As filed with the Securities and Exchange Commission on April 4, 2000
Registration No. 333-95939
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Post-Effective
Amendment No. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
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:
Robert G. Specker, Esq.
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
(650) 321-2400
--------------------
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>
- ----------------------------------------------------------------------------------------------
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(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 34,052 shares $132.25 $4,503,377 $1,188.89
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The price of $132.25 per share, which was the average of the high and low
prices of the Common Stock on the Nasdaq National Market on March 30,
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.
(2) A fee in the amount of $3,355.05 was previously paid in connection with
the registration of 157,870 shares (78,935 pre-split) of our stock
pursuant to this registration statement.
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>
EXPLANATORY NOTE
The purposes of this Post-Effective Amendment No. 1 are:
(1) to reflect in the prospectus the 2 for 1 stock split (in the
form of a stock dividend) of our common stock that occurred for
stockholders of record on February 3, 2000. The shares resulting from the
split have been distributed by our transfer agent.
(2) to register an additional 34,052 (17,026 pre-split) shares of
our stock to be sold by the selling stockholders.
<PAGE>
Subject to Completion, dated April 4, 2000
191,922 Shares
MICROMUSE INC.
Common Stock
-----------------
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
STARTING ON PAGE 4.
-----------------
The selling stockholders listed on pages 14 and 15 are offering and
selling 191,922 shares of our common stock under this prospectus.
The selling stockholders may offer their Micromuse stock through public or
private transactions, on or off the Nasdaq National Market, at prevailing market
prices, or at privately negotiated prices.
Our common stock is traded on The Nasdaq National Market under the symbol
"MUSE." On March 30, 2000, the closing bid price of the common stock on The
Nasdaq National Market was $132.25 per share.
------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------------
<PAGE>
The date of this Prospectus is April __, 2000
-------------------
TABLE OF CONTENTS
Page
----
Business of Micromuse Inc. 3
Recent Developments 3
Risk Factors 4
Forward-Looking Statements 13
Use of Proceeds 13
Selling Stockholders 14
Plan of Distribution 16
Legal Matters 16
Experts 16
Where You Can Find More Information 16
2
<PAGE>
THE BUSINESS OF MICROMUSE
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, 1999, we had over 440 customers operating in and serving a variety of
industries. Customers include AirTouch, America Online, 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.
------------------------------
This Prospectus includes trademarks of Micromuse and other corporations.
------------------------------
3
<PAGE>
RISK FACTORS
Because we have a limited operating history, 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. Only recently has our software
business been profitable and as of September 30, 1999 we had an accumulated
deficit of $3.5 million. 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 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 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;
4
<PAGE>
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 176 employees on September
30, 1998 to 321 employees on September 30, 1999 and currently plan to recruit
more staff. Moreover, members of our management team, including the Chairman and
Chief Executive Officer, President and Chief Financial Officer, Senior Vice
President, Sales and Business Operations, Senior Vice President, General Counsel
and Secretary and Senior Vice President, Human Resources have been in their
current positions with us for a limited period of time.
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 such as the Vice President, Marketing. 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 and the release of our Netcool/Reporter, Netcool/Internet
Service Monitors, Netcool/FireWall-1, Netcool/Fusion, Netcool/NTSM, and
Netcool/Impact, the
5
<PAGE>
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 34%, 26% and 11% of our total revenues
in fiscal 1999, 1998 and 1997, 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 79%, 68% and 58% of our total revenues in fiscal 1999, 1998 and
1997, 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.
6
<PAGE>
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 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,
7
<PAGE>
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 is long, typically from
approximately 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, will 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 another business 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 an
agreement to acquire Calvin Alexander Networking, Inc., a developer of network
auto-discovery software. Because of these acquisitions, we will need to
integrate distinct products, customers and corporate cultures into our own.
These 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; 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 may 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
8
<PAGE>
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've introduced Netcool/Reporter,
Netcool/Internet Service Monitors, Netcool/FireWall-1, Netcool/Fusion,
Netcool/NTSM, and Netcool/Impact, 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. Although no one customer accounted for more
than 10% of revenues in fiscal 1999, entities affiliated with MCI/WorldCom
accounted for 10% and 18% of our total revenue in fiscal 1998 and 1997,
respectively. 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 to 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 29%, 39% and 48% of our total revenues in fiscal 1999, 1998
and 1997, 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 managing foreign operations;
o an even lengthier sales cycle than with domestic customers;
9
<PAGE>
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; and
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.
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 or different standards for managing
telecommunications networks 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.
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
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 largely completed but will be ongoing. Any undetected 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. Because of the unprecedented nature of such litigation, it is
uncertain to what extent we may be affected by it. 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. Although we do not currently
believe that we will experience material disruptions in our business associated
with preparing our internal systems for the Year 2000, 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
technology used in our internal systems, which are composed of third-party
software, third-party hardware that contains embedded software and our own
software products. 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.
