UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-26008
MYSOFTWARE COMPANY
2197 E. Bayshore Road, Palo Alto, California 94303
(650) 473-3600
Incorporated in I.R.S. Employer Identification No.
Delaware 7-0195362
- -------- ----------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant: (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-KSB. [ X ]
Based on the closing price of $18.50 on February 28, 1999, the aggregate
market value of the common stock held by non-affiliates of the registrant as
of February 28, 1999 was $62,824,372.
The number of shares outstanding of the registrant's common stock as of
December 31, 1998, was 4,458,950.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 12, 1999 to be
delivered to stockholders in connection with the Notice of Annual Meeting of
Shareholders to be held on May 19, 1999, are incorporated by reference into
Part III.
<PAGE>
TABLE OF CONTENTS
Page No.
PART 1
Item 1. Business 3
Item 2. Properties 16
Item 3. Legal Proceedings 16
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters 17
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 7. Financial Statements and Supplementary Data 21
Item 7a. Quantitative and Qualitative Disclosure About Market Risk 21
PART III
Item 9. Directors and Executive Officers of the Registrant 22
Item 10. Executive Compensation 22
Item 11. Securities of Ownership of Certain Beneficial Owners and
Management 23
Item 12. Certain Relationships and Related Transactions 23
Item 13. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 23
Signatures 24
Financial Statements 26
Exhibits 44
<PAGE>
PART I
ITEM 1. BUSINESS
MySoftware Company (the "Company" or "MySoftware") designs, markets, and
supports a family of leading task-specific software applications,
annuity-based products and Internet services for small businesses, including
home-based businesses. MySoftware provides users with easy-to-learn and
easy-to-use direct marketing solutions, including tools for downloading
on-line prospects lists, on-line file back-up, managing mail lists and saving
on direct mail postage. MySoftware also provides graphic tools and
productivity tools for creating brochures, stationery, postcards, labels, and
invoices and estimates. Headquartered in Palo Alto, California, the Company
was founded in 1986 and completed its initial public offering in June 1995.
In addition to retail software products, MySoftware offers complementary
annuity-based products and Internet services to its customers, particularly
in the area of direct marketing, where MySoftware has established a leading
market position. With an increasing number of small businesses relying on
direct marketing to grow their businesses, MySoftware is positioned to meet
the on-line list prospecting, mailing management needs of this important
market. Current services include address correction, available through
subscriptions to MyAddressChecker CD-ROM, on-line file back-up, available
through www.myfilebackup.com, and on-line prospects download, available
through www.myprospects.com, offering customers added value and creating the
opportunity for long-term relationships with MySoftware.
The Company places significant emphasis on consumer marketing techniques in
developing products and building brand awareness. The Company primarily
distributes its packaged products through the retail channel in computer
software and office supply stores throughout the United States and Canada.
The Company has also added new distribution methods, including direct,
original equipment manufacturer ("OEM"), international and Internet channels.
In addition to retail software products, annuity-based direct marketing
products and Internet prospecting services, the Company also offers
complementary paper products and receives commissions from the sales of such
products by third parties.
IDC/Link reports that there are approximately 22 million small businesses and
home businesses in the United States. According to IDC/LINK,
income-generating home offices are expected to grow over 27% from 1995 to
1999, with the fastest growth expected in those companies with fewer than 10
employees. According to a Home Office Computing (1997) survey, the top three
challenges facing small businesses are getting new business, promoting their
businesses and growing their businesses. In sum, there is a need to address
the #1 concern of over 67% of small business professionals: How do I quickly
and profitably grow my business? The Company's internal research indicates
that small businesses are concerned about projecting a professional image in
their sales and marketing materials and in other communications with
customers. The Company's research also indicates that many small businesses
perceive opportunities for improvement in the delivery and management of
prospect lists and mailings.
Historically, small businesses have lacked the tools to obtain on-line
prospects lists, create professional-quality marketing materials and to mail
their materials effectively, or they have relied on costly third-party
providers. Today, small businesses are adopting new office productivity
technologies in growing numbers. Penetration of computers in the small
business market increased from 40% in 1989 to 80% in 1998, according to
IDC/LINK. In addition, penetration of Internet access in the small business
market increased from 20% in 1996 to 44% in 1998, according to IDC/LINK.
Moreover, the availability of low cost, high resolution laser and inkjet
printers, including color printers, has made it possible to produce
professional-looking materials directly from personal computers. As a result,
small businesses are increasingly using their computers to find their
prospects, combine text, data, and color graphics to produce high-quality
marketing materials on their own desktops and to mail these materials via the
United States Postal Service ("USPS") to their prospects.
To serve this market, a number of companies have begun to offer marketing and
communications products as well as all kinds of on-line services targeted
towards small businesses. These companies include Dun and Bradstreet Corp.
("D&B") and infoUSA, which provide targeted mailing lists; D&B, infoUSA,
iMarketinc, and I-Rent-America, which offer on-line data download;
PaperDirect, Inc. ("PaperDirect"), and Geographics, Inc., ("Geographics"),
which provide pre-printed papers; Pitney Bowes, Inc. ("Pitney Bowes"), which
provides their Personal Post Office, a desktop postage meter for small
businesses including home-based businesses; and Kinko's Copies and Alpha
Graphics, Inc. which provide production services. Although various general
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purpose software applications,such as word processing, database, and desktop
publishing applications, have a broad range of features and can be used to
perform many of the sales and marketing tasks desired by small businesses,
these applications are often complex and relatively difficult to use.
Accordingly, the Company believes that there is a substantial opportunity for
offering direct marketing solutions, from on-line prospecting data download
to task-specific software designed to provide cost-effective, easy-to-learn,
and easy-to-use solutions, to busy, results-oriented small business users.
Company Strategy
The Company's core strategy is to help its users to turn their PCs into
direct marketing powerhouses and transition the Company from a primarily
retail software company to a direct marketing solution company. MySoftware's
core software products and services address the sales and marketing needs of
small businesses: attracting new business, communicating with customers, and
managing customer lists. In order to address this growing market, the Company
has focused on becoming the leading seller in its core categories, including
on-line prospecting, mailing, brochures, labeling, business cards, and
invoices/estimates. Key elements of the Company's strategy are summarized
below.
Provide a cost-efficient Web service for new customer prospecting at
www.myprospects.com. MyProspects.com users can connect real-time via the
Internet to 13 million U.S. business listings and a 112 million consumer
listings compiled by Polk and Experian. Detailed geographic and demographic
selection criteria assists in generating prospecting lists targeting specific
customer demographics. Small business users are the key targets for
www.myprospects.com as they are constrained in the search for new customers
by i) access to quality direct marketing list data, ii) overall data cost and
iii) time. Presently small business users do not have real time access to
quality direct marketing prospecting data in small, inexpensive quantities
due to the nature of the mainframe computing infrastructure of data compilers
such as Polk and Experian. By offering a Web-based new customer prospecting
tool through www.myprospects.com, the Company can deliver new customer
prospecting data in smaller quantities than currently available to the small
business market in a cost effective, Internet efficient and timely framework.
Provide a line of fully featured, task-specific applications. The Company's
target users are busy and results-oriented. These users often find general
purpose software programs cumbersome to learn and to use for a particular
task. By developing task-specific applications, MySoftware makes its
products easy to learn and use, while incorporating all the capabilities
needed to successfully perform a focused task. Users can solve other small
business marketing challenges by purchasing additional task-specific software
from MySoftware's family of inter-related products.
Build product loyalty and brand name. The Company believes that building the
MySoftware brand is important to its long-term success. By offering a family
of related products that complement one another and have similar names and
packaging, the Company aims to raise brand awareness and increase sales of
each of its products. MySoftware also conducts active brand marketing and
communications campaigns, including public relations efforts, direct
communications, advertising, and retailer promotions. To further increase
consumer exposure to its products, the Company establishes cooperative
marketing arrangements with companies that offer complementary sales and
marketing products. To date, MySoftware has established such arrangements
with Avery Dennison Corporation ("Avery"), American Express Company
("American Express"), PaperDirect, Geographics, New England Business Systems,
Inc. ("NEBS"), Pitney Bowes, MindSpring Enterprises, Inc. ("MindSpring") and
EarthLink Network, Inc.("EarthLink").
Focus on core product categories. MySoftware focuses its marketing and
development resources on three core product categories: Web prospecting,
mailing and marketing communication. The Company further leverages its
leadership position in the mailing category by offering annuity-based
mailing-related products and services. By maintaining this focus, the Company
believes that it will continue to be positioned to understand customer needs,
produce easy-to-learn and easy-to-use products, build its brand name, and
lead the market in these categories.
Focus on expanding channels of distribution. Presently, the Company's
distribution efforts for packaged software are primarily focused on the
retail channel, since most small businesses and individuals purchase software
through retail outlets. The Company actively seeks to increase its
visibility in the retail channel by conducting periodic retail promotions,
monitoring sell-through and inventory levels, designing its packaging for
self-service selling environments, supporting retailers' advertising and
promotional efforts, and conducting independent public relations and
advertising efforts. In addition to retail distribution, the Company is
actively expanding its direct channel and Web channel for its products and
services offerings. The Company also distributes products through its OEM
channel, through which it has formed partnerships with internationally known
companies such as Pitney Bowes, Hewlett-Packard Company, Brother, Ameritech,
US WEST, Acer and other industry leaders. Such relationships enable the
<PAGE>
Company to generate additional revenues, expand its target market for
annuity-based products and services, and build awareness of the MySoftware
brand.
Emphasize market-driven product development. The Company employs extensive
market research and user feedback to define, develop, and improve its
products and services to meet customer needs more effectively. MySoftware
applies an integrated four-step consumer marketing process to define,
develop, and improve its products. These steps include: performing consumer
research to identify user needs and behavior; incorporating the research to
develop easy-to-learn, easy-to-use, fully featured, task-specific
applications; conducting both pre- and post-release usability testing to
validate these designs; and collecting customer support data and product
returns feedback to drive future improvements.
Leverage core competencies. MySoftware leverages its core competencies in
product development and in sales and marketing through strategic use of
third-party service providers. The Company has chosen to use third-party
providers to perform functions that it believes can be better or more
effectively performed by a specialized organization. These functions include
some portion of the software coding , assembly, customer technical support,
telephone customer registration, and some aspects of direct communications to
consumers (such as fax and e-mail distribution). MySoftware believes that
this organizational approach allows it to achieve quality and flexibility and
to control costs, while maintaining effective control over its business
operations.
Products
The Company's core products are a family of leading task-specific software
applications that address the specific sales and marketing needs of small
businesses, usually those with ten or fewer employees. The Company provides
users with powerful, easy-to-learn and easy-to-use solutions for creating
customized, professional-quality mailing lists, brochures, labels, business
cards, invoices/estimates, and other marketing communications materials. The
Company also markets annuity-based mailing products and Web prospecting
services that complement the Company's existing mailing software products.
The Company backs its products with a 30-day money-back guarantee. Most of
MySoftware's core applications are available for Microsoft Windows 3.1,
Windows 95 and Windows 98. In addition, the Company introduced its first
Web-based services in Q4 1998 to address its target users' needs in efficient
prospecting and back-up utilities.
MyDeluxeMailList / MyAddressChecker / MyMailList & Address Book / MyBusiness
e-Mailer
MySoftware's initial mailing list product was introduced in September 1987.
The advanced version introduced in June 1989, stores and organizes mailing
list data that can be printed in a variety of forms, including mailing
labels, envelopes, address books, and Rolodex cards, or used in conjunction
with other MySoftware applications, such as MyAdvancedBrochures.
