on assets, return on capital,
stockholder returns, profit margin, earnings per Share, net earnings, operating
earnings, price per Share, sales or market share.
With regard to a particular performance period, the LTIP Committee shall
have the discretion, subject to the LTIP's terms, to select the length of the
performance period, the type(s) of Performance Compensation Award(s) to be
issued, the performance goals that will be used to measure performance for the
period and the performance formula that will be used to determine what portion,
if any, of the Performance Compensation Award has been earned for the period.
Such discretion shall be exercised by the LTIP Committee in writing no later
than 90 days after the commencement of the performance period and performance
for the period shall be measured and certified by the LTIP Committee upon the
period's close. In determining entitlement to payment in respect of a
Performance Compensation Award, the LTIP Committee may through use of negative
discretion reduce or eliminate such award, provided such discretion is permitted
under Section 162(m) of the Code.
TRANSFERABILITY. Each award, and each right under any award, shall be
exercisable only by the participant during the participant's lifetime, or, if
permissible under applicable law, by the participant's guardian or legal
representative and, except as otherwise provided in an applicable award
agreement, no award may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a participant otherwise than by will or
by the laws of descent and distribution and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against Peachtree or any affiliate; PROVIDED that the designation
of a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance. Notwithstanding the foregoing, the
LTIP Committee has the discretion under the LTIP to provide that options granted
under the LTIP that are not intended to qualify as incentive stock options may
be transferred without consideration to certain family members or trusts,
partnerships or limited liability companies whose only beneficiaries or partners
are the original grantee and/or such family members.
AMENDMENT TO STOCK PLAN. The Board may amend, alter, suspend, discontinue,
or terminate the LTIP or any portion thereof at any time; PROVIDED that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement applicable to the LTIP and no such action that
would adversely affect the rights of any participant with respect to awards
previously granted under the LTIP shall not to that extent be effective without
the participant's consent.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS. The following
summary of the Federal income tax consequences of the grant and exercise of
nonqualified and incentive stock options awarded under the LTIP, and the
disposition of Shares purchased pursuant to the exercise of such stock options,
is intended to reflect the current provisions of the Code and the regulations
thereunder. This summary is not intended to be a complete statement of
applicable law, nor does it address state and local tax considerations.
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No income will be realized by an optionee upon grant of a nonqualified stock
option. Upon exercise of a nonqualified stock option, the optionee will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the underlying stock over the option exercise price
(the "Spread") at the time of exercise. The Spread will be deductible by
Peachtree for federal income tax purposes subject to the possible limitations on
deductibility under Sections 280G and 162(m) of the Code of compensation paid to
executives designated in those sections. The optionee's tax basis in the
underlying shares acquired by exercise of a nonqualified stock option will equal
the exercise price plus the amount taxable as compensation to the optionee. Upon
sale of the shares received by the optionee upon exercise of the nonqualified
stock option, any gain or loss is generally long-term or short-term capital gain
or loss, depending on the holding period. The optionee's holding period for
shares acquired pursuant to the exercise of a nonqualified stock option will
begin on the date of exercise of such option.
Pursuant to currently applicable rules under Section 16(b) of the Exchange
Act, the grant of an option (and not its exercise) to a person who is subject to
the reporting and short-swing profit provisions under Section 16 of the Exchange
Act (a "Section 16 Person") begins the six-month period of potential short-swing
liability. The taxable event for the exercise of an option that has been
outstanding at least six months ordinarily will be the date of exercise. If an
option is exercised by a Section 16 Person within six months after the date of
grant, however, taxation ordinarily will be deferred until the date which is six
months after the date of grant, unless the person has filed a timely election
pursuant to Section 83(b) of the Code to be taxed on the date of exercise.
Pursuant to a recent amendment to the rules under Section 16(b) of the Exchange
Act, the six-month period of potential short-swing liability may be eliminated
if the option grant is approved in advance by Peachtree's Board of Directors (or
a committee composed solely of two or more non-employee directors) or approved
in advance, or subsequently ratified by Peachtree's stockholders no later than
the next annual meeting of stockholders. Consequently, the taxable event for the
exercise of an option that satisfies either of the conditions described above
will be the date of exercise.
The payment by an optionee of the exercise price, in full or in part, with
previously acquired Shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired Shares to Peachtree, and Shares
received by the optionee, equal in number to the previously surrendered Shares,
will have the same tax basis as the Shares surrendered to Peachtree and will
have a holding period that includes the holding period of the Shares
surrendered. The value of Shares received by the optionee in excess of the
number of Shares surrendered to Peachtree will be taxable to the optionee. Such
additional Shares will have a tax basis equal to the fair market value of such
additional Shares as of the date ordinary income is recognized, and will have a
holding period that begins on the date ordinary income is recognized.
The Code requires that, for incentive stock option treatment, Shares
acquired through exercise of an incentive stock option cannot be disposed of
before two years from the date of grant and one year from the date of exercise.
Incentive stock option holders will generally incur no federal income tax
liability at the time of grant or upon exercise of such options. However, the
Spread will be an "item of tax preference" which may give rise to "alternative
minimum tax" liability at the time of exercise. If the optionee does not dispose
of the Shares before two years from the date of grant and one year from the date
of exercise, the difference between the exercise price and the amount realized
upon disposition of the Shares will constitute long-term capital gain or loss,
as the case may be. Assuming both the holding periods are satisfied, no
deduction will be allowable to Peachtree for federal income tax purposes in
connection with the grant or exercise of the option. If, within two years of the
date of grant or within one year from the date of exercise, the holder of shares
acquired through the exercise of an incentive stock option disposes of such
Shares, the optionee will generally realize ordinary taxable compensation at the
time of such disposition equal to the difference between the exercise price and
the lesser of the fair market value of the stock on the date of initial exercise
or the amount realized on the subsequent
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disposition, and such amount will generally be deductible by Peachtree for
federal income tax purposes, subject to the possible limitations on
deductibility under Sections 280G and 162(m) of the Code for compensation paid
to executives designated in those sections.
ANTICIPATED STOCK OPTION GRANTS
In connection with the Offering, Peachtree expects to make grants of stock
options to executive officers, non-employee directors and certain other
employees of Peachtree. See "Long-Term Incentive Plan" and "Stock Option Plan
for Directors." The exercise price of such options is expected to be the public
offering price of the Common Stock set forth on the cover page of this
Prospectus. The following table sets forth the number of shares of Common Stock
underlying options that are expected to be granted to each of the executive
officers of Peachtree, the executive officers of Peachtree as a group, the
non-employee directors of Peachtree as a group and all employees of Peachtree as
a group other than the executive officers of Peachtree.
<TABLE>
<CAPTION>
ANTICIPATED
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Ronald F. Verni...............................................................................
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Douglas G. Meyer..............................................................................
EXECUTIVE VICE PRESIDENT, BUSINESS OPERATIONS AND SECRETARY
Janet M. Van Pelt.............................................................................
SENIOR VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
James B. Ducker...............................................................................
SENIOR VICE PRESIDENT OF MARKETING
John J. Vasil.................................................................................
SENIOR VICE PRESIDENT OF SALES
Executive Officer Group.......................................................................
Non-Employee Director Group...................................................................
Non-Executive Employee Group..................................................................
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CONTINUATION AGREEMENTS
In connection with the Offering, ADP and Peachtree have entered into
agreements (each, a "Continuation Agreement") with various officers and
employees of Peachtree, including each of Mr. Verni, Mr. Meyer, Ms. Van Pelt,
Mr. Ducker and Mr. Vasil, relating to their continued employment with Peachtree
through and following the consummation of a sale of Peachtree in the Offering or
otherwise. A copy of the form of Continuation Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Pursuant to the Continuation Agreements, such officers and employees of
Peachtree have agreed to perform their existing duties for Peachtree and to
assist Peachtree in consummating a sale transaction, and Peachtree has agreed
that, until the later of October 13, 1999 (one year from the date of the
agreement) and the date of such sale transaction, Peachtree will not terminate
their employment without cause (as defined).
Pursuant to the Continuation Agreements, Peachtree has agreed that prior to
the consummation of the Offering, Peachtree will enter into an employment
agreement with the officer or employee providing for continued employment with
Peachtree in the Atlanta Metropolitan Statistical Area in the
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same or substantially the same position with substantially similar duties for a
period of no less than one year following consummation of the Offering. The
terms and conditions of such employment agreement will be substantially similar
to the officer's or employee's current terms of employment.
The Continuation Agreements provide for severance arrangements upon
termination by Peachtree of the officer's or employee's employment in connection
with the Offering as follows:
If Peachtree terminates the officer's or employee's employment during the
one-year period following the closing date of the Offering without cause (as
defined in the Continuation Agreement), Peachtree will pay to the officer or
employee, in addition to any other benefits (other than severance) to which the
officer or employee is entitled, an amount equal to the salary that would have
been payable to the officer or employee for the one-year period following the
date of such termination. All such payments are required to be made in equal
installments payable when the officer's or employee's salary would otherwise
have been paid. In addition, any such payments are expressly conditioned upon
the execution by such officer or employee of a general release in favor of
Peachtree and its affiliates.
The Continuation Agreements provide for the payment by Peachtree of such
officer's or employee's target bonus immediately following the consummation of
the Offering and for the grant of stock options to acquire shares of Common
Stock for an exercise price equal to the price of the Common Stock in the
Offering. See "Anticipated Stock Option Grants." The Continuation Agreements
also provide, under certain circumstances, for vesting in connection with the
Offering of existing ADP stock options held by such officer or employee.
EMPLOYMENT AGREEMENTS
Pursuant to the Continuation Agreements, in connection with the Offering
Peachtree has entered into employment agreements (each, an "Employment
Agreement") with Mr. Verni, Mr. Meyer, Ms. Van Pelt, Mr. Ducker and Mr. Vasil
(each, an "Executive") which will expire on - , 2000.
Pursuant to the Employment Agreements, each Executive will serve in the
office(s) set forth next to such Executive's name under the caption "Executive
Officers" with an annual base salary of $ - , in the case of Mr. Verni,
$ - , in the case of Mr. Meyer, $ - , in the case of Ms. Van Pelt, $ - ,
in the case of Mr. Ducker, and $ - , in the case of Mr. Vasil.
Pursuant to the Employment Agreements, each Executive will be eligible to
receive an annual bonus of - % of base salary, in the case of Mr. Verni,
- % of base salary, in the case of Mr. Meyer, - % of base salary, in the
case of Ms. Van Pelt, - % of base salary, in the case of Mr. Ducker, and
- % of base salary, in the case of Mr. Vasil, in each case upon the
attainment of an annual target (the "Target") by Peachtree. Mr. Verni's Target
will be established annually by the Board of Directors within the first three
months of the fiscal year to which the Target applies. In addition, each
Executive will be granted stock options as set forth under the caption
"Anticipated Stock Option Grants."
Pursuant to the Employment Agreements, if Peachtree terminates an
Executive's employment without "Cause" (as defined in the Employment Agreement),
such Executive shall continue to receive base salary and the annual bonus that
would have been payable upon achievement of the Target (the "Target Bonus")
through the expiration date of such Executive's Employment Agreement, determined
as if such termination had not occurred.
The Employment Agreements also provide that an Executive may not compete
with the business of Peachtree or solicit Peachtree's employees or consultants
during the term of the Employment Agreement and during the one-year term
following the earlier of the expiration of the Employment Agreement or the date
such Executive ceases to be employed by Peachtree.
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PRINCIPAL AND SELLING STOCKHOLDER
No present or future officer or director of Peachtree currently owns any
shares of Common Stock, all of which are currently owned by ADP. Upon
consummation of the Offering, ADP will own approximately - % of the Common
Stock ( - % if the Underwriters' over-allotment option is exercised in full).
For a description of certain agreements that will be entered into between
Peachtree and ADP in connection with the Offering, see "Relationship with ADP."
ADP and its subsidiaries are engaged in the computing services business. The
principal executive offices of ADP are located at One ADP Boulevard, Roseland,
NJ 07068.
Other than as described above, Peachtree is not aware of any person or group
that will beneficially own more than 5% of the outstanding shares of Common
Stock following the Offering. See "Management--Anticipated Stock Option Grants."
RELATIONSHIP WITH ADP
Immediately prior to the Offering, ADP will be the sole stockholder of
Peachtree. After the Offering, ADP may not have a controlling interest in
Peachtree, but through its ownership of shares of Common Stock, ADP will have
substantial voting power in elections of directors. As such, ADP will be in a
position to influence various matters of significance to Peachtree and its
stockholders. Such matters could include the following: engaging in mergers or
other business combinations, acquiring or disposing of assets or investments,
issuing capital stock or other securities, incurring debt and paying dividends.
See "Risk Factors--Relationship with ADP; Potential Conflicts of Interest."
Since the acquisition of Peachtree by ADP, Peachtree has not had direct
third-party indebtedness, and has relied instead on internally generated funds
and funds provided by ADP to finance its operations. Following the Offering,
however, ADP will not be obligated, and has advised Peachtree that it does not
intend, to provide working capital or other funds to Peachtree. Peachtree will
receive certain net cash proceeds of its sale of shares in the Offering and will
receive a cash payment from ADP in connection with the cancellation of an
intercompany receivable. Following the Offering, Peachtree may enter into a
revolving credit facility with a bank or other financial institution. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Financial Resources."
INTERCOMPANY AGREEMENT
In connection with the Offering, ADP and Peachtree intend to enter into
various agreements and transactions (the "Separation") which are intended to
separate the business of Peachtree from the other operations of ADP and its
subsidiaries other than Peachtree (the "ADP Group"). The Separation will
establish Peachtree as a stand-alone entity with objectives separate from those
of ADP. The Separation will be substantially completed by the closing date of
the Offering. The Separation and the transactions being undertaken in connection
therewith will be effected in accordance with an Intercompany Agreement between
Peachtree and ADP (the "Intercompany Agreement") and certain ancillary
agreements referred to therein (the "Ancillary Agreements"). The Ancillary
Agreements will include the Registration Rights Agreement, the Technology
Agreement and the Tax Indemnification Agreement. Because these agreements will
be entered into at a time when Peachtree is still a wholly owned subsidiary of
ADP, they are not the result of arm's-length negotiations between the parties.
The Intercompany Agreement and the Ancillary Agreements have been filed as
exhibits to the Registration Statement of which this Prospectus is a part and
the summaries of such agreements set forth in this Prospectus are qualified in
their entirety by reference to the full text of such agreements.
Pursuant to the Intercompany Agreement, ADP will transfer or cause its
subsidiaries to transfer to Peachtree, or acknowledge Peachtree's ownership of,
all of ADP's right, title and interest in the Peachtree Assets (as defined) and
Peachtree will assume and agree to perform and fulfill all of the
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Peachtree Liabilities (as defined) in accordance with their terms. Except as
expressly set forth in the Intercompany Agreement or in any Ancillary Agreement,
neither ADP nor Peachtree shall be deemed to make any representation or warranty
as to the business, operations, assets or liabilities transferred or assumed in
accordance with the Intercompany Agreement or any Ancillary Agreement, any
consents or approvals required in connection therewith, the value of, or the
existence of any encumbrance on, any of the assets so transferred or the
existence of any defense or counterclaim to any liability so assumed, or as to
the legal sufficiency of any assignment, document or instrument delivered to
convey title to or effect transfer of any asset so transferred. Except as
otherwise expressly set forth in the Intercompany Agreement or in an Ancillary
Agreement, all assets will be transferred and accepted on an "as is, where is"
basis. Pursuant to the Intercompany Agreement, Peachtree will agree to bear the
economic and legal risks that any such purported transfer is insufficient to
vest in Peachtree good and marketable title to such asset, free and clear of
encumbrances.
RELEASES AND INDEMNIFICATION
The Intercompany Agreement will provide for full and complete releases and
discharges as of the closing date of the Offering of all liabilities existing or
arising from all acts or events occurring or failing to occur or alleged to have
occurred or failed to occur and all conditions existing or alleged to have
existed on or prior to such closing date (including any contractual arrangements
existing or alleged to exist between Peachtree and ADP on or before such closing
date), between Peachtree or any of its subsidiaries, on the one hand, and ADP or
any member of the ADP Group, on the other hand, except as expressly set forth in
the Intercompany Agreement or any Ancillary Agreement.
The Intercompany Agreement will provide that Peachtree will indemnify,
defend and hold harmless ADP, each member of the ADP Group, and each of their
directors, officers, employees, agents and representatives, from and against any
and all liabilities relating to, arising out of or resulting from (1) the
failure of Peachtree or any other person to pay, perform or otherwise promptly
discharge any Peachtree Liabilities; (2) any acts or omissions by Peachtree or
any member of the ADP Group in the conduct of the Peachtree business; (3) any
breach by Peachtree of the Intercompany Agreement or any of the Ancillary
Agreements; and (4) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to this Prospectus or the Registration Statement of which it is
part.
The Intercompany Agreement will provide that ADP will indemnify, defend and
hold harmless Peachtree, each of its subsidiaries, and each of their directors,
officers, employees, agents and representatives, from and against any and all
liabilities relating to, arising out of or resulting from (1) the failure of ADP
or any member of the ADP Group to pay, perform or otherwise promptly discharge
any ADP Liability (as defined); and (2) any breach by ADP of the Intercompany
Agreement or any of the Ancillary Agreements.
PROCEEDS AND EXPENSES OF THE OFFERING
The Intercompany Agreement will provide that the proceeds from the Offering
will be used as set forth under the caption "Use of Proceeds" in this
Prospectus, that underwriting discounts and commissions attributable to the
shares of Common Stock sold by Peachtree in the Offering will be paid by
Peachtree and underwriting discounts and commissions attributable to the shares
of Common Stock sold by ADP in the Offering will be paid by ADP and that any and
all third-party costs, fees and expenses relating to the Offering, including all
of the costs of producing, printing and distributing this Prospectus, and all of
the reimbursable expenses of the Underwriters pursuant to the Underwriting
Agreement, will be paid by Peachtree.
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BRIDGING SERVICES
The Intercompany Agreement will provide that ADP will provide certain
administrative and corporate support and employee benefit services to Peachtree
on an interim or transitional basis following the Offering. Specified charges
for such services will generally be designed to allow ADP to recover the fully
allocated costs of providing the services, plus out-of-pocket costs and
expenses. ADP will agree to furnish services thereunder through the same or
similarly qualified personnel and the same or similar facilities as it has in
the past, but the selection of personnel to perform the various services shall
be within the sole control of ADP. In addition, ADP will not be required to
increase the volume or quality of the services provided beyond the level at
which they were performed for Peachtree in the past. This bridging services
provision of the Intercompany Agreement will have a -year term. In addition,
either ADP or Peachtree may terminate this provision with respect to one or more
of the services provided thereunder upon giving prior written notice to the
other party.
ACCESS TO INFORMATION
The Intercompany Agreement will provide that ADP and Peachtree will: (1)
cooperate in the provision to each other of existing corporate documents such as
minute books, stock registers, stock certificates and documents of title in
their possession relating to the business and affairs of the other; (2) afford
the other, including designated representatives, reasonable access and
duplicating rights during normal business hours to all records and other data
and information in such party's possession relating to the business and affairs
of the other (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by the other
party including, without limitation, for audit, accounting, tax and litigation
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations; (3) use reasonable efforts to make available to the other, upon
written request, its officers, directors, employees and agents as witnesses to
the extent that such persons may reasonably be required in connection with any
legal, administrative or other proceedings arising out of the business of the
other (subject to certain rights of reimbursement of costs and expenses); and
(4) except as otherwise required by law or agreed to in writing, retain all
information relating to the other party's business in accordance with such
party's written record retention policy or, if no such policy exists, the past
practice of such party, subject to certain exceptions and conditions.
NONSOLICITATION
The Intercompany Agreement will provide that Peachtree and ADP will not
solicit each other's employees for a period of one year.
CONFIDENTIALITY
The Intercompany Agreement will provide that, subject to certain exceptions,
ADP and Peachtree will hold and will cause their respective affiliates,
directors, officers, employees, agents, consultants and advisors to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
information (other than any such information relating solely to the business or
affairs of such party) concerning the other party, except to the extent that
such information can be shown to have been: (1) in the public domain through no
fault of such party; (2) later lawfully acquired on a non-confidential basis
from other sources by the party to which it was furnished; (3) independently
generated without reference to any proprietary or confidential information of
the other party; or (4) information that may be disclosed pursuant to any
Ancillary Agreement.
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TERMINATION; FURTHER ASSURANCES
The Intercompany Agreement will provide that the Intercompany Agreement and
the Ancillary Agreements may be unilaterally terminated by ADP at any time prior
to the execution and delivery of the underwriting agreement with respect to the
Offering and, if so terminated, neither Peachtree nor ADP (nor any of their
respective directors, officers, employees, agents or representatives) will have
any liability or further obligation to any party thereunder or arising
therefrom. The Intercompany Agreement will also provide that each of Peachtree
and ADP will use its reasonable best efforts to take all actions, and to do all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements, to consummate, carry out and make effective the
transactions, undertakings and agreements contemplated by the Intercompany
Agreement and the Ancillary Agreements.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement will provide that, upon the written
request of ADP, Peachtree will use its best efforts to effect the registration
under the applicable federal and state securities laws of any of the shares of
Common Stock (and any other securities issued in respect of or in exchange for
such securities) beneficially owned by ADP for sale in accordance with ADP's
intended method of disposition thereof, and will take such other actions as may
be reasonably necessary to permit the sale thereof in such jurisdictions as ADP
shall request, subject to various conditions. ADP will also have the right,
subject to certain conditions, at any time and from time to time, to include the
shares of Common Stock (and any other securities issued in respect of or in
exchange for such securities) beneficially owned by it in certain other
registrations of common equity securities of Peachtree initiated by Peachtree on
its own behalf or on behalf of Peachtree's other stockholders. Peachtree will
agree to pay all out-of-pocket costs and expenses in connection with each such
registration in which ADP participates (including the reasonable fees and
expenses of counsel to ADP), except for underwriting discounts and commissions,
if any, attributable to securities sold by ADP in connection with such
registration.
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The Registration Rights Agreement will provide that ADP will be entitled to
a total of four demand registrations and an unlimited number of "piggyback"
registrations. ADP's registration rights will generally be assignable by ADP and
its assigns. The Registration Rights Agreement will also provide for certain
indemnification and contribution by Peachtree for the benefit of ADP in
connection with such registrations.
TECHNOLOGY AGREEMENT
Peachtree and ADP will enter into a Technology Agreement, effective as of
the closing date of the Offering, pursuant to which Peachtree will license
certain rights to ADP and ADP will license certain rights to Peachtree. Under
the Technology Agreement, ADP will assign to Peachtree, or acknowledge as
Peachtree's exclusive property, all right, title and interest in and to
Peachtree's registered or unregistered trademarks, Peachtree's registered or
unregistered copyrights, all foreign rights in and to the foregoing and all
other intellectual property rights used in the Peachtree business, including
trade secrets and know-how and databases. Under the Technology Agreement,
Peachtree will retain all of the intellectual property relating to the Peachtree
business. Pursuant to the Technology Agreement, Peachtree will license certain
intellectual property rights to ADP for use in its business on a worldwide,
royalty-free and non-exclusive basis and ADP will license certain intellectual
property rights to Peachtree for use in its business on a worldwide,
royalty-free and non-exclusive basis. From time to time in the future, Peachtree
and ADP may also enter into additional royalty-bearing licenses with respect to
other intellectual property owned by Peachtree.
TAX INDEMNIFICATION AGREEMENT
Prior to the Offering, Peachtree has been included in ADP's consolidated
group for Federal income tax purposes. Accordingly, Peachtree's Federal income
tax liability has been included in ADP's consolidated Federal income tax
liability. As a result of the Offering, Peachtree will no longer be a part of
ADP's consolidated group. In connection with the Offering and the Separation,
Peachtree and ADP will enter into the Tax Indemnification Agreement under which
ADP will indemnify Peachtree and all Peachtree subsidiaries for all federal,
state and local income tax liabilities and employment tax liabilities arising in
or relating to periods ending on or prior to the closing date of the Offering.
Under the Tax Indemnification Agreement, in computing its own stand-alone tax
liability or tax refund in the future, Peachtree will generally be unable to use
certain tax items arising in periods during which Peachtree was a member of
ADP's consolidated group, such as net operating losses, foreign tax credits and
other tax credits.
CORPORATE OPPORTUNITIES
The Charter will provide that ADP shall have no duty to refrain from
engaging in the same or similar activities or lines of business as Peachtree,
and neither ADP nor any officer or director thereof (except as provided below)
shall be liable to Peachtree or its stockholders for breach of any fiduciary
duty by reason of any such activities of ADP. In the event that ADP acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both ADP and Peachtree, ADP shall have no duty to communicate or
offer such corporate opportunity to Peachtree and shall not be liable to
Peachtree or its stockholders for breach of any fiduciary duty as a stockholder
of Peachtree by reason of the fact that ADP pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person, or
does not communicate information regarding such corporate opportunity to
Peachtree.
