<PAGE> 1
As filed with the Securities and Exchange Commission on November 16, 1998
Registration No. 333- /333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
MOMENTUM BUSINESS APPLICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
<TABLE>
<CAPTION>
DELAWARE 7372 94-3313175
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1301 HARBOR BAY BOULEVARD
ALAMEDA, CALIFORNIA 94502-6576
(510) 769-5122
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
ANEEL BHUSRI
PRESIDENT
1301 HARBOR BAY BOULEVARD
ALAMEDA, CALIFORNIA 94502-6576
(510) 769-5122
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
PEOPLESOFT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7372 68-0137069
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
4460 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
(925) 694-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
DAVID A. DUFFIELD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PEOPLESOFT, INC.
4460 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
(925) 694-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------------
<PAGE> 2
Copies to:
HENRY P. MASSEY, JR., ESQ. ALFRED J. CASTINO
STEVEN L. BERSON, ESQ. ROBERT D. FINNELL, ESQ.
PETER S. HEINECKE, ESQ. PEOPLESOFT, INC.
MICHAEL S. RUSSELL, ESQ. 4460 HACIENDA DRIVE
WILSON SONSINI GOODRICH & ROSATI PLEASANTON, CALIFORNIA 94588
PROFESSIONAL CORPORATION (925) 694-3000
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(650) 493-9300
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]*
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
* With respect to the Form S-3.
CALCULATION OF REGISTRATION FEE
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======================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE (2) REGISTRATION FEE
- - - ------------------------------------- ------------------- ------------------- ---------------------
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Momentum Class A Common Stock,
par value $0.001 per share........... 4,750,000 shares(1) $300,000,000.00 $ 83,400.00
- - - ------------------------------------- ------------------- ------------------- ---------------------
PeopleSoft Common Stock, par value
$0.01 per share (3).................. 4,000,000 shares(4) n/a n/a
======================================================================================================
</TABLE>
(1) Based on an estimate of the maximum number of shares of Momentum Class A
Common Stock issuable in connection with the distribution described herein.
(2) Estimated solely for the purpose of calculating the registration statement
fee pursuant to Rule 457(f)(2) under the Securities Act of 1933 based on the
adjusted book value of the Momentum Class A Common Stock after giving effect
to the distribution described herein. No consideration will be paid by the
recipients of the Momentum Class A Common Stock.
(3) The Momentum Class A Common Stock may be converted into such shares of
PeopleSoft Common Stock if PeopleSoft exercises the Purchase Option (as
defined herein) with respect to the Momentum Class A Common Stock. Pursuant
to Rule 457(i) under the Securities Act of 1933, as amended, no separate fee
is required with respect to these shares of PeopleSoft Common Stock.
(4) Estimated number of shares that may be issuable by PeopleSoft in payment of
the exercise price of the Purchase Option based upon a price of $23.19 per
share of PeopleSoft Common Stock, the average of the high and low prices per
share of PeopleSoft Common Stock as reported on the Nasdaq National Market
on November 9, 1998. An additional indeterminable number of shares are also
being registered to cover any adjustments that may be required as a result
of (i) fluctuations in the per share price of PeopleSoft Common Stock and
the corresponding number of shares of PeopleSoft Common Stock required to be
issued in payment of the exercise price of the Purchase Option (ii) final
determination of the Purchase Option Exercise Price and (iii) stock splits
or similar events.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT 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> 3
[PeopleSoft Letterhead]
December ___ , 1998
Dear Stockholder:
I am pleased to send you the attached prospectus concerning Momentum
Business Applications, Inc. ("Momentum") and notify you of the special
distribution of shares of Momentum Class A Common Stock (the "Distribution") to
the holders of Common Stock of PeopleSoft, Inc. ("PeopleSoft"). Each holder of
PeopleSoft Common Stock at the close of business on December __, 1998 (the
record date for the Distribution) will receive one share of Momentum Class A
Common Stock for each 50 shares of PeopleSoft Common Stock then held.
The Distribution is expected to occur on or about December ___, 1998.
The shares of Momentum Class A Common Stock will be held in "book-entry" form,
although stock certificates are available upon request. Boston EquiServe, L.P.,
is acting as distribution agent and will be responsible for making book-entry
credits to holders of record on the record date and for mailing stock
certificates to Momentum stockholders upon request. The Momentum Class A Common
Stock has been approved for quotation on the Nasdaq National Market under the
symbol "MMTM."
PeopleSoft formed Momentum to select and develop certain software
application products, and to commercialize such products, most likely through
licensing to PeopleSoft. In exchange for all of the shares of Momentum Common
Stock outstanding prior to the Distribution, PeopleSoft will contribute $300
million to Momentum to be used for the development of these software application
products. PeopleSoft, as the sole holder of the Momentum Class B Common Stock
following the Distribution, will have the option to repurchase all, but not less
than all, of the outstanding shares of Momentum Class A Common Stock under
specified conditions. In addition, in exchange for technology licenses granted
by PeopleSoft to Momentum and a commitment by PeopleSoft to make specified
payments on sales of certain products, PeopleSoft will have an exclusive option
to license any products and technology developed by Momentum.
Momentum's software application development activities will take place
under a development and license agreement with PeopleSoft. It is anticipated
that substantially all of Momentum's funds will be directed toward developing
the following software application products: (i) electronic business
("e-business") applications; (ii) analytic applications; and (iii) software
applications designed for specific industry segments.
The goal of providing e-business applications, analytic applications and
industry-specific software applications for a number of different industries
involves an ambitious product development effort that requires market specific
domain expertise significantly different from PeopleSoft's existing skill base.
PeopleSoft believes that it should form Momentum to pursue this opportunity
because of time to market considerations and the unique skills and technologies
needed to develop these new software application products.
By creating Momentum and distributing the Momentum Class A Common Stock
to PeopleSoft stockholders, PeopleSoft will separate the risks associated with
developing these new software application products from the risks associated
with PeopleSoft's traditional cross-industry enterprise resource planning
applications. Thus, the transaction will provide an opportunity for PeopleSoft's
stockholders to increase or decrease their level of participation in this new
business by varying their level of investment in Momentum following the
Distribution.
<PAGE> 4
We are very enthusiastic about this opportunity for Momentum to develop
new software application products for commercialization by PeopleSoft.
The attached prospectus contains important information about the
Distribution and about the proposed business of Momentum. I encourage you to
read it carefully. Holders of PeopleSoft Common Stock on the record date for the
Distribution are not required to take any action to participate in the
Distribution. However, the distribution will be taxable to you as a dividend.
Please read the information set forth under the caption "Certain Federal Income
Tax Considerations" in the attached prospectus and consult your tax advisor with
respect to the income tax consequences of the Distribution to you.
Sincerely,
David A. Duffield
President and Chief Executive Officer
<PAGE> 5
[RED HERRING LEGEND]
The information in this prospectus is not complete and may be changed.
Momentum and PeopleSoft may not sell or distribute 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> 6
SUBJECT TO COMPLETION, DATED NOVEMBER 16, 1998
PROSPECTUS
4,750,000 SHARES
MOMENTUM BUSINESS APPLICATIONS, INC.
CLASS A COMMON STOCK
PeopleSoft, Inc. will distribute to the holders of record of PeopleSoft
Common Stock as of the close of business on December__, 1998 approximately
4,750,000 shares of the Class A Common Stock of Momentum Business Applications,
Inc. Each such holder of PeopleSoft Common Stock will receive one share of
Momentum Class A Common Stock for every 50 shares of PeopleSoft Common Stock
then held. This distribution will be taxable as a dividend to the recipients of
the Momentum Class A Common Stock.
Under Momentum's Certificate of Incorporation, PeopleSoft has the right
to purchase all (but not less than all) of the Momentum Class A Common Stock.
PeopleSoft may exercise this right at any time from the date the Momentum Class
A Common Stock is distributed to its stockholders until the earlier of (i)
December 31, 2002 (or later, if extended as provided in Momentum's Certificate
of Incorporation) or (ii) the 60th day after which PeopleSoft receives notice
that Momentum holds less than $2.5 million in cash and marketable securities.
The exercise price for such right will be determined in accordance with a
formula contained in Momentum's Certificate of Incorporation. PeopleSoft may pay
the exercise price in cash, PeopleSoft Common Stock, or any combination of the
two. This prospectus also covers 4,000,000 shares of PeopleSoft Common Stock,
the estimated number of shares of PeopleSoft Common Stock that may be issuable
by PeopleSoft in connection with such exercise.
No public market currently exists for Momentum's securities. The
Momentum Class A Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "MMTM." The PeopleSoft Common Stock is quoted
on the Nasdaq National Market under the symbol "PSFT." On November 9, 1998, the
closing price of PeopleSoft Common Stock was $23.44.
--------
THE SHARES OF MOMENTUM CLASS A COMMON STOCK DISTRIBUTED HEREUNDER AND THE
RELATED SHARES OF PEOPLESOFT COMMON STOCK (IF THE PURCHASE OPTION IS EXERCISED)
INVOLVE A HIGH DEGREE OF RISK.
PLEASE READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE 13 OF
THIS PROSPECTUS.
--------
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.
The date of this prospectus is December ___, 1998.
<PAGE> 7
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TABLE OF CONTENTS
Page
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Prospectus Summary............................................................................ 3
Glossary......................................................................................11
Risk Factors..................................................................................13
Distribution of Momentum Class A Common Stock.................................................22
Plan of Distribution of PeopleSoft Common Stock...............................................23
Momentum Capitalization.......................................................................24
Reasons for the Distribution and Effects on PeopleSoft........................................25
Business of Momentum..........................................................................27
Available Information.........................................................................31
Incorporation of Certain Documents by Reference...............................................32
Management of Momentum........................................................................33
Security Ownership of Momentum................................................................34
Selected Financial Data of Momentum...........................................................35
Management's Discussion and Analysis of Financial Condition and Results of Operations.........36
The Agreements and the Purchase Option........................................................38
Certain Federal Income Tax Considerations.....................................................44
Description of Momentum Capital Stock.........................................................47
Transfer Agent and Registrar..................................................................48
Experts.......................................................................................48
Legal Matters.................................................................................48
Index to Financial Statements.................................................................F-1
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................A-1
</TABLE>
-----------------------------
You should rely only on the information contained in this
prospectus, the related registration statement and any documents incorporated by
reference into the registration statement. Momentum and PeopleSoft have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. Momentum and PeopleSoft are not making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate as of the date on
the front cover of this prospectus only. Momentum and PeopleSoft's business,
financial condition, results of operations and prospects may have changed since
that date.
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<PAGE> 8
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information that
is important to you. To understand this offering fully, you should read the
entire prospectus carefully, including the risk factors and financial
statements. Certain words that are capitalized in this summary are defined in
the Glossary following this summary.
WHY THIS PROSPECTUS WAS SENT TO YOU
This prospectus is being delivered by PeopleSoft, Inc., a Delaware
corporation ("PeopleSoft"), to you because you were a holder of PeopleSoft
Common Stock on December __, 1998. This entitles you to receive a distribution
of one share of the Class A Common Stock of a new company, Momentum Business
Applications, Inc., a Delaware corporation ("Momentum"), for each 50 shares of
PeopleSoft Common Stock held by you on December __, 1998. Although no action is
required on your part to cause this to happen and you do not have to pay cash or
other consideration to receive these shares, the distribution of these shares to
you will be taxable as a dividend, so please read carefully the information in
this prospectus regarding the tax consequences of this transaction.
This prospectus describes the business of Momentum, the relationship
between PeopleSoft and Momentum, how this transaction benefits PeopleSoft and
its stockholders and provides other information to assist you in evaluating the
benefits and risks of holding or disposing of your shares of Momentum Class A
Common Stock. The Momentum Class A Common Stock has been approved for quotation
on the Nasdaq National Market under the symbol "MMTM."
BUSINESS OF MOMENTUM
PeopleSoft is a leader in the development, marketing, licensing and
support of enterprise client/server business administration software application
solutions. PeopleSoft recently formed Momentum to develop and commercialize new
software products and technology.
Momentum plans to develop products and technology based on product plans
developed in conjunction with PeopleSoft. Momentum currently expects that these
products will include:
1. Electronic business ("e-business") applications that will be
intuitive, user-focused solutions that enable people to conduct a
broad range of business processes and commercial transactions
over the Internet or a customer's intranet. These e-business
applications will include a new extended-enterprise class of
applications that integrate content from a customer's intranet,
third party information and service providers and PeopleSoft's
traditional cross-industry enterprise resource planning ("ERP")
applications.
2. Analytic applications that will utilize information captured by
enterprise on-line transaction processing ("OLTP") applications
and other information sources to facilitate business decisions.
3. Software applications designed for specific industries -- such as
utilities, professional services, financial services, retailing
and health care -- that will provide information processing
capabilities for business functions required in those industries.
These industry-specific applications are expected to use
PeopleSoft's rapid application development
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<PAGE> 9
environment and architecture, known as PeopleTools(R), and
complement PeopleSoft's existing cross-industry ERP applications
in the areas of financial management, human resource management
and supply chain management.
Momentum anticipates that it will have limited staff and facilities. As
a result, Momentum will engage PeopleSoft and/or other firms to perform
substantially all of the research and development activities necessary to
develop its products. These products will be owned by Momentum, which will then
license, sell or grant distribution rights to these products to PeopleSoft
and/or others. Momentum may also acquire or invest in complementary companies,
products, or technologies or enter into joint ventures or strategic alliances
with other companies as a part of its overall strategy to accelerate or enhance
product development. In addition, PeopleSoft will perform a variety of
administrative activities for Momentum under a separate services arrangement.
RELATIONSHIP BETWEEN PEOPLESOFT AND MOMENTUM
FORMATION AND FUNDING
Prior to the distribution of the Momentum Class A Common Stock to the
PeopleSoft stockholders (the "Distribution"), PeopleSoft will contribute $300
million in cash to Momentum to fund product development and operating expenses.
This payment will reduce the total amount of cash, cash equivalents, and
short-term and long-term investments on PeopleSoft's balance sheet by $300
million. Upon completion of the Distribution, Momentum will cease to be a
wholly-owned subsidiary of PeopleSoft, and PeopleSoft's stockholders' equity
will be reduced by $300 million. Momentum will have no assets other than the
$300 million initially contributed by PeopleSoft and the contract rights
described below. PeopleSoft does not currently intend to provide any additional
funding to Momentum. However, PeopleSoft has a right of first refusal, but not
an obligation, to provide additional funding to Momentum.
STOCK OWNERSHIP AND CORPORATE GOVERNANCE
Class A and Class B Common Stock. Momentum has two classes of Common
Stock, Class A Common Stock (which is subject to PeopleSoft's Purchase Option
described below) and Class B Common Stock. PeopleSoft owns all of the authorized
shares of the Momentum Class B Common Stock. Under Momentum's Certificate of
Incorporation, Momentum will be prohibited from taking or permitting any action
that would alter PeopleSoft's rights under the Purchase Option. Momentum may
not, without the consent of PeopleSoft as the sole holder of the Momentum Class
B Common Stock, merge, liquidate, transfer or encumber any substantial assets,
or amend its Certificate of Incorporation to change any of the following:
o the PeopleSoft Purchase Option;
o the authorized capitalization of Momentum; or
o the portions of Momentum's Certificate of Incorporation
governing the Board of Directors.
Board of Directors. Momentum's Board of Directors will consist of four
directors, one selected by the holders of the Momentum Class B Common Stock and
three selected by the holders of the Momentum Class A Common Stock. The
representative of the Momentum Class B Common Stock will serve a one-year term.
The representatives of the Momentum Class A Common Stock will serve staggered
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<PAGE> 10
three-year terms. Momentum currently has one director, Aneel Bhusri, an officer
of PeopleSoft and the interim President of Momentum, who will be the
representative of the Momentum Class B Common Stock. Momentum expects that prior
to the Distribution, Mr. Bhusri will appoint an individual who is unaffiliated
with PeopleSoft and has experience in the software industry to replace Mr.
Bhusri as President of Momentum. The new President will be one of the three
directors who represents the holders of the Momentum Class A Common Stock. The
new President will propose two additional persons unaffiliated with PeopleSoft
and with experience in the software industry, finance or accounting to fill the
remaining vacancies on the Board of Directors. At each annual meeting of
stockholders, the holders of the Momentum Class A Common Stock will select one
director to serve a three-year term, and the holders of the Momentum Class B
Common Stock will select one director to serve a one-year term.
PURCHASE OPTION
Under Momentum's Certificate of Incorporation, PeopleSoft has the right
to purchase all (but not less than all) of the outstanding Momentum Class A
Common Stock (the "Purchase Option") at any time prior to December 31, 2002.
This deadline will be extended for successive six month periods if, as of any
June 30 or December 31 date beginning with June 30, 2002, Momentum has not paid
or accrued expenses for all but $15 million of the Available Funds as of such
date. The Purchase Option will terminate on the 60th day after Momentum provides
PeopleSoft with a statement that, as of the end of any calendar month, there are
less than $2.5 million of the Available Funds remaining.
