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As filed with the Securities and Exchange Commission on November 13, 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, as amended
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Portal Software, Inc.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 7371 77-0369737
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification Number)
</TABLE>
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10200 South DeAnza Boulevard, Cupertino, California 95014, (408) 572-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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Mitchell L. Gaynor
Vice President, General Counsel, Secretary
Portal Software, Inc.
10200 South DeAnza Boulevard, Cupertino, California 95014, (408) 572-2000
(Name and Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent For Service)
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Copies to:
Timothy R. Curry, Esq.
Ashok K. Lalwani, Esq.
David Haber, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
(650) 424-0160
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Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after this Registration Statement is declared 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, as amended, 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 of 1933, as amended, check
the following box and list the Securities Act of 1933, as amended,
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 of 1933, as amended, check the following box and list
the Securities Act of 1933, as amended, 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. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to be Registered be Registered Per Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value................. 7,500,000 $28.88 $216,600,000 $57,183
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(1) Pursuant to Rule 457(c) under the Securities Act of 1933, as amended, this
per share amount is based on the average of the high and low prices of our
common stock on November 9, 2000 as reported on the NASDAQ National
Market. Estimated solely for the purpose of calculating the registration
fee.
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 that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. The selling stockholders may not sell these securities until the +
+registration statement filed with the Securities and Exchange Commission is +
+effective. This prospectus is not an offer to sell these securities and it is +
+not soliciting an offer to buy these securities in any state where the offer +
+or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2000
PRELIMINARY PROSPECTUS
7,500,000 Shares
Portal Software, Inc.
Common Stock
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This prospectus relates to the public offering, which is not being
underwritten, of 7,500,000 shares of our common stock, $0.001 par value per
share, and the registration of these shares of our common stock for resale by
former shareholders of solution42 AG, a German company we acquired on November
2, 2000. In connection with this acquisition, our newly created German
subsidiary, Portal Solution GmbH, issued ordinary shares to the shareholders of
solution42, and these shares may be exchanged in the aggregate for the
7,500,000 shares of our common stock to which this prospectus relates pursuant
to an option we granted to these shareholders. We also have the option under
some circumstances to force this exchange.
Our common stock is traded on the Nasdaq National Market under the symbol
"PRSF." The closing price on November 10, 2000 was $28.25 per share.
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The shares of our common stock offered or sold under this prospectus involve
a high degree of risk. See "Risk Factors" beginning on page 4 of this
prospectus to read about important factors you should consider before buying
our common stock.
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Neither the Securities and Exchange Commission nor any state securities
commission 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 November 13, 2000.
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone 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 contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
TABLE OF CONTENTS
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Page
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PROSPECTUS SUMMARY......................................................... 3
RISK FACTORS............................................................... 4
FORWARD-LOOKING STATEMENTS................................................. 15
WHERE YOU CAN FIND MORE INFORMATION........................................ 16
SELLING STOCKHOLDERS....................................................... 17
USE OF PROCEEDS............................................................ 18
PLAN OF DISTRIBUTION....................................................... 18
LEGAL MATTERS.............................................................. 19
EXPERTS.................................................................... 19
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PROSPECTUS SUMMARY
This summary highlights some information from this prospectus, and it may
not contain all of the information that is important to you. It is qualified in
its entirety by the more detailed information and consolidated financial
statements, including the notes to the consolidated financial statements,
incorporated by reference in this prospectus. You should read the full text of,
and consider carefully the more specific details contained in or incorporated
by reference into, this prospectus.
Our Business
Portal develops, markets and supports real-time, scalable customer
management and billing software, or CM&B software, for providers of Internet-
based services. Portal's Infranet software is a comprehensive platform that
meets the complex, mission critical provisioning, accounting, reporting and
marketing needs of providers of Internet-based services. Portal's Real Time No
Limits Infranet product enables the real-time provisioning and reporting of
services, including such functions as account creation, user authentication and
authorization, activity tracking, pricing and rating, billing and customer
service, including self-service, all on a scale of up to millions of users. In
contrast to solutions that require extensive customization services, Portal's
Infranet platform provides an "out-of-the-box" product that can generally be
used by a wide variety of service providers ranging from emerging small
companies offering an innovative service to a small number of subscribers to
large telecommunications carriers with millions of subscribers. Portal believes
that by providing a platform with an open architecture with fully documented
APIs, Infranet facilitates the development of new services that can integrate
with existing and new software applications and that can be interoperated with
other new or existing services offered by other providers using Infranet. As of
July 31, 2000, more than 320 customers have licensed Infranet, including US
West, Qwest Communications Corp., Covad Communications Company, Inktomi Corp.,
Juno Online Services, L.P., Deutsche Telekom Online Service GmbH, France
Telecom SA and Demon Interactive Ltd.
Corporate Information
Portal Software, Inc. was incorporated in California in March 1994 as Portal
Information Network, Inc. In December 1995, Portal Communications Company, a
company founded by John E. Little, Portal's Chief Executive Officer, and
incorporated in California in May 1985, was merged with and into Portal
Information Network, Inc. In October 1997, Portal Information Network, Inc.
changed its name to Portal Software, Inc. Portal Software, Inc. reincorporated
in Delaware in April 1999. References to "Portal," "we," "our," and "us" refer
to Portal Software, Inc., a Delaware corporation, its predecessors, and each of
its subsidiaries. Our principal executive offices are located at 10200 South De
Anza Boulevard, Cupertino, California 95014 and our telephone number is (408)
572-2000. Information contained on our website does not constitute part of this
prospectus.
The Offering
This prospectus relates to the sale of up to 7,500,000 shares of our common
stock by the selling stockholders identified in this prospectus. The prices at
which the selling stockholders may sell their shares will be determined by the
prevailing market for the shares or in negotiated transactions. See " Selling
Stockholders."