MyDeluxeMailList, the updated version of the advanced mailing list
application, introduced in March 1995, includes Zip Look Up, a CD-ROM of
every valid address in the United States, enabling users to correct their
addresses and add ZIP+4 codes that help speed delivery of their mail. Since
then, MyDeluxeMailList has been updated periodically and runs on both Windows
95 and 98 format. MyDeluxeMailList has a built-in database function that
enables MySoftware's customers to maintain and sort mailing lists and other
customer data. MyAddressChecker, introduced in 1994, is USPS CASS-certified
and enables users to qualify for Bulk Mail discounts from the Post Office.
Users must subscribe to bi-monthly CD-ROM updates to continue to qualify for
postal discounts, which can be as great as approximately 72%. The program
verifies and corrects addresses against the national database of deliverable
addresses maintained by the Post Office and supplies the appropriate ZIP+4
codes necessary to print delivery point bar codes and to qualify for these
discounts. MyMailList & Address Book, introduced in December 1997, provides
users with simple features to organize names and addresses, at a lower price
point than the Company's other mailing products. MyBusiness e-Mailer,
introduced in December 1998, is designed to help users to reach their
customers efficiently and effectively. MyBusiness e-Mailer offers a fully
featured mass email application with built-in database and works with most
popular database programs to help users to reach their customers efficiently
and effectively.
MyBrochures / MyAdvancedBrochures / MyProfessionalMarketingMaterials /
MyBusinessPublisher
MyBrochures was originally introduced in April 1994. MyAdvancedBrochures was
introduced in September 1994. MyAdvancedBrochures enables users to design
and produce flyers, postcards, professional-looking color brochures, menus,
newsletters, and invitations in a variety of formats and sizes. All these
brochure programs offer built-in templates, which can be easily customized to
suit users' needs. The Windows 95 version of the program was introduced in
September 1995. MyProfessional-MarketingMaterials, introduced in September
1996, provides customers with more than 600 color printable designs, as well
as the ability to design from more than 500 pre-printed specialty papers.
MyBusinessPublisher was introduced in December 1998. MyBusinessPublisher is
an all-in-one solution for any marketing print and Web publishing needs.
This product provides users with powerful and easy-to-use design and drawing
tools.
<PAGE>
MyAdvancedLabelDesigner / MyDeluxeLabelDesigner / MyLabels
MySoftware's initial labeling product was introduced in March 1988.
MyAdvancedLabelDesigner, introduced in May 1992, enables users to design and
print professional-looking, color labels in standard and custom sizes,
including mailing and shipping labels, name cards, Rolodex cards, file
folders, cassette and video tape labels, and more. Text, data, and graphics
can be entered directly into MyAdvancedLabelDesigner or imported from other
applications such as dBase, Paradox, and Access. Labels can be enhanced with
special design elements including color, rotated text, and clip art. In
March 1996, the Company introduced the Windows 95 version of
MyAdvancedLabelDesigner, which supports ten different label brands and more
than 500 label sizes. MyLabels was introduced in March 1996 to provide
similar features to a more value-conscious consumer.
MyAdvancedInvoices & Estimates / ProVenture Billing Solution
MySoftware's initial invoice product was introduced in December 1990. The
Advanced version, introduced in August 1993, is an invoicing, estimating, and
cash management application. The program easily produces professional-looking
invoices and estimates on plain paper or on a variety of pre-printed forms.
The application also produces a variety of sales and accounts-receivable
reports designed to assist small businesses in analyzing financial and
accounting aspects of their businesses. The current version of
MyAdvancedInvoices is embedded with Windows 95 code base and offers enhanced
usability features. ProVenture Billing Solution was introduced in June 1997
and was designed to help customers manage the entire billing process. It
offers enhanced tracking capabilities, such as the Tracker window that
automatically notifies the user when a customer is overdue. MySoftware also
sells pre-printed invoice, estimate, and statement forms for use with all
software products in its invoicing/estimating category. The Company
contracts with a third party to manage its private-label forms business and
shares in the sales revenues and marketing costs of the business. There can
be no assurance that this arrangement can be maintained or will benefit the
Company.
MyProfessionalBusinessCards / ProVenture Custom Business Stationery
In April 1995, the Company introduced MyProfessionalBusinessCards.
MyProfessionalBusinessCards gives small business owners a tool for creating
professional-looking business cards in minutes. This program gives small
business owners the flexibility to design and print small quantities of
customized business cards for any occasion. MyProfessionalBusinessCards is
available in both Windows 3.1 and Windows 95 versions. The Company introduced
Custom Business Stationery in May 1997. This product is designed to create
custom, matching, professional-quality business cards, letterhead, and
envelopes. Custom Business Stationery also gives customers the ability to
import logos in 15 different formats and to maintain a database of employees
or contacts.
ProVenture Budget Titles
During 1998, the Company introduced a total of 12 budget products under its
ProVenture brand name. These budget products address the same marketing and
mailing needs to end-users like its core products except with fewer features
and are offered at a lower prices at retail. The twelve budget products that
were introduced in 1998 were Business Cards, Label Maker, Mail List, DataBase,
Brochures, Stationery, Invoices & Estimates, Postcards, Newsletters,
Presentation & Charts, Address Book, and WebPage Designer.
Web Products and Services
The Company launched its Web site, www.myprospects.com in December 1998 to
enable users to select and download qualified customers from the Internet.
With www.myprospects.com, users can connect with more than 13 million USA
business listings and more than 180 million consumer records compiled by the
leading companies in the Direct Marketing industry in a cost-effective and
time-efficient way. In addition to the prospecting service, the Company also
launched another Web site, www.myfilebackup.com to provide users with safe
and secure off-site storage, automatic file backups, and unlimited access to
their files from any PC in the world with Internet access.
Other Products
The Company sells a simple database program, MyDataBase, and other graphics
tool products, MyTypeArtist and MyCreativeClipArt. MyDataBase is designed to
enable users to easily organize and summarize information. MyTypeArtist
contains 1,000 unique typestyles that can be browsed according to color,
pattern, theme, shape and more. MyCreativeClipArt includes 10,000 quality
clipart and border images for home and business use. In addition, the Company
also provides productivity tools for Internet home pages, Web-based resumes,
and Web-based calendars. During 1998, the Company introduced its first
seasonal product, MyHolidayMailingKit, which is designed for creating and
mailing holiday greetings, announcements. The Company also markets the
American Check Printers line of checks for personal financial programs.
These products are not expected to contribute materially to the Company's
future revenues.
<PAGE>
Product Development
The software and Internet industry is undergoing rapid changes, including
evolution of industry standards, introduction of new operating systems and
environments, frequent new product introductions, introduction of new media,
and changes in customer requirements and preferences. The Company believes
that its future success will depend in large part upon its ability to keep
pace with competitive offerings, to adapt to new operating systems, hardware
platforms, media, Internet technologies, and industry standards, and to
provide additional functionality by enhancing its existing products and
introducing new products on a timely basis.
The Company focuses on developing and improving its family of core products
at the same time as it develops products and services in complementary
software categories and Internet services related to direct marketing areas.
This focused strategy allows MySoftware to know its market and to develop
solutions to customer problems. In order to meet the business development
needs of small businesses, the Company works with current and prospective
users to define the functionality of the Company's new products and services
and make improvements to its existing products and services. The Company's
development process is organized around multi-functional teams composed of
product development, marketing, and quality assurance personnel who work
together in the development of products from an earlier design stage. This
team approach ensures a high level of marketing and customer support input
throughout many stages of product development. From time to time, the Company
will license third-party's products that fit into the Company's core product
line and strategy and publish such products under the Company brands and sell
them through the Company's channel.
MySoftware conducts systematic usability testing as an integral part of the
product development process, beginning with the product specification phase,
continuing during development and beta testing phases, and concluding with
post-release customer satisfaction audits. This testing is used to identify
potential problems quickly and formulate early solutions. In addition to
monitoring customer support calls and requests, the Company has in place a
mandatory customer registration program that further enhances its ability to
monitor customer use of its products and to obtain valuable customer feedback.
With respect to its core software applications, MySoftware creates all
product specifications for both new products and updates of its existing
products, and maintains internal control over the creative and market-driven
aspects of product development. Once a product has been defined and a
detailed specification has been designed, the Company leverages its resources
by outsourcing most of the coding functions. The Company relies primarily on
two independent firms with which the Company has worked for eight and seven
years, respectively, to perform the majority of the coding for its software
products, including coding for new products and maintenance and bug-fix
releases, and updates for existing products. The need to update the
Company's products, both for enhanced functionality and for ease of use under
new operating platforms, increases the Company's dependence on these
third-party coders. The Company has entered into separate software
development agreements for the development of specific pieces of software as
work-for-hire with its third-party coders. The Company compensates
third-party coders primarily through payments for software production costs
and royalty payments. Royalty expenses have been at 2% of net revenues of
the relevant products, with a dollar maximum cap on total royalty payments
for certain products. The Company generally owns all intellectual property
rights to products developed by third-party coders with the exception of the
base code for MyBrochures, MyAdvancedBrochures,
MyProfessionalMarketingMaterials, MyProfessionalBusinessCards, Custom
Business Stationery and MyBusinessPublisher. With respect to these products,
the Company owns the code for the user interface, while the base code is
owned by the third-party coder. The Company holds an irrevocable,
non-exclusive license to copy and distribute the executable code compiled
from the base code and to make limited modifications. There can be no
assurance that third-party coders will not develop or market any stand-alone
desktop publishing software based on the base code that competes with the
Company's products. The Company's success depends in part on its continued
ability to obtain and renew agreements for coding by independent software
developers. There can be no assurance that the Company will be able to
obtain or renew such coding agreements on favorable terms, if at all.
The Company has made use of shared code across products. For example,
MyAdvancedMailList and MyAdvancedLabelDesigner share portions of the same
base code, and the code for MyAdvancedBrochures was used to develop
MyProfessionalBusinessCards, Custom Business Stationery and
MyBusinessPublisher. The Company believes its ability to leverage
significant blocks of code across multiple products has enabled it to shorten
development time and reduce development costs.
<PAGE>
During 1998, the Company licensed third-party's products that are strategic
to its product strategy and distributed such products through its regular
channels. The Company generally does not own the intellectual property rights
to such licensed products. The Company compensates third-party licensees
through royalty expenses for revenues generated from such licensed products.
Royalty expenses for licensed products range from 10% to 12% of net revenues
of the relevant products. The Company's success depends in part on its
continued ability to renew or obtain such license agreements. There can be
no assurance that the Company will be able to obtain or renew such licensed
agreements on favorable terms, if at all.
With respect to its development for the Internet services for prospecting,
the Company formed an Internet Data Group in June 1998 to develop its
Internet prospecting services. All the design, interface and programming are
done by the Company's internal employees. The Company's Web services success
depends on the ability to retain and recruit technical professionals to
develop and maintain its Web services. There is no guarantee that the Company
can retain its professionals or can attract professional key employees with
good qualifications and technical skills.
As of December 31, 1998, the Company had 20 full-time and one part-time
professional and technical employees engaged in product development. During
the years ended December 31, 1998, 1997, and 1996, product development
expenses were $1,915,015, $2,221,712, and $1,988,881, respectively, not
including capitalized software production costs paid to third-party coders of
$523,032, $1,290,180 and $1,253,117, respectively, which were capitalized.
Sales and Marketing
Sales
The Company's products are distributed primarily through computer software
and office supply retailers throughout the United States and Canada,
including computer superstores (CompUSA Inc.; Elek-tek, Inc.; Fry's
Electronics, Inc.; MicroCenter), office warehouse clubs (Office Depot Inc.;
OfficeMax; Staples Inc.), software specialty stores (Electronics Boutique;
Future Shop), consumer electronics stores (BestBuy Co., Inc.) and general
warehouse clubs (Price/Costco Inc.; Sam's Club). Of the Company's top ten
retail outlets, MySoftware sells directly to six and serves the other four
retailers through distributors such as Ingram Micro, Inc. ("Ingram"),
Merisel, Inc. and Triad. Ingram and Office Depot, Inc. accounted for 37% and
15% of net revenues for 1998, 37% and 20% of net revenues for 1997, and 34%
and 29% of net revenues for 1996, respectively. The Company has
non-exclusive arrangements with its distributors and retailers that generally
do not require minimum purchases of the Company's products and may be
terminated at any time.