If PeopleSoft exercises its Purchase Option, the exercise price (the
"Purchase Option Exercise Price") will be the greatest of:
1. 15 times the sum of (i) the actual worldwide payments made by or
due from PeopleSoft to Momentum with respect to all Licensed
Products and Developed Technology for the four calendar quarters
immediately preceding the quarter in which the Purchase Option
is exercised (the "Base Period"); plus (ii) such payments as
would have been made during the Base Period by, or due from,
PeopleSoft to Momentum if PeopleSoft had not previously
exercised its Product Payment Buy-Out Option with respect to any
Momentum Product (for purposes of the calculations in (i) and
(ii), payments will be annualized for any product that has not
been licensed during each of the four calendar quarters in the
Base Period);
minus
any amounts previously paid by PeopleSoft to exercise any
Product Payment Buy-Out Option for such Momentum Product;
2. the fair market value of 720,000 shares of PeopleSoft Common
Stock (adjusted in the event of a stock split) as of the date
the Purchase Option is exercised;
3. $350,000,000 plus any additional funds contributed to Momentum
by PeopleSoft, less the aggregate of all amounts paid or
incurred by Momentum to develop Momentum Products or pursuant to
the Services Agreement as of the date the Purchase Option is
exercised; or
4. $90,000,000.
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<PAGE> 11
In each case, the amount payable as the Purchase Option Exercise Price
will be reduced to the extent, if any, that Momentum's liabilities at the time
of exercise (other than liabilities under the Development Agreement, the
Services Agreement and the Marketing Agreement) exceed Momentum's cash and cash
equivalents, and short-term and long-term investments (excluding any Available
Funds). PeopleSoft may pay the Purchase Option Exercise Price in cash, in
PeopleSoft Common Stock or in any combination of the two. Any PeopleSoft Common
Stock issued to holders of Momentum Class A Common Stock in connection with the
exercise of the Purchase Option will be freely tradeable upon receipt. The per
share purchase price of the Momentum Class A Common Stock will be reduced if
Momentum issues additional Momentum Class A Common Stock after the date of this
prospectus and prior to the date that PeopleSoft exercises the Purchase Option.
CONTRACTUAL ARRANGEMENTS
PeopleSoft and Momentum have entered into a series of agreements -- a
Development and License Agreement (the "Development Agreement"), a Marketing and
Distribution Agreement (the "Marketing Agreement") and a Services Agreement (the
"Services Agreement") -- that set forth:
o the permitted uses of the Available Funds;
o Momentum's rights to use certain technology of PeopleSoft;
o the development work and other services to be performed by
PeopleSoft; and
o PeopleSoft's rights with respect to the products to be developed
by Momentum.
The following summary sets forth the principal terms and conditions of
the Development Agreement, the Marketing Agreement and the Services Agreement.
Please refer to the actual agreements for a more complete description of the
rights and obligations of the parties under these agreements.
Development Agreement. Under the terms of the Development Agreement,
PeopleSoft will propose to Momentum that Momentum develop certain software
products and related technologies. If Momentum agrees to develop a product, then
Momentum and PeopleSoft will agree on a timetable, budget and specifications for
the product. PeopleSoft has granted Momentum a license to some of its
technology, including its PeopleTools(R) technology, for the purpose of
developing products under the Development Agreement. Products developed under
the Development Agreement are referred to in this prospectus as "Momentum
Products." Momentum may use the Available Funds only to develop or acquire
Momentum Products and related technologies and for related administrative
expenses.
Momentum may develop or acquire third party software toolsets
("Developed Technology") for the purpose of developing Momentum Products.
Momentum will grant PeopleSoft a license with respect to the Developed
Technology in exchange for PeopleSoft's agreement to pay Momentum a 1% royalty
on PeopleSoft's net revenues from sales of any products PeopleSoft develops
using the Developed Technology for a period of 10 years.
Momentum plans to undertake the research and development required by the
Development Agreement by contracting with third parties because it will have
limited staffing and facilities. Momentum currently expects that it will
contract with PeopleSoft for various research and development and other
services, but PeopleSoft is not obligated to provide Momentum with any such
services. Momentum will
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<PAGE> 12
pay PeopleSoft 105% of PeopleSoft's fully burdened costs relating to the
research and development provided by PeopleSoft to Momentum.
The Development Agreement automatically expires on the exercise or
expiration of the Purchase Option.
Marketing Agreement. Under the Marketing Agreement, Momentum has granted
PeopleSoft certain distribution and licensing rights with respect to the
Momentum Products. Prior to a Momentum Product becoming Generally Available,
PeopleSoft has an exclusive license to market and distribute the Momentum
Product. PeopleSoft will pay Momentum a 6% royalty on any such sales.
PeopleSoft's exclusive license with respect to a Momentum Product expires upon
the earlier of (i) the exercise or expiration of the License Option with respect
to that Momentum Product or (ii) the expiration of the Purchase Option.
PeopleSoft has agreed to use commercially reasonable efforts to promptly conduct
marketing with respect to each Momentum Product prior to such product becoming
Generally Available.
In addition, PeopleSoft has an option (the "License Option") to obtain a
perpetual, exclusive license to market, distribute, sublicense, support and
enhance any Momentum Product. PeopleSoft may exercise this right at any time
prior to the earlier of (i) 30 days after the Momentum Product becomes Generally
Available or (ii) the expiration of the Purchase Option. Upon exercise of the
License Option with respect to a Momentum Product, PeopleSoft will be
responsible for any further development and support of that product. PeopleSoft
will then pay Momentum a royalty on Net Revenues of the Momentum Product based
on a formula contained in the Development Agreement for a period of 10 years.
PeopleSoft may eliminate this continuing royalty obligation by paying Momentum a
lump sum in accordance with a formula specified in the Development Agreement.
If PeopleSoft does not exercise its License Option with respect to a
particular Momentum Product, Momentum may commercialize the product itself or
with the assistance of parties other than designated competitors of PeopleSoft.
Services Agreement. Under the Services Agreement, PeopleSoft will
provide Momentum, for a fee, certain services relating to administration,
including accounting, finance, human resources and legal services.
REASONS FOR THE DISTRIBUTION
PeopleSoft and Momentum believe that an attractive business opportunity
exists to develop e-business applications, analytic applications and
industry-specific software applications. However, PeopleSoft is not in a
position to capture this opportunity because PeopleSoft does not presently have
the required expertise to develop such applications. PeopleSoft believes that
the formation of Momentum will benefit PeopleSoft stockholders by:
o separating this new business, with its own unique market
opportunity and risk/reward profile, from PeopleSoft's
traditional cross-industry ERP applications;
o enabling PeopleSoft stockholders to increase or decrease their
level of participation in this new business by varying their
level of investment in Momentum (by selling or acquiring
Momentum shares in the open market); and
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<PAGE> 13
o allowing PeopleSoft's financial results to continue to reflect
principally its traditional cross-industry ERP applications
business and previously existing industry initiatives.
THE DISTRIBUTION
Each PeopleSoft stockholder will receive one share of Momentum Class A
Common Stock for every 50 shares of PeopleSoft Common Stock held. As of October
31, 1998, PeopleSoft had 233,017,263 shares of Common Stock outstanding.
Record Date, Distribution Date. The record date for the Distribution
will be the close of business on December __, 1998. The Distribution is expected
to take place on or about December __, 1998, subject to certain conditions.
No Fractional Shares. No fractional shares of Momentum Class A Common
Stock will be distributed. Fractional shares of Momentum Class A Common Stock
will be aggregated and sold by Momentum's transfer agent and distribution agent
for the Distribution, Boston EquiServe, L.P., to provide cash to holders in lieu
of such fractional shares.
Trading Market. The Momentum Class A Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol "MMTM."
All Shares Subject to Purchase Option. All shares of the Momentum Class
A Common Stock will be subject to the Purchase Option. PeopleSoft will decide
whether to exercise the Purchase Option based on the prevailing circumstances at
the time consideration is given to its exercise. Such circumstances include the
extent to which Momentum is successful in developing Momentum Products, the
level of market acceptance such products initially achieve (as indicated by
initial licensing activities under PeopleSoft's License Option), and whether the
Momentum Products will fit PeopleSoft's business strategies at the time of such
exercise evaluation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is expected that the Distribution will be taxable to each PeopleSoft
stockholder in the amount of the fair market value of the Momentum Class A
Common Stock distributed to such PeopleSoft stockholder. In early 1999, each
recipient of distributed Momentum Class A Common Stock will receive an IRS Form
1099-DIV reflecting the fair market value of the Momentum Class A Common Stock
distributed. The recipient's initial basis (for income tax purposes) in the
distributed Momentum Class A Common Stock will be the fair market value of such
shares at the time of the Distribution.
Upon the sale or other disposition of the Momentum Class A Common Stock,
including the exercise by PeopleSoft of the Purchase Option, a holder of the
Momentum Class A Common Stock will have a taxable gain or loss equal to the
difference between the value of the consideration received from PeopleSoft in
such exercise and such holder's basis in the Momentum Class A Common Stock,
unless PeopleSoft were to exercise the Purchase Option solely for shares of
PeopleSoft Common Stock and certain other conditions were satisfied, in which
case receipt of the PeopleSoft Common Stock may be tax-free to the holder under
current federal income tax laws.
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The Distribution, any subsequent sale of Momentum Class A Common Stock,
and the exercise or expiration of the Purchase Option may have other federal
income tax consequences to holders. See "Certain Federal Income Tax
Considerations."
Each PeopleSoft stockholder is urged to consult their own tax advisors
with respect to the tax consequences of this transaction.
RISK FACTORS
Ownership of the Momentum Class A Common Stock involves a high degree of
investment risk. The risk factors below should be considered carefully in
evaluating the ownership of the Momentum Class A Common Stock. See "Risk
Factors."
o Momentum is a newly formed company.
o Momentum and PeopleSoft may not be successful in selecting and
developing any Momentum Products.
o Momentum may not be able to access developers with the domain expertise
necessary to develop the Momentum Products.
o Momentum and PeopleSoft may not successfully commercialize any Momentum
Products.
o Momentum may not have sufficient funds to complete the development of
any or all of the Momentum Products.
o The Development Agreement, the Marketing Agreement and the Services
Agreement between PeopleSoft and Momentum and PeopleSoft's rights as
holder of the Momentum Class B Common Stock may restrain Momentum from
taking certain actions, including actions with third parties, and may
impair the ability of Momentum to raise additional capital.
o PeopleSoft may not exercise the License Option for any Momentum Products
or exercise the Purchase Option to acquire all of the outstanding
Momentum Class A Common Stock.
o There may be conflicts of interest between PeopleSoft and Momentum,
including competition from PeopleSoft.
o PeopleSoft can allocate its resources as it deems appropriate and is not
obligated to accept any development projects proposed by Momentum.
o The terms of the Development Agreement, the Marketing Agreement and the
Services Agreement between PeopleSoft and Momentum were not negotiated
at arm's length.
o Because Momentum Products will be based on PeopleSoft's technology and
designed to interface and be compatible with PeopleSoft's products,
Momentum may not be able to design products that will be compatible with
other technologies.
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o Momentum and PeopleSoft will face competition from others with greater
resources, experience and market presence.
o Momentum may pursue acquisitions of other businesses or technologies to
enhance or accelerate its product development, which would involve
various risks and uncertainties.
o To avoid potential conflicts of interest, the largest stockholder in
Momentum plans to reduce his percentage ownership in the Momentum Class
A Common Stock shortly after the Distribution from approximately 21% of
the outstanding shares to just below 5% of the outstanding shares
through the sale or other disposition of approximately 16% of the
outstanding shares, which could have an adverse effect on the trading
price of the Momentum Class A Common Stock.
o Momentum cannot license its products to a third party unless or until
PeopleSoft determines not to exercise the License Option with respect to
a given Momentum Product, or the License Option expires with respect to
that Momentum Product.
o Momentum and PeopleSoft may not be successful marketing and licensing
the Momentum Products outside North America without significant
localization efforts.
o Momentum Products may infringe the patents, copyrights or other
intellectual property rights of others.
o The holders of the Momentum Class A Common Stock will not elect
Momentum's initial Board of Directors.
o Because of Momentum's staggered Board of Directors, the holders of
Momentum Class A Common Stock will be able to elect only one director at
each annual meeting.
o There has not been a trading market for the Momentum Class A Common
Stock prior to the Distribution and the trading market for, and the
trading price of, the Momentum Class A Common Stock after the
Distribution cannot be predicted.
o Momentum has included certain anti-takeover provisions in its
Certificate of Incorporation that could make it more difficult for a
third party to gain control of Momentum, which could have an adverse
effect on the trading price of the Momentum Class A Common Stock.
o Momentum may be adversely affected if entities which provide services to
it or to PeopleSoft are not Year 2000 compliant.
INVESTOR CONTACT
Momentum and PeopleSoft stockholders with questions about the Distribution
should contact PeopleSoft's principal executive offices at 4460 Hacienda Drive,
Pleasanton, California 94588; telephone (925) 694-1496.
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GLOSSARY
Available Funds.............. The initial $300 million contribution by
PeopleSoft to Momentum plus the interest earned on
such funds less amounts spent to develop or
acquire Momentum Products and related technology
and for related administrative expenses.
Developed Technology......... Software toolsets developed by Momentum or
acquired by Momentum from parties other than
PeopleSoft pursuant to the Development Agreement.
Development Agreement........ The Development and License Agreement between
PeopleSoft and Momentum dated December __, 1998
whereby certain research and development projects
are requested by PeopleSoft, approved by Momentum
and then undertaken by Momentum.
Development Costs............ Costs incurred by Momentum to develop products
under the Development Agreement.
Distribution................. PeopleSoft's distributing, on a pro rata basis,
the Momentum Class A Common Stock to the record
holders of PeopleSoft Common Stock as of December
__, 1998.
e-business................... Electronic business.
ERP applications............. Enterprise resource planning applications.
Generally Available.......... A determination by PeopleSoft that a Momentum
Product has successfully completed the pre-release
testing model PeopleSoft uses with its own
products and meets the specifications agreed to by
PeopleSoft and Momentum pursuant to the
Development Agreement.
License Option............... PeopleSoft's option to obtain a perpetual,
exclusive license to market, distribute,
sublicense, support and enhance any Momentum
Product.
Licensed Product............. A Momentum Product licensed by PeopleSoft under
the License Option.
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Marketing Agreement ......... The Marketing and Distribution Agreement between
Momentum and PeopleSoft dated December __, 1998
whereby PeopleSoft is granted certain rights with
respect to the licensing and distribution of the
Momentum Products.
Momentum Products............ Products developed under the Development
Agreement.
Net Revenue.................. End user license fees received by PeopleSoft or a
third party for licensing or sub-licensing the
Momentum Products less the value of bundled
services and development and enhancement expenses
incurred by PeopleSoft on Licensed Products.
OLTP......................... On-line transaction processing.
PeopleSoft Technology.........PeopleSoft's PeopleTools(R) technology and any
other software products or technologies which
PeopleSoft agrees to contribute to Momentum
pursuant to the Development Agreement.
Product Payment Buy-Out
Option....................... The right of PeopleSoft under the Marketing
Agreement to eliminate its obligation to pay
royalties on a Licensed Product by instead making
a single lump sum payment.
Product Payments............. Amounts payable by PeopleSoft to Momentum for
Licensed Products.
Purchase Option.............. The right of PeopleSoft to purchase all, but not
less than all, of the outstanding Momentum Class A
Common Stock at the Purchase Option Exercise
Price.
Purchase Option Exercise
Price........................ Amount payable by PeopleSoft to acquire all of the
outstanding shares of the Momentum Class A Common
Stock upon exercise of the Purchase Option.
Services Agreement........... The Services Agreement between Momentum and
PeopleSoft dated December __, 1998 whereby
PeopleSoft agrees to provide Momentum with certain
administrative services including accounting,
finance, human resources and legal services.
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RISK FACTORS
You should carefully consider the risks described below when evaluating
your ownership of the Momentum Class A Common Stock. The risks and uncertainties
described below are not the only ones Momentum faces. Additional risks and
uncertainties Momentum is presently not aware of or that it currently considers
immaterial may also impair Momentum's business operations.
If any of the following risks actually occurs, Momentum's business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of the Momentum Class A Common Stock
could decline significantly.
This prospectus also contains forward-looking statements. These
statements include words such as "may," "will," "expect," "believe," "intend,"
"anticipate," "estimate" or similar words. These statements are based on
Momentum's current beliefs, expectations and assumptions. Momentum's actual
results could differ materially from those anticipated in these forward-looking
statements due to certain factors, including the risks described below and
elsewhere in this prospectus. Momentum undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
RISKS ASSOCIATED WITH FORMING A NEW COMPANY
Momentum is a newly formed company. It faces all of the risks associated
with establishing a new business enterprise in the software industry. Momentum
will incur substantial losses for several years as it develops its products.
Momentum will be able to recover such losses only if its development efforts are
successful.
RISKS ASSOCIATED WITH PRODUCT SELECTION AND DEVELOPMENT
Momentum has entered into the Development Agreement with PeopleSoft that
requires Momentum to use all the Available Funds in connection with the research
and development of products that PeopleSoft proposes and Momentum approves.
