RIGHTNOW TECHNOLOGIES INC, S-1, 2000-04-20

RIGHTNOW TECHNOLOGIES INC
S-1, 2000-04-20

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As filed with the Securities and Exchange Commission on April 20, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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RIGHT NOW TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Montana 7372 81-0503540
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>

77 Discovery Drive
Bozeman, Montana 59718
(406) 522-4200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

Greg R. Gianforte
Chief Executive Officer
Right Now Technologies, Inc.
77 Discovery Drive
Bozeman, Montana 59718
(406) 522-4200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
<TABLE>
<S> <C>
John W. Manning William H. Hinman, Jr.
Lawrence T. Martinez Shearman & Sterling
Dorsey & Whitney LLP 1550 El Camino Real, Suite 100
507 Davidson Building Menlo Park, CA 94025-4100
8 Third Street North (650) 330-2200
Great Falls, Montana 59401
(406) 727-3632
</TABLE>

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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.

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,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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

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<CAPTION>
Title of each class of securities to be Maximum Aggregate Amount of
registered Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock, par value $.001 per
share................................. $50,000,000 $13,200
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).

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.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We 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 offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 20, 2000

[RightNow Technologies, Inc. Logo]

Common Stock

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Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on The Nasdaq
Stock Market's National Market under the symbol "RTNW."

The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.

Investing in the common stock involves risks. See "Risk Factors" on page 6.

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<CAPTION>
Underwriting Proceeds to
Price to Discounts and RightNow
Public Commissions Technologies
-------------- -------------- --------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total.............................. $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about , 2000.

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.

Credit Suisse First Boston

Dain Rauscher Wessels

Thomas Weisel Partners LLC

Adams, Harkness & Hill, Inc.

D.A. Davidson & Co.

The date of this prospectus is , 2000.
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[DESCRIBE INSIDE COVER GRAPHICS]

[Our artwork portrays a representation of how our RightNow Web product
addresses questions a visitor to a business Web site may have. It will use the
words "Self-Help," "E-Mail Management," "Live Chat Interaction" and "Customer
Driven Dynamic Knowledgebase" in the depiction. It will also use our corporate
logo and the phrase "Getting Answers with RightNow Web."]
<PAGE>

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TABLE OF CONTENTS

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Page
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Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
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Page
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Business................................................................... 29
Management................................................................. 43
Related Party Transactions................................................. 52
Principal Stockholders..................................................... 53
Description of Capital Stock............................................... 55
Shares Eligible for Future Sale............................................ 58
Underwriting............................................................... 60
Notice to Canadian Residents............................................... 63
Legal Matters.............................................................. 64
Experts.................................................................... 64
Where You Can Find More Information........................................ 64
Index to Financial Statements.............................................. F-1
</TABLE>
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may be accurate only
on the date of this document.

Dealer Prospectus Delivery Obligation

Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information you should consider before
buying shares in this offering. You should read the entire prospectus
carefully, including our financial statements and related notes, before making
an investment decision.

RightNow Technologies, Inc.

Businesses are increasingly using the Internet as an integral means of
communicating and interacting with their customers, business partners and
employees. As customer communication shifts to the Internet, customers expect
the capability not only to view and purchase products online, but also to
obtain answers to their product and service questions at any hour of the day.
We believe that the ability to efficiently provide fast, reliable and accurate
information to meet customer expectations has become a competitive necessity
for many organizations.

We believe a significant market opportunity exists for an integrated
Internet customer service solution that enables both effective customer self-
service and streamlined escalation to other channels of company communication.
Self-service, or the ability of customers to help themselves by accessing the
information they seek, allows businesses to rapidly respond to growing customer
needs without hiring the large numbers of additional personnel that are
required to generate responses by traditional means. When self-service is
combined with a dynamically updated knowledgebase and the ability to easily
deliver information through e-mail, live chat or other person-to-person
interaction, the resulting solution allows companies to leverage their existing
resources to achieve higher levels of customer satisfaction, increased employee
productivity and decreased cost per customer service interaction.

Our Internet customer service solution provides businesses and other
organizations with the following benefits:

. increased customer satisfaction, which our products achieve by enabling
fast, efficient and intelligent resolution of customer service questions
and issues;

. reduced cost of customer service, which results from enabling and
encouraging customer self-service, helping customers communicate
questions they cannot answer on their own to a customer service
representative and assisting customer service representatives to answer
questions;

. dynamic knowledge capture, organization, publication and distribution,
the core features of our knowledgebase technology;

. application service provider delivery, which allows businesses to
minimize implementation requirements and reduce the cost of ownership of
our hosted products;

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. a comprehensive, rapidly deployable solution that integrates Internet-
based customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities; and

. a scalable, Web-based architecture that allows businesses to meet the
growth in Internet-based communications.

Our objective is to enhance our position as a leading provider of Internet
customer service solutions to businesses and organizations of all sizes. As of
March 31, 2000, we had 574 customers, which we believe to be more than any
other Internet customer service software company. To continue our success in
this regard, we intend to leverage the efficiency of our direct sales channel
to acquire new customers and increase penetration of our existing customers,
and to expand our indirect sales channels and strategic relationships. In
addition, we intend to extend the breadth and depth of our product offerings,
increase the availability of our application service provider hosting services
and expand our international presence.

We were incorporated in Montana in September 1995. We intend to
reincorporate in Delaware as RightNow Technologies, Inc. prior to the
consummation of this offering. Our principal executive offices are located at
77 Discovery Drive, Bozeman, Montana 59718, and our telephone number is (406)
522-4200. Our Web site is located at http://www.rightnowtech.com. Information
contained on our Web site does not constitute a part of this prospectus.

"Right Now" is our trademark. We have applied for federal registration of
the trademarks "RightNow" combined with the RightNow logo, and
"SmartAssistant." Other trademarks or service marks appearing in this
prospectus are the property of their respective holders.

The Offering

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<S> <C>
Common stock offered................ shares
Common stock to be outstanding after
the offering....................... shares
Use of proceeds..................... For general corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................. RTNW
</TABLE>

The number of shares of common stock to be outstanding after the offering is
based upon the actual number of shares outstanding as of March 31, 2000. It
does not include:

. 10,000,000 shares of common stock reserved for issuance under our stock
option plans, 6,572,050 of which were covered by outstanding options with
a weighted average exercise price of $0.63 per share and 2,705,200 of
which were available for future grants; and

. 500,000 additional shares of common stock that will be reserved for
issuance under our employee stock purchase plan.

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Unless otherwise indicated, the information in this prospectus reflects the
number of shares outstanding on March 31, 2000 assuming:

. the conversion of all outstanding shares of preferred stock into common
stock upon the closing of this offering;

. our reincorporation in Delaware, which will be effected prior to the
closing of this offering; and

. no exercise of the underwriters' over-allotment option.

4
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Summary Financial Data

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<CAPTION>
Three Months
Year Ended December Ended March
31, 31,
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1997 1998 1999 1999 2000
------ ------ ------- ------ -------
(in thousands, except per share
data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue.............................. $ 79 $ 279 $ 2,025 $ 135 $ 1,443
Cost of revenue...................... 1 3 64 3 166
Gross profit......................... 78 276 1,961 132 1,277
Total operating expenses............. 61 439 4,439 316 4,473
Income (loss) from operations........ 17 (163) (2,478) (184) (3,196)
Net income (loss).................... 26 (163) (2,445) (184) (3,028)
Basic and diluted net income (loss)
per share........................... $ -- $(0.01) $ (0.12) $(0.01) $ (0.15)
Shares used in computing basic and
diluted net income (loss) per
share............................... 20,000 20,114 20,364 20,319 20,602
Pro forma basic and diluted net loss
per share........................... $ (0.12) $ (0.12)
Shares used in computing basic and
diluted pro forma net loss per
share............................... 20,509 26,156
</TABLE>

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<CAPTION>
March 31, 2000
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Pro Forma
Actual Pro Forma As Adjusted
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(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $12,374 $12,374
Working capital.................................. 10,683 10,683
Total assets..................................... 18,140 18,140
Deferred revenue................................. 7,171 7,171
Redeemable convertible preferred stock........... 16,120 --
Total stockholders' equity (deficit)............. (6,899) 9,221
</TABLE>

The pro forma information in the above tables assumes conversion of all
outstanding shares of our preferred stock into common stock. The pro forma as
adjusted information in the above balance sheet data table is adjusted to
reflect the sale of shares of common stock offered by us in this offering
at an assumed initial public offering price of $ per share, after deduction
of the estimated underwriting discounts and commissions and estimated offering
expenses.

See note 1 of the notes to our financial statements for an explanation of
the determination of the number of weighted average shares used to compute
basic and diluted net income (loss) per share and pro forma basic and diluted
net loss per share data.

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RISK FACTORS

Before investing in our common stock, you should be aware that various risks
are involved, including those described below. The occurrence of any of the
following risks could have a material adverse effect on our business, financial
condition and results of operations. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment.
Before making a decision to buy our common stock, you should carefully consider
the risks described below as well as the other information in this prospectus,
including our financial statements and the related notes.

Risks Related to Our Business

Our limited operating history makes it difficult to evaluate our business and
future prospects.

We first recorded revenue from subscriptions for our software in November
1997. Due to our limited operating history, we have limited financial data that
you can use to evaluate our business. In addition, our products address a new
and emerging market for Internet-based customer service software solutions.
Because of the new and rapidly evolving nature of the market in which we
operate combined with our limited operating history, our prospects are
difficult to predict and may change rapidly and without warning.

If we fail to properly manage and support the rapid growth and expansion of our
business, our financial results will be adversely affected.

We have substantially expanded our business and operations since March 1,
1999. We have increased our number of employees to 206 at March 31, 2000 from
36 at March 31, 1999. We have recently expanded our operations by opening a
sales office in Dallas, and we plan to open other sales offices. In addition,
the majority of our senior management team has been hired since August 1999.
This expansion has placed, and is expected to continue to place, a significant
strain on our managerial, administrative, operational, financial and other
resources. To manage this growth and execute our business strategy effectively,
we will need to implement and improve our financial systems, procedures and
controls, hire, train and integrate new personnel, manage expanded operations
and integrate our management team. If we are unable to properly manage and
support our rapid growth, our business and financial results will be adversely
affected.

We have incurred and expect to incur substantial operating losses, and
consequently we may not be profitable in the future.

We incurred losses from operations of approximately $2.5 million for the
year ended December 31, 1999 and $3.2 million for the three months ended March
31, 2000. As of March 31, 2000, we had an accumulated deficit of approximately
$5.6 million. We expect to continue to incur significant sales and marketing,
product development and general and administrative expenses and, as a result,
we will need to generate significant revenues to achieve and maintain
profitability. Although our revenues have grown significantly in recent
quarters, we cannot be certain that we can sustain these growth rates or that
we will generate sufficient revenues to achieve profitability in the future or
at all.

Substantially all of our revenue to date has been derived from subscriptions
for RightNow Web, and if we fail to successfully upgrade or enhance RightNow
Web and introduce new products, our ability to grow our business will be
adversely affected.

Substantially all of our revenue to date has been derived from subscriptions
for RightNow Web. Our future financial performance will depend, in significant
part, on our successful development and sale of new and enhanced versions of
RightNow Web and other new products. We may not be able to successfully develop
new products and our new products may not achieve market acceptance, in which
case we will be unable to adequately grow our business.

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We face intense competition in our market, and our failure to compete
successfully could make it difficult for us to acquire and retain customers.

The market for our products is new and intensely competitive. We expect the
intensity of competition to increase in the future. If we are unable to compete
effectively, it will be difficult for us to acquire and retain customers.
Increased competition could result in pricing pressures, reduced margins or the
failure of our products to achieve or maintain market acceptance.

Our products compete with systems that were developed and maintained
internally by businesses. We also compete directly with companies that provide
licensed software products for customer service solutions. Our competitors
include a number of companies offering one or more products for the electronic
customer relationship management software market, some of which compete
directly with our products. Our competitors include companies providing similar
solutions, including eGain Communications Corporation, Kana Communications,
Inc. and Servicesoft Technologies, Inc. In addition, we face competition from
other companies that provide customer relationship management, e-commerce and
communications and knowledgebase management solutions.

Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
technical, marketing, management, service, support and other resources than we
have. In addition, many of our competitors have well-established relationships
with our current or potential customers and potential alliance partners and
have an extensive knowledge of our industry. Therefore, they may be able to
respond more quickly than we can to new or changing opportunities,
technologies, standards or customer requirements.

A significant number of companies are entering the electronic customer
relationship management software market. We expect that new competitors will
continue to enter the market with competing products as the size and visibility
of the market opportunity increase. We also expect that competition will
increase as a result of software industry consolidations and formations of
alliances among industry participants. For example, in February 2000, Kana
announced plans to acquire Silknet Software, Inc. Competitors with large market
capitalizations or cash reserves would be better positioned than we are to
acquire complementary businesses, new technologies or products.

We may not be able to compete successfully against current and future
competitors, and competitive pressures may seriously harm our business.

Substantially all of our products are sold pursuant to single- or multi-year
subscriptions, and if our existing customers elect not to renew their
subscriptions, our reputation and financial results will be adversely affected.

Customers who desire to continue to use our products at the end of their
software subscription term will have to renew their subscriptions. To date,
only a few subscriptions have come up for renewal. Between March 31 and
December 31, 2000, approximately 8% of our current subscriptions will come up
for renewal and, in 2001, a majority of our current subscriptions will come up
for renewal. Given our limited operating history, we do not have historical
information with which to estimate the rates of renewal or the terms on which
renewals will be made. If large numbers of existing customers decide not to
renew their subscriptions, our reputation will suffer and our financial results
will be adversely affected.

If we fail to respond effectively to rapidly changing technology and evolving
industry standards, our products may become obsolete.

The market for our products is characterized by rapid technological change,
changes in customer requirements, frequent new product and service
introductions and enhancements and evolving industry

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standards. Competing products based on new technologies or new industry
standards may perform better or cost less than our products and could render
our products obsolete or unmarketable. If we are unable on a timely basis to
develop new and enhanced products that respond to changing technology and
satisfy the needs of our customers, our business and financial results could
suffer. Our future success depends on our ability to satisfy diverse and
evolving customer requirements and achieve market acceptance. We cannot be
certain that we will be successful in developing and marketing product
enhancements or new products in a timely or cost-effective manner, or that
these products, if developed, will achieve market acceptance.

Failure to develop and expand our marketing capabilities will limit our growth
and prevent us from increasing our revenue.

We need to expand our marketing operations in order to increase market
awareness of our products, market our products to a greater number of
organizations and generate increased revenue. Competition in the market for
Internet-based customer service solutions is intense, and if we fail to
differentiate our products from those of our competitors and acquire greater
market share, we will be unable to grow our business or increase our revenue.
Furthermore, we have limited experience marketing our products broadly to a
large number of customers and may be unable to do so successfully.

A failure to expand our direct sales force will impede our growth.

To date, we have sold our products primarily through our direct sales force,
which has grown to 79 at March 31, 2000 from eight at December 31, 1998. Our
ability to achieve significant revenue growth in the future will depend, in
large part, on our success in recruiting, training and retaining sufficient
direct sales personnel. New hires require training and take time to achieve
full productivity. Our recent hires and planned hires may not become as
productive as necessary, and we may be unable to hire sufficient numbers of
qualified individuals in the future. In addition, we plan to use international
direct sales personnel and therefore must hire sales personnel outside of the
United States, where we have no experience in hiring and managing sales
personnel and may be unsuccessful in doing so. If we are unable to hire and
develop sufficient numbers of productive sales personnel, sales of our products
will suffer.

A failure to develop indirect sales channels will impede our growth.

To execute our business strategy, we must increase the number of our
marketing and distribution partners, including value-added resellers,
integrators and outsourced call centers. In addition, we intend to pursue
strategic alliances with technology providers to enhance the marketing and
distribution of our products. We will rely on these indirect sales channels to
increase our customer base. At times, we will rely on these third parties to
recommend our products to their customers and to implement and support our
products for their customers. Our existing or future distribution partners may
choose to devote greater resources to marketing and supporting the products of
our competitors than they do to marketing and supporting our products, which
would impede our revenue growth. Further, if these third parties fail to
implement or support our products successfully, our reputation may be harmed
and sales will be adversely affected.

Our application service provider delivery model relies on third parties to
provide hosting services, and if we are unable to contract with third-party
hosting providers, our products may become less desirable.

Approximately 50% of our current customers have selected our hosting
services, and we expect that the percentage of our customers that are hosted
will increase. We currently have relationships with third-party hosting
providers to maintain data centers. If our current hosting arrangements were to
be terminated, we could experience delays in arranging new third-party hosting
services, which could harm our relationships with customers and our reputation,
resulting in decreased revenue. Our operations depend on our current hosting
providers' ability to protect their and our systems in their data center
against damage or interruption. Our third-party hosting providers do not
guarantee that our customers' access to hosted solutions will be uninterrupted,
error-free or secure. We have no formal disaster recovery plan in the event of
damage or interruption, and our

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insurance policies may not adequately compensate us for any losses that we may
incur. Any system failure that causes an interruption in our service or a
decrease in responsiveness could harm our relationships with our customers and
result in reduced revenue. In addition, our business and customer relationships
could suffer or we could be subject to costly litigation if the security of our
customers' confidential information contained in our data centers is breached.

Variations in quarterly revenue and operating results due to factors such as
changes in demand for our products may cause our stock price to decline.

Our quarterly revenue and operating results may fluctuate significantly as a
result of a variety of factors, including those listed below, many of which are
outside of our control. If our quarterly revenue or operating results fall
below the expectations of investors or securities analysts, the price of our
common stock could decline substantially. Factors that might cause fluctuations
in our quarterly revenue and operating results include the following:

. variations in and difficulty predicting demand for our products;

. the timing and success of new product introductions or upgrades by us or
our competitors;

. our practice of paying sales commissions at the time of sale, while the
related revenue is recognized ratably over the term of the subscription;

. the renewal rate of customers whose subscriptions have expired and the
terms upon which they renew;

. changes in our pricing policies or those of our competitors;

. changes in the mix of term software subscriptions and perpetual licenses
sold in a particular quarter due to the different methods of revenue
recognition;

. our ability to expand our operations, and the amount and timing of
expenditures related to this expansion;

. the purchasing and budgeting cycles of our customers;

. the rate of success of our international expansion;

. general economic conditions as well as those specific to our customers
and markets; and

. costs related to possible acquisitions of technology or businesses.

Most of our expenses, such as salaries and third-party hosting costs, are
relatively fixed in the short term, and our expense levels are based in part on
our expectations regarding future revenue levels. As a result, if revenue for a
particular quarter is below our expectations, we will not be able to
proportionally reduce operating expenses for that quarter. A revenue shortfall
will have a disproportionate effect on our expected operating results for that
quarter.

For the foregoing reasons, we believe that quarter-to-quarter comparisons of
our operating results are not necessarily meaningful, and you should not rely
on them as an indication of our future performance.

Our business operations could be significantly disrupted if we lose members of,
or fail to properly integrate, our management team.

Our success depends to a significant degree upon the skills, experience and
performance of our senior management, engineering, sales, marketing, service,
support and other key personnel. Specifically, we believe that our future
success is highly dependent on Greg R. Gianforte, our founder, Chairman and
Chief Executive Officer. If we lose the services of Mr. Gianforte or other key
personnel, our business will be severely disrupted and we may be unable to
operate effectively. We do not maintain "key person" life insurance policies
except on Mr. Gianforte. This life insurance policy may not be sufficient to
compensate us for the loss of his services.

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Almost all of the members of our senior management team joined us since
August 1999. Most of these individuals have not previously worked together and
are currently being integrated as a management team. If our senior management
is unable to work effectively as a team, our business operations could be
significantly disrupted.

Our failure to attract and retain qualified personnel may prevent us from
effectively developing, marketing and supporting our products.

We intend to continue to significantly expand our sales, marketing, product
development and customer support personnel. Qualified personnel are in great
demand throughout the software industry. Our business success depends in large
part upon our ability to attract, train, motivate and retain highly skilled
employees, particularly sales and marketing personnel, software engineers and
other senior personnel. If we fail to retain and recruit necessary sales and
marketing, engineering, customer support or other personnel, we will be unable
to develop new products and services in a timely manner or to provide
acceptable levels of customer support.

Our market share will decrease and our reputation will suffer if our products
fail to perform properly.

Our software products may contain undetected errors, or bugs, that may
result in product failures or otherwise fail to perform in accordance with
customer expectations. Product performance problems could result in loss of or
delay in revenue, loss of market share, failure to achieve market acceptance,
the diversion of development resources or injury to our reputation.

We intend to expand our international sales efforts but do not have substantial
experience in international markets, and therefore may be unable to
successfully expand internationally.

Although our international sales have not been material to date, we intend
to expand our international sales efforts, including the development of direct
and indirect sales channels. We have limited experience in marketing, selling
and supporting our products and services abroad. If we are unable to grow our
international operations successfully and in a timely manner, we will be unable
to grow our business successfully. Expanding internationally subjects us to a
number of risks, including:

. greater difficulty in staffing and managing foreign operations;

. changes in a specific country's or region's political or economic
conditions;

. expenses associated with localizing products for foreign countries;

. differing intellectual property rights;

. protectionist laws and business practices that favor local competitors;

. longer sales cycles and collection periods or seasonal reductions in
business activity;

. multiple, conflicting and changing governmental laws and regulations; and

. foreign currency exchange rate fluctuations.

We are starting to implement our international expansion and expect to have
sales and marketing professionals located in the United Kingdom and Germany by
the end of 2000 and in the Pacific Rim in 2001. We also may explore other
regions for future expansion. Expanding our international operations will
require a significant amount of attention from our management and significant
financial resources, and may take needed attention and resources away from our
domestic operations, which could harm our business and financial results.

We may face increased competition if we are unable to protect our intellectual
property rights.

Our success depends to a significant degree upon the protection of our
software and other proprietary technology rights. We rely on trade secret,
copyright and trademark laws, patents and confidentiality

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<PAGE>

agreements with employees and third parties, all of which offer only limited
protection. We currently have four U.S. patent applications pending relating to
our software. Our pending patent applications may not result in the issuance of
patents and, if issued, may not be broad enough to protect our proprietary
rights or could be successfully challenged by one or more third parties, which
could result in our loss of the right to prevent others from exploiting the
inventions claimed in those patents. None of our technology is patented outside
of the United States, nor do we currently have any international patent
applications pending. The laws of other countries in which we market our
products may afford little or no effective protection of our proprietary
technology. Consequently, we may be unable to prevent our proprietary
technology from being exploited abroad, which could diminish international
sales revenue or require costly efforts to protect our technology.

Both domestically and internationally, the reverse engineering, unauthorized
copying or other misappropriation of our proprietary technology could enable
third parties to benefit from our technology without paying us for it. This
could have a material adverse effect on our business and financial results.
Policing the unauthorized use of our products is difficult. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Such litigation could result in substantial costs and
diversion of management resources, either of which could harm our business.

We may become subject to claims of intellectual property infringement, which
could be costly and time-consuming.

If any of our products violate third-party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties to continue offering our products without substantial reengineering. We
generally do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes patents held by third parties. Third
parties might make a claim of infringement against us or our customers. Many of
our license agreements require us to indemnify our customers from any claim or
finding of intellectual property infringement. In addition, product development
is inherently uncertain in a rapidly evolving technological environment in
which there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. Any efforts to
reengineer our products or obtain licenses from third parties may not be
successful and, in any case, would substantially increase our costs and harm
our business and financial results.

We could incur substantial costs as a result of product liability claims
relating to our customers' business operations.

If one of our products fails, a customer may assert a claim for substantial
damages against us, whether or not we are responsible for the product failure.
Our license agreements 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. However, these contractual limitations on liability may not
be enforceable, and we may be subject to claims based on errors in our
software. Product liability claims could require us to spend significant time
and money in litigation or to pay significant damages. Although we maintain
general liability insurance, including coverage for errors and omissions, we
cannot assure you that this coverage will continue to be available on
reasonable terms or will be available in amounts sufficient to cover one or
more large claims, or that the insurer will not disclaim coverage as to any
future claim.

Future acquisitions could disrupt our business and harm our financial
condition.

In order to remain competitive, we may find it necessary to acquire
additional businesses, products and technologies. In the event that we do
complete an acquisition, we could be required to do one or more of the
following:

. issue equity securities, which would dilute current stockholders;

. incur substantial debt;

11
<PAGE>

. assume contingent liabilities;

. incur a one-time charge; or

. amortize goodwill and other intangible assets.

Any of these actions would adversely affect our financial results and could
result in decreased profitability. Additionally, we may not be able to
successfully integrate any technologies, products, personnel or operations of
companies that we acquire. These difficulties could disrupt our business,
divert management resources and increase our expenses.

Risks Related to Our Industry

Our business depends on the continued growth of Internet usage and the
continued growth of business being conducted over the Web.

Our products are designed to serve the customer service needs of businesses
that use the Internet for marketing, sales and customer service. Our future
success depends substantially upon the widespread adoption of the Internet as a
primary medium for commerce, communication and business applications. Because
our business is Internet-based, the failure of this market to develop, or a
delay in the development of this market, would impact our ability to grow our
business. Our business growth also would be impeded if Internet usage does not
continue to grow or grows more slowly than we currently anticipate. The
continued growth of the Internet depends on various factors, all of which are
outside of our control. Moreover, the Web has experienced, and is expected to
continue to experience, significant user and traffic growth, which has, at
times, caused user frustration with slow access and download times. If Web
infrastructure is unable to support the demands placed on it, our market may
grow more slowly than expected and our revenue growth may suffer.

Additionally, critical issues concerning the commercial use of the Web, such
as security, reliability, cost, accessibility and quality of service, remain
unresolved and may negatively affect the growth of Web use or the
attractiveness of commerce and business communication over the Web. The Web
could lose its viability due to delays in the development or adoption of new
standards and protocols to handle increased activity or due to increased
government regulation and taxation of Internet commerce. Because our business
is Internet-based, any of these results would significantly limit the market
for our products.

Finally, our products address a new and emerging market for Internet-based,
interactive electronic business solutions. Because of the new and rapidly
evolving nature of the market in which we operate combined with our limited
operating history, our prospects are difficult to predict and may change
rapidly and without warning.

Increasing government regulation of the Internet could slow our growth or
impede our ability to be profitable.

Federal, state or foreign government bodies or agencies may adopt laws or
regulations affecting the use of the Internet as a commercial medium. If
enacted, these laws or regulations could limit the market for our products,
which could slow our growth and reduce our revenue. Even if they do not apply
to our business directly, we expect that laws and regulations relating to user
privacy, pricing, content and quality of products and services could indirectly
affect our business. It is possible that these types of laws or regulations
could expose companies involved in Internet commerce to liability or could
limit the growth of Internet commerce generally. Either of these results would
slow our growth and impede our ability to be profitable.

The imposition of sales and other taxes on products sold by our customers over
the Internet could limit online commerce and, as a result, reduce the demand
for our products.

The imposition of new sales or other taxes could limit the growth of
Internet commerce generally and, as a result, the demand for our products and
services. Current federal legislation limits the imposition of state and

12
<PAGE>

local taxes on Internet-related sales. Congress may choose not to renew this
legislation in 2001, in which case state and local governments would be free to
impose taxes on electronically purchased goods.

Companies that sell products over the Internet are not required to collect
sales or other taxes on shipments of their products into states or foreign
countries where they are not physically present. However, one or more states or
foreign countries may seek to impose sales or other tax collection obligations
on companies that engage in e-commerce outside of the state or foreign
jurisdiction. A successful assertion by one or more states or foreign countries
that companies engaging in e-commerce should collect sales or other taxes on
the sale of their products over the Internet, even though not physically in the
state or country, could indirectly reduce demand for our products.

Privacy concerns relating to the Internet are increasing, which could result in
legislation that adversely affects our business or reduces sales of our
products.

Businesses using our software capture information regarding their customers
when those customers contact them online with customer service inquiries.
Privacy concerns may cause visitors to resist providing the personal data
necessary to allow our customers to use our software products most effectively.
Also, even the perception of privacy concerns, whether or not valid, may
indirectly inhibit market acceptance of our products. In addition, legislative
or regulatory requirements may heighten these concerns if businesses must
notify visitors to their Web sites that the data captured after visiting some
Web sites may be used by marketing entities to direct product promotion and
advertising to that user. While we are not aware of any legislation or
regulatory requirements of this sort currently in effect in the United States,
other countries and political entities, including the European Union, have
adopted this type of legislation or regulatory requirements, and the United
States may do so as well.

Risks Related to This Offering

Our common stock is particularly subject to volatility because our industry is
newly emerging and rapidly growing.

The stock market has recently experienced extreme price and volume
fluctuations. In particular, the market prices of securities of technology
companies, especially Internet-related companies, have been extremely volatile
and have experienced fluctuations that often have been unrelated or
disproportionate to the operating performance of companies. These broad market
fluctuations could reduce the market price of our common stock.

The significant control over stockholder voting matters that may be exercised
by our founder and Chief Executive Officer will deprive you of the ability to
influence corporate actions.

After this offering, Greg R. Gianforte, our founder and Chief Executive
Officer, will control approximately % of the outstanding common stock and,
together with our other officers and directors, will control approximately
% of the outstanding stock. As a result, Mr. Gianforte, acting alone, will
be able to control all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying, preventing or
deterring a change in control of RightNow, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of
RightNow and might reduce the market price of our common stock.

The price of our common stock after this offering may be lower than the price
you pay.

The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you pay. After this offering, an
active trading market in our stock might not develop or continue. If you
purchase shares of our common stock in this offering, you will pay a price that
was not established in a

13
<PAGE>

competitive market. Rather, you will pay a price that we negotiated with the
representatives of the underwriters based upon several factors. See
"Underwriting" for a description of these factors.

Our broad discretion in using the proceeds from this offering may negatively
impact our financial results.

Our decisions regarding the use of the proceeds of this offering could harm
our business, operating results and financial condition. We have not identified
specific uses for the proceeds from this offering, and we will have broad
discretion in how we use them. You will not have the opportunity to evaluate
the economic, financial or other information on which we base our decisions on
how to use the proceeds.

Our prospects for obtaining additional financing, if required, are uncertain,
and failure to obtain needed financing could diminish our ability to pursue
future growth.

We may need to raise additional funds to develop or enhance our products, to
fund expansion, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. If required, additional financing may not
be available on terms that are acceptable to us. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and these securities might have
rights, preferences and privileges senior to those of our current stockholders.
If adequate funds are not available on acceptable terms, our ability to fund
our expansion, develop or enhance products, take advantage of unanticipated
opportunities or otherwise respond to competitive pressures will be
significantly limited.

Investors will experience immediate and substantial dilution in the book value
of their investment.

