CONFORMED COPY
As filed with the Securities and Exchange Commission on October 16, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PROPHET 21, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
23-2746447
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(I.R.S. Employer Identification No.)
19 West College Avenue, Yardley, Pennsylvania 19067
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(Address of Principal Executive Offices) (Zip Code)
1993 Stock Plan
August 1997 Options
1997 Employee Stock Purchase Plan
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(Full Title of the Plan)
Charles L. Boyle, III
President and Chief Executive Officer
Prophet 21, Inc.
19 West College Avenue, Yardley, Pennsylvania 19067
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(Name and Address of Agent For Service)
(215) 493-8900
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(Telephone Number, Including Area Code, of Agent For Service)
Copy to:
David J. Sorin, Esq.
John F. Cinque, Esq.
Buchanan Ingersoll
500 College Road East
Princeton, NJ 08540
(609) 987-6800
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================================================
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount Of
Title Of Securities To Be Offering Price Aggregate Registration
To Be Registered Registered(1) Per Share Offering Price Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share
Issued under the 1993 Stock Plan ...... 600,000 $ 5.95 (2) $ 3,570,000(2) $ 1,081.82
To be issued under the 1993 Stock
Plan ............................... 400,000 $ 13.4375 (3) $ 5,375,000(3) $ 1,628.79
Issued under the August 1997 Options 10,000 $ 5.375 (4) $ 53,750(4) $ 16.29
To be issued under the 1997 Employee
Stock Purchase Plan ................ 100,000 $ 13.4375 (3) $ 1,343,750(3) $ 407.20
- ----------------------------------------------------------------------------------------------------------------
TOTAL ............................ 1,110,000 $ 10,342,500 $ 3,134.10
================================================================================================================
</TABLE>
(1) For the sole purpose of calculating the registration fee, the number of
shares to be registered under this Registration Statement has been divided among
four subtotals.
(2) Pursuant to Rule 457(h), these prices are calculated based on the weighted
average exercise price of $5.95 per share covering 600,000 shares subject to
stock options granted under the 1993 Stock Plan.
(3) Pursuant to Rule 457(h) and Rule 457(c), these prices are estimated solely
for the purpose of calculating the registration fee and are based upon the
average of the high and low price per share of the Registrant's Common Stock as
reported on the Nasdaq National Market on October 13, 1997.
(4) Pursuant to Rule 457(h), these prices are calculated on an exercise price of
$5.375 per share covering 10,000 shares subject to the August 1997 Options.
---------------
<PAGE>
EXPLANATORY NOTE
----------------
This Registration Statement has been filed by Prophet 21, Inc. (the
"Company") in order to register an aggregate of 1,110,000 shares of Common Stock
as follows: (i) 1,000,000 shares of Common Stock issuable under the 1993 Stock
Plan (the "1993 Plan"); (ii) 100,000 shares of Common Stock issuable under the
1997 Employee Stock Purchase Plan (the "1997 Plan" and, collectively with the
1993 Plan, hereinafter referred to as the "Plans"); and (iii) 10,000 shares of
Common Stock issuable under certain options granted outside the Plans. On
September 4, 1997, the Board of Directors of the Company approved proposals to
(i) amend the 1993 Plan to increase the maximum number of shares of Common Stock
available for issuance under the 1993 Plan from 600,000 to 1,000,000 shares, and
(ii) adopt the 1997 Plan. The foregoing proposals have been submitted for a vote
by stockholders at the Company's Annual Meeting of Stockholders to be held on
October 23, 1997.
i
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The document(s) containing the information specified by Part I of this
Form S-8 will be sent or given to participants in the Plans listed on the cover
page of this Registration Statement as specified in Rule 428(b)(1) promulgated
by the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). Such document(s) are
not being filed with the Commission but constitute (taken together with the
documents incorporated by reference into this Registration Statement pursuant to
Item 3 of Part II hereof) a prospectus that meets the requirements of Section
10(a) (the "Section 10(a) Prospectus") of the Securities Act.