The Company monitors product sell-through and retail inventory information.
Most of the Company's distributors and key retailers provide weekly or
monthly sell-through data as well as current inventory information. This
information is analyzed for both positive and negative trends and is used to
assist the Company's retailers in managing product inventory levels. This
information is also used to determine the effectiveness of retail promotions
and account advertising. The Company's promotional vehicles are also geared
toward increasing customer exposure to its products with additional facings
and high traffic locations. The Company maintains sales forces in the Los
Angeles and New York metropolitan areas, and has contracted with
manufacturers' representative firms in the Dallas and Minneapolis
metropolitan areas.
The Company's products are also distributed through direct, OEM, and
international channels. Direct sales to customers are expected to increase as
the Company introduces new, annuity-based products and services to its
mailing customer base. Sales through the OEM channel, with partners such as
Pitney Bowes, Brother, U S WEST, Ameritech and others, enable the Company to
generate additional revenues, expand the target market for its annuity-based
products and services, and build awareness of the MySoftware brand. During
December 1998, the Company launched its first Internet service channel via
Web channel. Revenues from such Web channel and from sources outside of North
America have not been significant to date.
Cooperative Marketing Arrangements
MySoftware has entered into cooperative marketing relationships with
companies that sell products complementary to the Company's products,
including paper products and targeted mailing lists. In exchange for
inserting these marketing partners' catalogs and product samples inside the
Company's retail software packages, the Company receives a
per-registered-user fee, per-product-shipped fee, or sales commission on any
sales generated by the Company's activities or other promotional
consideration. MySoftware currently has cooperative marketing programs with
Geographics, PaperDirect, BeaverPrints, MindSpring and EarthLink. To date,
these activities have not produced significant revenues, but the Company
believes that these activities contribute to its brand-building efforts.
There can be no assurance that any of these arrangements can be maintained or
will benefit the Company.
<PAGE>
In addition, the Company has developed custom versions of its products for
sale by some of its marketing partners. The Company has entered into a resale
contract with NEBS, Geographics and Great Gizmos for various MySoftware
titles. There can be no assurance that any significant revenue will result
from these activities or that any of these relationships can be maintained.
Marketing
MySoftware's marketing department is responsible for managing products and
developing new market opportunities; building brand recognition through
public relations, advertising, and other promotional techniques; and
communicating directly with current customers to market additional products
and services. The Company's marketing department has three main areas of
focus: product marketing, corporate marketing and direct communications.
The Company's product marketing group is responsible for analyzing the
marketing needs of small businesses and individuals, specifying product
features, validating product ease-of-learning and ease-of-use, managing
package design, coordinating product training, developing sales of
complementary products and services, and increasing repeat purchases by
existing customers. Market research is an integral part of MySoftware's
customer-focused approach, enabling the Company to continue to improve
existing products and define new products. Product marketing personnel work
closely with product development engineers to develop overall product
development specifications based on demonstrated customer needs.
The Company's corporate marketing group focuses on building awareness of the
MySoftware brand and increasing MySoftware product trials. Its
responsibilities include external communications, such as public and investor
relations, advertising, the corporate Web site, trademark issues and
promotions. MySoftware also conducts periodic retail promotions designed to
increase short-term sales and strengthen relationships with retailers.
The Company formed a direct communications group in late 1997 to utilize
various technologies, including the Internet, to market products and services
directly to MySoftware customers, who then order these annuity products and
services directly from the Company. This group markets primarily
mailing-related products and services to the Company's current mailing
customers using direct mail, fax, and e-mail communications. In December
1998, the Company launched the Web prospecting service, www.myprospects.com,
as well as two software products, MyBusiness e-Mailer and
MyBusinessPublisher, expanding its suite of direct marketing products and
services. This suite of direct marketing solution tools will be offered
directly to the Company's existing customers as well as all the small office
and home office users and in the meantime the direct communication group will
be actively promoting this direct marketing suite of products and services.
Customer Support
The Company's customer support activities provide valuable services to its
customers and enhance customer satisfaction, in addition to providing
valuable customer input to the Company's product development process.
MySoftware provides customer technical support in-house for certain Internet
products and through a third party managed by the Company's internal customer
support group for all other products. This structure facilitates the
Company's ability to achieve satisfactory customer support on a
cost-effective basis. The Company receives daily downloads of data from its
customer technical support provider, allowing it to monitor service levels
and support quality. The Company's contract with its customer technical
support operator can be terminated on 60 days' notice by either party. This
third-party provider also provides services to several larger companies, and
there can be no assurance that demands from such companies or other factors
will not result in termination of this relationship. The unavailability of
such a firm to perform customer technical support for the Company could
result in significant disruption to the Company's operations, could lead to
customer dissatisfaction, and could have a material adverse effect on the
Company.
Operations
The Company directly performs all purchasing, finished goods inventory
management and warehousing, scheduling, order processing, and shipping. The
Company prepares master software diskettes, CD-ROMs, user manuals, and
packaging designs, and conducts independent quality control and testing at
its facilities. Diskette and CD-ROM duplication, printing of documentation,
and packaging and assembly are performed by independent contractors to the
Company's specifications. To date, the Company has not experienced any
material difficulties or delays in the manufacture and assembly of its
products. However, if such difficulties and delays were encountered and if
the Company's transition to an alternate vendor were not completed promptly,
the Company could be adversely affected.
<PAGE>
The Company generally ships products within three days of receipt of an
order. As a result, the Company has relatively little backlog at any given
time, and does not consider backlog to be a significant indicator of future
performance.
Competition
The market for the Company's small business products is intensely
competitive, and is characterized by pressure to increase marketing and
promotional activity, incorporate new features, release new product versions,
and reduce prices. Existing software companies may broaden or enhance their
product lines to compete with the Company's products, and other potential new
competitors, including computer hardware manufacturers, diversified media
companies, and small business service companies, may enter or increase their
focus on the small business software market, resulting in even greater
competition for the Company. The Company's software products compete with
task-specific products sold by Avery (labeling software), Intuit, Inc.
("Intuit") (invoicing/estimating software), The Learning Company, Inc.
("The Learning Company") (business card, labeling, and brochure/marketing
material software), and several other companies of varying size and financial
and marketing strength. The Company's products also compete with general
purpose programs, such as word processing, database, and desktop publishing
products from major software companies, including Adobe Systems Incorporated
("Adobe"), Lotus Development Corp. ("Lotus"), Microsoft Corporation
("Microsoft") and Corel Corporation ("Corel"). The Company believes it would
face increased competition from such general purpose programs if such
programs were designed for greater ease-of-use of task-specific functions.
The Company's Web services compete with the similar services provided by some
large data provider like InfoUSA, iMarketinc, I-Rent-America, and Dun &
Bradstreet. The Company believes that it will face increased competition
from similar Web services provided by other data companies like Acxiom, First
Data, Experian and others. In addition, new operating systems may incorporate
features enabling users to accomplish small business marketing and other
tasks currently addressed by the Company's software products.
The Company's strategy of focusing on its core and complementary products and
services heightens the competitive risk. Many of the companies with which
the Company currently competes, or may compete in the future, have greater
financial, technical, marketing, sales, and customer support resources, as
well as greater name recognition and access to customers, than the Company.
The competition for retail shelf space and direct Internet selling is also
likely to increase due to the proliferation of software products and
companies. Failure to achieve and maintain unit sales volumes may result in
loss of shelf space, which may, in turn, lead to further reductions in sales
volumes.
Only a small percentage of products introduced in the market achieve any
degree of sustained market acceptance. Principal competitive factors in the
marketing of software include product features, quality, reliability,
technological sophistication, brand recognition, ease-of-learning,
ease-of-use, merchandising, access to distribution channels and retail shelf
space, marketing, advertising, public relations, price, and the availability
and quality of support services. The Company believes that it competes
effectively in these areas, particularly in the areas of quality, brand
recognition, ease-of-learning, ease-of-use, merchandising, access to
distribution channels and retail shelf space. To the extent that competitors
achieve performance, price, or other selling advantages, the Company could be
adversely affected. There can be no assurance that the Company will have the
resources required to respond to market or technological changes or to
compete successfully in the future. In addition, increasing competition in
the small business software market may cause prices to fall, which could
adversely affect the Company.
The Company started offering its prospecting Web services in December 1998
and expects to see increased competition from other larger data companies in
the very near future. There can be no assurance that the Company will have
the resources required to successfully drive traffic to the Company's
prospecting Web site or to convert such Web site traffic into revenues.
Proprietary Rights and Licenses
The Company relies primarily on a combination of trademark, copyright, and
trade secret laws, employee and third-party nondisclosure agreements and
other methods to protect its proprietary rights. The Company does not
include in its products any mechanism to prevent or inhibit unauthorized
copying. Unauthorized copying occurs within the software industry, and if a
significant amount of unauthorized copying of the Company's products were to
occur, the Company could be adversely affected. In addition, as the number
of software products in the industry increases and the functionality of these
products further overlaps, software developers and publishers may
<PAGE>
increasingly become subject to infringement claims. There can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to current or future products. Use of
third-party coders or license of third-party products may increase the risk
of infringement of the rights of others. The third-party coders' and
licensors' liabilities to the Company for any infringement of copyrights,
trade secrets or patents are contractually limited to royalties received from
the Company.
Although the Company has not been the target of any actual, pending, or
threatened intellectual property litigation, there has been substantial
litigation regarding copyrights, trademark, and other intellectual property
rights involving other computer software companies. Any such claims or
litigation, with or without merit, could be costly and could divert
management's attention, which could have a material adverse effect on the
Company. Adverse determinations in such claims or litigation could also have
a material adverse effect on the Company.
Employees
As of December 31, 1998, the Company employed 66 full-time employees and two
part-time employees. Of the Company's full-time employees, 27 are in sales
and marketing, 20 are in development, six are in customer support, 10 are in
systems, administration and finance, and three are in operations. None of
the Company's employees is represented by a collective bargaining agreement,
nor has the Company ever experienced any work stoppage. The Company believes
that it has good employee relations.
Risk Factors
The following risk factors should be considered carefully in addition to the
other information contained in this Form 10-KSB.
Emerging Market; Uncertainty of Market Acceptance
The Company's success is dependent on the market acceptance of its new and
existing products and services. The majority of the Company's revenues are
derived from the sale of task-specific software applications for small
businesses. The market for such products is relatively undeveloped, making
it difficult to predict with any assurance the future size of the market.
The Company's focus on a small number of core products heightens exposure to
these market development and product acceptance risks. The Company embraces
a strategy of building brand name recognition primarily through the use of
consumer marketing techniques. This strategy is likely to require increased
sales and marketing expenditures. There can be no assurance that the Company
will be able to build brand recognition successfully, or that its marketing
strategy will be successful. There also can be no assurance that the
Company's existing products will achieve broad-based market acceptance, that
sales of such products will continue at historical rates or that the Company
will introduce new products that achieve significant market acceptance in the
future.
The Company's success is increasingly dependent upon its ability to secure
arrangements with OEM partners that distribute the Company's products. These
relationships allow the Company to generate additional revenues, expand its
target market for annuity-based products and services, and build awareness of
the MySoftware brand. OEM revenues accounted for 13.9% of the Company's
revenues in 1998. The market for these relationships is highly competitive,
and there can be no assurance that the Company will be successful in
sustaining existing relationships or creating new relationships in the
future. Although revenues from international sales of the Company's products
have been insignificant in the past, the Company plans to seek out various
international partners for the localization, marketing, and distribution of
the Company's products. The markets that the Company plans to penetrate are
highly fragmented and very competitive. There can be no assurance that the
Company will be successful in penetrating these international markets.