In the event that a director or officer of Peachtree who is also a director
or officer of ADP acquires knowledge of a potential transaction or matter which
may be a corporate opportunity for both Peachtree and ADP, such director or
officer of Peachtree shall have fully satisfied and fulfilled the
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fiduciary duty of such director or officer to Peachtree and its stockholders
with respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:
(1) a corporate opportunity offered to any person who is an officer of
Peachtree, and who is also a director but not an officer of ADP, shall
belong to Peachtree;
(2) a corporate opportunity offered to any person who is a director but not
an officer of Peachtree, and who is also a director or officer of ADP,
shall belong to Peachtree if such opportunity is expressly offered to
such person in writing solely in his or her capacity as a director of
Peachtree, and otherwise shall belong to ADP; and
(3) a corporate opportunity offered to any person who is an officer of both
Peachtree and ADP shall belong to Peachtree if such opportunity is
expressly offered to such person in writing solely in his or her capacity
as an officer of Peachtree, and otherwise shall belong to ADP.
For purposes of the foregoing:
(1) A director of Peachtree who is chairman of the board of directors of
Peachtree or of a committee thereof shall not be deemed to be an officer
of Peachtree by reason of holding such position (without regard to
whether such position is deemed to be an officer of Peachtree under the
By-laws), unless such person is a full-time employee of Peachtree; and
(2) (a) the term "Peachtree" shall mean Peachtree and all corporations,
partnerships, joint ventures, associations and other entities in which
Peachtree beneficially owns (directly or indirectly) more than fifty
percent of the outstanding voting stock, voting power, partnership
interest or similar voting interests, and (b) the term "ADP" shall mean
ADP and all corporations, partnerships, joint ventures, associations and
other entities (other than Peachtree, defined in accordance with clause
(a) of this section (2)) in which ADP beneficially owns (directly or
indirectly) more than fifty percent of the outstanding voting stock,
voting power, partnership interests or similar voting interests.
The foregoing provisions of the Charter shall expire on the date that ADP
ceases to own beneficially Common Stock representing at least 20% of the total
voting power of all classes of outstanding Common Stock and no person who is a
director or officer of Peachtree is also a director or officer of ADP or any of
its subsidiaries.
In addition to any vote of the stockholders required by the Charter, until
such time as ADP ceases to own beneficially Common Stock representing at least
20% of the total voting power of all classes of outstanding Common Stock, the
affirmative vote of the holders of more than 80% of the total voting power of
outstanding Common Stock shall be required to alter, amend or repeal in a manner
adverse to the interests of ADP or adopt any provision adverse to the interests
of ADP and inconsistent with the corporate opportunity provisions described
above. So long as ADP beneficially owns Common Stock representing at least 20%
of the total voting power of all classes of outstanding Common Stock, it can
prevent any such alteration, amendment, repeal or adoption.
Any person purchasing or otherwise acquiring Common Stock will be deemed to
have notice of, and to have consented to, the foregoing provisions of the
Charter.
DESCRIPTION OF CAPITAL STOCK
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
PROVISIONS OF THE CHARTER AND BY-LAWS, COPIES OF WHICH HAVE BEEN FILED AS
EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE
"BUSINESS--AVAILABLE INFORMATION."
The transfer agent and registrar for the Common Stock is - .
The authorized capital stock of Peachtree consists of 20 million shares of
Common Stock, par value $.01 per share, and 5 million shares of preferred stock
("Preferred Stock"), of which - shares
64
<PAGE>
of Common Stock and no shares of Preferred Stock are outstanding. Upon
completion of the Offering, no shares of Preferred Stock are expected to be
outstanding.
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that any such market will develop. See "Risk
Factors--No Prior Public Market for the Common Stock."
COMMON STOCK
VOTING RIGHTS. Except as set forth below under "Certain Anti-takeover
Provisions," the Charter provides that holders of Common Stock are entitled to
one vote per share on all matters submitted to a vote of stockholders.
DIVIDENDS. Each share of Common Stock is entitled to receive dividends if,
as and when declared by the Board of Directors. Under Delaware law, a
corporation may declare and pay dividends out of surplus, or if there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and/or the preceding year. No dividends may be declared, however, if
the capital of the corporation has been diminished by depreciation in the value
of its property, losses or otherwise to an amount less than the aggregate amount
of capital represented by any issued and outstanding stock having a preference
on the distribution of assets. See "Dividend Policy."
OTHER RIGHTS. Stockholders of Peachtree have no preemptive or other rights
to subscribe for additional shares. Subject to any rights of the holders of any
Preferred Stock, all holders of Common Stock are entitled to share equally on a
share-for-share basis in any assets available for distribution to stockholders
on liquidation, dissolution or winding up of Peachtree. No shares of Common
Stock are subject to redemption or a sinking fund. All outstanding shares of
Common Stock are, and the Common Stock to be outstanding upon completion of the
Offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized to issue, without further authorization
from stockholders, up to 5 million shares of Preferred Stock in one or more
series and to determine, at the time of creating each series, the distinctive
designation of, and the number of shares in, the series, its dividend rate, the
number of votes, if any, for each share of such series, the price and terms on
which such shares may be redeemed, the terms of any applicable sinking fund, the
amount payable upon liquidation, dissolution or winding up, the conversion
rights, if any, and such other rights, preferences and priorities of such series
as the Board may be permitted to fix under the laws of the State of Delaware as
in effect at the time such series is created. The issuance of Preferred Stock
could adversely affect the voting power of the holders of Common Stock and could
have the effect of delaying, deferring or preventing a change in control of
Peachtree.
SERIES A PREFERRED STOCK
A series of Preferred Stock has been designated "Series A Preferred Stock"
with a par value of $0.01 per share. Two hundred thousand (200,000) shares of
the Series A Preferred Stock have been reserved for issuance upon exercise of
the Preferred Rights referred to under the caption "Certain Anti-takeover
Provisions" in this Prospectus. The relative rights and preferences of the
Series A Preferred Stock are set forth in the Charter, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Charter and By-laws and applicable sections of the Delaware General
Corporation Law (the "DGCL") contain several provisions that may make the
acquisition of control of Peachtree more difficult without the prior approval of
Peachtree's Board of Directors. Certain provisions of the Charter
65
<PAGE>
and the By-laws, among other things: (1) classify the Peachtree Board of
Directors into three classes, each of which serves for staggered three-year
terms; (2) provide that a director of Peachtree may be removed by the
stockholders only for cause by the affirmative vote of holders of at least
four-fifths of the total voting power; (3) provide that only the Chairman of the
Board, Vice Chairman, President or the Peachtree Board of Directors may call
special meetings of the stockholders; (4) provide that the stockholders may take
action only at a meeting of Peachtree stockholders, not by written consent; (5)
provide that stockholders must comply with certain advance notice procedures in
order to nominate candidates for election to the Peachtree Board of Directors or
to place stockholders' proposals on the agenda for consideration at meetings of
the stockholders; and (6) provide that the stockholders may amend or repeal any
of the foregoing provisions of the Charter or the By-laws only by a vote of at
least four-fifths of the stock entitled to vote generally in the election of
directors.
DGCL SECTION 203
In general, Section 203 of the DGCL prohibits publicly held Delaware
corporations from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date of the transaction
in which the person or entity became an interested stockholder, unless (1) prior
to such date, either the business combination or the transaction which resulted
in the stockholder's becoming an interested stockholder is approved by the Board
of Directors, (2) upon consummation of the transaction which resulted in the
stockholder's becoming an interested stockholder, the interested stockholder
owned at least 85% of the outstanding voting stock of the corporation (excluding
for this purpose certain shares owned by persons who are directors and also
officers of the corporation and by certain employee benefit plans) or (3) on or
after such date the business combination is approved by the Board of Directors
and by the affirmative vote (and not by written consent) of at least 66 2/3% of
the outstanding voting stock which is not owned by the interested stockholder.
For the purposes of Section 203, a "business combination" is broadly defined to
include mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or within the immediately
preceding three years did own) 15% or more of the corporation's voting stock.
PREFERRED STOCK
The Charter also authorizes the Board of Directors to issue up to 5 million
shares of preferred stock, in series, and to establish the rights and
preferences (including the convertibility of such shares of preferred stock into
shares of Common Stock) of any series of preferred stock so issued. The issuance
of preferred stock could have the effect of delaying or preventing a change in
control of Peachtree, even if such a change in control were in the best
interests of some, or a majority, of Peachtree's stockholders. See "Description
of Capital Stock."
THE RIGHTS PLAN
The Board of Directors of Peachtree has adopted a preferred stock purchase
rights plan (the "Rights Plan"). Pursuant to the Rights Plan, the Board of
Directors declared a dividend of one right (a "Preferred Right") for each
outstanding share of Common Stock. The terms of the Preferred Rights are set
forth in a Rights Agreement between the Company and the Rights Agent (the
"Rights Agreement"), a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Except as set forth
in the Rights Agreement, each Preferred Right entitles the registered holder to
purchase from Peachtree one one-hundredth of a share of Series A Preferred
Stock, at a price of $150.00 per share in cash, subject to adjustment.
The Rights Plan would cause substantial dilution to a person or group that
attempts to acquire Peachtree on terms not approved in advance by the Peachtree
Board of Directors. Under the Rights Plan, until the earlier of 10 business days
following such time as a person or group has acquired beneficial ownership of,
or 15 business days following such time as a person or group has proposed a
66
<PAGE>
tender offer or exchange offer that would result in a person or group's owning,
15% or more of the outstanding shares of Common Stock (the "Rights Distribution
Effective Date"), the Preferred Rights will be transferred only with the Common
Stock. Following the Rights Distribution Effective Date, separate certificates
evidencing the Preferred Rights will be mailed to each holder of record on the
Rights Distribution Effective Date. Thereafter, each holder of a Preferred Right
(other than the person or group which made the acquisition triggering the
distribution) will thereafter have the right to receive, upon exercise of such
Preferred Right, that number of shares of Common Stock having a market value
equal to two times the exercise price of the Right. Similar provisions apply in
the event of a merger or other business combination as a result of which a
person or group will own 15% or more of the outstanding shares of Common Stock.
Under certain circumstances, the Board of Directors may redeem the Preferred
Rights for $.01 per Preferred Right. After the time that any such person or
group acquires 15% or more, but less than 50%, of the outstanding shares of
Common Stock, the Board of Directors may exchange the Preferred Rights, in whole
or in part, at an exchange ratio of one share of Common Stock, or one-hundredth
of a share of Series A Preferred Stock per Preferred Right.
The Rights Plan will except ADP and its affiliates from its effects.
Accordingly, ADP and its affiliates may be in a position to effect a business
combination or other transaction with Peachtree in situations where others would
be restricted from effecting a similar transaction.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, Peachtree will have - shares of Common
Stock issued and outstanding. Of these shares, the shares of Common Stock sold
in the Offering will be freely tradeable without restrictions or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" of Peachtree as defined in Rule 144 under the Securities Act ("Rule
144"), which will be subject to the resale limitations under Rule 144. Peachtree
and ADP have agreed with the Underwriters not to effect transactions in or
relating to the Common Stock for a period of time following the Offering. See
"Underwriting."
Immediately after the Offering, ADP will own - shares of Common Stock,
which will represent approximately - % of the outstanding Common Stock
( - % if the Underwriters' over-allotment option is exercised in full). None
of the shares of Common Stock beneficially owned by ADP will be registered under
the Securities Act upon consummation of the Offering and may not be sold by ADP
in the absence of an effective registration statement under the Securities Act,
except in accordance with an exemption from registration thereunder, including
under Rule 144. ADP has certain demand and piggyback registration rights to
require Peachtree to effect registration of all of the shares of Common Stock
owned by ADP. See "Relationship with ADP--Registration Rights Agreement."
Prior to the Offering, there has been no market for the Common Stock, and no
prediction can be made as to the effect, if any, that sales of outstanding
shares of Common Stock, or the availability of such shares for sale, will have
on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock beneficially owned by
ADP in the public market or otherwise, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock
offered in the Offering.
ADP may dispose of Common Stock owned by it at any time. ADP has advised
Peachtree that it currently intends to retain the Common Stock beneficially
owned by it; however, other than as set forth above, ADP is not subject to any
contractual obligation to retain such Common Stock. There can be no assurance
concerning the period of time during which ADP will maintain its beneficial
ownership of the Common Stock owned by it following the Offering. See
"Underwriting."
In general, under Rule 144 (1) a person or persons whose shares are required
to be aggregated who has beneficially owned shares of Common Stock for a period
of one year, including a person who may be deemed an "affiliate," is entitled to
sell, within any three-month period, a number of shares not exceeding the
greater of (A) one percent of the total number of outstanding shares of such
class and
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<PAGE>
(B) the average weekly reported trading volume of such class during the four
calendar weeks immediately preceding such sale and (2) a person who is not an
"affiliate" of Peachtree and who has beneficially owned shares for at least two
years is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. Under Rule 144, an "affiliate" of an issuer
is a person that directly or indirectly through the use of one or more
intermediaries controls, is controlled by, or is under common control with, such
issuer. At the time of the Offering, ADP will have owned the Common Stock owned
by it for more than two years.
UNDERWRITING
The Underwriters of the Offering named below (the "Underwriters"), for whom
Lehman Brothers Inc., and - are acting as representatives (the
"Representatives") have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement (the "Underwriting Agreement") with
Peachtree and ADP, to purchase from Peachtree and ADP, and Peachtree and ADP
have agreed to sell to each Underwriter, the aggregate number of shares of
Common Stock set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------
<S> <C>
Lehman Brothers Inc........................................................ -
Salomon Smith Barney Inc................................................... -
Total................................................................ -
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase shares of Common Stock are subject to the approval of certain legal
matters by counsel and to certain other conditions. The Underwriting Agreement
provides that, if any shares of Common Stock are purchased pursuant to such
Underwriting Agreement, all the shares of Common Stock agreed to be purchased
pursuant to such Underwriting Agreement must be so purchased.
ADP has granted to the Underwriters an option to purchase up to an
additional - shares of Common Stock, at the initial public offering price
less the aggregate underwriting discounts and commissions, solely to cover
over-allotments. The option may be exercised at any time up to 30 days after the
date of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to Peachtree
and Proceeds to ADP will be $ - , $ - , $ - and $ - .
Peachtree has been advised that the Underwriters propose to offer the shares
of Common Stock directly to the public initially at the public offering price
set forth on the cover page of this Prospectus, and to certain selected dealers
(who may include the Underwriters) at such public offering price less a selling
concession not in excess of $ - per share. The selected dealers may reallow a
concession not in excess of $ - per share on sales to certain other dealers.
After the initial offering of the Common Stock, the public offering price,
concession to selected dealers and reallowance to other dealers may be changed.
Peachtree and ADP have agreed to allow the Underwriters a discount of - %
of the public offering price of the Common Stock. The following table sets forth
the underwriting discount to be allowed in connection with the Offering.
<TABLE>
<CAPTION>
TOTAL UNDERWRITING TOTAL UNDERWRITING
DISCOUNT DISCOUNT
(EXCLUDING (INCLUDING
UNDERWRITING THE OVER-ALLOTMENT THE OVER-ALLOTMENT
DISCOUNT PER SHARE OPTION) OPTION)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Paid By Peachtree..................................... - - -
Paid By ADP........................................... - - -
</TABLE>
68
<PAGE>
Peachtree and ADP have also agreed:
- to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, and to contribute to
payments which the Underwriters may be required to make in respect
thereof; and
- to reimburse the Underwriters for certain out-of-pocket expenses incurred
in connection with the Offering.
The following table sets forth the various expenses payable in connection
with the Offering. All the amounts shown are estimates, except the Commission's
registration fee. All of such expenses are being borne by Peachtree.
<TABLE>
<CAPTION>
FEE OR EXPENSE
--------------
<S> <C>
SEC Registration Fee.............................................................................. $ 38,920
Blue Sky Fee...................................................................................... -
Nasdaq National Market Fee........................................................................ -
NASD Fee.......................................................................................... 14,500
Accounting Fees and Expenses...................................................................... -
Legal Fees and Expenses........................................................................... -
Printing and Engraving Expenses................................................................... -
Registrar and Transfer Agent's Fees............................................................... -
Miscellaneous Fees and Expenses................................................................... -
--------------
Total....................................................................................... -
</TABLE>
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock to accounts over which they exercise
discretionary authority.
Peachtree and ADP have agreed not to (1) offer, sell, pledge, contract to
sell, file a registration statement pursuant to the Securities Act (except for
certain registration statements relating to the issuance of stock and stock
options to employees) or otherwise dispose of any shares of Common Stock or
securities convertible into or exchangeable for Common Stock, or sell or grant
options, rights or warrants with respect to any shares of Common Stock or
securities convertible into or exchangeable for Common Stock except for Common
Stock and options with respect to Common Stock issued or granted to officers,
directors or employees of Peachtree, or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
in each case without the prior written consent of Lehman Brothers Inc. on behalf
of the Underwriters, for a period of - days after the date of this
Prospectus.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock has been determined by
negotiations among Peachtree, ADP and the Representatives. Among the principal
factors considered in making such determination were the past and present
operations of Peachtree, the historical results of operations of Peachtree and
the trend of its revenue and earnings, the prospects for future earnings of
Peachtree, an assessment of Peachtree's management, the history of and prospects
for the industry in which Peachtree competes, the prices of similar securities
of generally comparable companies and the general condition of the securities
markets at the time of the Offering. There can be no assurance that an active
trading market will develop for the Common Stock or that the Common Stock will
trade in the public market subsequent to the Offering at or above the initial
public offering price.
Peachtree has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "PEAC."
69
<PAGE>
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions may consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described herein.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security by purchasers in the Offering.
Neither Peachtree, ADP nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither Peachtree, ADP nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Certain of the U.S. Underwriters have provided, from time to time, and
expect to provide in the future, brokerage and investment banking services to
Peachtree, ADP and their affiliates for which they receive customary fees and
compensation.
The Offering and the distribution of this Prospectus in certain
jurisdictions may be restricted by law. No action has been taken by Peachtree
that would permit an offering of shares of Common Stock or the circulation or
distribution of this Prospectus or any offering material in relation to
Peachtree or such shares in any country outside the United States where action
for that purpose is required. Persons who come into whose possession of this
Prospectus are required by Peachtree to inform themselves about and to observe
any such restrictions.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
Peachtree by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
Certain legal matters will be passed upon for the Underwriters by Simpson
Thacher & Bartlett, New York, New York. Paul, Weiss, Rifkind, Wharton & Garrison
has in the past provided legal services to ADP and its affiliates and may
continue to provide such services in the future.
EXPERTS
The consolidated financial statements of Peachtree as of June 27, 1998 and
June 28, 1997 and for each of the three years in the period ended June 27, 1998
included in this Prospectus and the related financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the Registration Statement and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
70
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report....................................................... F-2
Consolidated Balance Sheets as of June 28, 1997, June 27, 1998 and September 26,
1998 (unaudited)................................................................. F-3
Consolidated Statements of Operations for the Years Ended June 29, 1996, June 28,
1997 and June 27, 1998 and for the Three Months Ended September 27, 1997
(unaudited) and September 26, 1998 (unaudited)................................... F-4
Consolidated Statements of Shareholder's Equity for the Years Ended June 29, 1996,
June 28, 1997 and June 27, 1998 and for the Three Months Ended September 26, 1998
(unaudited)...................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 29, 1996, June 28,
1997 and June 27, 1998 and for the Three Months Ended September 27, 1997
(unaudited) and September 26, 1998 (unaudited)................................... F-6
Notes to Consolidated Financial Statements......................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder of
Peachtree Software, Inc.:
We have audited the accompanying consolidated balance sheets of Peachtree
Software, Inc. (a wholly owned subsidiary of Automatic Data Processing, Inc.)
("Peachtree" or the "Company") as of June 28, 1997 and June 27, 1998, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the three years in the period ended June 27, 1998. These
financial statements are the responsibility of Peachtree's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Peachtree as
of June 28, 1997 and June 27, 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 27, 1998, in conformity with generally accepted accounting principles.
Atlanta, Georgia
August 25, 1998
F-2
<PAGE>
PEACHTREE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash....................................................................... $ 454 $ 583 $ --
Accounts receivable, net of allowance for doubtful accounts and sales
returns of $1,821, $4,690, and $2,929 (unaudited), respectively.......... 9,871 9,369 5,921
Inventories................................................................ 1,510 736 750
Prepaid and other assets................................................... 1,663 1,279 2,646
Deferred tax asset......................................................... 8,221 10,227 10,227
Intercompany receivable.................................................... 7,791 15,152 16,147
--------- --------- -------------
Total current assets................................................... 29,510 37,346 35,691
PROPERTY AND EQUIPMENT--Net.................................................. 2,923 2,970 3,060
INTANGIBLE ASSETS--Net....................................................... 23,216 19,845 18,462
--------- --------- -------------
TOTAL ASSETS........................................................... $ 55,649 $ 60,161 $ 57,213
--------- --------- -------------
--------- --------- -------------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities................................... $ 3,474 $ 6,461 $ 7,634
Deferred revenue........................................................... 15,536 15,664 11,355
--------- --------- -------------
Total current liabilities.............................................. 19,010 22,125 18,989
DEFERRED TAX LIABILITY....................................................... 1,836 584 584
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000 shares authorized, 100 shares issued
and outstanding.......................................................... -- -- --
Additional paid in capital................................................. 47,450 49,850 49,850
Accumulated deficit........................................................ (12,647) (12,398) (12,210)
--------- --------- -------------
Total shareholder's equity............................................. 34,803 37,452 37,640
--------- --------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY................................... $ 55,649 $ 60,161 $ 57,213
--------- --------- -------------
--------- --------- -------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PEACHTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998
--------- --------- --------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
License fees.................................... $ 18,806 $ 23,757 $ 27,411 $ 4,319 $ 5,682
Service fees.................................... 16,488 23,151 25,123 5,579 5,999
--------- --------- --------- ------ -------------
Total revenue............................... 35,294 46,908 52,534 9,898 11,681
COST OF REVENUE:
Cost of license fees............................ 7,445 9,826 10,040 1,615 1,943
Cost of service fees............................ 6,297 10,108 8,938 1,933 2,267
--------- --------- --------- ------ -------------
Total cost of revenue....................... 13,742 19,934 18,978 3,548 4,210
--------- --------- --------- ------ -------------
GROSS PROFIT...................................... 21,552 26,974 33,556 6,350 7,471
OPERATING EXPENSES:
Sales and marketing............................. 9,246 12,204 16,804 3,634 4,901
Research and development........................ 6,535 7,275 8,071 1,833 2,331
General and administrative...................... 2,090 2,564 2,709 665 749
Amortization of intangibles..................... 4,929 5,787 5,840 1,439 1,469
--------- --------- --------- ------ -------------
Total operating expenses.................... 22,800 27,830 33,424 7,571 9,450
--------- --------- --------- ------ -------------
OPERATING INCOME (LOSS)........................... (1,248) (856) 132 (1,221) (1,979)
INTEREST INCOME................................... 281 501 564 71 232
--------- --------- --------- ------ -------------
INCOME (LOSS) BEFORE INCOME TAXES................. (967) (355) 696 (1,150) (1,747)
INCOME TAX EXPENSE (BENEFIT)...................... (21) 154 447 (738) (1,935)
--------- --------- --------- ------ -------------
NET INCOME (LOSS)................................. $ (946) $ (509) $ 249 $ (412) $ 188
--------- --------- --------- ------ -------------
--------- --------- --------- ------ -------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PEACHTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ------------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
BALANCE--June 30, 1995................................ 100 $ -- $ 41,000 $ (11,192) $ 29,808
Contribution of capital for acquisition............. -- -- 6,450 -- 6,450
Net loss............................................ -- -- -- (946) (946)
--- ------------ ----------- ------------ ---------
BALANCE--June 29, 1996................................ 100 -- 47,450 (12,138) 35,312
Net loss............................................ -- -- -- (509) (509)
--- ------------ ----------- ------------ ---------
BALANCE--June 28, 1997................................ 100 -- 47,450 (12,647) 34,803
Contribution of capital for acquisition............. -- -- 2,400 -- 2,400
Net income.......................................... -- -- -- 249 249
--- ------------ ----------- ------------ ---------
BALANCE--June 27, 1998................................ 100 -- 49,850 (12,398) 37,452
Net income (unaudited).............................. -- -- -- 188 188
--- ------------ ----------- ------------ ---------
BALANCE--September 26, 1998 (unaudited)............... 100 $ -- $ 49,850 $ (12,210) $ 37,640
--- ------------ ----------- ------------ ---------
--- ------------ ----------- ------------ ---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PEACHTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998
--------- --------- --------- ------------- -------------
<CAPTION>
UNAUDITED
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $ (946) $ (509) $ 249 $ (412) $ 188
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation................................... 966 1,545 1,806 205 380
Amortization................................... 4,929 5,787 5,840 1,439 1,469
Deferred income taxes.......................... (2,634) (4,117) (3,258) -- --
Decrease (increase) in accounts receivable....... (4,920) (4,762) 502 3,917 3,448
Decrease (increase) in prepaid and other
assets......................................... (282) (1,112) 384 (1,974) (1,367)
Decrease (increase) in inventories............... (553) (493) 774 174 (14)
Increase (decrease) in accounts payable and
accrued expenses............................... (810) (121) 2,987 624 1,173
Increase (decrease) in deferred revenue.......... 4,626 6,699 128 (3,763) (4,309)
--------- --------- --------- ------------- -------------
Net cash provided by operating activities.... 376 2,917 9,412 210 968
INVESTING ACTIVITIES:
Capital expenditures............................. (997) (1,478) (1,923) (189) (556)
Other, net....................................... (68) (442) 1 -- --
--------- --------- --------- ------------- -------------
Net cash used in investing activities........ (1,065) (1,920) (1,922) (189) (556)
FINANCING ACTIVITIES--Decrease (Increase) in
amounts due from ADP............................. (153) (1,924) (7,361) 1,602 (995)
--------- --------- --------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... (842) (927) 129 1,623 (583)
CASH AND CASH EQUIVALENTS:
Beginning of period.............................. 2,223 1,381 454 454 583
--------- --------- --------- ------------- -------------
End of period.................................... $ 1,381 $ 454 $ 583 $ 2,077 $ --
--------- --------- --------- ------------- -------------
--------- --------- --------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
1. ORGANIZATION AND BASIS OF PRESENTATION
Peachtree Software, Inc. (an indirect wholly owned subsidiary of Automatic
Data Processing, Inc. ("ADP") ("Peachtree" or the "Company") develops, markets,
and supports microcomputer accounting applications software. The Company has
been in operation since 1978. On April 5, 1994, all of the common stock of the
Company was acquired by ADP Atlantic, Inc., a wholly owned subsidiary of ADP,
for a purchase price of $41,000. The financial statements of the Company reflect
the pushdown of certain balances including goodwill relating to the ADP
acquisition. See Note 9 relating to transactions with ADP and Note 10 relating
to the acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The financial statements include the accounts
of the Company and its wholly owned subsidiaries. All intercompany transactions
and balances have been eliminated.