The Company will provide a written statement to each participant of the
Plans advising each such participant of the availability without charge, upon
written or oral request, of the documents referred to under Item 3 --
"Incorporation of Documents by Reference" which have been incorporated in the
Section 10(a) Prospectus by reference, along with any other documents required
to be delivered to employees pursuant to Rule 428(b) promulgated by the
Commission under the Securities Act. Whenever updating information is required,
the Company shall furnish promptly without charge to each participant in any of
the Plans, upon written or oral request, a copy of all documents containing the
applicable information regarding the Plans required by Part I that then
constitute part of the Section 10(a) Prospectus, although documents previously
furnished need not be re-delivered. Requests for such copies should be directed
to the Chief Financial Officer, Prophet 21, Inc., 19 West College Avenue,
Yardley, Pennsylvania 19067. Telephone requests may be directed to (215)
493-8900.
1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- --------------------------------------------------
The following documents which have been or will be filed with the
Commission are incorporated herein by reference and in the Section 10(a)
Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the year ended June 30,
1997 filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) All reports filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") since June 30, 1997.
(c) The description of the Company's Common Stock, $.01 par value, which
is contained in the Company's Registration Statement on Form 8-A filed pursuant
to Section 12(g) of the Exchange Act in the form declared effective by the
Commission on March 10, 1994 including any subsequent amendments or reports
filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference and to be a part hereof from the date of
the filing of such documents.
Item 4. Description of Securities.
- ------------------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
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Not applicable.
Item 6. Indemnification of Directors and Officers.
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Subsection (a) of Section 145 of the Delaware General Corporation Law
empowers a corporation to indemnify any person who was or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
II-1
<PAGE>
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsection (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that the
indemnification provided by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the scope
of indemnification extends to directors, officers, employees, or agents of a
constituent corporation absorbed in a consolidation or merger and persons
serving in that capacity at the request of the constituent corporation for
another. Section 145 also empowers the corporation to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.
Article IX of the Company's By-laws specifies that the Company shall
indemnify its directors, officers, employees and agents because he or she was or
is a director, officer, employee or agent of the Company or was or is serving at
the request of the Company as a director, officer, employee or agent of another
entity to the full extent that such right of indemnity is permitted by the laws
of the State of Delaware. This provision of the By-laws is deemed to be a
contract between the Company and each director and officer who serves in such
capacity at any time while such provision and the relevant provisions of the
Delaware General Corporation Law are in effect, and any repeal or modification
thereof shall not offset any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
The Company has executed indemnification agreements with each of its
officers and directors pursuant to which the Company has agreed to indemnify
such parties to the full extent permitted by law, subject to certain exceptions,
if such party becomes subject to an action because such party is a director,
officer, employee, agent or fiduciary of the Company.
II-2
<PAGE>
Section 102(b)(7) of the Delaware General Corporation Law enables a
corporation in its certificate of incorporation to limit the personal liability
of members of its board of directors for violation of a director's fiduciary
duty of care. This Section does not, however, limit the liability of a director
for breaching his duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, or from any transaction in
which the director derived an improper personal benefit. This Section also will
have no effect on claims arising under the federal securities laws. The Company
Certificate of Incorporation limits the liability of its directors as authorized
by Section 102(b)(7).
The Company has obtained liability insurance for the benefit of its
directors and officers which provides coverage for losses of directors and
officers for liabilities arising out of claims against such persons acting as
directors or officers of the Company (or any subsidiary thereof) due to any
breach of duty, neglect, error, misstatement, misleading statement, omission or
act done by such directors and officers, except as prohibited by law.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought
nor is the Company aware of any threatened litigation that may result in claims
for indemnification by any director or officer.
Item 7. Exemption from Registration Claimed.
- ----------------------------------------------
Not applicable.
Item 8. Exhibits.
- -------------------
Exhibit
Number Description
------- -----------
4.1 1993 Stock Plan (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (File Number 33-74276)
which became effective on March 10, 1994.)
4.2 1997 Employee Stock Purchase Plan.
4.3 Stock Option Agreement dated June 20, 1997 evidencing an option to
purchase 10,000 shares of the Company's Common Stock by Scott
Stevenson.
5 Opinion of Buchanan Ingersoll.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Buchanan Ingersoll (contained in the opinion filed as
Exhibit 5).
24 Power of Attorney (see "Power of Attorney" below).
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<PAGE>
Item 9. Undertakings.
- -----------------------
The undersigned Registrant 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, 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; and
(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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by 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 and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Yardley, State of Pennsylvania, on this 16th day of
October, 1997.
PROPHET 21, INC.
By: /s/ Charles L. Boyle, III
-------------------------
Charles L. Boyle, III.,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Charles L. Boyle, III and Thomas M.