Use of Proceeds
The selling stockholders will receive all of the proceeds from the sale of
the common stock pursuant to this prospectus. We will not receive any of the
proceeds from sales by the selling stockholders of the offered shares of common
stock.
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RISK FACTORS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
prospectus. You should carefully consider the following risk factors, together
with all other information included or incorporated by reference into this
prospectus, before you decide whether to purchase shares of our common stock.
Risks and uncertainties, in addition to those we describe below, that are
not presently known to us, or that we currently believe are immaterial may also
impair our business operations. If any of the following risks occur, our
business, operating results and financial condition could be seriously harmed.
In addition, the trading price of our common stock could decline due to the
occurrence of any of these risks.
Portal's future operating results may vary substantially from period to
period. The price of our common stock will fluctuate in the future, and an
investment in our common stock is subject to a variety of risks, including but
not limited to the specific risks identified below. Inevitably, some investors
in our securities will experience gains while others will experience losses
depending on the prices at which they purchase and sell securities. Prospective
and existing investors are strongly urged to carefully consider the various
cautionary statements and risks set forth in this prospectus.
Risks Associated with Portal's Business and Future Operating Results
It is difficult to predict our business because we have a limited history
operating as a provider of CM&B software
We have a relatively brief operating history as a provider of CM&B software
and had no meaningful license revenue until 1996. Therefore, we will experience
the risks and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets. Our business strategy may not prove
successful, and we may not successfully address these risks.
We have a short history of profitability and cannot be certain that we will
sustain or increase profitability
In order to continue to be profitable, we must increase our revenues. We may
not be able to increase or even maintain our revenues, and we may not achieve
sufficient revenue or profitability in any future period. We incurred net
losses of approximately $7.6 million for fiscal year 2000, $17.4 million for
fiscal year 1999, $7.6 million for fiscal year 1998 and $2.3 million for fiscal
year 1997. We had a slight net profit in the fourth quarter of fiscal year 2000
and we had operating profits in the quarters ending April 30, 2000 and July 31,
2000. Our fiscal year ends on January 31 of each year.
In addition, we expect to significantly increase our sales and marketing,
product development and administrative expenses. As a result, we will need to
generate significant revenues from sales of Infranet to maintain profitability.
We expect that we will face increased competition that may make it more
difficult to increase our revenues. Even if we are able to increase revenues,
we may experience price competition which would lower our gross margins and our
profitability. Another factor that will lower our gross margins is any increase
in the percentage of our revenues that is derived from indirect channels and
from services, both of which have lower margins. We cannot be certain that we
can sustain or increase operating and net profitability on a quarterly or
annual basis.
Our quarterly operating results may fluctuate in future periods and we may fail
to meet expectations
Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors. In future quarters, our operating results
may be below one or more of the expectations of public market
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analysts and investors, and the price of our common stock may fall. Failure by
technology companies to meet or exceed analyst expectations or any resulting
change in analyst recommendations or ratings frequently results in substantial
decreases in the market value of the stock of such companies. Factors that
could cause quarterly fluctuations include:
. variations in demand for our products and services;
. the timing and execution of individual contracts, particularly large
contracts that would materially affect our operating results in a given
quarter;
. the timing of sales of our products and services;
. our ability to develop and attain market acceptance of enhancements to
Infranet and new products and services;
. delays in introducing new products and services;
. new product introductions by competitors;
. changes in our pricing policies or the pricing policies of our
competitors;
. announcements of new versions of products that cause customers to
postpone purchases of Portal's current products;
. the mix of products and services sold;
. the mix of sales channels through which our products and services are
sold;
. the mix of domestic and international sales;
. costs related to acquisitions of technologies or businesses;
. the timing of releases of new versions of third-party software and
hardware products that work with our products;
. our ability to attract, integrate, train, retain and motivate a
substantial number of sales and marketing, research and development,
technical support and other management personnel;
. our ability to expand our operations;
. the amount and timing of expenditures related to expansion of our
operations; and
. global economic conditions generally, as well as those specific to ISPs
and other providers of Internet-based services.
We have difficulty predicting the volume and timing of orders. For example,
substantially all of our future revenues will come from licenses of Infranet
and related services, and the market for this product is in its early stages of
development and is therefore unpredictable. In any given quarter, our sales
have involved, and we expect will continue to involve, large financial
commitment from a relatively small number of customers. As a result, the
cancellation or deferral of even a small number of large licenses of Infranet
would reduce our revenues, which would adversely affect our quarterly financial
performance. Also, we have often booked a large amount of our sales in the last
month of the quarter and often in the last week of that month. Accordingly,
delays in the closing of sales near the end of a quarter could cause quarterly
revenue to fall substantially short of anticipated levels.
We record as deferred revenue fees from contracts that do not meet our
revenue recognition policy requirements. While a portion of our revenues each
quarter is recognized from deferred revenue, our quarterly performance will
depend primarily upon entering into new contracts to generate revenues for that
quarter. New contracts that we enter into may not result in revenue in the
quarter in which the contract was signed, and we may not be able to predict
accurately when revenues from these contracts will be recognized.
5
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We plan to significantly increase our operating expenses to expand our sales
and marketing operations, broaden our customer support capabilities, develop
new distribution channels and fund greater levels of research and development.
We determine our operating expenses largely on the basis of anticipated revenue
trends and a high percentage of our expenses are fixed in the short term. As a
result, a delay in generating or recognizing revenue could cause significant
variations in our operating results from quarter-to-quarter and could result in
substantial operating losses.