INTERIM FINANCIAL INFORMATION--The financial statements at September 26,
1998 and the three months ended September 27, 1997 and September 26, 1998 are
unaudited but include all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair presentation of its
financial position at such date and its operating results and cash flows for
those periods. Results for interim periods are not necessarily indicative of
results for the entire year.
CASH FLOWS--The statements of cash flows exclude the effects of the
acquisition of certain assets relating to the One Write Plus product line from
New England Business Services, Inc. in 1996 and the acquisition of Micro
Associates, Inc. in 1998. Both acquisitions were paid for by ADP and contributed
to the Company. See Note 10 relating to the acquisitions.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The book values of cash, trade accounts
receivable, trade accounts payable, and other financial instruments approximate
their fair values principally because of the short-term maturities of these
instruments.
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK--The Company sells its
products through distributors and through direct marketing efforts. One
distributor accounted for approximately 24% of net sales for years ended June
29, 1996, June 28, 1997, and June 27, 1998. The Company performs ongoing credit
evaluation of its customers' financial condition. The Company maintains reserves
for estimated credit losses.
REVENUE RECOGNITION AND DEFERRED REVENUE--License fees are generally
recognized at the time of shipment, provided that no significant vendor
obligations remain and collection of the resulting receivable is deemed
probable. Certain of the Company's sales are made to distributors subject to
F-7
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rights of return and price protection on unsold merchandise. Accordingly, the
Company defers revenue on shipments into the retail distribution channel until
sale of the product to the small business customer is deemed reasonably assured.
Service fees include customer maintenance and support, payroll, and property
tax updates and commissions on sales of preprinted business forms. Customer
maintenance and support are recognized ratably over the term of the software
support services agreement, which is typically 12 months. Payroll and property
tax updates are recognized in proportion to the associated expenses.
Deferred revenue consisted of the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Deferred revenue:
Distribution channel inventory................................... $ 10,976 $ 10,757 $ 7,500
Other license and service fees................................... 4,560 4,907 3,855
--------- --------- -------------
Total deferred revenue....................................... $ 15,536 $ 15,664 $ 11,355
--------- --------- -------------
--------- --------- -------------
</TABLE>
COST OF REVENUE--Cost of license fees includes direct product costs,
warranty support costs, and royalties paid by the Company. Cost of services
revenue includes employee compensation and benefits, telephone charges, direct
product costs, and other costs related to providing such services. The Company
records the direct product costs at the time of shipment without reduction for
revenue reserves or deferred revenue if distribution channel inventory is deemed
above appropriate levels.
PROPERTY AND EQUIPMENT--Property and equipment consists of building
improvements, furniture and fixtures, and computers and equipment. These assets
are depreciated on a straight-line basis over a two-, three-, or five-year life.
Building improvements are amortized over the shorter of their economic lives or
the term of the lease.
INTANGIBLE ASSETS--Intangible assets include goodwill, current technology,
trademarks, workforce, and installed base, all recorded in conjunction with the
acquisitions as described in Note 10, and purchased software. Intangible assets
are being amortized on a straight-line basis over the following periods:
<TABLE>
<S> <C>
Goodwill.......................................................... 15 years
Trademarks........................................................ 17 years
Current technology................................................ 5 years
Workforce......................................................... 5 years
Installed base.................................................... 5 years
Purchased software................................................ 2-3 years
</TABLE>
F-8
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible asset amortization expense was as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998
----------- ----------- ----------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Amortization of purchased software......... $ 99 $ 167 $ 153 $ 34 $ 24
Amortization of other acquisition related
intangibles.............................. 4,830 5,620 5,687 1,405 1,445
----------- ----------- ----------- ------ ------
$ 4,929 $ 5,787 $ 5,840 $ 1,439 $ 1,469
----------- ----------- ----------- ------ ------
----------- ----------- ----------- ------ ------
</TABLE>
INVENTORIES--Inventories are stated at the lower of FIFO cost or market
(determined on the basis of estimated realizable values).
CAPITALIZED SOFTWARE DEVELOPMENT COSTS--Research and development expenses
are charged to expense as incurred. Computer software development costs are
charged to research and development expense until technological feasibility is
established; after which, remaining software production costs are capitalized in
accordance with Statement of Financial Accounting Standards ("SFAS") 86,
"Accounting for Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." The Company has defined technological feasibility as the point in
time at which the Company has a working model of the related product.
Historically, the development costs incurred during the period between the
achievement of technological feasibility and the point at which the product is
available for general release to customers have not been material. Accordingly,
the Company has concluded that the amount of development costs capitalizable
under the provisions of SFAS 86 was not material to the financial statements for
the years ended June 29, 1996, June 28, 1997, and June 27, 1998 and has charged
all software development costs to expense as incurred.
IMPAIRMENT OF LONG LIVED AND INTANGIBLE ASSETS--The Company periodically
reviews the carrying values of long-lived assets, including property and other
assets, to determine whether any impairments are other than temporary.
Management believes that the long-lived assets in the accompanying balance
sheets are not impaired.
The Company periodically reviews the values of goodwill and intangible
assets to determine whether events and circumstances have occurred which
indicate that the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable. The
Company uses an estimate of undiscounted cash flows over the remaining life of
the goodwill and other intangible assets in measuring whether the goodwill and
other intangible assets are recoverable.
F-9
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES--Accounts payable and accrued
liabilities include the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
----------- ----------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Accounts payable.................................................... $ 1,427 $ 2,322 $ 2,909
Accrued taxes, other than income taxes.............................. 207 1,088 930
Accrued compensation, benefits, and commissions..................... 620 855 1,072
Accrued other....................................................... 1,220 2,196 2,723
----------- ----------- ------
Total accounts payable and accrued liabilities...................... $ 3,474 $ 6,461 $ 7,634
----------- ----------- ------
----------- ----------- ------
</TABLE>
INCOME TAXES--The Company accounts for its income taxes using the asset and
liability approach. Deferred taxes reflect the tax consequences on future years
of differences between the financial reporting and tax bases of assets and
liabilities. The Company's results of operations are included in the
consolidated federal income tax return filed by ADP. The income tax provisions
included in the statements of operations have been determined as if the Company
was a separate taxpayer.
NEW ACCOUNTING PRONOUNCEMENTS--The Company adopted Statement of Position
("SOP") 97-2, "Software Revenue Recognition," in the first quarter of fiscal
year 1999. The adoption of SOP 97-2 did not have a material impact on the
Company's consolidated financial statements as the existing revenue recognition
policy was similar to that prescribed by SOP 97-2.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards ("SFAS") 130, "Reporting Comprehensive
Income." SFAS 130 is designed to improve the reporting of changes in equity from
period to period. The Company adopted SFAS 130 in the first quarter of fiscal
1999. As the Company has no components of other comprehensive income, adoption
of SFAS 130 did not have an impact on the Company's financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS 131 requires that an enterprise
disclose certain information about operating segments. The Company adopted the
provisions of SFAS 131 in the first quarter of fiscal 1999. The Company
currently has only one operating segment and therefore adoption of SFAS 131 did
not have an impact on the Company's financial statements.
In June 1998, SFAS 133, "Accounting for Derivative instruments and Hedging
Activities," was issued. SFAS 133 establishes standards for derivative
instruments and hedging activities and requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. Peachtree has
not determined what effect, if any, adoption of SFAS 133 will have on
Peachtree's financial statements.
F-10
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Accounts receivable:
Trade............................................................ $ 11,176 $ 13,914 $ 8,686
Other............................................................ 516 145 164
Allowance for doubtful accounts and sales returns.................. (1,821) (4,690) (2,929)
--------- --------- ------
Accounts receivable-net...................................... $ 9,871 $ 9,369 $ 5,921
--------- --------- ------
--------- --------- ------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
----------- ----------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Building improvements............................................... $ 1,729 $ 2,006 $ 2,008
Furniture and fixtures.............................................. 844 1,472 1,472
Computers and equipment............................................. 3,513 4,455 4,923
----------- ----------- ------
6,086 7,933 8,403
Less accumulated depreciation....................................... 3,163 4,963 5,343
----------- ----------- ------
Property and equipment-net.................................... $ 2,923 $ 2,970 $ 3,060
----------- ----------- ------
----------- ----------- ------
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 27, SEPTEMBER 26,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Goodwill........................................................... $ 14,851 $ 17,251 $ 17,251
Current technology................................................. 16,960 16,960 16,960
Installed base..................................................... 3,900 3,900 3,900
Trademarks......................................................... 1,780 1,780 1,780
Workforce.......................................................... 1,840 1,840 1,840
Purchased software................................................. 531 600 686
--------- --------- -------------
Total............................................................ 39,862 42,331 42,417
Less accumulated amortization...................................... 16,646 22,486 23,955
--------- --------- -------------
Intangible assets-net........................................ $ 23,216 $ 19,845 $ 18,462
--------- --------- -------------
--------- --------- -------------
</TABLE>
F-11
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
6. INCOME TAXES
The Company's operations are included in the consolidated tax returns of
ADP. The income tax provisions included in the statements of operations have
been determined as if the Company was a separate taxpayer.
The components of the provision for income taxes for the years ended June
29, 1996, June 28, 1997, and June 27, 1998 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Current tax expense........................................................ $ 2,613 $ 4,271 $ 3,705
Deferred tax benefit....................................................... (2,634) (4,117) (3,164)
Adjustment of deferred tax assets for change in tax rate................... -- -- (94)
--------- --------- ---------
$ (21) $ 154 $ 447
--------- --------- ---------
--------- --------- ---------
</TABLE>
The deferred tax benefit represents the tax impact related to certain
deferred revenue that is recognized when received for tax purposes and accrued
liabilities and other credits that have been recorded for financial statement
purposes, but are not deductible for income tax purposes until paid. The Company
has net operating loss carryforwards of approximately $3,300 expiring in years
2006 through 2008, and tax credits of approximately $603 expiring in years 2003
through 2008. The Company believes that it is more likely than not that the tax
benefit will be realized, and therefore, a valuation allowance has not been
recorded.
The tax effects of significant temporary differences, net operating loss
carryforwards, and tax credits at June 28, 1997 and June 27, 1998 are summarized
as follows:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Deferred revenue................................................................. $ 5,669 $ 5,671
Allowance for doubtful accounts and returns...................................... 1,285 2,365
Accrued liabilities.............................................................. 425 1,150
Net operating loss carryforward.................................................. 1,812 1,221
Inventory........................................................................ 280 436
Tax credits...................................................................... 603 603
--------- ---------
Total gross deferred income tax assets....................................... 10,074 11,446
Deferred income tax liabilities:
Differences between book and tax bases of property, equipment, and intangible
assets......................................................................... (3,040) (1,189)
Other deferred tax liabilities................................................... (649) (614)
--------- ---------
Total gross deferred income tax liabilities.................................. (3,689) (1,803)
--------- ---------
</TABLE>
F-12
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
6. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Net deferred income tax assets............................................... $ 6,385 $ 9,643
--------- ---------
--------- ---------
The net deferred income tax asset is classified as follows:
Current deferred tax asset....................................................... $ 8,221 $ 10,227
Noncurrent deferred tax liability................................................ (1,836) (584)
--------- ---------
$ 6,385 $ 9,643
--------- ---------
--------- ---------
</TABLE>
Following is a reconciliation between income taxes at statutory rates to
income taxes as reported June 29, 1996, June 28, 1997, and June 27, 1998:
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory income tax (benefit)................. $ (329) (34.0)% $ (121) (34.0)% $ 237 34.0%
Nondeductible goodwill......................... 301 31.1 301 84.8 323 46.4
State and local income tax expense (benefit),
net of federal benefit....................... (1) (0.1) 14 3.9 50 7.2
Utilization of tax credits..................... -- -- (80) (22.5) (80) (11.5)
Deferred tax adjustment for the effects of
changes in state tax rates................... -- -- -- -- (94) (13.5)
Additional federal tax due to graduated
rates........................................ -- -- 29 8.2 -- --
Other nondeductible expenses................... 8 0.8 11 3.0 11 1.6
--------- --------- --------- --------- --------- ---------
Income tax expense (benefit)............... $ (21) (2.2)% $ 154 43.4% $ 447 64.2%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
7. EMPLOYEE BENEFIT PLANS
PENSION PLAN--Substantially all of the Company's employees participate in
ADP's pension plan under which employees are credited with a percentage of base
pay plus 7% interest. Employees are fully vested after five years of service.
The Company was allocated related expense of $133, $177, and $184 for the years
ended June 29, 1996, June 28, 1997, and June 27, 1998, respectively.
RETIREMENT AND SAVINGS PLAN--Certain employees of the Company participate in
ADP's 401(k) retirement and savings plan which allows eligible employees to
contribute up to 16% of their compensation annually. ADP matches a portion of
this contribution and the Company was allocated related expense of $246, $330,
and $342 for the years ended June 29, 1996, June 28, 1997, and June 27, 1998,
respectively.
STOCK PLANS--Certain employees of the Company receive stock options under
ADP's stock option plan which provides for the issuance to eligible employees of
incentive and non-qualified stock options,
F-13
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
which expire 10 years from the date of the grant, at prices not less than the
fair market value on the date of the grant. The options generally vest ratably
over five years from the date of grant.
Certain employees of the Company participate in ADP's stock purchase plans
under which eligible employees have the ability to purchase shares of ADP common
stock at 85% of the lower of market value as of the date of purchase election or
the end of the plans.
The Company continues to account for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees," and consequently, the Company has not recorded related
compensation expense. Had compensation cost been determined under SFAS 123,
"Accounting for Stock Based Compensation," the Company's net earnings would have
been ($990), ($599), and $39 for the years ended June 29, 1996, June 28, 1997,
and June 27, 1998, respectively. The fair value of these instruments was
estimated at the date of the grant using a Black-Scholes pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
JUNE 29, JUNE 28, JUNE 27,
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Dividend yield............................................ 1.1% 1.0-1.1% 1.0%
Expected volatility....................................... 11.9-13.3% 12.7-13.2% 13.9-17.4%
Risk-free interest rates.................................. 5.2-6.5% 5.8-6.6% 5.4-6.3%
Expected life............................................. 6.2 6.2 6.2
Weighted average fair value:
Options................................................. $9.53 $12.43 $15.97
Purchase rights......................................... $9.53 $11.94 $21.44
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
LEASES--The Company leases furniture, equipment, and office space under
various noncancelable operating leases expiring through June 28, 2003. Future
minimum lease payments under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
- -------------------------------------------------------------------------------------
<S> <C>
June 26, 1999........................................................................ $ 1,142
June 24, 2000........................................................................ 589
June 30, 2001........................................................................ 83
June 29, 2002........................................................................ 83
June 28, 2003........................................................................ 42
Thereafter........................................................................... --
---------
$ 1,939
---------
---------
</TABLE>
F-14
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rent expense under operating leases for the years ended June 29, 1996, June
28, 1997, and June 27, 1998 was $484, $786, and $897, respectively.
ROYALTIES--The Company has royalty agreements with certain software
developers which provide for payments based on the certain product sales. The
Company expensed royalties of $918, $1,157, and $1,031 for the years ended June
29, 1996, June 28, 1997, and June 27, 1998, respectively.
CONTINGENCIES--The Company is involved in various claims arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
financial statements of the Company.
9. TRANSACTIONS WITH RELATED PARTIES
TRANSACTIONS WITH ADP--ADP provides certain services to the Company,
including payroll and employee benefits administration, data processing, and
telecommunications services. ADP administers certain programs in which the
Company participates, including active medical and insurance programs. Costs for
these services and programs are billed to the Company based on estimated usage
and are included in the Company's statements of operations. These costs totaled
$1,181, $1,261, and $1,275 for the years ended June 29, 1996, June 28, 1997, and
June 27, 1998, respectively. Management believes that the methods of billing
these costs are reasonable and that the costs charged to the Company are
approximately that which would be incurred on a stand-alone basis. Certain other
services including legal and tax return preparation are provided by ADP and are
not charged to Peachtree. The Company believes that these expenses have been
immaterial.
Certain costs are paid by the Company on behalf of ADP and are billed to
ADP. Interest is charged on the intercompany balances at a rate of 6.0% per
year. Excess cash is swept by ADP from the Company's cash accounts.
Included in the intercompany amounts due from (to) ADP are the following
transactions:
<TABLE>
<S> <C>
Intercompany balance due from (to) ADP at June 30, 1995............ $ 3,799
Cash transferred to ADP.......................................... 7,923
Payroll funded by ADP............................................ (5,525)
Income tax payable to ADP........................................ (2,613)
Interest on intercompany balance................................. 281
Net expense allocations and reimbursements....................... 2,002
---------
</TABLE>
F-15
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
9. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
<TABLE>
<S> <C>
Intercompany balance due from (to) ADP at June 29, 1996............ 5,867
Cash transferred to ADP.......................................... 13,775
Payroll funded by ADP............................................ (7,124)
Income tax payable to ADP........................................ (4,271)
Interest on intercompany balance................................. 501
Net expense allocations and reimbursements....................... (957)
---------
Intercompany balance due from (to) ADP at June 28, 1997............ 7,791
Cash transferred to ADP.......................................... 17,201
Payroll funded by ADP............................................ (8,619)
Income tax payable to ADP........................................ (3,705)
Interest on intercompany balance................................. 564
Net expense allocations and reimbursements....................... 1,920
---------
Intercompany balance due from (to) ADP at June 27, 1998............ 15,152
Cash transferred to ADP (unaudited).............................. 2,916
Payroll funded by ADP (unaudited)................................ (2,744)
Income tax payable to ADP (unaudited)............................ 1,935
Interest on intercompany balance (unaudited)..................... 232
Net expense allocations and reimbursements (unaudited)........... (1,344)
---------
Intercompany balance due from (to) ADP at September 26, 1998
(unaudited)...................................................... $ 16,147
---------
---------
</TABLE>
OTHER RELATED PARTY TRANSACTIONS--In 1991, the Company entered into a
license agreement with Accounting by Design. Subsequent to the agreement, the
majority shareholder of Accounting by Design was employed by the Company. The
Company paid royalties to Accounting by Design of $660, $831, and $543 for the
years ended June 29, 1996, June 28, 1997, and June 27, 1998, respectively.
10. ACQUISITIONS
On April 4, 1994, ADP acquired all of the outstanding shares of Peachtree
Software, Inc. The total purchase price of $41,000 was satisfied in cash. The
acquisition was accounted for by the purchase method of accounting.
F-16
<PAGE>
PEACHTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF JUNE 28, 1997 AND JUNE 27, 1998 AND SEPTEMBER 26, 1998 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27, 1998
AND THE THREE MONTHS ENDED SEPTEMBER 27, 1997 (UNAUDITED)
AND SEPTEMBER 26, 1998 (UNAUDITED)
(in thousands)
10. ACQUISITIONS (CONTINUED)
The excess of $35,292 over the net liabilities assumed and in-process
research and development at the acquisition date was allocated as follows:
<TABLE>
<S> <C>
Current technology................................................. $ 14,000
Trademarks......................................................... 1,400
Workforce.......................................................... 1,700
Installed base..................................................... 2,300
Goodwill........................................................... 15,892
</TABLE>
The net liabilities acquired included a valuation allowance against deferred
tax assets. During 1995, it was determined that $2,411 of the valuation
allowance was no longer necessary and was written off against goodwill.
On March 22, 1996, the Company acquired certain assets of the One Write Plus
("OWP") product line from New England Business Services, Inc ("NEBS"). The total
purchase price of $6,450 included a cash payment of $4,500 to NEBS and net
liabilities assumed and acquisition expenses totaling $1,950. The acquisition
has been accounted for by the purchase method of accounting and accordingly, the
accompanying financial statements include the results of operations of OWP
subsequent to the acquisition date.
The $6,450 purchase price was allocated as follows:
<TABLE>
<S> <C>
Current technology.......................................................... $ 2,960
Trademarks.................................................................. 380
Workforce................................................................... 140
Installed base.............................................................. 1,600
Goodwill.................................................................... 1,370
</TABLE>
On January 13, 1998, the Company acquired all of the outstanding stock of
Micro Associates, Inc. The total purchase price of $2,400 included a cash
payment of $2,000 and acquisition expenses totaling $400. The acquisition has
been accounted for by the purchase method of accounting and accordingly, the
accompanying financial statements include the results of operations of Micro
Associates, Inc. subsequent to the acquisition date. The excess of $2,400 over
the net assets acquired at the acquisition date was recorded as goodwill.
F-17
<PAGE>
- Shares
[LOGO]
PEACHTREE
Common Stock
------------------------------------
PROSPECTUS
- , 1999
-------------------------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable in connection
with the Offering. All the amounts shown are estimates, except the Securities
and Exchange Commission's registration fee. All of such expenses are being borne
by Peachtree.
<TABLE>
<CAPTION>
FEE OR EXPENSE
--------------
<S> <C>
SEC Registration Fee.......................................................... $ 38,920
Blue Sky Fee.................................................................. -
Nasdaq National Market Fee.................................................... -
NASD Fee...................................................................... 14,500
Accounting Fees and Expenses.................................................. -
Legal Fees and Expenses....................................................... -
Printing and Engraving Expenses............................................... -
Registrar and Transfer Agent's Fees........................................... -
Miscellaneous Fees and Expenses............................................... -
--------------
Total................................................................... $ -
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a provision in the certificate of incorporation of each corporation
organized thereunder, eliminating or limiting, with certain exceptions, the
personal liability of a director to the corporation or its stockholders for
monetary damages for certain breaches of fiduciary duty as a director.
Peachtree's Charter eliminates the personal liability of directors to the
fullest extent permitted by the DGCL.
Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any suit or proceeding other than by or on behalf of the
corporation, if they acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of the corporation, and, with respect
to a criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
With respect to actions by or on behalf of the corporation, Section 145
permits a corporation to indemnify its officers, directors, employees and agents
against expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such action or suit, provided such
person meets the standard of conduct described in the preceding paragraph,
except that no indemnification is permitted in respect of any claim where such
person has been found liable to the corporation, unless the Court of Chancery or
the court in which such action or suit was brought approves such indemnification
and determines that such person is fairly and reasonably entitled to be
indemnified.
Article Eight of the Charter provides for the indemnification of officers
and directors and certain other parties (the "Indemnitees") of Peachtree to the
fullest extent permitted under the DGCL; PROVIDED, that except in the case of
proceedings to enforce rights to indemnification, Peachtree shall indemnify such
Indemnitee in connection with a proceeding initiated by such Indemnitee only if
such proceeding was authorized by the Board.