Giuliani, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Charles L. Boyle, III President, Chief Executive October 16, 1997
- ------------------------ Officer and Director
Charles L. Boyle, III (Principal Executive Officer)
/s/Thomas M. Giuliani Chief Financial Officer and October 16, 1997
- --------------------- Treasurer (Principal
Thomas M. Giuliani Financial and Accounting
Officer)
/s/John E. Meggitt, Ph.D. Chairman of the Board and October 16, 1997
- ------------------------- Director
John E. Meggitt, Ph.D.
Secretary and Director October , 1997
- -------------------------
Dorothy M. Meggitt
/s/Louis J. Cissone Director October 16, 1997
- -------------------
Louis J. Cissone
/s/Mark A. Timmerman Director October 16, 1997
- --------------------
Mark A. Timmerman
II-6
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
Number Description Number
------ ----------- ------
4.1 1993 Stock Plan (Incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-1
(File Number 33-74276) which became effective on March
10, 1994.)
4.2 1997 Employee Stock Purchase Plan.
4.3 Stock Option Agreement dated June 20, 1997 evidencing an
option to purchase 10,000 shares of the Company's Common
Stock by Scott Stevenson.
5 Opinion of Buchanan Ingersoll.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Buchanan Ingersoll (contained in the opinion
filed as Exhibit 5).
24 Power of Attorney (included on signature page).
PROPHET 21, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
I. DEFINITIONS
--------------
"Account" means the Employee Stock Purchase Plan Account established for a
Participant under Section IX hereunder.
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Stock Purchase Plan Committee appointed and
acting in accordance with the terms of the Plan.
"Common Stock" shall mean shares of the Company's Common Stock, par value
$.01 per share, and any security into which such stock shall be converted or
shall become by reason of changes in its nature such as by way of
recapitalization, reclassification, changes in par value, merger, consolidation
or similar transaction.
"Company" shall mean Prophet 21, Inc., a Delaware corporation. When used
in the Plan with reference to employment, Company shall include Subsidiaries.
"Compensation" shall mean the total cash compensation paid to an Eligible
Employee by the Company, as reportable on IRS Form W-2. Notwithstanding the
foregoing, Compensation shall not include bonuses, overtime pay or commissions
based on sales.
"Effective Date" shall mean October 23, 1997.
"Eligible Employees" shall mean only those persons who, as of the first
day of a Purchase Period, are Employees of the Company and who are not, as of
the day preceding the first day of the Purchase Period, deemed for purposes of
Section 423(b)(3) of the Code to own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company.
"Employees" shall mean all persons who are employed by the Company as
common-law employees, excluding persons (i) whose customary employment is 20
hours or less per week, or (ii) whose customary employment is for not more than
five months in a calendar year.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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<PAGE>
"Exercise Date" shall mean the last day of a Purchase Period.
"Fair Market Value" shall mean as of any date: (i) the average of the
closing bid and asked prices on such date of the Common Stock as quoted by
Nasdaq; or (ii), as the case may be, the last reported sales price of the Common
Stock on such date as reported by the Nasdaq National Market or the principal
national securities exchange on which such stock is listed and traded, or in
each such case where there is no trading on such date, on the first previous
date on which there is such trading.
"Participant" shall mean an Eligible Employee who elects to participate in
the Plan under Section VII hereunder.
"Plan" shall mean the Prophet 21, Inc. 1997 Employee Stock Purchase Plan,
as set forth herein and as amended from time to time.
"Purchase Period" shall mean (a) for 1997, the period commencing on the
Effective Date and ending on January 1, 1998; and (b) thereafter, purchase
periods shall be annual, semi-annual or quarterly, in each case as elected by
the Committee not less than 60 days in advance of the commencement of such
period. A Purchase Period shall begin on the first business day of, and end on
the last business day of, each such calendar period. In the absence of any such
election, Purchase Periods subsequent to the first period shall be for one
calendar year. The last Purchase Period under the Plan shall terminate on or
before the date of termination of the Plan provided in Section XXIII.
"Subsidiary" shall mean any corporation which is a subsidiary of the
Company within the meaning of Section 425(f) of the Code.
"Termination of Service" shall mean the earliest of the following events
with respect to a Participant: his retirement, death, quit, discharge or
permanent separation from service with the Company.
The masculine gender includes the feminine, the singular number includes
the plural and the plural number includes the singular unless the context
otherwise requires.