If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution, in that the price you pay will
be substantially greater than the net tangible book value per share of the
shares you acquire. This dilution is due in large part to the fact that our
earlier investors paid substantially less than the public offering price when
they purchased their shares of common stock. You will experience additional
dilution upon our optionees' exercise of outstanding stock options to purchase
our common stock.

Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company.

Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable and may limit the market price of our common stock. These
provisions include the following:

. establishing a classified board in which only a portion of the total
board members will be elected at each annual meeting;

. authorizing the board to issue preferred stock;

. prohibiting cumulative voting in the election of directors;

. limiting the persons who may call special meetings of stockholders; and

. prohibiting stockholder action by written consent.

Future sales by existing stockholders could depress the market price of our
common stock.

If our existing stockholders sell a large number of shares of our common
stock after this offering, the market price of the common stock could decline
significantly. Moreover, a perception in the public market that our existing
stockholders might sell shares of common stock could depress the market price
of our common

14
<PAGE>

stock. Immediately after this offering, approximately 26,301,438 shares held by
our existing stockholders will be outstanding. Of these shares,
shares will be available for resale in the public market without restriction
immediately following this offering, substantially all of which are subject to
lock-up agreements restricting the sale of common stock for 180 days after the
date of this prospectus. In addition, shares will be available for
resale in the public market without restriction 90 days after the date of this
prospectus, of which are subject to lock-up agreements restricting the
sale of common stock for 180 days after the date of this prospectus.

Some of our existing stockholders have the right to require us to register
with the Securities and Exchange Commission up to 5,554,853 shares of our
common stock that they own. If we register these shares of common stock, the
stockholders can freely sell those shares in the public market. All of these
shares are subject to lock-up agreements restricting their sale for 180 days
after the date of this prospectus.

After this offering, we intend to register approximately 10 million shares
of our common stock that we have issued or may issue under our stock plans.
Once we register these shares, they can be freely sold in the public market
upon issuance, subject to the lock-up agreements, if applicable, described
above.

15
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and elsewhere. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue" or the negative of these terms, or other comparable
terminology. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
level of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed
or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assume responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.

In this prospectus, we use market data and industry forecasts that we have
obtained from publicly available information and other industry publications.
Neither we nor any of the underwriters represent that any such information is
accurate. Each of these sources may have its own definitions for a particular
market or market segment and, accordingly, the information obtained from one
source might not be comparable with information obtained from other sources.
Industry publications generally state that the information they provide has
been obtained from sources believed to be reliable, but that the accuracy and
completeness of such information is not guaranteed. We have not independently
verified any of this information. In particular, we do not know what rate of
general economic growth was assumed in preparing forecasts. Forecasts of
developing industries such as ours are not based upon sophisticated analyses of
substantial amounts of historical data, as in the case of more mature
industries. Thus, forecasts of developing industries like ours are much less
likely to be accurate.

16
<PAGE>

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the shares of common
stock we are offering will be approximately $ million, assuming an initial
public offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $ million.

The principal purposes of this offering are to obtain additional working
capital, to create a public market for our common stock and to facilitate
future access by us to public markets. In addition, we may use a portion of the
net proceeds to acquire complementary products, technologies or businesses.
However, we currently have no commitments or agreements and are not involved in
any negotiations to make any acquisitions. Pending use of the net proceeds of
this offering, we intend to invest the net proceeds in interest-bearing,
investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock,
except for the S corporation distribution discussed below. We currently intend
to retain any future earnings to finance the growth and development of our
business and therefore do not anticipate paying any cash dividends in the
foreseeable future.

Prior to the issuance of shares of our preferred stock in December 1999, we
were a corporation subject to taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended. As a result, our net earnings were taxed, for
federal and state income tax purposes, as income of our stockholders. In
December 1999, we terminated our S corporation status. At that time, we
authorized the payment of a distribution to our S corporation stockholders in
an amount approximating their individual income tax liability resulting from
S corporation taxable earnings up to the date of termination. For further
discussion of our S corporation distribution, see "Related Party Transactions."

17
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000:

. on an actual basis;

. on a pro forma basis, giving effect to the conversion of all outstanding
shares of our preferred stock into a total of 5,554,853 shares of common
stock upon the closing of this offering; and

. on a pro forma as adjusted basis after giving effect to our receipt of
the net proceeds from the sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes that appear elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of March 31, 2000
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Long-term capitalized lease obligations, less
current portion................................ $ 5 $ 5 $
Redeemable convertible Series A preferred stock,
$.001 par value per share, 5,554,853 shares
authorized and designated, 5,554,853 shares
outstanding actual, no shares outstanding pro
forma and pro forma as adjusted................ 16,120 -- --
Stockholders' equity (deficit):
Common stock, $.001 par value, 50,000,000
shares authorized, 20,746,585 shares
outstanding actual, 26,301,438 shares
outstanding pro forma, shares
outstanding pro forma as adjusted............ 21 26
Preferred stock, $.001 par value, 9,445,147
shares authorized and undesignated, no shares
issued or outstanding actual, pro forma or
pro forma as adjusted........................ -- --
Additional paid-in capital.................... (1,319) 14,796
Accumulated deficit........................... (5,601) (5,601)
------- ------- ----
Total stockholders' equity (deficit)........ (6,899) 9,221
------- ------- ----
Total capitalization...................... $ 9,226 $ 9,226 $
======= ======= ====
</TABLE>

This table excludes the following shares:

. 6,572,050 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $0.63
per share;

. 2,705,200 shares of common stock available for future grant under our
stock option plans; and

500,000 shares of common stock available for issuance under our employee
stock purchase plan.

18
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding.

Our pro forma net tangible book value as of March 31, 2000, after giving
effect to the conversion of our outstanding preferred stock into common stock
in connection with this offering, was $9.2 million, or approximately $0.35 per
share. After giving effect to our sale of the shares of common stock
in this offering at an assumed initial public offering price of $ per share,
less estimated underwriting discounts and commissions and estimated offering
expenses, our pro forma net tangible book value at March 31, 2000 would have
been approximately $ million, or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $ per share to purchasers of common stock in this offering. The
following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share at March 31,
2000......................................................... $0.35
Increase per share attributable to new investors..............
-----
Pro forma as adjusted net tangible book value per share after
the offering...................................................
----
Dilution per share to new investors............................. $
====
</TABLE>

The following table sets forth, on a pro forma basis as of March 31, 2000,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by new investors:

<TABLE>
<CAPTION>
Total
Shares Purchased Consideration Average
------------------ -------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 26,301,438
New public investors................
---------- --- --- ---
Total............................. 100% 100%
========== === === ===
</TABLE>

The above tables exclude the following shares:

. 6,572,050 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.63 per share;

. 2,705,200 shares of common stock available for future grant under our
stock option plans; and

. 500,000 shares of common stock available for issuance under our employee
stock purchase plan.

To the extent that any of these options are exercised or shares are issued,
there will be further dilution to new investors. See "Capitalization,"
"Management--Employee Benefit Plans" and "Description of Capital Stock."

19
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
data included elsewhere in this prospectus. The statement of operations data
for the years ended December 31, 1997, 1998 and 1999, and the balance sheet
data as of December 31, 1998 and 1999, are derived from our audited financial
statements included elsewhere in this prospectus. The statements of operations
data for the period from our inception on September 18, 1995 to December 31,
1995 and for the year ended December 31, 1996, and the balance sheet data as of
December 31, 1995, are derived from our unaudited financial information not
included in this prospectus. The balance sheet data as of December 31, 1996 and
1997 are derived from our audited financial statements not included in this
prospectus. The selected financial data as of March 31, 2000 and for the three
months ended March 31, 1999 and 2000 have been derived from our unaudited
financial statements also included elsewhere in this prospectus and, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the data for the unaudited
periods. Historical results are not necessarily indicative of results to be
expected in any future period, and results of interim periods are not
necessarily indicative of results that may be expected for the entire year.

<TABLE>
<CAPTION>
Three Months
Period from Ended
Inception Year Ended December 31, March 31,
(September 18, 1995) ----------------------------- ---------------
to December 31, 1995 1996 1997 1998 1999 1999 2000
-------------------- ------ ------ ------ ------- ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenue................. $ 1 $ 63 $ 79 $ 279 $ 2,025 $ 135 $ 1,443
Cost of revenue......... -- -- 1 3 64 3 166
------ ------ ------ ------ ------- ------ -------
Gross profit............ 1 63 78 276 1,961 132 1,277
Operating expenses:
Sales and marketing.... 7 4 -- 279 3,343 206 3,479
Research and
development........... 1 35 43 74 603 72 633
General and
administrative........ 6 13 18 86 493 38 361
------ ------ ------ ------ ------- ------ -------
Total operating
expenses.............. 14 52 61 439 4,439 316 4,473
------ ------ ------ ------ ------- ------ -------
Income (loss) from
operations............. (13) 11 17 (163) (2,478) (184) (3,196)
Interest and other
income, net............ -- 12 9 -- 33 -- 168
------ ------ ------ ------ ------- ------ -------
Net income (loss)....... $ (13) $ 23 $ 26 $ (163) $(2,445) $ (184) $(3,028)
====== ====== ====== ====== ======= ====== =======
Basic and diluted net
income (loss) per
share.................. -- -- -- $(0.01) $ (0.12) $(0.01) $ (0.15)
Shares used in computing
basic and diluted net
income (loss) per
share.................. 20,000 20,000 20,000 20,114 20,364 20,319 20,602
Pro forma basic and
diluted net loss per
share.................. $ (0.12) $ (0.12)
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 20,509 26,156
</TABLE>

<TABLE>
<CAPTION>
December 31, March 31, 2000
----------------------------- ------------------------------
Pro Forma
1995 1996 1997 1998 1999 Actual Pro Forma As Adjusted
---- ---- ---- ---- ------- ------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 2 $ 5 $19 $ 86 $14,183 $12,374 $12,374
Working capital
(deficit).............. (31) 11 33 (64) 13,113 10,683 10,683
Total assets............ 21 20 37 264 17,348 18,140 18,140
Deferred revenue........ -- -- -- 171 4,165 7,171 7,171
Long-term capital lease
obligations, less
current portion........ -- -- -- -- 7 5 5
Redeemable convertible
preferred stock........ -- -- -- -- 16,120 16,120 --
Total stockholders'
equity (deficit)....... (12) 11 37 (96) (3,981) (6,899) 9,221
</TABLE>

See note 1 of the notes to our financial statements for an explanation of the
determination of the number of weighted average shares used to compute basic
and diluted net income (loss) per share and pro forma basic and diluted net
loss per share data.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Financial Data" and
our financial statements and related notes appearing elsewhere in this
document.

Overview

We provide a comprehensive Internet-based customer service solution that
integrates customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities. We were
incorporated in September 1995 but had no significant operations until 1997. In
the second half of 1997, we began to conduct research and development relating
to our initial product.

In November 1997, we released the initial version of RightNow Web on a
hosted and non-hosted basis. Since that time, we have released upgrades,
including enhancements to existing product features and additional
functionality, at least twice a year. In the second half of 1999, we
significantly expanded the functionality and features of RightNow Web to
include e-mail management, live interaction and service contract management
capabilities. In April 2000, we introduced RightNow Metrics, a customer
satisfaction survey and measurement tool.

As we have expanded our business, we have increased our direct sales force
to 79 at March 31, 2000 from eight at December 31, 1998. In October 1999, we
opened a sales office in Dallas, Texas. To date, virtually all of our sales
activity has taken place over the telephone and via the Web, rather than
through face-to-face meetings. The average sales cycle for our products is less
than 100 days. In cases where our sales force has been provided leads generated
through our marketing activities described below, the sales cycle has generally
been shorter than the average. In the fourth quarter of 1999, we also began to
develop our indirect sales channels. Our customer base has increased to 574 at
March 31, 2000 from 106 at December 31, 1998. We intend to continue to develop
and expand our direct and indirect sales channels, initially focusing on value-
added resellers, integrators, technology providers and outsourced call centers.
We also plan to establish sales offices in the United Kingdom and Germany in
2000 and in the Pacific Rim in 2001.

As of March 31, 2000, we had an accumulated deficit of $5.6 million. This
deficit and our losses are the result of costs incurred in the development and
sales and marketing of our products. We intend to continue to invest heavily in
our product development, sales and marketing strategies and administrative
infrastructure. As a result, we anticipate that we will incur additional
operating losses for the foreseeable future.

Revenue

The majority of our revenue is generated from subscriptions for our
software, support and application service provider hosting services. The
typical subscription term is 24 months, although we also offer terms ranging
from six to 36 months. Support consists of maintenance and upgrades provided
over the subscription term and is included in the price of term software
subscriptions. We also sell our software on a perpetual basis, in which case
subscriptions for our support services are sold separately. Our hosting
services include providing data connections, equipment, maintenance and
automatic upgrades to hosted customers and are priced on a subscription basis.
We also generate revenue from providing training and professional services to
our customers.

We recognize revenue from subscriptions ratably on a monthly basis over the
software, support or hosting term. We begin to recognize revenue when a
customer purchases a subscription for our software, is granted a password and
is able to download our software over the Internet. Because our subscriptions
are typically billed in full at the time of purchase, substantially all of the
subscription price is recorded as deferred revenue on our balance sheet. This
practice of collecting cash at the beginning of the subscription period
contributes to the funding of our operations. We recognize the revenue
generated from the sale of perpetual software licenses when there is persuasive
evidence of an arrangement and collectibility is considered probable. Revenue
generated from providing training and professional services is recognized when
the service is performed and collectibility is reasonably certain.

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<PAGE>

Customers generally have the right to return our products for a full refund
within 60 days of purchase for any reason. As of March 31, 2000, less than 5%
of the products sold have been returned. Customers who desire to continue to
use our products at the end of their software subscription term will have to
renew their subscriptions. To date, only a few subscriptions have come up for
renewal. Between March 31 and December 31, 2000, approximately 8% of our
current subscriptions will come up for renewal and, in 2001, a majority of our
current subscriptions will come up for renewal. Given our limited operating
history, we do not have historical information with which to estimate the rates
of renewal or the terms on which renewals will be made.

Cost of Revenue

Cost of revenue consists primarily of costs relating to our hosting
services, including maintaining data centers for our hosted customers. Cost of
revenue also includes payroll and travel expenses related to providing training
and professional support to our customers. We do not pay royalties to any third
parties for technology included in our products. Since our products are
delivered via the Internet, we do not incur significant product delivery costs.
We plan to expand our application hosting services by developing an
international network of application hosting services through internal and
external resources. As our customer base grows, we intend to continue to invest
additional resources in our application hosting services.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses consist primarily
of payroll related to the sales, marketing and customer support functions,
advertising and promotion of our products and telecommunications costs for
sales activities. As we hire more employees in sales and customer service and
further develop our indirect sales channels, we expect these costs to continue
to increase significantly. We also expect significant increases in advertising
expenses as we more fully implement our marketing plan. We are also expanding
our sales office in Texas and are currently evaluating other locations both in
the United States and abroad. We expect our sales and marketing expenses to
increase significantly in the foreseeable future as we continue to expand our
sales force, implement our marketing strategy and increase our customer service
group to support our business expansion. As our business grows, we also expect
sales commissions to increase. These commissions are expensed at the time of
sale, while the related revenue is recognized ratably over the term of the
subscription.

Research and development expenses. Research and development expenses consist
primarily of payroll for development personnel and costs related to the
development of new products, enhancement of existing products and quality
assurance and testing. To date, we have not capitalized any of our software
development costs because the timing of the commercial release of our products
has substantially coincided with the attainment of technological feasibility.
As a result, research and development costs have been expensed as incurred. We
intend to continue to expand and enhance our product offerings. To accomplish
this we are hiring additional personnel and, to a lesser extent, contracting
with external resources. Accordingly, we expect our research and development
expenses will continue to increase significantly for the foreseeable future.

General and administrative expenses. General and administrative expenses
consist primarily of payroll associated with executive management and corporate
administrative personnel as well as professional fees. We expect general and
administrative expenses will continue to increase significantly as we expand
our business.

We allocate most general expenses such as office supplies, computer
supplies, utilities, rent, depreciation for furniture and equipment, bad debt
expense, payroll taxes, and employee benefits to sales and marketing, research
and development and general and administrative based on the relative headcount
of our respective departments.

Provision for income taxes. At the time of our incorporation, we elected to
be treated as an S corporation under Subchapter S of the Internal Revenue Code
of 1986, as amended. As an S corporation, our

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<PAGE>

stockholders were liable for any federal and state income tax liabilities
resulting from our operations. Effective December 13, 1999, we terminated our
status as an S corporation and have been liable for federal and state income
taxes subsequent to that date. Immediately prior to the termination of our S
corporation status, we authorized a cash distribution payable to our S
corporation stockholders in an amount approximating their individual income tax
liability resulting from S corporation taxable earnings up to the date of
termination. If we had been a C corporation for all of 1999, we would have
recorded income tax expense of approximately $266,000. At March 31, 2000, we
had a deferred tax asset of approximately $2.9 million, all of which has been
reserved for by a valuation allowance. In the future, if available evidence
indicates it is more likely than not that we will be able to utilize this
deferred tax asset, we will record an income tax benefit in the amount of the
asset recognized.

Results of Operations

The following table lists, for the periods indicated, each line item as a
percentage of revenue:

<TABLE>
<CAPTION>
Three Months
Year Ended Ended March
December 31, 31,
--------------------- ---------------
1997 1998 1999 1999 2000
----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
As a Percentage of Revenue:
Revenue..................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue............. 1.0 1.3 3.1 2.0 11.5
----- ----- ------ ------ ------
Gross profit.............. 99.0 98.7 96.9 98.0 88.5
Operating expenses:
Sales and marketing....... 1.0 99.9 165.1 152.3 241.1
Research and development.. 54.0 26.5 29.8 53.0 43.9
General and
administrative........... 23.0 30.7 24.3 28.4 25.0
----- ----- ------ ------ ------
Total operating
expenses............... 78.0 157.1 219.2 233.7 310.0
----- ----- ------ ------ ------
Income (loss) from
operations................. 21.0 (58.4) (122.3) (135.7) (221.5)
Interest and other income,
net........................ 11.8 -- 1.6 -- 11.6
----- ----- ------ ------ ------
Net income (loss)........... 32.8% (58.4)% (120.7)% (135.7)% (209.9)%
===== ===== ====== ====== ======
</TABLE>

Three Months Ended March 31, 2000 and 1999

Revenue

Revenue increased to $1.4 million for the three months ended March 31, 2000
from $135,000 for the three months ended March 31, 1999. This increase was the
result of increased sales of RightNow Web, an increase in the average selling
price of our products due, in part, to increased functionality of RightNow Web
and the introduction of RightNow Metrics. We added 176 customers in the three
months ended March 31, 2000, compared to 56 in the three months ended March 31,
1999.

Cost of Revenue

Cost of revenue increased to $166,000 for the three months ended March 31,
2000 from $3,000 for the three months ended March 31, 1999. Cost of revenue
increased to 11.5% of revenue in the three months ended March 31, 2000 from
2.0% of revenue in the three months ended March 31, 1999. The increase was due
primarily to the increase of our application hosting costs. We increased the
number of personnel in our application hosting services group beginning in late
1999 and entered into a contract in December 1999 with a third party to provide
our application hosting equipment and facilities. We also increased the number
of our professional services and training personnel to support our increasing
customer base.

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<PAGE>

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses increased to $3.5
million for the three months ended March 31, 2000 from $206,000 for the three
months ended March 31, 1999. This increase was due primarily to the addition of
sales, marketing and customer service personnel, an increase in sales
commissions associated with increased sales and higher marketing costs due to
expanded advertising and promotional activities. The number of sales, marketing
and customer service personnel increased to 158 as of March 31, 2000 from 15 as
of March 31, 1999. As a percentage of revenue, sales and marketing expenses
increased to 241.1% in the three months ended March 31, 2000 from 152.3% in the
three months ended March 31, 1999.

Research and development expenses. Research and development expenses
increased to $633,000 for the three months ended March 31, 2000 from $72,000
for the three months ended March 31, 1999. This increase was due primarily to
the increase in personnel for development of new products, enhancement of
existing products, quality assurance and testing. As a percentage of revenue,
research and development expenses decreased to 43.9% in the three months ended
March 31, 2000 from 53.0% of revenue in the three months ended March 31, 1999.

General and administrative expenses. General and administrative expenses
increased to $361,000 for the three months ended March 31, 2000 from $38,000
for the three months ended March 31, 1999. The increase was due to the addition
of senior management and other administrative personnel and professional
services expenses. General and administrative expenses decreased to 25.0% of
revenue in the three months ended March 31, 2000 from 28.4% of revenue in the
three months ended March 31, 1999.

Interest and other income, net. Interest and other income, net consists
primarily of interest earned on cash and cash equivalents. Interest and other
income, net was $168,000 for the three months ended March 31, 2000. The
increase in interest income was due to increased cash balances resulting from
the sale of our preferred stock in December 1999.

Years Ended December 31, 1999 and 1998

Revenue

Revenue increased to $2.0 million in 1999 from $279,000 in 1998. The
increase in revenue was due primarily to increased sales of RightNow Web and
also to a higher average sales price due, in part, to increased functionality
of the product. Our number of customers increased to 422 at December 31, 1999
from 106 at December 31, 1998.

Cost of Revenue

Cost of revenue increased to $63,000 in 1999 from $4,000 in 1998. Cost of
revenue increased to 3.1% of revenue for the year ended December 31, 1999 from
1.3% of revenue for the year ended December 31, 1998. The increase in cost of
revenue in 1999 was primarily due to the expansion of our application hosting
costs. We increased the number of personnel in our application hosting services
group in 1999 and entered into a contract with a third party in December 1999
to provide our application hosting equipment and facilities.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses increased to $3.3
million in 1999 from $279,000 in 1998. This increase was due primarily to the
addition of sales, marketing and customer service personnel, an increase in
sales commissions associated with increased sales, and higher marketing costs
due to expanded advertising and promotional activities. The number of sales,
marketing and customer service personnel increased to 107 as of December 31,
1999 from 13 as of December 31, 1998. Sales and marketing expenses increased to
165.1% of revenue in 1999 from 99.9% of revenue in 1998.

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<PAGE>

Research and development expenses. Research and development expenses
increased to $603,000 in 1999 from $74,000 in 1998. This increase was due
primarily to the increase of personnel for product development and enhancement.
As a percentage of revenue, research and development expenses were 29.8% in
1999 and 26.5% in 1998.

General and administrative expenses. General and administrative expenses
increased to $493,000 in 1999 from $86,000 in 1998. The increase was due to the
addition of senior management and other administrative personnel. General and
administrative expenses decreased to 24.3% of revenue in 1999 from 30.7% of
revenue in 1998, primarily as a result of increased revenue in 1999.

Interest and other income, net. In 1999 we recorded net interest income of
$33,000 due to increased cash balances resulting from the sale of our preferred
stock in December 1999.

Years Ended December 31, 1998 and 1997

Revenue

Revenue increased to $279,000 in 1998 from $79,000 in 1997. We began selling
our initial product in November 1997. Our number of customers increased to 106
at December 31, 1998, from seven at December 31, 1997. Until September 1998,
our products were sold primarily through hosting arrangements and perpetual
licenses. Revenue from consulting services unrelated to our current operations
was $68,000 in 1997.

Cost of Revenue

Cost of revenue was $4,000 in 1998 related to application hosting costs when
our product was initially released in November 1997. In 1997, cost of revenue
was immaterial.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses were $279,000 in
1998. In 1998, sales and marketing expenses increased as we hired sales and
marketing personnel and incurred public relations expenses in connection with
the release of our initial product at the end of 1997. We also created our
customer service group in October 1998 to support new installations and
maintenance of our product. Sales and marketing expenses were 99.9% of revenue
in 1998. Until January 1998, we did not expend any material resources on sales
and marketing.

Research and development expenses. Research and development expenses
increased to $74,000 in 1998 from $43,000 in 1997. The increase was due
primarily to the addition of personnel for continued development and
enhancement of our products. Research and development expense decreased to
26.5% of revenue in 1998 from 54.0% of revenue in 1997. This decrease in the
percentage of revenue in 1998 was a result of increased revenue from the
introduction of our initial product in 1997.

General and administrative expenses. General and administrative expenses
increased to $86,000 in 1998 from $18,000 in 1997. The increase was primarily
the result of increasing our personnel. In addition, our founder and Chief
Executive Officer began receiving a salary, which he had not received prior to
1998.

Interest and other income, net. We had no material interest income in 1998
or 1997. Other income in 1997 was the result of a gain on the sale of assets
unrelated to our current operations.

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<PAGE>

Quarterly Results of Operations

The following table sets forth a summary of our unaudited quarterly
operating results for the five quarters ended March 31, 2000. In management's
opinion, this unaudited quarterly information has been prepared on the same
basis as the audited financial statements and related notes and includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the quarters presented. This
information should be read in conjunction with the audited financial statements
and related notes included elsewhere in this prospectus. We believe that
quarter-to-quarter comparisons of our financial results are not necessarily
meaningful and should not be relied upon as an indication of future
performance.

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1999 1999 1999 1999 2000
--------- -------- ------------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenue................. $ 135 $ 264 $ 714 $ 912 $ 1,443
Cost of revenue......... 3 4 17 40 166
------ ----- ------ ------- -------
Gross profit........ 132 260 697 872 1,277
Operating expenses:
Sales and marketing... 206 325 875 1,937 3,479
Research and
development.......... 72 87 143 301 633
General and
administrative....... 38 52 95 308 361
------ ----- ------ ------- -------
Total operating
expenses........... 316 464 1,113 2,546 4,473
------ ----- ------ ------- -------
Loss from operations.... (184) (204) (416) (1,674) (3,196)
Interest and other
income, net............ -- -- -- 33 168
------ ----- ------ ------- -------
Net loss................ $ (184) $(204) $ (416) $(1,641) $(3,028)
====== ===== ====== ======= =======
As a Percentage of
Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 2.0 1.6 2.3 4.4 11.5
------ ----- ------ ------- -------
Gross profit.......... 98.0 98.4 97.7 95.6 88.5
Operating expenses:
Sales and marketing... 152.3 123.1 122.6 212.4 241.1
Research and
development.......... 53.0 33.0 20.1 32.9 43.9
General and
administrative....... 28.4 19.6 13.3 33.8 25.0
------ ----- ------ ------- -------
Total operating
expenses........... 233.7 175.7 156.0 279.1 310.0
------ ----- ------ ------- -------
Loss from operations.... (135.7) (77.3) (58.3) (183.5) (221.5)
Interest and other
income, net............ -- -- -- 3.6 11.6
------ ----- ------ ------- -------
Net loss................ (135.7)% (77.3)% (58.3)% (179.9)% (209.9)%
====== ===== ====== ======= =======
</TABLE>

We do not consider our business to be seasonal. Our revenue is impacted by
the mix of term software subscriptions and perpetual licenses sold in a
particular quarter. In the three months ended September 30, 1999, perpetual
licenses represented a higher proportion of our revenue than in other periods.
Accordingly, total operating expenses in the quarter, as a percentage of
revenue, were lower. The trend over the past five quarters represents the
expansion in all areas of our business. In the fourth quarter of 1999, we began
to significantly expand our sales force and marketing activities, released an
upgrade to RightNow Web, which included e-mail management and live interaction
capabilities, and increased our research and development and administrative
personnel. This expansion continued in the three months ended March 31, 2000,
as we continued to grow our customer base.

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<PAGE>

The amount and timing of our operating results generally will vary from
quarter to quarter depending on our level of actual and anticipated business
activities. Factors affecting quarterly operating results can include, but are
not limited to:

. variations in and difficulty predicting demand for our products;

. the timing and success of new product introductions or upgrades by us or
our competitors;

. our practice of paying sales commissions at the time of sale, while the
related revenue is recognized ratably over the term of the subscription;

. the renewal rate of customers whose subscriptions have expired and the
terms upon which they renew;

. changes in our pricing policies or those of our competitors;

. changes in the mix of term software subscriptions and perpetual licenses
sold in a particular quarter due to the different methods of revenue
recognition;

. our ability to expand our operations, and the amount and timing of
expenditures related to this expansion;

. the purchasing and budgeting cycles of our customers;

. the rate of our international expansion;

. general economic conditions, as well as those specific to our customers
and markets; and

. costs related to possible acquisitions of technology or businesses.

Our revenues and operating results are difficult to forecast and will
fluctuate, and we believe that quarter-to-quarter comparisons of our operating
results will not necessarily be meaningful. As a result, you should not rely
upon them as an indication of our future performance.

Liquidity and Capital Resources

From our inception through December 1999, we funded our operations primarily
through cash from operations, with additional funding from private borrowings,
including loans from our founder and Chief Executive Officer, and bank
borrowings. Our practice of collecting cash at the beginning of the
subscription period also contributed to the funding of our operations. In
December 1999, we raised approximately $16.1 million from a private placement
of our preferred stock to fund our significant business expansion.

As of March 31, 2000, we had $12.4 million in cash and cash equivalents and
a secured bank line of credit of $500,000. The line of credit expires on July
29, 2000, and the borrowings under the line of credit bear interest at prime
plus 1.5%. There were no borrowings under the line of credit at March 31, 2000.

Our operating activities used cash of $1.2 million during the three months
ended March 31, 2000. Cash provided from operating activities was $64,000 for
the year ended December 31, 1999, $5,000 for the year ended December 31, 1998
and $19,000 for the year ended December 31, 1997. As we continue to expand our
sales and marketing, product development and support organizations, we
anticipate the growth in these activities will use cash resources in excess of
cash received. Our deferred revenue was $7.2 million at March 31, 2000 and $4.2
million at December 31, 1999. We expect our deferred revenue and accounts
receivable balances to increase significantly if we continue to increase sales
at current rates. Our practice of collecting cash at the beginning of the
subscription period will continue to contribute to the funding of our
operations.

Our investing activities used cash of $580,000 during the three months ended
March 31, 2000. Cash used for investing activities was $514,000 for the year
ended December 31, 1999, $37,000 for the year ended December 31, 1998 and
$5,000 for the year ended December 31, 1997. Our investing activities have
consisted

27
<PAGE>

primarily of purchases of computer equipment, furniture and equipment to
support our operations. We expect to continue to use cash for purchases of
furniture and equipment to support our expanding workforce and application
service provider hosting infrastructure.

Our financing activities generated $21,000 for the three months ended March
31, 2000 from the exercise of stock options. Total financing activities for the
year ended December 31, 1999 generated $14.5 million compared to $100,000
during 1998. In December 1999, we issued shares of preferred stock generating
$16.1 million of net proceeds. Of the proceeds, $1.2 million was used to
repurchase stock. Prior to the termination of our S corporation status in
December 1999, a stockholder distribution of $330,000 was declared to fund S
corporation income taxes payable by our stockholders. The distribution was paid
in April 2000. In 1998, cash from financing activities was generated through
loans totaling $100,000 from our founder and Chief Executive Officer and an
affiliated entity.