Our quarterly operating results may fluctuate in future periods due to seasonal
variations and we may fail to meet expectations
We may also experience seasonality in our business. In many software
companies, rate of growth of license fees revenues tends to decline between the
fourth quarter of one year and the first quarter of the next year, due in part
to the structure of sales compensation plans. If we experience such seasonality
in the future, our rate of growth or absolute revenues could decline in the
first quarter of a fiscal year compared to the preceding fourth quarter. In
addition, the European operations of many companies experience a degree of
flatness in the summer months. Portal may also experience such a pattern in its
European operations. For example, the rate of growth in our European operations
in the second quarter of fiscal year 2001 was significantly lower than the rate
of growth in our other regions. Such seasonality may cause our results of
operations to fluctuate or become more difficult to predict and could cause us
to fail to meet internal or analyst expected financial results.
It is difficult to predict the timing of individual orders because Infranet has
a long and variable sales cycle
To date, the sales cycle for Infranet generally has been three to nine
months or more. The long sales and implementation cycles for Infranet may cause
license revenues and operating results to vary significantly from period to
period. Along with systems integrators and our other distribution partners, we
spend significant time educating and providing information to our prospective
customers regarding the use and benefits of Infranet. Even after purchase, our
customers tend to deploy Infranet slowly and deliberately, depending on the
specific technical capabilities of the customer, the size of the deployment,
the complexity of the customer's network environment, and the quantity of
hardware and the degree of hardware configuration necessary to deploy Infranet.
Our business depends on the commercial acceptance of Infranet, and it is
uncertain to what extent the market will accept this product
Our future growth depends on the commercial success of Infranet.
Substantially all of our licensing revenues are derived from Infranet. Our
business will be harmed if our target customers do not adopt and purchase
Infranet. The market for Internet-based CM&B software is still in its early
stages of development. In addition, some prospective customers may base their
purchasing decisions based on a vendor's ability to support their CM&B needs
for both their Internet-based services and their other existing or planned non-
Internet service offerings, such as fixed wire or mobile voice telephony or
cable television. Our ability to address these current and future non-Internet
based service requirements with our current version of Infranet and planned
future enhancements may affect the market acceptance of Infranet by prospective
customers who desire an integrated CM&B solution for their different services.
Our future financial performance will also depend on the successful
development, introduction and customer acceptance of new and enhanced versions
of Infranet. We are not certain that our target customers will widely adopt and
deploy Infranet as their CM&B solution. In the future we may not be successful
in marketing Infranet or any new or enhanced products or services. Our future
revenues will also depend on our customers licensing software for additional
applications or for additional subscribers. Their failure to do so could harm
our business.
6
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Significant technical challenges arise in our business because many of our
customers purchase and implement Infranet in phases, deploy Infranet across a
variety of computer hardware platforms and integrate it with a number of legacy
systems, third-party software applications and programming tools.
Implementation frequently involves participation by our professional services
group, which has limited resources. Some customers may also require us to
develop costly customized features or capabilities, which increase our costs
and consume our limited customer service and support resources. Also, revenues
we derive from our services business have a significantly lower margin than
revenues derived from licensing Infranet. If new or existing customers have
difficulty deploying our products or require significant amounts of our
professional services support, our operating margins could be harmed.
Unpredictable foreign payroll taxes may cause operating results to fluctuate in
future periods and we may fail to meet expectations
We are generally subject to employer payroll taxes when our employees
exercise their stock options. The employer payroll taxes are assessed on each
employee's gain, which is the difference between the price of our common stock
on the date of exercise and the exercise price. During a particular period,
these payroll taxes could be material. These employer payroll taxes would be
recorded as an expense and are assessed at tax rates that vary depending upon
the employee's taxing jurisdiction in the period such options are exercised
based on actual gains realized by employees. However, because we are unable to
predict how many stock options will be exercised, at what price and in which
country during any particular period, we cannot predict, the amount, if any, of
employer payroll expense that will be recorded in a future period or the impact
on our future financial results.
We must hire and retain qualified sales personnel to sell Infranet
Our financial success and our ability to increase revenues in the future
depend considerably upon the growth and productivity of our direct sales force
that has historically generated a majority of Portal's license revenues. This
productivity and growth will depend to a large degree on our success in
recruiting, training and retaining additional direct salespeople. There is a
shortage of direct sales personnel with the skills and expertise necessary to
sell our products. Our business will be harmed if we fail to hire or retain
qualified sales personnel, or if newly hired salespeople fail to develop the
necessary sales skills or develop these skills more slowly than we anticipate.
In addition, because we currently rely on indirect sales for a significant
portion of our market opportunities, we may miss sales opportunities that are
available through other sales distribution methods and other sources of leads,
such as domestic and foreign resellers. In the future, we intend to augment our
indirect sales distribution methods through additional third-party distribution
arrangements. However, there is no guarantee that we will successfully augment
these arrangements or that the expansion of indirect sales distribution methods
will increase revenues. We may be at a serious competitive disadvantage if we
fail to enhance these indirect sales channels.
We also use systems integrators and other strategic relationships to implement
and sell Infranet
We have entered into relationships with third-party systems integrators, as
well as with hardware platform and software applications developers and service
providers. We have derived, and anticipate that we will continue to derive, a
significant portion of our revenues from customers that have significant
relationships with our market and platform partners. We could lose sales
opportunities if we fail to work effectively with these parties or fail to grow
our base of market and platform partners.
Many of these partners also work with competing software companies, and our
success will depend on their willingness and ability to devote sufficient
resources and efforts to marketing our products versus the products of others.
We may not be able to enter into additional, or maintain our existing,
strategic relationships on commercially reasonable terms, or at all. Our
agreements with these parties typically are in the form of
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nonexclusive joint marketing or reseller agreements that may be terminated by
either party without cause or penalty and with limited notice. Therefore, there
is no guarantee that any single party will continue to market our products. If
these relationships fail, we will have to devote substantially more resources
to the distribution, sales and marketing, implementation and support of
Infranet than we would otherwise, and our efforts may not be as effective as
those of our partners, either of which would harm our business.