These products may not be the appropriate products for development. To date,
PeopleSoft has relied upon third parties to develop industry-specific software
and has obtained these products through licensing arrangements or acquisitions.
PeopleSoft, therefore, does not have substantial experience in developing
industry-specific products. In addition, neither PeopleSoft nor Momentum have
significant familiarity with the evolving markets of e-business and analytic
application products. Such inexperience and unfamiliarity may cause PeopleSoft
and Momentum to choose inappropriate products for development.
Even if PeopleSoft and Momentum choose appropriate products for
development, Momentum may not be able to successfully develop such products.
Developing any of these products involves a number of risks and uncertainties,
including:
o it may be difficult to assemble a workforce with sufficient
domain expertise;
o evolving customer demands for product functionality may require
greater resources than originally anticipated;
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o Momentum may need to develop new technologies to address
increased product functionality requirements;
o development efforts may be complex and such complexities may
create a risk that these products will not be technologically
feasible; and
o any products developed may rapidly become obsolete or require
substantial resources to stay current.
Any one or all of these factors may prevent Momentum from successfully
developing any of these software application products.
PeopleSoft has granted Momentum a license to use PeopleSoft Technology
to develop products under the Development Agreement. However, some or all of the
products Momentum may attempt to develop under the Development Agreement may
require new technologies, or enhancements or modifications to existing
PeopleSoft Technology. Momentum may not be able to acquire or develop the
technology necessary to successfully develop its products.
RISKS ASSOCIATED WITH MARKETING MOMENTUM PRODUCTS
PeopleSoft or Momentum may not be able to successfully market any
products developed by Momentum. PeopleSoft may need to develop or expand its
marketing capabilities in order to commercially exploit any products it chooses
to license from Momentum, and PeopleSoft may be unable or unwilling to undertake
such a development or expansion of its marketing capabilities. If PeopleSoft
does not choose to license a product developed under the Development Agreement,
Momentum will have to identify other ways of commercially exploiting that
product as Momentum currently has no marketing capabilities. If Momentum decides
to market a product itself or through a third party, PeopleSoft may not approve
Momentum's use of Available Funds for marketing the product. Additionally,
Momentum may not have sufficient resources to fund any such marketing effort.
Even if acceptable marketing resources are available, the products developed by
Momentum may be unsuccessful in the market.
RISKS ASSOCIATED WITH FINANCING MOMENTUM
Prior to the Distribution, PeopleSoft will contribute $300 million in
cash to Momentum. PeopleSoft does not currently intend to contribute additional
funds to Momentum, although it may do so in the future. Under the Development
Agreement, Momentum must use all the Available Funds in connection with the
research and development of Momentum Products and for related administrative
expenses. Momentum may not have sufficient funds to complete the development of
any such products.
Although Momentum is not prohibited from raising additional capital by
any of the arrangements between Momentum and PeopleSoft, PeopleSoft's Purchase
Option and its rights as the sole holder of the Momentum Class B Common Stock
may make it difficult for Momentum to raise additional capital. For example,
PeopleSoft's Purchase Option (and its ability to control certain matters as the
sole holder of the Momentum Class B Common Stock) may make it more difficult for
a third party to acquire Momentum even if a change of control could benefit
Momentum's stockholders by providing them with a premium over the then current
market price of their shares. As a result, the market value and liquidity of the
Momentum Class A Common Stock may be adversely affected.
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If the Purchase Option expires unexercised, Momentum may have very
little cash, few assets and an undeterminable number of products under research
and development. Momentum may also have very little internal expertise in
product development or marketing. Under these circumstances, third parties might
be reluctant to lend money to or to invest in Momentum.
NO ASSURANCE OF EXERCISE OF PEOPLESOFT'S LICENSE OPTION OR PURCHASE OPTION
PeopleSoft is not obligated to exercise its License Option with respect
to any Momentum Product. If PeopleSoft elects not to exercise its License Option
with respect to a product, Momentum may be required to find alternative ways to
commercialize the product. Momentum may not be able to establish alternative
channels to commercialize its products. In addition, the Marketing Agreement
prevents Momentum from commercializing any products containing PeopleSoft
Technology through designated competitors of PeopleSoft.
PeopleSoft has sole discretion as to when, if ever, it exercises the
Purchase Option, and may choose to do so at a time when the purchase price is as
low as possible. If PeopleSoft does not exercise the Purchase Option, the
Development Agreement will expire and Momentum may need to seek alternative
research and development facilities, either independently or with a third party.
Momentum may not be able to obtain access to adequate research and development
facilities on a timely basis, on acceptable terms, or at all.
POTENTIAL CONFLICTS OF INTEREST WITH PEOPLESOFT
DEPENDENCE ON PEOPLESOFT FOR PERSONNEL AND FACILITIES. Momentum expects
that it will engage PeopleSoft to perform substantially all of the research and
development required under the Development Agreement. Momentum believes that
PeopleSoft's current and planned personnel and facilities will be adequate for
PeopleSoft to perform such work. However, PeopleSoft is not obligated to perform
any research and development for Momentum. In the event PeopleSoft agrees to
undertake any research and development projects for Momentum, PeopleSoft will be
able to allocate its personnel and facilities among its own or Momentum's
projects as it deems appropriate, subject only to its obligation to use diligent
efforts under the Development Agreement.
DEPENDENCE ON PEOPLESOFT TECHNOLOGY. Momentum expects that all of the
products it develops will to some extent incorporate PeopleSoft Technology.
PeopleSoft has licensed such technology to Momentum. However, if Momentum wants
to engage a party other than PeopleSoft to conduct research and development on
its behalf, Momentum must obtain PeopleSoft's consent before that party may use
the PeopleSoft Technology. In addition, Momentum believes that enhanced
functionality will need to be added to PeopleTools(R) in order for Momentum to
develop certain of its products. If PeopleSoft chooses not to develop those
enhancements itself, Momentum would either have to develop them internally or
pay a third party to do so. Any enhancements to PeopleSoft Technology by
Momentum or any third party will be owned by PeopleSoft.
DEPENDENCE ON PEOPLESOFT FOR MARKETING AND DISTRIBUTION PRIOR TO GENERAL
AVAILABILITY. Prior to the commercial release of a product, software companies
typically allow selected users to use, test and comment upon the product. Such
pre-release marketing and distribution is often a critical element in the
development and refinement of a software product. Under the Development
Agreement, PeopleSoft will control the marketing and distribution of all
Momentum Products prior to such products becoming Generally Available. Though
the Development Agreement requires that PeopleSoft use commercially
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reasonable efforts with respect to such marketing and distribution efforts,
Momentum and PeopleSoft may disagree about the timing, breadth and intensity of
such efforts.
PEOPLESOFT'S CONTROL OVER DETERMINATION OF GENERAL AVAILABILITY. Under
the Marketing Agreement, PeopleSoft is responsible for determining when a
Momentum Product is Generally Available. Because PeopleSoft's right to exercise
its License Option with respect to a Momentum Product expires 30 days after the
product becomes Generally Available, PeopleSoft could delay its determination
that the product is Generally Available.
PEOPLESOFT'S CONTROL OVER LICENSED PRODUCTS. If PeopleSoft exercises its
License Option with respect to a Momentum Product, PeopleSoft will receive a
perpetual, worldwide, exclusive license to, among other things, market and
distribute that product. The right to market and distribute the Momentum Product
allows PeopleSoft to control the pricing of the product. PeopleSoft has no
minimum royalty obligation or any express obligation with respect to its
marketing and distribution effort. As a result, PeopleSoft may have substantial
control over the Net Revenues it receives from licensing the Momentum Product,
which may impact the Product Payments made by PeopleSoft to Momentum.
RIGHTS AS HOLDER OF THE MOMENTUM CLASS B COMMON STOCK. PeopleSoft will
own all of the authorized shares of the Momentum Class B Common Stock.
Momentum's Certificate of Incorporation prohibits Momentum from taking or
allowing any action inconsistent with, or that would in any way adversely
affect, PeopleSoft's Purchase Option. Additionally, Momentum will need
PeopleSoft's consent to merge, liquidate, transfer or encumber any substantial
portion of its assets, or amend its Certificate of Incorporation to change any
of the following:
o PeopleSoft's Purchase Option;
o the authorized capitalization of Momentum; or
o the portions of Momentum's Certificate of Incorporation
governing the Board of Directors.
PeopleSoft's ability to control the matters listed above could adversely affect
the trading price and liquidity of the Momentum Class A Common Stock. Also,
PeopleSoft may be able to delay or prevent a change of control of Momentum, even
if such a change of control would be beneficial to Momentum's stockholders. This
could limit the price that certain investors might be willing to pay for the
Momentum Class A Common Stock in the future. The special rights given to the
holder of the Momentum Class B Common Stock will expire on the same date that
the Purchase Option expires.
THE PURCHASE OPTION EXERCISE PRICE. The price at which PeopleSoft can
exercise the Purchase Option was determined by PeopleSoft alone and not through
arm's-length negotiations. PeopleSoft considered the following factors in making
its determination of the purchase price:
o how the Momentum Class A Common Stock will be distributed;
o Momentum's planned business;
o the terms of the Development Agreement and the Marketing
Agreement;
o the advice of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"); and
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o other factors it deemed appropriate.
Until the Purchase Option expires, the market value of the Momentum Class A
Common Stock will be limited by the Purchase Option Exercise Price.
PRODUCT COMPETITION. PeopleSoft may develop and/or market for its own
benefit products that compete directly with products that Momentum develops.
LEGAL REPRESENTATION. Wilson Sonsini Goodrich & Rosati, Professional
Corporation, is legal counsel to both PeopleSoft and Momentum.
MOMENTUM PRODUCTS BASED ON PEOPLESOFT TECHNOLOGY; NO ASSURANCE OF COMPATIBILITY
WITH OTHER TECHNOLOGIES OR PRODUCTS
Momentum expects that the Momentum Products will be designed and built
to interface and be compatible with PeopleSoft's technology and products. As a
result, Momentum's ability to market the Momentum Products is dependent on
market acceptance of PeopleSoft's technologies, products and installed base of
customers. If Momentum wishes to develop products based on technologies and/or
for products other than PeopleSoft's, Momentum may need to incur substantial
development costs to ensure compatibility with such other technologies and/or
products. Momentum anticipates that PeopleSoft will not approve the use of
Available Funds for this purpose. Even if Momentum is able to fund these
development efforts, Momentum may be unable to develop products that are
compatible with technologies other than PeopleSoft's technology.
COMPETITION
The market for business application software is intensely competitive.
Momentum believes it will face substantial competition from the large,
established providers of enterprise-wide application software as well as from
numerous smaller, more specialized software companies. Other than PeopleSoft,
SAP AG, Oracle Corporation, Baan Company N.V. and J.D. Edwards & Company are the
major providers of enterprise-wide software. Momentum believes that each of
these companies has either launched initiatives or has the technical, financial,
and marketing capability to launch initiatives to develop products which
directly compete with the products Momentum intends to develop. In addition,
numerous well-established companies specialize in e-business products, analytic
applications or particular industry-specific applications. Almost all of
Momentum's competitors have substantially greater financial, technical and
marketing resources than those of Momentum. Furthermore, although Momentum
believes PeopleSoft does not intend to compete with it, PeopleSoft is free to do
so.
Momentum expects that any products developed by it will be
commercialized by other parties, most likely through PeopleSoft. Although
PeopleSoft has substantial market share in the enterprise-wide application
software market, it does not have a significant presence in the markets for
e-business or analytic application products or in any of the markets for which
Momentum intends to develop industry-specific application products. As a result,
PeopleSoft may not be able to compete successfully with the other large
providers of enterprise-wide application software or with the established
specialized software companies in these markets. Additionally, if Momentum
commercializes its products through third parties, such third parties may not
have the financial, technical and marketing resources to compete successfully
with Momentum's competitors.
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RISKS ASSOCIATED WITH ACQUISITIONS
As part of its overall strategy to enhance or accelerate its product
development efforts, Momentum may acquire or invest in complementary companies,
products or technologies or enter into joint ventures or strategic alliances
with other companies. Risks commonly encountered in such transactions include
the difficulty of assimilating the operations and personnel of the combined
companies, the potential disruption of Momentum's ongoing business, the
inability to retain key technical and managerial personnel, the inability of
management to maximize the financial and strategic position of Momentum through
the successful integration of the acquired business, decreases in reported
earnings as a result of charges for in-process research and development and
amortization of acquired intangible assets, dilution of existing equity holders,
difficulty in maintaining controls, procedures and policies, and the impairment
of relationships with employees and customers as a result of any integration of
new personnel. There can be no assurances that Momentum would be successful in
overcoming these risks or any other problems encountered in connection with such
business combinations, investments or joint ventures, or that such transactions
will not have an adverse effect on Momentum's business, financial condition and
results of operations. Because of the rights of PeopleSoft set forth in
Momentum's Certificate of Incorporation, Momentum cannot effectively make any
acquisitions without the prior approval of PeopleSoft.
POTENTIAL ADVERSE EFFECT ON MARKET PRICE OF MOMENTUM CLASS A COMMON STOCK OF
DISPOSITION OF SHARES BY PRINCIPAL STOCKHOLDER.
Immediately following the Distribution, David A. Duffield, the President
and Chief Executive Officer of PeopleSoft, will beneficially own approximately
21% of the outstanding Momentum Class A Common Stock. Because of the potential
for conflicts of interest to arise between PeopleSoft and Momentum as a result
of Mr. Duffield's role as the President and Chief Executive Officer of
PeopleSoft, on one hand, and as the principal stockholder of Momentum, on the
other hand, Mr. Duffield has advised Momentum that he intends to gift, sell or
otherwise dispose of approximately 16% of the outstanding shares of Momentum
Class A Common Stock shortly after the Distribution is completed. The sale of
such a large block of the Momentum Class A Common Stock by Mr. Duffield (or any
of his donees or transferees) could have a material adverse effect on the
trading price of the Momentum Class A Common Stock. Such sales could also make
it more difficult for Momentum to sell equity securities or equity-linked
securities in the future at a time and price that Momentum deems appropriate.
LIMITATION ON LICENSES TO THIRD PARTIES
Momentum has granted PeopleSoft an option to obtain a perpetual,
exclusive license to market, distribute, sublicense, support and enhance any
products that Momentum develops under the Development Agreement. PeopleSoft's
option with respect to a particular product expires 30 days after that product
becomes Generally Available. Until that time, Momentum may not license such
products to any other party. As a result, Momentum may miss opportunities to
license the products it develops to third parties for higher royalty rates than
those PeopleSoft is obligated to pay. In addition, in the event that PeopleSoft
declines to exercise its License Option, the delay in Momentum's ability to
identify and enter into a licensing arrangement with a third party may adversely
affect the terms Momentum is eventually able to obtain from that third party.
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LIMITED INTERNATIONAL CAPABILITY
Products developed by Momentum may have difficulty achieving broad
market penetration outside of North America. In order to commercialize software
application products outside of North America, Momentum or its third party
licensees may need to create localized versions of these products. Neither
Momentum nor its third party licensees may have sufficient resources or funding
to create, market and license localized versions of any of the products
developed by Momentum.
In addition to the uncertainties related to commercializing Momentum's
products outside of North America, there are certain risks inherent in doing
business internationally. These risks include:
o compliance with regulatory requirements and changes in these
requirements;
o tariffs and other trade barriers;
o unfavorable pricing and price competition;
o currency fluctuations;
o longer payment cycles in some countries;
o difficulties in collecting international accounts receivable;
o difficulties in enforcing contractual obligations and
intellectual property rights;
o potentially adverse tax consequences;
o increased costs associated with maintaining international
marketing efforts and offices; and
o political instability.
Any one or all of these factors may adversely affect the commercialization of
Momentum's products outside of North America.
POTENTIAL INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS; LIMITED
PROTECTION OF MOMENTUM'S INTELLECTUAL PROPERTY RIGHTS
The products Momentum intends to develop may incorporate certain
technologies of PeopleSoft and other third parties. While Momentum intends to
obtain from third parties permission to use their technologies, Momentum's
activities could unintentionally infringe the patents, copyrights or other
intellectual property rights of others. Consequently, third parties may assert
infringement claims against Momentum with respect to its products. Any such
assertion could require Momentum to enter into royalty arrangements or could
result in costly litigation.
Momentum intends to rely on a combination of copyright, trade secret,
and patent laws and employee and third party non-disclosure agreements to
protect its intellectual property rights, including the features and design
aspects of its products. Such measures may not be sufficient to protect its
rights, and
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Momentum's competitors may independently develop technologies that are
substantially equivalent to or superior to Momentum's technology. Momentum may
from time to time become involved in litigation regarding the scope and validity
of its intellectual property rights. Any such litigation, whether or not
successful, could result in substantial costs to Momentum and diversion of
efforts by Momentum's management.