Our capital requirements depend on numerous factors. We expect to devote
substantial resources to continue research and development efforts, expand our
sales, support and marketing organizations, establish additional offices
worldwide and build the infrastructure necessary to support our growth. Since
the introduction of our initial product in November 1997, we have experienced
increases in our expenditures consistent with the growth in our operations and
personnel, and we anticipate that our expenditures will continue to increase in
the future. We believe that the proceeds of this offering, together with our
current cash and cash equivalents and our borrowing capacity, will be
sufficient to fund our activities for at least the next 12 months. Thereafter
we may need to raise additional funds to develop or enhance products, to fund
expansion, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. If required, additional financing may not
be available on terms that are acceptable to us. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and these securities might have
rights, preferences and privileges senior to those of our current stockholders.

Qualitative and Quantitative Disclosures About Market Risk

We develop products in the United States and sell them primarily in North
America and to a lesser extent internationally. Our sales to date have all been
priced and payable in U.S. dollars. As such, we are not subject to significant
market risk from foreign exchange rates at this time. However, fluctuations in
the U.S. dollar or foreign currencies could affect the competitiveness of our
products in foreign markets. Interest income and expense are sensitive to
changes in the general level of U.S. interest rates, particularly since our
investments are in short-term instruments. However, based on the nature and
current level of our investments and obligations, we have concluded that there
is no material risk of exposure.

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<PAGE>

BUSINESS

Overview

We are a leading provider of Internet customer service solutions. Our
products are designed to enable businesses and other organizations operating on
or utilizing the Web to enhance customer interactions and anticipate customer
needs, thereby producing higher levels of customer satisfaction. Our
comprehensive solution uses a dynamically updated, self-learning knowledgebase
to deliver customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities. The content of
each individual knowledgebase is customer-driven, meaning that the
knowledgebase "learns" as customers communicate and interact with the business.
This allows businesses to efficiently capture, organize, publish and distribute
valuable product and service information both to customers and throughout the
rest of the extended enterprise. Our objective is to enhance our position as a
leading provider of Internet customer service solutions to businesses and
organizations of all sizes. As of March 31, 2000, we had 574 customers, which
we believe to be more than any other Internet customer service software
company. To continue our success in this regard, we intend to leverage the
efficiency of our direct sales channel to acquire new customers and increase
penetration of our existing customers, and to expand our indirect sales
channels and strategic relationships. In addition, we intend to extend the
breadth and depth of our product offerings, increase the availability of our
application service provider hosting services and expand our international
presence.

Industry Background

The use of the Internet to communicate and conduct business is growing
rapidly. Businesses and other organizations are increasingly using the Internet
as an integral means of communicating and interacting with their customers,
business partners and employees. International Data Corporation, or IDC,
estimates that the worldwide number of customers buying goods and services over
the Web will grow from approximately 33.8 million in 1998 to 229.7 million in
2003. This growth has led to a dramatic transformation in the manner in which
companies communicate and interact with their customers. As Internet-based
customer communication continues to grow, we believe that the ability to
efficiently provide fast, reliable and accurate information to meet customer
expectations has become a competitive necessity for many organizations.

As customer communication shifts to the Internet, customers increasingly
expect the capability not only to view and purchase products online, but also
to obtain answers to their product and service questions 24 hours a day, seven
days a week. We believe that, to remain competitive in this environment, every
organization, whether a traditional bricks-and-mortar company with a Web
presence or a completely Internet-based business, must be able to provide a
significant level of service and interaction electronically and in real-time.
The low cost of switching vendors or services on the Internet heightens the
importance of providing superior customer service and communication. Moreover,
Internet-based customer service also applies to other parts of the extended
enterprise that generate product and support-related questions, such as
internal support personnel, human resources departments and suppliers.

The initial Web presence for many companies consisted only of an
infrastructure that supported general marketing and transaction capabilities.
However, in many cases both companies that conduct their business over the
Internet and those that simply have a Web presence have been unprepared for the
significant increase in volume of customer service inquiries that Internet-
based communications channels generate. According to Jupiter Communications,
customer satisfaction with shopping on the Internet is decreasing, and the
proportion of customers who were highly satisfied with their experiences
purchasing from online businesses decreased from 62% in 1998 to 42% in 1999. We
believe that the primary cause of this dissatisfaction is the combination of
increased customer expectations and the inability of many businesses on the Web
to efficiently respond to

29
<PAGE>

customer needs. We also believe that customers expect a quicker response when
they communicate with businesses via the Internet than when traditional modes
of communication such as direct mail and the telephone are used. To effectively
respond to customer inquires on this scale, we believe businesses need to
enable their customers to easily find answers on their own.

E-mail, in particular, illustrates the customer service problems that
businesses on the Internet currently face. E-mail, like a telephone call,
requires a prompt, accurate response in order to be effective. Many businesses
have been unable to cost-effectively manage the volume of e-mail inquiries that
a presence on the Internet generates. According to a Jupiter Communications
survey, 43% of Web sites surveyed did not respond to a customer's e-mail within
24 hours, and 19% of sites did not respond at all. As a result, we believe many
customers prefer to have the ability to resolve questions on their own by
reference to the company's Web site. In situations like these, an increasing
volume of e-mails from customers is often symptomatic of a larger customer
service problem that the business has not addressed, namely, the inability of
customers to find the information they are seeking on a company's Web site. We
believe that businesses that subject their customers to this experience are
driving a significant proportion of their customers to do business elsewhere.
Internet self-service can provide an attractive alternative to this frustrating
end-user experience.

When companies first began to move their businesses to the Internet,
customer service solutions were often designed and developed by internal
information technology personnel. However, in response to rapidly changing
technology, the expansion of Internet-based business activities, time-to-market
pressures and the lack of information technology personnel, many companies have
sought external solutions for their customer service automation needs. Current
Internet customer service products generally take one of two approaches. The
first approach is to provide highly customized products to large businesses
that can afford the relatively high prices and long implementation cycles of
the traditional enterprise software model. This approach, by virtue of its cost
and complexity of implementation, is effectively unavailable to anyone other
than large companies. The second approach is to address only a portion of the
larger customer service problem through point solutions such as e-mail
management or live chat. This second approach fails to provide the
functionality and scalability needed to address current customer service needs
and, because it is not a comprehensive solution, requires integration with
other point products. We believe these approaches are not effective because
neither provides an integrated customer service solution that begins with self-
service and includes a dynamically updated, self-learning and customer-driven
knowledgebase.

Most self-service solutions currently available rely on knowledge experts to
collect, compile and publish information. There are three problems with these
solutions. First, a manual approach is time-consuming and expensive, as the
knowledge expert must often spend a great deal of time to compile, document and
organize the information. Second, the resulting knowledgebase quickly becomes
obsolete because there is no automatic method for adding or deleting
information. Finally, and perhaps most significantly, this approach relies on
the knowledge expert to know what information customers are seeking.

We believe a significant market opportunity exists for an integrated
Internet customer service solution that enables both effective customer self-
service and streamlined escalation to other channels of company communication.
IDC estimates that demand for Internet customer service-related software and
services will grow from $11 billion in 1998 to $43 billion by 2003. We believe
an integrated, cost-effective solution that enables customer self-service by
drawing on a dynamically updated, self-learning knowledgebase is required to
meet this demand. Self-service, or the ability of customers to help determine
the type of interaction and information they seek, allows businesses to rapidly
respond to changes in customer needs without hiring the large numbers of
additional personnel that are required to generate accurate responses by
telephone, mail or other traditional means. When self-service is combined with
a dynamically updated knowledgebase and the ability to easily deliver
information through e-mail, live chat or other person-to-person interaction,
the resulting solution allows companies to leverage their existing resources to
achieve higher levels of customer satisfaction and revenue.

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<PAGE>

Solution

We provide an Internet customer service solution for businesses and other
organizations that operate on or utilize the Web. Our products are designed to
enable businesses to enhance customer interactions and anticipate customer
needs, thereby producing higher levels of customer satisfaction. Our
comprehensive solution uses a dynamically updated, self-learning knowledgebase
to deliver customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities. The content of
each individual knowledgebase is customer-driven, meaning that the
knowledgebase "learns" as customers communicate and interact with the business.
This allows businesses to efficiently capture, organize, publish and distribute
valuable product and service information both to customers and throughout the
rest of the extended enterprise. In addition, because each knowledgebase is
self-learning, it does not require businesses to invest significant resources
in the manual processes traditionally associated with knowledgebase creation
and maintenance. Our products are available on both a hosted and non-hosted
basis.

Our products offer customers the following important benefits:

Increased customer satisfaction. Our products are designed to increase
customer satisfaction by enabling fast, efficient and intelligent resolution of
customer service questions and issues. Our automated Internet-based self-
service solutions enable a greater number of customers to answer their own
questions on a 24x7 basis. Additionally, our products allow customers to choose
other forms of interaction with a customer support representative, including e-
mail and live chat. When a customer elects one of these options, our solution
automatically accesses the knowledgebase to suggest answers to the customer
service representative handling the inquiry. This allows a company's customer
service representatives to more effectively address customer inquiries that
require person-to-person assistance. The result is enhanced customer
interactions and improved customer loyalty.

Reduced cost of customer service. Our products reduce the costs of customer
service inquiries by enabling and encouraging customer self-service, helping
customers communicate questions they cannot resolve on their own to customer
service representatives and assisting customer service representatives to
answer questions. Costs are also reduced by automating the expansion and
organization of the business's knowledgebase, which replaces the process of
manually collecting and organizing the information needed to answer customer
questions. As a result, businesses that use our solution can focus customer
service representatives on servicing the more complex issues and providing an
integrated, personalized customer interaction experience. These same features
allow businesses to cost-effectively scale their customer support
infrastructure to the higher volume of customer communications that an Internet
presence generates, increase employee productivity and decrease cost per
customer service interaction.

Dynamic knowledge capture, management and distribution. Our solution enables
a dynamically developed company-specific knowledgebase that provides customers,
business partners and employees with a single point of access for customer
service information. The content that our solution generates is customer-driven
and reflects both customer communications that are explicit, such as e-mails,
and those that are implicit, such as a customer's navigation patterns within
the knowledgebase. This knowledgebase also allows businesses to collaborate
with customers, partners, vendors and suppliers to solve support problems,
share information and conduct e-commerce. Businesses and other organizations
can use our solution not only to address current customer questions, but also
to capture the information generated in answering questions and automatically
add it to the knowledgebase to enable customer self-resolution of similar
questions in the future. Customers benefit from the company's experience in
resolving prior customers' issues, and the information developed in the
knowledgebase becomes a valuable internal marketing and training tool. In
addition, customers, business partners and employees can elect to receive
selected information from the knowledgebase as that information develops and is
updated.

Application service provider delivery. We have designed our products to be
installed in a hosted fashion in order to minimize implementation requirements
and reduce cost of ownership. As a result, hosted solutions

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can be implemented in a matter of days and work together as a comprehensive
product suite as soon as they are installed. Our application service provider
design reduces total cost of ownership of our solutions and eliminates the need
for our customers to purchase hardware, obtain additional Internet connections
or hire additional systems administration personnel. This delivery model also
allows us to install and rapidly upgrade our software with minimal customer
involvement or commitment of resources.

Comprehensive, rapidly deployable, scalable solution. Our product suite is a
comprehensive solution for Internet-based customer service, which integrates
self-service, e-mail management, live interaction, issue tracking and customer
satisfaction measurement capabilities. The ability of our solutions to work
together facilitates rapid deployment and eliminates the need for companies to
try to customize multiple vendors' software tools. When desired, our customers
also can integrate our software solutions with external systems such as call
centers and other customer databases. We work together with our alliance
partners to provide the professional services necessary to perform such
integrations. In addition, our products are built on a scalable Web-based
architecture which allows our customers to scale their customer service
infrastructure to meet levels of customer service activity significantly
greater than any of our customers are currently experiencing.

Strategy

Leverage highly efficient direct sales channel. To date, our sales model has
allowed us to rapidly scale our business in terms of the number of potential
customers contacted, the number of customers acquired and the number of
solutions actually implemented. In contrast to the traditional methods of on-
site sales and implementation used by most other enterprise software companies,
we conduct the vast majority of our sales and implementation processes through
the telephone and over the Internet. We believe that this gives us significant
operating efficiencies relative to many of our competitors. We intend to
continue to leverage the efficiency and scalability of our sales model by
targeting those companies with a strong need for Internet-based customer
service capabilities. Additionally, we intend to increase our sales and
marketing efforts to broaden our customer base and to achieve expanded use of
our products by our existing customers.

Expand indirect sales channels and strategic relationships. We currently
have strategic alliances with more than 30 value-added resellers, integrators,
technology providers and outsourced call centers. We intend to continue to
enter into and expand our strategic relationships to assist in the marketing
and distribution of our products and services. By expanding existing alliances
and aggressively developing new ones, we can leverage the sales and services
organizations of much larger firms to increase our market penetration and
target the needs of specific market segments.

Extend the breadth and depth of our product offerings. We believe that
maintaining and enhancing our products is important to our ability to expand
our market share, differentiate ourselves from our competitors and acquire and
retain customers. We intend to continue to invest in research and development
to broaden the range of solutions our products offer. In particular, we intend
to leverage our current base of more than 550 customers and our strategic
partners to determine desired features and product extensions, and to develop,
license or acquire new products that would complement our current products. We
recently introduced RightNow Metrics to provide businesses the ability to
survey and measure customer satisfaction.

Expand application service provider hosting services. Companies that conduct
business over the Internet usually desire rapid implementation and integrated
delivery of software, which makes software products hosted by application
service providers an attractive alternative to products that reside locally on
the company's network. We intend to continue to expand our application service
provider hosting infrastructure. In addition,

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we intend to make our application service provider hosting services
increasingly available through third-party application service providers.

Expand international presence. As Web usage accelerates abroad, we believe
that significant international market demand will exist for Internet-based
customer service solutions, especially in Europe and the Pacific Rim. We intend
to devote significant resources toward making our products and services the
leading solution for Internet customer service internationally. We expect to
establish sales offices in the United Kingdom and Germany by the end of 2000
and in the Pacific Rim in 2001. Our flagship product RightNow Web is currently
available in eight languages, and we intend to continue to adapt our products
to additional languages to facilitate the penetration of international markets.

Products and Technology

Our products provide an Internet customer service solution for businesses
and other organizations that operate on or utilize the Web. Our comprehensive
solution uses a dynamically updated, self-learning knowledgebase to deliver
customer self-service, e-mail management, live interaction, issue tracking and
customer satisfaction measurement capabilities. The content of each individual
knowledgebase is customer-driven, meaning that the knowledgebase "learns" as
customers communicate and interact with the business. This allows businesses to
efficiently capture, organize, publish and distribute valuable product and
service information both to customers and throughout the rest of the extended
enterprise. In addition, because each knowledgebase is self-learning, it does
not require a business to invest significant resources in the manual processes
traditionally associated with knowledgebase creation and maintenance. Our
products are available both in hosted form, in which case we act as an
application service provider, and in local form, in which case our software is
installed directly on the customer's systems. RightNow Web is currently
available in English, French, German, Italian, Spanish, Portuguese, Dutch and
Finnish. In addition, we are in the process of developing RightNow Web's
capability to support all major languages by the end of 2000.

All of our products have been designed using industry standards for the
Internet. Our software is written in C/C++ and Java, two widely accepted
development languages for developing applications. Our products can be deployed
by any business using the Web through a Web browser. Our products operate on a
number of operating systems and hardware platforms. Currently, both UNIX
(Solaris, Linux, FreeBSD) and Microsoft Windows Server (NT, 2000) are supported
operating systems. Industry standard relational databases (such as Oracle8 and
Microsoft SQL Server) are used to store data.

[A diagram is presented illustrating how customer e-mail and Web inquiries
seeking an answer to a question interact with the self-help, e-mail management
and live chat interaction capabilities of RightNow Web. The diagram also
illustrates the individual knowledgebase and workflow routing between the
customer and a company's customer service representative. The diagram also
presents boxes to note the external system integration and system reporting
capabilities of our solution. Finally, the diagram contains a box noting the
automated survey capability of RightNow Metrics.]

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RightNow Web

RightNow Web was first released commercially in November 1997. The initial
release was designed to allow businesses to provide their customers the ability
to answer questions themselves. Since the initial release, we have upgraded
RightNow Web frequently to include additional capabilities, such as e-mail
management, live interaction, management reporting, issue tracking and service
contract management capabilities. The current release, RightNow Web 3.1,
integrates all of these capabilities.

Knowledgebase technology. Our self-learning knowledgebase incorporates
proprietary technology that is designed to minimize the amount of
administrative time necessary for a business to compile, organize and publish
information on their Web site. We have developed several proprietary approaches
to knowledge management that enable our solution to learn what information is
important and related without requiring the intervention of a knowledge expert.
In this way, the knowledge structure and content is customer-driven and grows
automatically as our products are used. For example, each time a piece of
information is accessed by a customer, its usefulness is recorded and ranked so
that future Web site visitors benefit from prior searches for that information.

We currently have four patent applications pending relating to our
knowledgebase technology, including processes relating to the relative
usefulness ranking and the order of display of retrieved information in the
knowledgebase; the ability of the knowledgebase to suggest related information
to a customer accessing the knowledgebase based on the keyword search and
navigation patterns of the customer; and the ability of the knowledgebase to
produce a relational map of help information items based on the historical
usage patterns of customers accessing the knowledgebase.

RightNow Web's self-learning knowledgebase provides a comprehensive,
Internet customer service solution for a business's external customers, and
valuable information by which business partners, vendors and suppliers may
collaborate to solve problems, share information and conduct e-commerce. For
example, this allows sharing of customer records, support activity or common
marketing documents. In addition, customer service representative, or CSR,
performance is made more efficient and effective by utilizing the knowledgebase
for internal training and educational purposes.

Customer self-service. RightNow Web is designed around the principle that
most customer questions are repetitive in nature and can be predicted. Our
self-service capability works by enabling businesses to offer to their
customers a dynamically updated selection of frequently asked questions via the
Web. Customers are able to search for answers to their questions, which are
organized according to a particular business's requirements. For example, the
questions may be organized by product, service or other individual category.
Customers are also able to use keyword searches to find the answers to their
questions. As customers interact with our solution, our proprietary
knowledgebase technology automatically prioritizes answers in the knowledgebase
to anticipate future customer questions. Using the knowledge gained from a
customer's previous sessions, our products have the functionality to allow a
customer to view answers that are related to the information that they viewed
during a prior search.

If customers are unable to answer their questions on their own, our solution
includes functionality that allows them to submit their questions via the Web,
e-mail their questions, initiate a live chat with a CSR or request a telephone
callback from a CSR.

E-mail management. The e-mail management capability of RightNow Web provides
businesses a full range of options for handling incoming e-mail inquiries. Our
SmartAssistant technology performs natural language processing on the submitted
question and searches the knowledgebase for appropriate answers. After this
processing, the SmartAssistant automatically suggests answers to questions
submitted via the Web either to the customer or to the CSR depending on the
business rules established by the company. In the event that the answer is not
available in the knowledgebase, the CSR can publish and distribute the question
and the answer into the knowledgebase, thereby making the solution easily
accessible to future customers. We believe our

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SmartAssistant technology increases the accuracy of and speed with which CSRs
can respond to e-mail inquiries, making CSRs more efficient and enhancing the
overall level of customer service a business provides.

Live interaction. Although we believe that the majority of customer
questions may be answered through the self-service capability of RightNow Web,
live chat interaction or a telephone call with a CSR may be the best method of
addressing some customer questions. We implement the live interaction
capability of RightNow Web using a Java applet. Based on established customer
service guidelines, our products allow customers who have not found the answers
to their questions to initiate live text chat or request a telephone call from
a CSR. Our SmartAssistant technology can assist the CSR in handling the
customer inquiry in a consistent, fast and efficient manner by allowing the CSR
to access the knowledgebase for potential answers.

Two-way chat (via pop-up browser windows) allows a business's customers and
CSRs to converse through typed conversation, enabling interactive problem
resolution. Web pages and additional product information or installation
instruction and diagrams can be "pushed" to the customer's computer screen
during live interaction, providing a visual, multimedia response. In addition,
at any time during a live chat session, customers can request a callback for
live phone conversation. Each CSR can handle a number of concurrent live chat
sessions to maximize the CSR's productivity.

Workflow routing and issue escalation. RightNow Web incorporates
sophisticated workflow routing and issue escalation capabilities. Although
self-service may be a preferred choice for many customers, organizations may
want to direct a certain portion of their customers to CSRs for personal
attention. In these cases, RightNow Web allows business rules to be easily
implemented to automatically assign incoming e-mails or Web requests to
specific customer service areas. An organization may also establish business
rules to provide that incoming questions be assigned, acted on or even
automatically responded to based on the question's content, customer status,
service contract status and other business rules. Our products also allow
businesses to establish escalation rules for monitoring CSR performance. If a
customer issue is not addressed in a timely manner, escalation rules can be
established to automatically re-assign the issue to another CSR or to notify a
supervisor.

Integration with external systems. RightNow Web incorporates a number of
features that facilitate integration with external systems, including data
import and export utilities to allow for bulk conversion between the RightNow
Web knowledgebase and a company's internal database. RightNow Web also has the
capability to provide linkage with a customer's other systems so that when an
e-mail or Web request is made through RightNow Web, a notification
automatically can be generated in the customer's call center application.
RightNow Web allows direct database programming when extremely tight system
integration is required. This is generally implemented through the use of
professional services personnel. In May 2000, we will add an Application
Programming Interface to RightNow Web that will provide our alliance partners,
customers requiring complex integrations and our professional services group
with additional flexibility in building tight integration bridges with external
systems.

Flexible reporting. RightNow Web incorporates a sophisticated Web-based
management report capability, including a report designer function that allows
an organization to create the reports its business needs may require. Once a
report is created, RightNow Web allows the organization to establish a schedule
for delivery via e-mail for daily, weekly or monthly automatic reporting.
Reports can be generated at any time using a Web browser to allow for real-time
report viewing and analysis.

Contract management. The contract management component of RightNow Web
automates the administration of service contracts of the customer. This feature
assists businesses that sell service contracts in managing the contracts based
on the term of the contract or the number of service interactions covered by
the contract.

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RightNow Metrics

In April 2000, we introduced the initial version of RightNow Metrics.
RightNow Metrics is a survey and measurement tool that allows businesses to
design and disseminate custom surveys to external and internal parties to
gather information for business decisions. RightNow Metrics can be used as a
stand alone product or can be fully integrated with RightNow Web. When
integrated with RightNow Web, surveys are automatically generated after
customers have submitted questions to a CSR. Survey responses are automatically
tabulated and graphed and can then be used by businesses to measure the
performance of their customer service staff or any individual CSR. This product
is designed to allow businesses to measure reaction to new products and
programs; identify product and service enhancements; evaluate and improve Web
sites; evaluate training locations, content and instruction quality; and
collect market intelligence on customer demographics, brand identification and
company positioning.

Application Service Provider Hosting Services

Our products are available on a hosted basis or can be implemented and
maintained by our customers in their own facilities. Our products have been
specifically designed to be installed in a hosted fashion in order to minimize
implementation requirements and reduce cost of ownership. As a result, our
hosted solutions can be implemented in a matter of days and work together as a
comprehensive product suite as soon as they are installed. In addition,
upgrades to our products can be made quickly and efficiently without the need
for a customer's systems group to be involved.

We believe providing our solutions on a hosted basis will be an important
factor in growing our customer base and making our comprehensive Internet-based
customer service solutions available to any business interacting with its
customers over the Web. Approximately 50% of our current customers are hosted
and an increasing percentage of our new customers since January 1, 2000 have
elected to be hosted.

We have contracted with Exodus Communications, Inc. and Up2 Technologies, a
subsidiary of Teleglobe, Inc., leading providers of Internet server hosting and
management solutions, to provide hosting services to support our product
solutions. Up2 maintains our East Coast data center operations while Exodus
will maintain our West Coast data center beginning in May 2000. We believe both
Exodus and Up2 are equipped to provide the security, reliability and
performance required for hosting our products through their network of
operating centers and high-speed wide area network backbone.

Sales and Marketing

We sell our products primarily through our direct sales force. Our sales
force consists of sales development personnel who make initial calls to
potential customers and qualify potential customer leads and direct sales
representatives who close sales with customers and assist our customer support
group in implementing our products. We are in the process of expanding our
direct sales force to also include named account representatives who will focus
on penetrating existing customer accounts where our solution is deployed in
only a portion of the larger organization.

To date, virtually all of our sales activity has taken place over the
telephone and via the Web, rather than through face-to-face meetings. The
average sales cycle for our products is less than 100 days. In cases where our
sales force has been provided leads generated through our marketing activities
described below, the sales cycle has generally been shorter than the average.

As of March 31, 2000, we had 77 North American direct sales employees and
two international sales employees together with a group of 11 sales engineers.
We typically recruit people for our sales force with a four-year college degree
and at least three years' experience in corporate field sales. We currently
have sales offices in Bozeman, Montana and Dallas, Texas.

Our marketing department coordinates customer interaction, conducts market
and competitive research and develops strategies to evaluate new product
direction, enhancements and product specifications. The product

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marketing function is an integral part of customer beta testing, product
packaging, pricing and deployment. Our marketing department consisted of 14
full-time employees as of March 31, 2000.

As an important part of our strategy to expand our customer base, we intend
to continue to expand both our direct and indirect sales channels. We are
actively pursuing alliances with value-added resellers, integrators and
outsourced call centers. In addition, we intend to pursue strategic alliances
with other technology providers to enhance the marketing and distribution of
our products and to offer our customers additional products that complement our
products. At March 31, 2000, we had relationships with more than 30 indirect
channel distributors. In addition, as we introduce new products and enhance the
functionality of our existing products, we intend to market and sell additional
products to our existing customer base.

We use an assortment of marketing programs to create market awareness of our
products and to generate sales leads. Our marketing activities include:

. conducting educational and product seminars;

. participating in trade shows and industry conferences;

. developing and placing Internet and traditional advertising;

. conducting ongoing media and public relations campaigns;

. developing and maintaining our Web site;

. developing customer reference programs, such as customer case studies;

. developing sales tools, including product brochures; and

. publishing white papers relating to customer relationship management
issues.

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Customers

As of March 31, 2000, we had 574 customers, including Internet, software and
hardware, consumer products, financial and travel-related companies as well as
governmental agencies and educational institutions. The following is a
representative list of our customers by industry as of March 31, 2000. No
customer accounted for more than 3% of our revenue in the year ended December
31, 1999. We do not intend the identification of these customers to imply that
these customers are actively endorsing or promoting our products.

Media Manufacturing Hardware

Echostar Communications Bes-Pac, Inc. CABLEExpress
Corporation Black and Decker Technologies
Investor Business Network Corporation Pitney Bowes, Inc.
Rocket Network, Inc. Briggs & Stratton Xerox Europe LTD
Corporation

Government Financial Services Education

Florida Department of FundsXpress Financial Rice University
Highway Safety Network Saddleback Valley United
Social Security Union Bank & Trust Co. School
Administration Women's Financial University of California
Wayne County GIS Network, Inc. Santa Cruz

Internet Consumer Communications

Cyberprinter.com Freelife International, Excel Corporation
product2store.com, Inc. Inc. Smith Micro Software,
ValueClick, Inc. Nike, Inc. Inc.
Rockford Corporation Sprint Local Telephone
Division

Automotive Software Services

Dana Corporation DataCore Software Corp CA4IT Inc.
Ford Motor Company of Eagle Software Digital Paper
Canada, Limited UTM systems corp Corporation
Henna Chevrolet IT Utility

Medical & Science Solution Providers Associations

Ambion, Inc. Fullscope, Inc. American Chemical
Aventis Pharmaceuticals It-radar.com Society
Transcend Services, Inc. Starr Seigle American Simmental
Communications Association
CIESIN at Columbia
University

International Travel

Aeronaut Industries Pty Frontier Airlines
Ltd. Lufthansa Airlines
Dolphin Communication
Technologies GmbH
Securicomm Italia S.r.l.

The following case studies illustrate the benefits some companies have
realized by using our products either to deliver Internet-based customer
solutions to their customers or to deliver information necessary to support
their internal customer service personnel.
Viata Online, Inc.

Specialized Bicycle Company (www.specialized.com)
Creating Sales with Service

Specialized, a customer since June 1999, is a premier manufacturer of
bicycles and bicycle accessories. As consumer awareness and interest in its Web
site grew, Specialized needed a fast, cost-effective way to answer customer
questions. Specialized chose RightNow Web's self-service capabilities to allow
its customers to

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obtain quick, consistent and accurate answers to their questions about the
company's bikes and accessories. By using our hosted service, Specialized was
able to deploy RightNow Web in less than 30 days.

Specialized believes that the information RightNow Web delivers to Web
visitors helps it to win sales over its competitors by providing superior
customer service. According to Specialized, RightNow Web allowed the company to
fully recoup its investment within one month of implementation by reducing
costs and increasing sales. In addition, the area of Specialized's Web site
where RightNow Web has been implemented is now the most heavily-trafficked area
of the company's Web site.

Sanyo Corporation (www.sanyo.com)
Providing Product Support via Self-Help Solutions

Sanyo is a leading developer and manufacturer of consumer electronics, home
appliances and other commercial products. Sanyo's service support organization
for North America chose RightNow Web to alleviate pressure on its call center
and to enable its customers to find answers to their more frequently asked
product and service questions.

Prior to implementing RightNow Web in November 1999, Sanyo's North American
service organization was receiving approximately 1,000 incoming customer
service calls per day. These calls typically involved repetitive questions
about product features and specifications, requests for operation manuals,
repair requests and general product troubleshooting. After deploying our
solution and creating a phone message directing "on hold" customers to their
support site, Sanyo's incoming customer service calls were reduced by
approximately 27% within 40 days of implementation.

University of South Florida--Information and Technology Department
(www.acomp.usf.edu)
Online Self-Help for Students, Faculty and Staff

The University of South Florida serves 36,000 students and 5,000 employees
in four campus locations. The University's Information and Technology
Department provides computer services and manages computer equipment for all
students and faculty. The IT Department was experiencing a growing number of
repetitive e-mail inquiries and phone calls at its help desk, with topics
ranging from simple to complex. After unsuccessfully trying to implement a
competing solution, the IT Department purchased and implemented RightNow Web.

According to the IT Department, RightNow Web provides a cost-effective
online self-help solution for its students, faculty and support staff, which
has allowed it to reduce its support staff. The IT Department estimates that
calls and e-mails were reduced by 20% within a month of deploying RightNow Web
in November 1999. The University of South Florida recently purchased two
additional licenses of RightNow Web for its Financial Aid and Student Computing
Departments.

Customer Service and Support

We believe we must provide a high level of support services to our customers
in order to increase and maintain our customer base. We use RightNow Web and
RightNow Metrics as an integral part of managing our customer support staff's
performance and measuring our customers' satisfaction level.