Our quarterly revenue is generated from a limited number of customers and our
customer base is concentrated and the loss of one or more of our customers
could cause our business to suffer
A substantial portion of our license and services revenues in any given
quarter has been, and is expected to continue to be, generated from a limited
number of customers with large financial commitments. For example, two
customers accounted for a total of 27% of total revenues for the quarter ended
October 31, 1999 and one customer accounted for 10% of total revenue during the
year ended January 31, 2000. As a result, if a large contract is cancelled or
deferred or an anticipated contract does not materialize, our business would be
harmed. We have initially targeted large ISPs, including on-line divisions of
telecommunications carriers and other providers of Internet-based services,
including the wireless divisions of telecommunications carriers. Some of the
industries we have targeted are consolidating, which could reduce the number of
potential customers available to us.
Our business will suffer dramatically if we fail to successfully manage our
growth
Our ability to successfully offer Infranet and new products and services in
a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations domestically and
internationally and have grown our headcount substantially. Our business will
suffer dramatically if we fail to effectively manage this growth. On November
1, 2000, we had more than 1,220 employees, compared to a total of 634 employees
on January 31, 2000. This growth has placed, and our anticipated future
operations will continue to place, a significant strain on our management
systems and resources and on our internal training capabilities. We expect that
we will need to continue to improve our financial and managerial controls and
reporting systems and procedures, and will need to continue to expand, train
and manage our work force worldwide. Although we have recently occupied two new
buildings for our headquarters in Cupertino, California, we expect that we will
also have to continue to expand our facilities in California and other
locations, and we may face difficulties and significant expenses identifying
and moving into suitable office space.
Our significant international operations and our planned expansion of our
international operations make us much more susceptible to risks from
international operations
For the quarters ended July 31, 1999 and 2000, we derived approximately 31%
and 37% of our revenue, respectively, from sales outside North America. As a
result, we face risks from doing business on an international basis, including,
among others:
. reduced protection for intellectual property rights in some countries;
. licenses, tariffs and other trade barriers;
. difficulties in staffing and managing foreign operations;
. longer sales and payment cycles;
. greater difficulties in collecting accounts receivable;
. political and economic instability;
. seasonal reductions in business activity;
. potentially adverse tax consequences;
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. compliance with a wide variety of complex foreign laws and treaties; and
. variance and unexpected changes in local laws and regulations.
We currently have offices in a number of foreign locations including
Australia, Canada, China, France, Germany, Hong Kong, Japan, Malaysia,
Singapore, Spain and the United Kingdom and plan to establish additional
facilities in other parts of the world. The expansion of our existing
international operations and entry into additional international markets will
require significant management attention and financial resources. We cannot be
certain that our investments in establishing facilities in other countries will
produce desired levels of revenue. In addition, we have sold Infranet
internationally for only a few years and we have limited experience in
developing localized versions of Infranet and marketing and distributing them
internationally.
Our operations and financial results also could be significantly affected by
factors associated with international operations such as changes in foreign
currency exchange rates and uncertainties relative to regional economic
circumstances, and political instability in emerging markets. For example, a
strengthening of the dollar versus other currencies could make our products
less competitive in foreign markets or collection of dollar denominated
receivables more difficult. We do not currently engage in currency hedging
activities.
To the extent that we are unable to successfully manage expansion of our
business into international markets due to any of the foregoing factors, our
business could be adversely affected.
Our proprietary rights may be inadequately protected, and there is a risk of
infringement
Our success and ability to compete depend substantially upon our internally
developed technology, which we protect through a combination of patent,
copyright, trade secret and trademark law. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology or to develop products with the same
functionality as our products. Policing unauthorized use of our products is
difficult, and we cannot be certain that the steps we have taken will prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States.
Others may develop technologies that are similar or superior to our technology.
Moreover, as the number of competitors in our industry segments grow and the
functionality of products in different industry segments overlaps, we expect
that our software products may in the future become subject to third-party
infringement claims. Some of our competitors in the market for CM&B software
may have filed or may intend to file patent applications covering aspects of
their technology upon which they may claim our technology infringes. Several
companies have very large patent portfolios covering a wide variety of
technologies and may attempt to use their large portfolios to elicit license
fees from our company. Any litigation, brought by us or by others, could be
time-consuming and costly and could divert the attention of our technical and
management personnel. In addition, litigation could 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 acceptable terms, or at all, and could have a material and
adverse impact on our gross margins and profitability. If a successful claim of
product infringement were made against us, our business could be significantly
harmed.
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Our business will suffer if our software contains significant errors or our
product development is delayed
We face possible claims and higher costs as a result of the complexity of
our products and the potential for undetected errors. Due to the "mission
critical" nature of Infranet, undetected errors are of particular concern.
Complex software, such as ours, always contains undetected errors. The
implementations of Infranet that we accomplish through our services division
and with our partners typically involves working with sophisticated software,
computing and communications systems. If we experience difficulties with an
implementation or do not meet project milestones in a timely manner, we could
be obligated to devote more customer support, engineering and other resources
to a particular project and to provide these services at reduced or no cost. If
our software contains significant undetected errors or we fail to meet our
customers' expectations or project milestones in a timely manner we could
experience:
. loss of or delay in revenues and loss of market share;
. loss of customers;
. failure to achieve market acceptance;
. diversion of development resources;
. injury to our reputation;
. increased service and warranty costs;
. legal actions by customers against us; and
. increased insurance costs.
Our licenses with customers generally contain provisions designed to limit
our exposure to potential product liability claims, such as disclaimers of
warranties and limitations on liability for special, consequential and
incidental damages. In addition, our license agreements generally cap the
amounts recoverable for damages to the amounts paid by the licensee to us for
the product or service-giving rise to the damages. However, these contractual
limitations on liability may not be enforceable in certain jurisdictions and
under certain circumstances, particularly if the damages relate to a Year 2000
problem, and we may be subject to claims based on errors in our software or
mistakes in performing our services including claims relating to damages to our
customers' internal systems. A product liability claim, whether or not
successful, could harm our business by increasing our costs, damaging our
reputation and distracting our management.
