As filed with the Securities and Exchange Commission on October 16, 2000
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MICROMUSE INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-3288385
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
139 Townsend Street
San Francisco, CA 94107
(415) 538-9090
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Stephen A. Allott
President and Chief Financial Officer
Micromuse Inc.
139 Townsend Street
San Francisco, CA 94107
(415) 538-9090
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
The Commission is requested to send copies of all communications to:
William A. Myers, Esq.
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
(212) 581-1600
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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 a 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. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Title of each Maximum
class of Offering Proposed Maximum Amount of
Securities to be Amount to be Price per Aggregate Registration
Registered Registered Security(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 142,850 shares $160.40 $22,913,140 $6,049.07
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(1) The price of $160.40 per share, which was the average of the high and low
prices of the Common Stock on the Nasdaq National Market on October 12,
2000 is set forth solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) of the Securities Act of 1933, as
amended.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion. Dated October 16, 2000
PROSPECTUS
[Micromuse Logo]
142,850 Shares of Common Stock
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This Prospectus relates to the public offering, which is not being
underwritten, of 142,850 shares of our Common Stock, which are held by some of
our current stockholders.
The prices at which such stockholders may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"MUSE." On October 13, 2000, the last reported sale price for the common stock
was $171.42 per share.
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An investment in the Common Stock involves a high degree of risk. Please see
"Risk Factors" beginning on page 4.
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Neither the Securities and Exchange Commission nor any other regulation body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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The date of this prospectus is __________, 2000
<PAGE>
TABLE OF CONTENTS
Page
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Micromuse Inc. ............................................................ 1
Risk Factors .............................................................. 4
Information Regarding Forward-Looking Statements .......................... 17
Use of Proceeds ........................................................... 17
Dilution .................................................................. 17
Plan of Distribution ...................................................... 18
Selling Stockholders ...................................................... 19
Where You Can Find More Information ....................................... 21
Incorporation by Reference ................................................ 21
Legal Matters ............................................................. 22
Experts ................................................................... 22
<PAGE>
MICROMUSE INC.
Micromuse develops, markets and supports a family of scalable, highly
configurable, rapidly deployable software solutions that enable fault and
service level management -- the effective monitoring and management of multiple
elements underlying an information technology infrastructure, including network
devices, computing systems and applications, and the mapping of these elements
to the business services they impact. Our Netcool(R) product suite collects,
normalizes and consolidates high volumes of event information from heterogeneous
network management environments into an active database that de-duplicates and
correlates the resulting data in real-time, and then rapidly distributes
graphical views of the information to operators and administrators responsible
for monitoring service levels. Netcool's unique architecture allows for the
rapid, programmer-less association of devices and specific attributes of those
devices to the business services they impact. This readily enables
administrators to create and modify their service views during systems
operations to monitor particular business services, rapidly identify which users
are affected by which network faults, pinpoint sources of network problems,
automate operator responses, facilitate problem resolution and report on the
results. We market and distribute to customers through our own sales force,
OEMs, value-added resellers and systems integrators. We have distribution
agreements with Cisco Systems, CTC (Itochu), Datacraft, Ericsson Data Services,
Lucent Technologies, N.E.T., Unisphere (Siemens), and Vanstar. As of September
30, 2000, we had over 600 customers operating in and serving a variety of
industries. Customers include AirTouch, AT&T, BT, Cable &Wireless, Cellular One,
Charles Schwab, Deutsche Telekom, GEIS, GTE, ICG Communications, ITC^DeltaCom,
JC Penney, MCI Worldcom, MindSpring Enterprises and a number of financial
investment concerns.
Our principal executive offices are located at 139 Townsend Street, San
Francisco, California 94107 and our telephone number is (415) 538-9090.
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks below, together with the other information
contained in this prospectus, before you decide to buy our common stock. If any
of the following risks occur, our business, results of operations and financial
condition could be harmed, the trading price of our common stock could decline,
and you could lose all or part of your investment.
RISK FACTORS
Because we have a limited operating history in a dynamic market, it is
difficult to predict our future operating results.
Because we have a limited operating history, it is difficult to predict
our future operating results. We first shipped our Netcool/OMNIbus product in
January of 1995 and therefore have a limited operating history of developing and
providing service level management software. Our limited operating history and
rapidly changing product development, installation, maintenance and market
dynamics make the prediction of future results of operations difficult. Our
prospects must be considered in light of the risks, costs and difficulties
frequently encountered by emerging companies, particularly companies in the
competitive software industry. We intend to increase our operating expenses to
hire experienced senior managers, develop new distribution channels, increase
our sales and marketing efforts, implement and improve operational, financial
and management information systems, broaden technical services and customer
support capabilities, fund higher levels of research and development and expand
administrative resources in anticipation of future growth. Our operating results
will be harmed if these increased expenditures do not result in increased
revenues.
Our operating results may vary from quarter to quarter, causing our stock
price to fluctuate.
Our quarterly revenues and operating results in business segments that we
track fluctuate and are difficult to predict. It is possible that in some
quarter or quarters our operating results will be below the expectations of
public market analysts or investors. In such event, or in the event adverse
conditions prevail, or are perceived to prevail, with respect to our business or
financial markets generally, the market price of our common stock may decline
significantly.
We realize a significant portion of our license revenues in the last month
of a quarter, frequently in the last weeks or even days of a quarter. As a
result, license revenues in any quarter are difficult to forecast because it is
substantially dependent on orders booked and shipped in that quarter. Moreover,
our sales cycle, from initial evaluation to delivery of software, varies
substantially from customer to customer. Further, we base our expense levels in
part on forecasts of future orders and sales, which are extremely difficult to
predict. A substantial portion of our operating expenses is related to
personnel, facilities, and sales and marketing programs. The level of spending
for such expenses cannot be adjusted quickly and is, therefore, relatively fixed
in the short term. Accordingly, our operating results will be harmed if revenues
fall below our expectations in a particular quarter. In addition, the number and
timing of large individual sales has been difficult for us to predict, and large
individual sales have, in some cases, occurred in quarters subsequent to those
we anticipated, or have not occurred at all. The loss or deferral of one or more
significant sales in a quarter could harm our operating results.