II. PURPOSE
-----------
It is the purpose of this Plan to provide a means whereby Eligible
Employees may purchase Common Stock through payroll deductions. It is intended
to provide a further incentive for Employees to promote the best interests of
the Company and to encourage stock ownership by Employees in order to
participate in the Company's economic progress.
2
<PAGE>
It is the intention of the Company to have the Plan qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Code and
the provisions of the Plan shall be construed in a manner consistent with the
Code.
III. ADMINISTRATION
-------------------
The Plan shall be administered by a Committee selected by the Board of
Directors from among its members, which shall consist of not less than two
members. The Committee shall have authority to make rules and regulations for
the administration of the Plan, and its interpretation and decisions with regard
thereto shall be final and conclusive. The Committee shall have all necessary
authority to communicate, from time to time, with Eligible Employees and
Participants for purposes of administering the Plan, and shall notify Eligible
Employees promptly of its election of the term of each forthcoming Purchase
Period, if other than a calendar year, and of its election to utilize the Trust
Administration Option referred to in Section IX.
IV. SHARES
----------
There shall be 100,000 shares of Common Stock reserved for issuance to and
purchase by Participants under the Plan, subject to adjustment in accordance
with Section XXI hereof. The shares of Common Stock subject to the Plan shall be
either shares of authorized but unissued Common Stock or shares of Common Stock
reacquired by the Company. Shares of Common Stock involved in any unexercised
portion of any terminated option may again be subject to options to purchase
granted under the Plan.
V. PURCHASE PRICE
-----------------
The purchase price per share of the shares of Common Stock sold to
Participants under this Plan for any Purchase Period shall be the lesser of (a)
85% of the Fair Market Value of a share of Common Stock on the first day of such
Purchase Period, or (b) 85% of the Fair Market Value of a share of Common Stock
on the Exercise Date of such Purchase Period.
VI. GRANT OF OPTION TO PURCHASE SHARES
--------------------------------------
Each Eligible Employee shall be granted an option effective on the first
day of each Purchase Period to purchase a number of full shares of Common Stock
(subject to adjustment as provided in Section XXI). The maximum number of shares
an Eligible Employee shall be eligible to purchase for any Purchase Period is
$5,000 ($2,500 for a Purchase Period of six months or $1,250 for a Purchase
Period of three months) divided by 100% of the Fair Market Value of a share of
Common Stock on the first day of the Purchase Period.
3
<PAGE>
Anything herein to the contrary notwithstanding, if, as of the first day
of a Purchase Period, any Eligible Employee entitled to purchase shares
hereunder would be deemed for the purposes of Section 423(b)(3) of the Code to
own stock (including any number of shares which such person would be entitled to
purchase hereunder) possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company, the maximum number of shares which
such person shall be entitled to purchase pursuant to the Plan shall be reduced
to that number which when added to the number of shares of stock of the Company
which such person is so deemed to own (excluding any number of shares which such
person would be entitled to purchase hereunder), is one less than such 5%.
VII. ELECTION TO PARTICIPATE
----------------------------
An Eligible Employee may elect to become a Participant in this Plan by
completing a "Stock Purchase Agreement" form prior to the first day of the
Purchase Period. In the Stock Purchase Agreement, the Eligible Employee shall
authorize regular payroll deductions from his Compensation subject to the
limitations in Section VIII below. Options granted to Eligible Employees who
fail to authorize payroll deductions will automatically lapse. If a
Participant's payroll deductions allow him to purchase fewer than the maximum
number of shares of Common Stock to which his option entitles him, the option
with respect to the shares which he does not purchase will lapse as of the last
day of the Purchase Period.
The execution and delivery of the Stock Purchase Agreement as between the
Participant and the Company shall be conditioned upon the compliance by the
Company at such time with Federal (and any applicable state) securities laws.
VIII. PAYROLL DEDUCTIONS
------------------------
An Eligible Employee may authorize payroll deductions from his
Compensation for each payroll period of a specified percentage of such
Compensation, not less than 1% and not more than 10%, in multiples of 1/2%.
The amount of payroll deduction shall be established at the beginning of a
Purchase Period and may not be altered, except for complete discontinuance under
Section XI, XIII or XIV hereunder.