All of our products are designed to be installed easily and administered
without requiring any significant amount of professional services or special
programming. In order for our customers to have the most up-to-date version of
our software, we have made it easy to upgrade the software. Included in our
normal installation utility is the intelligence to determine the version of
software installed and then automatically perform the actions required to
upgrade the installed version to the most recent version.

Our Customer Services Group consists of an Implementation and Technical
Support Group, Application Service Provider Management Group and Professional
Services Group. As of March 31, 2000, our Customer Services Group consisted of
29 full-time employees.

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Our Implementation and Technical Support Group assists our customers in
implementing our products and promoting customer self-sufficiency. To date,
virtually all of our product implementations have been done on a remote basis
through the Internet and telephone. The level of our implementation services
vary depending on the individual customer's requirements. As we increase our
indirect sales channel, these implementation services will increasingly be
provided by third parties who are marketing and selling our products. We also
provide our customers with 24x7 Web and telephone support, software update
support and other product maintenance services.

Our Application Service Provider Management Group manages our East and West
Coast data centers. As of March 31, 2000, approximately 50% of our customers
were hosted.

Our Professional Services Group's technical and product specialists help
customers achieve business benefits through a process of Web site prototyping,
testing and deployment. Our professional services personnel allow companies to
use their staff more efficiently, reduce strain on their own internal resources
and efficiently integrate our products into their existing operations. Our
professional services personnel also provide consulting services relating to
specific tasks, including analysis of a customer's business processes,
customization, configuration and integration of our products with a customer's
existing systems and designing custom reports.

Research and Development

We believe that strong product development capabilities are essential to our
strategy of enhancing our core technology, developing new products and
maintaining the competitiveness of our product offerings. Our research and
development expenses totaled approximately $633,000, or 43.9% of revenue in the
three months ended March 31, 2000, $603,000, or 29.8% of revenue in 1999,
$74,000, or 26.5% of revenue in 1998 and $43,000, or 54.0% of revenue in 1997.
As of March 31, 2000, 31 of our employees were engaged in research and
development activities. In addition, we supplement our internal research and
development activities with outside development resources.

Competition

Our products compete with systems that were developed and maintained
internally by businesses. We also compete directly with companies that provide
licensed software products for customer service solutions. Our competitors
include a number of companies offering one or more products for the electronic
customer relationship management software market, some of which compete
directly with our products. Our competitors include companies providing similar
solutions, including eGain Communications Corporation, Kana Communications,
Inc. and Servicesoft Technologies, Inc. In addition, we face competition from
other companies providing customer relationship management, e-commerce and
communications and knowledgebase management solutions.

Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
technical, marketing, management, service, support and other resources than we
have. Therefore, they may be able to respond more quickly than we can to new or
changing opportunities, technologies, standards or customer requirements. In
addition, many of our competitors have well-established relationships with our
current or potential customers and potential alliance partners and have an
extensive knowledge of our industry.

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and visibility of the market opportunity increase. We also expect that
competition will increase as a result of software industry consolidations and
formations of alliances among industry participants. For example, in February
2000, Kana announced plans to acquire Silknet Software, Inc. Competitors with
large market capitalizations or cash reserves would be better positioned than
we are to acquire complementary businesses, new technologies or products.

We may not be able to compete successfully against current and future
competitors, and competitive pressures may seriously harm our business.

Intellectual Property

Our success depends on our ability to maintain the proprietary aspects of
our technology and operate without infringing the property rights of others. We
rely on a combination of patent, copyright, trade secret and trademark laws to
protect our intellectual property.

We currently have pending four U.S. patent applications covering the
following aspects of our knowledgebase technology:

. processes relating to an information search and retrieval system via a
network, such as the Internet, in which the relative usefulness ranking
and the order of display of the retrieved information in the
knowledgebase is adjusted based on actions taken by a user and the amount
of time elapsed since the particular information was last accessed;

. processes allowing the knowledgebase to suggest related information to a
customer based on the keyword search and navigation patterns of a
customer; and

. processes allowing the knowledgebase to produce a relational map of help
information items based on the strengths of the relationship between
information in the knowledgebase, which are determined based on
historical usage behaviors of customers accessing the knowledgebase.

We also enter into confidentiality or license agreements with our employees,
consultants and alliance partners, and generally control access to and
distribution of our software, documentation and other proprietary information.
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 proprietary
rights as fully as do the laws of the United States.

In addition, we have one U.S. trademark registration and two pending U.S.
trademark applications. Our trademark applications may not be allowed and even
if allowed, may not provide us a competitive advantage. Competitors may
successfully challenge the validity and scope of our patents and trademarks.
Although we rely on patent, copyright, trade secret and trademark law to
protect our technology, we believe that factors such as the technological and
creative skills of our personnel, new product developments, frequent product
enhancements and reliable product maintenance are more essential to
establishing and maintaining a technology leadership position. We can give no
assurance that others will not develop technologies that are similar or
superior to our technology.

If any of our products violate third-party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties to continue offering our products without substantial reengineering.
Any efforts to reengineer our products or obtain licenses from third parties
may not be successful and, in any case, would substantially increase our costs
and have a material adverse effect on our business, operating results and
financial condition. We generally do not conduct comprehensive patent searches
to determine whether the technology used in our products infringes patents held
by third parties. In addition, product development is inherently uncertain in a
rapidly evolving technological environment in which there may be numerous
patent applications pending, many of which are confidential when filed, with
regard to similar technologies.

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Employees

As of March 31, 2000, we had 206 full-time employees, of which 150 were at
our headquarters in Bozeman, Montana and 56 were at our Dallas, Texas sales
office. Of the total employees, 129 were in sales and marketing, 31 were in
research and development, 29 were in customer service and 17 were in finance
and administration.

None of our employees is represented by a labor union. We believe that our
relations with our employees are good.

Facilities

Our corporate headquarters are located in Bozeman, Montana, where we lease
approximately 20,000 square feet with terms that expire in March 2005, and
approximately 10,000 square feet under multiple leases with terms that expire
within one year. We have agreed to enter into a five-year lease for an
additional 30,000 square feet of space in Bozeman, Montana, that will be
available in approximately one year. We also lease 14,000 square feet in
Dallas, Texas with a term that expires in April 2004. We believe that these
existing and planned facilities are adequate to meet our current, foreseeable
requirements or that suitable additional or substitute space will be available
on commercially reasonable terms.

Legal Proceedings

We currently are not subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.

42
<PAGE>

MANAGEMENT

Executive Officers, Directors and Key Employees

Our executive officers, directors and other key employees and their ages as
of March 31, 2000, are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Greg R. Gianforte..................... 38 Chairman and Chief Executive Officer

Jeffrey W. Honeycomb.................. 44 President and Chief Operating Officer

Susan J. Carstensen................... 37 Chief Financial Officer

Michael A. Myer....................... 33 Vice President of Development

Cynthia A. Taylor..................... 52 Vice President of Alliances

Roger L. Evans(1)..................... 54 Director

William J. Lansing(1)................. 41 Director

Robert J. Ryan(2)..................... 52 Director

Margaret L. Taylor(1)(2).............. 48 Director
</TABLE>
- --------
(1) Member of audit committee.
(2) Member of compensation committee.

Greg R. Gianforte is our founder, Chairman and Chief Executive Officer.
Prior to founding RightNow in September 1995, he was the Vice President of
North American Sales of Network Associates, Inc. (formerly McAfee Associates,
Inc.), a provider of network security and tools to small and medium-sized
businesses, during 1994. Before joining McAfee Associates, Mr. Gianforte
founded Brightwork Development, a developer of network management applications,
in 1986, and served as President of Brightwork until 1994. Mr. Gianforte holds
a B.E. degree in electrical engineering and an M.S. degree in computer science
from Stevens Institute of Technology.

Jeffrey W. Honeycomb has been our President and Chief Operating Officer
since August 1999. He served as a director from October 1999 to April 2000.
From 1994 to 1999, Mr. Honeycomb served as Vice President of Business Direct
Sales at Network Associates, Inc., a provider of network security and
management tools to small and medium-sized companies. Mr. Honeycomb also served
as Vice President Europe and Vice President of Eastern Sales for Network
Associates. Prior to joining Network Associates, Mr. Honeycomb served in sales
and management positions with Brightwork Development, Central Point Software
and Lanier Business Products. Mr. Honeycomb holds a B.S. degree in business
administration from the University of Maine.

Susan J. Carstensen has been our Chief Financial Officer since October 1999.
She served as a director from October 1999 to April 2000. From 1995 to October
1999, Ms. Carstensen held various positions in finance and audit at Powerhouse
Technologies, Inc., a diversified gaming technology company. She served as
Chief Financial Officer of Powerhouse from 1997 until June 1999. Prior to
joining Powerhouse in 1995, Ms. Carstensen spent three years in financial
management for Martin Marietta Astronautics Group and six years at Ernst &
Young LLP. Ms. Carstensen holds B.S and B.A degrees in business and political
science from Montana State University.

Michael A. Myer has been our Vice President of Development since March 2000
and prior to that served as our Director of Development from August 1998. From
1987 through August 1998, Mr. Myer held various positions in computer research
and product development with Lucent Technologies (previously a subsidiary of
AT&T Corp.). Mr. Myer holds M.S. and B.S. degrees in computer science from
Rutgers University and an A.S. degree in computer science from Penn State
University.

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<PAGE>

Cynthia A. Taylor has been our Vice President of Alliances since March 2000.
In January 1998, Ms. Taylor founded and served as President of The Improved
Performance Group, a consulting company, until joining us in March 2000. Prior
to founding Improved Performance, she was the Senior Director of the New Media
Division for Oracle Corporation from June 1995 through December 1997, Vice
President of Sales for Avistar Systems Corporation from August 1994 through May
1995, and Vice President for Sales and Marketing of Servio Corporation (now
known as Gemstone Corporation) from 1990 through 1994. Ms. Taylor is a director
of Docuscribe, a Bozeman-based software company, and also is a member of the
National Advisory Board of Burns Telecommunications Center at Montana State
University and the advisory board of Tradeaway.com, a Web bartering site. She
holds B.S. and M.S. degrees in mathematics from Georgia Southern University.

Roger L. Evans has served on our board of directors since December 1999. Mr.
Evans has been associated with Greylock Management Corporation, a Boston-based
venture capital firm, since 1989, serving as a general partner of Greylock
since January 1991. From 1985 to 1988, he served as President and Chief
Executive Officer of Micom Systems, Inc., a data communications equipment
manufacturer, which he co-founded in 1976. Mr. Evans also serves as a director
of Copper Mountain Networks, Phone.com Inc. and several privately held
companies. Mr. Evans holds an M.A. degree in economics from Cambridge
University, England.

William J. Lansing has served on our board of directors since April 2000.
Mr. Lansing is the Chief Executive Officer of NBC Internet, Inc. From May 1998
to March 2000, Mr. Lansing served in various positions for Fingerhut Companies
Inc., a direct marketing company, including Chairman, President and Chief
Executive Officer. From November 1996 to May 1998, Mr. Lansing served as Vice
President of Corporate Development for General Electric Corp. From January 1996
to October 1996, he served as Chief Operating Officer of Prodigy, Inc., an
online service company. From 1986 through 1995, Mr. Lansing was a principal at
McKinsey & Co., a management consulting company. Mr. Lansing also serves as a
director of Digital River, Inc., an electronic commerce solutions provider,
Select Comfort Corp., a specialty retailer and direct marketer of air beds, Net
Perceptions, Inc., a developer of Internet marketing solutions, and BigStar
Entertainment, Inc., an online film and entertainment superstore. Mr. Lansing
holds a B.A. degree in English from Wesleyan University and a J.D. degree from
Georgetown University.

Robert J. Ryan has served on our board of directors since May 1999. Since
1995, Mr. Ryan has served as Chairman of Entrepreneur America, LLC, a business
consulting company. Prior to founding Entrepreneur America in 1995, Mr. Ryan
founded and served as Chief Executive Officer and Chairman of Ascend
Communications, Inc., a networking company, from 1989 to 1995. Mr. Ryan also
serves as a director of Looksmart Ltd. and several privately held companies.
Mr. Ryan holds a B.S. degree in mathematics and physics from Cornell University
and an M.A. in mathematics from the University of Wisconsin.

Margaret L. Taylor has served on our board of directors since April 2000.
Since 1999, she has served as the Chief Executive Officer of Venture Buildings,
LLC, a consulting company for start-up businesses. From 1989 to 1999, Ms.
Taylor was the Senior Vice President of PeopleSoft, Inc., a provider of
enterprise application software. Prior to joining PeopleSoft, she served in
various management positions for The Hibernia Bank of San Francisco, California
and the Bank of California. Ms. Taylor also serves as a director of Fair, Isaac
and Co., Inc. and OnDisplay, Inc. She has a B.A. degree in communications and
psychology from Lone Mountain College.

In connection with its investment in us in December 1999, Greylock
Management Corporation was given the right to elect one person to be a member
of our board of directors. Mr. Evans was appointed to our board of directors by
Greylock Management Corporation in December 1999. At the closing of this
offering, Greylock's right to appoint a member of our board of directors will
cease.

Board Composition

Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our board of directors will be

44
<PAGE>

elected each year. To implement the classified structure, prior to the
consummation of the offering, one of the nominees to the board will be elected
to a one-year term, two will be elected to two-year terms, and two will be
elected to three-year terms. Thereafter, directors will be elected for three-
year terms. Mr. Gianforte has been designated a Class I director whose term
expires at the 2001 annual meeting of stockholders. Mr. Evans and Mr. Lansing
have been designated Class II directors whose terms expire at the 2002 annual
meeting of stockholders. Mr. Ryan and Ms. Margaret Taylor have been designated
Class III directors whose terms expire at the 2003 annual meeting of
stockholders. For more information on the classified board, see "Description of
Capital Stock--Anti-Takeover Effects of Our Certificate of Incorporation and
Bylaws and Delaware Law."

Board Committees

Our board of directors has established an audit committee and a compensation
committee. The audit committee consists of Messrs. Evans and Lansing and Ms.
Margaret Taylor. The audit committee makes recommendations to the board of
directors regarding the selection of independent auditors, reviews the results
and scope of audit and other services provided by our independent auditors and
reviews and evaluates our audit and control functions.

The compensation committee consists of Mr. Ryan and Ms. Margaret Taylor. The
compensation committee administers our stock plans and makes recommendations to
the board of directors regarding executive compensation matters.

Compensation Committee Interlocks and Insider Participation

The members of our compensation committee currently are Mr. Ryan and Ms.
Margaret Taylor, neither of whom has at any time been an officer or employee of
RightNow.

Director Compensation

We currently do not provide our directors with cash compensation for their
services as members of the board of directors or any committee of the board,
but we may reimburse directors for some expenses in connection with their
attendance at board and committee meetings. Under our 2000 stock plan, outside
directors are granted an option to purchase 20,000 shares of our common stock
upon appointment to our board of directors, vesting quarterly over two years.
At each annual stockholders' meeting, non-employee directors will receive
automatic option grants for 5,000 shares of common stock, which options will be
vested immediately. In April 2000, in connection with the adoption of a
compensation plan for non-employee directors, the board granted options to
purchase 20,000 shares of our common stock to each of Messrs. Evans, Lansing
and Ryan and Ms. Margaret Taylor. The options, which vest quarterly over two
years, have an exercise price of $7.00 per share. During 1999, the board of
directors also granted options to purchase 600,000 shares to Mr. Ryan in
connection with his initial appointment to the board, at an exercise price of
$0.10 per share, under our 1998 stock plan. After this offering, future grants
will be made under our 2000 stock plan. See "--Benefit Plans."

45
<PAGE>

Executive Compensation

The following table provides information regarding compensation paid or
earned for services rendered to us in all capacities during the year ended
December 31, 1999 by our Chief Executive Officer and each of our other two most
highly compensated executive officers who earned more than $100,000 in 1999.
These individuals are referred to in this prospectus as the "named executive
officers."

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------- ------------
Number of
Shares
Other Annual Underlying
Name and Principal Position Salary Bonus Compensation Options
- --------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Greg R. Gianforte
Chief Executive Officer and
Chairman........................ $116,200(3) -- -- --

Jeffrey W. Honeycomb(1)
President and Chief Operating
Officer......................... 36,711(3) $24,471 $7,000(4) 2,200,000

Susan J. Carstensen(2)
Chief Financial Officer......... 21,627 -- -- 300,000
</TABLE>
- --------
(1) Mr. Honeycomb became our President and Chief Operating Officer in August
1999. Mr. Honeycomb's salary in 1999 on an annualized basis was $100,000.

(2) Ms. Carstensen became our Chief Financial Officer in October 1999. Ms.
Carstensen's salary in 1999 on an annualized basis was $100,000.

(3) Includes matching contributions by us under our 401(k) plan as follows: Mr.
Gianforte, $1,200; and Mr. Honeycomb, $1,484. Employees vest in the
employer matching contribution in four equal installments over a four-year
period.

(4) Reflects expenses paid by us for Mr. Honeycomb's relocation to Bozeman,
Montana.

46
<PAGE>

In the year ended December 31, 1999, we granted options to purchase up to an
aggregate of 5,379,700 shares to employees, directors and consultants. No stock
appreciation rights were granted during this period. All options were granted
under our 1998 stock plan at exercise prices at or above the fair market value
of our common stock on the date of grant, as determined in good faith by the
board of directors. All options granted under the plan have a term of 10 years.
However, in the event of the optionee's death, disability or termination of
employment with us, the option will terminate 90 days after the optionee's
death, disability or termination. Optionees may pay the exercise price by cash,
check, cancellation of any outstanding indebtedness of the optionee to us or
delivery of already owned shares of our common stock. All options granted to
executive officers vest over four years in equal installments every six months
from the date of grant, except that Mr. Honeycomb's options vested 25% upon his
relocation to Bozeman, Montana, and his remaining options vest over four years
in equal installments every six months from the date of grant.

The following table provides information concerning the stock option grants
we made in 1999 to each of the named executive officers, including the
potential realizable value over the 10-year term of the options, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.

Option Grants in 1999

<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Number of Price
Securities % of Total Appreciation for
Underlying Options Option Term
Options Granted Exercise Price Expiration -----------------
Name Granted in 1999 Per Share Date 5% 10%
- ---- ---------- ---------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Greg R. Gianforte....... -- -- -- -- -- --
Jeffrey W. Honeycomb.... 2,200,000 40.9% $0.15 8/25/09 $207,535 $525,935
Susan J. Carstensen..... 300,000 5.6 0.30 10/14/09 56,601 143,437
</TABLE>

The following table provides information concerning shares of common stock
represented by the number and value of unexercised stock options held by the
named executive officers as of December 31, 1999. No options were exercised by
the named executive officers during the year ended December 31, 1999. There was
no public trading market for the common stock as of December 31, 1999. The
value of unexercised in-the-money options has been calculated by determining
the difference between the exercise price per share payable upon exercise of
the options and the fair value price, $2.91, at December 31, 1999.

Aggregated 1999 Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1999 December 31, 1999
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Greg R. Gianforte........... -- -- -- --
Jeffrey W. Honeycomb........ 550,000 1,650,000 $1,518,000 $4,554,000
Susan J. Carstensen......... -- 300,000 -- 783,000
</TABLE>

Employment and Change-in-Control Arrangements

In August 1999 we entered into an employment agreement with Jeffrey W.
Honeycomb, our President and Chief Operating Officer. Under Mr. Honeycomb's
agreement, he will serve as President and Chief Operating Officer for a one-
year term, which will automatically be extended for two successive one-year
periods if not

47
<PAGE>

terminated earlier by us or Mr. Honeycomb. The agreement provides for an annual
base salary of $100,000, and Mr. Honeycomb also is eligible for a quarterly
incentive bonus of up to $25,000 per quarter based on quarterly goals related
to revenue and profit. Additionally, we granted Mr. Honeycomb an option to
purchase 2,200,000 shares of common stock, 25% of which vested upon Mr.
Honeycomb's establishment of a residence in Montana in September 1999. The
remaining shares vest in equal installments every six months from the date of
grant for a period of four years. If Mr. Honeycomb is terminated by us without
cause (as defined in the agreement), he will receive 12 months' salary, and his
option shares will continue to vest during that time as if he were still
employed by us, but all unexercised options will terminate on the third
anniversary of his termination without cause. Upon the occurrence of a change-
in-control transaction, the vesting of all of Mr. Honeycomb's options will be
automatically accelerated so that they become completely vested.

Ms. Carstensen's offer letter provides that if she is terminated after the
occurrence of a change in control, she will be entitled to receive six months'
salary as severance.

The option agreements with our executive officers, other than Mr. Honeycomb,
and key employees provide that if the officer's or key employee's employment is
terminated involuntarily other than for cause within 12 months following a
change-in-control transaction, then, subject to limitations, the vesting of any
stock option held by the officer or key employee will be automatically
accelerated so that the option becomes completely vested.

Benefit Plans

1998 Long-Term Incentive and Stock Option Plan

Our 1998 Long-Term Incentive and Stock Option Plan, or "1998 Option Plan,"
was adopted by the board of directors and received stockholder approval in
February 1998. A total of 10,000,000 shares of common stock have been reserved
for issuance under the 1998 Option Plan. Under the 1998 Option Plan, we were
authorized to grant to officers and other employees options to purchase shares
of common stock intended to qualify as incentive stock options, as defined
under Section 422 of the Internal Revenue Code of 1986, and options that do not
qualify as incentive stock options under the Internal Revenue Code. Incentive
stock options granted under the 1998 Option Plan are exercisable within 10
years and non-incentive stock options are exercisable within 15 years of the
original grant date and generally become exercisable pro rata every six months
over a period of four years from the date of grant. Options granted under the
1998 Option Plan are not transferable by the recipient except by will or by the
laws of descent and distribution. As of March 31, 2000, options to purchase
9,181,450 shares of our common stock had been granted under the 1998 Option
Plan. Of that amount, options to purchase 6,572,050 shares of our common stock
remain outstanding as of March 31, 2000, and are exercisable at prices ranging
from $0.025 per share to $6.00 per share.

2000 Stock Incentive Plan

Our 2000 Stock Incentive Plan will be approved by our board of directors and
stockholders prior to the completion of this offering. The 2000 Stock Incentive
Plan provides for the granting of:

. stock options, including incentive stock options and non-qualified stock
options;

. stock appreciation rights, or "SARs";

. restricted stock and restricted stock units;

. performance awards; and

. other stock-based awards.

We have reserved shares of common stock for issuance under the
2000 Stock Incentive Plan. The 2000 Stock Incentive Plan will be administered
by our compensation committee. The compensation committee will have the
authority:

. to establish rules for the administration of the 2000 Incentive Plan;

. to select the persons to whom awards are granted;

48
<PAGE>

. to determine the types of awards to be granted and the number of shares
of common stock covered by awards; and

. to set the terms and conditions of awards.

The compensation committee also may determine whether the payment of any
amounts received under any award shall be deferred. Awards may provide that
upon grant or exercise, the holder will receive shares of common stock, cash or
any combination, as the compensation committee will determine.

In order to meet the requirements of Section 162(m) of the Internal Revenue
Code, the 2000 Stock Incentive Plan limits the number of options that may be
granted to any single person in any one calendar year.

The exercise price per share under any incentive stock option or the grant
price of any SAR cannot be less than 100% of the fair market value of our
common stock on the date of grant of that incentive stock option or SAR. In the
event that a proposed optionee owns more than 10% of our common stock, any
incentive stock option granted to that optionee must have an exercise price not
less than 110% of the fair market value of our common stock on the grant date
and may not have a term longer than five years. Options may be exercised by
payment in full of the exercise price, either in cash or, at the discretion of
the compensation committee, in whole or in part by the tendering of shares of
common stock or other consideration having a fair market value on the date the
option is exercised equal to the exercise price. Determinations of fair market
value under the 2000 Stock Incentive Plan are made in accordance with methods
and procedures established by the compensation committee.

The holder of an SAR is entitled to receive the excess of the fair market
value on the date of exercise of a specified number of shares over the grant
price of the SAR.

The holder of restricted stock may have all of the rights of a stockholder
of our company, including the right to vote the shares subject to the
restricted stock award and to receive any dividends, or these rights may be
restricted. Restricted stock may not be transferred by the holder until the
restrictions established by the compensation committee lapse. Holders of
restricted stock units have the right, subject to any restrictions imposed by
the compensation committee, to receive shares of common stock, or a cash
payment equal to the fair market value of such shares, at some future date.
Upon termination of the holder's employment during the restriction period,
restricted stock and restricted stock units will be forfeited, unless the
compensation committee determines otherwise.

If any shares of common stock subject to any award or to which an award
relates are not purchased or are forfeited, or if any award terminates without
the delivery of shares or other consideration, the shares previously used for
these awards will become available for future awards under the 2000 Stock
Incentive Plan. Except as otherwise provided under the procedures adopted by
the compensation committee to avoid double-counting with respect to awards
granted in tandem with or in substitution for other awards, all shares relating
to awards granted are counted against the aggregate number of shares available
for granting awards under the 2000 Stock Incentive Plan.

Our board of directors may amend, alter or discontinue the 2000 Stock
Incentive Plan at any time, except that stockholder approval must be obtained
for any change that, absent stockholder approval:

. would cause Rule 16b-3 of the Exchange Act or Section 162(m) of the
Internal Revenue Code to become unavailable with respect to the 2000
Stock Incentive Plan;

. would violate any rules or regulations of the National Association of
Securities Dealers, Inc., The Nasdaq National Market or any securities
exchange applicable to us; or

. would cause us to be unable under the Internal Revenue Code to grant
incentive stock options under the 2000 Stock Incentive Plan.

Under the 2000 Stock Incentive Plan, the compensation committee may permit
participants receiving or exercising awards to surrender shares of common stock
to us to satisfy federal and state withholding tax

49
<PAGE>

obligations. In addition, the compensation committee may grant a bonus to a
participant in order to provide funds to pay all or a portion of federal and
state taxes due as a result of the receipt, exercise or lapse of restrictions
relating to an award.

Employee Stock Purchase Plan

Our board of directors and stockholders will adopt our 2000 Employee Stock
Purchase Plan, or the "Stock Purchase Plan," prior to the completion of this
offering. The Stock Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code of
1986. The Stock Purchase Plan covers an aggregate of 500,000 shares of common
stock. In order to participate in the Stock Purchase Plan, employees must meet
certain eligibility requirements. Participating employees will be able to
direct the company to make payroll deductions of up to 15% of their
compensation during a purchase period for the purchase of shares of common
stock. The maximum amount that an employee may deduct during any one year is
$25,000. Each purchase period, with the exception of the initial offering
period, will be six months. The Stock Purchase Plan will provide participating
employees with the right, subject to some limitations, to purchase our common
stock at a price equal to 85% of the lesser of the fair market value of our
common stock on the first day or the last day of the applicable purchase
period, except that the price on the first day of the initial purchase period
will be the initial public offering price of the shares of the common stock
offered by this prospectus. The Stock Purchase Plan will terminate on a date
that our board of directors may determine, or automatically as of the date on
which all of the shares of common stock reserved for purchase under the Stock
Purchase Plan have been sold.

401(k) Plan

We have established a tax-qualified employee savings and retirement plan, or
"401(k) Plan," for all of our employees who satisfy eligibility requirements,
including requirements relating to age and length of service. Pursuant to the
401(k) Plan, employees may elect to reduce their current compensation by up to
the lower of 12% or the statutorily prescribed limit and have the amount of the
reduction contributed to the 401(k) Plan. The 401(k) Plan permits us to make
additional discretionary matching contributions, and we currently match 100% of
employees' contributions up to a maximum of 3% of their annual compensation.
The employer contribution vests annually over a four-year period in four equal
installments. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees or by us to the 401(k)
Plan, and income earned on plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that our contributions, if any,
will be deductible by us when made.

Limited Liability and Indemnification Matters

We have entered into indemnification agreements with each of our directors
and executive officers. The form of agreement provides that we will indemnify
against any and all expenses of the director or executive officer who incurred
the expenses because of his or her status as a director or executive officer of
RightNow, to the fullest extent permitted by Delaware law, our certificate of
incorporation and our bylaws.

Our certificate of incorporation and bylaws contain provisions relating to
the limitation of liability and indemnification of directors and officers. The
certificate of incorporation provides that our directors will not be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability:

. for any breach of the director's duty of loyalty to us or our
stockholders;

. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. in respect of unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or

. for any transaction from which the director derives any improper personal
benefit.

50
<PAGE>

Our certificate of incorporation also provides that if Delaware law is
amended after the approval by our stockholders of the certificate of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of our directors will be
eliminated or limited to the fullest extent permitted by Delaware law. The
foregoing provisions of the certificate of incorporation are not intended to
limit the liability of directors or officers for any violation of applicable
federal securities laws. In addition, as permitted by Section 145 of the
Delaware General Corporation Law, our bylaws provide that:

. we are required to indemnify our directors and executive officers to the
fullest extent permitted by Delaware law;

. we may, in our discretion, indemnify other officers, employees and agents
as provided by Delaware law;

. to the fullest extent permitted by Delaware law, but subject to various
exceptions, we are required to advance all expenses incurred by our
directors and executive officers in connection with a legal proceeding;

. the rights conferred in the bylaws are not exclusive;

. we are authorized to enter into indemnification agreements with our
directors, officers, employees and agents; and

. we may not retroactively amend the bylaw provisions relating to
indemnity.

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<PAGE>

RELATED PARTY TRANSACTIONS

Share Issuances

In December 1999, we received proceeds of approximately $16.1 million from
the sale of 5,554,853 shares of our preferred stock in a private placement to
several investors, including Greg R. Gianforte and Susan J. Carstensen, our
Chief Executive Officer and Chief Financial Officer, respectively, Robert J.
Ryan, a director, Summit Accelerator Fund, L.P. and Greylock IX Limited
Partnership, the general partner of which is Greylock IX GP Limited
Partnership. Roger L. Evans, a member of our board of directors, is a general
partner of Greylock IX GP Limited Partnership. In connection with this sale of
stock, Greylock was given the right to designate one person to serve on our
board of directors, and Mr. Evans was elected to the board in December 1999 as
Greylock's designee. At the closing of this offering, Greylock's right to
designate a member of our board of directors will cease. The shares of
preferred stock will be converted into an equal number of shares of our common
stock upon the closing of this offering.

We have granted options to two of our named executive officers (Mr.
Honeycomb and Ms. Carstensen) and to our directors, other than Mr. Gianforte.
See "Management--Option Grants in Last Fiscal Year" and "Principal
Stockholders."