Because of these fluctuations we believe that quarter-to-quarter
comparisons of our operating results are not necessarily meaningful or
indicative of our future performance. A number of other factors are likely to
cause these variations, including:
o changes in the demand for our software products and services and the
level of product and price competition that we encounter;
o the timing of new hires and our ability to attract, retain and
motivate qualified personnel, including changes in our sales
incentives;
o the mix of products and services sold, including the mix of sales to
new and existing customers and through third-party distributors and
our direct sales force;
o changes in the mix of, and lack of demand from, distribution
channels through which our products are sold;
o the length of our sales cycles and the success of our new customer
generation activities;
o spending patterns and budgetary resources of our customers on
network management software solutions;
o product life-cycles and the timing of introductions or enhancements
of products, or delays in the introductions or enhancements of our
products and those of our competitors;
o market acceptance of new products;
o changes in the renewal rate of support agreements;
o seasonal variation in revenues because a disproportionate amount of
our annual revenues have historically been generated by sales of our
products during our fourth fiscal quarter and this trend may or may
not continue;
o expansion of international operations, including gains and losses on
the conversion to United States dollars of accounts receivable and
accounts payable arising from international operations and the mix
of international and domestic revenue;
o the extent of market consolidation; and
o software defects and other product quality problems.
Failure to manage our growth may adversely affect our business.
We have grown rapidly, adding customers, personnel and expanding the scope
and geographic area of our operations. Our growth has resulted in new and
increased responsibilities for our management personnel and has placed and will
continue to place a significant strain upon our management and our operating and
financial systems and resources. We have grown from 321 employees on September
30, 1999 to approximately 500 employees on June 30, 2000 and currently plan to
recruit more staff.
Failure to improve our infrastructure may adversely affect our business.
We need to continue to implement and improve a variety of operational,
financial and management information systems, procedures and controls. In
particular, we need to improve our accounting and financial reporting systems,
which currently require substantial management effort, and to successfully
manage an increasing number of relationships with customers, suppliers and
employees. These demands require the addition of new management personnel, and
we are currently in the process of recruiting individuals to fill important
management positions. Further, we need to continue to develop a U.S.-based
financial and accounting system. Our business will be harmed if we are unable to
recruit and retain these key personnel, if our current and future executive
officers do not operate effectively, both independently and as a group, or if we
fail to implement improved operational, financial and management systems.
We need to continue to expand and improve the productivity of our sales
force and our technical services and customer support organization.
We need to continue to hire additional sales personnel. Based on our
experience, such personnel are in high demand, are difficult to recruit and
retain and require nine months, or longer, to become fully productive. Although
we increased the size of our sales organization during fiscal 1999, we
experienced difficulty in recruiting a sufficient number of qualified sales
personnel during the period. Our business will be harmed if we are unable to
recruit additional sales personnel or increase the productivity of our current
sales personnel. Further, because of the recent expansion of the installed base
of Netcool/OMNIbus(TM) and the release of our Netcool/Reporter(TM),
Netcool/Internet Service Monitors(TM), Netcool/FireWall-1(TM),
Netcool/Fusion(TM), Netcool/NTSM(TM), and Netcool/Impact(TM), and
Netcool/Wave(TM) and other software products, the
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demands on our technical services and customer support resources have grown
rapidly. We need to significantly expand our technical services and customer
support organizations and similar third-party capabilities if we are to achieve
significant additional revenue growth. Competition for additional qualified
technical personnel to perform the required functions is intense and such
personnel may not be available. If our technical services and customer support
resources are insufficient to support our growth our business will be harmed.
We need to continue to expand our distribution channels and retain our
existing third-party distributors.
We need to continue to develop relationships with leading network
equipment and telecommunications providers and to expand our third-party channel
of distribution. We are currently investing, and plan to continue to invest,
significant resources to develop these relationships and channels of
distribution, which could reduce our ability to generate profits. Third-party
distributors accounted for approximately 35%, 36% and 26% of our total revenues
in the nine months ended June 30, 2000, fiscal 1999 and 1998, respectively. Our
business will be harmed if we are not able to attract additional distributors
that market our products effectively. Further, many of our agreements with
third-party distributors are nonexclusive, and many of the companies with which
we have agreements also have similar agreements with our competitors or
potential competitors. Our third-party distributors have significantly greater
sales and marketing resources than we do, and their sales and marketing efforts
may conflict with our direct sales efforts. In addition, although sales through
third-party distributors result in reduced sales and marketing expense with
respect to such sales, we sell our products to third-party distributors at
reduced prices, resulting in lower gross margins on such third-party sales. We
believe that our success in penetrating markets for our fault and service level
management applications depends substantially on our ability to maintain our
current distribution relationships, in particular, those with Cisco Systems,
Lucent Technologies, Unisphere (Siemens) and others. Our business will be harmed
if network equipment and telecommunications providers and distributors
discontinue their relationships with us, compete directly with us or form
additional competing arrangements with our competitors.
We are dependent on the market for software designed for use with advanced
communications services, and the size of this market is unproven.
The market for our products is in an early stage of development and is
very dynamic. Although the rapid expansion and increasing complexity of computer
networks in recent years and the resulting emergence of service level agreements
has increased the demand for fault and service level management software
products, the awareness of and the need for such products is a recent
development. Because the market for these products is only beginning to develop,
it is difficult to assess the size of this market, the appropriate features and
prices for products to address this market, the optimal distribution strategy
and the competitive environment that will develop.
We are substantially dependent upon telecommunications carriers and
internet service providers continuing to purchase our products.