IX. EMPLOYEE STOCK PURCHASE ACCOUNT
AND TRUST ADMINISTRATION OPTION
-----------------------------------
An Employee Stock Purchase Account will be established for each
Participant in the Plan. Payroll deductions made under Section VIII will be
credited to the individual Accounts. In the event the Committee determines with
respect to any Purchase Period, not to utilize the "Trust Administration Option"
set forth in the next paragraph, no interest or other earnings will be credited
to a Participant's Account.
4
<PAGE>
With respect to any one or more Purchase Periods, the Committee may elect
to utilize, in addition to the separate accounting for payroll deductions
provided in the Plan, the option to administer the funding of the Accounts
through a trust established pursuant to a trust agreement between the Company
and an institution exercising fiduciary powers (the "Trust Administration
Option") as hereinafter set forth in this paragraph. The Company shall provide
for the funding of each Account on a regular basis during each Purchase Period
reflecting payroll deductions of Participants and shall cause such sums to be
deposited within 15 days following such deductions in a trust account at such
institution and upon such terms as are established by the Committee. The trust
account assets shall be invested in shares of a tax-exempt money-market
registered investment company designated in the trust agreement, which
designation shall not be changed during the Purchase Period. Assets deposited in
the aforesaid trust account shall be commingled, but a separate accounting shall
be kept for each Participant's interest therein. Each Participant shall be
credited with his allocable share of the earnings of the trust account, which
credits shall be reflected in each Participant's Account balance hereunder. At
all times, the funds in such trust account shall be considered the property of
the respective Participants, and no part of the trust account assets may at any
time revert to, or be subject to any lien or claim of, the Company; provided,
however, that such trust account assets may be used only for the purchase of
shares as provided in Section X hereof or for withdrawal by or return to
Participants (or their beneficiaries) as provided in Sections XI, XIII or XXIII
hereof.
X. PURCHASE OF SHARES
---------------------
If, as of any Exercise Date, there is credited to the Account of a
Participant an amount at least equal to the purchase price of one share of
Common Stock for the current Purchase Period, as determined in Section V, the
Participant shall buy and the Company shall sell at such price the largest
number of whole shares of Common Stock which can be purchased with the amount in
his Account.
Any balance remaining in a Participant's Account at the end of a Purchase
Period will be carried forward into the Participant's Account for the following
Purchase Period. In no event will the balance carried forward be equal to or
exceed the purchase price of one share of Common Stock as determined in Section
V above. Notwithstanding the foregoing provisions of this paragraph, if as of
any Exercise Date the provisions of Section XV are applicable to the Purchase
Period ending on such Exercise Date, and the Committee reduces the number of
shares which would otherwise be purchased by Participants on such Exercise Date,
the entire balance remaining credited to the Account of each Participant after
the purchase of the applicable number of shares of Common Stock on such Exercise
Date shall be refunded to each such Participant. Except with respect to a
Purchase Period for which the Trust Administration Option has been elected, no
refund of an Account balance made pursuant to the Plan shall include any amount
in respect of interest or other imputed earnings.
5
<PAGE>
Anything herein to the contrary notwithstanding, no Participant may, in
any calendar year, purchase a number of shares of Common Stock under this Plan
which, together with all other shares of stock of the Company and its
Subsidiaries which he may be entitled to purchase in such year under all other
employee stock purchase plans of the Company and its subsidiaries which meet the
requirements of Section 423(b) of the Code, have an aggregate Fair Market Value
(measured as of the first day of each applicable Purchase Period) in excess of
$5,000. The limitation described in the preceding sentence shall be applied in a
manner consistent with Section 423(b)(8) of the Code.
XI. WITHDRAWAL
--------------
A Participant may withdraw from the Plan at any time prior to the Exercise
Date of a Purchase Period by filing a notice of withdrawal. Upon a Participant's
withdrawal, the payroll deductions shall cease for the next payroll period and
the entire amount credited to his Account shall be refunded to him. Any
Participant who withdraws from the Plan may again become a Participant hereunder
at the start of the next Purchase Period in accordance with Section VII.
XII. ISSUANCE OF STOCK CERTIFICATES
-----------------------------------
The shares of Common Stock purchased by a Participant shall, for all
purposes, be deemed to have been issued and sold at the close of business on the
Exercise Date. Prior to that date, none of the rights or privileges of a
stockholder of the Company shall exist with respect to such shares. Stock
certificates shall be registered either in the Participant's name or jointly in
the names of the Participant and his spouse, as the Participant shall designate
in his Stock Purchase Agreement. Such designation may be changed at any time by
filing notice thereof. Certificates representing shares of purchased Common
Stock shall be delivered promptly to the Participant following issuance.