SOME DIRECTORS TO SERVE AFTER THE DISTRIBUTION NOT IDENTIFIED; DIRECTORS NOT
INITIALLY ELECTED BY STOCKHOLDERS
Momentum currently has one director, Aneel Bhusri, an officer of
PeopleSoft and the interim President of Momentum. Momentum expects that prior to
the Distribution, Mr. Bhusri will appoint an individual who is unaffiliated with
PeopleSoft and has experience in the software industry to replace Mr. Bhusri as
the sole officer of Momentum. The new President will then propose two additional
persons unaffiliated with PeopleSoft and with experience in the software
industry, finance or accounting to fill the remaining two vacancies on the Board
of Directors. Holders of Momentum Class A Common Stock will not have elected any
of the initial members of Momentum's Board of Directors. Because the
representatives of the Class A Common Stock serve staggered three-year terms,
the holders of Momentum's Class A Common Stock will be able to vote on only one
representative at each annual meeting of stockholders.
NO PRIOR TRADING MARKET FOR MOMENTUM CLASS A COMMON STOCK; STOCK PRICE MAY BE
VOLATILE
Prior to the Distribution, there has been no public market for the
Momentum Class A Common Stock. The Momentum Class A Common Stock has been
approved for quotation on the Nasdaq National Market. Momentum does not know
whether investor interest in Momentum will lead to the development of a trading
market or, if a trading market develops, how active that trading market will be.
A number of factors may affect the price and liquidity of the Momentum Class A
Common Stock, including:
o actual or anticipated fluctuations in Momentum's operating
results;
o changes in expectations as to Momentum's future financial
performance or changes in securities analysts' financial
estimates;
o the operating and stock price performance of PeopleSoft;
o the operating and stock price performance of other comparable
companies; and
o changes in investors' estimates of the likelihood, price and
timing of the possible exercise by PeopleSoft of its Purchase
Option.
In addition, the Momentum Class A Common Stock may be followed by few,
if any, market analysts and there may be few institutions acting as market
makers for the Momentum Class A Common Stock. Either of these factors could
adversely affect the liquidity and trading price of the Momentum Class A Common
Stock. Also, the stock market in general has experienced extreme price and
volume volatility that has especially affected the market prices of securities
of many high technology companies. At times, this volatility has been unrelated
to the operating performance of particular companies. These broad
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market and industry fluctuations may adversely affect the trading price of the
Momentum Class A Common Stock, regardless of Momentum's actual operating
performance.
ANTI-TAKEOVER PROVISIONS
Certain provisions of Momentum's Certificate of Incorporation and Bylaws
could make it more difficult for a third party to gain control of Momentum, even
if a change in control might be beneficial to Momentum's stockholders. This
could adversely affect the market price of the Momentum Class A Common Stock.
These provisions include:
o the elimination of the right of stockholders to act by written
consent;
o the elimination of the right of stockholders to call special
meetings of the stockholders;
o the creation of a staggered Board of Directors;
o the ability of the Board of Directors to designate and issue
Preferred Stock without stockholder consent; and
o the ability of PeopleSoft to purchase the Momentum Class A
Common Stock pursuant to the Purchase Option.
YEAR 2000 COMPLIANCE
Momentum expects that substantially all of its research and development
and administrative activities will be performed by PeopleSoft. Momentum believes
that PeopleSoft's internal systems are Year 2000 compliant. To the extent that
Momentum purchases its own internal systems or contracts with other parties for
such services, it expects to be able to find systems and service providers which
are Year 2000 compliant. However, Momentum and PeopleSoft will be relying on a
variety of service providers, including telephone companies, utilities and
network services providers whose Year 2000 compliance is difficult to ascertain.
If any these providers were unable to provide their services to either
PeopleSoft or Momentum, Momentum's business could be adversely affected.
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<PAGE> 27
DISTRIBUTION OF MOMENTUM CLASS A COMMON STOCK
The Board of Directors of PeopleSoft has declared a dividend, payable to
its stockholders, of one share of Momentum Class A Common Stock for every 50
shares of PeopleSoft Common Stock held on December __, the record date for the
Distribution. As a result of the Distribution, all of the then outstanding
Momentum Class A Common Stock will be distributed to PeopleSoft's stockholders.
After the Distribution, PeopleSoft will hold all of the authorized shares of the
Momentum Class B Common Stock.
See "Description of Momentum Capital Stock."
Subject to certain conditions set forth in the Distribution Agreement
between Momentum and PeopleSoft (the "Distribution Agreement"), PeopleSoft will
effect the Distribution (expected to be on or about December __, 1998) by
delivering all of the Momentum Class A Common Stock to Boston EquiServe, L.P.,
the distribution agent for the Distribution. Commencing on or about December __,
1998, the distribution agent will begin mailing account statements reflecting
ownership of Momentum Class A Common Stock to the Momentum stockholders.
Momentum stockholders may request stock certificates from the distribution
agent.
No fractional shares will be issued as part of the Distribution. The
distribution agent will aggregate undistributed fractional shares and sell such
shares at the earliest practicable date at the then-prevailing market price.
Each person who would be otherwise entitled to receive a fractional share will
instead receive a cash payment equal to such person's proportionate share of the
net proceeds of the sale of such aggregated shares.
PeopleSoft's stockholders will not be required to pay any cash or other
consideration for the Momentum Class A Common Stock received in the
Distribution. However, the Distribution of the Momentum Class A Common Stock to
PeopleSoft stockholders is a taxable transaction under federal income tax law.
See "Certain Federal Income Tax Considerations."
The general terms and conditions of the Distribution and the
arrangements between PeopleSoft and Momentum are set forth in the Development
Agreement, the Marketing Agreement, the Services Agreement and the Distribution
Agreement. See "The Agreements and the Purchase Option." The Distribution
Agreement conditions the Distribution on, among other things, the absence of
material adverse changes in the business, financial condition or results of
operations of PeopleSoft or Momentum.
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<PAGE> 28
PLAN OF DISTRIBUTION OF PEOPLESOFT COMMON STOCK
In the event PeopleSoft exercises its Purchase Option, PeopleSoft may
pay the Purchase Option Exercise Price in cash, in PeopleSoft Common Stock or in
any combination of the two. If PeopleSoft decides to pay any portion of the
Purchase Option Exercise Price with shares of PeopleSoft Common Stock,
PeopleSoft will deliver such shares of PeopleSoft Common Stock to its transfer
agent. PeopleSoft will instruct the transfer agent to mail account statements
reflecting ownership of the PeopleSoft Common Stock to the holders of the
Momentum Class A Common Stock as of the date PeopleSoft exercises its Purchase
Option. The payment will be reflected in book-entry form. However, Momentum
stockholders may request stock certificates from the transfer agent.
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<PAGE> 29
MOMENTUM CAPITALIZATION
The following table sets forth the capitalization and certain other
balance sheet data of Momentum as of November 10, 1998, as adjusted to give
effect to the contribution by PeopleSoft of $300 million to Momentum and the
issuance to PeopleSoft of the Momentum Class A Common Stock and Class B Common
Stock prior to the Distribution. The data set forth below should be read in
conjunction with the Financial Statements and related Notes included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
AS ADJUSTED AS OF
NOVEMBER 10, 1998(1)
---------------------
<S> <C>
Cash ........................................................................... $300,000,000
============
Stockholders' equity:
Class A Common Stock, $0.001 par value; 10,000,000 shares authorized;
4,750,000 shares outstanding as adjusted .................................. 4,750
Class B Common Stock, $0.001 par value; 1,000 shares authorized; 1,000 shares
outstanding as adjusted(2) ................................................ 1
Preferred Stock, $0.001 par value, 2,000,000 shares
authorized, no shares issued and outstanding ................................ --
Additional paid-in capital ..................................................... 299,995,249
------------
Total stockholders' equity ............................................... $300,000,000
============
</TABLE>
- - - ----------------------
(1) See notes (a), (b) and (c) to Momentum's Pro Forma Balance Sheet on Page
F-6 for a description of the pro forma adjustments reflected in the
adjusted balances.
(2) All shares of Class B Common Stock, as adjusted, are held by PeopleSoft.
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<PAGE> 30
REASONS FOR THE DISTRIBUTION AND EFFECTS ON PEOPLESOFT
PeopleSoft's management regularly discusses the current state of the
software industry and where future demand will be focused. Based on these
discussions, PeopleSoft believes that an attractive business opportunity exists
to develop e-business applications, analytic applications, and industry-specific
software applications. These market opportunities provide PeopleSoft with
potential growth and profitability opportunities to complement its existing
market presence in enterprise applications. However, the development of these
products requires new and different technologies and core competencies, and
consequently, entails a higher level of technology and business risk to
PeopleSoft than that of its traditional OLTP products. The development of
analytic applications and e-business products may require the use of technology
unlike that utilized in PeopleSoft's current development activities. PeopleSoft
believes the potential risk of hiring individuals and acquiring or developing
technology to allow for adequate research and development in these areas is too
high for it to accept on its own.
PeopleSoft believes the formation of Momentum to develop products in
these areas, and the arrangements between PeopleSoft and Momentum, will provide
PeopleSoft with an opportunity to pursue, more quickly than would otherwise be
possible, these new businesses. PeopleSoft believes that the arrangement with
Momentum will benefit PeopleSoft stockholders by:
o separating this new business, with its own unique market opportunity and
risk/reward profile, from PeopleSoft's traditional cross-industry ERP
applications;
o enabling PeopleSoft stockholders to increase or decrease their level of
participation in this new business by varying their level of investment
in Momentum (by selling or acquiring Momentum shares in the open
market); and
o allowing PeopleSoft's financial results to continue to reflect
principally its traditional cross-industry ERP applications business and
previously existing industry initiatives.
After reviewing PeopleSoft's goals and objectives and considering other
possible methods of enhancing the growth of its product commercialization
business, PeopleSoft's management and Board of Directors believe enhancing this
business through the formation of Momentum and the Distribution will benefit the
PeopleSoft stockholders. PeopleSoft's Board of Directors approved the formation
of Momentum and the Distribution based on information provided by PeopleSoft's
management and its financial advisor Merrill Lynch. See "Opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated" attached as Exhibit A to this
prospectus.
PeopleSoft will pay Merrill Lynch a fee for its services in connection
with the Distribution. The receipt of the fee is contingent upon the
consummation of the Distribution. Merrill Lynch will also be reimbursed for
expenses that it has incurred or will incur in rendering its services.
PeopleSoft has agreed to indemnify Merrill Lynch against certain liabilities and
expenses in connection with its services as financial advisors. Merrill Lynch
has from time to time performed various investment banking and financial
advisory services for PeopleSoft.
Merrill Lynch, as part of its investment banking business, engages in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate and other
purposes. PeopleSoft
-25-
<PAGE> 31
selected Merrill Lynch as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the Distribution.
Although Merrill Lynch participated in certain of the discussions
regarding the Distribution, the terms of the Distribution were determined by
PeopleSoft's Board of Directors.
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<PAGE> 32
BUSINESS OF MOMENTUM
BACKGROUND
PeopleSoft established Momentum to select and develop certain e-business
products, analytic applications and industry-specific application products.
Prior to the Distribution, PeopleSoft will contribute $300 million to Momentum
so that Momentum will have financial resources to pursue the development of
these products. In addition, PeopleSoft and Momentum have entered into a series
of agreements relating to various matters including:
o the permitted uses of the Available Funds;
o Momentum's right to use PeopleSoft Technology;
o development work and other services which may be performed by
PeopleSoft; and
o PeopleSoft's rights with respect to the products to be developed
by Momentum.
Under the Development Agreement, Momentum may use the Available Funds
only to develop those products which PeopleSoft proposes and which Momentum
accepts for development. PeopleSoft and Momentum will jointly agree on the work
plans and cost estimates for such products. PeopleSoft has granted to Momentum
the right to use PeopleSoft Technology to develop such products. Because
Momentum is expected to have limited staff and facilities, Momentum anticipates
engaging PeopleSoft to perform substantially all of the research and development
activity related to such products. However, Momentum could engage third parties
to perform such efforts, perform them itself or acquire other technologies or
companies. Momentum currently has no plans to develop products other than those
pursuant to the Development Agreement.
Momentum expects that initially its only revenue will come from
investment income derived from the Available Funds and that it will incur
substantial losses as it expends funds pursuant to the Development Agreement.
Momentum believes it eventually will derive revenue from the commercialization
of the products it develops, most likely through PeopleSoft. However, Momentum
has made no forecasts as to when, if at all, it will be profitable or when, if
at all, meaningful revenues will be generated through this activity.
PEOPLESOFT TECHNOLOGY OVERVIEW
PeopleSoft developed PeopleTools(R), its rapid application development
environment and architecture, specifically for developing client/server software
application products. Software developers use PeopleTools(R) to, among other
things, build and modify data tables, design and customize user interface
windows and develop varying security level functionality. Since the introduction
of PeopleTools(R) in 1988, PeopleSoft has invested and continues to invest
considerable funds and resources in the ongoing enhancement and updating of this
development environment. Using this proprietary development environment,
PeopleSoft has developed a comprehensive suite of cross-industry administrative
OLTP applications. This enterprise-wide suite of products includes applications
in human resource management, financials, distribution, manufacturing, and
supply chain optimization.
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<PAGE> 33
PeopleSoft has granted Momentum a license to use PeopleTools(R) and
certain other technology to develop products under the Development Agreement.
Momentum believes that to develop industry-specific applications, PeopleSoft or
Momentum may need to develop or acquire enhanced functionality for
PeopleTools(R). In addition, Momentum may need to develop, acquire or license
additional development technologies to develop its e-business and analytic
applications. The Development Agreement allows Momentum to obtain, either
through development, acquisition or licensing, the rights to development tools
as deemed necessary to complete the products selected.
THE MOMENTUM PRODUCTS
Momentum Products are products recommended by PeopleSoft, and accepted
by Momentum, for research and development under the Development Agreement.
Momentum currently intends to develop the following types of Momentum Products:
e-business Products. Momentum currently plans to build e-business
applications that will be intuitive, user-focused solutions that enable people
to conduct a broad range of business processes and commercial transactions over
the Internet or a customer's intranet. These e-business applications will
include a new extended-enterprise class of applications that integrate content
from a customer's intranet, third party information and service providers and
PeopleSoft's traditional cross-industry ERP applications. Momentum believes that
e-business applications could effectively and efficiently meet the needs of
people fulfilling different roles in their organizations.
Analytic Application Products. PeopleSoft's OLTP products have
traditionally focused on helping companies improve the efficiency of business
processes. In contrast, analytic application products are focused on turning
stored data (created primarily by OLTP applications) into business intelligence
that can be used by companies to improve operating effectiveness. Momentum
currently plans to develop analytic application products that will deliver data
warehouse capabilities while allowing for integration and reconciliation to the
general ledger, billing, and time and labor systems. These analytic application
products are intended to enable rapid analysis and decision making while
lowering the risk of inconsistent data within an organization.
Industry-Specific Application Products. Momentum plans to develop a
series of products to address the software application needs of certain
industries. The initial target markets include utilities, professional services,
financial services, retailing and healthcare. The Momentum Products will be
designed to provide information processing capabilities for business functions
critical to each specific industry. Such industry-specific application products
typically support the core operating areas of a company.
Under the License Option, PeopleSoft has the right to obtain a
perpetual, exclusive license to market, distribute, sublicense, support and
enhance any product developed by Momentum pursuant to the Development Agreement.
This right expires 30 days after a product becomes Generally Available. The
determination of whether a product is Generally Available will be made by
PeopleSoft based upon the test procedures it uses for its own products. If
PeopleSoft exercises its rights under the License Option for a product, it will
pay Momentum a royalty on sales of that product in accordance with a formula
contained in the License Option. PeopleSoft will also then be responsible for
all upgrades, bug fixes and customer support related to the product. If
PeopleSoft does not exercise its rights under the License Option, Momentum may
commercialize the product itself or through arrangements with third parties that
are not designated competitors of PeopleSoft.
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<PAGE> 34
In the event Momentum successfully commercializes a product, any revenue
it receives from such commercialization will not be considered Available Funds.
Momentum will be free to use such revenue for any purpose, including additional
product development. PeopleSoft will have no rights with respect to any products
Momentum develops using funds other than Available Funds.
DEVELOPMENT CYCLE
Scope and Design: Based on input from sales personnel, customers,
business partners and industry analysts, PeopleSoft will identify and prioritize
product opportunities and present such opportunities to Momentum. For each
product opportunity, high level business requirements are defined and
documented. This initial product scope is reviewed and discussed with internal
and external business process functional experts in an iterative review process
that confirms a product's conceptual framework. Once the initial product scope
is defined, the individual product features are identified and prioritized. In
addition, new technologies that would be required to build and deploy the
product are identified. For each product feature or new technology, a written
summary of its business requirements is prepared and is reviewed with
appropriate development personnel. Based on this review, product strategy and
development personnel reach an initial agreement on the product's content and
priorities for the initial release. Functional and technical designs are
developed for each planned feature. Design reviews are held with teams comprised
of product strategy, release testing, documentation, sample data and training
personnel. During the design review process, this group ensures not only that
the functional requirements are complete but also that the technical design
meets the business needs.