Despite investigation and testing by us and our partners, Infranet and the
underlying systems and protocols running it may contain previously undetected
errors or defects associated with Year 2000 or other date functions. Several
customers, despite warnings regarding the use of non-Year 2000 certified
versions of Infranet, have continued to use non-certified versions, and decline
to upgrade to certified versions or implement maintenance fixes or bug releases
made available to them. Portal integrates certain third party software into
Infranet. These third party vendors may detect errors in their products after
previously indicating that their products are Year 2000 compliant. Such
revelations by our partners have occurred in the past and may occur in the
future and these revelations have and could cause us to make changes in our
products in response.
In the past we have failed to release certain new products and upgrades on
time. Future delays may result in:
. customer dissatisfaction;
. cancellation of orders and license agreements;
. negative publicity;
. loss of revenues;
. slower market acceptance; or
. legal action by customers against us.
10
<PAGE>
Our business may be harmed if we are unable to develop, license or acquire
new products or enhancements to Infranet on a timely and cost-effective basis,
or if the market does not accept these products or enhancements.
We incorporate software licensed from third parties into Infranet and any
significant interruption in the availability of these third-party software
products or defects in these products could harm our business in the short-term
Portions of Infranet incorporate software developed and maintained by third-
party software vendors, such as operating systems, tools and database vendors.
We expect that we may have to incorporate software from third party vendors and
developers to a larger degree in our future products. Any significant
interruption in the availability of these third-party software products or
defects in these products or future products could harm our sales unless and
until we can secure another source. We may not be able to replace the
functionality provided by the third-party software currently offered with our
products if that software becomes obsolete, defective or incompatible with
future versions of our products or is not adequately maintained or updated. The
absence of, or any significant delay in, the replacement of that functionality
could result in delayed or lost sales and increased costs and could harm our
business in the short-term.
Our future success will depend on our ability to manage technological change
The market for CM&B software and services and Internet applications is
characterized by:
. rapid technological change;
. frequent new product introductions;
. changes in customer requirements; and
. evolving industry standards.
Future versions of hardware and software platforms embodying new
technologies and the emergence of new industry standards could render our
products obsolete. Our future success will depend upon our ability to develop
and introduce a variety of new products and product enhancements to address the
increasingly sophisticated needs of our customers.
Infranet is designed to work on a variety of hardware and software platforms
used by our customers. However, Infranet may not operate correctly on evolving
versions of hardware and software platforms, programming languages, database
environments, accounting and other systems that our customers use. We must
constantly modify and improve our products to keep pace with changes made to
these platforms and to back-office applications and other Internet-related
applications. This may result in uncertainty relating to the timing and nature
of new product announcements, introductions or modifications, which may harm
our business. If we fail to modify or improve our products in response to
evolving industry standards, our products could rapidly become obsolete, which
would harm our business.
The markets in which we sell our product are highly competitive and we may not
be able to compete effectively
We compete in markets that are new, intensely competitive, highly fragmented
and rapidly changing. We face competition from providers of traditional CM&B
software such as Amdocs (which has recently acquired Solect Technology) and the
Kenan Systems division of Lucent; emerging providers of billing software, such
as Belle Systems, Geneva and Daleen Technologies, Inc.; and providers of
Internet-based services that develop proprietary systems. We also compete with
systems integrators and with internal MIS departments of larger
telecommunications carriers. We are aware of numerous other major ISPs,
software developers and smaller entrepreneurial companies that are focusing
significant resources on developing and marketing products and services that
will compete with Infranet. We anticipate continued growth and competition in
the on-line
11
<PAGE>
services and telecommunications industries and the entrance of new competitors
into the CM&B software market, and that the market for our products and
services will remain intensely competitive. We expect that competition will
increase in the near term and that our primary long-term competitors may have
not yet entered the market. Many of our current and future competitors have
significantly more personnel and greater financial, technical, marketing and
other resources than we do.
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than we can. Also, current
and potential competitors have greater name recognition and more extensive
customer bases that they can use to compete more effectively. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins and loss of market share, any of which could harm our business.
Our business substantially depends upon the continued growth of the Internet
and Internet-based services
We sell Infranet to organizations providing Internet-based services.
Consequently, our future revenues and profits, if any, substantially depend
upon the continued acceptance and use of the Internet as an effective medium of
commerce and communication. Rapid growth in the use of the Internet and on-line
wireless services is a recent phenomenon and it may not continue. As a result,
a broad base of regular Internet users may not develop, and the market may not
accept recently introduced services and products that rely upon the Internet,
such as Infranet.
Future regulation of the Internet may slow its growth, resulting in decreased
demand for our products and services and increased costs of doing business
Due to the increasing popularity and use of the Internet, it is possible
that state and federal regulators could adopt laws and regulations that may
impose additional burdens on those companies conducting business on-line. The
growth and development of the market for Internet-based services may prompt
calls for more stringent consumer protection laws or for imposition of
additional taxes. The adoption of any additional laws or regulations may
decrease the expansion of the Internet or impose additional burdens on those
companies conducting business on-line. A decline in the growth of the Internet
could decrease demand for our products and services and increase our cost of
doing business, or otherwise harm our business. Moreover, the applicability to
the Internet of existing laws in various jurisdictions governing issues such as
property ownership, sales tax, libel and personal privacy is uncertain and may
take years to resolve. Our costs could increase and our growth could be harmed
by any new legislation or regulation, the application of laws and regulations
from jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other on-line
services.