The Company's strategy of becoming a direct marketing solutions company
relies in part on the success of its new prospecting Web services. The
Internet market is highly competitive and this service is relatively new to
users. There is no assurance that the Company can successfully create the
necessary traffic to its prospecting site or can convert such traffic and
site visits into revenues.
Changes in Technology and Industry Standards; Timing and Quality of New
Product Offerings
The Company believes that its future success will depend in large part upon
its ability to keep pace with competitive offerings, to adapt to new
operating systems, hardware platforms, media, and industry standards, and to
provide additional functionality by enhancing its existing products and
services and introducing new products and services on a timely basis. The
development cycle for products and services utilizing new operating systems
or formats may be significantly longer than the Company's current development
cycle for products and services on existing operating systems and formats.
If the Company were unable to develop such products in a timely manner due to
<PAGE>
resource constraints or technological or other reasons, this inability would
have a material adverse effect on the Company. Failure to develop and
introduce new products and services and product/service enhancements in a
timely fashion could result in significant product returns and inventory
obsolescence and could have a material adverse effect on the Company. In
addition, introduction or anticipation of new or improved products and
services by others could also result in lower sales and increased product
returns.
Dependence on Postal Regulations and Availability of Postal Information
The Company's line of mailing products, which in the aggregate accounted for
15% of the Company's net revenues in 1998, have been developed based on
current USPS regulations ("Postal Service regulations"). Changes in Postal
Service regulations, which historically have occurred frequently, could
necessitate updating these products or could eliminate or reduce the
usefulness of these products, which could adversely affect the Company's
operating results. The Company licenses from an independent third-party
address information and certain software code embodied in the
MyDeluxeMailList and AddressChecker products that perform address correction,
add ZIP+4 Codes and supply delivery point bar codes. There can be no
assurance that the Company will be able to maintain or renew its relationship
with this third party or that the code and information licensed to the
Company will be error free or perform to the Company's specifications or in
accordance with Postal Service regulations. Significant changes in Postal
Service regulations or the inability to maintain or renew its relations with
the independent party on acceptable terms or at all could have a material
adverse effect on the Company. The Company must also obtain Postal Service
certification on a bi-monthly basis in order to be able to supply,
MyDeluxeMailList and AddressChecker users with CD-ROM updates in a timely
manner. There can be no assurance that the Company will be able to continue
to secure such certification on a timely basis, if at all, and the failure to
do so could have a material adverse effect on the Company. Moreover,
increased adoption of facsimile, electronic mail, or other alternative
communications technologies could result in reduced use of the postal system,
thereby adversely affecting the market for the Company's mailing products.
Fluctuations in Operating Results
The Company has experienced, and may continue to experience, significant
fluctuations in operating results due to a variety of factors. These factors
include: the size and rate of growth of the market for task-specific
applications for small businesses and of the software market in general;
market acceptance of the Company's products and services and those of its
competitors; the timing and number of product enhancements and new product
and services introductions by the Company and its competitors; the timing and
extent of development and promotional expenses; the timing and delivery of
partnership arrangements; product returns; changes in pricing policies by the
Company and its competitors; accuracy of retailers' forecasts of consumer
demand; timing of the receipt of orders from major retailer and distributor
customers; cancellations or terminations by retail or distributor accounts;
shelf space reductions; and delays in shipment. Products generally are
shipped as orders are received, and accordingly, the Company historically
has operated with little backlog. As a result, net revenues in any quarter
are dependent on orders booked and shipped in that quarter. A significant
portion of the Company's operating expenses are relatively fixed, and planned
expenditures are based, in part, on expectations with regard to future sales.
As a result, if net revenues do not meet the Company's expectations in any
given quarter, operating results may be materially adversely affected. The
Company's operating results can also be affected substantially by the timing
of new product and services introductions, which may result in substantial
increases in product returns and higher selling and marketing expenses. In
response to competitive pressure, the Company may also take certain pricing
or marketing actions that could have a material adverse effect on the
Company. There can be no assurance that the Company will achieve consistent
profitability on a quarterly or annual basis.
Competition
The market for the Company's products and services is intensely competitive,
and is characterized by pressure to increase marketing and promotional
activities, incorporate new features, release new product versions, and
reduce prices. Existing software companies may broaden or enhance their
product lines to compete with the Company's products and services, and other
potential new competitors, including computer hardware manufacturers,
diversified media companies, data providers and small business service
companies, may enter or increase their focus on the small business software
market, resulting in even greater competition for the Company. The Company's
software products compete with task-specific products sold by Avery (labeling
software), Intuit (invoicing/estimating software), The Learning Company
(business card and labeling software and marketing material software), and
several other companies of varying size and financial and marketing strength.
The Company's products also compete with general purpose programs, such as
word processing, database and desktop publishing products from major software
companies, including Adobe, Lotus, Microsoft, and Corel. The Company believes
that it would face increased competition from such general purpose programs
if such programs were designed for greater ease-of-use of task-specific
functions. The Company's Web services compete with the similar services
provided by some large data provider like InfoUSA, iMarketinc,
I-Rent-America, and Dun & Bradstreet. The Company believes that it will face
<PAGE>
increased competition from similar Web services provided by other data
companies like Acxiom, First Data, Experian and others. In addition, new
operating systems may incorporate features enabling users to accomplish small
business marketing and other tasks currently addressed by the Company's
software products.
The Company's strategy of focusing on its core and complementary products and
services heightens the competitive risk. Many of the companies with which
the Company currently competes, or may compete in the future, have greater
financial, technical, marketing, sales, and customer support resources, as
well as greater name recognition and access to customers, than the Company.
The competition for retail shelf space and direct Internet selling is also
likely to increase due to the proliferation of software products and
companies. Failure to achieve and maintain unit sales volumes may result in
loss of shelf space, which may, in turn, lead to further reductions in sales
volumes.
Only a small percentage of products introduced in the market achieve any
degree of sustained market acceptance. Principal competitive factors in the
marketing of software include product features, quality, reliability,
technological sophistication, brand recognition, ease-of-learning,
ease-of-use, merchandising, access to distribution channels and retail shelf
space, marketing, advertising, public relations, price, and the availability
and quality of support services. The Company believes that it competes
effectively in these areas, particularly in the areas of quality, brand
recognition, ease-of-learning, ease-of-use, merchandising, access to
distribution channels and retail shelf space. To the extent that competitors
achieve performance, price, or other selling advantages, the Company could be
adversely affected. There can be no assurance that the Company will have the
resources required to respond to market or technological changes or to
compete successfully in the future. In addition, increasing competition in
the small business software market may cause prices to fall, which could
adversely affect the Company.
The Company started offering its prospecting Web services in December 1998
and expects to see increased competition from other larger data companies in
the very near future. There can be no assurance that the Company will have
the resources required to successfully drive traffic to the Company's
prospecting Web site or to convert such Web site traffic into revenues.
Dependence on Limited Distribution and Retail Channels
Sales to a limited number of distributors and retailers have constituted, and
are anticipated to continue to constitute, a significant share of the
Company's net revenues from software. There is an increasing number of
software products competing for access to these channels. Retailers of the
Company's products typically have a limited amount of shelf space and
promotional resources, and there is intense competition for shelf space and
promotional support from retailers. Some distributors control access to
shelf space of certain retailers, and termination of the Company's
relationship with a particular distributor may prevent the Company from
obtaining shelf space in some retail outlets. As a result, retailers and
distributors increasingly are in a better position to negotiate favorable
terms of sale, including price discounts and product-return policies. Since
task-specific applications for small businesses constitute a relatively small
percentage of these retailers' sales volumes, there can be no assurance that
such retailers will continue to purchase the Company's products or provide
the Company's products with high quality and adequate levels of shelf space
and promotional support. The Company has nonexclusive arrangements with its
distributors and retailers which generally do not require minimum purchases
of the Company's products and which may be terminated at any time. In
addition, other types of retail outlets and methods of product distribution
may become important in the future, such as the Internet, online services,
and other electronic distribution services. The Company's success will
depend, in part, upon its ability to maintain access to existing channels of
distribution and gain access to new channels if and when they develop.
Dependence on the Internet
The success of the Company's future mailing-related products and services may
rely on Internet distribution. The failure of Internet usage to grow could
have a material adverse effect on the Company. The failure to drive and
direct traffic to the Company's Web site or Web services could result in
lower revenues and could have a material adverse effect on the Company
financially.
Customer Concentration; Credit Risk
The Company sells its products principally to a limited number of major
retailers and to distributors for resale to retailers. Such sales have
constituted, and may continue to constitute, a majority of the Company's net
revenues. In 1998, one distributor accounted for 37% of net revenues, and
one retailer accounted for 15% of net revenues. None of the Company's
distributors or retailers has a minimum purchase obligation. The loss of, or
significant reduction in, sales volume attributable to any of the Company's
principal distributors or retail accounts could materially and adversely
affect the Company.
<PAGE>
The Company's sales are made on credit terms, and the Company does not hold
collateral to secure payment. Although the Company currently maintains
accounts receivable insurance that covers a portion of its accounts, there
can be no assurance that the Company will be able to maintain or increase
such insurance on acceptable terms or at all. The inability to collect any
significant receivable in a timely manner could adversely affect the Company.
A majority of the Company's software sales are made through retailers. The
Company could be adversely affected if an alternative channel for
distribution of software were to become a major vehicle for distributing
software.
Risk of Product Returns
The Company has various stock balancing terms with distributors and retailers
that allow distributors and retailers certain rights to return products.
There can be no assurance that retailers and distributors will not seek and
obtain additional return and credit rights. The Company also provides
end-users with a 30-day money-back guarantee. It is difficult for the
Company to ascertain current demand for its existing products, predict demand
for newly introduced products or verify that inventories are appropriate for
actual demand levels. Accordingly, the Company is exposed to the risk of
product returns from retailers and distributors, particularly during times of
product transition. In addition, promotional or other activities of
competitors could cause returns to increase sharply at any time. The Company
establishes allowances based on estimated future returns of products, taking
into account promotional activities, the timing of new product introductions,
distributor and retailer inventories of the Company's products, and other
factors. Product returns that exceed the Company's allowances could
adversely affect the Company's operating results and financial condition.
Dependence on External Coding Contractors and Licensors
The Company generally develops internally the specifications for both new
products and updates of its existing products. From time to time, the
Company also licenses third-party products that are complementary to its core
product line strategy. The Company relies primarily on two independent firms
and licensors to perform the majority of the coding for its software
products, including coding for new products and bug fixes, maintenance and
updates for existing products. While the Company generally owns the code
that is developed by these firms with the exception of licensed products, the
base code used in developing the Company's brochures and business cards
products is owned by the third-party coder. With respect to these products,
the Company holds an irrevocable, non-exclusive license to copy and
distribute the executable code complied form the base code and to make
limited modifications. Although the agreements with these firms contain
various protective terms, there can be no assurance that such provisions will
effectively protect the Company's interests or that third-party coders will
not develop or market any stand-alone desktop publishing software based on
the base code that competes with the Company's products. The need to update
the Company's software products over time, both for enhanced functionality
and to take advantage of new operating platforms, increases the Company's
dependence on these third-party coders and licensors. The Company may have
less control over the scheduling and quality of the work of independent
coders than it does over its own employees, and there can be no assurance
that such coders or licensors will complete products for the Company on a
timely basis, within acceptable guidelines, or at all. In addition, many
independent coders or licensors have limited financial resources, which
exposes the Company to the risk that such coders or licensors may go out of
business prior to completing a project or require larger pre-payments from
the Company. As independent coders are in high demand, there can be no
assurance that independent coders, including those who have developed
products for the Company in the past, will be available to provide coding
services to the Company in the future. The Company has compensated
third-party coders and licensors primarily through royalty payments, which
have been partially prepaid to cover their costs. Even if the Company is able
to secure coding services, increased demand for these services may allow
third-party coders or licensors to negotiate more advantageous terms. There
can be no assurance that the Company will be able to obtain or renew such
coding or licensing agreements on favorable terms, or at all.