XIII. TERMINATION OF SERVICE
----------------------------
(a) Upon a Participant's Termination of Service for any reason other than
retirement or death, no payroll deduction may be made from any Compensation due
him as of the date of his Termination of Service and the entire balance credited
to his Account shall be automatically refunded to him.
(b) Upon a Participant's retirement from the Company after age 55, no
payroll deduction shall be made from any Compensation due him as of the date of
his retirement. Such a Participant may, prior to Retirement, elect:
(1) to have the entire amount credited to his Account as of the date of
his retirement refunded to him, or
6
<PAGE>
(2) to have the entire amount credited to his Account held therein and
utilized to purchase shares on the Exercise Date as provided in
Section X.
(c) Upon the death of a Participant, no payroll deduction shall be made
from any Compensation due him at time of death, and the entire balance in the
deceased Participant's Account shall be paid to the Participant's designated
beneficiary, or otherwise to his estate.
XIV. TEMPORARY LAYOFF, AUTHORIZED LEAVE
OF ABSENCE, DISABILITY
---------------------------------------
Payroll deductions shall cease during a period of absence without pay from
work due to a Participant's temporary layoff, authorized leave of absence,
disability or for any other reason. If such Participant shall return to active
service prior to the Exercise Date for the current Purchase Period, payroll
deductions shall be resumed in accordance with his prior authorization.
If the Participant shall not return to active service prior to the
Exercise Date for the current Purchase Period, the balance of his Stock Purchase
Account will be used to purchase shares on the Exercise Date as provided in
Section X, unless the Participant elects to withdraw from the Plan in accordance
with Section XI.
XV. PROCEDURE IF INSUFFICIENT SHARES AVAILABLE
----------------------------------------------
In the event that on any Exercise Date the aggregate funds available for
the purchase of shares of Common Stock pursuant to Section X hereof would result
in purchases of shares in excess of the number of shares of Common Stock then
available for purchase under the Plan, the Committee shall proportionately
reduce the number of shares which would otherwise be purchased by each
Participant on the Exercise Date in order to eliminate such excess, and the
provisions of the second paragraph of Section X shall apply.
XVI. RIGHTS NOT TRANSFERABLE
----------------------------
The right to purchase shares of Common Stock under this Plan is
exercisable only by the Participant during his lifetime and is not transferable
by him. If a Participant attempts to transfer his right to purchase shares under
the Plan, he shall be deemed to have requested withdrawal from the Plan and the
provisions of Section XI hereof shall apply with respect to such Participant.
XVII. NO OBLIGATION TO EXERCISE OPTION
--------------------------------------
Granting of an option under this Plan shall impose no obligation on an
Eligible Employee to exercise such option.
7
<PAGE>
XVIII. NO GUARANTEE OF CONTINUED EMPLOYMENT
-------------------------------------------
Granting of an option under this Plan shall imply no right of continued
employment with the Company for any Eligible Employee.
XIX. NOTICE
-----------
Any notice which an Eligible Employee or Participant files pursuant to
this Plan shall be in writing and shall be delivered personally or by mail
addressed to the Committee, c/o Chief Executive Officer at 19 West College
Avenue, Yardley, Pennsylvania 19067, or such other person or location as may be
specified by the Committee.
XX. REPURCHASE OF STOCK
-----------------------
The Company shall not be required to repurchase from any Participant
shares of Common Stock acquired under this Plan.
XXI. ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
--------------------------------------------------
The aggregate number of shares of Common Stock which may be purchased
pursuant to options granted hereunder, the number of shares of Common Stock
covered by each outstanding option, and the purchase price thereof for each such
option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a stock split or
other subdivision or consolidation of shares of Common Stock or for other
capital adjustments or payments of stock dividends or distributions or other
increases or decreases in the outstanding shares of Common Stock affected
without receipt of consideration of the Company.
Subject to any required action by the stockholders, if the Company shall
be the surviving corporation in any merger, reorganization or other business
combination, any option granted hereunder shall cover the securities or other
property to which a holder of the number of shares of Common Stock would have
been entitled pursuant to the terms of the merger. A dissolution or liquidation
of the Company or a merger or consolidation in which the Company is not the
surviving entity shall cause every option outstanding hereunder to terminate.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any such
adjustment shall provide for the elimination of any fractional share which might
otherwise become subject to an option.