Subchapter S Corporation Distribution

Prior to the issuance of shares of our Series A preferred stock in December
1999, we were a corporation subject to taxation under Subchapter S of the
Internal Revenue Code of 1986. As a result, our net earnings were taxed, for
federal and state income tax purposes, as income of our stockholders. In
December 1999, we terminated our S corporation status. At that time, we
authorized the payment of a distribution to our S corporation stockholders in
an amount approximating their individual income tax liability resulting from
taxable earnings up to the date of termination. As a part of this distribution,
Mr. Gianforte received a distribution of $351,292, representing his pro rata
ownership of our outstanding common stock at the time our S corporation status
was terminated.

Transactions with our Chief Executive Officer

Office Leases with Genesis

We have entered into two leases with Genesis Partners, LLC, under which we
lease 9,184 square feet of office space for our principal executive offices at
77 Discovery Drive, Bozeman, Montana, and another 9,184 square feet of office
space at 45 Discovery Drive, Bozeman, Montana. Mr. Gianforte has a 50%
membership interest in Genesis Partners, LLC. The leases have 60-month terms
starting April 1, 2000 and May 1, 2000, with options to extend for three
additional 60-month periods upon the same terms and conditions except for
renegotiated rent. Under each lease, our rent for the first year of the lease
term is $13.50 per square foot, or $10,332 per month, including insurance,
taxes and common area maintenance, but excluding utilities. We believe that the
terms of these leases are no less favorable to us than they would have been if
obtained from unaffiliated third parties.

Loans to RightNow

In 1998, Mr. Gianforte and an affiliated entity made loans totaling $100,000
to us to provide working capital. We repaid the full amount of these loans in
1999.

Pledge of Collateral to Secure Line of Credit to RightNow

In October 1999, we established a line of credit with Big Sky Western Bank
under which we may borrow up to $500,000 pursuant to a promissory note due July
29, 2000. Mr. Gianforte and his spouse pledged securities to secure the line of
credit in accordance with the terms of a pledge agreement between Big Sky
Western Bank and Mr. Gianforte and his spouse. This pledge was terminated in
December 1999.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table provides information concerning beneficial ownership of
our common stock as of March 31, 2000, by:

. each stockholder that we know owns more than 5% of our outstanding common
stock;

. each of our named executive officers;

. each of our directors; and

. all of our directors and executive officers as a group.

The following table lists the applicable percentage of beneficial ownership
based on 26,301,438 shares of common stock outstanding as of March 31, 2000, as
adjusted to reflect the conversion of the outstanding shares of preferred stock
upon completion of this offering. The table also lists the applicable
percentage beneficial ownership based on shares of common stock
outstanding upon completion of this offering, assuming no exercise of the
underwriters' over-allotment option.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and generally includes voting power and/or
investment power with respect to the securities held. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of March
31, 2000, are deemed outstanding for purposes of computing the percentage
beneficially owned by the person holding the options but are not deemed
outstanding for purposes of computing the percentage beneficially owned by any
other person. Except as otherwise noted, the persons or entities named have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.

53
<PAGE>

Unless otherwise indicated, the principal address of each of the
stockholders below is c/o RightNow Technologies, Inc., 77 Discovery Drive,
Bozeman, Montana 59718.

<TABLE>
<CAPTION>
Percentage of Common
Number of Stock Owned
Shares -------------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned(1) the Offering the Offering
- ------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Greg R. Gianforte(2)................... 20,034,367 76.17%
Roger L. Evans(3)...................... 4,759,650 18.10
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Greylock IX Limited Partnership........ 2,379,825 9.05
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Greylock X Limited Partnership......... 2,209,953 8.40
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Robert J. Ryan......................... 373,377 1.41
Roaring Lion Ranch, LLC
77 Storm King Road
Hamilton, MT 59840
Jeffrey W. Honeycomb................... 756,250 2.80
Susan J. Carstensen.................... 71,549 *
William J. Lansing..................... -- -- --
NBC Internet
300 Montgomery Street
San Francisco, CA 94104
Margaret L. Taylor..................... -- -- --
P.O. Box 7546
Incline Village, NV 89452
All directors and executive officers as
a group (8 persons)(4)................ 26,326,443 95.47
</TABLE>
- --------
* Less than 1% of the outstanding shares of common stock.
(1) Includes the following shares underlying options exercisable as of or
within 60 days of March 31, 2000: Mr. Ryan, 150,000 shares; Mr. Honeycomb,
756,250 shares; and Ms. Carstensen, 37,500 shares.
(2) Excludes 40,000 shares held by Mr. Gianforte's spouse, as to which he has
no voting or investment power and disclaims beneficial ownership.
(3) Consists of 2,379,825 shares held by Greylock IX Limited Partnership,
2,209,953 shares held by Greylock X Limited Partnership and 169,872 shares
held by Greylock X-A Limited Partnership. Mr. Evans is a director of
RightNow and a general partner of Greylock IX GP Limited Partnership, which
is the general partner of Greylock IX Limited Partnership, and Mr. Evans
also is the general partner of Greylock X GP Limited Partnership, which is
the general partner of Greylock X Limited Partnership and Greylock X-A
Limited Partnership. Mr. Evans disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein. Mr. Evans
shares voting and dispositive powers over these shares with the other
general partners of Greylock IX Limited Partnership, Greylock X Limited
Partnership and Greylock X-A Limited Partnership.
(4) Includes 1,275,000 shares underlying options exercisable as of or within 60
days of March 31, 2000.

54
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Following the closing of this offering, our authorized capital stock will
consist of 150,000,000 shares of common stock, par value $.001 per share, and
15,000,000 shares of preferred stock, par value $.001 per share.

Common Stock

As of March 31, 2000, there were 20,746,585 shares of common stock
outstanding, held by approximately 34 stockholders of record.

Holders of our common stock do not have cumulative voting rights and are
entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders, including the election of directors. Holders of our
common stock are entitled to receive ratably dividends declared by the board of
directors out of funds legally available therefor, subject to the prior rights
of any preferred stock then outstanding. See "Dividend Policy."

Upon a liquidation, dissolution or winding up of RightNow, the holders of
our common stock will be entitled to share ratably in the net assets legally
available for distribution to stockholders after the payment of all debts and
other liabilities of RightNow, subject to the prior rights of any preferred
stock then outstanding. Holders of our common stock have no preemptive or
conversion rights or other subscription rights, and there are no redemption or
sinking funds provisions applicable to the common stock. All outstanding shares
of common stock are, and the common stock outstanding upon completion of this
offering will be, fully paid and nonassessable.

Preferred Stock

Effective upon the closing of this offering, our board of directors will
have the authority, without further action by the stockholders, to issue from
time to time 15,000,000 shares of preferred stock in one or more series and to
fix for each series the number of shares, designations, preferences, powers and
relative, participating, optional or other special rights and the
qualifications or restrictions thereof. The preferences, powers, rights and
restrictions of different series of preferred stock may differ with respect to
dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions, purchase funds and
other matters.

The issuance of preferred stock could decrease the amount of earnings and
assets available for distribution to holders of common stock or adversely
affect the rights and powers, including voting rights, of the holders of common
stock. It may have the effect of delaying, deferring or preventing a change in
control of RightNow. We currently do not plan to issue any additional shares of
preferred stock.

Registration Rights

After this offering, the holders of 5,554,853 shares of common stock or
their transferees will be entitled to rights with respect to the registration
of these shares under the Securities Act as follows:

Demand registration rights. At any time after six months following the
closing of this offering, the holders of at least 50% of these shares of common
stock may request that we register all or a portion of their shares with an
aggregate offering price of at least $7,500,000. Upon their request, we must,
subject to some restrictions and limitations, use our best efforts to cause a
registration statement covering the number of shares of common stock that are
subject to the request to become effective. The holders may only require us to
file a maximum of two registration statements in response to their demand
registration rights.

Piggyback registration rights. The holders of these shares may request that
we register their shares whenever we file a registration statement to register
securities for our own account. These registration

55
<PAGE>

opportunities are unlimited, but the number of shares that may be registered
may be cut back in limited situations by the underwriters.

Form S-3 registration rights. The holders of these shares may request that
we register their shares if we are eligible to file a registration statement on
Form S-3 and if the aggregate price of the shares offered to the public is at
least $1,000,000. The holders may only require us to file one registration
statement on Form S-3 per calendar year.

These registration rights terminate when all of these shares may be sold
under Rule 144 under the Securities Act during any 90-day period. All holders
of these registration rights have waived their registration rights in
connection with this offering.

Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and
Delaware Law

Some provisions of Delaware law and our certificate of incorporation and
bylaws could make the following transactions more difficult:

. acquisition of RightNow by means of a tender offer;

. acquisition of RightNow by means of a proxy contest or otherwise; or

. removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are designed
to encourage persons seeking to acquire control of us first to negotiate with
our board of directors, and also are intended to provide management with
flexibility to enhance the likelihood of continuity and stability in the
composition of RightNow if our board of directors determines that a takeover is
not in the best interests of us and our stockholders. However, these provisions
could have the effect of discouraging attempts to acquire us, which could
deprive our stockholders of opportunities to sell their shares of common stock
at prices higher than prevailing market prices. We believe that the benefits of
these provisions, including increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure us, outweigh the disadvantages of discouraging takeover
proposals because negotiation of takeover proposals could result in an
improvement of their terms.

Election and Removal of Directors

Our board of directors is divided into three classes serving staggered
three-year terms. This system of electing directors may tend to discourage a
third party from making a tender offer or otherwise attempting to obtain
control of us because generally at least two stockholders' meetings will be
required for stockholders to effect a change in control of the board of
directors. In addition, our bylaws contain provisions that establish specific
procedures for appointing and removing members of the board of directors. Under
our bylaws, vacancies and newly created directorships on the board of directors
may be filled only by a majority of the directors then serving on the board,
and directors may be removed by the stockholders only for cause.

Stockholder Meetings

Under our bylaws, only the board of directors, the Chairman of the Board,
our President or stockholders holding 15% of the outstanding voting power may
call special meetings of stockholders.

Requirements for Advance Notification of Stockholder Nominations and
Proposals

Our bylaws establish advance notice procedures with respect to stockholder
proposals and the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board of directors.

56
<PAGE>

Delaware Anti-Takeover Law

We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became
an interested stockholder, unless the business combination or the transaction
in which the person became an interested stockholder is approved in a
prescribed manner. Generally, a "business combination" includes a merger, asset
or stock sale, or another transaction resulting in a financial benefit to the
interested stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years prior to
the determination of interested stockholder status did own, 15% or more of the
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions that are not approved in advance
by the board of directors, including discouraging attempts that might result in
a premium over the market price for the shares of common stock held by
stockholders.

Elimination of Stockholder Action by Written Consent

Our certificate of incorporation eliminates the right of stockholders to act
by written consent without a meeting.

No Cumulative Voting

Our certificate of incorporation and bylaws do not provide for cumulative
voting in the election of directors. Cumulative voting allows a minority
stockholder to vote a portion or all of its shares for one or more candidates
for seats on the board of directors. Without cumulative voting, a minority
stockholder will not be able to gain as many seats on our board of directors
based on the number of shares of our stock the stockholder holds as the
stockholder would be able to gain if cumulative voting were permitted. The
elimination of cumulative voting makes it more difficult for a minority
stockholder to gain a seat on our board of directors to influence the board's
decision regarding a takeover.

Undesignated Preferred Stock

The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
RightNow. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of RightNow.

Amendment of Charter Provisions

The amendment of any of the above provisions requires approval by holders of
at least two-thirds of the outstanding common stock.

Listing on The Nasdaq Stock Market's National Market

We have applied for quotation of our common stock on The Nasdaq Stock
Market's National Market under the symbol "RTNW."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be the American
Stock Transfer and Trust Company.

57
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock, and we cannot assure you that a significant public market for our common
stock will develop or be sustained after this offering. As described below, no
shares currently outstanding will be available for sale immediately after this
offering due to certain contractual and securities law restrictions on resale.
Sales of substantial amounts of our common stock in the public market after the
restrictions lapse could cause the prevailing market price to decline and limit
our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding shares
of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of options to purchase common stock that were
outstanding as of March 31, 2000. Of these shares, the shares offered for sale
through the underwriters will be freely tradeable without restriction under the
Securities Act unless purchased by our affiliates or covered by a separate
lock-up agreement.

The remaining 26,301,438 shares of common stock held by existing
stockholders are restricted securities. Restricted securities may be sold in
the public market only if registered or if they qualify for an exemption from
registration described below under Rule 144, 144(k) or 701 under the Securities
Act. These provisions are described below.

As a result of the lock-up agreements and the provisions of Rules 144,
144(k) and 701, these restricted shares will be available for sale in the
public market as follows:

. no shares may be sold prior to 180 days from the date of this prospectus;

. beginning 181 days after the date of this prospectus, shares held
by persons who are not our affiliates will have been held long enough to
be sold under either Rule 701 or Rule 144, subject to the limitations
described below;

. beginning 181 days after the date of this prospectus, shares
held by our affiliates will have been held long enough to be sold under
Rule 144, subject to volume and other limitations described below; and

. the remaining shares may be sold under Rule 144 or 144(k) once they have
been held for the required time.

Lock-up agreements. Our officers, directors and stockholders have agreed not
to transfer or dispose of, directly or indirectly, any shares of our common
stock, or any securities convertible into or exercisable or exchangeable for
shares of our common stock, for a period of 180 days after the date of this
prospectus, without the prior written consent of Credit Suisse First Boston
Corporation.

Rule 144. In general, under Rule 144, a person who has beneficially owned
restricted securities for at least one year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:

. 1% of the number of shares of our common stock then outstanding, which,
immediately after this offering, will equal approximately
shares; or

. the average weekly trading volume of our common stock on The Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.

Sales under Rule 144 also are limited by manner-of-sale provisions, notice
requirements and requirements relating to the availability of current public
information about us.

Rule 144(k). Under Rule 144(k), a person who is not deemed to have been one
of our affiliates at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years,
is entitled to sell these shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144
discussed above.

58
<PAGE>

Rule 701. In general, under Rule 701, our employees, consultants or advisors
who purchase or receive shares from us under a compensatory stock purchase plan
or option plan or other written agreement will be eligible to resell their
shares beginning 90 days after the date of this prospectus. Nonaffiliates will
be able to sell their shares subject only to the manner-of-sale provisions of
Rule 144. Affiliates will be able to sell their shares without compliance with
the holding period requirements of Rule 144.

Registration rights. Upon completion of this offering, the holders of
5,554,853 shares of our common stock have rights to have their shares
registered under the Securities Act. All shares are covered by lock-up
agreements; following the expiration of the lock-up period, registration of
these shares under the Securities Act would result in the shares becoming
freely tradeable without restriction under the Securities Act immediately upon
the effectiveness of the registration.

Stock options. Prior to the expiration of the lock-up period, we intend to
file a registration statement under the Securities Act covering
shares of common stock reserved for issuance upon exercise of outstanding
options under the 2000 Plan, the 1998 Option Plan and the Stock Purchase Plan.
See "Management--Benefit Plans." Subject to the lock-up agreements, shares
registered under that registration statement will be available for resale in
the open market immediately upon the effectiveness of that registration
statement, except with respect to Rule 144 volume limitations that apply to our
affiliates.

59
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Dain Rauscher
Incorporated, Thomas Weisel Partners LLC, Adams Harkness & Hill, Inc. and D.A.
Davidson & Co. are acting as representatives, the following respective numbers
of shares of common stock:

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Dain Rauscher Incorporated.........................................
Thomas Weisel Partners LLC.........................................
Adams, Harkness & Hill, Inc. ......................................
D.A. Davidson & Co.................................................
---
Total............................................................
===
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering, if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table summarizes the compensation and expenses we will pay.

<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge,

60
<PAGE>

disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except issuances pursuant to the exercise of employee stock options outstanding
on the date hereof.

Our officers, directors and stockholders, including holders of shares of our
common stock and preferred stock, have agreed that they will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock, enter into a transaction that
would have the same effect, or enter into a swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic consequences of
ownership of our common stock, whether any of the above transactions is to be
settled by delivery of our common stock or other securities, in cash or
otherwise, or publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Credit Suisse
First Boston Corporation for a period of 180 days after the date of this
prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not purchased will be offered
by the underwriters to the general public on the same terms as the other
shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "RTNW."

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives of the underwriters. The principal factors
to be considered in determining the initial public offering price include the
following:

. the information set forth in this prospectus and otherwise available to
the representatives;

. market conditions for initial public offerings;

. the history of and the prospects for the industry in which we will
compete;

. the ability of our management;

. our prospects for future earnings;

. the present state of our development and current financial condition;

. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and

. the general condition of the securities markets at the time of this
offering.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.

. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified minimum.

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<PAGE>

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids, may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has acted as a lead or co-manager on
numerous public offerings of equity securities. Thomas Weisel Partners does not
have any material relationship with us or any of our officers, directors or
other controlling persons, except with respect to its contractual relationship
with us under the underwriting agreement entered into in connection with this
offering.

62
<PAGE>

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws,
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

Representations of Purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."

Rights of Action (Ontario Purchasers)

The securities being offered are those of a foreign issuer, and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or these persons outside of Canada.

Notice to British Columbia Residents

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within 10 days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.

Taxation and Eligibility for Investment

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to tax consequences of an investment in the common stock
in their particular circumstances and with respect to the eligibility of the
common stock for investment by the purchaser under relevant Canadian
legislation.

63
<PAGE>

LEGAL MATTERS

Dorsey & Whitney LLP, Great Falls, Montana, and Minneapolis, Minnesota, will
pass upon the validity of the shares of common stock offered by this prospectus
for us. Shearman & Sterling, Menlo Park, California, will pass upon certain
legal matters in connection with this offering for the underwriters.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements as of December 31, 1998 and 1999 and for each of the three years in
the period ended December 31, 1999, as set forth in their report. We have
included our financial statements in this prospectus and elsewhere in the
registration statement in reliance on the report of Ernst & Young LLP, which
was given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
common stock offered by this prospectus. As permitted by the rules and
regulations of the Commission, this prospectus, which is a part of the
registration statement, omits certain information, exhibits, schedules and
undertakings set forth in the registration statement. For further information
about us and the common stock offered by this prospectus, you should review the
registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents or provisions of any contract
or other document referred to in this prospectus are not necessarily complete,
and in each instance reference is made to the copy of the contract or other
document filed as an exhibit to the registration statement. All statements made
in this prospectus concerning these contracts or documents are qualified in all
respects by this reference. A copy of the registration statement, as well as
other documents we file with the Commission, may be inspected without charge in
the Commission's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information
about its public reference rooms. Copies of all or any part of the registration
statement and other documents we file may be taken from the public reference
rooms upon the payment of fees prescribed by the Commission. In addition, the
registration statement and other documents we file with the Commission through
its Electronic Data Gathering, Analysis and Retrieval, or "EDGAR," system are
available to the public through the Commission's Web site at
http://www.sec.gov.

Upon completion of this offering, we will be required to file periodic
reports, proxy statements and other information with the Commission. These
periodic reports, proxy statements and other information will be available for
inspection and copying at the Commission's public reference rooms and through
the Web site of the Commission referred to above.

64
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................................. F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statement of Changes in Stockholders' Equity (Deficit)...................... F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
RightNow Technologies, Inc.

We have audited the accompanying balance sheets of RightNow Technologies,
Inc. as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' deficit and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RightNow Technologies, Inc.
at December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
January 14, 2000

F-2
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31 Equity
---------------------- March 31, March 31,
1998 1999 2000 2000
--------- ----------- ----------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.............. $ 86,436 $14,182,845 $12,374,291
Accounts receivable, net
of allowance for doubtful
accounts of $7,025 and
$229,150 at December 31,
1998 and 1999 and
$335,976 at March 31,
2000..................... 133,500 2,585,610 4,305,082
Notes receivable.......... -- -- 293,702
Prepaid expenses.......... 6,422 46,754 103,125
--------- ----------- -----------
Total current assets.... 226,358 16,815,209 17,076,200
Property and equipment...... 42,271 571,041 1,151,241
Less accumulated
depreciation............... (4,305) (43,908) (94,220)
--------- ----------- -----------
37,966 527,133 1,057,021
Other assets................ -- 5,788 6,790
--------- ----------- -----------
Total assets............ $ 264,324 $17,348,130 $18,140,011
========= =========== ===========
Liabilities and
stockholders' equity
(deficit)
Current liabilities:
Accounts payable.......... $ 13,775 $ 235,302 $ 548,546
Stockholder
distributions............ -- 330,000 330,000
Commissions payable....... 11,513 234,007 358,548
Other accrued
liabilities.............. 3,589 205,419 498,100
Officer wages payable..... 60,000 25,000 --
Due to stockholder........ 100,000 -- --
Current portion of capital
lease obligation......... -- 7,859 7,446
Current portion of
deferred revenue......... 101,142 2,664,824 4,650,615
--------- ----------- -----------
Total current
liabilities............ 290,019 3,702,411 6,393,255
Long-term capital lease
obligation, net of current
portion.................... -- 7,272 5,347
Deferred revenue, net of
current portion............ 69,946 1,499,841 2,520,744
--------- ----------- -----------
Total liabilities....... 359,965 5,209,524 8,919,346
Redeemable convertible
preferred stock:
Series A, $.001 par value:
Authorized and designated
shares--5,554,853
Issued and outstanding
shares--5,554,853....... -- 16,119,622 16,119,622 $ --
Stockholders' equity
(deficit):
Preferred stock, $.001 par
value:
Authorized and
undesignated shares--
9,445,147
Issued and outstanding
shares--None
Common stock, $.001 par
value:
Authorized shares--
50,000,000
Issued and outstanding
shares--1998--
20,303,600; 1999--
20,521,335; 2000--
20,746,585; pro forma
issued and outstanding
shares--26,301,438...... 20,304 20,521 20,746 26,301
Additional paid-in
capital.................. 11,286 (1,429,312) (1,319,056) 14,795,011
Accumulated deficit....... (127,231) (2,572,225) (5,600,647) (5,600,647)
--------- ----------- ----------- -----------
Total stockholders'
equity (deficit)....... (95,641) (3,981,016) (6,898,957) $ 9,220,665
--------- ----------- ----------- ===========
Total liabilities and
stockholders' equity
(deficit).............. $ 264,324 $17,348,130 $18,140,011
========= =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months ended
Year ended December 31 March 31
---------------------------------- -----------------------
1997 1998 1999 1999 2000
---------- ---------- ----------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Revenue................. $ 79,064 $ 279,428 $ 2,024,541 $ 135,256 $ 1,443,110
Cost of revenue......... 797 3,756 63,418 2,668 166,096
---------- ---------- ----------- ---------- -----------
Gross profit.......... 78,267 275,672 1,961,123 132,588 1,277,014
Operating expenses
Sales and marketing..... 746 279,162 3,342,748 205,986 3,478,713
Research and
development............ 42,656 74,098 603,283 71,713 633,576
General and
administrative......... 18,208 85,772 492,752 38,435 361,016
---------- ---------- ----------- ---------- -----------
Total operating
expenses............. 61,610 439,032 4,438,783 316,134 4,473,305
---------- ---------- ----------- ---------- -----------
Income (loss) from
operations............. 16,657 (163,360) (2,477,660) (183,546) (3,196,291)
Interest and other
income, net............ 9,274 29 32,666 77 167,869
---------- ---------- ----------- ---------- -----------
Net income (loss)....... $ 25,931 $ (163,331) $(2,444,994) $ (183,469) $(3,028,422)
========== ========== =========== ========== ===========
Net income (loss) per
common share--basic and
diluted................ $ -- $ (.01) $ (.12) $ (.01) $ (.15)
========== ========== =========== ========== ===========
Shares used in computing
basic and diluted net
income (loss) per
common share........... 20,000,000 20,113,530 20,363,644 20,318,644 20,601,541
========== ========== =========== ========== ===========
Pro forma net loss per
share--basic and
diluted................ $ (.12) $ (.12)
=========== ===========
Shares used in computing
basic and diluted pro
forma net loss per
share.................. 20,508,860 26,156,394
=========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Total
Common Stock Additional Accumulated Stockholders'
------------------- Paid-In Equity Equity
Shares Amount Capital (Deficit) (Deficit)
---------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 20,000,000 $20,000 $ (19,000) $ 10,169 $ 11,169
Net income............. -- -- -- 25,931 25,931
---------- ------- ----------- ----------- -----------
Balance at December 31,
1997................... 20,000,000 20,000 (19,000) 36,100 37,100
Issuance of common
stock for services
rendered.............. 303,600 304 10,286 -- 10,590
Value of stock options
granted for services
rendered.............. -- -- 20,000 -- 20,000
Net loss............... -- -- -- (163,331) (163,331)
---------- ------- ----------- ----------- -----------
Balance at December 31,
1998................... 20,303,600 20,304 11,286 (127,231) (95,641)
Exercise of stock
options............... 522,500 522 15,635 -- 16,157
Issuance of common
stock for services
rendered.............. 15,235 15 3,772 -- 3,787
Issuance of common
stock................. 80,000 80 3,920 -- 4,000
Repurchase of common
stock................. (400,000) (400) (1,163,600) -- (1,164,000)
Value of stock options
granted for services
rendered.............. -- -- 29,675 -- 29,675
Stockholder
distributions......... -- -- (330,000) -- (330,000)
Net loss............... -- -- -- (2,444,994) (2,444,994)
---------- ------- ----------- ----------- -----------
Balance at December 31,
1999................... 20,521,335 20,521 (1,429,312) (2,572,225) (3,981,016)
Exercise of stock
options............... 200,250 200 22,781 -- 22,981
Issuance of common
stock for services
rendered.............. 25,000 25 87,475 -- 87,500
Net loss............... -- -- -- (3,028,422) (3,028,422)
---------- ------- ----------- ----------- -----------
Balance at March 31,
2000 (unaudited)....... 20,746,585 $20,746 $(1,319,056) $(5,600,647) $(6,898,957)
========== ======= =========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Three Months ended
Year ended December 31 March 31
------------------------------- ----------------------
1997 1998 1999 1999 2000
------- --------- ----------- --------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)....... $25,931 $(163,331) $(2,444,994) $(183,469) $(3,028,422)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation........... 981 3,324 39,603 4,850 50,312
Gain on sale of
assets................ (7,961) -- -- -- --
Value of stock options
granted for services
rendered.............. -- 20,000 29,675 - 87,500
Issuance of common
stock in lieu of cash
compensation.......... -- 10,590 3,787 -- --
Changes in operating
assets and
liabilities:
Accounts receivable... 1,190 (119,480) (2,452,110) (135,135) (1,719,472)
Notes receivable...... -- -- -- -- (293,702)
Prepaid expenses...... -- (6,422) (40,332) 3,500 (56,371)
Accounts payable...... -- 13,775 221,527 (9,541) 313,244
Commissions payable... -- 11,513 222,494 13,156 124,541
Officer wages
payable.............. -- 60,000 (35,000) 12,500 (25,000)
Accrued liabilities... (269) 3,587 531,830 1,185 292,681
Deferred revenue...... (1,055) 171,090 3,993,577 291,421 3,006,694
Other................. -- 500 (5,788) -- (1,002)
------- --------- ----------- --------- -----------
Net cash provided by
(used in) operating
activities............. 18,817 5,146 64,269 (1,533) (1,248,997)
Investing activities
Purchases of property
and equipment.......... (4,902) (37,369) (513,639) (16,548) (580,200)
------- --------- ----------- --------- -----------
Net cash used in
investing activities... (4,902) (37,369) (513,639) (16,548) (580,200)
Financing activities
Proceeds (payment) on
loan from stockholder.. -- 100,000 (100,000) (60,000) --
Proceeds from issuance
of common stock........ -- -- 20,157 4,000 22,981
Proceeds from issuance
of preferred stock..... -- -- 16,119,622 -- --
Payments on capital
lease obligations...... -- -- -- -- (2,338)
Stockholder
distributions.......... -- -- (330,000) -- --
Repurchase of common
stock.................. -- -- (1,164,000) -- --
------- --------- ----------- --------- -----------
Net cash provided by
(used in) financing
activities............. -- 100,000 14,545,779 (56,000) 20,643
------- --------- ----------- --------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 13,915 67,777 14,096,409 (74,081) (1,808,554)
Cash and cash
equivalents at
beginning of period.... 4,744 18,659 86,436 86,436 14,182,845
------- --------- ----------- --------- -----------
Cash and cash
equivalents at end of
period................. $18,659 $ 86,436 $14,182,845 $ 12,355 $12,374,291
======= ========= =========== ========= ===========
</TABLE>

See accompanying notes.

F-6
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1999

1. Business Description and Summary of Significant Accounting Policies

Business Description

RightNow Technologies, Inc. (the Company) provides a comprehensive,
Internet-based customer service software solution that integrates customer
self-help, e-mail management, live interaction, issue tracking and customer
satisfaction measurement capabilities. The Company was incorporated in Montana
in September 1995 but had no significant operations until 1997. The Company
considers its business activities as a single segment.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are considered to be available for sale. Cash equivalents are
carried at cost which approximates market value.

Property and Equipment

Property and equipment, including software purchased for internal use, are
stated at cost less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, generally three to seven years. Leasehold improvements are amortized
over the estimated life of the assets or the related lease term, whichever is
less, on a straight-line basis.

The Company evaluates long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable.

Income Taxes

In December 1999, as a result of the issuance of its Redeemable Convertible
Series A Preferred Stock, the Company's legal status changed from an S
corporation to a C corporation for U.S. federal and state income tax purposes.

Income taxes for 1999 related to the period of time when the Company was a C
corporation are recorded under the liability method, whereby deferred tax asset
and liability account balances are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

Revenue Recognition

The Company generates revenue from subscriptions for software, support and
application service provider hosting services. The typical subscription term is
24 months, although terms range from six to 36 months. Support consists of
maintenance and upgrades provided over the subscription term and is included in
the price of term software subscriptions. Software is also sold on a perpetual
basis, in which case subscriptions for support services are sold separately.
Hosting services include providing data connections, equipment, maintenance and
automatic upgrades to hosted customers and are priced on a subscription basis.
Revenue is also generated by providing training and professional services to
customers.

F-7
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company recognizes revenue in accordance with Statement of Position
(SOP) 97-2, Software Revenue Recognition. SOP No. 97-2 requires that revenue
recognized from software arrangements be allocated to each element of the
arrangement based on the relative fair values of the elements, such as software
products, upgrades, enhancements, post contract customer support, installation
or training. Under SOP 97-2, the determination of fair value is based on
objective evidence that is specific to the vendor. If evidence of fair value
for each element of the arrangement does not exist, all revenue from the
arrangement is deferred until such time as evidence of fair value does exist or
until all elements of the arrangement are delivered.

Revenue from subscriptions is recognized ratably on a monthly basis over the
software, support or hosting term. Revenue from sales of perpetual software
licenses is recognized when there is persuasive evidence of an arrangement and
collectibility is considered probable. Professional service revenue is
recognized when the services are performed and collectibility is reasonably
certain.