Capitalized Software Production Costs
The Company makes payments to third-party developers for software production
costs. These payments are capitalized upon the establishment of
technological feasibility, which is defined by the Company as the completion
of a detailed design specification of the software and are amortized to cost
of revenues during the period that the related product revenues are
recognized. The on-going assessment of the realizability of these costs
requires considerable judgment related to anticipated future product
revenues, estimated economic lives, and changes in hardware and software
technology. In the event that the future product revenues do not meet the
anticipated forecasts, the unamortized software production costs could
adversely affect the Company's financial statements. For example, the
Company had a write-off of $1,296,000 in 1997.
<PAGE>
Dependence on Third-Party Service Providers and Supplies
The Company relies on external service providers to perform most of its
customer technical support and product assembly functions. One independent
firm provides substantially all customer technical support for the Company's
software products. The Company's agreement with this firm is terminable on
60 days notice by either party. This contractor also provides services to
several larger companies, and there can be no assurance that demands from
such companies or other factors will not result in termination by such
contractor of its relationship with the Company. The unavailability of such
firm to perform customer technical support for the Company would result in
significant disruption to the Company's operations, could lead to customer
dissatisfaction and could have a material adverse effect on the Company. The
Company relies on two printers for packaging and two assembly houses to
assemble and package its products and has only limited sources for some of
its supplies. The Company does not have contracts with such assembly houses
or suppliers. All of the Company's inventory of packaging components is
maintained at third-party facilities. The Company's ability to assemble and
package its products is dependent on continued relationships with these third
parties. The failure of such third-party vendors to continue to provide
supplies and services to the Company on a timely basis could have a material
adverse effect on the Company.
Dependence on Key Personnel
The Company's success depends to a significant extent on the performance and
continued service of its senior management and certain key employees.
Competition for highly skilled employees with technical, management,
marketing, sales, product development and other specialized skills is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. In addition, there can be no
assurance that employees will not leave the Company or, after leaving,
compete against the Company. The Company's failure to attract additional
qualified employees or to retain the services of key personnel could have a
material adverse effect on the Company.
Management of Growth
The Company has experienced periods of growth that have placed, and could
continue to place, a significant strain on the Company's financial,
management, and other resources. The Company may attempt to hire additional
key personnel in high level management positions in the future. The
Company's ability to manage its growth effectively will require it to
continue to improve its operations and financial management information
systems, and to attract, train, motivate, manage, and retain key employees.
If the Company's management were to become unable to manage growth
effectively, the Company could be adversely affected.
Limited Protection of Intellectual Property and Proprietary Rights
The Company relies primarily on a combination of trademarks, copyright and
trade secret laws, employee and third-party nondisclosure agreements and
other methods to protect its proprietary rights. The Company does not
include in its products any mechanism to prevent or inhibit unauthorized
copying. Unauthorized copying occurs within the software industry, and if a
significant amount of unauthorized copying of the Company's products were to
occur, the Company could be adversely affected. In addition, as the number
of software products in the industry increases and the functionality of these
products further overlaps, software developers, and publishers may
increasingly become subject to infringement claims. There can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to current or future products. Use of
third-party coders or publishing of licensed products may increase the risk
of infringement. In the event that the Company's third-party coders or
licensors were to use infringing code in the Company's products, the Company
could be required to pay damage or be subject to an injunction to prevent the
Company from shipping its products. The third-party coders' liability to the
Company for any infringement of copyrights, trade secrets, or patents is
contractually limited to amounts received from the Company. Although the
Company has not been the target of any actual, pending, or threatened
intellectual property litigation, there has been substantial litigation
regarding copyright, trademark, and other intellectual property rights
involving computer software companies. Any such claims or litigation, with
or without merit, could be costly and a diversion of management's attention,
which could have a material adverse effect on the Company. Adverse
determinations in such claims or litigation could also have a material
adverse effect on the Company.
As part of the Company's general branding strategy, it attempts to limit the
use of the "My" prefix by others in the software field. If the Company is
unsuccessful in these efforts, the value of the Company's brand could be
materially impacted.
Year 2000 Issues
The Company presently believes that the Year 2000 issues will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing
are not effected timely with respect to Year 2000 problems that are
identified, there can be no assurance that the Year 2000 issue will not
materially adversely impact the Company's results of operations or adversely
<PAGE>
affect the Company's relationship with customers or others. Additionally,
the failure to correct a material Year 2000 problem could result in an
interruption in certain normal business activities or operations. Such
failure could materially and adversely affect the Company's systems, results
of operations, liquidity and financial condition.
Possible Volatility of Stock Price
The Company believes factors such as quarterly fluctuations in its revenues
or results of operations, general conditions in the computer hardware,
software and Internet industries, and announcements of new products and
services by the Company or by its competitors may cause the market price of
the Common Stock to fluctuate, perhaps substantially. In addition, in recent
years the stock market in general, and the prices of the stocks of technology
companies in particular, has experienced large price fluctuations, sometimes
without regard to the fundamentals of the particular company. These broad
market and industry fluctuations may adversely affect the market price of the
Company's Common Stock.
Anti-Takeover Provisions
The Company's Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
and privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of the Company's Common Stock will
be subject to and may be adversely affected by, the rights of the holders of
any Preferred Stock that may be issued in the future. Issuance of shares of
Preferred Stock could have the effect of making it more difficult for a third
party to acquire a majority of outstanding voting stock of the Company. In
addition, the Company is subject to anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which prohibits the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. The application of Section 203 also could have the
effect of delaying or preventing a change of control of the Company. Certain
other provisions of the Company's Certificate of Incorporation may have the
effect of delaying or preventing changes in control or management of the
Company, which could adversely affect the market price of the Company's
Common Stock.
In addition, in June 1998 the Company adopted a share purchase rights plan,
or poison pill. The Rights Plan could have the effect of discouraging,
delaying or preventing an acquisition of the Company.
ITEM 2. PROPERTIES
As of December 31, 1998 MySoftware leased approximately 20,000 square feet of
office space in Palo Alto, California, which facility includes its executive
offices, marketing, sales, product development, and customer support. In
addition, the Company also has a non-cancelable operating lease for
approximately 3,000 square feet of office space in San Francisco from
previous years. The Company entered into an agreement to lease its
facilities under a certain non-cancelable operating lease extending through
2000.
During 1998, the Company entered into non-cancelable operating sublease
agreements for its San Francisco office and a portion of its Palo Alto
office. The Company received operating sublease revenues of $123,000 in
1998. The total future minimum lease payments to be received under these
non-cancelable operating subleases are approximately $70,764, which are not
reflected in the above table.
ITEM 3. LEGAL PROCEEDINGS
MySoftware is not a party to any legal proceedings.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Since the Company's initial public offering of its Common Stock on June 15,
1995, the Company's Common Stock has been traded on the Nasdaq National
Market ("Nasdaq") under the symbol "MYSW." As of December 31, 1998 there
were 46 record holders of the Company's Common Stock. As of the same date,
4,458,950 shares of Common Stock were outstanding out of 20,000,000 shares of
Common Stock authorized.
The following table sets forth the range of high and low sales prices per
share of Common Stock for each of the periods indicated, as reported by
Nasdaq.
<TABLE>
<CAPTION>
High Low
- ---------------------------------------------------------------------------
<S> <C> <C>
1997 by quarter:
First $ 4.38 $ 2.25
Second 3.25 2.06
Third 2.48 1.56
Fourth 4.25 1.88
1998 by quarter:
First $ 4.25 $ 1.88
Second 6.44 3.25
Third 5.50 3.25
Fourth 15.13 3.13
</TABLE>
Dividend Policy
Prior to its initial public offering, the Company made distributions as a S
corporation from undistributed earnings to its stockholders, including
amounts to fund the payments of their individual tax liabilities attributable
to their allocation of the Company's income. Such distributions totaled
$2,815,000 and $200,000 (less contributions of $200,000) in 1995 and 1994,
respectively. Upon completion of its initial public offering, the Company
terminated its S corporation status. Future earnings will be retained for use
in the Company's business, and the Company does not intend to pay any cash
dividends on its Common Stock for the foreseeable future.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
MySoftware designs, markets and supports a family of leading task-specific
software applications and Internet services for small businesses, including
home-based businesses. The Company provides users with powerful,
easy-to-learn and easy-to-use solutions for business mailers, including tools
for mail list management; postage savings; creating brochures, stationery,
and postcards; and Internet tools to get prospects data. The Company also
provides productivity tools for labels, invoices/estimates, Internet home
pages, Web-based resumes and Web-based calendars. The Company's products are
fully featured to meet the requirements of a particular task, yet they are
easy to learn and easy to use. MySoftware places significant emphasis on
consumer marketing techniques in developing products and building brand
awareness. The Company's products are distributed primarily through computer
software and office supply retailers, and are currently sold in approximately
5,000 stores throughout the United States and Canada.
Fiscal 1998 was a period during which the Company focused on stabilizing its
cost and expenses structure and returning to profitability. Leveraging the
Company's core strength in productivity software solutions for the small
businesses and home offices, MySoftware introduced six new products under the
My brand: in February 1998 - MyDataBase; in June 1998 - MyTypeArtist; in
September 1998 - MyHolidayMailingKit; and in December 1998 - MyBusiness
E-Mailer, MyBusinessPublisher and MyCreativeClipArt. The Company also
introduced twelve new budget products under the ProVenture brand: in June
1998 - Business Cards, Label Maker, Mail List, DataBase, Brochures, and
Stationery; and in September 1998 - Invoices and Estimates, Postcards,
Newsletters, Presentations and Charts, Address Book, and Web Page Designer.
In addition to its regular software application development, the Company also
launched its first Internet services product, www.myprospects.com, for list
prospecting in December 1998.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Annual Report contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed elsewhere herein.
Net Revenues
MySoftware's net revenues increased 22% to $15.0 million in 1998, compared to
$12.4 million in 1997. The Company's net revenues decreased 4% in 1997 from
$12.9 million in 1996. The Company generates revenues primarily through the
sale of software products to retailers and to distributors for resale to
retailers. During 1998, approximately 3% of software sales were made
directly to end-users. In addition, approximately 21% of total net revenues
were generated by sales of complementary products, such as address-correction
CD-ROM's, invoice forms and checks, and other supplies and related services
during 1998. The Company also generated revenues of approximately 14% of
total net revenues from sales of its products by strategic partners who
typically bundle MySoftware products with their own products. Sales of
software products to retail and end-users represented 67.0%, 81.3% and 81.6%
of net revenues in 1998, 1997 and 1996, respectively.
The increase in net revenues in 1998 compared to 1997 was primarily the
result of increased revenues through Original Equipment Manufacturers ("OEM")
arrangements, as well as the Company's annuity products. The 1998 net
revenues also benefited from the launch of a new seasonal promotional
product, MyHolidayMailingKit, in September 1998. The decrease in net
revenues in 1997 compared to 1996 was primarily the result of softness in the
retail market for the Company's products.
In accordance with Statement of Position ("SOP") 97-2, Software Revenue
Recognition, the Company is required to defer revenue related to certain
promotional product offerings. In the fourth quarter of 1998, the Company
recorded deferred revenue of approximately $599,000 related to such
promotional product offerings. This deferred revenue will be recognized as
revenue by the Company upon redemption of the promotion by end-users or upon
expiration of the promotion, whichever occurs first.