Each of Peachtree's executive officers is expected to enter into an
indemnification agreement with Peachtree in the form attached as an exhibit to
this Registration Statement. Such agreements contain
II-1
<PAGE>
provisions entitling such executives to indemnification for losses incurred in
the course of service to Peachtree or its subsidiaries, under certain
circumstances.
Peachtree currently expects to obtain customary directors' and officers'
liability insurance coverage pursuant to which directors and officers would be
entitled to indemnity from the insurer with respect to certain liabilities
incurred in their capacity as directors and officers of Peachtree.
Pursuant to the underwriting agreement between Peachtree, ADP and the
underwriters filed as an exhibit to this Registration Statement, the
underwriters have agreed to indemnify each officer and director of Peachtree and
ADP and each person, if any, who controls Peachtree or ADP within the meaning of
the Securities Act of 1933, as amended, against certain liabilities, including
liabilities under said Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, Peachtree has not issued or sold any
unregistered securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1** --Form of Underwriting Agreement.
3.1* --Form of Amended and Restated Certificate of Incorporation of Peachtree.
3.2* --Form of Amended and Restated By-laws of Peachtree.
4.1* --Specimen Common Stock Certificate.
4.2** --Form of Rights Agreement relating to Preferred Stock Purchase Rights of Peachtree.
5.1** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to Validity of Common Stock.
10.1**+ --Form of Employment Agreement between Peachtree and Peachtree's Executive Officers.
10.2*+ --Form of Continuation Agreement between Peachtree and Certain Officers.
10.3**+ --Form of 1998 Long-Term Incentive Plan of Peachtree.
10.4**+ --Form of Stock Plan for Non-Employee Directors of Peachtree.
10.5**+ --Form of Employee Stock Purchase Plan of Peachtree.
10.6*+ --Form of Indemnification Agreement of Peachtree.
10.7** --Form of Intercompany Agreement between Peachtree Software, Inc. and Automatic Data Processing, Inc.
10.8* --Form of Registration Rights Agreement between Peachtree Software, Inc. and Automatic Data
Processing, Inc.
10.9** --Form of Technology Agreement between Peachtree Software, Inc. and Automatic Data Processing, Inc.
10.10** --Form of Tax Indemnification Agreement between Peachtree Software, Inc. and Automatic Data
Processing, Inc.
21.1* --List of Subsidiaries
23.1* --Consent of Deloitte & Touche LLP
23.2** --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1)
24** --Power of Attorney
27* --Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
+ Management contract or compensatory plan or arrangement.
II-2
<PAGE>
(b) Except as follows, financial statement schedules have been omitted
because they are inapplicable, are not required under applicable
provisions of Regulation S-X, or the information that would otherwise be
included in such schedules is contained in Peachtree's financial
statements and accompanying notes.
PEACHTREE SOFTWARE, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 29, 1996, JUNE 28, 1997 AND JUNE 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS
Year ended June 29, 1996...................................... $ 349 $ 4,664 $ (4,411)(1) $ 602
Year ended June 28, 1997...................................... $ 602 $ 7,075 $ (5,856)(1) $ 1,821
Year ended June 27, 1998...................................... $ 1,821 $ 11,011 $ (8,142)(1) $ 4,690
INVENTORY MARKET RESERVES
Year ended June 29, 1996...................................... $ 40 $ 330 $ (272)(2) $ 98
Year ended June 28, 1997...................................... $ 98 $ 835 $ (761)(2) $ 172
Year ended June 27, 1998...................................... $ 172 $ 480 $ (100)(2) $ 552
</TABLE>
- ------------------------
(1) Represents merchandise returned and related credits issued.
(2) Represents write-off of obsolete inventory.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Peachtree pursuant to its Charter, By-laws or otherwise, Peachtree has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Peachtree of expenses
incurred or paid by a director, officer or controlling person of Peachtree in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Peachtree will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Peachtree pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Norcross, in the State of
Georgia, on the 18th day of December, 1998.
<TABLE>
<S> <C> <C>
PEACHTREE SOFTWARE, INC.
By: /s/ RONALD F. VERNI
-----------------------------------------
Name: Ronald F. Verni
Title: President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ GARY C. BUTLER
- ------------------------------ Chairman of the Board of
Gary C. Butler Directors
President, Chief Executive
/s/ RONALD F. VERNI Officer and Director
- ------------------------------ (Principal Executive
Ronald F. Verni Officer)
Senior Vice President,
/s/ JANET M. VAN PELT Treasurer and Chief
- ------------------------------ Financial Officer
Janet M. Van Pelt (Principal Financial and
Accounting Officer)
</TABLE>
Dated: December 18, 1998
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1.1** --Form of Underwriting Agreement.
3.1* --Form of Amended and Restated Certificate of Incorporation of Peachtree.
3.2* --Form of Amended and Restated By-laws of Peachtree.
4.1* --Specimen Common Stock Certificate.
5.1** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to Validity of Common Stock.
10.1**+ --Form of Employment Agreement between Peachtree and Peachtree's Executive Officers.
10.2*+ --Form of Continuation Agreement between Peachtree and Certain Officers.
10.3**+ --Form of 1998 Long-Term Incentive Plan of Peachtree.
10.4**+ --Form of Stock Plan for Non-Employee Directors of Peachtree.
10.5**+ --Form of Employee Stock Purchase Plan of Peachtree.
10.6*+ --Form of Indemnification Agreement of Peachtree.
10.7** --Form of Intercompany Agreement between Peachtree Software, Inc. and Automatic Data
Processing, Inc.
10.8* --Form of Registration Rights Agreement between Peachtree Software, Inc. and Automatic Data
Processing, Inc.
10.9** --Form of Technology Agreement between Peachtree Software, Inc. and Automatic Data Processing,
Inc.
10.10** --Form of Tax Indemnification Agreement between Peachtree Software, Inc. and Automatic Data
Processing, Inc.
21.1* --List of Subsidiaries
23.1* --Consent of Deloitte & Touche LLP
23.2** --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1)
24** --Power of Attorney
27* --Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
+ Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
PEACHTREE SOFTWARE, INC.
Peachtree Software, Inc., a corporation duly incorporated under the
laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Peachtree Software, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on the 29th day of
September, 1988.
SECOND: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with Sections 242 and 245 of the Delaware General
Corporation Law (the "General Corporation Law").
THIRD: This Amended and Restated Certificate of Incorporation restates,
integrates and amends the original Certificate of Incorporation of the
Corporation as follows:
1. Name. The name of the corporation is Peachtree Software, Inc. (the
"Corporation").
<PAGE>
2. Address; Registered Office and Agent. The address of the
Corporation's registered office is 9 East Loockerman Street, City of Dover,
County of Kent. The name of its registered agent at such address is National
Registered Agents, Inc.
3. Purpose. The purpose of the Corporation is to engage in, carry on
and conduct any lawful act or activity for which corporations may be organized
under the General Corporation Law.
4. Number of Shares. The total number of shares of stock that the
Corporation shall have authority to issue is twenty-five million (25,000,000),
divided as follows: five million (5,000,000) shares of Preferred Stock (the
"Preferred Stock"), and twenty million (20,000,000) shares of Common Stock, of
the par value of $0.01 per share (the "Common Stock").
5. Designation of Classes; Relative Rights, Etc. The designation,
relative rights, preferences and limitations of the shares of each class are as
follows:
5.1 Preferred Stock.
5.1.1 General. The shares of Preferred Stock may be
issued from time to time in one or more series of any number of shares, provided
that the aggregate number of shares issued and not canceled of any and all such
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with such powers, preferences and rights and
qualifications, limitations or restrictions thereof, and such distinctive serial
designations, all as shall hereafter be stated and expressed in the resolution
or resolutions providing for the issue of such
<PAGE>
shares of Preferred Stock from time to time adopted by the Board of Directors of
the Corporation (the "Board of Directors") pursuant to authority so to do which
is hereby vested in the Board of Directors. Each series of shares of Preferred
Stock (a) may have such voting rights or powers, full or limited, or may be
without voting rights or powers; (b) may be subject to redemption at such time
or times and at such prices; (c) may be entitled to receive dividends (which may
be cumulative or non-cumulative) at such rate or rates, on such conditions and
at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d) may have
such rights upon the voluntary or involuntary liquidation, winding up or
dissolution of, or upon any distribution of the assets of, the Corporation; (e)
may be made convertible into or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Corporation at such price or prices or at such rates of exchange
and with such adjustments; (f) may be entitled to the benefit of a sinking fund
to be applied to the purchase or redemption of shares of such series in such
amount or amounts; (g) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or any
subsidiary, upon the issue of any additional shares (including additional shares
of such series or of any other series) and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of, any outstanding shares of
the Corporation and (h) may have such other relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof; all
as shall be stated in said resolution or resolutions providing for the issue
<PAGE>
of such shares of Preferred Stock. Any of the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of any such
series of Preferred Stock may be made dependent upon facts ascertainable outside
of the resolution or resolutions providing for the issue of such Preferred Stock
adopted by the Board of Directors pursuant to the authority vested in it by this
Section 5.1.1, provided that the manner in which such facts shall operate upon
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of such series of Preferred Stock is clearly and
expressly set forth in the resolution or resolutions providing for the issue of
such Preferred Stock. The term "facts" as used in the next preceding sentence
shall have the meaning given to it in Section 151(a) of the General Corporation
Law. Shares of Preferred Stock of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or that if convertible or
exchangeable, have been converted into or exchanged for shares of any other
class or classes shall have the status of authorized and unissued shares of
Preferred Stock undesignated as to series and may be reissued as a part of the
series of which they were originally a part or as part of a new series of shares
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of shares of Preferred Stock, all
subject to the conditions or restric tions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of any series of shares of Preferred Stock.
5.1.2 Series A Preferred Stock. The first series of
Preferred Stock of the Corporation shall be, and hereby is, designated "Series A
Preferred Stock" (the "Series A Shares"), shall have a par value of $0.01 per
share, and the
4
<PAGE>
number of shares constituting such series shall initially be two hundred
thousand (200,000). The relative rights and preferences of the Series A Shares
shall be as follows:
Section A. Dividends and Distributions.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series A Shares
with respect to dividends, the holders of Series A Shares, in preference to the
holders of Common Stock, and of any other junior stock, shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
lawfully available therefor, cash dividends thereon, payable quarterly, from the
date of issuance thereof, upon the last days of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a Series A Share, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $0.25 or (b) subject to the
provisions for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a
dividend or distribution payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any Series A Share. In the event the Corporation
shall at any time after the date of filing of this Amended and Restated
Certificate of Incorporation (i) declare
5
<PAGE>
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amounts to which holders
of Series A Shares were entitled immediately prior to such event under clause
(a) and clause (b) of the preceding sentence shall be adjusted by multiplying
each such amount by a fraction the numerator of which is the number of shares of
Common Shares outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(2) The Corporation shall declare a dividend or distribution on the
Series A Shares as provided in paragraph (1) of this Section A immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend or distribution payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.25 per share of the
Series A Shares shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date; and provided further that nothing contained in this
paragraph (2) shall be construed so as to conflict with any provision relating
to the declaration of dividends contained elsewhere in this Amended and Restated
Certificate of Incorporation.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series A Shares from the Quarterly Dividend Payment Date next preceding the date
of issue of such Series A Shares, unless (a) the date of issue of
6
<PAGE>
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or (b) unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of Series A Shares entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
Series A Shares in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of Series A
Shares entitled to receive payment of a dividend or distribution declared
thereon.
Section B. Redemption. The Series A Shares are not redeemable.
Section C. Liquidation, Dissolution or Winding Up. In the event of the
voluntary or involuntary liquidation of the Corporation the "preferential
amount" which the holders of the Series A Shares shall be entitled to receive
out of the assets of the Corporation shall be $100.00 per share plus all accrued
and unpaid dividends thereon.
(1) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made to the holders of shares of stock ranking junior
(upon liquidation, dissolution or winding up) to the Series A Shares unless,
prior thereto, the holders of Series A Shares shall have received $100.00 per
share,
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plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of Series A Shares unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
100 (as appropriately adjusted as set forth in paragraph (3) of this Section C
to reflect such events as stock splits, stock dividends and recapitalization
with respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding Series A
Shares and Common Stock, respectively, holders of Series A Shares and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
one with respect to the Series A Shares and Common Stock, on a per share basis,
respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Shares, then all such available assets
shall be distributed ratably to the holders of the Series A Shares and the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common
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Adjustment, then any such remaining assets shall be distributed ratably to the
holders of Common Stock.
(3) In the event the Corporation shall at any time after the
date of filing of this Amended and Restated Certificate of Incorporation, (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section D. Sinking Fund. The Series A Shares shall not be entitled to
the benefit of any sinking fund for the redemption or purchase of such shares.
Section E. Conversion.
(1) Subject to paragraph (2) of this Section E, the Series A Shares
shall not be convertible.
(2) In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the Series A Shares shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock,
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securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of Series A Shares shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event, and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section F. Voting Rights.
(1) The holders of Series A Shares shall have no voting rights except
as provided by Delaware statutes or by paragraph (2) of this Section F.
(2) So long as any Series A Shares shall be outstanding, and in
addition to any other approvals or consents required by law, without the consent
of the holders of 66-2/3% of the Series A Shares outstanding as of a record date
fixed by the Board of Directors, given either by their affirmative vote at a
special meeting called for that purpose, or, if permitted by law, in
writing without a meeting:
(i) The Corporation shall not sell, transfer or lease
all or substantially all the properties and assets of the Corporation;
provided, however, that nothing herein shall require the consent of the
holders of
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Series A Shares for or in respect of the creation of any mortgage,
pledge, or other lien upon all or any part of the assets of the
Corporation.
(ii) The Corporation shall not effect a merger or
consolidation with any other corporation or corporations unless as a
result of such merger or consolidation and after giving effect thereto
holders of Series A Shares are entitled to receive a per share amount
and type of consideration equal to 100 times the per share amount and
type of consideration received by holders of shares of Common Stock, or
(1) either (A) the Corporation shall be the surviving corporation or
(B) if the Corporation is not the surviving corporation, the successor
corporation shall be a corporation duly organized and existing under
the laws of any state of the United States of America or the District
of Columbia, and all obligations of the Corporation with respect to the
Series A Shares shall be assumed by successor corporation, (2) the
Series A Shares then outstanding shall continue to be outstanding, and
(3) there shall be no alteration or change in the designation or the
preferences, relative rights or limitations applicable to outstanding
Series A Shares prejudicial to the holders thereof.
(iii) The Corporation shall not amend, alter or
repeal any of the provisions of this Amended and Restated Certificate
of Incorporation in any manner which adversely affects the relative
rights, preferences or limitations of the Series A Shares or the
holders thereof.
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Section G. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Shares as provided in Section A are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on Series A Shares outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (as to dividends) to
the Series A Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (as to
dividends) with the Series A Shares, except dividends paid ratably on
the Series A Shares and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (as to dividends) to
the Series A Shares, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation, ranking junior
(as to dividends) to the Series A Shares; and
(iv) purchase or otherwise acquire for consideration
any Series A Shares, or any shares of stock ranking on a parity (as to
dividends) with the Series A Shares, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors ) to all
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holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and the relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (1) of this Section G,
purchase or otherwise acquire such shares at such time and in such manner.
Section H. Fractional Shares. The Corporation may issue fractions and
certificates representing fractions of Series A Shares in integral multiples of
1/100th of a Series A Share, or in lieu thereof, at the election of the Board of
Directors of the Corporation at the time of the first issue of any Series A
Shares, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depository selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all rights, privileges and preferences to which they would
be entitled as beneficial owners of Series A Shares. In the event that
fractional Series A Shares are issued, the holders thereof shall have all the
rights provided herein of holders of full Series A Shares in the proportion
which such fraction bears to a full share.
5.2 Common Stock. Subject to the provisions of any applicable law or of
the By-laws of the Corporation, as from time to time amended (the "By-laws"),
with respect to the closing of the transfer books or the fixing of a
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record date for the determination of stockholders entitled to vote and except as
otherwise provided by law or by the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock, the holders of outstanding
shares of Common Stock shall exclusively possess voting power for the election
of directors and for all other purposes, each holder of record of shares of
Common Stock being entitled to one vote for each share of Common Stock standing
in his or her name on the books of the Corporation. Except as otherwise provided
by the resolution or resolutions providing for the issue of any series of shares
of Preferred Stock, the holders of shares of Common Stock shall be entitled, to
the exclusion of the holders of shares of Preferred Stock of any and all series,
to receive such dividends as from time to time may be declared by the Board of
Directors. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment shall have been
made to the holders of shares of Preferred Stock of the full amount to which
they shall be entitled pursuant to the resolution or resolutions providing for
the issue of any series of shares of Preferred Stock, the holders of shares of
Common Stock shall be entitled, to the exclusion of the holders of shares of
Preferred Stock of any and all series, to share, ratably according to the number
of shares of Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
5.3 Issuance of Stock; Consideration and Purpose. Subject to the
provisions of this Amended and Restated Certificate of Incorporation and except
as otherwise provided by law, the stock of the Corporation, regardless of
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class, may be issued for such consideration and for such corporate purposes as
the Board of Directors may from time to time determine.
6. Compromise, Arrangement or Reorganization. Whenever a compromise or
arrangement is proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of the General
Corporation Law or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of General Corporation Law order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all stockholders or class of stockholders of this Corporation, as the case may
be, and also on this Corporation.
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7. Limitation of Liability. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under Section 174 of the General
Corporation Law or (d) for any transaction from which the director derived any
improper personal benefits. If the General Corporation Law is hereafter amended
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 General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. Indemnification.
8.1 Indemnity Undertaking. To the extent not prohibited by
law, the Corporation shall indemnify any person (an "Eligible Person") who is or
was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Corporation, or, while a
director or officer of the Corporation, is or
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was serving, at the request of the Corporation, as a director or officer of any
other corporation or in a capacity with comparable authority or responsibilities
for any partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges).
8.2 Payment of Expenses. The Corporation shall, from time
to time pay to an Eligible Person the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred by or on behalf of such
Eligible Person in connection with any Proceeding, as such expenses are incurred
in advance of the final disposition of such Proceeding; provided, however, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of such Eligible Person may be paid in advance of the final disposition
of a Proceeding only upon receipt by the Corporation of an undertaking, by or on
behalf of such Eligible Person, to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Eligible Person is not entitled to be
indemnified for such expenses.
8.3 Certain Exclusions. Section 8.1 and 8.2 shall not include
any Proceeding commenced by any Eligible Person without the advance approval of
the Board of Directors.
8.4 Binding Effect. The provisions of this Section 8 shall be
a contract between the Corporation, on the one hand, and each Eligible Person,
on the other hand, pursuant to which the Corporation and each such Eligible
Person intend to
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be, and shall be, legally bound. No repeal or modification of this Section 8
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or any proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
8.5 Procedural Rights. The rights to indemnification and
payment of expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by an Eligible Person entitled to such indemnification or payment of
expenses in any court of competent jurisdiction. The burden of proving that such
indemnification or payment of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including the disinterested
directors on its Board of Directors, a committee of such disinterested
directors, the Corporation's independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that such
indemnification or payment of expenses is proper in the circumstances, nor an
actual determination by the Corporation (including the disinterested directors
on its Board of Directors, a committee of such disinterested directors, the
Corporation's independent legal counsel and its stockholders) that such person
is not entitled to such indemnification or payment of expenses shall constitute
a defense to the action or create a presumption that such person is not so
entitled. Notwithstanding anything to the contrary in Section 8.3, such Eligible
Person shall also be indemnified for any expenses incurred in connection with
successfully establishing his or her right to such indemnification or payment of
expenses, in whole or in part, in any such proceeding.
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8.6 Service Deemed at Corporation's Request. Any director or
officer of the Corporation serving (a) as a director or officer of another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed to be doing so at the request of the Corporation.
8.7 Election of Applicable Law. Any person entitled to be
indemnified or to payment of expenses as a matter of right pursuant to this
Section 8 may elect to have the right to indemnification or payment of expenses
interpreted on the basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the applicable Proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time such indemnification or payment of expenses is sought. Such election
shall be made, by a notice in writing to the Corporation, at the time
indemnification or payment of expenses is sought; provided, however, that if no
such notice is given, the right to indemnification or payment of expenses shall
be determined by the law in effect at the time indemnification or payment of
expenses is sought.
8.8 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, this Amended and Restated
Certificate of Incorporation, the By-laws, any agreement, any vote of
stockholders or disinterested directors or
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otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
8.9 Continuation of Benefits. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Section 8 shall continue as to a person who has ceased to be a director
or officer (or other person indemnified hereunder) and shall inure to the
benefit of the executors, administrators, legatees and distributees of such
person.
8.10 Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of an Other
Entity, against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Section 8 or under Section
145 of the General Corporation Law or any other provision of law.
9. Directors. This Section is inserted for the management of the
business and for the conduct of the affairs of the Corporation and it is
expressly provided that it is intended to be in furtherance of and not in
limitation or exclusion of the powers conferred by applicable law.
9.1 Number, Election, and Terms of Office of Board of Directors. The
business of the Corporation shall be managed by a Board of Directors
consisting of not less than two (2) or more than fifteen (15) members. The
exact
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number of directors within the minimum and maximum limitations specified in the
preceding sentence shall be fixed from time to time by resolution adopted by a
majority of the entire Board of Directors then in office, whether or not present
at a meeting. Directors need not be stockholders of the Corporation. The
directors shall be divided into three (3) classes (known as "Class I," "Class
II" and "Class III") with the term of office of Class I to expire at the first
annual meeting of Stockholders of the Corporation next following the end of the
Corporation's fiscal year ending in 2002, the term of office of Class II to
expire at the first annual meeting of Stockholders of the Corporation next
following the end of the Corporation's fiscal year ending in 2000 and the term
of office of Class III to expire at the annual meeting of Stockholders of the
Corporation next following the end of the Corporation's fiscal year ending in
2001. At each annual meeting of stockholders following such initial election as
specified above, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election.
9.2 Tenure. Notwithstanding any provisions to the contrary
contained herein, (i) each director shall hold office until his or successor is
elected and qualified, or until the earlier of such director's death,
resignation or removal and (ii) the term of any director who is also an officer
of the Corporation shall terminate if he or she ceases to be an officer of the
Corporation.
9.3 Newly Created Directorships and Vacancies. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors
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or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the remaining directors then in office although less than
a quorum, or by a sole remaining director and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of the class to which they have been elected expires or, in each case,
until their respective successors are duly elected and qualified. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director. When any director shall give notice of
resignation effective at a future date, the Board of Directors may fill such
vacancy to take effect when such resignation shall become effective.
9.4 Removal of Directors. Any one or more or all of the
directors may be removed, at any time, but only for cause by the stockholders
having at least four-fifths in voting power of the then issued and outstanding
shares of capital stock of the Corporation.
10. Action by Stockholders. Notwithstanding the provisions of Section
228 of the General Corporation Law (or any successor statute), any action
required or permitted by the General Corporation Law to be taken at any annual
or special meeting of stockholders of the Corporation may be taken only at such
an annual or special meeting of stockholders and cannot be taken by written
consent without a meeting. At any annual meeting or special meeting of
stockholders of the Corporation, only such business shall be conducted as shall
have been brought before such meeting in the manner provided by the By-laws.
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11. Special Meetings of Stockholders. Special meetings of stockholders
for any purpose may be called at any time by the Board of Directors, the
Chairman of the Board of Directors, the Vice-Chairman of the Board of Directors
or the President of the Corporation. Special meetings shall be held at such
place or places within or without the State of Delaware as shall from time to
time be designated by the Board of Directors and stated in the notice of such
meeting or in the waiver of notice thereof.
12. Corporate Opportunities.
12.1 In anticipation that the Corporation will cease to be an
indirect, wholly-owned subsidiary of Automatic Data Processing, Inc. ("ADP"),
but that ADP will remain a substantial stockholder of the Corporation, and in
anticipation that the Corporation and ADP may engage in the same or similar
activities or lines of business and have an interest in the same areas of
corporate opportunities, and in recognition of the benefits to be derived by the
Corporation through its continued contractual, corporate and business relations
with ADP (including possible service of officers and directors of ADP as
officers and directors of the Corporation), the provisions of this Article are
set forth to regulate and define the conduct of certain affairs of the
Corporation as they may involve ADP and its officers and directors, and the
powers, rights, duties and liabilities of the Corporation and its officers,
directors and stockholders in connection therewith.
12.2 ADP shall have no duty to refrain from engaging in the
same or similar activities or lines of business as the Corporation, and neither
ADP nor any officer or director thereof (except as provided in Section 12.3
below) shall be
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liable to the Corporation or its stockholders for breach of any fiduciary duty
by reason of any such activities of ADP. In the event that ADP acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both ADP and the Corporation, ADP shall have no duty to
communicate or offer such corporate opportunity to the Corporation and shall not
be liable to the Corporation or its stockholders for breach of any fiduciary
duty as a stockholder of the Corporation by reason of the fact that ADP pursues
or acquires such corporate opportunity for itself, directs such corporate
opportunity to another person, or does not communicate information regarding
such corporate opportunity to the Corporation.