In 1997, the Company recorded $67,749 of revenue related to consulting
services unrelated to its current product offerings.

Research and Development

Research and development expenditures are expensed as incurred. Statement of
Financial Accounting Standards No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, requires capitalization of
certain software development costs subsequent to the establishment of
technological feasibility. Based on the Company's product development process,
technological feasibility is established upon completion of a working model. To
date, the period between achieving technological feasibility and general
availability of such software has been short and software development costs
qualifying for capitalization have been immaterial. Accordingly, the Company
has not capitalized any software development costs.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Stock-Based Compensation

The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, but applies Accounting Principles Board Opinion No. 25 (APB 25)
and related interpretations in accounting for its stock plans. Under APB 25,
when the exercise price of an employee stock option equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.

Net Income (Loss) Per Share

The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128). Basic net income (loss) per
share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share is computed using the weighted
average number of outstanding shares of common stock and, when dilutive,
potential common shares from options and convertible securities using the

F-8
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

as-if converted basis. All potential common shares have been excluded from the
computation of diluted net income (loss) per share for the applicable periods
presented because the effect would have been anti-dilutive.

Pro Forma Stockholders' Equity

Upon the closing of the Company's planned initial public offering, all
outstanding shares of Series A preferred stock will automatically convert into
5,554,853 shares of common stock. The pro forma effects of these transactions
are unaudited and have been reflected in the accompanying pro forma
stockholders' equity section at March 31, 2000.

Pro Forma Net Loss Per Share

Pro forma net loss per share for the year ended December 31, 1999 and the
three months ended March 31, 2000 is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Redeemable Convertible Series A Preferred Stock
into shares of the Company's common stock as if such conversion occurred at the
date of original issuance. The resulting pro forma adjustments includes an
increase in the weighted average shares used to compute basic and diluted net
loss per share of 145,216 shares for the year ended December 31, 1999 and
5,554,853 shares for the three months ended March 31, 2000. The pro forma
effects of these transactions are unaudited.

Interim Financial Statements

The interim financial statements for the three months ended March 31, 1999
and 2000 are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles. In the opinion of the Company's management, the
unaudited interim financial statements contain all adjustments, consisting of
normal recurring adjustments, considered necessary for a fair presentation. The
results of operations for the interim periods are not necessarily indicative of
the results of the entire year.

2. Property and Equipment

Property and equipment as of December 31 are as follows:

<TABLE>
<CAPTION>
1998 1999
------- --------
<S> <C> <C>
Equipment............................................... $ -- $ 45,333
Computer equipment...................................... 38,658 303,982
Furniture and fixtures.................................. -- 154,401
Leasehold improvements.................................. -- 8,158
Purchased software...................................... 3,613 59,167
------- --------
42,271 571,041
Less accumulated depreciation........................... (4,305) (43,908)
------- --------
$37,966 $527,133
======= ========
</TABLE>

3. Long-Term Debt

The Company has a line of credit with a bank under which it can borrow up to
$500,000 at an interest rate of prime plus 1.5%. Any borrowings on the line of
credit are secured by substantially all of the Company's assets. The line of
credit expires on July 29, 2000. At December 31, 1999, there were no
outstanding borrowings on this line of credit.

F-9
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Redeemable Convertible Preferred Stock

In December 1999, the Company authorized and issued Redeemable Convertible
Series A Preferred Stock to two private investor groups and three members of
the Board of Directors.

As of December 31, 1999, there were 15,000,000 shares authorized to be
designated as preferred stock. The Company issued 5,554,853 shares as
Redeemable Convertible Series A Preferred Stock at a price of $2.91 per share.

Under the provision of the stock purchase agreements, the holders of the
Company's Series A Preferred Stock are entitled to:

. Liquidation preference of $2.91 per share plus all declared but unpaid
dividends on the Series A Preferred. After payment of this preference
amount, remaining assets and funds of the Company legally available for
distribution shall be distributed among the holders of the then
outstanding common stock pro rata, in proportion to the full amount each
such holder is otherwise entitled to receive.

. Non-accruing, non-cumulative, right to dividends in an amount equal to
$0.26 per annum for each share of Series A Preferred, if declared by the
Board of Directors.

. Voting rights equal to common stockholders.

. Voting rights to elect one member of the Board of Directors.

Each holder of Series A Preferred may at any time, convert any or all of
such Series A Preferred into fully-paid and nonassessable shares of common
stock at the applicable conversion price. Each share of Series A Preferred
shall be convertible into the number of shares of common stock that results
from dividing $2.91 by the Conversion Price in effect at the time of
conversion. In addition, each share of Series A Preferred shall automatically
be converted into common stock at the then effective conversion price in the
event that holders of a majority of the shares consent to such conversion, or
upon the closing of an underwritten public offering at a per share public
offering price of not less than $8.73 and aggregate offering proceeds of at
least $10,000,000.

No dividends have been declared or paid on the Company's preferred stock.

Common Stock

Prior to 1999, the Company's common stock carried no par value. In
conjunction with the preferred stock issuance, the Company's Board of Directors
approved a par value for the Company's common stock of $.001 per share. Each
share of common stock has one vote. In December 1999, in connection with the
termination of the Company's S corporation status, the Company declared a
distribution to its stockholders in an amount necessary solely to cover their
income tax liabilities as a result of the prior S corporation status.

Stock Splits

In 1999, the Company's Board of Directors declared a 2-for-1 stock split and
a 20-for-1 stock split payable in the form of a stock dividend. Accordingly,
all share, per share, weighted average share and stock option information for
periods prior to the splits, has been restated to reflect the splits.

Stock Option Plan

The Company's 1998 Long-Term Incentive and Stock Option Plan provides for
stock options to be granted to employees, consultants, independent contractors,
officers and directors. Options are generally granted

F-10
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

at an exercise price equivalent to the estimated fair market value per share at
the date of grant, as determined by the Company's Board of Directors. All
options are granted at the discretion of the Company's Board of Directors, with
the term determined by the Board of Directors. Incentive Stock Options have a
term not greater than ten years from the date of grant and options not
qualifying as Incentive Stock Options have a term not greater than 15 years
from the date of grant. Options generally vest over a period of four years in
increments of 12.5% every six months, and are exercisable upon vesting. Options
are generally granted to all full-time employees at the time of hire.

<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
Available Outstanding Per
for Grant Options Share
---------- ----------- --------
<S> <C> <C> <C>
Balance at December 31, 1997............. -- -- $ --
Shares authorized...................... 10,000,000 -- --
Granted................................ (3,320,000) 3,320,000 .04
Exercised.............................. -- -- --
Canceled............................... 1,010,000 (1,010,000) .03
---------- ----------
Balance at December 31, 1998............. 7,690,000 2,310,000 .04
Granted................................ (5,379,700) 5,379,700 .33
Exercised.............................. -- (522,500) .03
Canceled............................... 764,750 (764,750) .05
---------- ----------
Balance at December 31, 1999............. 3,075,050 6,402,450 $.29
========== ==========
</TABLE>

The weighted average fair value of options granted in 1998 and 1999 was $.01
and $.08 per share, respectively. The exercise prices are equal to the
estimated fair value of the common stock, as determined by the Board of
Directors on the grant dates. At December 31, 1998 and 1999, options to
purchase 252,500 and 1,045,001 shares of common stock are exercisable,
respectively, at weighted average exercise prices of $.025 and $.16,
respectively. The 6,402,450 options outstanding as of December 31, 1999 include
2,038,750 options with exercise prices between $.025 and $.10 per share;
3,664,000 options with exercise prices between $.15 and $.30 per share; and
699,700 options with exercise prices between $1.20 and $2.91 per share. At
December 31, 1999, the outstanding options had a weighted average contractual
life of nine years.

Pro forma information regarding net income (loss) and related per share data
is required by Statement 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of Statement 123.
The fair value for these options was estimated at the date of grant using the
minimum value option pricing model with the following weighted average
assumptions for 1998 and 1999: risk-free interest rate of 5.3%, dividend yield
of 0% and a weighted average expected life of the option of five years.

Had the Company recorded compensation cost in accordance with Statement 123,
the net loss and loss per share would have been:

<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Net loss as reported.............................. $(163,331) $(2,444,994)
Pro forma net loss................................ $(164,293) $(2,462,889)

Net loss per share as reported.................... $ (.01) $ (.12)
Pro forma net loss per share...................... $ (.01) $ (.12)
</TABLE>

F-11
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

5. Operating Lease Commitments

The Company leases its office facilities and certain office equipment under
various non-cancelable operating lease agreements with various expiration dates
through December 31, 2003. Future minimum payments as of December 31, 1999,
under these leases, are as follows:

Rent expense was $200, $10,594 and $99,720 in 1997, 1998 and 1999,
respectively.

The Company is currently in negotiations with a development group, of which
the Company's Chief Executive Officer is a 50% partner, for a long-term lease
for two 9,000-square-foot buildings under construction and one 30,000-square-
foot building in the planning stages. These negotiations are expected to result
in a five- to ten-year lease commitment at market rates.

6. Income Taxes

Prior to December 1999, the Company was an S corporation and as such was not
subject to corporate federal or state income taxes. As a result of the issuance
of preferred stock in December 1999, the Company became a C corporation and as
such is subject to state and federal income tax in 1999.

Upon conversion to C corporation status, the Company recorded deferred taxes
for which it will be responsible resulting from the termination of S
corporation status. The components of the deferred tax assets as of December
31, 1999 are as follows:

<TABLE>
<S> <C>
Deferred tax assets:
Deferred revenue.......................................... $ 1,576,600
Accounts receivable allowance............................. 87,000
Other..................................................... 30,300
-----------
1,693,900
Valuation allowance....................................... (1,693,900)
-----------
$ --
===========
</TABLE>

The Company has established a valuation allowance equal to the net deferred
tax asset due to uncertainties regarding the realization of deferred tax assets
based on the Company's lack of earnings and expected lack of near term future
taxable earnings on which to recover these deferred tax assets.

F-12
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The following summarizes the components of the pro forma income tax expense
(benefit) assuming the Company had been a C corporation for all periods
presented for the years ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
1997 1998 1999
------ -------- -----------
<S> <C> <C> <C>
Current:
Federal.................................... $8,800 $ -- $ 228,300
State...................................... 700 -- 37,500
Deferred:
Federal.................................... -- (55,500) (1,425,000)
State...................................... -- (4,300) (233,900)
Valuation allowance........................ -- 59,800 1,658,900
------ -------- -----------
$9,500 $ -- $ 265,800
====== ======== ===========
</TABLE>

A reconciliation from the federal statutory rate to the pro forma tax
expense (benefit) for the years ended December 31, 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
1997 1998 1999
---- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate........................... 34.0% (34.0)% (34.0)%
State income taxes, net of federal benefit........... 2.6 (2.6) (2.6)
Effect of S corporation termination.................. -- -- 10.9
Valuation allowance.................................. -- 36.6 36.6
---- ----- -----
36.6% --% 10.9%
==== ===== =====
</TABLE>

7. Employee 401(k) Plan

In October 1999, the Company established a voluntary defined contribution
retirement plan qualifying under Section 401(k) of the Internal Revenue Code of
1986. The plan covers substantially all full-time employees. Under the terms of
the plan, participants may contribute up to 12% of their salary to the plan.
Employees are eligible after 90 days of service. At its discretion, the Company
may make matching contributions. The Company made matching contributions during
1999 of $16,171.

F-13
<PAGE>

[Inside Back Cover]

[Our artwork displays screens that a business's customer would see if the
customer were using the self-service capability of RightNow Web, or if the
customer elected to submit a question via e-mail or initiate a live interaction
with a customer service representative. The screens depict a hypothetical Web
site for Acme Washing Machines.]

<PAGE>

[RightNow Technologies, Inc. Logo]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

Except as set forth below, the following fees and expenses will be paid by
us in connection with the issuance and distribution of the securities
registered hereby and do not include underwriting commissions and discounts.
All expenses, except for the SEC registration, NASD filing and Nasdaq listing
fees, are estimated.

<TABLE>
<S> <C>
SEC registration fee............................................... $
NASD filing fee.................................................... $ 5,500
Nasdaq National Market listing fee................................. $ 95,000
Legal fees and expenses............................................ $
Accounting fees and expenses....................................... $
Transfer Agent's and Registrar's fees.............................. $ 3,500
Printing and engraving expenses.................................... $125,000
Miscellaneous...................................................... $
--------
Total............................................................ $
========
</TABLE>

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify directors, officers and corporate agents under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Section 3.14
of our bylaws provides for mandatory indemnification of our directors and
executive officers and permissible indemnification of employees and other
agents to the maximum extent and under the circumstances permitted by the
Delaware General Corporation Law. Article IX of our certificate of
incorporation provides that, subject to Delaware law, our directors will not
be personally liable to us or our stockholders for monetary damages for
breaches of their fiduciary duties as directors. This provision in the
certificate of incorporation does not eliminate the directors' fiduciary
duties, and in appropriate circumstances equitable remedies, such as
injunctive or other forms of nonmonetary 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 us or our
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.

In addition to these provisions in our certificate of incorporation and
bylaws, we have entered into indemnification agreements with each of our
executive officers and directors, a form of which has been filed with the
Securities and Exchange Commission as an exhibit to this registration
statement. The indemnification agreements provide our directors and executive
officers with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law.

The Underwriting Agreement contained in Exhibit 1.1 to this registration
statement provides that the underwriters are obligated, under certain
circumstances, to indemnify our directors and officers against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. In addition, Section 2.7 of the Investors' Rights Agreement contained
in Exhibit 4.2 to this registration statement provides for indemnification of
certain of our stockholders against liabilities described in the Investors'
Rights Agreement.

II-1
<PAGE>

Item 15. Recent Sales of Unregistered Securities

Since March 31, 1997, we have issued and sold the following securities that
were not registered under the Securities Act. All share numbers and per share
prices are adjusted to reflect stock splits that occured prior to March 31,
2000.

. On March 23, 1998, we issued 183,600 shares of our common stock to an
employee at a price of $.025 per share.

. On October 1, 1998, we issued 100,000 shares of common stock valued at
$5,000 to a consultant in exchange for media relations services provided
to us.

. On December 1, 1998, we issued 20,000 shares of common stock to an
employee at a price of $.05 per share.

. On January 1, 1999, we issued 20,000 shares of our common stock to an
employee at a price of $.05 per share.

. On March 31, 1999, we issued 60,000 shares of our common stock to an
employee at $.05 per share.

. On November 15, 1999, we issued 15,235 shares of common stock valued at
$3,787.50 to a consultant in exchange for consulting services provided to
us.

. In February 2000, we issued 25,000 shares of common stock valued at
$87,500 to an executive search firm in exchange for services to us.

. On December 13, 1999, we issued and sold 5,554,853 shares of Series A
preferred stock for an aggregate of $16,164,622.23. Each share of our
Series A preferred stock automatically will convert into one share of
common stock upon the closing of this offering.

. From February 1998 through March 2000, we granted stock options to our
employees, directors and consultants under our 1998 stock option plan
pursuant to which the optionees may purchase up to an aggregate of
9,634,450 shares of our common stock at exercise prices ranging from
$.025 to $6.00 per share. Of the options we granted during this period,
options to purchase a total of 2,224,150 shares of our common stock have
been canceled, and options to purchase a total of 722,750 shares of
common stock have been exercised, for an aggregate cash consideration of
$39,137.50.

The sale and issuance of these securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or (1) Regulation D promulgated thereunder as transactions by
an issuer not involving a public offering, where the purchasers represented
their intention to acquire securities for investment purposes only and not
with a view to or for sale in connection with any distribution thereof, and
where the purchasers received or had access to adequate information about us,
or (2) Rule 701 promulgated thereunder in that the securities were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.

3.1* Form of Certificate of Incorporation of the Company.

3.2* Form of Bylaws of the Company.

4.1* Specimen of Common Stock Certificate.

4.2 Investors' Rights Agreement dated December 13, 1999, between RightNow
Technologies, Inc. and the investors listed on Exhibit A thereto.

5.1* Opinion of Dorsey & Whitney LLP.

10.1* 2000 Employee Stock Purchase Plan.

10.2 1998 Long-Term Incentive and Stock Option Plan.

10.3* 2000 Stock Incentive Plan.

10.4 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC,
and RightNow Technologies, Inc. (relating to property at 77 Discovery
Drive, Bozeman, Montana).

10.5 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC,
and RightNow Technologies, Inc. (relating to property at 45 Discovery
Drive, Bozeman, Montana).

10.6 Employment Agreement dated August 15, 1999 between RightNow
Technologies, Inc. and Jeffrey W. Honeycomb.

10.7* Form of Indemnification Agreement.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Ernst & Young LLP.

23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1 to the
Registration Statement).

24.1 Powers of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.

(b) Financial Statement Schedules

Item 17. Undertakings

The undersigned registrant hereby undertakes that:

The registrant will provide to the underwriters at the closing specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the 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 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

II-3
<PAGE>

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 Act and will be governed by the
final adjudication of such issue.

For purposes of determining any liability under the Securities Act of
1933, the registrant will treat 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 as
part of this registration statement as of the time the Securities and
Exchange Commission declared it effective.

For the purpose of determining any liability under the Securities Act of
1933, the registrant will treat each post-effective amendment that contains
a form of prospectus as a new registration statement for the securities
offered in the registration statement, and will treat that offering of the
securities at that time as the initial bona fide offering of those
securities.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bozeman, State of
Montana, on April 20, 2000.

RightNow Technologies, Inc.

/s/ Greg R. Gianforte
By: _________________________________
Greg R. Gianforte
Chairman and Chief Executive
Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Greg R. Gianforte and Susan J.
Carstensen, and each of them, his true and lawful attorneys-in-fact and agents,
with full powers of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all (i) amendments
(including post-effective amendments) and additions to this registration
statement and (ii) registration statements, and any and all amendments thereto
(including post-effective amendments), relating to the offering contemplated
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents and each of them full power and authority to
do and perform each and every act and thing requisite or necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them or his or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Greg R. Gianforte Chairman and Chief Executive April 20, 2000
____________________________________ Officer (principal executive
Greg R. Gianforte officer)

/s/ Susan J. Carstensen Chief Financial Officer April 20, 2000
____________________________________ (principal financial officer
Susan J. Carstensen and principal accounting
officer)

/s/ Robert J. Ryan Director April 20, 2000
____________________________________
Robert J. Ryan

/s/ Roger L. Evans Director April 20, 2000
____________________________________
Roger L. Evans

/s/ William J. Lansing Director April 20, 2000
____________________________________
William J. Lansing

/s/ Margaret L. Taylor Director April 20, 2000
____________________________________
Margaret L. Taylor
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.

3.1* Form of Certificate of Incorporation of the Company.

3.2* Form of Bylaws of the Company.

4.1* Specimen of Common Stock Certificate.

4.2 Investors' Rights Agreement dated December 13, 1999, between RightNow
Technologies, Inc. and the investors listed on Exhibit A thereto.

5.1* Opinion of Dorsey & Whitney LLP.

10.1* 2000 Employee Stock Purchase Plan.

10.2 1998 Long-Term Incentive and Stock Option Plan.

10.3* 2000 Stock Incentive Plan.

10.4 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC, and
RightNow Technologies, Inc. (relating to property at 77 Discovery
Drive, Bozeman, Montana).

10.5 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC, and
RightNow Technologies, Inc. (relating to property at 45 Discovery
Drive, Bozeman, Montana).

10.6 Employment Agreement dated August 15, 1999 between RightNow
Technologies, Inc. and Jeffrey W. Honeycomb.

10.7* Form of Indemnification Agreement.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Ernst & Young LLP.

23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1 to the
Registration Statement).

24.1 Powers of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

Exhibit 4.2

RIGHT NOW TECHNOLOGIES, INC.

INVESTORS' RIGHTS AGREEMENT

December 13, 1999
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS............................................................ 1

2. REGISTRATION RIGHTS.................................................... 2

2.1 Demand Registration.............................................. 2
2.2 Company Registration............................................. 3
2.3 Form S-3 Registration............................................ 4
2.4 Obligations of the Company....................................... 5
2.5 Termination of Registration Rights............................... 6
2.6 Furnish Information.............................................. 6
2.7 Indemnification.................................................. 6
2.8 Rule 144 Reporting............................................... 9
2.9 Assignment of Registration Rights................................ 9
2.10 Amendment of Registration Rights................................. 9
2.11 Limitations on Subsequent Registration Rights.................... 9
2.12 "Market Stand-Off" Agreement..................................... 10

3. COVENANTS OF THE COMPANY............................................... 10

3.1 Basic Financial Information and Reporting........................ 10
3.2 Inspection Rights................................................ 11
3.3 Confidentiality of Records....................................... 11
3.4 Employee Agreements.............................................. 12
3.5 Insurance........................................................ 12
3.6 Internal Revenue Code Section 1202............................... 12
3.7 Vesting of Stock Options......................................... 12
3.8 Termination of Covenants......................................... 12

4. RIGHTS OF FIRST REFUSAL................................................ 12

4.1 Subsequent Offerings............................................. 12
4.2 Exercise of Rights............................................... 13
4.3 Issuance of Equity Securities to Other Persons................... 13
4.4 Termination of Rights of First Refusal........................... 13
4.5 Transfer of Rights of First Refusal.............................. 13
4.6 Excluded Securities.............................................. 13

5. LEGENDS................................................................ 14

5.1 Legends.......................................................... 14

6. MISCELLANEOUS.......................................................... 15

6.1 Governing Law.................................................... 15
6.2 Survival......................................................... 15
6.3 Successors and Assigns........................................... 15
6.4 Severability..................................................... 15
</TABLE>

-ii-
<PAGE>

TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
----
<S> <C>
6.5 Amendment and Waiver............................................. 15
6.6 Delays or Omissions.............................................. 16
6.7 Notices, etc..................................................... 16
6.8 Attorneys' Fees.................................................. 16
6.9 Titles and Subtitles............................................. 16
6.10 Counterparts..................................................... 16
</TABLE>

-iii-
<PAGE>

RIGHT NOW TECHNOLOGIES, INC.

INVESTORS' RIGHTS AGREEMENT

This Investors' Rights Agreement (the "Agreement") is entered into as of
December 13, 1999, by and among Right Now Technologies, Inc., a Montana
corporation (the "Company"), and the parties listed on Exhibit A hereto
---------
(collectively the "Investors" and individually an "Investor").

Recitals
--------

A. The Company proposes to sell and issue 5,554,853 shares of Series A
Preferred Stock pursuant to that certain Series A Preferred Stock Purchase
Agreement dated of even date herewith, by and among the Company and the
Investors (the "Series A Agreement");

B. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Series A Agreement.

C. The Company desires to enter into this Agreement and grant the
Investors the rights contained herein in order to fulfill such condition.

Now, Therefore, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:

1. DEFINITIONS

1.1 The term "Holder" means any Investor owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.9 hereof.

1.2 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.

1.3 The term "Registrable Securities" means (a) Common Stock of the
Company issued or issuable upon conversion of the Series A Preferred Stock held
by the Holders (the "Preferred Stock"); (b) shares of Common Stock purchased by
the Holders or issued or issuable to Holders upon conversion of other securities
purchased by Holders pursuant to their right of first refusal in Section 4 of
this Agreement; and (c) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person either pursuant to an effective registration statement, Rule 144 or in a
private transaction in which the transferor's rights under Section 2 of this
Agreement with respect to such registration rights are not assigned.

<PAGE>

1.4 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar United States federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

1.5 The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

1.6 The term "SEC" or "Commission" means the Securities and Exchange
Commission.

2. REGISTRATION RIGHTS.

2.1 Demand Registration.

(a) Subject to the conditions of this Section 2.1, if the Company
shall receive at any time after the earlier of (i) six (6) months after the
effective date of the Company's first registered public offering of its stock,
or (ii) December 13, 2002, a written request from the Holders of not less than
fifty percent (50%) of the Registrable Securities (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities which will have an aggregate offering
price of at least $7,500,000 then the Company shall, within ten (10) days of the
effective date of such notice as defined in Section 6.7 of this Agreement, give
written notice of such request to all Holders, and, subject to the limitations
of Section 2.1(b), effect as soon as practicable the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered within twenty (20) days of the effective date of such notice by the
Company in accordance with Section 6.7.

(b) In the event that a registration pursuant to Section 2.1 is for a
registered public offering involving an underwriting, the Initiating Holders
will so advise the Company as part of the written request given by such
Initiating Holders and the Company shall in turn so advise the Holders in the
written notice referred to in Section 2.1(a). The right of any Holder to include
his or her Registrable Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters. Notwithstanding any other provision of this
Section 2.1, if the underwriter advises the Company in writing that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities), then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated, first, to the Holders of Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); second, to shares to be registered and sold
for the Company's own account; and third, to the stockholders (other than the
Holders) invoking contractual rights to have their securities registered, if
any, on a pro rata basis.

2
<PAGE>

(c) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 2.1. A registration pursuant to this Section 2.1 may be
the first public offering of the Company's securities (the "Initial Offering").

(d) Notwithstanding the foregoing, the Company may delay initiating
the preparation and filing of any registration statement requested pursuant to
Section 2.1(a) if (i) in the good faith judgment of the Company's Board of
Directors effecting the registration would adversely affect or would require the
premature disclosure of any financing, acquisition, disposition or assets or
stock, merger or other comparable transaction or would require the Company to
make public disclosure of information the public disclosure of which would have
a material adverse effect on the Company or (ii) a request for registration is
received during the period starting with the date thirty (30) days prior to the
Company's good faith estimate of the date of the filing of, and ending on a date
one hundred fifty (150) days following the effective date of, a Company-
initiated registration subject to Section 2.2 relating to the Initial Offering,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.

(e) All expenses incurred in connection with each registration by the
Holders pursuant to this Section 2.1 (excluding underwriters' discounts and
commissions, which shall be paid by the selling Holders pro rata and the fees
and disbursements of counsel for the selling Holders), including without
limitation all registration, filing, qualification, printers' and accounting
fees, and fees and disbursements of counsel for the Company shall be borne by
the Company; provided, however, that the Company shall not be required to pay
-------- -------
for any expenses of any registration proceeding begun pursuant to Section 2.1 if
the registration request is subsequently withdrawn by the Initiating Holders,
unless the withdrawal of the registration request results from either (i)
intentional actions by the Company outside the normal course of business, or
(ii) the discovery of information about the Company which was not known at the
time of the Initiating Holders' request made pursuant to Section 2.1(a), that
materially reduces the feasibility of the registration proceeding.

2.2 Company Registration. The Company shall promptly notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of equity securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of equity securities of
the Company, but excluding registration statements relating to employee benefit
plans or a transaction covered by Rule 145 under the Securities Act) and will
afford each such Holder an opportunity to include in such registration statement
all or part of such Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by it shall, within fifteen (15) days after the
effective date of the above-described notice from the Company as defined in
Section 6.7, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent

3
<PAGE>

registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.

(a) If the registration statement under which the Company gives notice
under this Section 2.2 is for an underwritten offering, the Company shall so
advise the Holders of Registrable Securities. In such event, the right of any
such Holder to be included in a registration pursuant to this Section 2.2 shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. If the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company for its own account; second, to the Holders on a pro rata basis
based on the total number of Registrable Securities held by the Holders; and
third, to any stockholder (other than a Holder) invoking contractual rights to
have their securities registered, if any, on a pro rata basis; provided, in the
Initial Offering, the underwriters and the Company, may exclude all of the
Registrable Securities held by the Holders. If any Holder disapproves of the
terms of any such underwriting, he or she may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.

(b) The Company shall bear all fees and expenses incurred in
connection with any registration under this Section 2.2, including without
limitation all registration, filing, qualification, printers' and accounting
fees, fees and disbursements of counsel to the Company, except that each
participating Holder shall bear its proportionate share of all amounts payable
to underwriters in connection with such offering for discounts and commissions
and the fees and disbursements of counsel to the selling Holders.

2.3 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 with respect to all or a part of
the Registrable Securities owned by such Holder or Holders, the Company will:

(i) promptly give written notice of the proposed registration to all
other Holders of Registrable Securities; and

(ii) as soon as practicable, effect such registration as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within fifteen (15) days after the
effective date of such written notice from the Company as defined in Section
6.7; provided, however, that the Company shall not be obligated to effect any
-------- -------
such registration pursuant to this Section 2.3: (a) if Form S-3 is not available
for such offering by the Holders, (b) if the Holders, together with the holders
of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities at an

4
<PAGE>

aggregate price to the public of less than $1,000,000, (c) if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer or
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred and twenty
(120) days after receipt of the request of the Holder or Holders under this
Section 2.3, or (d) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration on
Form S-3 for the Holders pursuant to this Section 2.3.

(iii) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. The Company shall pay all expenses incurred
in connection with any registrations requested pursuant to this Section 2.3
(excluding underwriters' discounts and commissions, which shall be paid by the
selling Holders pro rata and any fees and disbursements of counsel for the
selling Holders), including without limitation all registration, filing,
qualification, printers' and accounting fees, and fees and disbursements of
counsel for the Company.

2.4 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days.

(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing

5
<PAGE>

underwriter(s) of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

(g) Use its reasonable best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.

2.5 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect as to
any Holder upon the earlier of (a) the date five (5) years following the closing
of the Initial Offering or (b) such time as such Holder could sell all of the
Registrable Securities held by such Holder in any one three-month period under
the terms of Rule 144 under the Securities Act, provided that the Company is
subject to the reporting requirements of the 1934 Act (as defined below).

2.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.1, 2.2 or
2.3 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.

2.7 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.1, 2.2 or 2.3.

(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as

6
<PAGE>

amended (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.7(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.

(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, or partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided,
--------
however, that the indemnity agreement contained in this Section 2.7(b)
- -------
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided further, that
in no event shall any indemnity under this Section 2.7(b) exceed the net
proceeds from the offering received by such Holder.

7
<PAGE>

(c) Promptly after receipt by an indemnified Party under this Section
2.7 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
-------- -------
shall have the right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.7.

(d) If the indemnification provided for in this Section 2.7 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

(e) The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished by the indemnified party to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.

(f) The obligations of the Company and Holders under this Section 2.7
shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.

8
<PAGE>

2.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its reasonable best efforts to:

(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.

(b) Use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);

(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such Holder
to sell any such securities without registration.

2.9 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities; provided, however,
-------- -------
that no such transferee or assignee shall be entitled to registration rights
under Sections 2.1, 2.2 or 2.3 hereof unless it owns a minimum of 100,000 shares
of Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits and similar
events), and the Company shall promptly be furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned. Notwithstanding the
foregoing, rights to cause the Company to register securities may be assigned to
any subsidiary or parent company of a Holder or any partner of any Holder.

2.10 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2.10 shall be binding upon each Holder and the Company. By acceptance of any
benefits under this Section 2, Holders of Registrable Securities hereby agree to
be bound by the provisions hereunder.