Gross Profits
The Company's gross profit margins were 72.1% in 1998, compared to 53.6% in
1997, and 69.3% in 1996. The increase in gross profit margin in 1998 from
1997 was primarily due to the success of cost restructuring efforts in 1998,
<PAGE>
as well as the write-off of software production costs related to product
development in 1997. The decline in gross profit margin in 1997 from 1996
was primarily due to the write-off of software production costs related to
product development.
Product Development Expenses
The Company's product development expenses were $1.9 million in 1998,
compared to $2.2 million in 1997 and $2.0 million in 1996. As a percent of
net revenues, product development expenses were 12.7% in 1998 compared to
18.0% in 1997 and 15.4% in 1996. The decrease in product development
expenses as a percent of net revenues in 1998 compared to 1997 was primarily
due to better management processes, more internal coding versus outside
coding efforts as well as leveraging the existing code for budget category
products. The increase in product development expenses as a percent of net
revenues in 1997 from 1996 was primarily the result of lower revenues and the
increased expense of developing new products in existing and new product
categories.
Much of the Company's product development costs are coding costs or licensing
costs paid to outside contractors or licensors, as well as internal
development costs for its new Internet services. These outside development
costs have been capitalized and amortized to the cost of revenues as the
corresponding products are sold. The Company includes the costs of
identifying and validating product concepts and features in sales and
marketing expenses.
Sales and Marketing Expenses
Sales and marketing expenses were $6.0 million in 1998, compared to $6.4
million in 1997 and $6.3 million in 1996, representing 39.9%, 51.5% and 48.7%
of net revenues, respectively. Sales and marketing expenses as a percent of
net revenues decreased in 1998 from 1997 due to a reduction in headcount and
the success of cost restructuring efforts. The increase in these expenses as
a percentage of net revenues in 1997 from 1996 was primarily the result of
the Company's efforts to introduce new products.
General and Administrative Expenses
General and administrative expenses were $2.6 million in 1998, $2.2 million
in 1997 and $1.8 million in 1996, representing 17.6%, 17.7% and 14.2% of net
revenues, respectively. The increase in absolute dollars in general and
administrative expenses in 1998 from 1997 was primarily due to the increased
expenses associated with the new chief executive officer's salary, investor
relations efforts and the set up of new information technology
infrastructure. The increase in absolute dollars in general and
administrative expenses in 1997 compared to 1996 was attributable to expenses
incurred to support the Company's creation of a division in San Francisco to
publish Internet-related products. In 1997, the Company incurred $193,000 of
restructuring expenses associated with the closing of the San Francisco
division.
Acquired Technology
In January 1996, the Company wrote off acquired technology in the amount of
$255,000, resulting from the Company's acquisition of technology from
MediaTech, Inc., an Internet publishing tools company, which had not reached
technological feasibility and had no alternative future use.
Interest Income
Interest income was $238,000 in 1998 compared to $309,000 in 1997 and
$397,000 in 1996. The decreases in interest income in 1998 from 1997 and in
1997 from 1996 were the result of lower average cash balances during the year.
Provision for Income Taxes
Due to the reversal of deductible temporary differences, the Company had a
net operating loss for income tax purposes in 1998 despite having net income
for financial reporting purposes. In addition, based on the uncertainty of
future realization of the deferred tax assets, the Company's management does
not believe that it is more likely than not that sufficient future taxable
income will be generated to realize all of the net deferred tax assets.
Accordingly, a full valuation allowance has been recorded against the deferred
tax assets.
Liquidity and Capital Resources
The Company's primary sources of financing have been net cash from
operations, and in 1995, the proceeds from its initial public offering of
common stock. Operating activities generated cash of $574,000 in 1998, used
cash of $1.3 million in 1997, and generated cash of $1.4 million in 1996.
The Company's cash and cash equivalents balance was $5.4 million on December
31, 1998.
<PAGE>
Recent Accounting Pronouncement
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 required
entities to capitalize certain costs related to internal-use software once
certain criteria have been met. The Company expects that the adoption of SOP
98-1 will not have a material impact on the Company's financial position,
results of operations or cash flows. The Company will be required to adopt
SOP 98-1 for the year ending December 31, 1999.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 requires all start-up costs that were capitalized in
the past to be charged immediately to expense when SOP 98-5 is adopted. The
Company expects that the adoption of SOP 98-5 will not have a material impact
on the Company's financial position, results of operations or cash flows.
The Company will be required to adopt SOP 98-5 for the year ending December
31, 1999.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions. SOP 98-9
establishes the method of recognizing revenue for certain multiple-element
software arrangements. The Company will be required to adopt SOP 98-9 for
transactions entered into beginning January 1, 2000. The Company expects
that the adoption of SOP 98-9 will not have a material impact on the Company
financial position, results of operations or cash flows.
Year 2000 Issues
Background of Year 2000 Issues
Many currently installed computer systems and software use only two digits to
identify a year in the date field and are unable to distinguish between
twentieth and twenty-first century dates. Such systems, applications and/or
devices could result in system failures or miscalculations causing
disruptions of operations of any businesses, including, among other things, a
temporary disability to process transactions, send invoices or engage in
similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to comply with such
"Year 2000" requirements.
State of Readiness
The Company has undertaken various initiatives intended to help ensure that
its computer equipment and software, as well as its software products, will
function properly with respect to dates in the Year 2000 and thereafter. For
this purpose, the term "computer equipment and software" includes systems
that are commonly thought of as information technology systems, including
accounting, data processing, communications networks such as the Internet and
private Intranets, telephone/PBX systems, and miscellaneous systems as well
as systems that are not commonly thought of as IT systems, such as fax
machines, or other miscellaneous systems. Both IT and non-IT systems may
contain imbedded technology, which complicates the Company's Year 2000
assessment, remediation, and testing efforts.
Company's External Software Products
As of December 31, 1998, all of the Company's current software products for
Windows 95 are Year 2000 compliant. Although the Company's software, which
is designed for use with Windows 3.1, is not Year 2000 compliant, the Company
provides upgrades to Windows 95 software products for a fee. In addition,
the Company encourages its customers to upgrade to products compatible with
Windows 95 through its written materials and during verbal communications
with end-users. However, there is no guarantee for customers whose computer
equipment and software are not Year 2000 compliant not to encounter any
unforeseen problems or disruption to their systems.
Company's Internal Systems and Equipment
Based on an analysis of all systems potentially impacted by conducting
business in the year 2000 and beyond, the Company applies a phased approach
to make such systems/software applications, and accordingly operations, ready
for the Year 2000. Beyond awareness of the issues and scopes of systems
involved, the phases of activities in progress include: an assessment and
evaluation of specific underlying computer systems, software applications and
/or hardware; remediation or replacement of Year 2000 non-complaint
technology; validation and testing of technologically compliant Year 2000
solutions; and the implementation of the Year 2000 compliant solutions. The
following table outlines the status and the timing of such phased activities.
<PAGE>
<TABLE>
<CAPTION>
Percentage Completed Expectant
Impacted Systems As of December 31, 1998 Completion Date
- --------------------- ----------------------- ---------------
<S> <C> <C>
Hardware and software systems
used to deliver services...... 80% Q3 1999
Telecommunication equipment... 25% Q2 1999
Operability with internal systems
of customers and suppliers.... 10% Q3 1999
</TABLE>
Company's Vendors and Suppliers
The Company relies on two outside software vendors for some of its software
coding, who has reported to the Company that they are Year 2000 compliant.
The Company's operational suppliers are for the most part not date-sensitive
for the services or capacity that they are serving the Company. However the
Company cannot be certain such vendors will not encounter operational
problems if any unforeseen problems related to Year 2000 should cause the
vendors or suppliers any interruption of the services they provide the
Company. If such interruption should occur, the Company does not foresee any
major problems in replacing these vendors or suppliers and the cost of
replacing such vendors and suppliers are not expected to materially adversely
affect the Company financially.
Costs to Address Year 2000 Issues
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of the Year 2000 issues is approximately $200,000.
As of December 31, 1998, the Company had incurred costs of approximately
$25,000 related to its Year 2000 identification, assessment, upgrading,
remediation and testing efforts.
Year 2000 Issues
The Company presently believes that the Year 2000 issues will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing
are not effected timely with respect to Year 2000 problems that are
identified, there can be no assurance that the Year 2000 issue will not
materially adversely impact the Company's results of operations or adversely
affect the Company's relationship with customers or others. Additionally,
the failure to correct a material Year 2000 problem could result in an
interruption in certain normal business activities or operations. Such
failure could materially and adversely affect the Company's systems, results
of operations, liquidity and financial condition.
Contingency Plans
The Company expects to develop contingency plans for key internal systems by
mid-1999. This contingency planning includes, but is not limited to
identifying additional vendors who could provide similar goods services on
short notice. Management expects these plans to substantially reduce the
risk of interruption, delay, or failure of key processes required for
business operations, impact on the Company's results of operations or
financial condition.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements included herein beginning on page 28.
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of the Company's investment activities is to preserve
principal and meet liquidity needs while at the same time maximizing the
income we receive from our investments without significantly increasing risk.
Most of the securities that the Company has invested in are not subject to
significant market risk due to their short-term maturity. The Company
maintains its portfolio of cash equivalents and short-term investments in a
variety of investments, including U.S. Treasuries, U.S. Government Agencies,
money market funds, Master Notes and Repurchase Agreements of AAA qualities
with short-term maturities. As of December 31, 1998, all of the Company's
investments mature on January 1, 1999.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Information with respect to Directors may be found in the section captioned
"Election of Directors" appearing in the definitive Proxy Statement to be
delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held on May 19, 1999. Such information is incorporated
herein by reference.
EXECUTIVE OFFICERS
The executive officers of the Company as of March 26, 1998 are as follows:
NAME AGE POSITIONS
- ----------------------- ----- ---------------------------------------
Gregory W. Slayton..... 39 President, Chief Executive Officer and
Director
Sharon S. Chiu......... 38 Vice President of Operations, Chief
Financial Officer and Secretary
A biography of the principal occupation for the past five years of each of
the executive officers is provided below.
Gregory W. Slayton joined the Company in December 1997 as President, Chief
Executive Officer and a member of the Company's Board of Directors. From
March 1996 to July 1997, Mr. Slayton was the President, Chief Operating
Officer, and Director of ParaGraph International. In August 1994, Mr.
Slayton co-founded Worlds, Inc. and served as Senior Vice President and Chief
Financial Officer until November 1995. Prior to founding Worlds, Inc., Mr.
Slayton served as Vice President and Chief Financial Officer at Paramount
Technology Group of Paramount Communications Inc. Mr. Slayton was also a
management consultant with McKinsey & Company for four years. Mr. Slayton
serves on a number of high tech corporate Boards including inTest Corporation
and is on the Board of Opportunity International, a large non-profit
organization. Mr. Slayton holds a Bachelors of Arts in Economics from
Dartmouth College magna cum laude and a Masters of Business Administration
with Distinction from Harvard Business School.
Sharon S. Chiu joined the Company in November 1990 and has served in a number
of financial, operational and managerial positions. Ms. Chiu has served as
Chief Financial Officer, Vice President of Operations and Secretary since May
of 1998. Ms. Chiu formerly held positions as Vice President, Director of
Finance, Controller, and Manager of Operations and Accounting. Prior to
joining the Company, Ms. Chiu served as Accounting Manager and Operations
Manager at PC manufacturing companies and high-tech start-up companies. Ms.
Chiu has a Bachelors Degree in Business Administration from National Taiwan
University and a Masters of Business Administration from University of
Illinois at Champaign and Urbana.
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to this item will be set forth in the Company's
Proxy Statement for its Annual Meeting of Stockholders to be held on May 19,
1999, and is incorporated herein by reference.