8
<PAGE>
XXII. AMENDMENT OF THE PLAN
---------------------------
The Board of Directors may, without the consent of the Participants, amend
the Plan at any time, provided that no such action shall adversely affect
options theretofore granted hereunder, and provided that no such action by the
Board of Directors, without approval of the Company's stockholders, may:
(a) increase the total number of shares of Common Stock which may be
purchased by all Participants, except as contemplated in Section XXI;
(b) change the class of Employees eligible to receive options under the
Plan;
(c) decrease the minimum purchase price under Section V;
(d) extend a Purchase Period hereunder; or
(e) extend the term of the Plan.
XXIII. TERM OF THE PLAN
-----------------------
This Plan shall become effective as of the Effective Date upon its
adoption by the Board of Directors, provided that it is approved at a duly-held
meeting of stockholders of the Company, by an affirmative majority of the total
votes present and voting thereat, within 12 months after the earlier of the
Effective Date or the date of adoption by the Board of Directors. If the Plan is
not so approved, no Common Stock shall be purchased under the Plan and the
balance of each Participant's Account shall be promptly returned to the
Participant. The Plan shall continue in effect through the December 31st
following the fourth anniversary of the Effective Date, unless terminated prior
thereto pursuant to Section XV or XXI hereof, or pursuant to the next succeeding
sentence. The Board of Directors shall have the right to terminate the Plan at
any time, effective as of the next succeeding Exercise Date. In the event of the
expiration of the Plan or its termination, outstanding options shall not be
affected, except to the extent provided in Section XV and any remaining balance
credited to the Account of each Participant as of the applicable Exercise Date
shall be refunded to each such Participant.
9
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
Prophet 21, Inc., a Delaware corporation (the "Company"), hereby grants to
Scott Stevenson (the "Optionee") an Option to purchase a total of 10,000 shares
(the "Shares") of Common Stock of the Company, $0.01 par value (the "Common
Stock"), at the exercise price set forth herein.
1. Nature of the Option. This Option is a Nonstatutory Stock Option and
is not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $5.375 for each share of Common
Stock, which price is not less than the fair market value per share of Common
Stock on the date of grant.
3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the following:
(i) Right to Exercise.
(a) Subject to subsections 3(i)(b), (c) and (d) below, the
shares subject to this Option shall become exercisable to the extent of
one-third of the options on each of the first, second and third anniversaries of
the date of grant.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In the event of Optionee's death, the exercisability of
the option is governed by Section 7 below, subject to the limitations contained
in subsection 3(i)(d) hereof.
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 9 below.
(ii) Method of Exercise. This Option shall be exercisable by written
notice in the form attached as Exhibit A, which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company. Such written notice shall be signed by Optionee and
shall be delivered in person or by certified mail to the Chief Executive Officer
or Chief Financial Officer of the Company. The written notice shall be
accompanied by payment of the exercise price.
<PAGE>
This Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the exercise price. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the shares of stock underlying this
Option, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the Option.
No shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
4. Investment Representations; Restrictions on Transfer.
By receipt of this Option, by its execution and by its exercise in
whole or in part, Optionee represents to the Company the following:
(a) Optionee understands that this Option and any Shares
purchased upon its exercise are securities, the issuance of which requires
compliance with federal and state securities laws.
(b) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities. Optionee
is acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(c) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Optionee further acknowledges
and understands that the Company is under no obligation to register the
securities. Optionee understands that the certificate evidencing the securities
will be imprinted with a legend which prohibits the transfer of the securities
unless they are registered or such registration is not required in the opinion
of counsel satisfactory to the Company and any other legend required under
applicable state securities laws.
(d) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will
- 2 -
<PAGE>
be exempt from registration under the Securities Act. In the event the Company
later becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three-month period not exceeding the
limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company; (2) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and (3) in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
5. Method of Payment. Payment of the purchase price shall be made by cash
or check.
6. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations (Regulation G) as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Death of Optionee. In the event of the death of Optionee this Option
may be exercised, at any time within six (6) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 9 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had Optionee continued
living.
8. Non-Transferability of Option. This Option may not be transferred in
any manner other than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of Optionee.