2.11 Limitations on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the

9
<PAGE>

Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company that would permit such holder or
prospective holder (a) to include such securities in any registration filed
under Section 2.1 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his or her securities will not reduce the
amount of the Registrable Securities of the Holders which is included or (b) to
make a demand registration which could result in such registration statement
being declared effective prior to the earlier of either of the dates set forth
in subsection 2.1 or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 2.1.

2.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that during
the one hundred eighty (180)-day following the effective date of a registration
statement of the Company filed under the 1933 Act, it shall not, to the extent
requested by the Company and the managing underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Stock of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:
-------- -------

(a) Such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and

(b) All officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.

In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.

3. COVENANTS OF THE COMPANY

3.1 Basic Financial Information and Reporting.

(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.

(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Holder of at least 250,000 shares of Registrable Securities (as
presently constituted and subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits and similar events) an audited
consolidated balance sheet of the Company, as at the end of such fiscal year,
and an audited consolidated statement of income and an audited consolidated
statement of cash flows of the Company, for such year, all prepared in
accordance with generally accepted accounting principles

10
<PAGE>

and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.

(c) So long as a Holder shall own at least 250,000 shares of
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits and similar
events), as soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within forty-five (45) days thereafter, the Company will furnish each such
Holder a consolidated balance sheet of the Company as of the end of each such
quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.

(d) So long as a Holder shall own at least 250,000 shares of
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits and similar
events), the Company will furnish each such Holder (i) at least thirty (30) days
prior to the beginning of each fiscal year an annual budget and operating plans
for such fiscal year, beginning with the Company's fiscal year ended December
31, 2001; and (ii) within thirty (30) days after the end of each month, an
unaudited balance sheet and statements of income and cash flows, prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes).

3.2 Inspection Rights. So long as a Holder shall own at least 250,000
shares of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits
and similar events), each such Holder (at such Holder's expense) shall have the
right to visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, all at such reasonable times and
as often as may be reasonably requested; provided, however, that the Company
-------- -------
shall not be obligated under this Section 3.2 with respect to a competitor of
the Company or with respect to information which the Board of Directors
determines in good faith is confidential and should not, therefore, be
disclosed.

3.3 Confidentiality of Records. Each Holder agrees to use, and to use its
reasonable best efforts to insure that its authorized representatives use, the
same degree of care as such Holder uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identified or marked as being confidential or proprietary (so long as
such information is not in the public domain), except that such Holder may
disclose such proprietary or confidential information to any partner, subsidiary
or parent of such Holder for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.

11
<PAGE>

3.4 Employee Agreements. All future employees of the Company and
consultants to the Company shall be required to execute an Employee Inventions
and Proprietary Rights Assignment Agreement substantially in the form attached
as Exhibit G to the Series A Agreement, with such amendments thereto or
---------
deviations therefrom as the Board of Directors may from time to time deem
appropriate.

3.5 Insurance. The Company agrees to maintain valid policies of workers'
compensation insurance and, to the extent such insurance is available on
commercially reasonable terms, insurance with respect to its properties and
business of the kinds and in the amounts not less than is customarily obtained
by corporations engaged in the same or similar business and similarly situated,
including, without limitation, insurance against loss, damage, fire, theft,
public liability and other risks. In addition, as soon as practicable following
the closing of the transaction contemplated by the Series A Agreement, the
Company agrees to procure and maintain a key man life insurance policy on Greg
Gianforte in an amount to be determined by the Board of Directors.

3.6 Internal Revenue Code Section 1202. The Company shall furnish to each
Purchaser, and shall make such filings with the Internal Revenue Service, as
shall from time to time be required pursuant to Section 1202(d)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"). In addition, the Company
agrees that it will not make any purchases of its stock within the meaning of
and which would exceed the limitation contained in Section 1202(c)(3)(B) of the
Code, unless such purchases (i) have been consented to by holders of a majority
of the Series A Preferred or (ii) are required by contractual obligations
entered into prior to the closing of the transaction contemplated by the Series
A Agreement. Any such information provided to the Purchaser under this Section
3.6 shall not be disclosed by any Purchaser to any party except as required and
solely in order for such Purchaser to claim any benefits under Section 1202 of
the Code.

3.7 Vesting of Stock Options. After the closing of the transaction
contemplated by the Series A Agreement, the standard vesting schedule for
options to purchase shares of Common Stock of the Company granted to employees
and directors of the Company under the Company's 1998 Long-Term Incentive and
Stock Option Plan and any other stock option plans of the Company shall provide
for vesting over a four (4)-year period, although alternative vesting schedules
may be used with respect to certain options if deemed by the Board of Directors
of the Company to be in the best interest of the Company. All stock options or
rights to purchase stock of the Company granted to employees, officers,
directors or consultants shall grant to the Company a right of first refusal to
purchase any and all stock acquired on exercise of the option or other right to
purchase such stock.

3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Holder upon
the date that the Company first becomes subject to the reporting obligations of
the 1934 Act.

4. RIGHTS OF FIRST REFUSAL.

4.1 Subsequent Offerings. Each Holder shall have a right of first refusal
to purchase its pro rata share of all Equity Securities (as defined below) that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded

12
<PAGE>

by Section 4.6 hereof. Each Holder's pro rata share is equal to the ratio of the
number of shares of Preferred Stock (or Common Stock issuable upon conversion
thereof) with respect to which such Holder is deemed to be a holder immediately
prior to the issuance of such Equity Securities to the total number of
outstanding shares of Preferred Stock or Common Stock of the Company. Greylock
IX Limited Partnership (assuming it is then entitled to the rights granted
pursuant to this Section 4.1), shall have a right of first refusal to purchase
up to 250,000 shares of Common Stock in the Initial Offering. Equity Securities
shall mean shares of, or securities convertible into or exercisable for any
shares of, any class of the Company's capital stock.

4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Holder written notice of its intention,
describing the Equity Securities, the price, and the terms and conditions upon
which the Company proposes to issue the same. Each Holder shall have fifteen
(15) days from the effective date of such notice as defined in Section 6.7 to
agree to purchase its pro rata share of the Equity Securities for the price and
upon the terms and conditions specified in the notice by giving written notice
to the Company and stating therein the quantity of Equity Securities to be
purchased. Notwithstanding the foregoing, the Company shall not be required to
offer or sell such Equity Securities to any Holder who would cause the Company
to be in violation of applicable federal securities laws by virtue of such offer
or sale.

4.3 Issuance of Equity Securities to Other Persons. If the Holders fail to
exercise in full the rights of first refusal within such fifteen (15)-day
period, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Holders' rights were not exercised, at a
price and upon terms and conditions no more favorable to the purchasers thereof
than specified in the Company's notice to the Holders pursuant to Section 4.2
hereof. If the Company has not sold such Equity Securities within such ninety
(90) days, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Holders in the manner provided
above.

4.4 Termination of Rights of First Refusal. The rights of first refusal
established by this Section 4 shall terminate upon the closing of an
underwritten public offering of Common Stock of the Company made pursuant to an
effective registration statement under the Securities Act.

4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Holder under this Section 4 may be transferred (a) to any subsidiary or
parent company of such Holder, to any partner of such Holder or to any successor
in interest to all or substantially all the assets of such Holder, or (b) with
respect to at least 100,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits and similar events), to a transferee other than
a direct competitor of the Company, provided that the Company is given written
notice by the Holder stating the name and address of the transferee and
identifying the Registrable Securities with respect to which the rights under
this Section 4 are being assigned.

4.6 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:

13
<PAGE>

(a) Shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of Directors
of the Company;

(b) any Equity Securities issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, including without limitation
convertible securities, options and warrants; and any Equity Securities issued
pursuant to any such rights or agreements granted after the date of this
Agreement, provided that the rights of first refusal established by this Section
4 applied with respect to the initial sale or grant by the Company of such
rights or agreements;

(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;

(d) except for the right granted to Greylock IX Limited Partnership
pursuant to Section 4.1, any Equity Securities that are issued by the Company as
part of an underwritten public offering referred to in Section 4.4 hereof;

(e) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company; and

(f) shares of Common Stock issued upon conversion of the Preferred
Stock.

(g) any Equity Securities issued to financial institutions or lessors
in connection with commercial credit arrangements, equipment financings, or
similar transactions as approved by the Board of Directors; or

(h) any Equity Securities issued to an entity as an integral
component of a strategic partnering transaction with such entity as approved by
the Board of Directors.

5. LEGENDS.

5.1 Legends. Each Investor understands that the share certificates
evidencing any Registrable Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):

(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."

14
<PAGE>

(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN INVESTORS' RIGHTS AGREEMENT WHICH PLACES CERTAIN
RESTRICTIONS ON THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST
IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH INVESTORS' RIGHTS AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."

6. MISCELLANEOUS.

6.1 Governing Law. This Agreement shall be governed in all respects by the
laws of California.

6.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

6.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
-------- -------
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.

6.4 Severability. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

6.5 Amendment and Waiver.

(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of not less than a majority of the Registrable Securities.

15
<PAGE>

(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of not less than a majority of the
Registrable Securities.

6.6 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.

6.7 Notices, etc. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed effective on the date of delivery, when
delivered personally or by overnight courier, upon electronic confirmation of
receipt when or sent by telegram or fax, or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address or
fax number as set forth on Exhibit A, or as subsequently modified by written
notice.

6.8 Attorneys' Fees. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and legal costs in connection therewith.

6.9 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.

COMPANY:

RIGHT NOW TECHNOLOGIES, INC.

By: /s/ Greg Gianforte
---------------------------------------
Greg Gianforte, Chief Executive Officer

16
<PAGE>

INVESTORS:

GREYLOCK IX LIMITED PARTNERSHIP

By: Greylock IX GP Limited Partnership,
its general partner

By: /s/ Roger Evans
---------------------------------------
General Partner

SUMMIT ACCELERATOR FUND, L.P.

By: SUMMIT ACCELERATOR PARTNERS, L.L.C.
Its General Partner

By: Summit Accelerator Management, L.P.
A Member

By: Summit Accelerator Management, L.L.C.
Its General Partner

By: /s/ Kip Sheeline
--------------------
A Managing Member

/s/ Robert Ryan
- ----------------------------------
Robert Ryan

/s/ Greg Gianforte
- ----------------------------------
Greg Gianforte

/s/ Susan Carstensen
- ----------------------------------
Susan Carstensen

17
<PAGE>

EXHIBIT A
---------

INVESTORS
- ---------

GREYLOCK IX LIMITED PARTNERSHIP

Address: 755 Page Mill Road, Bldg. A, Suite 100
Palo Alto, California 94304

Fax: 650-493-5575

GREG GIANFORTE

Address: c/o Right Now Technologies, Inc.
601 Haggerty Lane, Suite D
Bozeman, Montana 59715

Fax: 406-522-4208

ROBERT RYAN

Address: 77 Storm King Road
Hamilton, Montana 59840

Fax: 406 363-0155

SUSAN CARSTENSEN

Address: c/o Right Now Technologies, Inc.
601 Haggerty Lane, Suite D
Bozeman, Montana 59715

Fax: 406-522-2908

SUMMIT ACCELERATOR FUND, L.P.

Address: 499 Hamilton Ave., Suite 200
Palo Alto, California 94301
Attention: Kip Sheeline

Fax: 650 321-1188

<PAGE>

Exhibit 10.2

Exhibit A
---------

1998 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN

1. Purpose of the Plan. This Plan shall be known as the "1998 Long-Term
-------------------
Incentive and Stock Option Plan" and is hereinafter referred to as the "Plan."
The purpose of the Plan is to aid in maintaining and developing personnel
capable of assuring the future success of Net Profit, Inc., a Montana
corporation, doing business as Right Now Technologies (the "Company"), to offer
such personnel additional incentives to put forth maximum efforts for the
success of the business, and to afford them an opportunity to acquire a
proprietary interest in the Company through stock options and other long-term
incentive awards as provided herein. Options granted under this Plan may be
either incentive stock options ("Incentive Stock Options") or options which do
not qualify as Incentive Stock Options. Awards under this Plan shall be
performance awards as hereinafter described.

2. Stock Subject to Plan. Subject to the provisions of Section 13 hereof,
---------------------
the stock to be subject to options or other awards under the Plan shall be the
Company's authorized Common Shares, no par value per share. Such shares may be
either authorized but unissued shares, or issued shares which have been
reacquired by the Company. Subject to adjustment as provided in Section 13
hereof, the maximum number of shares on which options may be exercised or other
awards issued under this Plan shall be 250,000 shares. If an option or award
under the Plan expires, or for any reason is terminated or unexercised with
respect to any shares, such shares shall again be available for options or
awards thereafter granted during the term of the Plan.

3. Administration of Plan. (a) The Plan shall be administered by the
----------------------
Board of Directors of the Company or a committee thereof. The members of any
such committee shall be appointed by and serve at the pleasure of the Board of
Directors and shall include only "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934. (The group
administering the Plan shall hereinafter be referred to as the "Committee.") In
addition, to the extent required by Section 162(m) of the Internal Revenue Code
of 1986, as amended (such statute, as it may be amended from time to time and
all proposed temporary or final Treasury Regulations promulgated thereunder
shall be referred to as the "Code"), at all times following the 1998 Annual
Meeting of Shareholders of the Company, all members of the Committee shall be
"outside directors" within the meaning of Section 162(m) of the Code.

(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option or award, (ii) to determine the
employees to whom and the time or times at which such options and awards shall
be granted and the number of shares to be subject to each, (iii) to determine
the
<PAGE>

form of payment to be made in connection with performance awards, either cash,
Common Shares of the Company, or a combination thereof, (iv) to determine the
terms of exercise of each option and award, (v) to accelerate the time at which
all or any part of an option or award may be exercised, (vi) to amend or modify
the terms of any option or award with the consent of the optionee, (vii) to
interpret the Plan, (viii) to prescribe, amend, and rescind rules and
regulations relating to the Plan, (ix) to determine the terms and provisions of
each option and award agreement under the Plan (which agreements need not be
identical, including the designation of those options intended to be Incentive
Stock Options, and (x) to make all other determinations necessary or advisable
for the administration of the Plan, subject to the exclusive authority of the
Board of Directors under Section 14 herein to amend or terminate the Plan. The
Committee's determinations on the foregoing matters, unless otherwise
disapproved by the Board of Directors of the Company, shall be final and
conclusive.

(c) The Committee shall select one of its members as its Chair and shall
hold its meetings at such times and places as it may determine. A majority of
its members shall constitute a quorum. All determinations of the Committee shall
be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.

4. Eligibility. Incentive Stock Options may only be granted under this
Plan to any full or part-time employee (which term as used herein includes, but
is not limited to, officers and directors who are also employees) of the Company
and of its present and future subsidiary corporations within the meaning of
Section 424(f) of the Code (hereinafter called "subsidiaries"). Full or part-
time employees, consultants, or independent contractors to the Company or one of
its subsidiaries shall be eligible to receive options which do not qualify as
Incentive Stock Options and awards. In determining the persons to whom options
and awards shall be granted and the number of shares subject to each, the
Committee may take into account the nature of services rendered by the
respective employees or consultants, their present and potential contributions
to the success of the Company and such other factors as the Committee in its
discretion shall deem relevant. A person who has been granted an option or award
under this Plan may be granted additional options or awards under the Plan if
the Committee shall so determine; provided, however, that for Incentive Stock
Options granted after December 31, 1986, to the extent the aggregate fair market
value (determined at the time the Incentive Stock Option is granted) of the
Common Shares with respect to which all Incentive Stock Options are exercisable
for the first time by an employee during any calendar year (under all

2
<PAGE>

plans described in subsection (d) of Section 422 of the Code of his employer
corporation and its parent and subsidiary corporations) exceeds $100,000, such
options shall be treated as options which do not qualify as Incentive Stock
Options. Nothing in the Plan or in any agreement thereunder shall confer on any
employee any right to continue in the employ of the Company or any of its
subsidiaries or affect, in any way, the right of the Company or any of its
subsidiaries to terminate his or her employment at any time.

5. Price. The option price for all Incentive Stock Options granted under
-----
the Plan shall be determined by the Committee but shall not be less than 100% of
the fair market value of the Common Shares at the date of grant of such option.
The option price for options granted under the Plan which do not qualify as
Incentive Stock Options, and, if applicable, the price for all awards shall also
be determined by the Committee. For purposes of the preceding sentence and for
all other valuation purposes under the Plan, the fair market value of the Common
Shares shall be as reasonably determined by the Committee. If on the date of
grant of any option or award hereunder the Common Shares are not traded on an
established securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 5 and in connection therewith shall
take such action as it deems necessary or advisable.

6. Term. Each option and award and all rights and obligations thereunder
----
shall expire on the date determined by the Committee and specified in the option
or award agreement. The Committee shall be under no duty to provide terms of
like duration for options or awards granted under the Plan, but the term of an
Incentive Stock Option may not extend more than ten (10) years from the date of
grant of such option and the term of options granted under the Plan which do not
qualify as Incentive Stock Options may not extend more than fifteen (15) years
from the date of granting such option.

7. Exercise of Option or Award. (a) The Committee shall have full and
---------------------------
complete authority to determine whether an option or award will be exercisable
in full at any time or from time to time during the term thereof, or to provide
for the exercise thereof in such installments, upon the occurrence of such
events (such as termination of employment for any reason) and at such times
during the term of the option as the Committee may determine and specify in the
option or award agreement.

(b) The exercise of any option or award granted hereunder shall only be
effective at such time that the sale of Common Shares pursuant to such exercise
will not violate any state or federal securities or other laws.

(c) An optionee or grantee electing to exercise an option or award shall
give written notice to the Company of such election and of the number of shares
subject to such exercise. The full purchase price of such shares shall be
tendered with such notice of exercise. Payment shall be made to the Company in

3
<PAGE>

cash (including bank check, certified check, personal check, or money order),
or, at the discretion of the Committee and as specified by the Committee, (i) by
delivering certificates for the Company's Common Shares already owned by the
optionee or grantee having a fair market value as of the date of grant equal to
the full purchase price of the shares, or (ii) by delivering the optionee's or
grantee's promissory notes, which shall provide for interest at a rate not less
than the minimum rate required to avoid the imputation of income, original issue
discount, or below-market-rate loan pursuant to Sections 483, 1274, or 7872 of
the Code or any successor provisions thereto, or (iii) a combination of cash,
the optionee's or grantee's promissory note and such shares. The fair market
value of such tendered shares shall be determined as provided in Section 5
herein. The optionee's or grantee's promissory note shall be a full recourse
liability of the optionee and may, at the discretion of the Committee, be
secured by a pledge of the shares being purchased. Until such person has been
issued the shares subject to such exercise, he or she shall possess no rights as
a shareholder with respect to such shares.

8. Performance Awards. The Committee is further authorized to grant
------------------
Performance awards. Subject to the terms of this Plan and any applicable award
agreement, Performance awards granted under the Plan (i) may be denominated or
payable in cash, Common Shares (including, without limitation, restricted
stock), other securities, other awards, or other property and (ii) shall confer
on the holder thereof rights valued as determined by the Committee, in its
discretion, and payable to, or exercisable by, the holder of the Performance
awards, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee, in its discretion, shall
establish. Subject to the terms of this Plan and any applicable award agreement,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance award granted, and the
amount of any payment or transfer to be made by the grantee and by the Company
under any Performance award shall be determined by the Committee.

9. Income Tax Withholding and Tax Bonuses. In order to comply with all
--------------------------------------
applicable federal or state income tax laws or regulations, the Company may take
such action as it deems appropriate to ensure that all applicable federal or
state payroll, withholding, income, or other taxes, which are the sole and
absolute responsibility of an optionee or grantee under the Plan, are withheld
or collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal and state taxes to be withheld or collected upon
exercise of an option or award which does not qualify as an Incentive Stock
Option hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, shall permit the optionee or
grantee to satisfy such tax obligations by (i) electing to have the Company
withhold a portion of the shares otherwise to be delivered upon exercise of such
option or award with a fair market value, determined in accordance with Section
5 herein, equal to such taxes or (ii) delivering to the Company Common Shares
other than the shares

4
<PAGE>

issuable upon exercise of such option or award with a fair market value,
determined in accordance with Section 5, equal to such taxes.

10. Additional Restrictions. The Committee shall have full and complete
-----------------------
authority to determine whether all or any part of the Common Shares of the
Company acquired upon exercise of any of the options or awards granted under the
Plan shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner the optionee's or grantee's rights
with respect thereto, but any such restriction shall be contained in the
agreement relating to such options or awards.

11. Ten Percent Shareholder Rule. Notwithstanding any other provision in
----------------------------
the Plan, if at the time an option is otherwise to be granted pursuant to the
Plan the optionee owns directly or indirectly (within the meaning of Section
424(d) of the Code) Common Shares of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or its parent or subsidiary corporations, if any (within the meaning of
Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to
such optionee pursuant to the Plan shall satisfy the requirements of Section
422(c)(5) of the Code, and the option price shall not be less than 110% of the
fair market value of the Common Shares of the Company determined as described
herein, and such option by its terms shall not be exercisable after the
expiration of five (5) years from the date such option is granted.

12. Non-Transferability. No option or award granted under the Plan shall
-------------------
be transferable by an optionee or grantee, otherwise than by will or the laws of
descent or distribution. Except as otherwise provided in an option or award
agreement, during the lifetime of an optionee or grantee, the option shall be
exercisable only by such optionee or grantee.

13. Dilution or Other Adjustments. If there shall be any change in the
-----------------------------
Common Shares through merger, consolidation, reorganization, recapitalization,
dividend in the form of stock (of whatever amount), stock split, or other change
in the corporate structure, appropriate adjustments in the Plan and outstanding
options and awards shall be made by the Committee. In the event of any such
changes, adjustments shall include, where appropriate, changes in the aggregate
number of shares subject to the Plan, the number of shares and the price per
share subject to outstanding options and awards and the amount payable upon
exercise of outstanding awards, in order to prevent dilution or enlargement of
option or award rights.

14. Amendment or Discontinuance of Plan. The Board of Directors may amend
-----------------------------------
or discontinue the Plan at any time. Subject to the provisions of Section 13 no
amendment of the Plan, however, shall without shareholder approval: (i) increase
the maximum number of shares under the Plan as provided in Section 2 herein,
(ii) decrease the minimum price provided in Section 5 herein, (iii) extend

5
<PAGE>

the maximum term under Section 6, or (iv) modify the eligibility requirements
for participation in the Plan. The Board of Directors shall not alter or impair
any option or award theretofore granted under the Plan without the consent of
the holder of the option.

15. Time of Granting. Nothing contained in the Plan or in any resolution
----------------
adopted or to be adopted by the Board of Directors or by the shareholders of the
Company, and no action taken by the Committee or the Board of Directors (other
than the execution and delivery of an option or award agreement), shall
constitute the granting of an option or award hereunder.

16. Effective Date and Termination of the Plan. (a) The Plan was approved
------------------------------------------
by the Board of Directors on February 20, 1998, and shall be approved by the
shareholders of the Company within twelve (12) months thereof.

(b) Unless the Plan shall have been discontinued as provided in Section 14
hereof, the Plan shall terminate December 31, 2008. No option or award may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee or grantee, alter or impair any rights or
obligations under any option or award theretofore granted.

<PAGE>

EXHIBIT 10.4

LEASE AGREEMENT

THIS LEASE (this "Lease") is made as of April 4, 2000 by and between Genesis
Partners, LLC of Bozeman, Montana, herein referred to as "Landlord", and Right
Now Technologies, Inc., a Montana corporation, of Bozeman, Montana, hereinafter
referred to as "Tenant".

WITNESSETH:

1. Leased Property. Landlord hereby leases to Tenant the office building
---------------
located on the real property in Gallatin County, Montana more particularly
described on attached Exhibit A whose address is 77 Discovery Drive, Bozeman,
Montana, consisting of approximately 9184 square feet together with (i) the non-
exclusive right of ingress and egress for Tenant and its employees, agents,
invitees and contractors between the building and the nearest public streets as
depicted on attached Exhibit B, and (ii) the right to use the parking as
depicted on attached Exhibit B for its employees, agents, invitees and
contractors in common with others (the "premises"). Landlord represents and
agrees that the parking lot will provide, at all times during the term of this
Lease, a parking ratio of not less than six spaces per 1000 square feet of
rentable square footage in buildings whose tenants are or will be using the
parking lot.

2. Terms of Lease. The primary term of this Lease shall be for sixty (60)
--------------
months commencing on the 1st day of April, 2000, and ending on the 31st day of
March, 2005, both dates inclusive, unless sooner terminated as herein provided.

3. Option to Extend. Upon expiration of the primary term of this Lease,
----------------
Tenant is granted an option to extend the term of this Lease for three (3)
additional sixty (60) month periods, each (each an "extension term") upon the
same terms and conditions as are included in this Lease, subject, however, to
renegotiation of the rent provided in paragraph 4 of this Lease. The primary
term and the extension terms will be collectively referred to in this Lease as
the "term." Tenant shall notify Landlord within not less than one hundred
twenty (120) days prior to the expiration of the primary term of this Lease or
prior to the expiration of each extension term of Tenant's exercise of its
option to extend this Lease, provided that in the circumstances described in
paragraph 13, the options to extend the term may be exercised earlier as
provided in paragraph 13, and if the option to extend is exercised earlier as
provided in paragraph 13, nevertheless, the rental payable as provided in
<PAGE>

paragraph 4 shall be determined at the time and in the manner provided in
paragraph 4 and this paragraph 3. During the following sixty (60) day period,
Tenant and Landlord shall negotiate and arrive at an agreement or disagreement
of the amount of rent to be paid during the applicable extension term. If
Landlord and Tenant agree upon the rent to be paid during the applicable
extension term, Landlord and Tenant shall at the end of the sixty (60) day
period enter into a new written lease or an amendment agreement setting forth
the amount of rental Tenant shall be required to pay pursuant paragraph 4 for
the applicable extension term and any other additional terms to which Landlord
and Tenant have agreed. If Tenant and Landlord fail to agree upon the rent to
be paid during the applicable extension term during the sixty (60) day period of
negotiations, a fair market appraisal comparison of comparable properties will
be completed by an independent party upon which the Landlord and Tenant may use
to negotiate the amount of rent to be paid during the applicable extension term.
If Tenant and Landlord fail to agree upon the rent to be paid during the
applicable extension term during the sixty (60) day period of negotiations,
either Landlord or Tenant may, by written notice to the other party given within
the ensuing thirty (30) day period, elect to invoke the arbitration provisions
of this Lease to determine the rent Tenant shall be required to pay pursuant to
paragraph 4 for the applicable extension term.

4. Rent. Tenant shall pay as rental for the premises for the first year
----
of the primary term of the Lease the sum of $123,984.00; computed at the rate of
$13.50 per square foot on 9184 square feet of office space, payable monthly, in
advance on the first day of each month (beginning on May 1st, 2000), in
installments of $10,332.00 per month. On each anniversary date of this Lease
during the primary term, the annual rent shall be adjusted by the percentage
increase or decrease in the Base Index as compared to the Comparison Index. The
Base Index shall be the Consumer Price Index for December 1999, and the
Comparison Index shall be the Consumer Price Index for each December during the
primary term of this Lease. For purposes of this paragraph 4, "Consumer Price
Index means United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index, All Urban Consumers, All Items, 1982-1984=100, or if
discontinued, any successor index which, in Landlord's reasonable opinion, is
most nearly equivalent to the Consumer Price Index. During any extension term,
the rental shall be determined as provided in paragraph 3. Rent shall be paid
without

2
<PAGE>

notice or demand by Landlord to Landlord at 895 Technology Blvd, Suite 101,
Bozeman, Montana 59718 or at such other place as Landlord may direct in writing.

5. Covenants. Tenant hereby acknowledges and agrees:
---------

A. Tenant is familiar with the premises. Tenant's taking of possession of
the premises shall be conclusive evidence that the premises were in good, clean
and sanitary condition, are in all respects satisfactory and acceptable to
Tenant, and are in the condition in which Landlord represented the premises to
be.

B. Tenant will keep the premises in a clean and sanitary condition during
the term of this Lease. Landlord shall have no obligation to make any
alterations or improvements of any kind in or about the premises other than as
set forth in this Lease. Tenant shall repair or replace promptly all damages to
the premises due to acts of Tenant, its agents, employees, invitees, or
subtenants, reasonable wear and tear excepted. Tenant also shall not cause any
waste to be committed in or about the premises; Tenant will keep the premises
free and clear of any and all refuse and debris; and Tenant agrees to observe
all rules and regulations of the County of Gallatin and State of Montana in any
way relating to maintenance, use and occupancy of the premises.

C. Tenant will not use or permit anything to be used upon the premises
which is likely to deface or damage the premises, or do anything that will
increase the rate of insurance thereof (unless Tenant first agrees to pay any
increased premiums), or permit anything to be done upon the premises or in the
areas, sidewalk or streets adjacent to the premises, which will amount to or
create a nuisance.

D. Tenant shall make no alterations in or additions to the premises
without first obtaining Landlord's written consent, which consent will not be
unreasonably withheld, delayed or conditioned. Tenant shall not erect or permit
to be erected upon the premises any signs without written consent of Landlord,
which consent will not be unreasonably withheld, delayed or conditioned.

E. Tenant agrees, with respect to all alterations or improvements to the
premises or any part thereof, which Tenant undertakes with written consent of
Landlord, that Tenant shall in all instances save Landlord and the premises
forever harmless and free from all damages, loss and liability of every kind and
character which may be claimed, asserted or charged, including liability to
adjacent

3
<PAGE>

owners or tenants, based upon the acts or negligence of Tenant or its agents,
contractors or employees, for any negligence, or for the failure of any of them
to observe and comply with the requirements of the law, including the
regulations and the authorities in the City of Bozeman, and Tenant will preserve
and hold Landlord and the premises free and clear from all liens or encumbrances
for labor and materials furnished. Any and all alterations, additions, and
improvements made by Tenant to or upon the premises (with the exception of
furnishings, equipment, and removable trade fixtures installed by Tenant) shall,
upon installation, be deemed attached and part of the premises, provided
however, that if prior to termination of this Lease, or within fifteen (15) days
thereafter, Landlord so directs by written notice to Tenant, promptly following
said termination of this Lease, Tenant shall remove such of the said additions,
improvements, fixtures, and installations placed upon the demised premises by
Tenant as shall by designated in said notice from Landlord, and Tenant shall
repair any damages occasioned by such removal. Further, in this regard, Tenant
hereby agrees that it will, during the continuance of this Lease, keep the
premises and interior of the premises in good condition and repair, reasonable
wear and tear excepted.

F. Tenant may use and occupy the premises for the purpose of a business
office and all activities incidental thereto, including the manufacture of
software, and not otherwise. Tenant shall not use or knowingly permit any part
of the premises to by used for any unlawful purposes and shall comply with all
applicable laws and regulations of the County of Gallatin, State of Montana, and
the United States of America.