Telecommunications carriers, including internet service providers, that
deliver advanced communications services to their customers have accounted for
approximately 82%, 79% and 68% of our total revenues in the nine months ended
June 30, 2000, fiscal 1999 and 1998, respectively. In addition, these providers
are the central focus of our sales strategy. If these customers cease to deploy
advanced communications services for any reason, the market for our products
will be harmed. Also, delays in the introduction of advanced services, such as
network management outsourcing, or the failure of such services to gain
widespread market acceptance or the decision of telecommunications carriers and
other service providers not to use our products in the deployment of these
services would harm our business.
We face intense competition, including from larger competitors with
greater resources than our own, which could result in our losing market share or
experiencing a decline in gross margins.
We face intense competition in our markets. As we enter new markets, we
encounter additional, market-specific competitors. In addition, because the
software market has relatively low barriers to entry, we are aware of new and
potential entrants in portions of our market space. Increased competition is
likely to result in price reductions and may result in reduced gross margins and
loss of market share.
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Further, many of our competitors have longer operating histories and have
significantly greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base, than
we do. As a result, they may be able to devote greater resources to the
development, promotion, sale and support of their products or to respond more
quickly to new or emerging technologies and changes in customer requirements
than we can. Existing competitors could also increase their market share by
bundling products having functionality offered by our products with their
current applications. Moreover, our current and potential competitors may
increase their share of the fault and service level management market by
strategic alliances and/or the acquisition of competing companies. In addition,
network operating system vendors could introduce new or upgrade and extend
existing operating systems or environments that include functionality offered by
our products, which could render our products obsolete and unmarketable.
Our current and prospective competitors offer a variety of solutions to
address the fault and service level and enterprise network management markets
and generally fall within the following five categories:
o customer's internal design and development organizations that
produce service level management and network management applications
for their particular needs, in some cases using multiple instances
of products from hardware and software vendors such as Compaq, Sun
Microsystems, Inc., Hewlett-Packard Company and Cabletron Systems,
Inc.;
o vendors of network and systems management frameworks including
Computer Associates International, Inc. and International Business
Machines Corporation;
o vendors of network and systems management applications including
Hewlett-Packard Company, BMC Software, Inc, Sun Microsystems, Inc.
and International Business Machines Corporation;
o providers of specific market applications; and
o systems integrators serving the telecommunications industry which
primarily provide programming services to develop customer specific
applications including TCSI Corporation (formerly Teknekron
Communications Systems, Inc.) and Objective Systems Integrators,
Inc.
Many of our existing and potential customers and distributors continuously
evaluate whether to design and develop their own network operations support and
management applications or purchase them from outside vendors. Sometimes these
customers internally design and develop their own software solutions for their
particular needs and therefore may be reluctant to purchase products offered by
independent vendors such as ours. As a result, we must continuously educate
existing and prospective customers as to the advantages of our products versus
internally developed network operations support and management applications.
If we ship products that contain defects, the market acceptance or our
products and our reputation will be harmed, and our customers could seek to
recover their damages from us.
If we ship products that contain defects, the market acceptance or our
products and our reputation will be harmed, and our customers could seek to
recover their damages from us. Complex software products frequently contain
errors or defects, especially when first introduced or when new versions or
enhancements are released. Despite our extensive product testing, we have in the
past released versions of Netcool/OMNIbus with defects and have discovered
software errors in certain of our products after their introduction. For
example, version 3.0 of Netcool/OMNIbus, released in 1996, had a number of
material defects. Version 1.0 of Netcool/Reporter, released in 1998, had
features and performance characteristics that limited market acceptance. A
significant portion of our technical personnel resources were required to
address these defects. Because of these defects, we could continue to experience
delays in or failure of market acceptance of products, or damage to our
reputation or relationships with our customers. Any defects and errors in new
versions or enhancements of our products after commencement of commercial
shipments would harm our business.
In addition, because our products are used to monitor and address network
problems and avoid failures of the network to support critical business
functions, any design defects, software errors, misuse of our products,
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incorrect data from network elements or other potential problems within or out
of our control that may arise from the use of our products could result in
financial or other damages to our customers. Our customers could seek to have us
pay for these losses. Although we maintain product liability insurance, it may
not be adequate. Further, although our license agreements with our customers
typically contain provisions designed to limit our exposure to potential claims
as well as any liabilities arising from such claims, such provisions may not
effectively protect us against such claims and the liability and costs
associated therewith.
The sales cycle for our software products is long, and the delay or
failure to complete one or more large license transactions in a quarter could
cause our operating results to fall below our expectations.
The sales cycle for our software products can be as long as three to nine
months, and our delay or failure to complete one or more large license
transactions in a quarter could harm our operating results. Our software is
generally used for division-wide or enterprise-wide, business-critical purposes
and involves significant capital commitments by customers. Potential customers
generally commit significant resources to an evaluation of available enterprise
software and require us to expend substantial time, effort and money educating
them about the value of our solutions. Licensing of our software products often
require an extensive sales effort throughout a customer's organization because
decisions to license such software generally involve the evaluation of the
software by a significant number of customer personnel in various functional and
geographic areas, each often having specific and conflicting requirements. A
variety of factors, including actions by competitors and other factors over
which we have little or no control, may cause potential customers to favor a
particular supplier or to delay or forego a purchase.
We depend on our key personnel, and the loss of any of our key personnel
could harm our business.
Our success is substantially dependent upon a limited number of key
management, sales, product development, technical services and customer support
personnel. The loss of the services of one or more of such key employees could
harm our business. We do not generally have employment contracts with key
personnel. In addition, we are dependent upon our continuing ability to attract,
train and retain additional highly qualified management, sales, product
development, technical services and customer support personnel. We have at times
and continue to experience difficulty in recruiting qualified personnel. Because
we face intense competition in our recruiting activities, we may be unable to
attract and/or retain qualified personnel.
We have acquired other businesses and we may make additional acquisitions
in the future, which will complicate our management tasks and could result in
substantial expenditures.