12
<PAGE>
FORWARD - LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference herein,
contains forward-looking statements that involve risks and uncertainties.
Statements contained in this prospectus or incorporated by reference herein that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the 1934 Act, including
statements regarding the Micromuse's expectations, beliefs, intentions or
strategies regarding the future. All forward-looking statements included in this
document are based on information available to the Micromuse on the date hereof,
and Micromuse assumes no obligation to update any such forward-looking
statements. Micromuse's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, those set forth in this prospectus under "Risk
Factors." You should carefully consider the risks described in the "Risk
Factors" section, in addition to the other information set forth in this
prospectus and incorporated by reference herein, before making an investment
decision.
USE OF PROCEEDS
All net proceeds from the sale of Micromuse common stock will go to the
stockholders who offer and sell their shares. Accordingly, Micromuse will not
receive any proceeds from the sale of the shares by the selling stockholders.
13
<PAGE>
SELLING STOCKHOLDERS
The following table presents selected information, as of December 28,
1999, regarding the number of shares of common stock owned by the selling
stockholders and as adjusted to give effect to the sales of the shares of common
stock being sold in this offering. Because the selling stockholders are not
obligated to sell the shares of common stock, and selling stockholders may also
acquire publicly traded shares of our common stock, we cannot know how many
shares each selling stockholder will beneficially own after this offering.
Therefore, the number of shares listed in the column entitled shares
beneficially owned after offering reflects only the current share ownership of
the selling stockholders. We may update or supplement this prospectus from time
to time to update this information. These shares are being registered to permit
public secondary trading of the shares and the selling stockholders may offer
these shares for resale from time to time. For a discussion regarding their
resale, please see "Plan of Distribution."
The shares being offered by the selling stockholders were acquired from us
in private placement transactions effected on December 28, 1999. The shares were
issued under the exemption from the registration requirements of the Securities
Act provided by Section 4(2) of the Securities Act. Each of the selling
stockholders represented to us that it was acquiring the shares for investment
and with no present intention of distributing the shares.
In this Post-Effective Amendment No. 1, the number of shares set forth
opposite each selling stockholder's name on the table below under the heading
"Shares Beneficially Owned Before the Offering" is as of December 28, 1999, and
does not reflect any subsequent sales of such shares pursuant to this
registration statement.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before the Owned After the
Offering Offering
Name and Address of Selling -------------------- --------------------
Stockholders Number Percent(1) Offered Number Percent(1)
- --------------------------- ------ ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Edmond Baydian 11,702 * 8,192 3,510 *
40-31 216 St
Bayside, NY 11361
Erick Berg 2,924 * 2,047 877 *
1558 Unionport Rd
Bronx, NY 10462
Rachel Burnett 8,228 * 1,644 6,584 *
700 E. 84th Street, Apt. 39B
New York, NY 10028
Andrew Burton 2,194 * 438 1,756 *
355 South End Ave., #21P
New York, NY 10280
Colrain Associates 3,510 * 702 2,808 *
c/o Bruce Rabb
919 Third Avenue, 40th Floor
New York, NY 10022
John Devine 8,228 * 1,644 6,584 *
59 Eaton Square
London SWIW9BG U.K
Sheldon Epstein 8,776 * 1,754 7,022 *
3 Timothy Lane
Englewood, NJ 07631
Norma Finkel 31,450 * 22,015 9,435 *
330 W. 56th St., - Apt. 24D
New York, NY 10019
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Adam Forbes 348,404 1.04% 58,430 289,974 *
150 East 18th St
New York, NY 10003
Angus Forbes 8,776 * 6,143 2,633 *
81 Washington St., #2A
Brooklyn, NY 11201
Joseph Isler 2,924 * 2,047 877 *
69 W. 9th St., Apt. 11A
New York, NY 10011
Alan Matthews 8,228 * 1,644 6,584 *
15 Gralynn Rd
Newton, MA 02459
Steve Mumby 6,582 * 1,316 5,266 *
430 West 24th St., #7B
New York, NY 10011
Rabb Family Partners 3,070 * 614 2,456 *
580 West End Avenue
New York, NY 10024-1723
Barry Reynolds 2,194 * 438 1,756 *
131 Grove St
Wellesley, MA 02482
Sergius Vonschischkoff 1,462 * 1,023 439 *
14-49 Lombardy Blvd
Bayshore, NY 11706-4045
Nathan Wildgrube 2,924 * 2,047 877 *
440 E. 6th St., #4E
New York, NY 10009
Michael Wood 348,404 1.04% 58,430 289,974 *
26-56 30th St., #1F
Long Island City, NY 11102
Allan Woolway 29,256 * 20,478 8,778 *
7 Louis Court
Edison, NJ 08820
Yair Yaish 6,582 * 876 5,706 *
400 Central Park West, Apt. 4X
New York, NY 10025
</TABLE>
- --------------------------------------------------------------------------------
* Represents less than 1%.