Develop and Port: In developing a new product, the development team will
code and unit test every feature in the products to ensure that the product
created complies with the functional and technical requirements. These tasks are
conducted using a reference development platform, and the functionality is
designed to provide global capabilities based on requirements from a proxy set
of countries around the world. All development issues are identified and
addressed. At the same time, system test requirements and procedures are
developed. Test strategies, product test plans, feature test requirements and
test procedures are completed. During the development and port phase,
documentation and curriculum development personnel work closely with the
developers to design documentation and training courses. Upon substantial
completion of development, the developed product is ported to support multiple
hardware, database and operating system platforms, and release platforms are
certified.
Test and Release: The product is delivered to a select group of
Pre-General Availability customers for limited use. Pre-General Availability
customers provide feedback on the features and functions as well as ease of use.
Issues identified during this phase are generally resolved prior to the product
being released as Generally Available. In addition, the combined product
features are system tested on the primary development platform. These tests
validate that the product and its features perform according to the specified
business and functional requirements. All test failures are logged, reviewed and
addressed. Release test requirements, plans and processes are developed and
finalized. During this phase, the product is tested to validate it is
operational on all supported platforms. The product is tested for (i) ease of
use, (ii) ease of installation, (iii) ease of upgrade, (iv) volume and (v)
performance. All incidents reported during release test are logged, reviewed and
addressed. Once the product has met system and release test exit criteria, all
sample data and documentation are finalized and incorporated into the master
production product. Final validation and acceptance tests are performed.
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<PAGE> 35
POTENTIAL RESEARCH AND DEVELOPMENT EXPENDITURES
Based on PeopleSoft's experience in developing other products, the
Available Funds are expected to be expended pursuant to the Development
Agreement over a period of approximately three to four years. These development
efforts are currently estimated to require $48-$72 million for scope and design,
$180-$210 million for develop and port and $36-$60 million for test and
release, although these estimates may change over time as PeopleSoft and
Momentum select and develop products. Because of the rapidly changing dynamics
of the computer software industry, products currently forecasted to be
undertaken by Momentum may be reprioritized as the market place develops. In
addition, factors outside of Momentum's control, such as customer functionality
demands, competitor product offerings, and hardware platforms, could alter the
timing or amount of estimated expenditures.
FACILITIES AND PERSONNEL
Momentum is not expected to hire a significant number of employees or to
acquire significant property or assets. However, in order to develop products
under the Development Agreement, Momentum will have to make decisions on how to
obtain adequate resources for its development efforts. Momentum currently
expects that it will contract with PeopleSoft to provide engineering personnel
and facilities to perform the development work. Momentum has the right to
perform this work directly or seek other third party providers. Momentum is
expected to use a substantial portion of the Available Funds to compensate
PeopleSoft for the research and development of Momentum Products. In addition,
Momentum has contracted with PeopleSoft to provide general administrative
support services.
COMPETITION
The market for business application software is intensely competitive.
Momentum believes it will face substantial competition from the large,
established providers of enterprise-wide application software as well as from
numerous smaller, more specialized software companies. Other than PeopleSoft,
SAP AG, Oracle Corporation, Baan Company N.V. and J.D. Edwards & Company are the
major providers of enterprise-wide software. Momentum believes that each of
these companies has either launched initiatives or has the technical, financial,
and marketing capability to launch initiatives to develop products which
directly compete with the products Momentum intends to develop. In addition,
numerous well-established companies specialize in e-business products, analytic
applications or particular industry-specific applications. Almost all of
Momentum's competitors have substantially greater financial, technical and
marketing resources than those of Momentum. Furthermore, although Momentum
believes PeopleSoft does not intend to compete with it, PeopleSoft is free to do
so.
Momentum expects that any products developed by it will be
commercialized by other parties, most likely through PeopleSoft. Although
PeopleSoft has substantial market share in the enterprise-wide application
software market, it does not have a significant presence in the markets for
e-business or analytic application products or in any of the markets for which
Momentum intends to develop industry-specific application products. As a result,
PeopleSoft may not be able to compete successfully with the other large
providers of enterprise-wide application software or with the established
specialized software companies in these markets. Additionally, if Momentum
commercializes its products through third parties, such third parties may not
have the financial, technical and marketing resources to compete successfully
with Momentum's competitors.
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<PAGE> 36
PATENTS; INTELLECTUAL PROPERTY
The products Momentum intends to develop may incorporate certain
technologies of PeopleSoft and other third parties. While Momentum intends to
obtain from third parties permission to use their technologies, Momentum's
activities could unintentionally infringe the patents, copyrights or other
intellectual property rights of others. Consequently, third parties may assert
infringement claims against Momentum with respect to its products. Any such
assertion could require Momentum to enter into royalty arrangements or could
result in costly litigation.
Momentum intends to rely on a combination of copyright, trade secret,
and patent laws and employee and third party non-disclosure agreements to
protect its intellectual property rights, including the features and design
aspects of its products. Such measures may not be sufficient to protect its
rights, and Momentum's competitors may independently develop technologies that
are substantially equivalent to or superior to Momentum's technology. Momentum
may from time to time be involved in litigation regarding the scope and validity
of its intellectual property rights. Any such litigation, whether or not
successful, could result in substantial costs to Momentum and diversion of
efforts by Momentum's management.
AVAILABLE INFORMATION
As a result of the Distribution, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") requires Momentum to file annual, quarterly and
other reports with the Securities and Exchange Commission. Momentum intends to
provide annual reports containing audited financial statements to its
stockholders in connection with its annual meetings of stockholders.
PeopleSoft files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission.
Momentum and PeopleSoft have filed with the Securities and Exchange
Commission a Registration Statement, which includes certain exhibits (the
"Registration Statement"), under the Securities Act of 1933, as amended, for the
securities offered by this prospectus. This prospectus contains general
information about the contents of contracts and other documents filed as
exhibits to the Registration Statement. However, this prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits filed with the Registration Statement. You should read the Registration
Statement and the exhibits for further information about Momentum, PeopleSoft
and the Distribution.
You may read and copy the Registration Statement and other materials
that Momentum and PeopleSoft file with the Securities and Exchange Commission at
the Public Reference Room of the Securities and Exchange Commission, 450 Fifth
Street, Washington, D.C. 20549 and at the Securities and Exchange Commission's
regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents, upon payment of a duplication fee, by writing
to the Securities and Exchange Commission's Public Reference Section. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the Public Reference Rooms. The Securities and
Exchange Commission filings of Momentum and PeopleSoft filings are also
available to the public on the Securities and Exchange Commission Internet site
(http://www.sec.gov).
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<PAGE> 37
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows PeopleSoft to "incorporate
by reference" the information PeopleSoft files with the Securities and Exchange
Commission, which means that PeopleSoft can disclose important information to
you by referring to those documents. The information incorporated by reference
is considered to be part of this prospectus, and information that PeopleSoft
files later with the Securities and Exchange Commission will automatically
update and supersede this information. PeopleSoft incorporates by reference the
documents listed below and any future filings it makes with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act prior to the termination of this offering.
1. PeopleSoft's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 (including those portions of PeopleSoft's Annual Report to Stockholders
and definitive proxy statement for the Annual Meeting of Stockholders held on
May 26, 1998 incorporated by reference therein).
2. PeopleSoft's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998.
3. The description of PeopleSoft's Common Stock contained in PeopleSoft's
Registration Statement on Form 8-A dated October 7, 1992, including any
amendment or report filed for the purpose of updating the description.
4. The description of PeopleSoft's Preferred Share Rights Agreement contained in
its Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on February 16, 1996, as amended on March 25, 1998, including any
additional amendment or report filed for the purpose of updating the
description.
You may request a copy of the documents incorporated by reference, at no
cost, by writing or telephoning Boston EquiServe, L.P., 289 S. San Antonio Road,
Suite 100, Los Altos, California 94022; telephone: (650) 947-3800.
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<PAGE> 38
MANAGEMENT OF MOMENTUM
The following table sets forth information about Momentum's executive
officer and director as of November 16, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - ---- --- --------
<S> <C> <C>
Aneel Bhusri..................... 32 President, Chief Financial Officer,
Secretary and Director
</TABLE>
Aneel Bhusri has been Momentum's President, Chief Financial Officer,
Secretary and sole director since Momentum's formation in November 1998. Prior
to the Distribution, Mr. Bhusri will appoint an individual who is unaffiliated
with PeopleSoft and has experience in the software industry to replace Mr.
Bhusri as the sole officer of Momentum. Mr. Bhusri joined PeopleSoft in August
1993 as Director of Strategic Planning. In April of 1995, he was appointed Vice
President of Product Strategy. In November of 1995, Mr. Bhusri was appointed
Senior Vice President of Product Strategy. In April 1997, he was appointed
Senior Vice President of Product Strategy, Business Development and Marketing.
Prior to joining PeopleSoft, Mr. Bhusri was an associate at Norwest Venture
Capital from June 1992 to March 1993. From 1988 to 1991 he was a financial
analyst in Morgan Stanley's Corporate Finance Department. Mr. Bhusri holds a
B.Sc. in Electrical Engineering and a B.A. in Economics from Brown University,
and an M.B.A. from Stanford University.
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<PAGE> 39
SECURITY OWNERSHIP OF MOMENTUM
Immediately prior to the Distribution, all of the outstanding shares of
Momentum Class A Common Stock will be held by PeopleSoft. The following tables
sets forth the projected beneficial ownership of Momentum Class A Common Stock
following the Distribution by (i) the director and executive officer of Momentum
and (ii) any stockholder that will beneficially own more than 5% of the
outstanding shares of the Momentum Class A Common Stock.
<TABLE>
<CAPTION>
MOMENTUM CLASS A COMMON
STOCK PROJECTED TO BE
BENEFICIALLY OWNED
------------------------------
PERCENT OF
NAME NUMBER(1)(2) CLASS
- - - ----- -------------- -------------
<S> <C> <C>
Director and Executive Officer
Aneel Bhusri.......................................................... 1,466 *
Others
David A. Duffield (3)................................................. 998,834 21%
4460 Hacienda Drive
Pleasanton, CA 94588
</TABLE>
- - - ----------------------
* Less than 1%
(1) Except as otherwise noted, reflects, in each case, the number of shares of
PeopleSoft Common Stock beneficially owned as of October 31, 1998, divided
by 50. In addition to shares held in the individual's sole name, this
column includes shares held by the spouse and other members of the named
person's immediate household who share that household with the named
person, and shares held in family trusts.
(2) In calculating the number of shares of Momentum Class A Common Stock
projected to be owned by the individuals listed above, the calculation has
been accomplished by treating each category of ownership, direct, book
entry, street name and trust account separately and dividing each by 50,
eliminating each set of fractional shares.
(3) Mr. Duffield has informed Momentum that he plans to reduce his percentage
ownership in the Momentum Class A Common Stock shortly after the
Distribution from approximately 21% of the outstanding shares to below 5%
of the outstanding share through the sale or other disposition of
approximately 16% of the outstanding shares.
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<PAGE> 40
SELECTED FINANCIAL DATA OF MOMENTUM
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AS OF NOVEMBER 10,
1998(1)
------------------
<S> <C>
Cash.......................................................................... $ 1,000
Stockholders' equity.......................................................... $ 1,000
</TABLE>
- - - ----------------------
(1) Momentum was incorporated in November 1998. PeopleSoft contributed
$1,000 in November 1998 in exchange for 1,000 shares of Momentum Common
Stock. Momentum currently does not have any operations and will not have
any operations prior to the Distribution.
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<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Momentum was formed on November 9, 1998. PeopleSoft will contribute a
total of $300 million in cash to Momentum prior to the Distribution.
PeopleSoft's contribution (together with interest earned thereon) is expected to
fund research and development activities for approximately three to four years.
Momentum's funds are expected to be used primarily to fund activities to be
conducted under the Development Agreement with PeopleSoft. Momentum expects to
engage PeopleSoft or other third parties to perform the development activities
on Momentum's behalf. Momentum is not expected to require significant facilities
or capital equipment of its own during the term of the Development Agreement.
There can be no assurances, particularly given the existence of the
Development Agreement, the Marketing Agreement and the Services Agreement, that
Momentum will be able to raise any additional capital. Such additional capital,
if raised, would most likely reduce the per share proceeds available to holders
of the Momentum Class A Common Stock if the Purchase Option were to be exercised
by PeopleSoft. See "The Agreements and the Purchase Option -- Purchase Option."
OPERATIONS
Prior to the Distribution, Momentum will not have conducted any
operations. After the Distribution, Momentum's operations will be conducted
largely pursuant to the Development Agreement, the Marketing Agreement and the
Services Agreement. See "The Agreements and the Purchase Option."
In its early years, Momentum's revenues are expected to consist solely
of investment income. In later years, Momentum may derive license revenues from
commercialization of Momentum Products, most likely by PeopleSoft. However,
Momentum is not expected to earn substantial revenues unless the Momentum
Products are successfully commercialized.
Momentum's expenses will be incurred primarily under the Development
Agreement and the Services Agreement. If Momentum engages PeopleSoft to perform
research and development work, PeopleSoft will charge Momentum 105% of its fully
burdened cost of performing such activities. These fully burdened costs will
include salary, benefits and overhead allocations. Momentum will also incur
certain direct costs associated with developing Momentum Products. These costs
could also include payments to other third parties for development, royalties,
or costs associated with acquiring or investing in complementary companies,
products or technology.
Under the Services Agreement, PeopleSoft will provide Momentum certain
administrative services including accounting, finance, human resources and legal
services. Momentum will pay PeopleSoft a fee equal to the sum of: (i) five
percent (5%) of PeopleSoft's fully burdened costs with respect to research and
development conducted by PeopleSoft under the Development Agreement; plus (ii)
five percent (5%) of any fees that Momentum pays to other third parties for the
research and development of products pursuant to the Development Agreement.
Momentum will also incur direct costs such as professional services, insurance,
taxes and regulatory fees.
As a result of its need to incur substantial development expenses prior
to receiving significant revenue, Momentum anticipates that it will incur
substantial losses which will likely be recurring.
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Momentum's future cash flow obligations will derive largely from the
Development Agreement and the Services Agreement. Momentum is required to expend
the Available Funds only to acquire or develop Momentum Products and related
technologies and for related administrative expenses. The rate at which
Available Funds are expended will derive from work plans and cost estimates
approved by Momentum.
YEAR 2000 DISCLOSURE
Momentum expects that substantially all of its research and development
and administrative activities will be performed by PeopleSoft. Momentum believes
that PeopleSoft's internal systems are Year 2000 compliant. To the extent that
Momentum purchases its own internal systems or contracts with other parties for
such services, it expects to be able to find systems and service providers which
are Year 2000 compliant. However, Momentum and PeopleSoft will be relying on a
variety of service providers, including telephone companies, utilities and
network services providers whose Year 2000 compliance is difficult to ascertain.
If any these providers were unable to provide their services to either
PeopleSoft or Momentum, Momentum's business could be adversely affected.
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THE AGREEMENTS AND THE PURCHASE OPTION
DEVELOPMENT AND LICENSE AGREEMENT
Momentum and PeopleSoft have entered into a Development and License
Agreement (the "Development Agreement") for the selection and development of
software application products including (i) e-business applications, (ii)
analytic applications, and (iii) industry-specific software application
products.
Pursuant to the Development Agreement, the parties have agreed to the
following terms:
PeopleSoft has granted to Momentum a perpetual, worldwide, non-exclusive
license to use PeopleSoft Technology solely for internal use purposes connected
with the Development Agreement and solely in conjunction with Momentum's
development, support, demonstration, testing (and all other similar supporting
tasks) of the Momentum Products.
PeopleSoft will propose to Momentum that it develop particular software
products and related technologies. If Momentum agrees to develop such products,
PeopleSoft and Momentum will agree upon timetables, budgets and specifications
for each product. Products recommended by PeopleSoft and approved by Momentum
for development are called "Momentum Products."
Momentum has agreed to use diligent efforts to research and develop
Momentum Products in accordance with agreed upon budgets and timetables.
Momentum expects that it will undertake research and development by contracting
with a third party, as it does not expect to have the staffing or facilities to
do such research and development itself. Momentum currently expects that
substantially all of the research and development relating to Momentum Products
will be performed by PeopleSoft. However, PeopleSoft is not obligated to provide
any such services to Momentum, and Momentum may choose to hire other third party
providers. If Momentum chooses to engage PeopleSoft, it will pay PeopleSoft one
hundred and five percent (105%) of PeopleSoft's fully burdened costs relating to
the research and development provided by PeopleSoft. PeopleSoft will recognize
such reimbursement amounts as product development revenues. If a third party is
hired to conduct research and development relating to Momentum Products, any
agreement between Momentum and such third party must include appropriate
provisions for the protection of PeopleSoft Technology and PeopleSoft's rights
under the Development Agreement, the Marketing Agreement, and the Services
Agreement and as a holder of the Momentum Class B Common Stock. Subject to
PeopleSoft's licensing rights and proprietary rights in PeopleSoft Technology
described below, Momentum will have title to all products and technologies
developed pursuant to the Development Agreement.