We have acquired other businesses and we may make additional acquisitions
in the future, which will complicate our management tasks and could result in
substantial expenditures. For example, on November 2, 1999, we entered into and
on December 26, 1999 we completed an agreement to acquire Calvin Alexander
Networking, Inc., a developer of network auto-discovery software. On June 21,
2000 and July 18, 2000, the Company entered into and subsequently completed,
respectively, an agreement to acquire all of the outstanding common and
preferred shares of NetOps Corp., a maker of network diagnostic software.
Because of these acquisitions, we will need to integrate distinct products,
customers and corporate cultures into our own. These past and potential future
acquisitions create numerous risks for us, including:
o failure to successfully assimilate acquired operations and products;
o diversion of our management's attention from other matters;
o loss of key employees of acquired companies;
o substantial transaction costs;
o substantial liabilities or exposures in the acquired entity that
were not known or accurately evaluated or forecast by us; and
o substantial additional costs charged to operations as a result of
the failure to consummate a potential acquisition.
Further, some of the products we acquire would require significant
additional development before they can be marketed and may not generate revenue
at levels we anticipate. Moreover, our future acquisitions, if any, may result
in issuances of our equity securities which dilute our stockholders, the
incurrence of debt, large one-time
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write-offs and creation of goodwill or other intangible assets that could result
in amortization expense. It is possible that our efforts to consummate or
integrate acquisitions will not be successful, which would harm our business.
We have relied and expect to continue to rely on a limited number of
products for a significant portion of our revenues.
All of our revenues have been derived from licenses for our Netcool family
of products and related maintenance, training and consulting services. We
currently expect that Netcool/OMNIbus-related revenues will continue to account
for a substantial percentage of our revenues beyond fiscal 2000 and for the
foreseeable future thereafter. Although we have introduced Netcool/Reporter,
Netcool/Internet Service Monitors, Netcool/FireWall-1, Netcool/Fusion,
Netcool/NTSM, Netcool/Impact, Netcool/Wave and other products our future
operating results, particularly in the near term, are significantly dependent
upon the continued market acceptance of Netcool/OMNIbus, improvements to
Netcool/OMNIbus and new and enhanced Netcool/OMNIbus applications. Our business
will be harmed if Netcool/OMNIbus does not continue to achieve market acceptance
or if we fail to develop and market improvements to Netcool/OMNIbus or new or
enhanced products. The life cycles of Netcool/OMNIbus, including the
Netcool/OMNIbus applications, are difficult to estimate due in large part to the
recent emergence of many of our markets, the effect of future product
enhancements and competition. A decline in the demand for Netcool/OMNIbus as a
result of competition, technological change or other factors would harm our
business.
We have relied and expect to continue to rely on a limited number of
customers for a significant portion of our revenues.
We derive a significant portion of our revenues in any particular period
from a limited number of customers. No customer accounted for more than 10% of
revenues for the quarter ended June 30, 2000. In the comparable period of the
prior year, one customer accounted for 12% of revenues. We expect to continue to
derive a significant portion of our revenues from a limited number of customers
in the future. If a significant customer, or group of customers, cancels or
delays orders for our products, or does not continue to purchase our products at
or above historical levels, our business will be harmed. For example,
pre-existing customers may be part of, or become part of, large organizations
that standardize using a competitive product. The terms of our agreements with
our customers typically contain a one-time license fee and a prepayment of one
year of maintenance fees. The maintenance agreement is renewable annually at the
option of the customer and there are no minimum payment obligations or
obligations to license additional software. Therefore, we generally do not have
long-term customer contracts upon which we can rely for future revenues.
Our international sales and operations expose us to currency fluctuation
risks and other inherent risks.
We license our products in foreign countries. In addition, we maintain a
significant portion of our operations, including the bulk of our software
development operations, in the United Kingdom. Fluctuations in the value of
these currencies relative of the United States dollar have adversely impacted
our results in the past and may do so in the future. These fluctuations can
cause our prices to not be competitive or raise our expenses and reduce our
profitability. License, maintenance and service revenues outside of the United
States accounted for 38%, 36% and 39% of our total revenues in the nine months
ended June 30, 2000, fiscal 1999 and 1998, respectively. We expect that
international license, maintenance and consulting revenues will continue to
account for a significant portion of our total revenues in the future. We pay
the expenses of our international operations in local currencies and do not
currently engage in hedging transactions with respect to such obligations.
Our international operations and revenues involve a number of other
inherent risks, including:
o longer receivables collection periods and greater difficulty in
accounts receivable collection;
o difficulty in staffing and generally higher costs associated with
managing foreign operations;
o an even lengthier sales cycle than with domestic customers;
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o the impact of possible recessionary environments in economies
outside the United States;
o sales in Europe and certain other parts of the world generally are
adversely affected in the quarter ending September 30, as many
customers reduce their business activities during the summer months.
If our international sales become a greater component of total
revenue, these seasonal factors may have a more pronounced effect on
our operating results;
o changes in regulatory requirements, including a slowdown in the rate
of privatization of telecommunications service providers, reduced
protection for intellectual property rights in some countries and
tariffs and other trade barriers; and
o changes in payroll, stock option, employee stock purchase and
business related taxation.
We intend to enter into additional international markets and to continue
to expand our operations outside of the United States by expanding our direct
sales force and pursuing additional strategic relationships. Such expansion will
require significant management attention and expenditure of significant
financial resources and could adversely affect our ability to generate profits.
If we are unable to establish additional foreign operations in a timely manner,
our growth in international sales will be limited, and our business could be
harmed.
Rapid technological change, including evolving industry standards and
regulations and new product introductions by our competitors, could render our
products obsolete.