(1) Based on 16,373,531 shares of common stock outstanding as of December 28,
1999.
15
<PAGE>
PLAN OF DISTRIBUTION
The shares offered hereby may be sold by the selling stockholders at
various times in one or more of the following transactions:
o In the over-the-counter market;
o On The Nasdaq National Market;
o In privately negotiated transactions; or
o In a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of the sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares. If
this happens, broker-dealers will either receive discounts or commissions from
the selling stockholders, or they will receive commissions from purchasers of
shares for whom they acted as agents.
For the purposes of this prospectus, the term "selling stockholders" shall
include donees, pledgees and other assignees selling shares received from a
selling stockholder named herein as well as any donees, pledgees and other
assignees selling shares received from such donees, pledgees or assignees.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
Micromuse by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California.
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.
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
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
1. Annual Report on Form 10-K for the year ended September 30, 1999,
filed on December 28, 1999;
2. Quarterly Report on Form 10-Q for the quarter ended December 31,
1999, filed on February 15, 2000; and
16
<PAGE>
3. The description of Micromuse capital stock contained in it's
registration statement on Form 8-A, dated February 12, 1998,
including any amendment or report updating such description.
You may request a copy of these filings, at no cost, by calling us at
(415) 538-9090 or by writing to us at the following address:
Micromuse Inc.
139 Townsend Street
San Francisco, CA 94107
Attn: Investors Center
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.
191,922 Shares
MICROMUSE INC.
Common Stock
-------------
April __, 2000
17
<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....... $10,000
Legal Fees and Expenses................................... 30,000
Accounting Fees and Expenses.............................. 5,000
Transfer Agent and Registrar Fees......................... 15,000
Miscellaneous............................................. 5,000
-------
Total.................................................. $65,000
=======
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.
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 Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
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 Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in the opinion filed as Exhibit 5.1).
24.1**** Power of Attorney.
* 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-1 (Registration No.
333-58975) as filed with the SEC on July 28, 1998.
*** Incorporated by reference from the exhibit of the same number in the
Registrant's registration statement on Form S-1 (Registration No.
333-42177) as filed with the SEC on February 12, 1998.
**** Previously filed.
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; 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.
II-3
<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 Post-Effective
Amendment No. 1 to the Registration Statement (No. 333-95939) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on this fourth day of April, 2000.
MICROMUSE INC.
By: /s/ Gregory Q. Brown
-------------------------------------
Gregory Q. Brown
Chairman and Chief Executive Officer
II-4
<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.
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 Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
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 Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in the opinion filed as Exhibit 5.1).
24.1**** Power of Attorney.
* 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-1 (Registration No.
333-58975) as filed with the SEC on July 28, 1998.
*** Incorporated by reference from the exhibit of the same number in the
Registrant's registration statement on Form S-1 (Registration No.
333-42177) as filed with the SEC on February 12, 1998.
**** Previously filed.
EXHIBIT 5.1
April 4, 2000
Micromuse Inc.
139 Townsend Street
San Francisco, California 94107
Re: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 filed by
Micromuse Inc. (the "Company") with the Securities and Exchange Commission (the
"Commission") on January 28, 2000, in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of up to 78,935 (157,870
post-split) shares of The Company's Common Stock of certain stockholders of the
Company, and the Post-Effective Amendment thereto filed on April 3, 2000 as
amended, (the "Registration Statement"), in connection with the registration
under the Act of up to an additional 34,052 (post-split) shares of the Company's
Common Stock of certain stockholders of the Company collectively, with the
shares registered on January 28, 2000, (the "Shares"). As your counsel in
connection with this transaction, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with the
sale and issuance of the Shares.
It is our opinion that the Shares, when issued and sold in the
manner described in the Registration Statement and accordance with the
resolution adopted by the Board of Directors of the Company, will be legally and
validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the said
Registration Statement, and further consent to the use of our name wherever
appearing in said Registration Statement, including the prospectus constituting
a part thereof, and in any amendment or supplement thereto.
Very truly yours,
/s/ Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation herein by reference of our reports dated October
23, 1999, except as to Note 11, which is as of November 2, 1999, relating to the
consolidated balance sheets of Micromuse Inc. and subsidiaries as of September
30, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended September 30, 1999, and related schedule, which reports
appear in the September 30, 1999, annual report on Form 10-K of Micromuse Inc.
We also consent to the reference to our firm under the heading "Experts."
/s/ KPMG LLP
Mountain View, California
April 4, 2000