- 3 -
<PAGE>
9. Term of Option. Notwithstanding any provision herein to the contrary,
this Option may not be exercised after the close of business (New York, New York
EST) on [ , 2007] (the "Termination Date"), and may be exercised from the date
hereof until the Termination Date only in accordance with the terms of this
Option.
10. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, Optionee will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the Shares over the
exercise price. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the option will be treated as capital gain or loss.
11. Tax Consequences. The Optionee understands that any of the foregoing
references to taxation are based on federal income tax laws and regulations now
in effect. The Optionee has reviewed with the Optionee's own tax advisors the
federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement. The Optionee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents. The Optionee understands that the Optionee (and not the Company) shall
be responsible for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement.
DATE OF GRANT:
June 20, 1997
Prophet 21, Inc.
By: /s/ Charles L. Boyle, III
-------------------------
Charles L. Boyle, III, President and
Chief Executive Officer
- 4 -
<PAGE>
Optionee has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board of Directors of the Company upon any questions
arising under this Option. Optionee further agrees to notify the Company upon
any change in the residence address indicated below.
Dated:
--------------------
/s/ Scott P. Stevenson
-------------------------------------
Name:
Residence Address:
18145 Evener Way
-------------------------------------
Eden Prairie, MN 66348
-------------------------------------
-------------------------------------
Social Security No. ###-##-####
-----------------
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
TO:
FROM:
DATE:
RE: Exercise of Stock Option
I hereby exercise my option to purchase shares of Common Stock
at $5.375 per share (total exercise price of $ ), effective today's date.
This notice is given in accordance with the terms of my Stock Option Agreement
dated , 1997. The option price and vested amount is in accordance with Sections
2 and 3 of the Stock Option Agreement.
Attached is a check payable to Prophet 21, Inc. for the total exercise
price of the shares being purchased. The undersigned confirms the
representations made in Section 4 of the Stock Option Agreement.
Please prepare the stock certificate in the following name(s):
------------------------------
------------------------------
If the stock is to be registered in a name other than your name, please so
advise the Company. The Stock Option Agreement requires the Company's approval
for registration in a name other than your name and requires certain agreements
from any joint owner.
Sincerely,
--------------------------------------
(Signature)
--------------------------------------
(Print or Type Name)
Letter and consideration
received on , 19 .
---------- ---
By:
-----------------------------
BUCHANAN INGERSOLL
Attorneys
500 College Road East
Princeton, New Jersey 08540
October 16, 1997
Prophet 21, Inc.
19 West College Avenue
Yardley, Pennsylvania 19067
Gentlemen:
We have acted as counsel to Prophet 21, Inc., a Delaware corporation (the
"Company"), in connection with the filing by the Company of a registration
statement on Form S-8 (the "Registration Statement"), under the Securities Act
of 1933, as amended, relating to the registration of an aggregate of 1,110,000
shares (the "Shares") of the Company's common stock, $.01 par value, of which:
(i) 1,000,000 shares of Common Stock are to be offered by the Company to its
employees and consultants under the 1993 Stock Plan (the "1993 Plan"); (ii)
100,000 shares of Common Stock are to be offered by the Company to its employees
under the 1997 Employee Stock Purchase Plan (the "1997 Plan" and, collectively
with the 1993 Plan, hereinafter referred to as the "Option Plans"); and (iii)
10,000 shares of Common Stock which underlie certain options granted outside the
Option Plans (the "Compensatory Contract"). The Option Plans and the
Compensatory Contract are referred to herein as the "Plans."
In connection with the Registration Statement, we have examined such
corporate records and documents, other documents, and such questions of law
as we have deemed necessary or appropriate for purposes of this opinion. On
the basis of such examination, it is our opinion that:
1. The issuance of the Shares has been duly and validly authorized;
and
2. The Shares underlying the Plans, when issued, delivered and sold in
accordance with the terms of the Plans and the stock options, or
other instruments authorized by such Plans, granted or to be granted
thereunder, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/BUCHANAN INGERSOLL
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Prophet 21, Inc.
We consent to the incorporation by reference in the registration statement of
Prophet 21, Inc. on Form S-8 of our report dated August 22, 1997, and on our
audits of the consolidated financial statements and financial statement schedule
of Prophet 21, Inc. as of June 30, 1997 and 1996, and for the years ended June
30, 1997, 1996 and 1995, which report is included in the Annual Report on Form
10-K of Prophet 21, Inc. for the year ended June 30, 1997.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 13, 1997