12.3 In the event that a director or officer of the
Corporation who is also a director or officer of ADP acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
the Corporation and ADP, such director or officer of the Corporation shall have
fully satisfied and fulfilled the fiduciary duty of such director or officer to
the Corporation and its stockholders with respect to such corporate opportunity,
if such director or officer acts in a manner consistent with the following
policy: (i) a corporate opportunity offered to any person who is an officer of
the Corporation, and who is also a director but not an officer of ADP, shall
belong to the Corporation; (ii) a corporate opportunity offered to any person
who is a director but not an officer of the Corporation, and who is also a
director or officer of ADP shall belong to the Corporation if such opportunity
is expressly offered to such person in writing solely in his or her capacity as
a director of the Corporation, and otherwise shall belong to ADP; and (iii) a
corporate opportunity offered to any person who is an officer of both the
Corporation and ADP
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shall belong to the Corporation if such opportunity is expressly offered to such
person in writing solely in his or her capacity as an officer of the
Corporation, and otherwise shall belong to ADP.
12.4 Any person purchasing or otherwise acquiring any interest
in shares of the capital stock of the Corporation shall be deemed to have notice
of and to have consented to the provisions of this Article.
12.5 For purposes of this Article only:
(a) a director of the Corporation who is Chairman of
the Board of Directors of the Corporation or of a committee thereof shall not be
deemed to be an officer of the Corporation by reason of holding such position
(without regard to whether such position is deemed an office of the Corporation
under the By-laws of the Corporation), unless such person is a full-time
employee of the Corporation; and (b) (i) the term "corporation" shall mean the
Corporation and all corporations, partnerships, joint ventures, associations and
other entities in which the Corporation beneficially owns (directly or
indirectly) more than 50% of the outstanding voting stock, voting power,
partnership interests or similar voting interests, and (ii) the term "ADP," for
the purpose of this Article only, shall mean ADP and all corporations,
partnerships, joint ventures, associations and other entities (other than the
Corporation, defined in accordance with clause (i) of this Section 12.5(b) in
which ADP beneficially owns (directly or indirectly) more than 50% of the
outstanding voting stock, voting power, partnership interests or similar voting
interests.
12.6 Notwithstanding anything in this Amended and Restated
Certificate of Incorporation to the contrary, (a) the foregoing provisions of
this
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Article shall expire on the date that ADP ceases to own beneficially Common
Stock representing at least 20% of the total voting power of all classes of
outstanding Common Stock of the Corporation and no person who is a director or
officer of the Corporation is also a director or officer of ADP or any of its
subsidiaries; and (b) in addition to any vote of the stockholders required by
this Amended and Restated Certificate of Incorporation, until the time that ADP
ceases to own beneficially Common Stock representing at least 20% of the total
voting power of all classes of outstanding Common Stock of the Corporation, the
affirmative vote of the holders of more than four-fifths of the total voting
power of all classes of outstanding Common Stock of the Corporation shall be
required to alter, amend or repeal in a manner adverse to the interests of ADP,
or adopt any provision adverse to the interests of ADP and inconsistent with,
any provision of this Article. Neither the alteration, amendment or repeal of
this Article nor the adoption of any provision of this Amended and 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 alteration, amendment, repeal or adoption.
13. Adoption, Amendment and/or Repeal of Certificate of Incorporation
or By-Laws.
13.1 Certificate of Incorporation. Notwithstanding any other
provisions of law, this Amended and Restated Certificate of Incorporation or the
Bylaws, and notwithstanding the fact that a lesser percentage may be specified
by law, the affirmative vote of the holders of not less than four-fifths of all
votes entitled to
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be cast by all of the then outstanding shares of capital stock of the
Corporation in an election of directors shall be required to amend, repeal, or
adopt any provision inconsistent with Sections 5.1.2, 9.1, 9.4, 10, 11 or 13 of
this Amended and Restated Certificate of Incorporation.
13.2 By-Laws. The By-laws of the Corporation may be altered or
repealed and new By-laws may be adopted (i) at any annual or special meeting of
stockholders, by the affirmative vote of not less than a majority of all votes
entitled to be cast by all of the then outstanding shares of capital stock of
the Corporation in the election of directors, provided, however, that any
proposed alteration or repeal of, or the adoption of any by-law inconsistent
with, Sections 2.4, 2.6, 2.12, 2.14, 3.2, 3.7 or Article 14 of the By-laws, by
stockholders shall require the affirmative vote of not less than four-fifths of
all votes entitled to be cast by all of
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the then outstanding shares of capital stock of the Corporation in an election
of directors, or (ii) by the affirmative vote of a majority of the Board of
Directors.
IN WITNESS WHEREOF, the undersigned has executed this Amended
and Restated Certification of Incorporation this [ ] day of [ ], 199[ ].
PEACHTREE SOFTWARE, INC.
By:
-----------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
of
PEACHTREE SOFTWARE, INC.
(A Delaware Corporation)
------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Business Day" means any day which is not a Saturday, a Sunday, or
a day on which banks are authorized to close in the City of New York.
1.5 "By-laws" means the by-laws of the Corporation, as amended from
time to time.
1.6 "Certificate of Incorporation" means the certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.7 "Chairman" means the Chairman of the Board of the Corporation.
1.8 "Chief Financial Officer" means the Chief Financial Officer of the
Corporation.
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1.9 "Corporation" means Peachtree Software, Inc.
1.10 "Directors" means directors of the Corporation.
1.11 "Entire Board" means all Directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
1.12 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.13 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.14 "President" means the President of the Corporation.
1.15 "Secretary" means the Secretary of the Corporation.
1.16 "Stockholders" means stockholders of the Corporation.
1.17 "Treasurer" means the Treasurer of the Corporation.
1.18 "Vice Chairman" means the Vice Chairman of the Board of the
Corporation.
1.19 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of Stockholders shall be held at
the Office of the Corporation or at such other place within or without the State
of Delaware as shall be specified or fixed in the notice of such meeting or in
the waiver of notice thereof.
2.2 Annual Meeting. A meeting of Stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such Business Day in each year as may be determined by resolution adopted
by the affirmative vote of a majority of the Entire Board and designated in the
notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual
meeting of Stockholders for the election of Directors and the transaction of
other business is not held on the date designated therefor or at any adjournment
of
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a meeting convened on such date, the Board shall call a meeting of Stockholders
for the election of Directors and the transaction of other business as soon
thereafter as convenient.
2.4 Special Meetings. A special meeting of Stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board, the
Chairman, the Vice Chairman or by the President. At any special meeting of
Stockholders, no business may be transacted other than (i) such business stated
in the notice thereof given pursuant to Section 2.6 hereof or in any waiver of
notice thereof given pursuant to Section 2.7 hereof (in a form prepared by the
Secretary) or (ii) such business as is related to the purpose or purposes of
such meeting and which is properly brought before the meeting by or at the
direction of the Board.
2.5 Fixing Record Date. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof or (ii) to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting and (y) in the case of
clause (a)(ii) or (b) above, more than sixty days prior to such action. If no
such record date is fixed:
2.5.1 the record date for determining Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and
2.5.2 the record date for determining Stockholders for any purpose
other than those specified in Section 2.5.1 hereof shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided
in Section 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the
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Certificate of Incorporation or these By-laws, a copy of the notice of any
meeting shall be given, personally or by mail, not less than ten nor more than
sixty days before the date of the meeting, to each Stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, with postage prepaid,
directed to the Stockholder at his or her address as it appears on the records
of the Corporation. An affidavit of the Secretary or an Assistant Secretary or
of the transfer agent of the Corporation that the notice required by this
Section 2.6 has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
and at the adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called. If, however, the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
2.8 List of Stockholders. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, the Stockholder's
agent or attorney, at the Stockholder's expense, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any Stockholder who is present. The Corporation
shall maintain the list of Stockholders in written form or in another form
capable of conversion into written form within a reasonable time. Upon the
willful neglect or refusal of the Directors to produce such a list at any
meeting for the election of Directors, they shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
who are the Stockholders entitled to examine the stock ledger, the list of
Stockholders or the books of the Corporation, or to vote in person or by proxy
at any meeting of Stockholders.
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2.9 Quorum of Stockholders; Adjournment. Except as otherwise provided
by any statute, the Certificate of Incorporation or these By-laws, the holders
of a majority of all outstanding shares of stock entitled to vote at any meeting
of Stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting. When a quorum is
once present to organize a meeting of Stockholders, it is not broken by the
subsequent withdrawal of any Stockholders. The holders of a majority of the
shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of Directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate of Incorporation or by these By-laws,
shall be decided by a majority of the votes cast at such meeting by the holders
of shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. Directors
may be elected either by written ballot or by voice vote. In voting on any other
question on which a vote by ballot is required by law or is demanded by any
Stockholder entitled to vote, the voting shall be by ballot. Each ballot shall
be signed by the Stockholder voting or the Stockholder's proxy and shall state
the number of shares voted. On all other questions, the voting may be by voice
vote. Each Stockholder entitled to vote at a meeting of Stockholders may
authorize another person or persons to act for such Stockholder by proxy. The
validity and enforceability of any proxy shall be determined in accordance with
Section 212 of the General Corporation Law. A Stockholder may revoke any proxy
that is not
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irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or by delivering a proxy in accordance
with applicable law bearing a later date to the Secretary.
2.11 Voting Procedures and Inspectors of Election at Meetings of
Stockholders. The Corporation, in advance of any meeting of Stockholders, shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting, the person presiding at the meeting shall
appoint, one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall (a) ascertain
the number of shares outstanding and the voting power of each, (b) determine the
shares represented at the meeting and the validity of proxies and ballots, (c)
count all votes and ballots, (d) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. The date and time of the opening
and the closing of the polls for each matter upon which the Stockholders will
vote at a meeting shall be determined by the person presiding at the meeting and
shall be announced at the meeting. No ballot, proxies or votes, or any
revocation thereof or change thereto, shall be accepted by the inspectors after
the closing of the polls unless the Court of Chancery of the State of Delaware
upon application by a Stockholder shall determine otherwise.
2.12 Conduct of Meetings. (a) At each meeting of Stockholders, the
President, or in the absence of the President, the Chairman, or if there is no
Chairman or if there be one and the Chairman is absent, a Vice President, and in
case more than one Vice President shall be present, that Vice President
designated by the Board (or in the absence of any such designation, the most
senior Vice President, based on age, present), shall act as chairman of the
meeting. The Secretary, or in his or her absence one of the Assistant
Secretaries, shall act as secretary of the meeting. In case none of the officers
above designated to act as chairman or secretary of the meeting, respectively,
shall be present, a chairman or a secretary of the meeting, as the case may be,
shall be chosen by a majority of the votes cast at such meeting by the holders
of shares of capital stock present in person or represented by proxy and
entitled to vote at the meeting.
(b) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as Directors. Nominations of
persons for election to the Board may be made at an annual meeting or special
meeting of Stockholders (i) by or at the direction of the Board, (ii) by any
nominating committee or person appointed by the Board or (iii) by any
Stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies
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with the provisions of the following paragraph (persons nominated in accordance
with (iii) above are referred to herein as "Stockholder nominees").
In addition to any other applicable requirements, all nominations of
Stockholder nominees must be made by written notice given by or on behalf of a
Stockholder of record of the Corporation (the "Notice of Nomination"). The
Notice of Nomination must be delivered personally to, or mailed to, and received
at the principal executive offices of the Corporation, addressed to the
attention of the Secretary, not less than 30 days nor more than 60 days prior to
the annual meeting or special meeting of Stockholders; provided, however, that
in the event that less than 40 days' notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, notice by the Stockholder
to be timely, must be received no later than the close of business on the tenth
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. Such Notice of Nomination shall set forth
(i) the name and record address of the Stockholder proposing to make
nominations, (ii) the class and number of shares of capital stock held of
record, held beneficially and represented by proxy held by such person as of the
record date for the meeting and as of the date of such Notice of Nomination,
(iii) all information regarding each Stockholder nominee that would be required
to be set forth in a definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Section 14 of the Securities Exchange Act of
1934, as amended, or any successor statute thereto (the "Exchange Act"), and the
written consent of each such Stockholder nominee to serve if elected, and (iv)
all other information that would be required to be filed with the Securities and
Exchange Commission if the person proposing such nominations were a participant
in a solicitation subject to Section 14 of the Exchange Act or any successor
statute thereto. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting, that any proposed nomination of a
Stockholder nominee was not made in accordance with the foregoing procedures
and, if he should so determine, he shall declare to the meeting and the
defective nomination shall be discarded. For purposes of Sections 2.12(b) and
(c) hereof, public disclosure shall be deemed to be first made when disclosure
of such date of the annual meeting of Stockholders is first made in a press
release reported by the Dow Jones News Services, Associated Press or comparable
national news service, or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of
the Exchange Act or any successor statute thereto.
(c) At any annual meeting of Stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting of Stockholders, (i) business must be
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (ii) otherwise properly brought before the meeting
by or at the direction of the Board or (iii) otherwise properly brought before
the meeting by a Stockholder in accordance with the terms of the following
paragraph (business brought before the meeting in accordance with (iii) above is
referred to as "Stockholder business").
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In addition to any other applicable requirements, all proposals of
Stockholder business must be made by written notice given by or on behalf of a
Stockholder of record of the Corporation (the "Notice of Business"). The Notice
of Business must be delivered personally to, or mailed to, and received at the
principal executive offices of the Corporation, addressed to the attention of
the Secretary, not less than 30 days nor more than 60 days prior to the annual
meeting of Stockholders; provided, however, that in the event that less than 40
days' notice or prior public disclosure of the date of the meeting is given or
made to Stockholders, notice by the Stockholder to be timely, must be received
no later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such Notice of Business shall set forth (i) the name and record address of
the Stockholder proposing such Stockholder business, (ii) the class and number
of shares of capital stock held of record, held beneficially and represented by
proxy held by such person as of the record date for the meeting and as of the
date of such Notice of Business, (iii) a brief description of the Stockholder
business desired to be brought before the annual meeting and the reasons for
conducting such Stockholder business at the annual meeting, (iv) any material
interest of the Stockholder in such Stockholder business and (v) all other
information that would be required to be filed with the Securities and Exchange
Commission if the person proposing such Stockholder business were a participant
in a solicitation subject to Section 14 of the Exchange Act. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at the
annual meeting of Stockholders except in accordance with the procedures set
forth in this Section 2.12(c), provided, however, that nothing in this Section
2.12(c) shall be deemed to preclude discussion by any Stockholder of any
business properly brought before the annual meeting in accordance with said
procedure. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting, that business was not properly brought before the
meeting in accordance with the foregoing procedures and, if he should so
determine, he shall declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2.13 Order of Business. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 Action by Stockholders. Notwithstanding the provisions of section
228 of the General Corporation Law (or any successor statute), any action
required or permitted by the General Corporation Law to be taken at any annual
or special meeting of Stockholders of the Corporation may be taken only at such
an annual or special meeting of Stockholders and cannot be taken by written
consent without a meeting.
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ARTICLE 3
Directors
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or the Certificate of
Incorporation or by statute, to be exercised and performed by the Stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of
not less than two or more than fifteen members. The exact number of Directors
within the minimum and maximum limitations specified in the preceding sentence
shall be fixed from time to time by resolution adopted by a majority of the
Entire Board. Directors need not be Stockholders. The Directors shall be divided
into three classes (known as "Class I," "Class II" and "Class III") with the
term of office of Class I to expire at the first annual meeting of Stockholders
of the Corporation next following the end of the Corporation's fiscal year
ending in 2002, the term of office of Class II to expire at the first annual
meeting of Stockholders of the Corporation next following the end of the
Corporation's fiscal year ending in 2000 and the term of office of Class III to
expire at the annual meeting of Stockholders of the Corporation next following
the end of the Corporation's fiscal year ending in 2001. At each annual meeting
of Stockholders following such initial election as specified above, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of Stockholders
after their election.
3.3 Tenure. Notwithstanding any provisions to the contrary contained
herein, (i) each Director shall hold office until his or successor is elected
and qualified, or until the earlier of such Director's death, resignation or
removal and (ii) the term of any Director who is also an officer of the
Corporation shall terminate if he or she ceases to be an officer of the
Corporation.
3.4 Election. Directors shall, except as otherwise required by statute
or by the Certificate of Incorporation, be elected by a plurality of the votes
cast at a meeting of Stockholders by the holders of shares present in person or
represented by proxy at the meeting and entitled to vote in the election.
3.5 Newly Created Directorships and Vacancies. Subject to the rights
of the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of Directors
or any
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vacancies in the Board resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled by a
majority vote of the remaining Directors then in office although less than a
quorum, or by a sole remaining Director and Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of the class to which they have been elected expires or, in each case,
until their respective successors are duly elected and qualified. No decrease in
the number of Directors constituting the Board shall shorten the term of any
incumbent Director. When any Director shall give notice of resignation effective
at a future date, the Board may fill such vacancy to take effect when such
resignation shall become effective.
3.6 Resignation. Any Director may resign at any time by written notice
to the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.7 Removal. Any one or more or all of the Directors may be removed,
at any time, but only for cause by the Stockholders having at least four-fifths
in voting power of the then issued and outstanding shares of capital stock of
the Corporation.
3.8 Compensation. Each Director, in consideration of his or her
service as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at Directors' meetings, or both, as the
Board may from time to time determine, together with reimbursement for the
reasonable out-of-pocket expenses, if any, incurred by such Director in
connection with the performance of his or her duties. Each Director who shall
serve as a member of any committee of Directors in consideration of serving as
such shall be entitled to such additional amount per annum or such fees for
attendance at committee meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in the performance of his or her
duties. Nothing contained in this Section 3.7 shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
3.9 Times and Places of Meetings. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.10 Annual Meetings. On the day when and at the place where the annual
meeting of Stockholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time
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and place specified in a notice given as provided in Section 3.11 hereof for
special meetings of the Board or in a waiver of notice thereof.
3.11 Regular Meetings. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.12 Special Meetings. Special meetings of the Board may be called by
the Chairman, the Vice Chairman, the President or the Secretary or by any two or
more Directors then serving on at least one day's notice to each Director given
by one of the means specified in Section 3.14 hereof other than by mail, or on
at least three days' notice if given by mail. Special meetings shall be called
by the Chairman, the Vice Chairman, the President or the Secretary in like
manner and on like notice on the written request of any two or more of the
Directors then serving.
3.13 Telephone Meetings. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
3.14 Adjourned Meetings. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.15 Notice Procedure. Subject to Sections 3.11 and 3.16 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.
3.16 Waiver of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any
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business on the ground that the meeting has not been lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Directors or a committee of Directors need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
3.17 Organization. At each meeting of the Board, the Chairman, the Vice
Chairman, or in the absence of the Chairman or Vice Chairman the President, or
in the absence of the President a chairman chosen by a majority of the Directors
present, shall preside. The Secretary shall act as secretary at each meeting of
the Board. In case the Secretary shall be absent from any meeting of the Board,
an Assistant Secretary shall perform the duties of secretary at such meeting;
and in the absence from any such meeting of the Secretary and all Assistant
Secretaries, the person presiding at the meeting may appoint any person to act
as secretary of the meeting.
3.18 Quorum of Directors. The presence in person of a majority of the
Entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.19 Action by Majority Vote. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.20 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. If a
member of a committee shall be absent from any meeting, or disqualified from
voting thereat, the remaining member or members present and not disqualified
from voting, whether or not such member or members constitute a quorum, may, by
a unanimous vote, appoint another member of the Board to act at the meeting in
the place of any such
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absent or disqualified member. Any such committee, to the extent provided in the
resolution of the Board or these By-laws, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be
impressed on all papers that may require it, but no such committee shall have
the power or authority of the Board in reference to: (i) approving or adopting,
or recommending to the Stockholders any matter expressly required by the General
Corporation Law to be submitted to the Stockholders for approval or (ii)
adopting, amending or repealing any By-law of the Corporation. Unless otherwise
specified in the resolution of the Board designating a committee, at all
meetings of such committee a majority of the total number of members of the
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members of the committee present at any meeting at
which there is a quorum shall be the act of the committee. Each committee shall
keep regular minutes of its meetings. Unless the Board otherwise provides, each
committee designated by the Board may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board conducts its business
pursuant to Article 3 of these By-laws.
ARTICLE 5
OFFICERS
5.1 Positions. The officers of the Corporation shall be a President, a
Secretary, a Treasurer or a Chief Financial Officer and such other officers as
the Board may appoint, including a Chairman, Vice Chairman, one or more Vice
Presidents and one or more Assistant Secretaries and Assistant Treasurers, who
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board. The Board may designate one or more Vice Presidents
as Executive Vice Presidents and may use descriptive words or phrases to
designate the standing, seniority or areas of special competence of the Vice
Presidents elected or appointed by it. Any number of offices may be held by the
same person unless the Certificate of Incorporation or these By-laws otherwise
provide.
5.2 Appointment. The officers of the Corporation shall be chosen by
the Board at its annual meeting or at such other time or times as the Board
shall determine.
5.3 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
5.4 Term of Office. Each officer of the Corporation shall hold office
for the term for which he or she is elected and until such officer's successor
is
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chosen and qualifies or until such officer's earlier death, resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at such later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any. Any officer elected or appointed by
the Board may be removed at any time, with or without cause, by vote of a
majority of the Entire Board. Any vacancy occurring in any office of the
Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.5 Fidelity Bonds. The Corporation may secure the fidelity of any or
all of its officers or agents by bond or otherwise.
5.6 Chairman. The Chairman, if one shall have been appointed, shall
preside at all meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the Board.
5.7 Vice Chairman. At the request of the Chairman, or, in the
Chairman's absence, at the request of the Board, the Vice Chairman shall perform
all of the duties of the Chairman and, in so performing, shall have all the
powers of, and be subject to all restrictions upon, the Chairman.
5.8 President. The President shall be the Chief Executive Officer of
the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of Directors. The President shall preside at all meetings
of the Stockholders and at all meetings of the Board at which the Chairman (if
there be one) is not present. The President may sign and execute in the name of
the Corporation deeds, mortgages, bonds, contracts and other instruments except
in cases in which the signing and execution thereof shall be expressly delegated
by the Board or by these By-laws to some other officer or agent of the
Corporation or shall be required by statute otherwise to be signed or executed
and, in general, the President shall perform all duties incident to the office
of President of a corporation and such other duties as may from time to time be
assigned to the President by the Board.
5.9 Vice Presidents. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation, or shall be
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required by statute otherwise to be signed or executed, and each Vice President
shall perform such other duties as from time to time may be assigned to such
Vice President by the Board or by the President.
5.10 Secretary. The Secretary shall attend all meetings of the Board
and of the Stockholders and shall record all the proceedings of the meetings of
the Board and of the Stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board, when required. The
Secretary shall give, or cause to be given, notice of all special meetings of
the Board and of the Stockholders and shall perform such other duties as may be
prescribed by the Board or by the President, under whose supervision the
Secretary shall be. The Secretary shall have custody of the corporate seal of
the Corporation, and the Secretary, or an Assistant Secretary, shall have
authority to impress the same on any instrument requiring it, and when so
impressed the seal may be attested by the signature of the Secretary or by the
signature of such Assistant Secretary. The Board may give general authority to
any other officer to impress the seal of the Corporation and to attest the same
by such officer's signature. The Secretary or an Assistant Secretary may also
attest all instruments signed by the President or any Vice President. The
Secretary shall have charge of all the books, records and papers of the
Corporation relating to its organization and management, shall see that the
reports, statements and other documents required by statute are properly kept
and filed and, in general, shall perform all duties incident to the office of
Secretary of a corporation and such other duties as may from time to time be
assigned to the Secretary by the Board or by the President.
5.11 Treasurer or Chief Financial Officer. The Treasurer or Chief
Financial Officer shall have charge and custody of, and be responsible for, all
funds, securities and notes of the Corporation; receive and give receipts for
moneys due and payable to the Corporation from any sources whatsoever; deposit
all such moneys and valuable effects in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board; against
proper vouchers, cause such funds to be disbursed by checks or drafts on the
authorized depositaries of the Corporation signed in such manner as shall be
determined by the Board and be responsible for the accuracy of the amounts of
all moneys so disbursed; regularly enter or cause to be entered in books or
other records maintained for the purpose full and adequate account of all moneys
received or paid for the account of the Corporation; have the right to require
from time to time reports or statements giving such information as the Treasurer
or Chief Financial Officer may desire with respect to any and all financial
transactions of the Corporation from the officers or agents transacting the
same; render to the President or the Board, whenever the President or the Board
shall require the Treasurer or Chief Financial Officer so to do, an account of
the financial condition of the Corporation and of all financial transactions of
the Corporation; exhibit at all reasonable times the records and books of
account to any of the Directors upon application at the Office of the
Corporation where such records and books are kept; disburse the funds of the
Corporation as ordered by the Board; and, in general, perform all duties
incident to the office of Treasurer or Chief Financial
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Officer of a corporation and such other duties as may from time to time be
assigned to the Treasurer or Chief Financial Officer by the Board or the
President.