Our future success depends on our ability to attract and retain additional
personnel, particularly qualified sales persons
We intend to hire a number of additional sales, support, marketing,
administrative and research and development personnel. Competition for these
individuals is intense, and we may not be able to attract, assimilate or retain
highly qualified personnel in the future. Our business cannot continue to grow
if we cannot attract qualified personnel. For example, we will need to increase
our customer service and support organization staff to support new customers
and the expanding needs of our existing customers. Hiring qualified customer
service and support personnel, as well as sales, marketing, administrative and
research and development personnel, is very competitive in our industry,
particularly in the San Francisco Bay Area, where Portal is headquartered, due
to the limited number of people available with the necessary technical skills
and understanding of the Internet. We may experience greater difficulty
attracting and retaining these personnel with equity incentives as a public
company than we did as a privately held company. Our future success also
depends upon the continued service of our executive officers and other key
sales, marketing and support
12
<PAGE>
personnel in general, and on the services of John E. Little, our President and
Chief Executive Officer, and David S. Labuda, our Chief Technology Officer, in
particular. None of our officers or key employees is bound by an employment
agreement for any specific term. Our relationships with these officers and key
employees are at will.
We may experience problems integrating the business of solution42 into our
business. Any integration problems could cause us to incur substantial
unanticipated costs and expenses, which would harm our operating results
If we fail to integrate solution42's business successfully, we will incur
substantial costs, which will increase our expenses and reduce any earnings or
potentially result in operating losses. In addition, integration problems could
divert management's attention from other business opportunities, which could
result in slower revenue growth than anticipated or even declines in revenue.
Integrating solution42's business with our business will be complex, time-
consuming, and expensive, particularly due to the geographic distance between
solution 42's operations in Germany and our headquarters in California. It may
disrupt our business if not completed in a timely, efficient and effective
manner. We have never attempted to integrate an acquisition of this size and we
may not be successful in doing so.
Specific integration challenges we will face include the following:
. retaining existing customers and strategic partners of solution42;
. retaining and integrating management and other key employees of
solution42;
. combining product offerings and product lines effectively and quickly,
including technical integration by our engineering team;
. integrating sales efforts so that customers can easily do business with
the combined company;
. transitioning multiple information technology systems to a single system;
. successfully developing and promoting a brand strategy and marketing it
to existing and prospective customers; and
. developing and maintaining uniform standards, controls, procedures, and
policies.
Acquisitions of additional companies or technologies may result in further
disruptions to our business and management due to difficulties in assimilating
personnel and operations
We may make additional acquisitions or investments in other companies,
products or technologies in the future. If and when we make any additional
acquisitions, we will be required to assimilate the operations, products and
personnel of the acquired businesses and train, retain and motivate key
personnel from the acquired businesses. We may be unable to maintain uniform
standards, controls, procedures and policies if we fail in these efforts.
Similarly, acquisitions may cause disruptions in our operations and divert
management's attention from day-to-day operations, which could impair our
relationships with our current employees, customers and strategic partners. The
issuance of equity securities for any acquisition could be substantially
dilutive to our stockholders. In addition, our profitability will be adversely
affected by acquisition-related costs or amortization costs for acquired
goodwill and other intangible assets.
Our reported financial results will suffer as a result of purchase accounting
treatment of the solution42 acquisition and the amortization of goodwill and
other intangible assets
Purchase accounting treatment of the acquisition of solution42 will result
in a large initial write-off and additional write-offs over the next several
years, which could have a material and adverse effect on our operating results
and the market price of our common stock. Under purchase accounting, we will
record the following as an asset on our balance sheet:
. the fair value of the consideration given for solution42's outstanding
common stock; and
13
<PAGE>
. acquisition-related direct transaction costs, including the fees of our
legal, accounting, and financial advisors.
We will allocate these costs to individual solution42 assets acquired and
liabilities assumed. These assets and liabilities will include various
identifiable intangible assets such as acquired developed technology, acquired
trademarks and tradenames, and acquired workforce. Intangible assets, including
goodwill, will be amortized over a period corresponding to the life of the
relevant asset. In addition, we will allocate a portion of the purchase price
for acquiring solution42 to in-process research and development which will be
expensed in the fiscal quarter ending January 31, 2001.
The price of our common stock has been, and will continue to be volatile
The trading price of our common stock has fluctuated in the past and will
fluctuate in the future. This future fluctuation could be a result of a number
of factors, many of which are outside our control. Some of these factors
include:
. quarter-to-quarter variations in our operating results;
. failure to meet the expectations of industry analysts;
. changes in earnings estimates by analysts;
. announcements and technological innovations or new products by us or our
competitors;
. increased price competition;
. developments or disputes concerning intellectual property rights; and
. general conditions in the Internet industry.
In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
Internet and computer software companies, including ours, and which have often
been unrelated to the operating performance of these companies or our company.
Decreases in the trading prices of stocks of technology companies are often
precipitous. For example, the price of Portal's stock dropped rapidly during
the first quarter of fiscal year 2001.
Risks Related To This Offering
Our common stock sold in this offering will increase the supply of common stock
on the public market, which may cause our stock price to decline
The sale into the public market of the common stock to be sold in this
offering could materially adversely affect the market price of our common
stock. Once the registration statement of which this prospectus forms a part is
declared effective, all of the shares of common stock to be sold in this
offering will be eligible for immediate and unrestricted resale into the public
market. A significant amount of common stock coming on the market at any given
time could result in a decline in the price of our common stock or increased
volatility.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus, together with all other information included or
incorporated by reference into this prospectus, contains forward-looking
statements that are not historical facts but rather are based on current
expectations, estimates and projections about our business and industry, our
beliefs and assumptions. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks
and uncertainties include those described in "Risk Factors" and elsewhere in
this prospectus, together with all other information included or incorporated
by reference into this prospectus. Forward-looking statements that were true at
the time made may ultimately prove to be incorrect or false. Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect our management's view only as of the date of this prospectus. Except as
required by law, we undertake no obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise.
15
<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
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 our Web site at http://www.portal.com or at the SEC's Web
site at http://www.sec.gov.