<PAGE>
ITEM 11. SECURITIES OF OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information with respect to this item will be set forth in the Company's
Proxy Statement for its Annual Meeting of Stockholders to be held on May 19,
1999, and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item will be set forth in the Company's
Proxy Statement for its Annual Meeting of Stockholders to be held on May 19,
1999, and is incorporated herein by reference.
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this report
1. Financial Statements
Independent Auditors' Report 29
Balance Sheets
December 31, 1998 and 1997 30
Statements of Operations
Years Ended December 31, 1998, 1997 and 1996 31
Statements of Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996 32
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996 33
Notes to Financial Statements 34
2. Exhibits:
See Exhibits Index on page 45. The Exhibits listed in the
accompanying Exhibits Index are filed or incorporated by reference
as part of this report.
(b) Reports on Form 8-K:
A Form 8-K was filed with Securities and Exchange Commission in
connection with the adoption of the Rights Agreement in June 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Palo Alto, California, on the 26th day of March 1998.
MYSOFTWARE COMPANY
BY /s/ Gregory W. Slayton
--------------------------
Gregory W. Slayton
President and Chief Executive Officer
<PAGE>
SIGNATURES
(Continued)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 26th day of March 1998.
Signature Title
- -------------------------- ------------------------
/s/ David P. Mans Chairman of the Board of Directors
- --------------------------
David P. Mans
/s/ Gregory W. Slayton President, Chief Executive Officer and Director
- -------------------------- (Principal Executive Officer)
Gregory W. Slayton
/s/ Sharon S. Chiu Vice President of Operations and Chief
- -------------------------- Financial Officer
Sharon S. Chiu (Principal Financial and Accounting Officer)
/s/ Grant M. Inman Director
- --------------------------
Grant M. Inman
/s/ Donald F. Wood Director
- --------------------------
Donald F. Wood
/s/ John J. Katsaros Director
- --------------------------
John J. Katsaros
/s/ Emerick M. Woods Director
- --------------------------
Emerick M. Woods
<PAGE>
FINANCIAL STATEMENTS
As required under Item 7. Financial Statements and Supplementary Data, the
financial statements of the Company are provided in this separate section.
The financial statements included in this section are as follows:
Sequentially
Numbered
Financial Statement Description Page
- -----------------------------------------------------------------------------
Independent Auditors' Report 29
Balance Sheets
December 31, 1998 and 1997 30
Statements of Operations
Years Ended December 31, 1998, 1997 and 1996 31
Statements of Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996 32
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996 33
Notes to Financial Statements 34
<PAGE>
Independent Auditors' Report
The Board of Directors
MySoftware Company:
We have audited the accompanying balance sheets of MySoftware Company as of
December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998. 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 generally accepted auditing
standards. 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 MySoftware Company as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998,
in conformity with generally accepted accounting principles.
KPMG LLP
Mountain View, California
February 5, 1999
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Balance Sheets
<CAPTION>
December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,387,463 $ 5,034,828
Accounts receivable, net 3,354,875 1,031,286
Inventories 265,605 620,781
Other current assets 87,524 1,019,089
------------ ------------
Total current assets 9,095,467 7,705,984
Property and equipment, net 217,360 278,287
Other assets 619,265 674,131
------------ ------------
Total assets $ 9,932,092 $ 8,658,402
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,088,052 $ 848,045
Accrued compensation 459,663 464,379
Other accrued liabilities 2,174,442 2,654,839
Deferred revenue 599,006 ----
------------ ------------
Total current liabilities 4,321,163 3,967,263
Stockholders' equity:
Preferred stock: $0.001 par value; 2,000,000
shares authorized;
None outstanding ---- ----
Common stock: $0.001 par value; 20,000,000
shares authorized;
4,458,950 and 4,235,866 shares issued and
outstanding, respectively 4,459 4,236
Deferred compensation (249,375) ----
Additional paid-in capital 9,258,559 8,568,393
Accumulated deficit (3,402,714) (3,881,490)
------------- ------------
Total stockholders' equity 5,610,929 4,691,139
------------- ------------
Total liabilities and stockholders' equity $ 9,932,092 $ 8,658,402
============= ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Statements of Operations
<CAPTION>
Years Ended December 31,
----------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net revenues $ 15,038,139 $ 12,353,090 $ 12,872,575
Cost of revenues 4,200,746 5,737,570 3,951,241
-------------- -------------- --------------
Gross profit 10,837,393 6,615,520 8,921,334
-------------- -------------- --------------
Operating expenses:
Product development 1,915,015 2,221,712 1,988,881
Sales and marketing 6,002,173 6,356,201 6,270,939
General and administrative 2,644,907 2,184,769 1,831,183
Restructuring charge ---- 193,000 ----
Write-off of acquired technology ---- ---- 255,000
-------------- -------------- --------------
Total operating expenses 10,562,095 10,955,682 10,346,003
-------------- -------------- --------------
Operating income (loss) 275,298 (4,340,162) (1,424,669)
Interest income, net 238,478 309,240 397,586
-------------- -------------- --------------
Income (loss) before taxes 513,776 ( 4,030,922) ( 1,027,083)
Income tax expense (benefit) 35,000 ---- ( 72,000)
-------------- -------------- --------------
Net income (loss) 478,776 $ ( 4,030,922) $ ( 955,083)
============== ============== ==============
Basic net income (loss)
per share $ 0.11 $ (0.95) $ (0.23)
============== ============== ==============
Shares used in computing
basic net income (loss)
per share 4,370,010 4,233,366 4,233,486
============== =============== =============
Diluted net income (loss)
per share $ 0.10 $ (0.95) $ (0.23)
============== =============== =============
Shares used in computing
diluted net income (loss)
per share 4,697,047 4,233,366 4,233,486
============== =============== =============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Statements of Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
Addit- Retained
Common Stock ional Deferred Earnings Total
---------------- Paid-in Compen- (Accumulated Stockholders'
Shares Amount Capital Sation Deficit) Equity
--------- ------ ---------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of
December 31,
1995 4,231,366 $4,232 $8,561,503 $ ---- $ 1,104,515 $ 9,670,250
Exercise of
stock options 2,000 2 ---- --- ---- 2
Net loss ---- ---- ---- ---- (955,083) (955,083)
--------- ------ ---------- ------- ----------- ----------
Balances as of
December 31,
1996 4,233,366 4,234 8,561,503 149,432 8,715,169
Exercise of
stock options 2,500 2 6,890 ---- ---- 6,892
Net loss ---- ---- ---- ---- (4,030,922) (4,030,922)
--------- ----- --------- ------- ---------- ----------
Balances as of
December 31,
1997 4,235,866 4,236 8,568,393 ---- (3,881,490) 4,691,139
Exercise of
stock options 223,084 223 427,031 ---- ---- 427,254
Deferred
compensation
related to
officer stock
bonus ---- ---- 263,135 (263,135) ---- ----
Amortization of
deferred
compensation ---- ---- ---- 13,760 ---- 13,760
Net income ---- ---- ---- ---- 478,776 478,776
--------- ----- -------- ------- -------- --------
Balances as of
December 31,
1998 $4,458,950 $4,459 $9,258,559 $(249,375) $(3,402,714) $5,610,929
========== ====== ========== ========== ============ ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MYSOFTWARE COMPANY
Statements of Cash Flows
Years Ended December 31,
--------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 478,776 $ (4,030,922) $ (955,083)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 771,621 2,117,859 658,478
Amortization of deferred compensation 13,760 ---- ----
Provisions for returns and doubtful
accounts (1,149,196) (57,002) 1,594,777
Deferred income taxes ---- 282,345 149,460
Changes in operating assets and
liabilities:
Accounts receivable (1,719,823) 35,023 595,256
Inventories 355,176 (24,645) (147,623)
Other assets 923,918 (199,001) (667,438)
Accounts payable 240,007 118,578 (47,924)
Deferred officers' compensation ---- --- (52,922)
Deferred income taxes ---- (25,388) ---
Accrued compensation (7,778) 75,985 46,323
Deferred revenue 599,006 ---- ----
Other accrued liabilities 68,095 362,364 238,766
---------- --------- ---------
Net cash provided by (used for)
operating activities 573,562 (1,344,804) 1,412,070
---------- ----------- ----------
Cash flows from investing activities:
Additions to property and equipment (125,149) (55,520) (234,838)
Software production costs and other
assets (523,032) (1,290,180) (1,253,117)
----------- ----------- -----------
Net cash used for investing
activities (648,181) (1,345,700) (1,487,955)
----------- ----------- -----------
Cash flows from financing activities-
Proceeds from exercise of stock
options 427,254 6,892 2
----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents 352,635 (2,683,612) (75,883)
Cash and cash equivalents at beginning
of year 5,034,828 7,718,441 7,794,324
----------- ----------- ----------
Cash and cash equivalents at end of
year $ 5,387,463 $ 5,034,829 $ 7,718,441
=========== =========== ===========
Noncash financing activities:
Deferred compensation related to
officer stock bonus $ 263,135 --- ---
=========== ============ ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements
Years Ended December 31, 1998, 1997 and 1996
1. Summary of Significant Accounting Policies
Nature of Business
MySoftware Company (the Company) develops, manufactures and markets small
business application programs and Internet list services. The Company sells
its products primarily through distributors and retail dealers.
Principles of Presentation and Preparation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition and Deferred Revenue
Effective January 1, 1998, the Company adopted Statement of Position (SOP)
97-2, Software Revenue Recognition. Under SOP 97-2 revenue from product
sales is recognized when evidence of the arrangement exists, delivery has
occurred, the fee is fixed or determinable and collection is probable. The
Company provides reserves for estimated returns of product sales to
distributors and retail dealers and accrues for the estimated costs of
providing customer support.
Under SOP 97-2, the Company is required to defer revenue related to certain
promotional product offerings based on the relative fair value of undelivered
products included in the promotional offering. As of December 31, 1998, the
Company recorded approximately $599,000 of deferred revenue related to such
promotional product offerings. The deferred revenue will be recognized as
revenue by the Company upon delivery of the promotional products to end-users
or upon expiration of the promotion, whichever occurs first.
Prior to 1998, the Company recognized revenue in accordance with SOP 91-1.
Under SOP 91-1, revenue was recognized upon shipment of the product provided
there were no remaining significant obligations and collection was probable.
The Company provided reserves for estimated returns of product sales to
distributors and retail dealers and accrued for estimated costs of providing
customer support.
Other Comprehensive Income or Loss
The Company has no items of other comprehensive income or loss.
Cash and Cash Equivalents
The Company considers all liquid instruments with an original maturity of 90
days or less to be cash equivalents. Cash equivalents are stated at cost and
consist primarily of money market securities. The carrying amount of cash
and cash equivalents approximates fair value.
Inventories
Inventories, comprising finished goods and packaging materials, are stated at
the lower of first-in, first-out cost or market.
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
Property and Equipment
Property and equipment, comprised primarily of computer equipment and
furniture, are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the respective
assets, generally three to seven years.
The Company reviews the recoverability of the carrying amount of its property
and equipment assets whenever events or changes in circumstances indicate
that the carrying amount of an asset might not be recoverable. In the event
that facts and circumstances indicate that the carrying amount of assets may
be impaired, an evaluation of recoverability would be performed and the
estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a write-down to fair
value is required. Fair value is determined by reference to discounted
future cash flows over the remaining useful life of the related asset.
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed, the Company capitalizes its internal software development
costs after technological feasibility has been established. Such amounts to
date have not been significant in its software development efforts.