5.12 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer or Chief Financial
Officer, respectively, or by the Board or by the President.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 Loans. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized by the Board so to do, may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by the Board
may be general or confined to specific instances, or otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
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ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
Vice Chairman, the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or Chief Financial Officer or an Assistant
Treasurer, and may be impressed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles, if
the certificate is countersigned by a transfer agent or registrar other than the
Corporation itself or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may, unless otherwise
ordered by the Board, be issued by the Corporation with the same effect as if
such person were such officer, transfer agent or registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its Stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of
any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its
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discretion, as a condition to the issue of any such new certificate, require the
owner of the lost, destroyed, stolen or mutilated certificate, or his or her
legal representatives, to make proof satisfactory to the Board of such loss,
destruction, theft or mutilation and to advertise such fact in such manner as
the Board may require, and to give the Corporation and its transfer agents and
registrars, or such of them as the Board may require, a bond in such form, in
such sums and with such surety or sureties as the Board may direct, to indemnify
the Corporation and its transfer agents and registrars against any claim that
may be made against any of them on account of the continued existence of any
such certificate so alleged to have been lost, destroyed, stolen or mutilated
and against any expense in connection with such claim.
7.5 Rules and Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certif icates representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of Stockholders
or among such Stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other distributions on
the outstanding shares of capital stock in such amounts and at such
time or times as it, in its discretion, shall deem advisable giving due
consideration to the condition of the affairs of the Corporation;
7.7.2 may use and apply, in its discretion, any of the surplus of
the Corporation in purchasing or acquiring any shares of capital stock
of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities
or evidences of indebtedness; and
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7.7.3 may set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as
a reserve fund to meet contingencies, or for equalizing dividends or
for the purpose of maintaining or increasing the property or business
of the Corporation, or for any purpose it may think conducive to the
best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnity Undertaking. To the extent not prohibited by law, the
Corporation shall indemnify any person (an "Eligible Person") who is or was
made, or threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the legal
representative, is or was a Director or officer of the Corporation, or, while a
Director or officer of the Corporation, is or was serving, at the request of the
Corporation, as a director or officer of any other corporation or in a capacity
with comparable authority or responsibilities for any partnership, joint
venture, trust, employee benefit plan or other enterprise (an "Other Entity"),
against judgments, fines, penalties, excise taxes, amounts paid in settlement
and costs, charges and expenses (including attorneys' fees, disbursements and
other charges).
8.2 Payment of Expenses. The Corporation shall, from time to time pay
to an Eligible Person the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred by or on behalf of such Eligible
Person in connection with any Proceeding, as such expenses are incurred in
advance of the final disposition of such Proceeding; provided, however, that, if
required by the General Corporation Law, such expenses incurred by or on behalf
of such Eligible Person may be paid in advance of the final disposition of a
Proceeding only upon receipt by the Corporation of an undertaking, by or on
behalf of such Eligible Person, to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Eligible Person is not entitled to be
indemnified for such expenses.
8.3 Certain Exclusions. Section 8.1 and 8.2 shall not include any
Proceeding commenced by any Eligible Person without the advance approval of the
Board of Directors.
8.4 Binding Effect. The provisions of this Section 8 shall be a
contract between the Corporation, on the one hand, and each Eligible Person, on
the other hand, pursuant to which the Corporation and each such Eligible Person
intend to
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be, and shall be, legally bound. No repeal or modification of this Section 8
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or any proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
8.5 Procedural Rights. The rights to indemnification and payment of
expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by an Eligible Person entitled to such indemnification or payment of
expenses in any court of competent jurisdiction. The burden of proving that such
indemnification or payment of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including the disinterested
directors on its Board of Directors, a committee of such disinterested
directors, the Corporation's independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that such
indemnification or payment of expenses is proper in the circumstances, nor an
actual determination by the Corporation (including the disinterested directors
on its Board of Directors, a committee of such disinterested directors, the
Corporation's independent legal counsel and its stockholders) that such person
is not entitled to such indemnification or payment of expenses shall constitute
a defense to the action or create a presumption that such person is not so
entitled. Notwithstanding anything to the contrary in Section 8.3, such Eligible
Person shall also be indemnified for any expenses incurred in connection with
successfully establishing his or her right to such indemnification or payment of
expenses, in whole or in part, in any such proceeding.
8.6 Service Deemed at Corporation's Request. Any director or officer
of the Corporation serving (a) as a director or officer of another corporation
of which a majority of the shares entitled to vote in the election of its
directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed to be doing so at the request of the Corporation.
8.7 Election of Applicable Law. Any person entitled to be indemni fied
or to payment of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or payment of expenses interpreted on
the basis of the applicable law in effect at the time of the occurrence of the
event or events giving rise to the applicable Proceeding, to the extent
permitted by law, or on the basis of the applicable law in effect at the time
such indemnification or payment of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification or
payment of expenses is sought; provided, however, that if no such notice is
given, the right to indemnification or payment of expenses shall be determined
by the law in effect at the time indemnification or payment of expenses is
sought.
8.8 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall not be deemed exclusive of any other rights to which a
person seeking
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indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Amended and Restated Certificate
of Incorporation, the By-laws, any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.9 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall continue as to a person who has ceased to be a director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.10 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Section 8 or under Section 145 of the
General Corporation Law or any other provision of law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. There shall be kept at the Office of the
Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
Stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
Stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
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and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
Stockholders for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall end on the last Saturday in
June of each calendar year, and may be changed by resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the Vice
Chairman, the President, any Vice President, the Secretary or the Treasurer or
Chief Financial Officer, or any one of them, may execute and deliver on behalf
of the Corporation proxies respecting any and all shares or other ownership
interests of any Other Entity owned by the Corporation appointing such person or
persons as the officer executing the same shall deem proper to represent and
vote the shares or other ownership interests so owned at any and all meetings of
holders of shares or other ownership interests, whether general or special,
and/or to execute and deliver consents respecting such shares or other ownership
interests; or any of the aforesaid officers may attend any meeting of the
holders of shares or other ownership interests of such Other Entity and thereat
vote or exercise any or all other powers of the Corporation as the holder of
such shares or other ownership interests.
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ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:
13.1 Notice to Board Members. Any one member of the Board or any one of
the following officers: Chairman, Vice Chairman, President, any Vice President,
Secretary, or Treasurer or Chief Financial Officer, may call a meeting of the
Board. Notice of such meeting need be given only to those Directors whom it is
practicable to reach, and may be given in any practical manner, including by
publication and radio. Such notice shall be given at least six hours prior to
commencement of the meeting.
13.2 Temporary Directors and Quorum. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 Actions Permitted To Be Taken. The Board as constituted in Section
13.2 hereof, and after notice as set forth in Section 13.1 hereof may:
13.3.1 prescribe emergency powers to any officer of the
Corporation;
13.3.2 delegate to any officer or Director, any of the powers of
the Board;
13.3.3 designate lines of succession of officers and agents, in
the event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
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ARTICLE 14
AMENDMENTS
These By-laws of the Corporation may be altered or repealed and new
By-laws may be adopted (i) at any annual or special meeting of Stockholders, by
the affirmative vote of not less than a majority of all votes entitled to be
cast by all of the then outstanding shares of capital stock of the Corporation
in the election of Directors, provided, however, that any proposed alteration or
repeal of, or the adoption of any by-law inconsistent with, Sections 2.4, 2.6,
2.12, 2.14, 3.2, 3.7 or this Article 14 of these By-laws, by Stockholders shall
require the affirmative vote of not less than four-fifths of all votes entitled
to be cast by all of the then outstanding shares of capital stock of the
Corporation in an election of Directors, or (ii) by the affirmative vote of a
majority of the Board.
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Exhibit 4.1
PWRW&G DRAFT 12/15/98
[FRONT OF COMMON STOCK CERTIFICATE]
COMMON STOCK COMMON STOCK
PAR VALUE $.01 PAR VALUE $.01
Number __________ CUSIP __________
SEE REVERSE FOR CERTAIN DEFINITIONS
Shares __________
PEACHTREE SOFTWARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT __________________________________________________
is the owner of
___________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Peachtree Software, Inc. (hereinafter called the "Corporation"), transferable on
the books of the Corporation by the registered holder hereof in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
In Witness Whereof, the Corporation has caused the facsimile signatures of
its duly authorized officers and its facsimile seal to be affixed hereto.
Dated: _________________ _______________________________
President
COUNTERSIGNED AND REGISTERED:
_____________________________ ______________________________
Transfer Agent and Registrar Treasurer
By: ____________________________________
Authorized Officer
[Corporate Seal]
<PAGE>
[BACK OF COMMON STOCK CERTIFICATE]
PEACHTREE SOFTWARE, INC.
A FULL STATEMENT OF THE DESIGNATION AND ANY PREFERENCES, CONVERSION AND OTHER
RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS
AND TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF CAPITAL STOCK MAY BE
OBTAINED FROM THE CORPORATION BY ANY STOCKHOLDER UPON REQUEST AND WITHOUT
CHARGE.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT ________ Custodian________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right ______________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
________________________________________
For value received, ______________________________________________ hereby
sell, assign and transfer unto _______________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of capital stock represented by the within Certificate and do hereby irrevocably
constitute and appoint ________________________________________________________
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Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated: _______________
Signature(s) _________________________________________
NOTICE: The signature(s) of this assignment
must correspond with the name as written
upon the face of the Certificate, in every
particular, without alteration or
enlargement, or any change whatever.
Signature Guaranteed By:
__________________________
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF
TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
PEACHTREE SOFTWARE, INC. AND [RIGHTS AGENT], DATED
_____________, (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF PEACHTREE
SOFTWARE, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. PEACHTREE SOFTWARE, INC. WILL MAIL TO THE HOLDER
OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
CHARGE PROMPTLY FOLLOWING RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREE MENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS,
WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH
PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
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Exhibit 10.2
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068-0456
(973) 994-5000
- --------------------------------------------------------------------------------
October 13, 1998
Dear :
As you know, Automatic Data Processing, Inc. ("ADP"), through its
subsidiary, ADP Atlantic, Inc., is the owner of all the outstanding stock of
Peachtree Software, Inc. ("Peachtree"). ADP is contemplating selling all or a
part of Peachtree in a negotiated private sale ("Private Sale") of the stock or
assets of Peachtree or in an initial public offering ("IPO") of the stock of
Peachtree. In connection with any such Private Sale or IPO, ADP and Peachtree
would like to secure your continued employment with Peachtree through the
consummation of such Private Sale or IPO and your assistance in consummating
such Private Sale or IPO. In addition, Peachtree would like to provide for your
continued employment after the consummation of such Private Sale or IPO.
In order to induce you to continue your employment with Peachtree and
to assist ADP and Peachtree in consummating a Private Sale or IPO of all or part
of Peachtree, ADP and Peachtree propose entering into the agreements set forth
below with you.
1. Your Obligations.
1.1 Continued Employment. During the term of this Agreement, you will
continue to perform your existing duties for Peachtree in accordance with the
direction, and subject to the authority and control of, the Board of Directors
of Peachtree. During the term of this Agreement, you shall devote your full
commercial business time, energy and skill, on a best efforts and exclusive
basis, to the business and affairs of Peachtree, including any Private Sale or
IPO of Peachtree proposed by ADP, and will use your full business time, energy
and skill to promote the business and interests of Peachtree and ADP. Until the
later of one year from the date of this Agreement and the date of a Private Sale
or IPO, Peachtree will not terminate your employment without cause (as defined
in Section 2.2(b)).
1.2. Assistance with Sale. During the term of this Agreement, you will
assist ADP and Peachtree in consummating any Private Sale or IPO of Peachtree
proposed by ADP. To the extent requested by ADP or Peachtree, such assistance
shall include, but not be limited to, assistance with establishing Peachtree as
a standalone entity, assistance with the auditing of the financial statements of
<PAGE>
Peachtree, preparation of operating plans, participation in the financial
analysis of any proposed transaction, review and comment on the terms of any
proposed transaction, assistance with any due diligence investigation,
participation in the preparation of an offering document or registration
statement relating to any proposed transaction, participation in road shows or
similar meetings, participation in management presentations to investors or
potential acquirors.
1.3. Confidentiality Obligation. You agree that you will not, without
the prior consent of Peachtree, during the two year period following the date
hereof, disclose, furnish or make accessible to any person, corporation, firm,
partnership or other entity whatsoever (except ADP or any of its respective
affiliates), or to any officer, director, stockholder, partner, associate,
employee, agent or representative of any such entity other than in the ordinary
course of business for the benefit of Peachtree, any proprietary information
that is not in the public domain (including, without limitation, any customer
lists, business methods, procedures, pricing and marketing structure and
strategy, source or object codes, experimental or research work, names and
addresses of current, former and prospective clients or employees, or any other
trade secrets, technical data, or know-how of any kind) relating to the
businesses of Peachtree or any of its respective affiliates that was learned by
you at any time prior to the date that is the second anniversary of this
Agreement. Upon termination of your employment with Peachtree for any reason
whatsoever, you shall immediately return to Peachtree all documents and notes
(including all copies thereof) of any and all information and materials
belonging or relating to the businesses of Peachtree or any of its affiliates
(whether or not such materials were prepared by you or another person).
1.4 Conditions to ADP's and Peachtree's Obligations. ADP's and
Peachtree's obligations hereunder are expressly conditioned upon (i) your
compliance with your obligations hereunder and (ii) your continued employment
with Peachtree through the consummation of a Private Sale or IPO of Peachtree.
2. Peachtree's Obligations.
2.1. Employment Agreement upon Sale. Prior to the consummation of a
Private Sale or IPO, Peachtree will enter into an employment agreement with you
providing for your continued employment with Peachtree in the Atlanta
Metropolitan Statistical Area in the same or substantially the same position
with substantially similar duties as your current duties with Peachtree for a
period of no less than one year following consummation of such Private Sale or
IPO. In the case of a Private Sale of all or substantially all the assets of
Peachtree, Peachtree will assign the employment agreement to the purchaser of
the Peachtree assets and such purchaser will assume the obligations of Peachtree
under the employment agreement. In the case of an IPO or Private Sale of all or
substantially all the stock of Peachtree, the employment agreement will remain
in full force and effect subsequent to the closing of such transaction. The
terms and conditions contained in the employment agreement will be substantially
similar to your current terms of employment.
2.2. Severance upon Termination by Peachtree. (a) If Peachtree is sold,
whether pursuant to a Private Sale or an IPO, and Peachtree terminates your
employment during the one-year period following the closing of such sale (the
"Closing Date") without cause (as defined below), Peachtree will pay to you, in
addition to any other benefits (other than severance) to which you are entitled,
an amount equal to the
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<PAGE>
salary that would have been payable to you for the one-year period following the
date of such termination. All payments pursuant to this section will be made in
equal installments payable when your salary would otherwise have been paid. In
addition, any payments made to you pursuant to this section are expressly
conditioned upon your execution of a general release in favor of Peachtree and
its affiliates.
(b) For purposes of the foregoing paragraph, termination "without
cause" shall mean termination of your employment by Peachtree for any reason
other than the following: (i) your death, (ii) you are unable by reason of
physical or mental disability to continue the proper performance of your duties
and such disability shall have continued for a period of at least four months,
(iii) you are convicted of a criminal act (excluding minor traffic violations),
(iv) you fail or refuse to perform any obligation hereunder or under your
employment agreement with Peachtree and such failure or refusal shall continue
during the 20 day period following the receipt by you of written notice from
Peachtree of such failure or refusal, (v) you commit any act of negligence in
the performance of your duties hereunder and fail to take appropriate corrective
action during the 20 day period following the receipt by you of written notice
from Peachtree of such negligence, or (z) you commit any act of willful
misconduct.
2.3. Payment of Bonus. If Peachtree is sold in a Private Sale or IPO,
immediately following the consummation of the Private Sale or IPO, Peachtree
will pay to you the amount of your target bonus for fiscal year 1999. The amount
of your 1999 fiscal year target bonus is $.
2.4. Issuance of Peachtree Options. If Peachtree is sold in an IPO,
simultaneously with the closing of the IPO, Peachtree will grant to you an
option to acquire shares of common stock of Peachtree sold in the IPO (whether
by Peachtree or others) for an exercise price equal to the IPO price. The terms
and conditions of the options will be comparable to those of non-qualified stock
option plans offered by comparable software companies to employees holding
positions similar to your position in connection with the initial public
offering of their common stock.
3. ADP Obligations.
3.1. Vesting of ADP Options. If Peachtree is sold, whether pursuant to
a Private Sale or an IPO, (i) outstanding options to acquire ADP common stock
held by you on the date of the consummation of the sale and vesting prior to
July 1, 2000 will automatically vest on the date of the consummation of the sale
and (ii) outstanding options to acquire ADP common stock held by you and vesting
on or after July 1, 2000 will automatically vest on the date of the consummation
of the sale if the gross proceeds resulting from a Private Sale exceed $100
million or the Fully Distributed Value of Peachtree resulting from an IPO
exceeds $120 million. "Fully Distributed Value" shall mean the product of the
number of shares of Peachtree outstanding immediately following the IPO
multiplied by the sales price of such shares at the IPO for such shares. All
options to acquire ADP common stock which do not vest on or prior to the date of
the consummation of the sale will be canceled. All vested options to acquire ADP
common stock that are not exercised prior to 15 days following the date of the
consummation of the sale will be canceled.
3.2. Acceleration of Stock Purchase Plan. Whether Peachtree is sold in
a private sale or pursuant to an IPO, upon consummation of such sale (i) if you
participate in ADP Stock Purchase Plan 29, you will be entitled to purchase ADP
shares in accordance with the terms of the plan as if ADP Stock Purchase Plan 29
ended on the date of the consummation of the sale (i.e., your pro rata share of
ADP stock
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<PAGE>
that could be purchased with the funds already invested in the Stock Plan 29
prior to the date of such sale). Upon the closing of the sale, amounts deposited
by you in order to participate in ADP Stock Purchase Plan 30 will be returned to
you in accordance with the terms of ADP Stock Purchase Plan 30.
3.3. Closing Bonus. If Peachtree is sold in a Private Sale, upon
consummation of the Private Sale, ADP will pay to you an aggregate amount equal
to % of the gross proceeds in excess of $150 million for your participation in
the sale process.
4. Term and Termination. This Agreement shall be effective for a period
commencing on the date hereof and ending on the first anniversary of the date of
this Agreement, except that if a Private Sale or IPO of Peachtree occurs prior
to such date, the term of this Agreement shall end on the first anniversary of
the consummation of such Private Sale or IPO of Peachtree.
5. Miscellaneous. This Agreement sets forth the entire agreement among
the parties relating to the subject matter hereof and there are no
representations, agreements or understandings between the parties except as set
forth or specifically referred to herein. This Agreement shall be governed by
the internal laws of the State of Georgia.
If you are in agreement with the foregoing, please indicate your
agreement by signing two copies of this letter in the space provided below and
returning it to Cecil House, One ADP Boulevard, MS 425, Roseland, NJ 07068, at
your earliest convenience.
Sincerely,
AUTOMATIC DATA PROCESSING, INC.
Gary Butler,
President and Chief Operating Officer
PEACHTREE SOFTWARE, INC.
Jim Benson
President and Secretary
AGREED AND ACCEPTED:
- -------------------------------
Name:
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Exhibit 10.6
INDEMNIFICATION AGREEMENT
AGREEMENT, made this __ day of ________, between PEACHTREE SOFTWARE,
INC., a Delaware corporation (the "Company"), and __________________________
(the "Indemnitee").
WHEREAS, it is essential to the Company and its stockholders to attract
and retain qualified and capable directors, officers, employees, agents and
fiduciaries; and
WHEREAS, the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") requires the Company to indemnify
and advance expenses to its directors and officers to the fullest extent
authorized by law and allows the Company to indemnify employees and agents to
the fullest extent authorized by law; and
WHEREAS, it is the policy of the Company to indemnify its directors and
officers so as to provide them with the maximum possible protection permitted by
law; and
WHEREAS, in recognition of the Indemnitee's need for protection against
personal liability in order to induce the Indemnitee to serve or continue to
serve the Company in an effective manner, and, in the case of directors and
officers, to supplement or replace the Company's directors' and officers'
liability insurance coverage, and in part to provide the Indemnitee with
specific contractual assurance that the protection promised by the Certificate
of Incorporation will be available to the Indemnitee (regardless of, among other
things, any amendment to or revocation of the Certificate of Incorporation or
any change in the composition of the Company's Board of Directors or any
acquisition transaction relating to the Company), the Company, with the prior
approval of the Company's stockholders, wishes to provide the Indemnitee with
the benefits contemplated by this Agreement; and
WHEREAS, as a result of the provision of such benefits the Indemnitee
has agreed to serve or to continue to serve the Company;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Definitions. The following terms, as used herein, shall have the
following respective meanings:
(a) An Affiliate: of a specified Person is a Person who directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person specified. The term Associate used
<PAGE>
to indicate a relationship with any Person shall mean (i) any corporation or
organization (other than the Company or a Subsidiary) of which such Person is an
officer or partner or is, directly, or indirectly, the Beneficial Owner of ten
(10) percent or more of any class of Equity Securities, (ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity (other than an
Employee Plan Trustee), (iii) any Relative of such Person, or (iv) any officer
or director of any corporation controlling or controlled by such Person.
(b) Beneficial Ownership: shall be determined, and a Person shall
be the Beneficial Owner of all securities which such Person is deemed to own
beneficially, pursuant to Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (or any successor rule or
statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall
be no successor rule or statutory provision thereto, pursuant to said Rule 13d-3
as in effect on the date hereof; provided, however, that a Person shall, in any
event, also be deemed to be the Beneficial Owner of any Voting Shares: (A) of
which such Person or any of its Affiliates or Associates is, directly or
indirectly, the Beneficial Owner, or (B) of which such Person or any of its
Affiliates or Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants, or options, or otherwise, or (ii) sole or
shared voting or investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or otherwise (but shall not
be deemed to be the Beneficial Owner of any Voting Shares solely by reason of a
revocable proxy granted for a particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting, with respect to shares of which
neither such Person nor any such Affiliate or Associate is otherwise deemed the
Beneficial Owner), or (C) of which any other Person is, directly or indirectly,
the Beneficial Owner if such first mentioned Person or any of its Affiliates or
Associates acts with such other Person as a partnership, syndicate or other
group pursuant to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of capital stock of the
Company; and provided further, however, that (i) no director or officer of the
Company, nor any Associate or Affiliate of any such director or officer, shall,
solely by reason of any or all of such directors and officers acting in their
capacities as such, be deemed for any purposes hereof, to be the Beneficial
Owner of any Voting Shares of which any other such director or officer (or any
Associate or Affiliate thereof) is the Beneficial Owner and (ii) no trustee of
an employee stock ownership or similar plan of the Company or any Subsidiary
("Employee Plan Trustee") or any Associate or Affiliate of any such Trustee,
shall, solely by reason of being an Employee Plan Trustee or Associate or
Affiliate of an Employee Plan Trustee, be deemed for any purposes hereof to be
the Beneficial Owner of any Voting Shares held by or under any such plan.
(c) A Change in Control: shall be deemed to have occurred if (A)
any Person (other than (i) the Company or any Subsidiary, (ii) any pension,
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profit sharing, employee stock ownership or other employee benefit plan of the
Company or any Subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity, or (iii) any Person who is as of June
10, 1997 the Beneficial Owner of 20% or more of the total voting power of the
Voting Shares) is or becomes, after the date of this Agreement, the Beneficial
Owner of 20% or more of the total voting power of the Voting Shares, (B) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director
whose election or appointment by the Board of Directors or nomination or
recommendation for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof, (C) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Shares of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Shares of the surviving entity) at
least 80% of the total voting power represented by the Voting Shares of the
Company or such surviving entity outstanding, or the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets, or (D) a change in control of a nature that would be required to be
reported in response to Item 5(f) of Schedule 14A of Regulation 14 promulgated
under the Securities Act of 1934, as amended, as in effect on the date hereof.
(d) Claim: means any threatened, pending or completed action,
suit, arbitration or proceeding, or any inquiry or investigation, whether
brought by or in the right of the Company or otherwise, that the Indemnitee in
good faith believes might lead to the institution of any such action, suit,
arbitration or proceeding, whether civil, criminal, administrative,
investigative or other, or any appeal therefrom.
(e) Equity Security: shall have the meaning given to such term
under Rule 3a11-1 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date hereof.