The SEC allows us to incorporate by reference into this prospectus the
information we file with the SEC, 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 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 made by us with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, or the Securities
Exchange Act, until the sale of all of the shares of common stock that are part
of this offering. The documents we are incorporating by reference are as
follows:
(1) our Annual Report on Form 10-K for the fiscal year ended January 31,
2000, filed on April 28, 2000;
(2) our Quarterly Report on Form 10-Q for the fiscal quarter ended April
30, 2000, filed on June 14, 2000;
(3) our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31,
2000, filed on September 13, 2000;
(4) our Current Report on Form 8-K filed on November 9, 2000 concerning an
Investment Agreement with the shareholders of solution42; and
(5) the description of our common stock contained in our Form 8-A/A filed
on April 28, 1999.
Any statement contained in a document incorporated by reference will be
modified or superseded for all purposes to the extent that a statement
contained in this prospectus (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to
that previous statement. Any statement so modified or superseded will not be
deemed a part of this prospectus except as so modified or superseded.
Upon written or oral request, we will provide without charge a copy of these
filings, and a copy of any and all of the information that has been or may be
incorporated by reference in this prospectus. Requests for these copies should
be directed to Investor Relations Department, Portal Software, Inc., 10200
South De Anza Blvd., Cupertino, CA 95014, Telephone (408) 572-2000.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement or amendment. 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 the information in this prospectus or in any filing
incorporated by reference is accurate as of any date other than the date on the
front of those documents.
16
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth (1) the name of the selling stockholders, (2)
the number of shares of our common stock being registered for sale as of the
date of this prospectus, which is equal to the number of shares of our common
stock into which the selling stockholders' shares in Portal Solutions may be
exchanged pursuant to an option granted by us to the selling stockholders and
(3) sets forth the number of shares of our common stock known by us to be
beneficially owned by each selling stockholder. This information is based upon
information provided by the selling stockholders and public documents filed
with the SEC, and is not necessarily indicative of beneficial ownership for any
other purpose. No selling stockholder will beneficially own one percent or more
of our outstanding common stock after completion of this offering. The term
"selling stockholder" includes the stockholders listed below and their
transferees, assignees, pledgees, donees or other successors. The following
table assumes that the selling stockholders will sell all of the shares being
offered for their account by this prospectus. However, we are unable to
determine the exact number of shares that actually will be sold. We have not
had a material relationship with any of the selling stockholders within the
past three years other than as a result of the ownership of our shares or other
securities. The shares offered by this prospectus may be offered from time to
time by the selling stockholders.
<TABLE>
<CAPTION>
Number of
Shares of Common
Number of Stock Number of
Shares of Common Beneficially Shares Beneficially
Name of Selling Stock Registered for Owned Prior to Owned After this
Stockholder Sale Hereby this Offering(1) Offering
--------------- -------------------- ---------------- -------------------
<S> <C> <C> <C>
Wolfgang Klotzki........ 442,321 442,321 0
Lydia Klotzki........... 73,007 73,007 0
Marc Stolte............. 515,328 515,328 0
Bernd NiedergesaB....... 813,224 813,224 0
Hermann NiedergesaB..... 70,545 70,545 0
Ingeborg NiedergesaB.... 70,545 70,545 0
Andrew Tan.............. 883,769 883,769 0
Rachel Tan.............. 70,545 70,545 0
Markus Driller.......... 883,769 883,769 0
Simone Driller.......... 70,545 70,545 0
Jurgen Riecke........... 883,769 883,769 0
Werner Riecke........... 70,545 70,545 0
Jorg Luzina............. 883,769 883,819 50
Nora Luzina............. 70,545 70,545 0
Arno Schlosser.......... 883,769 883,769 0
Susanne Schlosser....... 70,545 70,545 0
Arche GmbH.............. 630,739 630,739 0
Rainer Zimmermann....... 37,275 37,275 0
Jorg Weitbrecht......... 74,246 74,246 0
</TABLE>
--------
(1) Consists of all shares of our common stock beneficially owned by the
selling stockholders as of November 9, 2000, plus the shares of common
stock registered in this prospectus.
17
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the common stock by
the selling stockholders. All proceeds will be received by the selling
stockholders.
PLAN OF DISTRIBUTION
We are registering all 7,500,000 shares of our common stock on behalf of the
selling stockholders. We will not receive any of the proceeds from sales by the
selling stockholders of the offered shares of common stock. The selling
stockholders named in the table above or pledgees, donees, transferees or other
successors-in-interest selling shares received from the selling stockholders as
a gift, partnership distribution or other non-sale related transfer after the
date of this prospectus may sell the shares of our common stock 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 these transactions by selling the shares of our common stock to or
through broker-dealers.
The shares of our common stock may be sold by one or more of, or a
combination of, the following:
. a block trade in which the broker-dealer so engaged will attempt to sell
the shares of our common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by this broker-
dealer for its account through this prospectus;
. an exchange distribution that complies with the rules of the exchange;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
. 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 of our common stock or
otherwise. In these transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders also may sell shares short and redeliver
the shares of our common stock to close out these 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 of our common
stock. The broker-dealer may then resell or otherwise transfer these shares
through this prospectus. The selling stockholders may also loan or pledge the
shares to a broker-dealer. The broker-dealer may sell the shares of our common
stock so loaned, or upon a default the broker-dealer may sell the pledged
shares by use of this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders. Broker-
dealers or agents may also receive compensation from the purchasers of the
shares of our common stock 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 of our common stock. Accordingly, any commission, discount
or concession received by them and any profit on the resale of the shares of
our common stock purchased by them may be deemed to be underwriting discounts
or commissions under the
18
<PAGE>
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 through Rule 144 promulgated under the Securities Act may be
sold under Rule 144 rather than through this prospectus. The selling
stockholders have advised us that they have not entered into any agreements,
The shares of our common stock 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 Securities Exchange Act,
any person engaged in the distribution of the shares of our common stock may
not engage in market-making activities with respect to our common stock during
certain restricted periods. In addition, the selling stockholders will be
subject to applicable provisions of the Securities Exchange Act and the
associated rules and regulations under the Securities Exchange Act, including
Regulation M, which 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 the selling stockholders
have been informed of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares of our common
stock.