Rapid technological change, including evolving industry standards and
regulations and new product introductions by our competitors, could render our
products obsolete. As a result, the life cycles of our products are difficult to
estimate and we must constantly develop, market and sell new and enhanced
products. If we fail to do so, our business will be harmed. For example, the
widespread adoption of new architecture standards for managing
telecommunications networks (for example TMN architecture) would force us to
adapt our products to such standard, which we may be unable to do on a timely
basis or at all. In addition, to the extent that any product upgrade or
enhancement requires extensive installation and configuration, current customers
may postpone or forgo the purchase of new versions of our products. Further, the
introduction or announcement of new product offerings by us or one or more of
our competitors may cause our customers to defer licensing of our existing
products.
Our products operate on third-party software platforms, and we could lose
market share if our products do not operate on the hardware and software
operating platforms employed by our customers.
Our products operate on third-party software platforms and we could lose
market share if our products do not operate on the hardware and software
operating platforms employed by our customers. Our products are designed to
operate on a variety of hardware and software platforms employed by our
customers in their networks. We must continually modify and enhance our products
to keep pace with changes in hardware and software platforms and database
technology. As a result, uncertainties related to the timing and nature of new
product announcements, introductions or modifications by systems vendors,
particularly Sun Microsystems, Inc., International Business Machines
Corporation, Hewlett-Packard Company, Cabletron Systems, Inc. and Cisco Systems,
Inc. and by vendors of relational database software, particularly Oracle
Corporation and Sybase, Inc., could harm our business. For example, we are
modifying certain of our products to operate with the Linux operating system.
Our efforts to protect our intellectual property may not be adequate, or a
third-party could claim that we are infringing its proprietary rights.
We cannot guarantee that the steps we have taken to protect our
proprietary rights will be adequate to deter misappropriation of our
intellectual property. In addition, we may not be able to detect unauthorized
use or our intellectual property and take appropriate steps to enforce our
rights. If third parties infringe or misappropriate our trade secrets,
copyrights, trademarks or other proprietary information or intellectual
property, our business could be harmed. In addition, protection of intellectual
property in many foreign countries is weaker and less reliable than in the
United States, so as our international operations expand, the risk that we will
fail to adequately protect our intellectual property increases. Further, while
we believe that our products and trademarks do not infringe upon the proprietary
rights of third parties, other parties may assert that our products infringe, or
may infringe, their
10
<PAGE>
proprietary rights. Any such claims, with or without merit could be
time-consuming, result in costly litigation and diversion of technical and
management personnel, cause product shipment delays or require us to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all. We expect that software product developers will be
increasingly subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps.
We rely on software that we have licensed from third-party developers to
perform key functions in our products.
We rely on software that we license from third parties, including software
that is integrated with internally developed software and used in our products
to perform key functions. We could lose the right to use this software or it
could be made available to us only on commercially unreasonable terms. Although
we believe that alternative software is available from other third-party
suppliers, the loss of or inability to maintain any of these software licenses
or the inability of the third parties to enhance in a timely and cost-effective
manner their products in response to changing customer needs, industry standards
or technological developments could result in delays or reductions in product
shipments by us until equivalent software could be developed internally or
identified, licensed and integrated, which would harm our business.
Our stock price is volatile.
The market price of our common stock has been and is likely to continue to
be highly volatile. The market price may vary in response to many factors, some
of which are outside our control, including:
o actual or anticipated fluctuations in our operating results;
o announcements of technological innovations, new products or new
contracts by us or our competitors;
o developments with respect to copyrights or proprietary rights;
o adoption of new accounting standards affecting the software
industry; and
o general market conditions and other factors.
In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market price for the common stock of technology companies. These types of broad
market fluctuations may adversely affect the market price of our common stock.
In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been initiated against
such company. Such litigation could result in substantial costs and a diversion
of our management's attention and resources that could harm our business.
General economic and market conditions may impair our business.
Segments of the software industry have experienced significant economic
downturns characterized by decreased product demand, price erosion, work
slowdowns and layoffs. Our operation may in the future experience substantial
fluctuations as a consequence of general economic conditions affecting the
timing of orders from major customers and other factors affecting capital
spending. Although we have a diverse client base, we target certain market
segments. Therefore, any economic downturns in general or in the targeted
segments in particular would harm our business.
Future sales of our common stock may affect the market price of our common
stock.
As of September 30, 2000, we had 35,260,125 shares of common stock
outstanding, excluding 6,556,351 shares subject to options outstanding as of
such date under our stock option plans that are exercisable at prices ranging
from $0.15 to $208.00 per share. We cannot predict the effect, if any, that
future sales of common stock or the availability of shares of common stock for
future sale, will have on the market price of common stock prevailing from time
to time. Sales of substantial amounts of common stock (including shares issued
upon the exercise of stock options), or the perception the such sales could
occur, may materially and adversely affect prevailing market prices for common
stock. In addition, tax charges resulting from the exercise of stock options
could adversely affect the reported results of operations.
We have various mechanisms in place to discourage takeover attempts.
Certain provisions of our certificate of incorporation and bylaws and
certain provisions of Delaware law could delay or make difficult a change in
control of Micromuse that a stockholder may consider favorable. The provisions
include:
11
<PAGE>
o "blank check": preferred stock that could be used by our board of
directors to increase the number of outstanding shares and thwart a
takeover attempt; and
o a classified board of directors with staggered, two-year, terms,
which may lengthen the time required to gain control of the board of
directors
In addition, Section 203 of the General Corporation Law of the State of
Delaware, which is applicable to us, and our stock incentive plans, may
discourage, delay or prevent a change of control of Micromuse.
Year 2000 and Euro conversion issues could impair our business.
We have designed and tested our products to be Year 2000 compliant. Our
evaluation of Year 2000-related risks and corrective actions in connection with
such third-party applications, internally developed products and local operating
systems is ongoing. We continue to believe that our products performed well
during the roll-over from 1999 to 2000 and February 29, 2000. Any undetected or
unreported errors or defects associated with Year 2000 date functions could
result in material costs to us. In addition, certain components of our products
process timestamp information from third-party applications or local operating
systems. If such third-party applications or local operating systems are not
Year 2000 compliant, our products that process such timestamp information may
not be Year 2000 compliant.