(f) D&O Insurance: means any valid directors' and officers'
liability insurance policy maintained by the Company for the benefit of the
Indemnitee, if any.
(g) Determination: means a determination, and "Determined" means
a matter which has been determined based on the facts known at the time, by: (i)
a majority vote of a quorum of disinterested directors, or (ii) if such a quorum
is not obtainable, or even if obtainable, if a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or, in the event
there has been a Change in Control, by the Special Independent Counsel (in a
written
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opinion) selected by the Indemnitee as set forth in Section 6, or (iii) a
majority of the disinterested stockholders of the Company, or (iv) a final
adjudication by a court of competent jurisdiction.
(h) Excluded Claim: means any payment for Losses or Expenses in
connection with any Claim: (i) based upon or attributable to the Indemnitee
gaining in fact any personal profit or advantage to which the Indemnitee is not
entitled; or (ii) for the return by the Indemnitee of any remuneration paid to
the Indemnitee without the previous approval of the stockholders of the Company
which is illegal; or (iii) for an accounting of profits in fact made from the
purchase or sale by the Indemnitee of securities of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or
similar provisions of any state law; or (iv) resulting from the Indemnitee's
knowingly fraudulent, dishonest or willful misconduct; or (v) the payment of
which by the Company under this Agreement is not permitted by applicable law.
(i) Expenses: means any reasonable expenses incurred by the
Indemnitee as a result of a Claim or Claims made against the Indemnitee for
Indemnifiable Events including, without limitation, attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in any Claim
relating to any Indemnifiable Event.
(j) Fines: means any fine, penalty or, with respect to an
employee benefit plan, any excise tax or penalty assessed with respect thereto.
(k) Indemnifiable Event: means any event or occurrence, occurring
prior to or after the date of this Agreement, related to the fact that the
Indemnitee is or was a director, officer, employee, trustee, agent or fiduciary
of the Company or its Predecessor Entities, or is or was serving at the request
of the Company or its Predecessor Entities as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, or by reason of anything done
or not done by the Indemnitee, including, but not limited to, any breach of
duty, neglect, error, misstatement, misleading statement, omission, or other act
done or wrongfully attempted by the Indemnitee, or any of the foregoing alleged
by any claimant, in any such capacity.
(l) Losses: means any amounts or sums which the Indemnitee is
legally obligated to pay as a result of a Claim or Claims made against the
Indemnitee for Indemnifiable Events including, without limitation, damages,
judgments and sums or amounts paid in settlement of a Claim or Claims, and
Fines.
(m) Person: means any individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust,
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unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
(n) Potential Change in Control: shall be deemed to have occurred
if (A) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (B) any Person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control; (C) any Person (other
than (i) the Company or any Subsidiary, (ii) any pension, profit sharing,
employee stock ownership or other employee benefit plan of the Company or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity, or (iii) any Person who is as of June 10, 1997 the
Beneficial Owner of 20% or more of the total voting power of the Voting Shares),
who is or becomes the Beneficial Owner of 9.5% or more of the total voting power
of the Voting Shares, increases his Beneficial Ownership of such voting power by
5% or more over the percentage so owned by such Person on the date hereof; or
(D) the Board of Directors adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(o) DELETED.
(p) Relative: means a Person's spouse, parents, children,
siblings, mothers- and father-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law.
(q) Reviewing Party: means any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by such Board (including the Special Independent
Counsel referred to in Section 6) who is not a party to the particular Claim for
which the Indemnitee is seeking indemnification.
(r) Subsidiary: means any corporation of which fifty percent of
any class of Equity Security is owned, directly or indirectly, by the Company.
(s) Trust: means the trust established pursuant to Section 7
hereof.
(t) Voting Shares: means any issued and outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors.
2. Basic Indemnification Agreement. In consideration of, and as an
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event the Indemnitee is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim by reason of (or arising in part out
of) an Indemnifiable Event,
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<PAGE>
the Company will indemnify the Indemnitee to the fullest extent authorized by
law, against any and all Expenses and Losses (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses and Losses) of such Claim, whether or not such Claim proceeds
to judgment or is settled or otherwise is brought to a final disposition,
subject in each case, to the further provisions of this Agreement.
3. Limitations on Indemnification. Notwithstanding the provisions of
Section 2, the Indemnitee shall not be indemnified and held harmless from any
Losses or Expenses (a) which have been Determined, as provided herein, to
constitute an Excluded Claim; (b) to the extent the Indemnitee is indemnified by
the Company and has actually received payment pursuant to the Certificate of
Incorporation, D&O Insurance, or otherwise; or (c) other than pursuant to the
last sentence of Section 4(d) or Section 14, in connection with any Claim
initiated by the Indemnitee, unless the Company has joined in or the Board of
Directors has authorized such Claim.
4. Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of any
Claim, the Indemnitee shall, if indemnification with respect thereto may be
sought from the Company under this Agreement, notify the Company of the
commencement thereof and the Indemnitee agrees further not to make any admission
or effect any settlement with respect to such Claim without the consent of the
Company, except any Claim with respect to which the Indemnitee has undertaken
the defense in accordance with the second to last sentence of Section 4(d).
(b) If, at the time of the receipt of such notice, the Company
has D&O Insurance in effect, the Company shall give prompt notice of the
commencement of Claim to the insurers in accordance with the procedures set
forth in the respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all Losses and Expenses payable as a result of such Claim.
(c) To the extent the Company does not, at the time of the Claim
have applicable D&O Insurance, or if a Determination is made that any Expenses
arising out of such Claim will not be payable under the D&O Insurance then in
effect, the Company shall be obligated to pay the Expenses of any Claim in
advance of the final disposition thereof and the Company, if appropriate, shall
be entitled to assume the defense of such Claim, with counsel satisfactory to
the Indemnitee, upon the delivery to the Indemnitee of written notice of its
election so to do. After delivery of such notice, the Company will not be liable
to the Indemnitee under this Agreement for any legal or other Expenses
subsequently incurred by the Indemnitee in connection with such defense other
than reasonable Expenses of investigation; provided that the Indemnitee shall
have the right to employ its counsel in such Claim but the fees and expenses of
such counsel incurred after delivery of notice from the Company of its
assumption of such defense shall be at the
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Indemnitee's expense; provided further that if: (i) the employment of counsel by
the Indemnitee has been previously authorized by the Company; (ii) the
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of any such
defense; or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such action, then the reasonable fees and expenses of
counsel shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of the
Indemnitee's written request therefor unless a Determination is made that the
Claims giving rise to the Indemnitee's request are Excluded Claims or otherwise
not payable under this Agreement, provided that all payments on account of the
Company's obligation to pay Expenses under Section 4(c) of this Agreement prior
to the final disposition of any Claim shall be made within 20 days of the
Indemnitee's written request therefor and such obligation shall not be subject
to any such Determination but shall be subject to Section 4(e) of this
Agreement. In the event the Company takes the position that the Indemnitee is
not entitled to indemnification in connection with the proposed settlement of
any Claim, the Indemnitee shall have the right at its own expense to undertake
defense of any such Claim, insofar as such proceeding involves Claims against
the Indemnitee, by written notice given to the Company within 10 days after the
Company has notified the Indemnitee in writing of its contention that the
Indemnitee is not entitled to indemnification. If it is subsequently determined
in connection with such proceeding that the Indemnifiable Events are not
Excluded Claims and that the Indemnitee, therefore, is entitled to be
indemnified under the provisions of Section 2 hereof, the Company shall promptly
indemnify the Indemnitee.
(e) The Indemnitee hereby expressly undertakes and agrees to
reimburse the Company for all Losses and Expenses paid by the Company in
connection with any Claim against the Indemnitee in the event and only to the
extent that a Determination shall have been made by a court of competent
jurisdiction in a decision from which there is no further right to appeal that
the Indemnitee is not entitled to be indemnified by the Company for such Losses
and Expenses because the Claim is an Excluded Claim or because the Indemnitee is
otherwise not entitled to payment under this Agreement.
5. Settlement. The Company shall have no obligation to indemnify the
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent. The Company shall not
settle any Claim in which it takes the position that the Indemnitee is not
entitled to indemnification in connection with such settlement without the
consent of the Indemnitee, nor shall the Company settle any Claim in any manner
which would impose any Fine or any obligation on the Indemnitee, without the
Indemnitee's written consent. Neither the Company nor the Indemnitee shall
unreasonably withhold their consent to any proposed settlement.
7
<PAGE>
6. Change in Control; Extraordinary Transactions. The Company and the
Indemnitee agree that if there is a Change in Control of the Company (other than
a Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control)
then all Determinations thereafter with respect to the rights of the Indemnitee
to be paid Losses and Expenses under this Agreement shall be made only by a
special independent counsel (the "Special Independent Counsel") selected by the
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld) or by a court of competent jurisdiction. The Company shall pay the
reasonable fees of such Special Independent Counsel and shall indemnify such
Special Independent Counsel against any and all reasonable expenses (including
reasonable attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
The Company covenants and agrees that, in the event of a Change in
Control of the sort set forth in clause (B) of Section 1(c), the Company will
use its best efforts (a) to have the obligations of the Company under this
Agreement including, but not limited to those under Section 7, expressly assumed
by the surviving, purchasing or succeeding entity, or (b) otherwise to
adequately provide for the satisfaction of the Company's obligations under this
Agreement, in a manner reasonably acceptable to the Indemnitee.
7. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by the Indemnitee, create a
trust (the "Trust") for the benefit of the Indemnitee and from time to time upon
written request of the Indemnitee shall fund the Trust in an amount sufficient
to satisfy any and all Losses and Expenses which are actually paid or which the
Indemnitee reasonably determines from time to time may be payable by the Company
under this Agreement. The amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by the
Reviewing Party, in any case in which the Special Independent Counsel is
involved. The terms of the Trust shall provide that upon a Change in Control:
(i) the Trust shall not be revoked or the principal thereof invaded without the
written consent of the Indemnitee; (ii) the trustee of the Trust shall advance,
within twenty days of a request by the Indemnitee, any and all Expenses to the
Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which the Indemnitee would be required to reimburse the
Company under Section 4(e) of this Agreement); (iii) the Company shall continue
to fund the Trust from time to time in accordance with the funding obligations
set forth above; (iv) the trustee of the Trust shall promptly pay to the
Indemnitee all Losses and Expenses for which the Indemnitee shall be entitled to
indemnification pursuant to this Agreement; and (v) all unexpended funds in the
Trust shall revert to the Company upon a final determination by a court of
competent jurisdiction in a final decision from which there is no further right
of appeal that the Indemnitee has been fully indemnified under the terms of this
Agreement. The Trustee of the Trust shall be chosen by the Indemnitee.
8
<PAGE>
8. No Presumption. For purposes of this Agreement, the termination of
any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that the Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.
9. Non-exclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights the Indemnitee may have under the Certificate
of Incorporation, the Company's By-laws, the Delaware General Corporation Law,
any vote of stockholders or disinterested directors or otherwise, both as to
action in the Indemnitee's official capacity and as to action in any other
capacity by holding such office, and shall continue after the Indemnitee ceases
to serve the Company as a director, officer, employee, agent or fiduciary, for
so long as the Indemnitee shall be subject to any Claim by reason of (or arising
in part out of) an Indemnifiable Event. To the extent that a change in the
Delaware General Corporation Law (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Certificate of Incorporation and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
10. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, the Indemnitee, if an officer or director of the Company, shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any director or officer of the
Company.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
12. Partial Indemnity, Etc. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses and Losses of a Claim but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify the Indemnitee
for the portion thereof to which the Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to any Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice, the
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith. In connection with any Determination as to whether the Indemnitee is
entitled to be indemnified hereunder the burden of proof shall be on the Company
to establish that the Indemnitee is not so entitled.
9
<PAGE>
13. Liability of Company. The Indemnitee agrees that neither the
stockholders nor the directors nor any officer, employee, representative or
agent of the Company shall be personally liable for the satisfaction of the
Company's obligations under this Agreement and the Indemnitee shall look solely
to the assets of the Company for satisfaction of any claims hereunder.
14. Enforcement.
(a) The Indemnitee's right to indemnification and other rights
under this Agreement shall be specifically enforceable by the Indemnitee only in
the state or Federal courts of [the States of Delaware or New York] and shall be
enforceable notwithstanding any adverse Determination by the Company's Board of
Directors, independent legal counsel, the Special Independent Counsel or the
Company's stockholders and no such Determination shall create a presumption that
the Indemnitee is not entitled to be indemnified hereunder. In any such action
the Company shall have the burden of proving that indemnification is not
required under this Agreement.
(b) In the event that any action is instituted by the Indemnitee
under this Agreement, or to enforce or interpret any of the terms of this
Agreement, the Indemnitee shall be entitled to be paid all court costs and
reasonable expenses, including reasonable counsel fees, incurred by the
Indemnitee with respect to such action, unless the court determines that each of
the material assertions made by the Indemnitee as a basis for such action were
not made in good faith or were frivolous.
15. Severability. In the event that any provision of this Agreement is
determined by a court to require the Company to do or to fail to do an act which
is in violation of applicable law, such provision (including any provision
within a single section, paragraph or sentence) shall be limited or modified in
its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with their terms to the fullest extent
permitted by law.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
17. Consent to Jurisdiction. The Company and the Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of [the States of
Delaware and New York] for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state and
Federal courts of [the States of Delaware and New York].
10
<PAGE>
18. Notices. All notices, or other communications required or
permitted hereunder shall be sufficiently given for all purposes if in writing
and personally delivered, telegraphed, telexed, sent by facsimile transmission
or sent by registered or certified mail, return receipt requested, with postage
prepaid addressed as follows, or to such other address as the parties shall have
given notice of pursuant hereto:
(a) If to the Company, to:
Peachtree Software, Inc.
1505 Pavilion Place
Norcross, Georgia 30093
Facsimile No.: (770) 564-6002
Attention: Ronald F. Verni
(b) If to the Indemnitee, to:
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19. Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.
20. Successors and Assigns. This Agreement shall be (i) binding upon
all successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii) shall
be binding upon and inure to the benefit of any successors and assigns, heirs,
and personal or legal representatives of the Indemnitee.
21. Amendment; Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
11
<PAGE>
IN WITNESS WHEREOF, the Company and the Indemnitee have executed this
Agreement as of the day and year first above written.
PEACHTREE SOFTWARE, INC.
By:
-----------------------
Name:
Title:
INDEMNITEE
------------------------------
Name:
12
<PAGE>
Exhibit 10.8
[PWRW&G Draft 12/15/98]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of
[DATE] by and between AUTOMATIC DATA PROCESSING, INC., a Delaware corporation
("ADP"), and PEACHTREE SOFTWARE, INC., a Delaware corporation ("Peachtree").
RECITALS
WHEREAS, ADP currently owns all of the issued and outstanding shares
of common stock, $0.01 par value (the "Common Stock"), of Peachtree;
WHEREAS, ADP has determined that it is appropriate and desirable,
subject to market conditions, to cause ADP and Peachtree to sell shares of the
Common Stock;
WHEREAS, ADP has determined that it is appropriate and desirable that
such sale be effected as an underwritten initial public offering of the Common
Stock (the "Offering");
WHEREAS, ADP has determined that in connection with the Offering the
separation of the business operations conducted by Peachtree from ADP's business
operations (the "Separation") is in the best interests of ADP and its
shareholders; and
WHEREAS, in connection with the Offering and the Separation, each of
ADP and Peachtree has determined that certain transactions and agreements
between Peachtree and ADP, all as more fully described in the Intercompany
Agreement of even date herewith between ADP and Peachtree (the "Intercompany
Agreement") and the Ancillary Agreements (as defined in the Intercompany
Agreement), are appropriate and desirable to establish Peachtree as a
stand-alone entity; and
WHEREAS, ADP and Peachtree desire to enter into this Agreement to set
forth their agreement regarding (i) certain registration rights with respect to
the Common Stock and any other securities issued in respect thereof or in
exchange therefor and (ii) certain representations, warranties, covenants and
agreements applicable in connection therewith.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ADP and Peachtree, for themselves,
their successors and assigns, hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used but not defined in
this Agreement shall have the meanings ascribed thereto in the Intercompany
Agreement. As used in this Agreement, the following terms will have the
following meanings, applicable both to the singular and the plural forms of the
terms described:
"ADP Entity" means any of ADP and the Subsidiaries of ADP (other than
Subsidiaries that constitute Peachtree Entities).
"Agreement" means this Registration Rights Agreement, as amended,
modified or supplemented and in effect from time to time.
"Company Securities" has the meaning ascribed thereto in Section
2.2(b).
"Disadvantageous Condition" has the meaning ascribed thereto in
Section 2.1(a).
"Holder" means ADP, the other ADP Entities and any Transferee.
"Holder Securities" has the meaning ascribed thereto in Section
2.2(b).
"Intercompany Agreement" has the meaning ascribed thereto in the
Recitals to this Agreement.
"Offering" has the meaning ascribed thereto in the Recitals to this
Agreement.
"Other Holders" has the meaning ascribed thereto in Section 2.2(c).
"Other Securities" has the meaning ascribed thereto in Section 2.2.
"Peachtree Entity" means any of Peachtree and its Subsidiaries.
"Registrable Securities" means shares of Common Stock and any stock or
other securities into which or for which such Common Stock may hereafter be
changed, converted or exchanged and any other shares or securities issued to the
Holders and such shares or other securities into which or for which such shares
are so changed, converted or exchanged upon any reclassification, share
combination, share subdivision, share dividend, share exchange, merger,
consolidation or other transaction or event. As to any particular Registrable
Securities, such Registrable Securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement; (ii)
they are sold by a person in a transaction in which rights under the
registration provisions of this Agreement are not
<PAGE>
assigned; (iii) they may be sold to the public pursuant to Rule 144(k) (or any
similar provision then in force) under the Securities Act without registration
under the Securities Act; (iv) they have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer have
been delivered by Peachtree and subsequent disposition of them does not require
registration of them under the Securities Act; or (v) they shall have ceased to
be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article II, including, without limitation, (i) the fees, disbursements and
expenses of Peachtree's counsel and accountants and the fees and expenses of
counsel selected by the Holders in accordance with this Agreement in connection
with the registration of the securities to be disposed of; (ii) all expenses,
including filing fees, in connection with the preparation, printing and filing
of the registration statement, any preliminary prospectus or final prospectus,
any other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to any underwriters, dealers, brokers
or agents designated by the Holders; (iii) the cost of printing or producing any
underwriting agreements and blue sky or legal investment memoranda and any other
documents in connection with the offering, sale or delivery of the securities to
be disposed of; (iv) all expenses in connection with the qualification of the
securities to be disposed of for offering and sale under state securities laws,
including the fees and disbursements of counsel for any underwriters, dealers,
brokers or agents designated by the Holders and the Holders of securities in
connection with such qualification and in connection with any blue sky and legal
investment surveys; (v) the filing fees incident to securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the securities to be disposed of; (vi) transfer agents' and registrars' fees
and expenses and the fees and expenses of any other agent or trustee appointed
in connection with such offering; (vii) all security engraving and security
printing expenses; (viii) all fees and expenses payable in connection with the
listing or approval for trading of the securities on any securities exchange or
automated interdealer quotation system or the rating of such securities, (ix)
any other fees, expenses and disbursements customarily paid by the sellers of
securities, but excluding underwriting discounts and commissions and transfer
taxes, if any, and (x) other reasonable actual out-of-pocket expenses of Holders
in addition to legal fees and expenses referred to in clause (i) above.
"Rule 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"Selling Holder" has the meaning ascribed thereto in Section 2.4(e).
"Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other voting ownership interests is owned
or controlled, directly or
<PAGE>
indirectly, by such Person or by one or more of the Subsidiaries of such Person
or by a combination thereof.
"Transferee" has the meaning ascribed thereto in Section 2.9.
Section 1.2 Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and references
to the parties shall mean the parties to this Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
(a) Upon written notice at any time after the Closing Date from
any Holder of Registrable Securities requesting that Peachtree effect the
registration under the Securities Act of any or all of the Registrable
Securities held by such Holder, which notice shall specify the intended method
or methods of disposition of such Registrable Securities, Peachtree shall use
its best efforts to effect the registration under the Securities Act and
applicable state securities laws of such Registrable Securities for disposition
in accordance with the intended method or methods of disposition stated in such
request (including in a Rule 415 Offering, if Peachtree is then eligible to
register such Registrable Securities on Form S-3 (or a successor form) for such
offering); provided, that:
(i) with respect to any registration statement filed, or to
be filed, pursuant to this Section 2.1, if Peachtree shall furnish to
the Holders of Registrable Securities that have made such request a
certified resolution of the Board of Directors of Peachtree (adopted
by the affirmative vote of a majority of the directors that are
neither designated by the ADP Entities nor directors or officers of
any ADP Entity) stating that in the Board of Directors' good faith
judgment it would (because of the existence of, or in anticipation of,
any acquisition or financing activity, or the unavailability for
reasons beyond Peachtree's reasonable control of any required
financial statements, or any other event or condition of similar
significance to Peachtree) be significantly disadvantageous (a
"Disadvantageous Condition") to Peachtree for such a registration
statement to be maintained effective, or to be filed and become
effective, and setting forth the general reasons for such judgment,
Peachtree shall be entitled to cause such registration statement to be
withdrawn and the effectiveness of such registration statement
terminated, or, in the event no registration statement has yet been
filed, shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of which
Peachtree shall promptly deliver to such Holders). Upon receipt of any
such notice of a Disadvantageous Condition, such Holders shall
forthwith discontinue use of the prospectus contained in such
registration statement and, if so directed by Peachtree, each such
Holder will deliver to Peachtree all copies, other than permanent
<PAGE>
file copies then in such Holder's possession, of the prospectus then covering
such Registrable Securities current at the time of receipt of such notice;
provided, that the filing or use of any such registration statement may not be
delayed or discontinued for a period in excess of 90 days due to the occurrence
of any particular Disadvantageous Condition and no more than two resolutions
regarding Disadvantageous Conditions may be made by the Board of Directors in
any two-year period;
(ii) the Holders of Registrable Securities may collectively
exercise their rights under this Section 2.1(through notice delivered
by Holders owning in the aggregate a majority in economic interest of
the Registrable Securities then held by Holders) on not more than four
occasions;
(iii) except as otherwise provided herein, the Holders of
Registrable Securities shall not have the right to exercise
registration rights pursuant to this Section 2.1 within the 180-day
period following the registration and sale of Registrable Securities
effected pursuant to a prior exercise of the registration rights
provided in this Section 2.1; and
(iv) the Holders of Registrable Securities shall not have
the right to exercise registration rights pursuant to this Section 2.1
within any "lock-up" period following the Closing Date agreed with the
Underwriters in connection with the Offering, unless such "lock-up" is
waived by the Underwriters.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement or (iii) if the conditions to closing specified in any
purchase or underwriting agreement entered into in connection with such
registration are not satisfied or waived other than by reason of some act or
omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this Section
2.1 shall involve, in whole or in part, an underwritten offering, the Holders of
a majority of the Registrable Securities to be registered shall have the right
to designate an underwriter or underwriters reasonably acceptable to Peachtree
as the lead or managing underwriters of such underwritten offering and, in
connection with each registration pursuant to this Section 2.1, such Holders may
select one counsel reasonably acceptable to Peachtree to represent all such
Holders.
(d) Peachtree shall have the right to cause the registration of
additional equity securities for sale for its account, the account of any
Peachtree Entity or
<PAGE>
any existing or former directors, officers or employees of Peachtree Entities in
any registration of Registrable Securities requested by the Holders pursuant to
paragraph (a) above; provided, that if such Holders are advised in writing (with
a copy to Peachtree) by a nationally recognized investment banking firm selected
by such Holders reasonably acceptable to Peachtree (which shall be the lead
underwriter or a managing underwriter in the case of an underwritten offering)
that, in such firm's good faith view, all or a part of such additional equity
securities cannot be sold and the inclusion of such additional equity securities
in such registration would be likely to have an adverse effect on the price,
timing or distribution of the offering and sale of the Registrable Securities
then contemplated by any Holder, the registration of such additional equity
securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered may require that any such additional equity
securities be included in the offering proposed by such Holders on the same
conditions as the Registrable Securities that are included therein. In the event
that the number of Registrable Securities requested to be included in a
registration statement by the Holders thereof exceeds the number which, in the
good faith view of such investment banking firm, can be sold without adversely
affecting the price, timing, distribution or sale of securities in the offering,
the number shall be allocated pro rata among the requesting Holders on the basis
of the relative number of Registrable Securities then held by each such Holder
(provided, that any number in excess of a Holder's request may be reallocated
among the remaining requesting Holders in a like manner).