G. Tenant agrees that Landlord shall not be liable for any damage or
injury to persons or property or for the loss of property sustained by Tenant or
by any other person or persons on the premises due to any act of negligence of
Tenant.

H. Tenant agrees that it will not assign this Lease or sublease any
portion of the premises or permit this Lease to transferred by operation of law
or otherwise without the written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned; provided, however, that any
merger and reorganization of Tenant for the purpose of incorporating under
another state law shall not be deemed to be an assignment for purposes of this
paragraph and shall not require Landlord's consent, or that any merger or change
in control of the Tenant shall not be

4
<PAGE>

deemed to be an assignment for purposes of this paragraph and shall not require
Landlord's consent. Tenant shall remain responsible under this Lease for any
portion of the premises sublet by Tenant (even if Landlord approved the
subletting), unless Landlord shall agree otherwise. Any subtenant to whom any
portion of the property is sublet shall agree to abide by the provisions of this
Lease which are applicable to the sublet portion of the premises, before
Landlord will be required to consent to the proposed subleasing of any portion
of the premises.

I. Tenant will permit Landlord, at all reasonable times and after
reasonable notice to Tenant at Landlord's sole risk and expense and in a manner
that causes the least practical disruption to Tenant, to enter upon the premises
(i) to inspect their condition and to make reasonable and necessary repairs for
the protection and preservation of the premises, (ii) to ascertain whether
Tenant has performed its covenants under this Lease, and (iii) to show the
premises to persons who may wish to rent the premises after the expiration of
the term of this Lease or to purchase the premises, provided that any showing of
the premises to persons who may wish to rent the premises shall be only during
the last year of the term of the Lease.

J. Tenant, upon leaving the premises, shall at its own expense, remove all
dirt, rubbish, and refuse and upon failure to do so, Landlord may immediately,
without further notice, do so at Tenant's expense. Tenant shall immediately pay
Landlord's expenses upon receipt of a bill for the same from Landlord.

6. Default and Landlord's Rights. If the premises shall be deserted or
-----------------------------
vacated, or if proceedings are commenced against Tenant for the appointment of a
trustee or receiver of a substantial portion of Tenant's property, or there
shall be a default in payment of any rent for more than five (5) days after
written notice of such default from Landlord, or there shall be a default in the
performance or any other covenant, agreement, condition, rule or regulation
herein contained, or hereafter established with Tenant's consent, which shall
continue for more than thirty (30) days (or, if the default is not curable
within thirty (30) days and if Tenant begins to cure the default within such
thirty (30) day period and diligently pursues curing the same, then for such for
additional period as shall be reasonably necessary to cure the default) after
Tenant's receipt of written notice of such default from Landlord, Tenant's
rights in this Lease (if Landlord so elects, and such election is reserved)
shall thereupon terminate and end without the necessity for any further notice,
and

5
<PAGE>

Landlord shall have the right to re-enter and repossess the premises in the
manner permitted by law and dispossess or remove there from Tenant or other
occupants thereof and their effects without being liable to any prosecution or
action therefore. Landlord may likewise, at Landlord's option, and in addition
to any other remedies which Landlord may have upon default, let and relet the
premises in whole or in part, altering, changing or subdividing the same as in
its reasonable judgment may accomplish the best rental results, and upon such
terms and for such length of time, whether lesser or greater than the unexpired
portion of the term of this Lease, as Landlord may reasonably see fit, and
Tenant shall be liable to Landlord for any deficiency between the remaining
unpaid rental and the rental so procured by Landlord for the period of said
letting or reletting which is during the remaining term of this Lease and shall
further be liable for the reasonable costs of reletting and alterations or
changes required to enable Landlord to let and relet the premises, the
deficiency and costs not to exceed, however, the balance of the unpaid rental
due from tenant for the remaining term of the Lease. Landlord any institute
action for the whole of any such deficiency immediately upon effecting a letting
or reletting and shall not thereafter be precluded from further like action in
the event such letting or reletting shall not cover the entire unexpired portion
of the term hereof, or Landlord may monthly, or at such greater intervals as it
may see fit, require Tenant to pay said deficiency then existing, and Tenant
agrees to pay said deficiency to Landlord from time to time when called upon by
Landlord to do so. Should this Lease not be terminated, Landlord may,
notwithstanding such letting or reletting, at any time thereafter elect to
terminate it. Tenant, upon termination as herein provided, will yield quiet and
peaceful possession to Landlord, subject to any letting or reletting Landlord
has effected of the premises. If Landlord shall give the notice of termination
as herein provided, then, at the expiration of such period, this Lease shall
terminate as completely as if that were the date herein fixed for the expiration
of the term of this Lease, and Tenant shall then surrender the premises to
Landlord.

7. No Waiver of Breach. Tenant agrees that no consent, expressed or
-------------------
implied, by Landlord to any breach of Tenant's covenants or agreements shall be
deemed a waiver of any succeeding breach.

8. Notice. It is agreed that all notices herein required to be given shall
------
be effective upon mailing, postage prepaid, addressed to Landlord at 895
Technology Blvd, Suite 101 Bozeman, Montana 59718 or addressed to Tenant at 77
Discovery Drive, Bozeman,

6
<PAGE>

Montana or such other place as either may designate in writing to the other. In
addition, any notice from Landlord to Tenant relating to this Lease or the
premises shall be deemed duly served if personally delivered to an officer of
Tenant at the premises.

9. Surrender Upon Termination. Tenant shall, upon termination of the
--------------------------
term, peacefully and quietly surrender the premises to Landlord in as good
condition as it was at the beginning, reasonable use and wear and damage by the
elements excepted. Tenant shall remove all of its personal property and trade
fixtures (repairing any damage to the premises such removal causes) so that
Landlord can repossess and enjoy the premises not later than noon on the day
upon which the term ends, whether upon notice or by holdover or otherwise.
Landlord shall have the right to enforce this covenant by ejectment, for
damages, or for breach of any other condition or covenant of this Lease.

10. Peaceful Possession. Landlord covenants and agrees, at its sole
-------------------
expense, that the exterior, structure, the roof and the heating, ventilating,
air conditioning, electrical, plumbing and all utility systems on or in the
premises shall be maintained in good repair and tenantable condition, excepting
damage resulting from neglect or intentional acts of Tenant, its agents,
employees, contractors and invitees. So long as Tenant pays the rent and
performs the covenants and agreements herein contained, Tenant shall peacefully
and quietly hold the premises for the primary term and any extensions thereof.

11. Time of Essence. Time is of the essence of this Lease with respect to
---------------
the performance by Tenant and Landlord of their obligations hereunder.

12. Attorney's Fees. In the event any action to enforce any of the terms
---------------
of this Lease is brought, the prevailing party shall be entitled to its
reasonable attorney's fees as provided in paragraph 25.

13. Liability - Premises. Landlord shall not be responsible or liable (i)
--------------------
for any personal injury to Tenant or any other person on the premises, or for
injury or damage to personal property or improvements of Tenant or of any third
party on the premises unless such injury or damage is caused by the neglect or
omissions of Landlord, its agents or employees; (ii) for injury or damage caused
by the neglect or omissions of Tenant or its agents, contractors, invitees or
employees; or (iii) on account of any inconvenience or annoyance or damage
caused by fire, explosion, earthquake,

7
<PAGE>

flood or other causes beyond the control of Landlord. Tenant will obtain general
liability insurance in an amount of not less than $1,000,000 on which Landlord
shall be named as an additional insured. If Tenant shall sublet any portion of
the premises, the subtenant shall also furnish the general liability insurance
required of Tenant or be covered under Tenant's policy.

In addition, Tenant will at all times hold Landlord harmless from any claim
or damages by reason of any personal injury, property damage, or otherwise,
arising from its operation or use of the premises or any of Tenant's equipment
used in connection therewith, provided the claim or damage is not caused by
negligence or omission of Landlord, its agents, contractors or employees.

Landlord shall carry, at its sole expense, all risk casualty insurance,
covering the premises, in the amount equal to the full replacement cost of the
premises. The policy shall be endorsed so that it may be terminated or amended
only upon not less than thirty (30) days prior written notice to Tenant. The
policy shall contain no co-insurance clause, a deductible amount not exceeding
$5,000, and the insurance company's consent to the waivers of subrogation set
forth in the next sentence. Landlord waives any claims it may have against
Tenant and any rights to grant subrogation rights to others for any loss, damage
or claim which is covered by Landlord's insurance. In the event that the
premises shall be rendered wholly or partially untenantable by fire, explosion,
earthquake, Act of God, or any other cause beyond the control of Landlord
(collectively, the "casualties"), Landlord (i) shall rebuild and restore the
premises as soon as reasonably practicable to the premises' former condition and
use but only (A) to the extent of the insurance proceeds Landlord receives, and
(B) if the casualties do not occur during the last two (2) years of the term
(and for this purpose the term shall include all extension terms Tenant notifies
Landlord it will exercise on or before thirty (30) days after the occurrence of
any of the casualties), or (ii) in circumstances not described in clause (ii)
may, at its option, either terminate this Lease by written notice given to
Tenant within sixty (60) days after the casualty or commence to repair the
premises within sixty (60) days after the casualty. If Landlord shall elect or
be required to repair the premises, the rental hereunder shall be abated in
proportion to the part of the premises that are untenantable, and no rental
shall be payable hereunder for the period that said premises shall be wholly
untenantable, provided that in the event any of the casualties is caused by the
carelessness, negligence or improper conduct of Tenant, or of Tenant's agents,
employees, contractors or invitees, the rental shall not be so abated.

8
<PAGE>

All fixtures or improvements placed on the premises by Tenant, which shall
be damaged or destroyed, shall be repaired and replaced by Tenant at its own
expense and not at the expense of Landlord.

If any of the glass or plate glass in the premised shall be damaged or
become broken from the inside, Tenant shall replace, at Tenant's own cost and
expense, all such glass or plate glass broken. If the glass is damaged or broken
from the outside, Landlord shall replace the same at its own cost and expense.

14. Repairs and Maintenance. Landlord shall bear the entire expense of all
-----------------------
repairs, maintenance, alterations, or improvements to the basic structure
(exterior walls, roof, heating, ventilating, air conditioning, electrical,
plumbing and other systems on the premises). Landlord shall, in addition, bear
the entire expense for the repair and maintenance of the parking area, including
landscaping and keeping the parking area free of rubbish, ice and snow. Tenant
shall pay at its own expense, all repairs, maintenance, and alterations of
Tenant installed fixtures or improvements and utilities.

15. Utilities, Taxes Etc. Tenant shall pay for all telephone, water/sewer,
--------------------
electricity, natural gas, fire system monitoring, and janitorial services used
in the operation of the premises. Tenant agrees to pay for replacement of light
bulbs. Landlord shall pay for all real property taxes and assessments levied
and assessed against the premises and for snow removal and lawn maintenance.

16. No Smoking Policy. There will be no smoking allowed anywhere in the
-----------------
premises by anyone. It will be Tenant's responsibility to convey to and enforce
this policy by its employees, agents and all other invitees.

17. Paragraph Headings. The paragraph headings in this instrument are for
------------------
convenience only and do not limit or construe the contents or any paragraphs.

18. Severability. It is the intent of the parties that if a part of this
------------
Lease is invalid, all valid parts that are severable from the invalid part shall
remain in effect. If a part of this Lease is invalid in one or more of it
applications, that part remains in effect in all valid applications that are
severable from the invalid applications.

19. Landlord's Liability. The term "Landlord" as used herein shall mean
--------------------
only the owner or owners at the time in question of the premises. In the event
of any transfer of such title or interest,

9
<PAGE>

Landlord herein named (and in case of any subsequent transfers the then grantor)
shall be relieved from and after the date of such transfer of all liabilities as
respects Landlord's obligations thereafter to be performed, provided that any
funds in the hands of Landlord or the then grantor at time of such transfer in
which Tenant has an interest shall be delivered to the grantee, who shall assume
the obligations of Landlord or the then grantor to Tenant with respect to those
funds. The obligations contained in this Lease to be performed by Landlord
shall, subject to the foregoing provisions of this paragraph 19, be binding on
Landlord's successors and assigns.

20. Supersedes. This Lease supersedes all prior agreements between the
----------
parties.

21. Exercise of Rights. The omission of Landlord or Tenant to exercise any
------------------
right provided for on the default of the other at any time shall not preclude
Landlord or Tenant from the exercise of such right at any subsequent default of
the other or be deemed a waiver thereof or the right to do so.

22. Binding Effect. This Lease shall be binding upon and inure to the
--------------
benefit of the heirs, successors, administrators, and permitted assigns of the
parties hereto.

23. Security Deposit. At the execution of this Lease, Tenant will pay
----------------
Landlord the sum of $10,000 as a security deposit. Landlord shall hold and use
the security deposit as security for Tenant's performance of its obligations
under this Lease. At the termination of this Lease and if at that time Tenant
has fully complied with all of its obligations under this Lease, Landlord shall
return the security deposit, without interest (or the part of the security
deposit which Landlord has not applied to satisfy Tenant's obligations under
this Lease), to Tenant

24. Governing Law. This Agreement and all matters relating thereto shall
-------------
be governed by the laws of Montana..

25. Arbitration. Any dispute under this Lease shall be decided by binding
-----------
arbitration initiated and conducted in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA"). The parties
shall decide upon the arbitrator. If the parties are unable to decide upon the
arbitrator within ten (10) days after a notice from one party to the other that
a dispute exists under this Lease, the AAA shall select the arbitrator. The
decision of the arbitrator shall be binding. All costs of arbitration shall be
borne by the party the arbitrator

10
<PAGE>

determines to be the non-prevailing party. Such costs shall include the costs
and reasonable attorneys' fees of the prevailing party.

11
<PAGE>

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date and
year first written above.

GENESIS PARTNERS, LLC - Landlord

By:_________________________________________

/s/ Steve Daines 4/4/00
- --------------------------------------------
Steve Daines, member - Landlord date

/s/ Clair Daines 4/4/00
- --------------------------------------------
Clair Daines, member - Landlord date

/s/ Greg Gianforte 4/6/00
- --------------------------------------------
Greg Gianforte, member - Landlord date

Right Now Technologies, Inc. - Tenant

By /s/ Susan Carstensen 4/6/00
-----------------------------------------
Susan Carstensen date
Chief Financial Officer

12
<PAGE>

Addendum to Lease

Landlord will provide a $2,500 budget per building for inside telecommunications
and computer wiring to each building 1 and building 2. Any overage to be paid
by Tenant. Roger's telephone should bill Landlord and Landlord will bill Tenant
for any overage.

Other items considered Tenant improvements and to be billed separately to Tenant
include:

1. Security system
2. Larger internal windows in building 1
3. Movement of the wiring closet doors after the design was completed
4. Upgraded doors on wiring closets
5. Adding and removing the false floor in the computer room
6. Any future design changes as of March 22, 2000

Items not considered Tenant improvements and to be paid for by Landlord include:
1. Expanded second floor bathrooms
2. Reception area for building 2

<PAGE>

Exhibit 10.5

LEASE AGREEMENT

WITNESSETH:

1. Leased Property. Landlord hereby leases to Tenant the office building
---------------
located on the real property in Gallatin County, Montana more particularly
described on attached Exhibit A whose address is 45 Discovery Drive, Bozeman,
Montana, consisting of approximately 9184 square feet together with (i) the non-
exclusive right of ingress and egress for Tenant and its employees, agents,
invitees and contractors between the building and the nearest public streets as
depicted on attached Exhibit B, and (ii) the right to use the parking as
depicted on attached Exhibit B for its employees, agents, invitees and
contractors in common with others (the "premises"). Landlord represents and
agrees that the parking lot will provide, at all times during the term of this
Lease, a parking ratio of not less than five spaces per 1000 square feet of
rentable square footage in buildings whose tenants are or will be using the
parking lot.

2. Terms of Lease. The primary term of this Lease shall be for sixty (60)
--------------
months commencing on the 1st day of May, 2000, and ending on the 30th day of
April, 2005, both dates inclusive, unless sooner terminated as herein provided.

4. Rent. Tenant shall pay as rental for the premises for the first year
-----
of the primary term of the Lease the sum of $123,984.00; computed at the rate of
$13.50 per square foot on 9184 square feet of office space, payable monthly, in
advance on the first day of each month (beginning on May 1st, 2000), in
installments of $10,332.00 per month. On each anniversary date of this Lease
during the primary term, the annual rent shall be adjusted by the percentage
increase or decrease in the Base Index as compared to the Comparison Index. The
Base Index shall be the Consumer Price Index for December 1999, and the
Comparison Index shall be the Consumer Price Index for each December during the
primary term of this Lease. For purposes of this paragraph 4, "Consumer Price
Index means United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index, All Urban Consumers, All Items, 1982-1984=100, or if
discontinued, any successor index which, in Landlord's reasonable opinion, is
most nearly equivalent to the Consumer Price Index. During any extension term,
the rental shall be determined as provided in paragraph 3. Rent shall be paid
without
2
<PAGE>

notice or demand by Landlord to Landlord at 895 Technology Blvd, Suite
101, Bozeman, Montana 59718 or at such other place as Landlord may direct in
writing.

5. Covenants. Tenant hereby acknowledges and agrees:
---------

3
<PAGE>

owners or tenants, based upon the acts or negligence of Tenant or its
agents, contractors or employees, for any negligence, or for the failure of any
of them to observe and comply with the requirements of the law, including the
regulations and the authorities in the City of Bozeman, and Tenant will preserve
and hold Landlord and the premises free and clear from all liens or encumbrances
for labor and materials furnished. Any and all alterations, additions, and
improvements made by Tenant to or upon the premises (with the exception of
furnishings, equipment, and removable trade fixtures installed by Tenant) shall,
upon installation, be deemed attached and part of the premises, provided
however, that if prior to termination of this Lease, or within fifteen (15) days
thereafter, Landlord so directs by written notice to Tenant, promptly following
said termination of this Lease, Tenant shall remove such of the said additions,
improvements, fixtures, and installations placed upon the demised premises by
Tenant as shall by designated in said notice from Landlord, and Tenant shall
repair any damages occasioned by such removal. Further, in this regard, Tenant
hereby agrees that it will, during the continuance of this Lease, keep the
premises and interior of the premises in good condition and repair, reasonable
wear and tear excepted.

4
<PAGE>

5
<PAGE>

8. Notice. It is agreed that all notices herein required to be given shall
------
be effective upon mailing, postage prepaid, addressed to Landlord at 895
Technology Blvd, Suite 101 Bozeman,

6
<PAGE>

Montana 59718 or addressed to Tenant at 45 Discovery Drive, Bozeman, Montana or
such other place as either may designate in writing to the other. In addition,
any notice from Landlord to Tenant relating to this Lease or the premises shall
be deemed duly served if personally delivered to an officer of Tenant at the
premises.

11. Time of Essence. Time is of the essence of this Lease with respect to
---------------
the performance by Tenant and Landlord of their obligations hereunder.

7
<PAGE>

8
<PAGE>

All fixtures or improvements placed on the premises by Tenant, which shall
be damaged or destroyed, shall be repaired and replaced by Tenant at its own
expense and not at the expense of Landlord.

17. Paragraph Headings. The paragraph headings in this instrument are for
------------------
convenience only and do not limit or construe the contents or any paragraphs.

9
<PAGE>

20. Supersedes. This Lease supersedes all prior agreements between the
----------
parties.

22. Binding Effect. This Lease shall be binding upon and inure to the
--------------
benefit of the heirs, successors, administrators, and permitted assigns of the
parties hereto.

24. Governing Law. This Agreement and all matters relating thereto shall
-------------
be governed by the laws of Montana.

10
<PAGE>

determines to be the non-prevailing party. Such costs shall include the costs
and reasonable attorneys' fees of the prevailing party.

11
<PAGE>

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date and
year first written above.

GENESIS PARTNERS, LLC - Landlord

By:_______________________________________

/s/ Steve Daines 4/4/00
- -------------------------------------------
Steve Daines, member - Landlord date

/s/ Clair Daines 4/4/00
- -------------------------------------------
Clair Daines, member - Landlord date

/s/ Greg Gianforte 4/6/00
- -------------------------------------------
Greg Gianforte, member - Landlord date

Right Now Technologies, Inc. - Tenant

By /s/ Susan Carstensen 4/6/00
- -------------------------------------------
Susan Carstensen date
Chief Financial Officer

<PAGE>

Exhibit 10.6

EMPLOYMENT AGREEMENT
--------------------

This EMPLOYMENT AGREEMENT (this "Agreement"), is dated as of the 15/th/ day
of August, 1999, between JEFF HONEYCOMB, an individual with an address of 6
Antler Pine Road, Sandy Hook, CT 06482 (the "Employee"), and RIGHT NOW
TECHNOLOGIES, INC., a Montana corporation with an address of 111 South Grand,
Bozeman, MT 59715 (the "Company").

WHEREAS, the Company wishes to employ the Employee as President and Chief
Operating Officer, and the Employee desires to accept such employment upon the
terms and conditions stated herein;

NOW, THEREFORE, in consideration of the promises and of the covenants and
agreements set forth herein, the parties hereby agree as follows:

1. Employment and Duties. The Company hereby agrees to employ the
---------------------
Employee, and the Employee accepts employment, upon the terms and conditions set
forth in the Agreement and the job description attached hereto as Exhibit A for
the position of President and Chief Operating Officer. During the term of his
employment, the Employee shall diligently and faithfully serve the Company in
such capacity. He shall devote his best effort and entire business time,
services and attention to the advancement of the Company's business and interest
and shall comply with the policies, programs and directions of the Company's
Board of Directors and the Chairman.

2. Compensation. In consideration of the services rendered by the
------------
Employee, the Company agrees to compensate him as follows:

1
<PAGE>

(a) The Company shall pay to the Employee an annual base salary of $100,000
payable in equal installments on the 15/th/ and last day of every month.

(b) The Employee shall, after sixty (60) days of employment, be entitled to
benefits comparable to the benefits afforded by the Company to other salaried
employees, including vacation and sick leave and coverage under any health,
accident, hospitalization, disability, retirement and life insurance plans,
programs or policies maintained by the Company.

(c) The Employee shall be entitled to reimbursement, in accordance with
Company policy, for all reasonable, ordinary and necessary out-of-pocket
expenses which he incurs on behalf of the Company in the course of performing
his duties hereunder, subject to furnishing appropriate documentation of such
expenses in form and substance satisfactory to the Company. The Employee shall
be reimbursed for up to $7,000 in moving expenses following the submission of
receipts for same.

(d) The Employee shall be entitled to an Incentive Bonus (IB) of $25,000
per quarter, commencing with the quarter ended September 30, 1999. The IB will
be based on quarterly goals related to revenue and profit. The IB will be paid
quarterly on the 15/th/ of the month following the end of each quarter.

(e) The Employee shall receive options to purchase 1,100,000 shares of the
Company's common stock at an option price of $.30 per share. Following the
pending stock split, the Employee shall have 2,200,000 options at an option
price of $.30 each.

2
<PAGE>

The options will vest in accordance with the terms of an option agreement, the
form of which is attached as Exhibit C to this Agreement.

3. Term. Unless terminated at an earlier date in accordance with Section
----
6 of the Agreement, this Agreement shall commence on the date first above
written for the period of one (1) year and shall be renewed automatically
thereafter for two successive one (1) year periods, unless either party gives
written notice to the other of its intention to allow this Agreement to expire
at least thirty (30) days prior to the expiration date of the original term or
any other of the two renewal terms.

4. Employee's Covenants.
--------------------

(a) During the term of his employment and for a period of one (1) year
thereafter, the Employee shall not, directly or indirectly, on his own behalf or
on behalf of others: (i) become involved as an employee, consultant, partner,
owner or in any other capacity, in any business which involves the marketing,
sale or distribution of web customer service software products and which
competes with the product lines in the marketing areas targeted by the Company;
(ii) solicit any person employed by the Company at the time of termination of
the Employee's employment or within the preceding or subsequent six-month
period, to leave the employ of the Company or to render services to any business
which competes with the business of the Company; or (iii) solicit business from
any customers of the Company or persons or entitles providing services or
supplying manufactured goods or equipment to the Company at the time of
Employee's termination or within the preceding or subsequent six (6) month
period. The Employee agrees that the restrictions and agreements contained in
this Section 4(a) are reasonable and necessary to protect the legitimate
interests of the Company

3
<PAGE>

and that any violation of this Section 4(a) will cause irreparable harm to the
Company that would not be quantifiable and for which no adequate remedy would
exist at law and accordingly injunctive relief shall be available for any
violation of this Section 4(a). If the duration or geographical extent of, or
business activities covered by this Section 4(a) are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Employee acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceed its express terms) possible under applicable law.

(b) The Employee acknowledges that some of the information which he will
acquire in the course of his employment with the Company concerning the Company
policies, business methods, products, systems advertiser lists, marketing
programs, ideas, plans concerning business or program development, and other
such matters is valuable proprietary information and may constitute trade
secrets of the Company. Therefore, the Employee agrees that he shall take all
reasonable and necessary steps during the term of his employment and thereafter
to safeguard such information, and he shall not disclose the same to any person
or firm, except as necessary in the course of performing his duties on behalf of
the Company. Further, upon termination of his employment hereunder, the
Employee agrees that he will deliver to the Company any and all records, files,
lists or other documents containing information within the scope of the
foregoing description.

4
<PAGE>

(c) During the term of this Agreement, the Employee will promptly reveal
to the management of the Company all matters pertaining to staff, members,
services, clients and prospective customers or suppliers coming to his attention
regarding the operation or administration of the Company or the conduct of its
affairs.

5. Cause for Termination of Employment. The following constitute the
-----------------------------------
sole grounds on which the Employee's employment hereunder may be terminated by
the Company for cause prior to the expiration of the initial term set forth in
Section 3 or any extension thereof:

(a) Habitual intemperance or addiction to a narcotic, the use of which
constitutes criminal conduct under federal and state laws;

(b) Disclosure of any confidential information concerning the Company, its
computer programs, or any of the Company's customers or suppliers to any person,
firm, group, corporation or any other entity, learned during the course of the
Employee's employment;

(c) Failure to disclose information regarding persons engaged in fraud or
dishonesty or any unethical practice which the Employee has reason to know will
result in damage to the reputation of the Company;

(d) Consistent refusal or failure to perform duties assigned to the
Employee by the Board of Directors or the CEO consistent with the nature of the
Employee's position;

(e) The Employee's refusal or, after appropriate request, failure to
perform or comply with any term or condition of his employment required to be
performed or complied with by him;

5
<PAGE>

(f) The conviction of the Employee of any criminal offense involving moral
turpitude, fraud, embezzlement, or forgery; or

(g) Conduct reflecting on the integrity and reputation of the Company.

6. Termination of Employment.
-------------------------

(a) The Employee's employment hereunder shall continue until either party
gives notice to the other party of its intention to terminate. Such notice
shall be given at least thirty (30) days prior to the effective date of
termination. Either party may terminate this Agreement for any reason
whatsoever upon giving thirty (30) days notice prior to the effective date of
termination.

(b) Notwithstanding the foregoing, the Company may terminate the
Employee's employment immediately, without giving notice, if the termination is
for cause as provided in Section 5 of this Agreement.

7. Effect of Termination.
---------------------

(a) Upon termination of the Employee's employment for any reason
whatsoever, all rights and obligations of the parties under this Agreement shall
cease, except that (i) the Employee shall be obligated to return to the Company
all documents, notes, tapes or other records of contacts and other information
concerning Company projects, (ii) the Employee shall continue to be bound by the
covenants set forth in Section 4 hereof, and (iii) the Company shall be bound to
pay the Employee accrued compensation to the date of termination, as provided in
Section 7(b) hereof.

(b) In the event of the Employee's termination by the Company without
cause, the Employee shall be paid, as severance, twelve (12) months' salary his
options shall

6
<PAGE>

continue to vest as set forth in the option agreement attached as Exhibit C to
this Agreement.

8. Remedies. The Employee acknowledges that any breach by the Employee
--------
of the covenants set forth in Section 4 of this Agreement will result in
irreparable harm to the Company, and the Employee agrees that the Company shall
be entitled to seek equitable relief for any such breach, in addition to any
other remedies to which it may be entitled, without the necessity of proving
irreparable harm or the inadequacy of money damages.

9. Miscellaneous.
-------------

(a) This Agreement may not be assigned by either party hereto.

(b) In the event that any provision of this Agreement is found by a
court of competent jurisdiction to be invalid or unenforceable, such provision
shall be, and shall be deemed to be, modified so as to become valid and
enforceable, and the remaining provisions of this Agreement shall not be
affected.

(c) Failure to insist upon strict compliance with any of the terms,
promises or conditions of this Agreement shall not be deemed a waiver of such
term, promise or condition, or any other term, promise or condition hereof, nor
shall any waiver or relinquishment of any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of that right or power at any
other time, or of any other right or power hereunder, unless so specifically
stated in writing.

(d) This Agreement cannot be amended, changed, modified, or discharged
except by an agreement in writing signed by both the Company and the Employee.

7
<PAGE>

(e) Each of the parties agrees to execute all further instruments and
documents and to take all further action as the other party may reasonably
request in order to effectuate the terms and purposes of this Agreement.

(f) This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Montana.

(g) Any and all notices, designations, consents, offers, acceptances, or
other communications required to be provided hereunder shall be in writing and
delivered, either personally or by courier, or sent by certified mail, to the
parties at the addresses first set forth above or such other address as either
party may request by notice hereafter, and shall be deemed given upon such
delivery.

(h) This Agreement, together with the exhibits attached hereto and hereby
incorporated into this Agreement by reference, constitute the entire agreement
of the parties with respect to such subject matter, whether written or oral.
Without limiting the generality of the foregoing, the parties represent that no
oral communication made prior to the execution of this Agreement shall in any
way add to, delete from, change or modify the terms of this Agreement or their
interpretation.

(i) The captions at the beginning of the several articles and sections of
this Agreement are not part of the terms and conditions of this Agreement but
are only guides or labels to assist in locating and reading such articles and
sections. They shall be given no effect in construing this Agreement.

(j) Except as otherwise herein expressly provided, this Agreement shall
inure to the benefit of and be binding upon the Company, its successors and
assigns, and the Employee, his heirs, executors, administrators and legal
representatives.

8
<PAGE>

RIGHT NOW TECHNOLOGIES, INC.

/s/ Jeff Honeycomb /s/ Greg Gianforte
__________________________________ ----------------------------------
JEFF HONEYCOMB BY: Greg R. Gianforte
ITS: CEO

<PAGE>

EXHIBIT 21.1
List of Subsidiaries
--------------------

RightNow Technologies (UK) Limited, a private limited company, organized under
the Companies Act 1985 of England and Wales.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 14, 2000 in the Registration Statement
(Form S-1) and related Prospectus of RightNow Technologies, Inc.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
April 20, 2000

<PAGE>
<ARTICLE> 5

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