In our standard license agreements, we provide certain warranties to
licensees that our software routines and programs are Year 2000 compliant. If
any of our licensees experience Year 2000 problems, such licensees could assert
claims for damages against us. Any such claims or litigation could result in
substantial costs and diversion of our resources even if ultimately decided in
our favor. Based on work done to date and our best estimates, we have not
incurred material costs and do not expect to incur future material costs in
addressing the Year 2000 issue in our systems and products.
Our Year 2000 internal readiness program primarily covers: information
technology-based office facilities, data and voice communications, building
management and security systems, taking inventory of hardware, software and
embedded systems, assessing business and customer satisfaction risks associated
with such systems, creating action plans to address known risks, executing and
monitoring action plans, and contingency planning. We have not experienced
material disruptions in our business associated with our internal systems, but
there can be no assurances that we will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technologies used in our internal systems. The most reasonably
likely worst case scenarios would include: (i) corruption of data contained in
our internal information systems, (ii) hardware failure and (iii) the failure of
infrastructure services provided by government agencies and other third parties
(e.g., electricity, phone service, water transport, internet services, etc.).
Contingency plans to include, among other things, manual "work-arounds" for
software and hardware failures, as well as substitution of systems, if
necessary.
Various European countries introduced a single currency (known as the
Euro) in January 1999. We have conducted a review of our internal information
systems to identify the systems that could be affected by such Year 2000 and
Euro conversion requirements. Further, to accommodate our recent growth, we will
be required to continue to implement and improve a variety of operational,
financial and management information systems, procedures and controls on a
timely basis. In particular, we will be required to improve our accounting and
financial reporting systems, which currently require substantial management
effort and will be required to implement a U.S.-based financial and accounting
system.
<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are principally contained in the sections on "Risk Factors" and
"Micromuse Inc."
In some cases, you can identify forward-looking statements by terms such
as "may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" or "continue" or
the negative of those terms or other comparable terms. Our forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performances or achievements expressed or
implied by the forward-looking statements. These factors are discussed in more
detail elsewhere in this prospectus, including under the captions "Risk Factors"
and "Micromuse Inc." Because of these uncertainties, you should not place undue
reliance on our forward-looking statements. We do not intend to update any of
these factors or to publicly announce the result of any revisions to any of our
forward-looking statements contained herein, whether as a result of new
information, future events or otherwise.
USE OF PROCEEDS
All of the shares of our common stock are being sold by the selling
stockholders. We will not receive any proceeds from the sale of the shares of
our common stock.
DILUTION
None of the shares offered hereby are being sold by Micromuse. Therefore,
there will be no dilution in the net tangible book value per share as a result
of the sale of the shares offered hereby.
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<PAGE>
PLAN OF DISTRIBUTION
We are registering all 142,850 shares (the "Shares") on behalf of certain
Selling Stockholders. All of the shares originally were issued by us in
connection with our acquisition of NetOps Corp. We will receive no proceeds from
this offering. The Selling Stockholders named in the table below or pledgees,
donees, transferees or other successors-in-interest selling shares received from
a named Selling Stockholder as a gift, partnership distribution or other
non-sale related transfer after the date of this prospectus (collectively the
"Selling Stockholders") may sell the shares from time to time. The Selling
Stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The Selling Stockholders may effect such transactions
by selling the shares to or through broker-dealers. The shares may be sold by
one or more of, or a combination of, the following:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
o an exchange distribution in accordance with the rules of such
exchange,
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
o in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate in the resales.
The Selling Stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Stockholders. The
Selling Stockholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Stockholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission discount or concession received by them and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because Selling
Stockholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the Selling Stockholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. Other than as noted below with respect to Louis
Steinberg, the Selling Stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-
18
<PAGE>
dealers regarding the sale of their securities. Other than as noted below with
respect to Louis Steinberg, there is no underwriter or coordination broker
acting in connection with the proposed sale of shares by Selling Stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
Selling Stockholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the Selling Stockholders. We will make copies of
this prospectus available to the Selling Stockholders and have informed them of
the need for delivery of copies of this prospectus to purchasers at or prior to
the time of any sale of the shares.
Louis Steinberg and Lehman Brothers Finance S.A. entered into a prepaid
variable forward share purchase contract, dated as of August 31, 2000. Pursuant
to the prepaid agreement, Mr. Steinberg has pledged to Lehman, as security for
Mr. Steinberg's obligations under the prepaid agreement, 17433 Shares, and
Lehman has paid to Mr. Steinberg an amount equal to $2,304,032.44 and has agreed
to pay to Mr. Steinberg additional amounts upon registration of such shares
under the Securities Act of 1933, as amended. Mr. Steinberg is required to
deliver to Lehman, at the end of the five year term of the prepaid agreement, a
cash amount which will vary depending on the trading price of the shares on such
date or, if the shares are freely tradable at such time, a number of shares
having a fair market value equal to the cash settlement amount.
We will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by a Selling
Stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
o the name of each such Selling Stockholder and of the participating
broker-dealer(s),
o the number of shares involved,
o the price at which such shares were sold,
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
o that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
o other facts material to the transaction.
We will be permitted to suspend the use of the prospectus which is a part
of the shelf registration statement for a period not to exceed ninety (90) days
under certain circumstances relating to pending corporate developments, public
filings with the Commission and similar events, or during any period during
which we are instructed, directed, ordered or otherwise requested by any
governmental agency or self-regulatory organization to stop or suspend trading
on sales.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Stockholders may agree to indemnify certain persons, including broker-dealers
and agents, against certain liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.