Momentum may develop or acquire (through licensing or otherwise) third
party software toolsets ("Developed Technology") for the purpose of developing
Momentum Products. To the extent Momentum has the right, Momentum will grant
PeopleSoft an irrevocable, worldwide, non-exclusive license to use, market,
manufacture, reproduce, copy, sublicense, distribute (through PeopleSoft's then
current worldwide channel distribution system), create derivative works, enhance
and modify the Developed Technology. For a period of ten (10) years from the
date the Developed Technology is acquired or first identified as part of the
work plan related to the development of a Momentum Product, PeopleSoft will pay
a royalty of one percent (1%) of net revenue on products (other than Momentum
Products) developed by PeopleSoft using Developed Technology. In order to
develop certain products
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using Developed Technology, PeopleSoft may need to acquire licenses or enter
into other arrangements with third parties. For purposes of calculating
royalties due to Momentum for the use of Developed Technology in these products,
net revenue will be reduced by the amount of license fees or similar payments
due to third parties from PeopleSoft with respect to such product.
PeopleSoft will own all rights with respect to any enhancements made by
Momentum to PeopleTools(R) or other software products contributed by PeopleSoft
and to any technology other than Developed Technology which is developed
pursuant to the Development Agreement. PeopleSoft will not be obligated to make
any royalty or other payments with respect to such technology or enhancements.
Momentum will own the Developed Technology and the Momentum Products subject to
PeopleSoft's license rights as described in the Development Agreement and the
Marketing Agreement.
Momentum may use the Available Funds only to develop or acquire Momentum
Products and related technologies and for related administrative expense. It is
anticipated that Momentum will spend the Available Funds over a period of
approximately three to four years. Prior to expenditure, Momentum will be
required to invest the Available Funds in high quality marketable securities.
Any such investment earnings shall become a part of the Available Funds.
Momentum may not encumber, pledge or otherwise take any action with respect to
Available Funds that could prevent the full expenditure of such funds under the
Development Agreement. Under certain circumstances, PeopleSoft will have the
right to require Momentum to make an affirmative pledge of the Available Funds
to performance under the Development Agreement. Other than PeopleSoft's rights
under the Purchase Option, there are no restrictions on Momentum's use of funds
it generates or receives, that are not Available Funds, to conduct its business
as it determines.
The Development Agreement will automatically terminate upon the
expiration of the Purchase Option; provided, however, PeopleSoft's obligation to
pay Developed Technology Royalties will continue until the expiration of the
respective royalty terms. Either party may terminate the Development Agreement
if the other party breaches a material obligation thereunder and such breach
continues uncured for thirty (30) days after written notice by the terminating
party.
In the event the Development Agreement or the Marketing Agreement is
terminated by PeopleSoft in connection with Momentum's breach of a material
obligation under the Development Agreement or the Marketing Agreement,
PeopleSoft shall be entitled to receive, as liquidated damages, the Available
Funds. If PeopleSoft reasonably believes that such liquidated damages are
inadequate, then PeopleSoft will be entitled to specific performance of
Momentum's obligations under the Development Agreement or the Marketing
Agreement in connection with such breach.
MARKETING AND DISTRIBUTION AGREEMENT
Under the Marketing and Distribution Agreement (the "Marketing
Agreement"), Momentum has granted PeopleSoft the exclusive license to market and
distribute pre-General Availability versions of each Momentum Product (the
"Pre-General Availability License") and an option to obtain a perpetual,
worldwide, exclusive license to market, distribute, sublicense, support and
enhance any post-General Availability versions of each Momentum Product (the
"License Option").
Under the Pre-General Availability License, PeopleSoft has an exclusive
license with respect to each Momentum Product to market and distribute the
Momentum Product for the period from which
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Momentum accepts the relevant product proposal from PeopleSoft until the earlier
of: (i) the exercise or expiration of PeopleSoft's License Option with respect
to the Momentum Product; or (ii) the expiration of the Purchase Option.
PeopleSoft shall pay Momentum royalties of six percent (6%) of Net Revenues from
the license of each Momentum Product. PeopleSoft has agreed to use commercially
reasonable efforts to promptly market each pre-General Availability Momentum
Product to a limited group of customers in accordance with PeopleSoft's standard
practices.
Under the License Option, PeopleSoft may obtain a perpetual, worldwide,
exclusive license (with the right to sublicense through multiple tiers) to
market, distribute, support and enhance each Momentum Product. PeopleSoft may
exercise the License Option with respect to any Momentum Product at any time
from the date on which Momentum agrees to develop the product until the earlier
of: (i) thirty (30) days after the product becomes Generally Available; or (ii)
the expiration of the Purchase Option. A Momentum Product will be deemed to be
Generally Available upon successful completion of the release testing model
which PeopleSoft uses for its own products with the level of functionality
originally agreed to by PeopleSoft and Momentum. Upon exercise of the License
Option with respect to a Momentum Product (a "Licensed Product"), PeopleSoft
will assume full responsibility for any product development, support, training,
consulting, bug fixes, modifications and enhancements with respect to such
Licensed Product. If PeopleSoft does not exercise the License Option with
respect to a Momentum Product, PeopleSoft will retain the right and obligation
to support any customers to whom it licensed such Momentum Product pursuant to
its Pre-General Availability License. These rights and obligations will survive
the termination of the Marketing Agreement.
PeopleSoft will make Product Payments to Momentum with respect to each
Licensed Product equal to the sum of (i) one percent (1%) of Net Revenues plus
(ii) an additional one-tenth of one percent (0.1%) of Net Revenue for each one
million dollars ($1,000,000) of Development Costs of the Licensed Product that
were incurred by Momentum, up to a maximum royalty rate of six percent (6%) of
Net Revenue. Net Revenues for a particular quarter are end user license fees
received by PeopleSoft or a third party for licensing or sub-licensing each
Licensed Product less the value of bundled services and development expenses
incurred by PeopleSoft on such Licensed Product for that quarter. Net Revenues
will include all user license fees paid with respect to each Licensed Product,
regardless of whether PeopleSoft directly licenses such License Product, or
indirectly licenses such Licensed Product through a reseller, distributor, or
other third party. Subject to PeopleSoft's Product Payment Buy-Out Option
described below, Product Payments will be payable by PeopleSoft to Momentum for
ten (10) years after General Availability of the Licensed Product. PeopleSoft
will retain all support services and maintenance fees with no royalty-sharing or
payment obligation to Momentum. PeopleSoft's royalty obligations will survive
the termination of the Marketing Agreement.
PeopleSoft has the option to buy out Momentum's right to receive Product
Payments for any Licensed Product. The Product Payment Buy-Out Option may be
exercised for any Licensed Product at any time beginning twelve (12) months
after the Licensed Product is declared Generally Available. The buy-out price
will be fifteen (15) times the payment made by or due from PeopleSoft to
Momentum with respect to licenses of such Licensed Product for the four (4)
quarters immediately preceding the quarter in which the Product Payment Buy-Out
Option is exercised (payment will be annualized for any such Licensed Product
that has not been licensed for each of such four (4) quarters).
If PeopleSoft does not exercise the License Option with respect to a
Momentum Product, Momentum will be free to commercialize that Momentum Product
itself or with the assistance of a third party. To the extent that any such
Momentum Product contains PeopleSoft Technology, PeopleSoft has
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granted Momentum a license with respect to PeopleSoft Technology allowing
Momentum to enhance, license, use and distribute the product provided that
Momentum may not contract with certain entities that PeopleSoft reasonably
believes and identifies as competitors of PeopleSoft. This license will survive
the termination of the Marketing Agreement.
During the term of the Marketing Agreement, PeopleSoft will provide
quarterly reports to Momentum detailing payments due for such period with
respect to the relevant Momentum Product or Licensed Product, as the case may
be. Such reports will be due thirty (30) days after the end of each calendar
quarter and will indicate the quantity and dollar amount of Net Revenues
relating to each Momentum Product or Licensed Product, as the case may be, or
other consideration in respect of Net Revenues, during the quarter covered by
such report. No more than once in each calendar year upon at least five (5)
business days notice and during regular business hours, at Momentum's expense,
PeopleSoft is required to make available for inspection by Momentum such records
of PeopleSoft as may be necessary to verify the accuracy of reports and payments
made under the Marketing Agreement. PeopleSoft must provide similar reports and
records with respect to all Developed Technology Products.
The Marketing Agreement terminates upon the earlier to occur of: (i) the
exercise of the Purchase Option by PeopleSoft; or (ii) the end of the thirtieth
(30th) day after the expiration of the Purchase Option. The Marketing Agreement
may be terminated by either party in the event that the other party (i) breaches
any material obligation under the Marketing Agreement (which breach continues
for a period of thirty (30) days after written notice to the defaulting party)
or (ii) enters into any proceeding, voluntary or involuntary, in bankruptcy,
reorganization or similar arrangement for the benefit of its creditors.
SERVICES AGREEMENT
Pursuant to the Services Agreement, PeopleSoft will provide Momentum
with certain services relating to administration, including accounting, finance,
human resources and legal services. Momentum has agreed to pay PeopleSoft a fee
equal to the sum of: (i) five percent (5%) of PeopleSoft's fully burdened costs
with respect to research and development conducted by PeopleSoft under the
Development Agreement; plus (ii) five percent (5%) of any fees that Momentum
pays to other third parties for the research and development of products
pursuant to the Development Agreement. The Services Agreement remains in force
until December 31, 2002 and thereafter is automatically renewed for one-year
terms.
DISTRIBUTION AGREEMENT
Under the Distribution Agreement, PeopleSoft will contribute $300
million in cash to Momentum in exchange for approximately 4,750,000 shares of
Momentum Class A Common Stock and 1,000 shares of Momentum Class B Common Stock.
PeopleSoft will then dividend such shares of Momentum Class A Common Stock to
the PeopleSoft stockholders in connection with the Distribution. Under the
Distribution Agreement, PeopleSoft has agreed to indemnify Momentum's officers
and directors to the same extent such persons are entitled to indemnification
under Momentum's Certificate of Incorporation if PeopleSoft exercises the
Purchase Option.
PURCHASE OPTION
The Purchase Option is set forth in Momentum's Certificate of
Incorporation. Pursuant to the Purchase Option, PeopleSoft has an exclusive,
irrevocable option to purchase all, but not less than all, of
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the issued and outstanding Momentum Class A Common Stock. PeopleSoft may
exercise the Purchase Option by written notice to Momentum at any time during
the period beginning immediately after the Distribution until December 31, 2002;
provided that such date will be extended for successive six month periods if, as
of any June 30 or December 31 beginning with June 30, 2002, Momentum has not
paid or accrued expenses for all but $15 million of the Available Funds as of
such date. In any event, the Purchase Option will terminate on the sixtieth
(60th) day after Momentum provides PeopleSoft with a statement that, as of the
end of any calendar month, there are less than $2.5 million of Available Funds
remaining. All certificates evidencing Momentum Class A Common Stock will bear a
legend indicating that the Momentum Class A Common Stock is subject to the
Purchase Option.
If the Purchase Option is exercised, the exercise price (the "Purchase
Option Exercise Price") will be the greatest of:
(1) 15 times the sum of (i) the actual worldwide payments made by or
due from PeopleSoft to Momentum with respect to all Licensed
Products and Developed Technology for the four calendar quarters
immediately preceding the quarter in which the Purchase Option
is exercised (the "Base Period"); plus (ii) such payments as
would have been made during the Base Period by, or due from,
PeopleSoft to Momentum if PeopleSoft had not previously
exercised its Product Payment Buy-Out Option with respect to any
Momentum Product (for purposes of the calculations in (i) and
(ii), payments will be annualized for any product that has not
been licensed during each of the four calendar quarters in the
Base Period);
minus
any amounts previously paid to exercise any Product Payment
Buy-Out Option for such Momentum Product;
(2) the fair market value of seven hundred twenty thousand (720,000)
shares of PeopleSoft Common Stock, adjusted in the event of a
stock split, as of the date PeopleSoft exercises its Purchase
Option;
(3) three hundred fifty million dollars ($350,000,000) plus any
additional funds contributed to Momentum by PeopleSoft, less the
aggregate of all amounts paid or incurred to develop the
Momentum Products or pursuant to the Services Agreement as of
the date the Purchase Option is exercised; or
(4) ninety million dollars ($90,000,000).
In each case, the amount payable as the Purchase Option Exercise Price
will be reduced (but not to less than the total par value of the outstanding
Momentum Class A Common Stock) to the extent, if any, that Momentum's
liabilities at the time of exercise (other than liabilities under the
Development Agreement, the Marketing Agreement and/or the Services Agreement)
exceed Momentum's cash and cash equivalents, and short-term and long-term
investments (excluding the amount of Available Funds remaining at such time).
For this purpose, liabilities will include, in addition to liabilities required
to be reflected on Momentum's financial statements under generally accepted
accounting principles, certain contingent liabilities relating to guarantees and
similar arrangements.
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PeopleSoft may pay the Purchase Option Exercise Price in cash, in
PeopleSoft Common Stock or in any combination of the two. For the purpose of
determining the Purchase Option Exercise Price, the fair market value of
PeopleSoft Common Stock shall be deemed to be the average of the closing sales
price of PeopleSoft Common Stock on the Nasdaq National Market for the twenty
(20) trading days ending with the trading day that is two trading days prior to
the date of determination. The per share purchase price of Momentum Class A
Common Stock will be reduced if Momentum issues additional shares after the
Distribution.
The closing of the acquisition of the Momentum Class A Common Stock
pursuant to exercise of the Purchase Option will take place on a date selected
by PeopleSoft, but no later than sixty (60) days after the exercise of the
Purchase Option unless, in the judgment of PeopleSoft, a later date is required
to satisfy any applicable legal requirements or to obtain required consents.
Between the time of exercise of the Purchase Option and the time of closing of
the acquisition of the Momentum Class A Common Stock, Momentum may not, without
PeopleSoft's consent, incur additional debt, dispose of assets, pay or declare
any dividends or operate its business other than in the ordinary course.
At PeopleSoft's election, Momentum may redeem on such closing date the
Momentum Class A Common Stock for an aggregate redemption price equal to the
final Purchase Option Exercise Price. Any such redemption would be in lieu of
PeopleSoft paying the final Purchase Option Exercise price directly to holders
of Momentum Class A Common Stock, and would be subject to PeopleSoft providing
the final Purchase Option Exercise Price to Momentum to allow Momentum to pay
the redemption price.
In the event that prior to PeopleSoft's exercise of the Purchase Option,
the number of outstanding shares of PeopleSoft Common Stock is increased by
virtue of a stock split or a dividend payable in PeopleSoft Common Stock or the
number of such shares is decreased by virtue of a combination or
reclassification of such shares, then the number of shares of PeopleSoft Common
Stock used to compute the Purchase Option Exercise Price (if the Purchase Option
Exercise Price is the fair market value of 720,000 shares of PeopleSoft Common
Stock) shall be increased or decreased, as the case may be, in proportion to
such increase or decrease in the number of outstanding shares of PeopleSoft
Common Stock.
Under Momentum's Certificate of Incorporation, Momentum will be
prohibited from taking or permitting any action inconsistent with, or which
would in any way alter, PeopleSoft's rights under the Purchase Option. Momentum
may not, without consent of PeopleSoft as the sole holder of the Momentum Class
B Common Stock, merge, liquidate, sell any substantial assets, or amend its
Certificate of Incorporation to (i) alter the Purchase Option, (ii) change
Momentum's authorized capitalization, or (iii) alter the provisions governing
the Board of Directors. To the extent Rule 13e-3 ("Rule 13e-3) under the
Exchange Act dealing with going private transactions by certain issuers or their
affiliates is applicable at the time of any exercise of the Purchase Option,
PeopleSoft and Momentum will comply with their respective obligations under Rule
13e-3, subject to any available exemptions from such obligations.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation with respect to certain material
federal income tax considerations under the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to the shares of Momentum Class A Common
Stock, cash in lieu of fractional shares of Momentum Class A Common Stock, or
both shares of Momentum Class A Common Stock and cash distributed to
PeopleSoft's stockholders in the Distribution. THIS DISCUSSION DOES NOT ADDRESS
THE TAX CONSEQUENCES OF THE ACQUISITION OF SHARES OF MOMENTUM CLASS A COMMON
STOCK BY PURCHASE OR MEANS OTHER THAN THE DISTRIBUTION. In addition, this
discussion is intended only to provide general information regarding PeopleSoft
stockholders that are subject to United States federal income tax; it may not
address all relevant federal income tax consequences to such persons or to other
categories of PeopleSoft stockholders, e.g., foreign persons, dealers in
securities, and stockholders that are exempt from federal income tax. This
discussion is based upon the Code, Treasury Regulations (including proposed
Treasury Regulations) promulgated thereunder, rulings, official pronouncements
and judicial decisions all as in effect on the date hereof and all of which are
subject to change or different interpretations by the Internal Revenue Service
("IRS") or the courts, any of which changes or interpretations may have
retroactive effect. Wilson Sonsini Goodrich & Rosati, Professional Corporation,
has disclaimed any undertaking to advise as to any change in the law that may
affect its opinion, including changes that may be made under currently pending
legislative proposals, and has expressed no opinion as to the laws of any
jurisdictions other than the federal income tax laws of the United States of
America. An opinion of counsel does not bind the IRS, which could take a
contrary position, but represents only counsel's judgment as to the likely
outcome if the issues involved were properly presented to a court of competent
jurisdiction. This discussion assumes that the shares of Momentum Class A Common
Stock will at all relevant times constitute capital assets of the stockholders.