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 stockholders
that any material arrangement has been entered into with a broker-dealer for
the sale of shares of our common stock through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
. the name of each such selling stockholder and of the participating
broker-dealer(s),
. the number of shares involved,
. the price at which such shares were sold,
. the commissions paid or discounts or concessions allowed to such broker-
dealer(s), where applicable,
. that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus,
and
. other facts material to the transaction.
We will bear all costs, expenses and fees in connection with the
registration of the shares of our common stock. The selling stockholders will
bear all commissions and discounts, if any, attributable to their respective
sales of the shares of our common stock. The selling stockholders may agree to
indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares of our common stock against some liabilities,
including liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of our common stock offered in this prospectus and certain
other legal matters will be passed upon for us by Brobeck, Phleger & Harrison
LLP, Palo Alto, California. As of the date of this prospectus, attorneys of
Brobeck, Phleger & Harrison LLP and family members thereof beneficially owned
an aggregate of approximately 11,000 shares of our common stock.
EXPERTS
The consolidated financial statements of Portal included in Portal's Annual
Report on Form 10-K for the year ended January 31, 2000, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
All costs and expenses incurred in connection with the issuance and
distribution of the securities being registered for sale will be paid by the
Registrant. The following is an itemized statement of these costs and expenses.
All amounts are estimates except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Registration Statement Fee.......................................... $57,183
Printing and engraving.............................................. $ 5,000
Legal fees and expenses............................................. $15,000
Accounting fees and expenses........................................ $10,000
Miscellaneous fees, costs and expenses.............................. $ 2,000
-------
Total............................................................. $89,183
=======
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6 of Portal's Amended
and Restated Bylaws provides for mandatory indemnification of its directors and
officers and permissible indemnification of employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. Portal's
Second Amended and Restated Certificate of Incorporation provides that, subject
to Delaware law, its directors shall not be personally liable for monetary
damages for breach of the directors' fiduciary duty as directors to Portal and
its stockholders. This provision in the Second Amended and Restated Certificate
of Incorporation does not eliminate the directors' fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to Portal or its stockholders for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations
of law, for actions leading to improper personal benefit to the director, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a
director's responsibilities under any other law, such as the federal securities
laws or state or federal environmental laws. Portal has entered into
indemnification agreements with its officers and directors, a form of which was
previously filed with the Securities and Exchange Commission as an Exhibit to
the Registrant's Registration Statement on Form S-1 (No. 333-7299) (the
"Indemnification Agreements"). The Indemnification Agreements provide Portal's
officers and directors with further indemnification to the maximum extent
permitted by the Delaware General Corporation Law.
II-1
<PAGE>
Item 16. Exhibits.
The exhibits listed in the Exhibit Index are filed herewith or incorporated
by reference herein:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
2.1(1) Investment Agreement dated as of November 2, 2000 by and among Portal
Software, Inc., Helianthus Vermogensverwaltunggesellschaft mbH, and
the shareholders of solution42 AG.
2.2(1) Agreement dated as of November 2, 2000 by and among Portal Software,
Inc., Helianthus Vermogensverwaltunggesellschaft mbH, Arno Schlosser,
as Shareholder Agent for the shareholders of solution42 AG, and U.S.
Bank Trust National Association, as Escrow Agent.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (See Signature Page).
</TABLE>
--------
(1) Previously filed as an Exhibit to the Form 8-K filed with the Commission on
November 9, 2000, and incorporated herein by reference.
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:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) 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;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to that information in the registration statement;
provided, however, that clauses (a) and (b) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Registrant pursuant to Section 13 or Sections
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are
incorporated by reference 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.
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 Exchange Act that is incorporated by reference in this
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.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the 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:
(1) 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of Cupertino, State of California, on this 9th day of November, 2000.
PORTAL SOFTWARE, INC.
/s/ John E. Little
By:__________________________________
John E. Little
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John E. Little, Jack L. Acosta and Mitchell L.
Gaynor and each of them, as such person's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this prospectus,
and to file same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John E. Little President and Chief November 9, 2000
____________________________________ Executive Officer, Chairman
John E. Little of the Board and Director
(Principal Executive
Officer)
/s/ Jack L. Acosta Chief Financial Officer and November 9, 2000
____________________________________ Vice President, Finance
Jack L. Acosta (Principal Financial and
Accounting Officer)
/s/ Arthur C. Patterson Director November 9, 2000
____________________________________
Arthur C. Patterson
/s/ David C. Peterschmidt Director November 9, 2000
____________________________________
David C. Peterschmidt
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert P. Wayman Director November 9, 2000
____________________________________
Robert P. Wayman
/s/ Edward J. Zander Director November 9, 2000
____________________________________
Edward J. Zander
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
2.1(1) Investment Agreement dated as of November 2, 2000 by and among Portal
Software, Inc., Helianthus Vermogensverwaltunggesellschaft mbH, and
the shareholders of solution42 AG.
2.2(1) Agreement dated as of November 2, 2000 by and among Portal Software,
Inc., Helianthus Vermogensverwaltunggesellschaft mbH, Arno Schlosser,
as Shareholder Agent for the shareholders of solution42 AG, and U.S.
Bank Trust National Association, as Escrow Agent.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (See Signature Page).
</TABLE>
--------
(1) Previously filed as an Exhibit to the Form 8-K filed with the Commission on
November 9, 2000, and incorporated herein by reference.