SELLING STOCKHOLDERS
The following table sets forth, as of September 30, 2000, the number of
shares owned by each of the Selling Stockholders. Except as disclosed below,
none of the Selling Stockholders has had a material relationship with us within
the past three years other than as a result of the ownership of the shares or
our other securities. No estimate can be given as to the amount of shares that
will be held by the Selling Stockholders after completion of this offering
because the Selling Stockholders may offer all or some of the shares and
because, other than as disclosed in "Plan of Distribution" above, there
currently are no agreements, arrangements or understandings with respect to the
sale of any of the shares. The shares offered by this prospectus may be offered
from time to time by the Selling Stockholders named below during the period
commencing on the date of this prospectus and ending on the earlier of (i) the
date on which all of the shares registered on this Registration Statement have
been sold, (ii) the date on which all of the shares then held by the Selling
Stockholders could be sold pursuant to Rule 144(k) under the Securities Act (or
any comparable or successor provision) or (iii) the date that is the six month
anniversary of the date on which this prospectus is declared effective by the
U.S. Securities and Exchange Commission, subject to extensions up to the number
of days of any suspension.
19
<PAGE>
The Selling Stockholders named below provided us the information contained
in the following table with respect to themselves and the respective amount of
common stock beneficially owned by them and which may be sold by each of them
under this prospectus. We have not independently verified this information. Each
of the Selling Stockholders owns less than 1% of our oustanding shares of Common
Stock.
The shares offered by this prospectus may be offered for sale from time to
time by the Selling Stockholders named below.
<TABLE>
<CAPTION>
Number of Number of
Shares Beneficially Shares Registered
Owned for Sale Hereby
-------------------- --------------------
Name of Selling Stockholders Number Number
---------------------------- ------ ------
<S> <C> <C>
Baker Communications Fund, L.P. 73,493 73,493
John R. Deuel(1) 502 502
David Fiore(2) 125 125
Mark Garver 1,074 1,074
Newlight Associates, L.P. 15,916 15,916
Newlight Associates (BVI), L.P. 24,351 24,351
William Nuti 167 167
Adediran Osinloye(3) 33 33
Dennis Parker 100 100
Barrett Peck 125 125
Richard Pekmezian 1,676 1,676
Joseph Riccobono 67 67
Alan Rothschild 13 13
Robert Sadofsky 134(4) 67
Louis Steinberg(5) 21,958(6) 21,791
May Steinberg 21,958(7) 167
Walter Steinberg 1,676 1,676
Evan Wetstone(8) 335 335
Edward Young(9) 335 335
</TABLE>
----------
(1) Currently works as Director of Engineering at Micromuse.
(2) Currently works as Staff Engineer at Micromuse.
(3) Currently works as Staff Engineer at Micromuse.
(4) Includes options to purchase 67 shares of our common stock within 60 days
of September 30, 2000.
(5) Currently works as Vice President of Engineering at Micromuse.
(6) Includes 167 shares held by wife, May Steinberg.
(7) Includes 21,791 shares held by husband, Louis Steinberg.
(8) Currently works as Principal Design Engineer at Micromuse.
(9) Currently works as Director of Business Development at Micromuse.
20
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington D.C. 20549. You may obtain informatation on the operation of the
SEC's public reference facilities by calling the SEC at 1-800-SEC-0330. You can
also access copies of such material electronically on the SEC's home page on the
World Wide Web at http://www.sec.gov. Reports, proxy statements and other
information concerning us are also available for inspection at the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION BY REFERENCE
This prospectus is part of a registration statement (Registration No.
333-_____) we filed with the SEC. The SEC permits us to "incorporate by
reference" the information that we file with them, which means that we can
disclose important information to you be referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file with the SEC after the date of this
prospectus will automatically update and supercede this information. We
incorporate by reference the documents listed below filed by us with the SEC. We
also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of this prospectus until the termination of this
offering.
1. Annual Report on Form 10-K for the fiscal year ended September 30,
1999, filed on December 28, 1999.
2. The description of our capital stock contained in our registration
statement on Form 8-A, dated February 12, 1998, including any
amendment or report updating such description.
3. Quarterly Report on Form 10-Q for the quarter ended December 31,
1999, filed on February 15, 2000.
4. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000,
filed on May 15, 2000.
5. Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
filed on August 14, 2000.
6. Current Report on Form 8-K, filed with the SEC on February 25, 2000.
7. Current Report on Form 8-K, filed with the SEC on July 7, 2000.
8. Our Current Report on Form 8-K, filed with the SEC on August 2,
2000.
9. Current Report on Form 8-K/A, filed with the SEC on October 2, 2000,
which amended our Current Report on Form 8-K, filed with the SEC on
August 2, 2000.
10. Current Report on Form 8-K/A, filed with the SEC on October 4,
2000, which amended our Current Report on Form 8-K/A, filed with the
SEC on October 2, 2000.
If you request, either in writing or orally, a copy of any or all of the
documents incorporated by reference, we will send to you the copies requested at
no charge. However, we will not send exhibits to such documents unless such
exhibits are specifically incorporated by reference in such documents. You
should direct requests for such copies to:
Micromuse Inc.
139 Townsend Street
San Francisco, CA 94107
Attn: Investors Center
21
<PAGE>
LEGAL MATTERS
The validity of the securities offered under this registration statement
will be passed upon for us by Brobeck, Phleger & Harrison LLP, New York, New
York.
EXPERTS
The consolidated balance sheets of Micromuse as of September 30, 1999,
and 1998 and the consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
September 30, 1999 have been incorporated by reference herein in reliance on the
report of KPMG LLP, independent auditors, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The balance sheets of NetOps as of December 31, 1999 and 1998 and the
related statement of operations, changes in stockholders' deficit and cash
flows for the years then ended incorporated in this prospectus by reference
to the Micromuse current report on Form 8-K/A dated Ocotober 4, 2000 have
been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
142,850 Shares
MICROMUSE INC.
Common Stock
-------------
__________, 2000
22
<PAGE>
This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
================================================================================
[Micromuse Logo]
142,850 Shares of
Common Stock
----------
PROSPECTUS
----------
__________, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts shown are estimates except
for the registration fee.