This discussion does not address state, local, or foreign tax considerations.
PEOPLESOFT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
TAXABILITY OF THE DISTRIBUTION TO HOLDERS OF PEOPLESOFT COMMON STOCK
The fair market value of shares of Momentum Class A Common Stock, plus
the cash intended to represent the fair market value of a fractional share of
Momentum Class A Common Stock (together, the "Taxable Amount"), distributed to a
holder of PeopleSoft Common Stock will constitute a dividend taxable as ordinary
income to the extent that PeopleSoft has current or accumulated "earnings and
profits" as of the end of the taxable year in which the Distribution occurs that
are allocable to the Distribution for federal income tax purposes. Assuming that
there will be a public market for the shares of Momentum Class A Common Stock at
the time of the Distribution, the fair market value of a share of Momentum Class
A Common Stock to a PeopleSoft stockholder for this purpose is expected to be
the average of the high and low trading price on the date of the Distribution or
if such date is not a trading day, on the first trading day following the
Distribution. If the Taxable Amount exceeds the stockholder's allocable share of
PeopleSoft's current and accumulated earnings and profits for federal income tax
purposes determined as of the end of PeopleSoft's fiscal year ending December
31, 1998, the excess will generally be treated first as a tax-free return of
capital to the extent of the stockholder's basis in the stockholder's PeopleSoft
Common Stock, and after this basis is reduced to zero, as capital gain, which
will be taxed in the manner discussed in the "Sale of Shares of Momentum Class A
Common Stock" section below. PeopleSoft's management has advised that, based on
the information currently available, PeopleSoft's accumulated earnings and
profits at December 31, 1998 is expected to be such that the Taxable Amount will
not exceed the PeopleSoft stockholder's allocable share of such earnings and
profits.
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No later than February 1, 1999, PeopleSoft will issue to each holder of
PeopleSoft Common Stock receiving shares of Momentum Class A Common Stock in the
Distribution an IRS Form 1099-DIV reflecting the fair market value of the shares
of Momentum Class A Common Stock (and any amount of cash received in lieu of
fractional shares of Momentum Class A Common Stock) distributed to such holder,
as well as any portion of the Taxable Amount exceeding such holder's allocable
share of PeopleSoft's current and accumulated earnings and profits.
To the extent that the Taxable Amount constitutes ordinary income, it
will generally be subject to back up withholding with respect to PeopleSoft
stockholders who, before the Distribution, have not provided their correct
taxpayer identification numbers to PeopleSoft on an IRS Form W-9 or a substitute
therefor. Although this discussion does not generally address tax consequences
of the Distribution to foreign holders of PeopleSoft Common Stock, such holders
should note that distribution of the Taxable Amount (to the extent of such
foreign holder's allocable share of PeopleSoft's current and accumulated
earnings and profits) will generally be subject to U.S. withholding tax at the
rate of 30%. This rate may be reduced by income tax treaties to which the United
States is a party. Nonresident alien individuals, foreign corporations and other
foreign holders of PeopleSoft Common Stock are urged to consult their own tax
advisors regarding the availability of such reductions and the procedures for
claiming them.
For corporate holders of PeopleSoft Common Stock, the Taxable Amount (to
the extent treated as ordinary income) will be eligible for a
"dividends-received" deduction, subject to limitations and exclusions provided
by the Code, if the Purchase Option is "significantly out of the money" for at
least 46 days during the 90-day period beginning 45 days before the PeopleSoft
Common Stock becomes ex-dividend with respect to the Distribution. However, for
corporate holders of PeopleSoft Common Stock, the Taxable Amount will be subject
to the Code's extraordinary dividend rules, which could reduce a corporate
holder's basis in its PeopleSoft Common Stock by the amount of the deduction, if
the Taxable Amount equals at least 10% of the holder's basis. Moreover, to the
extent that the untaxed distribution exceeds the corporate holder's basis, gain
will be recognized.
SALE OF SHARES OF MOMENTUM CLASS A COMMON STOCK
Upon the sale of shares of Momentum Class A Common Stock, the PeopleSoft
stockholder will have a capital gain or loss equal to the difference between the
sale price and the stockholder's basis in the shares of Momentum Class A Common
Stock sold. This gain or loss will be long-term capital gain or loss if the
shares of Momentum Class A Common Stock have a holding period of more than one
year on the sale date. The maximum stated federal income tax rate for long-term
capital gain is 20% for noncorporate holders. In addition, the combination of
the shares of Momentum Class A Common Stock and the Purchase Option may be
deemed a "straddle," with the result that the holding period of shares of
Momentum Class A Common Stock would not begin until such date as the Purchase
Option is exercised or expires. There is presently no difference in federal
income tax rates between ordinary income and capital gains of corporations.
Limitations may apply to deduction of capital loss.
A PeopleSoft stockholder's initial basis in shares of Momentum Class A
Common Stock received in the Distribution will be the fair market value of those
shares of Momentum Class A Common Stock at the time of the Distribution, which
fair market value will be determined in the manner set forth in the "Taxability
of the Distribution to Holders of PeopleSoft Common Stock" section above.
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EXERCISE OF PURCHASE OPTION
If PeopleSoft exercises its Purchase Option for cash (or otherwise if
the requirements for tax-free treatment described below are not satisfied),
holders of shares of Momentum Class A Common Stock will have a capital gain or
loss due to such exercise equal to the difference between (a) the cash (and any
other deemed consideration) received and (b) the holder's basis in the shares of
Momentum Class A Common Stock surrendered. Gain or loss due to the exercise of
the Purchase Option will be long-term capital gain or loss if the shares of
Momentum Class A Common Stock have been held for more than one year at the time
of the closing of the exercise of the Purchase Option. However, the combination
of the shares of Momentum Class A Common Stock and the Purchase Option may be
deemed a "straddle," with the result that the holding period of shares of
Momentum Class A Common Stock would not begin until such date as the Purchase
Option is exercised and that capital gain or loss upon exercise of the Purchase
Option would be short-term. Limitations may apply to deduction of capital loss.
If PeopleSoft exercises its Purchase Option solely by delivering shares
of PeopleSoft Common Stock in exchange for Momentum Class A Common Stock, no
gain or loss will be taxable to the holders of Momentum Class A Common Stock
upon the exchange if (a) exercise of the Purchase Option constitutes a "plan of
reorganization" for purposes of Section 368(a)(1)(B) of the Code, (b) no
consideration other than PeopleSoft Common Stock and cash paid in lieu of
fractional shares (which cash generally will be taxable in the manner set forth
in the preceding paragraph) is deemed to be paid by PeopleSoft upon exercise of
the Purchase Option and (c) the other requirements of Section 368(a)(1)(B) of
the Code are met at the time of such exchange. In such case, former holders of
Momentum Class A Common Stock will receive a tax basis in the shares of
PeopleSoft Common Stock received upon the exchange equal to their tax basis in
the Momentum Class A Common Stock surrendered less the tax basis, if any,
allocated to fractional share interests, and the holding period of such
PeopleSoft Common Stock in the hands of such holders will include the holding
period of their shares of Momentum Class A Common Stock surrendered. However,
there can be no assurance that the requirements of Section 368(a)(1)(B) will be
met.
EXPIRATION OF PURCHASE OPTION
If the Purchase Option expires unexercised, each holder of shares of
Momentum Class A Common Stock on the date it expires may have short-term capital
gain in the amount of the fair market value of the portion of the Purchase
Option covering the holder's shares of Momentum Class A Common Stock on the date
of the Distribution; any such gain would increase the holder's basis in the
shares of Momentum Class A Common Stock. PeopleSoft believes that the fair
market value of the Purchase Option is not readily ascertainable. Each holder of
shares of Momentum Class A Common Stock should consult his or her own tax
adviser as to what amount, if any, should be reported as gain if the Purchase
Option expires unexercised.
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DESCRIPTION OF MOMENTUM CAPITAL STOCK
At the time of the Distribution, Momentum's authorized capital stock
will consist of (i) 10,000,000 shares of Momentum Class A Common Stock, (ii)
1,000 shares of Momentum Class B Common Stock (together with Momentum Class A
Common Stock, the "Momentum Common Stock"), and (iii) 2,000,000 shares of
undesignated Preferred Stock.
Holders of Momentum Common Stock will be entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. Available Funds may not be used to pay dividends. In the
event of a liquidation, dissolution or winding up of Momentum, holders of
Momentum Common Stock will be entitled to receive, pro rata, all remaining
assets of Momentum available for distribution to stockholders.
No preemptive rights, conversion rights or sinking fund provisions will
be applicable to Momentum Class A Common Stock. Upon completion of this
Distribution, all outstanding Momentum Class A Common Stock will be fully paid
and nonassessable and will not be subject to any liability for further call. The
Momentum Class A Common Stock will be subject to the Purchase Option and
certificates representing such shares and book-entry account statements will
bear a legend to that effect.
See "The Agreements and the Purchase Option -- Purchase Option."
No preemptive rights or sinking fund provisions will be applicable to
the Momentum Class B Common Stock. Each share of the Momentum Class B Common
Stock, all of which are held by PeopleSoft, will automatically convert into one
share of Class A Momentum Stock upon such date as the Purchase Option expires.
Until the expiration of the Purchase Option, PeopleSoft, as the sole
holder of the Momentum Class B Common Stock, will be entitled to vote separately
as a class with respect to any merger or liquidation of Momentum, the sale,
lease, exchange, transfer or other disposition of any substantial asset of
Momentum, and any amendments to the Certificate of Incorporation of Momentum
that would alter the Purchase Option, Momentum's authorized capitalization, or
the provisions of the Certificate of Incorporation governing Momentum's Board of
Directors. Accordingly, PeopleSoft could preclude the holders of the Momentum
Class A Common Stock from taking any of the foregoing actions during such
period. Prior to exercise of the Purchase Option, the holders of the Momentum
Class B Common Stock, voting as a separate class, will be entitled to elect one
director, and the holders of the Momentum Class A Common Stock will be entitled
to elect up to three directors. Upon exercise of the Purchase Option,
PeopleSoft, as the sole holder of the Momentum Class B Common Stock, will have
the right to elect all of the Momentum directors and to remove directors with or
without cause. On all other matters, holders of the Momentum Class A Common
Stock and Momentum Class B Common Stock will vote together as a single class.
Holders of Momentum Common Stock will have one vote for each share of Momentum
Common Stock held by them.
Only the Momentum Board of Directors, the Chairman of the Board or the
President may call special meetings of the Momentum stockholders. The approval
of the holder of the Momentum Class B Common Stock is required to amend the
provisions of Momentum's Certificate of Incorporation and bylaws governing the
number and classification of the Board of Directors and certain related matters.
The provisions of Momentum's Certificate of Incorporation granting special
voting rights to the holder or holders of the Momentum Class B Common Stock and
eliminating the right of Momentum stockholders to call special meetings of
stockholders may inhibit a change in control of Momentum.
-47-
<PAGE> 53
Momentum has authorized 2,000,000 shares of Preferred Stock. Shares of
Preferred Stock may be issued without stockholder approval. The Board of
Directors is authorized to issue such shares in one or more series and to fix
the rights, preference, privileges, qualifications, limitations and restrictions
thereof, including dividend rights and rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series of the designation of such series without any
vote or action by the stockholders. However, any Preferred Stock issued must be
subject to the Purchase Option and any issuance of Preferred Stock which would
adversely affect the rights preferences and privileges of the Momentum Class B
Common Stock would require the approval of the holders of Momentum Class B
Common Stock
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Momentum Class A Common Stock
is Boston EquiServe, L.P., 289 S. San Antonio Road, Suite 100, Los Altos,
California 94022; telephone: (650) 947- 3800.
EXPERTS
The balance sheet of Momentum Business Applications, Inc. at November
10, 1998, appearing in this prospectus and the Registration Statement has been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and is included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of PeopleSoft, Inc. appearing in
PeopleSoft's Annual Report (Form 10-K) for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The statements included in this prospectus under the caption "Certain
Federal Income Tax Considerations" have been reviewed by, and the validity of
the Momentum Class A Common Stock offered hereby will be passed upon by, Wilson
Sonsini Goodrich & Rosati, Professional Corporation, of Palo Alto, California.
Wilson Sonsini Goodrich & Rosati, Professional Corporation, is legal counsel to
both Momentum and PeopleSoft.
-48-
<PAGE> 54
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................................... F-2
Momentum Business Applications, Inc. Balance Sheet and Notes to Balance Sheet.............. F-3
Momentum Business Applications, Inc. Pro Forma Balance Sheet and Notes to Pro Forma Balance
Sheet (unaudited)................................................................... F-6
PeopleSoft, Inc. Pro Forma Balance Sheet (unaudited)....................................... F-7
</TABLE>
F-1
<PAGE> 55
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the accompanying balance sheet of Momentum Business
Applications, Inc. as of November 10, 1998. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
a reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluation of the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Momentum Business Applications,
Inc. as of November 10, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
San Jose, California
November 11, 1998
F-2
<PAGE> 56
MOMENTUM BUSINESS APPLICATIONS, INC.
BALANCE SHEET
NOVEMBER 10, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash .............................................. $1,000
======
STOCKHOLDERS' EQUITY (NOTE 3)
Common Stock, $0.001 par value, 1,000 shares
authorized, 1,000 shares issued and outstanding $ 1
Additional paid-in capital ........................ 999
------
Total stockholders' equity ................ $1,000
======
</TABLE>
F-3
<PAGE> 57
MOMENTUM BUSINESS APPLICATIONS, INC.
NOTES TO BALANCE SHEET
1. Organization and Ownership
Momentum Business Applications, Inc. (the "Company" or "Momentum") was
incorporated on November 9, 1998, in the state of Delaware for the purposes of
selecting and developing certain software applications and for commercializing
such products, most likely through licensing to PeopleSoft, Inc.
("PeopleSoft").
The Company has not yet commenced significant operations, and its only
activity to date has been the initial funding provided by PeopleSoft, which owns
all of the Company's outstanding Common Stock. Accordingly, no statement of
operations or statement of cash flows is presented.
2. Certain Transactions with PeopleSoft (unaudited)
On November 10, 1998, the Board of Directors of Momentum authorized the
Company to enter into certain agreements with PeopleSoft including a Development
and License Agreement (the "Development Agreement"), a Services Agreement (the
"Services Agreement") and a Marketing and Distribution Agreement (the "Marketing
Agreement"). In addition, under the Company's Certificate of Incorporation,
PeopleSoft will have an option, for a specified amount of time, to purchase all
of the outstanding shares of the Momentum Class A Common Stock.
Under the proposed terms of the Development Agreement, PeopleSoft will
grant Momentum, at no charge, a worldwide license to use its PeopleTools(R)
rapid application development environment and architecture solely to develop
products accepted for development under the Development Agreement.
Under the proposed terms of the Development Agreement, Momentum is
required to spend all of the funds contributed by PeopleSoft for the development
and acquisition of software products and related technologies under the
Development Agreement and for related administrative expenses. Momentum is not
expected to have staffing or facilities to perform under the Development
Agreement on its own. Momentum is expected to spend most of these funds to pay
PeopleSoft for the costs of these activities. PeopleSoft will charge Momentum
105% of PeopleSoft's fully-burdened costs of these services (salaries and
benefits, plus overhead).
Under the proposed terms of the Services Agreement, PeopleSoft will
provide Momentum with administrative services, including accounting, finance,
human resource and legal services at a fee equal to 5% of the development costs
incurred under the Development Agreement.
3. Common Stock (unaudited)
Prior to the Distribution contemplated by this prospectus, the Company
intends to restate its Certificate of Incorporation to provide for two classes
of stock, Class A Common Stock and Class B Common Stock. The common stockholders
of PeopleSoft will receive one share of Momentum Class A Common Stock for each
50 shares of PeopleSoft common stock held on the record date. The shares of
F-4
<PAGE> 58
Momentum Common Stock held by PeopleSoft on the record date will be converted
into 1,000 shares of Momentum Class B Common Stock.
4. Preferred Stock (unaudited)
Prior to the Distribution contemplated by this prospectus, the Company
intends to restate its Certificate of Incorporation to provide for 2,000,000
shares of Preferred Stock. The Board of Directors is authorized to issue such
shares in one or more series and to fix the rights, preference, privileges,
qualifications, limitations and restrictions thereof, including dividend rights
and rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any series
of the designation of such series.
F-5
<PAGE> 59
MOMENTUM BUSINESS APPLICATIONS, INC.
PRO FORMA BALANCE SHEET
NOVEMBER 10, 1998
(UNAUDITED)
The following pro forma balance sheet should be read in conjunction with
the audited balance sheet and notes of Momentum Business Applications, Inc. as
of November 10, 1998. The pro forma balance sheet is presented to show the
financial position of Momentum following the receipt of the remainder of
$300,000,000 in cash contributed by PeopleSoft, the conversion of 1,000 shares
of Momentum's Common Stock owned by PeopleSoft into 1,000 shares of Momentum's
Class B Common Stock, and the issuance to PeopleSoft of shares of Momentum Class
A Common Stock prior to the Distribution.