Section 2.2 Piggyback Registration. In the event that Peachtree at any
time after the Closing Date proposes to register any of its Common Stock, any
other of its equity securities or securities convertible into or exchangeable
for its equity securities (collectively, including Common Stock, "Other
Securities") under the Securities Act, whether or not for sale for its own
account, in a manner that would permit registration of Registerable Securities
for sale for cash to the public under the Securities Act, it shall at each such
time give prompt written notice to each Holder of Registrable Securities of its
intention to do so and of the rights of such Holder under this Section 2.2.
Subject to the terms and conditions hereof, such notice shall offer each such
Holder the opportunity to include in such registration statement such number of
Registrable Securities as such Holder may request. Upon the written request of
any such Holder made within 15 days after the receipt of Peachtree's notice
(which request shall specify the number of Registrable Securities intended to be
disposed of and the intended method of disposition thereof), Peachtree shall use
its best efforts to effect, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which Peachtree has been so requested to register, to the extent
required to permit the disposition (in accordance with such intended method of
disposition thereof) of the Registrable Securities so requested to be
registered; provided, that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration, Peachtree
shall determine for any reason not to register the Other Securities, Peachtree
may, at its election, give written notice of such determination to such Holders
and thereupon Peachtree shall be relieved of its obligation to register such
Registrable Securities in connection with the registration of such Other
Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to
<PAGE>
request that such registration be effected as a registration under Section 2.1
to the extent permitted thereunder;
(b) if the registration referred to in the first sentence of this
Section 2.2 is to be an underwritten registration on behalf of Peachtree, and a
nationally recognized investment banking firm selected by Peachtree advises
Peachtree in writing that, in such firm's good faith view, all or a part of such
Registrable Securities cannot be sold and the inclusion of all or a part of such
Registrable Securities in such registration would be likely to have an adverse
effect upon the price, timing or distribution of the offering and sale of the
Other Securities then contemplated, Peachtree shall include in such
registration:
(i) first, all Other Securities Peachtree proposes to sell
for its own account ("Company Securities");
(ii) second, up to the full number of Registrable Securities
held by Holders constituting ADP Entities that are requested to be
included in such registration (Registrable Securities that are so held
being sometimes referred to herein as "Holder Securities") in excess
of the number of Company Securities to be sold in such offering which,
in the good faith view of such investment banking firm, can be sold
without adversely affecting such offering (and (x) if such number is
less than the full number of such Holder Securities, such number shall
be allocated by ADP among such ADP Entities and (y) in the event that
such investment banking firm advises that less than all of such Holder
Securities may be included in such offering, such ADP Entities may
withdraw their request for registration of their Registrable
Securities under this Section 2.2 and 90 days subsequent to the
effective date of the registration statement for the registration of
such Other Securities request that such registration be effected as a
registration under Section 2.1 to the extent permitted thereunder;
(iii) third, up to the full number of Registrable Securities
held by Holders (other than ADP Entities) of Registrable Securities
that are requested to be included in such registration in excess of
the number of Company Securities and Holder Securities to be sold in
such offering which, in the good faith view of such investment banking
firm, can be so sold without so adversely affecting such offering (and
(x) if such number is less than the full number of such Registrable
Securities, such number shall be allocated pro rata among such Holders
on the basis of the number of Registrable Securities requested to be
included therein by each such Holder and (y) in the event that such
investment banking firm advises that less than all of such Registrable
Securities may be included in such offering, such Holders may withdraw
their request for registration of their Registrable Securities under
this Section 2.2 and 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities
request that such registration be effected as a registration under
Section 2.1 to the extent permitted thereunder); and
(iv) fourth, up to the full number of the Other Securities
(other than Company Securities), if any, in excess of the number of
Company Securities and Registrable Securities to be sold in such
offering which, in the good
<PAGE>
faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and, if such number is less than
the full number of such Other Securities, such number shall be
allocated pro rata among the holders of such Other Securities (other
than Company Securities) on the basis of the number of securities
requested to be included therein by each such Holder);
(c) if the registration referred to in the first sentence of this
Section 2.2 is to be an underwritten secondary registration on behalf of holders
of Other Securities (the "Other Holders"), and the lead underwriter or managing
underwriter advises Peachtree in writing that in their good faith view, all or a
part of such additional securities cannot be sold and the inclusion of such
additional securities in such registration would be likely to have an adverse
effect on the price, timing or distribution of the offering and sale of the
Other Securities then contemplated, Peachtree shall include in such registration
the number of securities (including Registrable Securities) that such
underwriters advise can be so sold without adversely affecting such offering,
allocated pro rata among the Other Holders and the Holders of Registrable
Securities on the basis of the number of securities (including Registrable
Securities) requested to be included therein by each Other Holder and each
Holder of Registrable Securities; provided, that if such Other Holders have
requested that such registration statement be filed pursuant to demand
registration rights granted to them by Peachtree, Peachtree shall include in
such registration (i) first, Other Securities sought to be included therein by
the Other Holders pursuant to the exercise of such demand registration rights,
(ii) second, the number of Holder Securities sought to be included in such
registration in excess of the number of Other Securities sought to be included
in such registration by the Other Holders which in the good faith view of such
investment banking firm, can be so sold without so adversely affecting such
offering (and (x) if such number is less than the full number of such Holder
Securities, such number shall be allocated by ADP among such ADP Entities and
(y) in the event that such investment banking firm advises that less than all of
such Holder Securities may be included in such offering, such ADP Entities may
withdraw their request for registration of their Registrable Securities under
this Section 2.2 and 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities request
that such registration be effected as a registration under Section 2.1 to the
extent permitted thereunder) and (iii) third, the number of Registrable
Securities sought to be included in such registration by Holders (other than ADP
Entities) of Registrable Securities in excess of the number of Other Securities
and the number of Holder Securities sought to be included in such registration
which, in the good faith view of such investment banking firm, can be so sold
without so adversely affecting such offering (and (x) if such number is less
than the full number of such Registrable Securities, such number shall be
allocated pro rata among such Holders on the basis of the number of Registrable
Securities requested to be included therein by each such Holder and (y) in the
event that such investment banking firm advises that less than all of such
Registrable Securities may be included in such offering, such Holders may
withdraw their request for registration of their Registrable Securities under
this Section 2.2 and 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities request
that such registration be effected as a registration under Section 2.1 to the
extent permitted thereunder);
<PAGE>
(d) Peachtree shall not be required to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
executive or employee benefit or compensation plans; and
(e) no registration of Registrable Securities effected under this
Section 2.2 shall relieve Peachtree of its obligation to effect a registration
of Registrable Securities pursuant to Section 2.1.
Section 2.3 Expenses. Except as provided herein and except for
underwriting discounts and commissions attributable to the Registrable
Securities sold by the Holders, Peachtree shall pay all Registration Expenses
with respect to a particular offering (or proposed offering). Notwithstanding
the foregoing, each Holder and Peachtree shall be responsible for its own
internal administrative and similar costs, which shall not constitute
Registration Expenses.
Section 2.4 Registration and Qualification. If and whenever Peachtree
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 or 2.2, Peachtree shall as promptly
as practicable:
(a) prepare, file and use its reasonable best efforts to cause to
become effective a registration statement under the Securities Act relating to
the Registrable Securities to be offered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities until the earlier of (A) such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition set forth in such registration statement and (B)
the expiration of six months after such registration statement becomes
effective; provided, that such six-month period shall be extended for such
number of days that equals the number of days elapsing from (x) the date the
written notice contemplated by paragraph (f) below is given by Peachtree to (y)
the date on which Peachtree delivers to the Holders of Registrable Securities
the supplement or amendment contemplated by paragraph (f) below;
(c) furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents, as the Holders of Registrable
Securities or such underwriter may reasonably request, and upon
<PAGE>
request a copy of any and all transmittal letters or other correspondence to or
received from, the Commission or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering;
(d) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such U.S. jurisdictions as the Holders of such
Registrable Securities or any underwriter to such Registrable Securities shall
request, and use its reasonable best efforts to obtain all appropriate
registrations, permits and consents in connection therewith, and do any and all
other acts and things which may be necessary or advisable to enable the Holders
of Registrable Securities or any such underwriter to consummate the disposition
in such jurisdictions of its Registrable Securities covered by such registration
statement; provided, that Peachtree shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any such
jurisdiction wherein it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) (i) use its best efforts to furnish to each Holder of
Registrable Securities included in such registration (each, a "Selling Holder")
and to any underwriter of such Registrable Securities an opinion of independent
counsel for Peachtree addressed to each Selling Holder and dated the date of the
closing under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement) and (ii)
use its best efforts to furnish to each Selling Holder a "cold comfort" letter
addressed to each Selling Holder and signed by the independent public
accountants who have audited the financial statements of Peachtree included in
such registration statement, in each such case covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities and such other matters as the Selling Holders may reasonably
request and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements;
(f) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant to
Sections 2.1 or 2.2 is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) of any request by the Commission
or any other regulatory body or other body having jurisdiction for any amendment
of or supplement to any registration statement or other document relating to
such offering, and in either such case, at the request of the Selling Holders
prepare and furnish to the Selling Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(g) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities to be so
included in the registration statement;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders to the extent not already provided, as soon as reasonably practicable,
but not later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at least
twelve (12) months beginning with the first full month after the effective date
of such registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act;
(i) use its best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and automated
inter-dealer quotation system on which a class of common equity securities of
Peachtree is then listed;
(j) to the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of Peachtree to attend any "road shows"
scheduled in connection with any such registration, with all out-of-pocket costs
and expense incurred by Peachtree or such officers in connection with such
attendance to be paid by Peachtree; and
(k) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Sections 2.1 or 2.2 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
Section 2.5 Conversion of Other Securities, Etc. In the event that any
Holder offers any options, rights, warrants or other securities issued by it or
any other Person that are offered with, convertible into or exercisable or
exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 2.1 and 2.2.
Section 2.6 Underwriting; Due Diligence.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Article II, Peachtree shall enter into an underwriting agreement with such
underwriters for such offering, which agreement will contain such
representations and warranties by Peachtree and such other terms and provisions
as are customarily contained in underwriting agreements of Peachtree to the
extent relevant and as are customarily contained in underwriting agreements
generally with respect to secondary distributions to the extent relevant,
including, without limitation, indemnification and contribution provisions
substantially to the effect and to the extent
<PAGE>
provided in Section 2.7, and agreements as to the provision of opinions of
counsel and accountants' letters to the effect and to the extent provided in
Section 2.4(e). The Selling Holders on whose behalf the Registrable Securities
are to be distributed by such underwriters shall be parties to any such
underwriting agreement and the representations and warranties by, and the other
agreements on the part of, Peachtree to and for the benefit of such
underwriters, shall also be made to and for the benefit of such Selling Holders.
Such underwriting agreement shall also contain such representations and
warranties by such Selling Holders and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, when relevant, including, without limitation, indemnification and
contribution provisions substantially to the effect and to the extent provided
in Section 2.7.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article II, Peachtree shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books and
records and such opportunities to discuss the business of Peachtree with its
officers and the independent public accountants who have certified the financial
statements of Peachtree as shall be necessary, in the opinion of such Holders
and such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
Section 2.7 Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities made
pursuant to this Article II, Peachtree agrees to indemnify and hold harmless, to
the extent permitted by law, each Selling Holder, each underwriter of
Registrable Securities so offered and each Person, if any, who controls any of
the foregoing Persons within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, against
any and all losses, liabilities, costs (including reasonable attorney's fees and
disbursements), claims and damages, joint or several, to which they or any of
them may become subject, under the Securities Act or otherwise, including any
amount paid in settlement of any litigation commenced or threatened, insofar as
such losses, liabilities, costs, claims and damages (or actions or proceedings
in respect thereof, whether or not such indemnified Person is a party thereto)
arise out of or are based upon any untrue statement by Peachtree or alleged
untrue statement by Peachtree of a material fact contained in the registration
statement (or in any preliminary or final prospectus included therein) or in any
offering memorandum or other offering document relating to the offering and sale
of such Registrable Securities prepared by Peachtree or at its direction, or any
amendment thereof or supplement thereto, or in any document incorporated by
reference therein, or any omission by Peachtree or alleged omission by Peachtree
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however that Peachtree
shall not be liable to any Person in any such case to the extent that any such
loss, liability, cost, claim or damage arises out of or relates to any untrue
statement or alleged untrue statement, or any omission, if such statement or
omission shall have been made in reliance upon and in conformity with
information relating to a Selling Holder,
<PAGE>
another holder of securities included in such registration statement or
underwriter furnished in writing to Peachtree by or on behalf of such Selling
Holder, other holder or underwriter specifically for use in the registration
statement (or in any preliminary or final prospectus included therein), offering
memorandum or other offering document, or any amendment thereof or supplement
thereto. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Selling Holder, any other holder or
any underwriter and shall survive the transfer of such securities. The foregoing
indemnity agreement is in addition to any liability that Peachtree may otherwise
have to each Selling Holder, other holder or underwriter of the Registrable
Securities or any controlling person of the foregoing and the officers,
directors, affiliates, employees and agents of each of the foregoing; provided
further, that, in the case of an offering with respect to which a Selling Holder
has designated the lead or managing underwriters (or a Selling Holder is
offering Registrable Securities directly, without an underwriter), this
indemnity does not apply to any loss, liability, cost, claim or damage arising
out of or relating to any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus or offering
memorandum if a copy of a final prospectus or offering memorandum was not sent
or given by or on behalf of any underwriter (or such Selling Holder or other
holder, as the case may be) to such Person asserting such loss, liability, cost,
claim or damage at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such final prospectus or offering
memorandum.
(b) In the case of each offering made pursuant to this Agreement,
each Selling Holder, by exercising its registration rights hereunder, agrees to
indemnify and hold harmless, and to cause each underwriter of Registrable
Securities included in such offering (in the same manner and to the same extent
as set forth in Section 2.7(a)) to agree to indemnify and hold harmless,
Peachtree, each other underwriter who participates in such offering, each other
Selling Holder or other holder with securities included in such offering and in
the case of an underwriter, such Selling Holder or other holder, and each
Person, if any, who controls any of the foregoing within the meaning of the
Securities Act and the officers, directors, affiliates, employees and agents of
each of the foregoing, against any and all losses, liabilities, costs (including
reasonable attorney's fees and disbursements), claims and damages to which they
or any of them may become subject, under the Securities Act or otherwise,
including any amount paid in settlement of any litigation commenced or
threatened, insofar as such losses, liabilities, costs, claims and damages (or
actions or proceedings in respect thereof, whether or not such indemnified
Person is a party thereto) arise out of or are based upon any untrue statement
or alleged untrue statement by such Selling Holder or underwriter, as the case
may be, of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or in any offering memorandum
or other offering document relating to the offering and sale of such Registrable
Securities prepared by Peachtree or at its direction, or any amendment thereof
or supplement thereto, or any omission by such Selling Holder or underwriter, as
the case may be, or alleged omission by such Selling Holder or underwriter, as
the case may be, of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that such untrue statement of a material fact is contained in, or such
material fact is omitted from information relating to such Selling
<PAGE>
Holder or underwriter, as the case may be, furnished to Peachtree in writing by
or on behalf of such Selling Holder or underwriter, as the case may be,
specifically for use in such registration statement (or in any preliminary or
final prospectus included therein), offering memorandum or other offering
document, or any amendment thereof or supplement thereto. The foregoing
indemnity is in addition to any liability which such Selling Holder or
underwriter, as the case may be, may otherwise have to Peachtree, or controlling
persons and the officers, directors, affiliates, employees, and agents of each
of the foregoing; provided, that, in the case of an offering made pursuant to
this Agreement with respect to which Peachtree has designated the lead or
managing underwriters (or Peachtree is offering securities directly, without an
underwriter), this indemnity does not apply to any loss, liability, cost, claim,
or damage arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission in any preliminary prospectus or
offering memorandum if a copy of a final prospectus or offering memorandum was
not sent or given by or on behalf of any underwriter (or Peachtree, as the case
may be) to such Person asserting such loss, liability, cost, claim or damage at
or prior to the written confirmation of the sale of the Registrable Securities
as required by the Securities Act and such untrue statement or omission had been
corrected in such final prospectus or offering memorandum.
(c) Each party indemnified under paragraph (a) or (b) above
shall, promptly after receipt of notice of a claim or action against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the claim or action; provided; that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party under this Section 2.7 (except that the
failure to notify an indemnifying party promptly of the commencement of any such
action to the extent prejudicial to the indemnifying party's ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party to the extent the indemnifying party is prejudiced under this
Section 2.7, but the omission so to notify the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.7). If any such claim or action shall be brought
against an indemnified party, and it shall have notified the indemnifying party
thereof, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified party and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be entitled to participate
therein, and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party (who shall not, except with the consent of
the indemnified party, be counsel to the indemnifying party). After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 2.7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. If the indemnifying party
does not assume the defense of such claim or action, it is understood that the
indemnifying party shall not, in connection with any one such claim or action or
separate but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to one separate firm of local attorneys in each such jurisdiction) at
any time for all such indemnified parties. Any indemnifying party
<PAGE>
against whom indemnity may be sought under this Section 2.7 shall not be liable
to indemnify an indemnified party if such indemnified party settles such claim
or action without the consent of the indemnifying party, which consent shall not
be unreasonably withheld.
(d) If the indemnification provided for in this Section 2.7 shall
for any reason be unavailable (other than in accordance with its terms) to an
indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage in
such proportion as shall be appropriate to reflect (i) the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other hand or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the indemnified party failed to give the
notice required under paragraph (c) above, the relative benefits and the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other with respect to the statements or omissions which resulted in
such loss, liability, cost, claim or damage as well as any other relevant
equitable considerations. The relative benefits received by the indemnifying
party and the indemnified party shall be deemed to be in the same respective
proportion as the net proceeds (before deducting expenses) of the offering
received by such party (or, in the case of an underwriter, such underwriter's
discounts and commissions) bear to the aggregate offering price of the
Registrable Securities or Other Securities. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the indemnifying party on the one hand or the
indemnified party on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission, but not by reference to any indemnified party's stock
ownership in Peachtree. The amount paid or payable by an indemnified party as a
result of the loss, cost, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph (d) shall be deemed to include, for
purposes of this paragraph (d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediate preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified in
the preceding paragraphs of this Section 2.7 (with appropriate modifications)
shall be given by Peachtree, the Selling Holders and underwriters with respect
to any required registration or other qualification of securities under any
state law or regulation or governmental authority.
<PAGE>
(f) In no event shall ADP be liable pursuant to this Section 2.7
for any amounts in excess of the net proceeds received by ADP pursuant to its
sales of securities in the offering in connection with which its liability
hereunder arises.
(g) The obligations of the parties under this Section 2.7 shall
be in addition to any liability which any party may otherwise have to any other
party.
Section 2.8 Rule 144 and Form S-3. Commencing 90 days after the
Closing Date, Peachtree shall use its best efforts to ensure that the conditions
to the availability of Rule 144 set forth in paragraph (c) thereof shall be
satisfied. Upon the request of any Holder of Registrable Securities, Peachtree
will deliver to such Holder a written statement as to whether it has complied
with such requirements. Peachtree further agrees to use its best efforts to
cause all conditions to the availability of Form S-3 (or any successor form)
under the Securities Act of the filing of registration statements under this
Agreement to be met as soon as practicable after the Closing Date.
Notwithstanding anything contained in this Section 2.8, Peachtree may deregister
under Section 12 of the Exchange Act if it then is permitted to do so pursuant
to said Act and the rules and regulations thereunder.
Section 2.9 Transfer of Registration Rights. Any Holder may transfer
all or any portion of its rights under Article II to any transferee of a number
of Registrable Securities owned by such Holder exceeding twenty percent (20%) of
such securities outstanding at the time of transfer (each transferee that
receives such minimum number of Registrable Securities, a "Transferee"). Any
transfer of registration rights pursuant to this Section 2.9 shall be effective
upon receipt by Peachtree of (i) written notice from such Holder stating the
name and address of any Transferee and identifying the number of Registrable
Securities with respect to which the rights under this Agreement are being
transferred and the nature of the rights so transferred and (ii) a written
agreement from such Transferee to be bound by the applicable terms of this
Agreement. The Holders may exercise their rights hereunder in such priority as
they shall agree upon among themselves.
Section 2.10 Holdback Agreement. If any registration pursuant to this
Article II shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public sale
or distribution, including any sale under Rule 144, of any equity security of
Peachtree or any security convertible into or exchangeable or exercisable for
any equity security of Peachtree, in the case of Registrable Securities
(otherwise than through the registered public offering then being made), within
7 days prior to or 90 days (or such lesser period as the lead or managing
underwriters may permit) after the effective date of the registration statement
(or the commencement of the offering to the public of such Registrable
Securities in the case of Rule 415 offerings). Peachtree hereby also so agrees
and agrees to cause each other holder of equity securities or securities
convertible into or exchangeable or exercisable for such securities purchased
from Peachtree otherwise than in a public offering so to agree; provided that,
subject to Section 2.6(a) hereof, Peachtree shall not be so restricted from
effecting any public sale or distribution of any security in connection with any
merger, acquisition, exchange offer, subscription offer, dividend reinvestment
plan or stock option or other executive or employee benefit or compensation
plan.
<PAGE>
ARTICLE III
MISCELLANEOUS
Section 3.1 Limitation of Liability. Neither ADP nor Peachtree shall
be liable to the other for any special, indirect, incidental or consequential
damages of the other arising in connection with this Agreement.
Section 3.2 Subsidiaries. ADP agrees and acknowledges that ADP shall
be responsible for the performance by each ADP Entity of the obligations
hereunder applicable to such entity. Peachtree agrees and acknowledges that
Peachtree shall be responsible for the performance by each Peachtree Entity of
the obligations hereunder applicable to such entity.
Section 3.3 Amendments. This Agreement may not be amended, modified or
terminated orally, but only by a writing duly executed by or on behalf of the
parties hereto in accordance with the terms of the Intercompany Agreement
governing amendment, modification or termination.
Section 3.4 Term. This Agreement shall remain in effect until all
Registrable Securities held by Holders have been transferred by them to Persons
other than Transferees; provided, that the provisions of Section 2.7 shall
survive any such expiration.
Section 3.5 Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other than
those to which it is so determined to be invalid, illegal or unenforceable,
shall remain in full force and effect to the fullest extent permitted by law and
shall not be affected thereby, unless such a construction would be unreasonable.
Section 3.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be deemed duly given upon actual
receipt, and shall be delivered (a) in person, (b) by registered or certified
mail, postage prepaid, return receipt requested or (c) by facsimile or other
generally accepted means of electronic transmission (provided, that a copy of
any notice delivered pursuant to this clause (c) shall also be sent pursuant to
clause (b)), addressed as follows:
(a) If to Peachtree, to:
If to the ADP Parties, to:
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068-1728
Facsimile Number: (973) 994-5387
Attention: Legal Department
<PAGE>
If to the Peachtree Parties, to:
Peachtree Software, Inc.
1505 Pavilion Place
Norcross, Georgia 30093
Facsimile Number: (770) 564-6002
Attention: Ronald F. Verni
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
Section 3.7 Further Assurances. ADP and Peachtree shall execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be necessary or advisable to
carry out their obligations under this Agreement and under any exhibit, document
or other instrument delivered pursuant hereto.
Section 3.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same agreement.
Section 3.9 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of New York.
Section 3.10 Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
Section 3.11 Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing contained in this Agreement, express or implied,
is intended to confer upon any other person or entity any benefits, rights or
remedies.
Section 3.12 Specific Performance. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that they
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
Section 3.13. Recitals. The Recitals in this Agreement are
incorporated herein by reference as if set forth in full and, as so
incorporated, are specifically agreed to by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
AUTOMATIC DATA PROCESSING, INC.
By:
---------------------------------
Name:
Title:
PEACHTREE SOFTWARE, INC.
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Peachtree Upgrade Corporation
Micro Associates, Inc.
ADP Peachtree, Inc.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Registration Statement of Peachtree Software,
Inc. on Form S-1 of our report dated August 25, 1998, appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the headings "Selected Financial Data" and "Experts" in such
Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Peachtree Software,
Inc. included in Item 16. This financial statement schedule is the
responsibility of Peachtree Software, Inc.'s management. Our responsibility is
to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 18, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 27, 1998 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JUNE 27, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> JUN-27-1998
<CASH> 583
<SECURITIES> 0
<RECEIVABLES> 14,059
<ALLOWANCES> 4,690
<INVENTORY> 736
<CURRENT-ASSETS> 37,346
<PP&E> 7,933
<DEPRECIATION> 4,963
<TOTAL-ASSETS> 60,161
<CURRENT-LIABILITIES> 22,125
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 37,452
<TOTAL-LIABILITY-AND-EQUITY> 60,161
<SALES> 52,534
<TOTAL-REVENUES> 52,534
<CGS> 18,978
<TOTAL-COSTS> 18,978
<OTHER-EXPENSES> 33,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 696
<INCOME-TAX> 447
<INCOME-CONTINUING> 249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