Securities and Exchange Commission Registration Fee....... $ 6,049.07
Legal Fees and Expenses................................... $10,000.00
Accounting Fees and Expenses.............................. $ 5,000.00
Transfer Agent and Registrar Fees......................... $ 5,000.00
Miscellaneous............................................. $ 5,000.00
----------
Total.................................................. $31,049.07
==========
Item 15. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation law ("DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with the DGCL, Micromuse's Certificate of Incorporation
("Certificate") contains a provision to limit the personal liability of the
directors of Micromuse for violations of their fiduciary duty as a director.
This provision eliminates each director's liability to Micromuse or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Micromuse or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL providing for liability of directors
for unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
Article XI of Micromuse's Certificate and Article VII of Micromuse's
Bylaws provide for indemnification of the officers and directors of Micromuse to
the fullest extent permitted by applicable law.
Micromuse has entered into indemnification agreements with each director
and executive officer which provide indemnification to such directors and
executive officers under certain circumstances for acts or omissions which may
not be covered by directors' and officers' liability insurance.
II-1
<PAGE>
Item 16. Exhibits.
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) Exhibits
Exhibit
Number Description
------ -----------
2.1* Agreement and Plan of Reorganization, dated November 2, 1999, by and
among Micromuse Inc., CAN Acquisition Corp., Calvin Alexander
Networking, Inc., Adam Forbes and Michael Wood.
2.2** Amendment to Agreement and Plan of Reorganization.
2.3*** Agreement and Plan of Merger and Reorganization, dated as of June 21,
2000, among Micromuse Inc., Salamander Acqusition Corp. and NetOps
Corporation.
3.1** Restated Certificate of Incorporation of the Registrant, as amended to
date.
3.2** Amended and Restated Bylaws of the Registrant.
4.1** Reference is made to Exhibits 3.1, 3.2 and 10.4.
4.2** Specimen Common Stock certificate.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.4** Amended and Restated Investors' Rights Agreement by and among the
Registrant and certain stockholders of the Registrant, dated as of
September 8, 1997.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants.
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1).
24.1 Power of Attorney (reference is made to the signature page of this
Registration Statement).
-----------
* Incorporated by reference from exhibit 10.11 to Registrant's Annual Report
on Form 10-K for the year ended September 30, 1999, filed on December 28,
1999.
** Incorporated by reference from the exhibit of the same number in the
Registrant's registration statement on Form S-3 (Registration No.
333-95939) as filed with the SEC on February 1, 2000.
*** Incorporated by reference from exhibit 2.1 to Registrant's Current Report
on Form 8-K, filed with the SEC on August 2, 2000.
Item 17. 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: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and (iii) 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.
(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.
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 provisions described in Item 15, or otherwise, the
II-2
<PAGE>
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by 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.
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 Section 15(d) of the
1934 Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the 1934 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.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
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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-3 and has duly caused this Form S-3
Registration Statement, to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California, on
this 16th day of October, 2000.
MICROMUSE INC.
By: /s/ Gregory Q. Brown
------------------------------------
Gregory Q. Brown
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Gregory Q. Brown
and Stephen A. Allott, and each of them, the lawful attorneys and agents, with
power and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents determine may be necessary or
advisable or required to enable Micromuse Inc., a Delaware corporation, to
comply with the Securities Act, and any rules or regulations or requirements of
the Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to this
Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement, and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents or
any of them shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gregory Q. Brown Chairman and Chief Executive October 16, 2000
----------------------------------- Officer (Principal Executive
Gregory Q. Brown Officer)
/s/ Stephen A. Allott President, Chief Financial Officer October 16, 2000
----------------------------------- and Director (Principal Financial
Stephen A. Allott and Accounting Officer)
/s/ Michael E.W. Jackson Director October 16, 2000
-----------------------------------
Michael E.W. Jackson
/s/ David C. Schwab Director October 16, 2000
-----------------------------------
David C. Schwab
/s/ Kathleen M.H. Wallman Director October 16, 2000
-----------------------------------
Kathleen M.H. Wallman
</TABLE>
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<PAGE>
Exhibit Index
Exhibit
Number Description
------ -----------
2.1* Agreement and Plan of Reorganization, dated November 2, 1999, by and
among Micromuse Inc., CAN Acquisition Corp., Calvin Alexander
Networking, Inc., Adam Forbes and Michael Wood.
2.2** Amendment to Agreement and Plan of Reorganization.
2.3*** Agreement and Plan of Merger and Reorganization, dated as of June 21,
2000, among Micromuse Inc., Salamander Acqiusitions Corp. and NetOps
Corporation.
3.1** Restated Certificate of Incorporation of the Registrant, as amended to
date.
3.2** Amended and Restated Bylaws of the Registrant.
4.1** Reference is made to Exhibits 3.1, 3.2 and 10.4.
4.2** Specimen Common Stock certificate.
5.1 Opinion of Brobeck, Phleger & Harrison, LLP.
10.4** Amended and Restated Investors' Rights Agreement by and among the
Registrant and certain stockholders of the Registrant, dated as of
September 8, 1997.
23.1 Consent of KPMG LLP.
23.2 Consent of PriceWaterhouseCoopers LLP.
23.3 Consent of Brobeck, Phleger & Harrison, LLP (included in the opinion
filed as Exhibit 5.1).
24.1 Power of Attorney (reference is made to the signature page of this
Registration Statement).
-----------
* Incorporated by reference from exhibit 10.11 to Registrant's annual report
on Form 10-K for the year ended September 30, 1999, filed on December 28,
1999.
** Incorporated by reference from the exhibit of the same number in the
Registrant's registration statement on Form S-3 (Registration No.
333-95939) as filed with the SEC on February 1, 2000.
*** Incorporated by reference from exhibit 2.1 to Registrant's Current Report
on Form 8-K, filed with the SEC on August 2, 2000.