<TABLE>
<CAPTION>
ASSETS
As Adjusted As
Pro Forma of November 10,
Unadjusted Adjustments 1998
------------- -------------- -------------
<S> <C> <C> <C>
Cash ...................................................... $ 1,000 $ 299,999,000(a) $ 300,000,000
============= ============= =============
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 1,000 shares authorized,
1,000 shares issued and outstanding (none as adjusted $ 1 $ (1)(b) $ --
Class A Common Stock, $0.001 par value, 10,000,000
shares authorized, 4,750,000 shares to be issued and
outstanding as adjusted ............................. -- 4,750(c) 4,750
Class B Common Stock, $0.001 par value, 1,000 shares
authorized, 1,000 shares to be issued and outstanding
as adjusted ......................................... -- 1(b) 1
Preferred Stock, $0.001 par value, 2,000,000 shares
authorized, no shares issued and outstanding ........... -- -- --
Additional paid-in capital ................................ 999 (4,750)(c) 299,995,249
299,999,000 (a)
------------- -------------- -------------
Total stockholders' equity ........................... $ 1,000 $ 299,999,000 $ 300,000,000
============= ============== =============
</TABLE>
- - - ---------------------
(a) To reflect the receipt of the remainder of the $300,000,000 contribution
from PeopleSoft.
(b) To reflect the conversion of 1,000 shares of Momentum's Common Stock
held by PeopleSoft into 1,000 shares of Momentum Class B Common Stock.
(c) To reflect the issuance of 4,750,000 shares of Momentum Class A Stock to
the stockholders of PeopleSoft.
F-6
<PAGE> 60
PEOPLESOFT, INC.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
The following pro forma balance sheet should be read in conjunction with
the unaudited balance sheet and notes of PeopleSoft as of September 30, 1998
which are incorporated by reference from PeopleSoft's quarterly report on Form
10-Q. The pro forma balance sheet is presented to show the financial position of
PeopleSoft following the contribution of $300,000,000 to Momentum, the initial
purchase by PeopleSoft of 1,000 shares of Momentum Common Stock, and the
subsequent distribution of one share of Momentum Class A Common Stock for each
50 shares of PeopleSoft held.
<TABLE>
<CAPTION>
Pro Forma
Unadjusted Adjustments As Adjusted
----------- ---------- -----------
ASSETS (in thousands)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 474,905 $ (1)(a) $ 174,905
(299,999)(b)
Short term investments 150,974 150,974
Accounts receivable, net 351,612 351,612
Deferred income taxes 39,613 39,613
Other current assets 38,504 38,504
----------- ---------- -----------
Total current assets 1,055,608 (300,000) 755,608
Property and equipment, at cost 282,633 282,633
Less accumulated depreciation and amortization (112,236) (112,236)
----------- -----------
170,397 170,397
Investments 51,742 51,742
Investment in Momentum -- 1 (a) --
299,999 (b)
(300,000)(c)
Deferred income taxes 7,371 7,371
Capitalized software, less accumulated amortization 8,878 8,878
Other assets 12,110 12,110
----------- ---------- -----------
$ 1,306,106 $ (300,000) $ 1,006,106
=========== ========== ===========
</TABLE>
- - - -----------------------------
(a) To reflect the formation of Momentum and the initial purchase of 1,000
shares of Momentum Common Stock for $1,000.
(b) To reflect the balance of the $300 million contributed to Momentum prior
to the Distribution.
(c) To reflect the Distribution of Momentum Class A Common Stock to
PeopleSoft stockholders.
F-7
<PAGE> 61
PEOPLESOFT, INC.
PRO FORMA BALANCE SHEET
(CONTINUED)
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Unadjusted Adjustments As Adjusted
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands)
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 80,894 $ 80,894
Accrued compensation and related expenses 102,584 102,584
Income taxes payable 28,781 28,781
Deferred revenue 397,648 397,648
----------- -----------
Total current liabilities 609,907 609,907
Long term deferred revenue 58,537 58,537
Other long term liabilities 19,529 19,529
Stockholders' equity:
Common stock 2,502 2,502
Additional paid-in capital 303,767 303,767
Accumulated foreign currency translation adjustment (2,611) (2,611)
Retained earnings 314,475 $ (300,000)(c) 14,475
----------- ----------- -----------
618,133 (300,000) 318,133
----------- ----------- -----------
$ 1,306,106 $ (300,000) $ 1,006,106
=========== =========== ===========
</TABLE>
- - - -----------------------------
(c) To reflect the Distribution of Momentum Class A Common Stock to
PeopleSoft stockholders.
F-8
<PAGE> 62
EXHIBIT A
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
[Merrill Lynch Letterhead]
December ___, 1998
Board of Directors
PeopleSoft, Inc.
4460 Hacienda Drive
Pleasanton, CA 94588
Gentlemen:
You have advised us that PeopleSoft, Inc. ("PeopleSoft") intends to distribute
(the "Distribution") to its stockholders shares of Class A Common Stock (the
"Momentum Shares") of Momentum Business Applications, Inc. ("Momentum"). The
Distribution is described in detail in the prospectus (the "Prospectus"), filed
as part of a registration statement on Form S-1/S-3 (Reg. no. 333-__/333-__),
which is to be sent to PeopleSoft stockholders in connection with the
Distribution. You have asked us for our opinion as to whether or not, from a
financial point of view, the Distribution is fair to the stockholders of
PeopleSoft. Each capitalized term used but not defined herein shall have the
meaning ascribed thereto in the Prospectus.
In arriving at the opinion set forth below, we have, among other things:
- - - - reviewed the Prospectus including the following items as presented or referred
to therein: (i) the terms and conditions of the Distribution, (ii) the Marketing
Agreement, (iii) the Development Agreement, (iv) the Services Agreement, (v) the
Distribution Agreement and (vi) the Certificate of Incorporation of Momentum
including the Purchase Option;
- - - - conducted discussions with members of the senior management of PeopleSoft with
respect to the businesses and prospects of PeopleSoft and Momentum and the
strategic objectives of each;
- - - - conducted discussions concerning the Distribution with other representatives
and advisors of PeopleSoft, including its independent public accountants;
- - - - reviewed the financial and other information concerning PeopleSoft (with and
without Momentum) that was publicly available or furnished to us by PeopleSoft,
including information provided during discussions with the senior management of
PeopleSoft;
- - - - reviewed historical trading prices and volume of the Common Stock of
PeopleSoft (the "PeopleSoft Common Stock"); and
A-1
<PAGE> 63
- - - - reviewed such other financial studies and analyses and took into account such
other matters as we deemed necessary, including our assessment of general
economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available (including the
information contained in the Prospectus), and we have not assumed any
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of the assets or liabilities of
PeopleSoft (with or without Momentum) or been furnished with any such evaluation
or appraisal. In addition, we have not assumed any obligation to conduct, nor
have we conducted, any physical inspection of the properties or facilities of
PeopleSoft. With respect to the financial forecast information furnished to or
discussed with us by PeopleSoft, we have assumed it has been reasonably prepared
and reflects the best currently available estimates and judgment of PeopleSoft's
management as to the expected future financial performance of PeopleSoft and
Momentum.
We have also assumed that: (i) the Distribution will occur as described in the
Prospectus, and (ii) after the Distribution, Momentum will be accounted for as
an entity independent of PeopleSoft.
Our opinion is necessarily based upon market, economic and other conditions,
including but not limited to generally accepted accounting principles, as they
exist and can be evaluated on, and on the information made available to us as
of, the date hereof. It is further understood that this Opinion does not
consider any future changes to such conditions that may occur following the date
of this Opinion which may adversely affect PeopleSoft's ability to pursue its
financial and strategic objectives. We note that trading in the PeopleSoft
Common Stock and the Momentum Shares for a period following completion of the
Distribution may be characterized by a redistribution of the shares of the
PeopleSoft Common Stock and the Momentum Shares among existing PeopleSoft
stockholders and other investors and, accordingly, during such period, the
PeopleSoft Common Stock and the Momentum Shares may trade at prices below those
at which they would trade on a fully distributed basis. We are not expressing
any opinion herein as to the price at which the PeopleSoft Common Stock will
actually trade after the announcement date of the Distribution or the price at
which the Momentum Shares will actually trade after the Distribution. In
addition, this opinion does not address the valuation or future performance of
Momentum as an independent public company following the Distribution, nor does
it address the adequacy of defensive measures included (A) in the Certificate of
Incorporation (as amended or restated) or the Bylaws of Momentum with respect to
(i) the rights of the holders of Momentum Shares or (ii) the rights of
PeopleSoft as holder of shares of the Class B Common Stock of Momentum, or (B)
in the agreements between PeopleSoft and Momentum entered into in connection
with the Distribution. We express no opinion as to whether the funds contributed
by PeopleSoft to Momentum will be adequate to accomplish the objective of
successfully developing the intended software products.
We are acting as financial advisor to PeopleSoft in connection with the
Distribution and will receive a fee for our services, which fee is contingent
upon the consummation of the Distribution. In addition, PeopleSoft has agreed to
indemnify us for certain liabilities arising out of our engagement. We may
continue to provide financial advisory or financing services to PeopleSoft and
may receive fees for the rendering of such services. In addition, in the
ordinary course of our business, we may actively trade PeopleSoft common stock,
and we may, in the future trade Momentum Shares for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
A-2
<PAGE> 64
This opinion is for the use and benefit of the Board of Directors of PeopleSoft.
On the basis of and subject to the foregoing, as of the date hereof, it is our
opinion that, from a financial point of view, the Distribution is fair to the
stockholders of PeopleSoft. Our conclusions are based on information available
to us as of the date of this letter.
Very truly yours,
A-3
<PAGE> 65
================================================================================
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
4,750,000 SHARES
MOMENTUM BUSINESS APPLICATIONS, INC.
CLASS A COMMON STOCK
----------------------
PROSPECTUS
----------------------
DECEMBER __, 1998
================================================================================
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses incurred by
Momentum Business Applications, Inc. ("Momentum") and PeopleSoft, Inc.
("PeopleSoft") in connection with the distribution of the securities being
registered which will be paid by PeopleSoft. All amounts are estimated except
the SEC Registration Fee and the Nasdaq National Market Application Fee.
<TABLE>
<S> <C>
SEC Registration Fee....................................................... $ 83,400
Nasdaq National Market Application Fee..................................... $
Financial Advisory Fees and Expenses....................................... $
Blue Sky Qualification Fees and Expenses................................... $
Accounting Fees and Expenses............................................... $
Legal Fees and Expenses (including Blue Sky)............................... $
Transfer Agent and Registrar Fees.......................................... $
Printing and Engraving..................................................... $
Miscellaneous.............................................................. $
---------
Total...................................................................... $
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, both Momentum and
PeopleSoft have included in their Certificates of Incorporation a provision to
eliminate the personal liability of their directors for monetary damages for
breach or alleged breach of their fiduciary duties as directors, subject to
certain exceptions. In addition, the Bylaws of Momentum and PeopleSoft require
the companies to (i) indemnify their officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and (ii) advance expenses to their officers and
directors as incurred in connection with proceedings against them for which they
may be indemnified. Momentum and PeopleSoft have entered into indemnification
agreements with their officers and directors containing provisions that are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements may require
the companies, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms. Momentum
and PeopleSoft believe that its charter provisions and the indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
Momentum and PeopleSoft understand that the staff of the Securities and
Exchange Commission is of the opinion that statutory, charter and contractual
provisions as are described above have no effect on claims arising under the
federal securities laws.
II-1
<PAGE> 67
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In November 1998, Momentum sold 1,000 shares of its Common Stock to
PeopleSoft for an aggregate cash purchase price of $1,000 in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof. In connection with the Distribution contemplated by this
Registration Statement, the 1,000 shares of Momentum Common Stock held by
PeopleSoft will be converted into 1,000 shares of Momentum Class B Common Stock
in a transaction exempt from the registration requirements of the Securities Act
pursuant to Section 3(a)(9) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------------
<S> <C>
3.1* Certificate of Incorporation of Momentum
3.2* Bylaws of Momentum
3.3* Form of Restated Certificate of Incorporation of Momentum (to be
effective prior to the Distribution)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati as to legality of
Momentum Class A Common Stock
5.2* Opinion of Wilson Sonsini Goodrich & Rosati as to legality of
PeopleSoft Common Stock
8.1* Opinion of Wilson Sonsini Goodrich & Rosati as to tax matters
10.1* Form of Development and License Agreement between PeopleSoft and
Momentum
10.2* Form of Marketing and Distribution Agreement between PeopleSoft and
Momentum
10.3* Form of Services Agreement between PeopleSoft and Momentum
10.4* Form of Distribution Agreement between PeopleSoft and Momentum
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
23.4* Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
24.1 Power of Attorney (Reference is made to page II-5)
</TABLE>
- - - ----------------------
* To be filed by Amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrants, PeopleSoft and Momentum, each hereby
undertakes that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions set forth in Item 14 above,
or otherwise, the Registrant has been advised in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred, or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and the Registrant will be governed by the final adjudication of
such issue.
II-2
<PAGE> 68
PeopleSoft hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-3
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Momentum
Business Applications, Inc. has duly caused this Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Sonoma, State of California on November 10, 1998.
MOMENTUM BUSINESS APPLICATIONS, INC.
By: /s/ Aneel Bhusri
-------------------------------
Aneel Bhusri,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - --------------------------------- ---------------------------------- -----------------
<S> <C> <C>
/s/ Aneel Bhusri President, Chief Financial Officer, November 10, 1998
- - - --------------------------------- Secretary and Director (Principal
Aneel Bhusri Executive, Financial and Accounting
Officer)
</TABLE>
II-4
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
PeopleSoft, Inc. has duly caused this Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Pleasanton, State of California on November 10, 1998.
PEOPLESOFT, INC.
By: /s/ David A. Duffield
-------------------------------------
David A. Duffield
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Ronald E. F. Codd and Robert D. Finnell,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendment to
this Registration Statement on Form S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - --------------------------------- ---------------------------------- -----------------
<S> <C> <C>
/s/ David A. Duffield Chairman of the Board, President and November 10, 1998
- - - --------------------------------- Chief Executive Officer (Principal
David A. Duffield Executive Officer)
/s/ Ronald E. F. Codd Senior Vice President of Finance and November 10, 1998
- - - --------------------------------- Chief Financial Officer (Principal
Ronald E. F. Codd Financial Officer)
/s/ Alfred J. Castino Senior Vice President of Finance and November 10, 1998
- - - --------------------------------- Administration, Chief Accounting Officer
Alfred J. Castino and Corporate Controller (Principal
Accounting Officer)
</TABLE>
II-5
<PAGE> 71
<TABLE>
<S> <C> <C>
Director November __, 1998
- - - ---------------------------
Dr. Edgar F. Codd
/s/ Albert W. Duffield Director November 10, 1998
- - - ---------------------------
Albert W. Duffield
/s/ A. George Battle Director November 10, 1998
- - - ---------------------------
A. George "Skip" Battle
/s/ George J. Still, Jr. Director November 10, 1998
- - - ---------------------------
George J. Still, Jr.
/s/ Cyril J. Yansouni Director November 10, 1998
- - - ---------------------------
Cyril J. Yansouni
</TABLE>
II-6
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------------
<S> <C>
3.1* Certificate of Incorporation of Momentum
3.2* Bylaws of Momentum
3.3* Form of Restated Certificate of Incorporation of Momentum (to be
effective prior to the Distribution)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati as to legality of
Momentum Class A Common Stock
5.2* Opinion of Wilson Sonsini Goodrich & Rosati as to legality of
PeopleSoft Common Stock
8.1* Opinion of Wilson Sonsini Goodrich & Rosati as to tax matters
10.1* Form of Development and License Agreement between PeopleSoft and
Momentum
10.2* Form of Marketing and Distribution Agreement between PeopleSoft and
Momentum
10.3* Form of Services Agreement between PeopleSoft and Momentum
10.4* Form of Distribution Agreement between PeopleSoft and Momentum
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
23.4* Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
24.1 Power of Attorney (Reference is made to page II-5)
</TABLE>
- - - ----------------------
* To be filed by Amendment.
II-7
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated November 11, 1998 with respect to the balance
sheet of Momentum Business Applications, Inc. ("Momentum"), in the Registration
Statement (Form S-1) and related prospectus for the registration of 4,750,000
shares of Momentum Class A Common Stock.
We also consent to the incorporation by reference therein of our report
dated January 28, 1998, with respect to the consolidated financial statements of
PeopleSoft, Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, CA
November 16, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated November 11, 1998 with respect to the balance
sheet of Momentum Business Applications, Inc. in the Registration Statement
(Form S-3) of PeopleSoft, Inc. ("PeopleSoft") and related prospectus for the
registration of 4,000,000 shares of PeopleSoft Common Stock.
We also consent to the incorporation by reference therein of our report
dated January 28, 1998, with respect to the consolidated financial statements of
PeopleSoft included in its Annual Report (Form 10-K) for the year ended December
31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, CA
November 16, 1998