The Company makes payments to third-party developers for software production
costs. These payments are capitalized upon the establishment of
technological feasibility, which is defined by the Company as the completion
of a detailed design specification of the software and are amortized to cost
of revenues during the period that the related product revenues are
recognized. The ongoing assessment of the realizability of the costs
requires considerable judgment related to anticipated future product
revenues, estimated economic life, and changes in hardware and software
technology. The capitalized amounts paid to third-party developers for the
years ended December 31, 1998, 1997 and 1996 aggregated $523,032 $1,179,660,
and $1,197,217 respectively. Accumulated amortization aggregated $1,446,846
as of December 31, 1998.
Amortization of these software production costs is provided on a
product-by-product basis. Annual amortization is the greater of the amount
computed using the ratio of current product revenue to the total of current
and anticipated future product revenue or the straight-line method over the
remaining estimated economic lives of two years. Amortization expenses for
the years ended December 31, 1998, 1997 and 1996, aggregated $585,544,
$1,986,143, and $538,390, of which a write-off of $1,296,000 software
production cost was included in 1997's expense. The write-off was related to
certain products that are not strategic to the Company's future strategy.
Royalties
Royalties are accrued based on net sales pursuant to agreements with external
software developers of software products published by the Company. Royalty
costs, generally 2% of related revenues subject to certain maximum payment
amounts, are included in cost of revenues.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company maintains cash and cash equivalents with one financial institution.
Management believes the financial risks associated with such deposits are
minimal. Substantially all of the Company's accounts receivable are derived
from sales to computer software distributors and retailers. Historically,
the Company has not incurred material credit-related losses.
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
Income Taxes
Income taxes are provided under the asset and liability method, whereby
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
A valuation allowance is established to reduce deferred tax assets when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted average
number of shares of common stock outstanding. Diluted net income (loss) per
share is computed using the weighted average number of shares of common stock
outstanding and, when dilutive, common equivalent shares from options to
purchase common stock using the treasury stock method.
Net income used to calculate basic net income (loss) per share was identical
to net income used to calculate diluted per share for all years presented.
Following is a reconciliation of the common shares used to calculate basic
net income per share to the common shares used to calculate diluted net
income per share for 1998, 1997, and 1996:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Weighted-average common
shares used to calculate
basic net income (loss)
per share 4,370,010 4,233,366 4,233,486
Stock options 327,037 ---- ----
---------- ---------- ----------
Weighted-average common shares
used to calculate diluted net
income(loss) per share 4,697,047 4,233,366 4,233,486
========== ========== ==========
</TABLE>
Excluded from the computation of diluted loss per share for 1997 and 1996 are
options to acquire 1,036,700 and 558,757 shares, respectively, of common
stock with weighted-average exercise prices of $2.91 and $3.51, respectively,
because their effect would be anti-dilutive.
Stock-Based Compensation
The Company accounts for its stock option plans using the intrinsic value
method. Deferred compensation is amortized ratably over the vesting period.
Fair Value of Financial Instruments
The fair value of the Company's cash, receivables, and accounts payable
approximate the carrying amount due to the relatively short maturity of these
items.
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
Disclosures About Segments of an Enterprise and Related Information
During 1998, the Company adopted SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards
for the manner in which public companies report information about operating
segments in annual and interim financial statements. The Company determines
its reportable segments based principally upon the type of products sold.
<TABLE>
2. Balance Sheet Components
Accounts Receivable
A summary of accounts receivable follows:
<CAPTION>
December 31,
----------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Accounts receivable $ 4,030,161 $ 2,310,338
Allowance for returns and
doubtful accounts ( 675,286) (1,279,052)
-------------- --------------
$ 3,354,875 $ 1,031,286
============== ==============
</TABLE>
<TABLE>
Other Current Assets
Other current assets consisted of
the following:
<CAPTION>
December 31,
----------------------------------
1998 1997
---------------- --------------
<S> <C> <C>
Prepaid income taxes ----- $ 958,151
Other 87,524 60,938
---------------- --------------
$ 87,524 $ 1,019,089
================ ==============
</TABLE>
<TABLE>
Property and Equipment
Property and equipment are as
follows:
<CAPTION>
December 31,
---------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Computer equipment and purchased
software $ 384,773 $ 413,886
Office equipment, furniture and
fixtures 139,613 174,831
Leasehold improvements ----- 1,547
------------- --------------
524,386 590,264
Less accumulated depreciation and
amortization (307,026) (311,977)
------------- --------------
$ 217,360 $ 278,287
============= ==============
</TABLE>
<TABLE>
Other Assets
Other assets consisted of the following:
<CAPTION>
December 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Software production costs paid
to third-party contractors,
net of accumulated amortization $ 579,535 $ 642,047
Deposits 39,730 32,084
-------------- --------------
$ 619,265 $ 674,131
============== ==============
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
Other Accrued Liabilities
A summary of other accrued liabilities follows:
<CAPTON>
December 31,
-------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Customer prepayments $ 307,767 $ 853,196
Accrued advertising 657,905 250,444
Accrued technical support 30,000 151,000
Customer Deposit 362,580 516,510
Other 816,190 883,689
------------------ ----------------
$ 2,174,442 $ 2,654,839
================== ================
</TABLE>
3. Stockholders' Equity
Officer Stock Bonus
In June 1998, the Board of Directors granted a stock bonus of 60,000 shares
of common stock, at no cost, to the Chief Executive Officer ("CEO").
Unvested shares are subject to a buy back provision and vest ratably over
five years, with acceleration if certain performance conditions are
achieved by the Company. The Company has recorded $263,135 as deferred
compensation, which is being amortized ratably, over the vesting period.
As the shares underlying the stock bonus had not been issued as of
December 31, 998, the shares have been disclosed as outstanding stock
options with a zero excise price in the tables below.
Stock Options
In September 1994, the Company granted five key employees an aggregate of
235,000 common stock options at an exercise price of $1.50 per share, the
fair market value of the Company's common stock on the date of grant.
These options vested ratably over three years and expire 10 years from
the grant date.
The Company adopted the 1995 Equity Incentive Plan (the Plan) in April
1995, and reserved 1,000,000 shares thereunder. The Plan provides for
the grant of incentive stock options to employees of the Company and for
the grant of nonstatutory stock options to employees and consultants of
the Company. The Board of Directors administers the Plan and has the
discretion to grant stock options. Exercise prices may not be less than
100% and 85% of the fair market value at the date of grant for incentive
options and nonstatutory options, respectively. Options granted under the
Plan generally vest over four years and expire 10 years from the grant
date. In 1998, the Company granted 544,522 options under the Plan.
The Company adopted the 1995 Nonemployee Directors' Plan in April 1995 and
reserved 200,000 shares thereunder. The Nonemployee Directors' Plan
provides for the automatic grant of nonstatutory stock options to
nonemployee directors of the Company at the fair market value of the
common stock on the date of grant. The term of all options granted under
the Nonemployee Directors' Plan may not exceed 10 years or the end of the
director's status as director. In 1998, the Company granted 10,000
options under the Nonemployee Directors' Plan.
The Company adopted the 1998 Non-Officer Stock Option Plan (the "NOSOP") in
November 1998 and reserved 215,000 shares thereunder. The NOSOP provides
for the grant of non-qualified options to non-officer employees and
consultants of the Company. The Board of Directors administers the NOSOP
and has the discretion to grant stock options. Exercise prices may not
be less than 100% of the fair market value at the date of grant. Options
granted under the NOSOP generally vest over four years and expire 10
years from the grant date. The Company granted 185,000 options during
1998 under the NOSOP.
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
On September 12, 1996, the Company offered its employees a stock option
repricing program that allowed employees to exchange on a one-for-one basis
any options with an exercise price above the September 17, 1996 closing price
of the MySoftware common stock, which was $4.00. As a result, 189,000
options were surrendered by eligible employees for repriced options. The
vesting of the repriced options was extended by six months.
On November 16, 1998, the Company offered its employees a stock option
repricing program that allowed employees to exchange on a one-for-one basis
any options priced above $4.25 for options with an exercise price of $3.875
per share, which was the closing price of the MySoftware common stock on
November 13, 1998. As a result, 135,500 options were surrendered by eligible
employees for repriced options. The vesting of the repriced options was
extended by six months.
The following table summarizes all stock option and stock bonus activities
for the Company's stock option plans:
<TABLE>
<CAPTION>
Shares Weighted
under average exercise
Option price per share
---------------- ------------------
<S> <C> <C>
Outstanding as of December 31, 1995 400,838 $ 4.85
Granted 380,450 4.68
Expired or canceled (220,531) 7.96
Exercised ( 2,000) 4.00
----------------
Outstanding as of December 31, 1996 558,757 3.51
Granted 584,000 2.48
Expired or canceled (103,557) 3.73
Exercised ( 2,500) 1.50
-----------------
Outstanding as of December 31, 1997 1,036,700 2.91
Granted 740,000 3.77
Expired or canceled (334,717) 4.30
Exercised (223,084) 1.95
----------------
Outstanding as of December 31, 1998 1,218,899 3.22
================
Available for grant at:
December 31, 1998 190,681
================
</TABLE>
<TABLE>
The following table summarizes information about stock bonus and stock
options outstanding as of December 31, 1998:
<CAPTION>
Outstanding Exercisable
----------------------------------- ----------------------------------
Weighted-Avg. Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Price Exercisable Exercise
Prices Life Price
- -------- ----------- ------------ -------------- ----------- ----------
<C> <C> <C> <C> <C> <C>
$ 0.00 60,000 9.50 years $ 0.00 6,000 $ 0.00
1.50 46,000 6.50 1.50 46,000 1.50
1.80 - 2.75 468,136 8.79 2.48 168,668 2.51
3.63 - 7.00 624,763 9.40 3.88 108,970 4.01
12.25 20,000 6.83 12.25 15,833 12.25
$0.00-12.25 1,218,899 9.02 $ 3.22 345,471 $ 3.25
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
The Company applies the intrinsic value method in accounting for its stock
option plans and, accordingly, has not recognized compensation cost because
the exercise price is equal to the fair market value of the underlying common
stock on the date of grant. If the Company had elected to recognize
compensation cost based on the fair value method as prescribed by SFAS No.
123, net income (loss) and net income (loss) per share would have been
changed to the pro forma amounts indicated in the table below (in thousands
except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net income (loss):
As reported $ 478,776 $ ( 4,030,922) $ ( 955,083)
Pro forma (212,187) ( 4,513,944) (1,276,711)
Net income (loss) per share-diluted:
As reported $ 0.10 $ ( 0.95) $ ( 0.23)
Pro forma (0.05) (1.07) ( 0.30)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
Expected dividend yield -
Expected stock price volatility 50.00%
Risk-free interest rate 4.58 - 6.22%
Expected life of options 4 - 5 years
The weighted-average fair value of options granted during 1998, 1997, and
1996 was $1.66, $1.25, and $2.44 per share, respectively.
4. Segment and Geographic Information
The Company is principally engaged in the development, marketing and
manufacturing of small business application programs and Internet services.
The Company's main products provide solutions for creating customized,
professional-quality mailing lists, brochures, labels, business cards,
invoices/estimates, and other marketing communications materials. The
Company also markets annuity-based mailing products and services which
complement the Company's existing mailing software products.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which the Company has adopted in 1998.
The Company identifies such segments based principally upon the type of
products sold. The accounting policies of these reportable segments are the
same as those described for the consolidated entity. The Company evaluates
the performance of its operating segments based on revenues, gross profit and
segment operating income. The Company does not assess the performance of its
segments on other measures of income or expense, such as depreciation and
amortization, interest revenue and expense, income taxes or net income. In
addition, as the Company's assets are primarily located in its corporate
office in the United States and not allocated to any specific segment, the
Company does not produce reports for or measure the performance of its
segments based on any asset-based metrics. Therefore, segment information,
is presented only for revenues and modified operating income.
The Company has not separately reported segment information on a geographic
basis, as international sales represent less than 1% of net revenue for the
year ended December 31, 1998.
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
The following segment information is provided for the years ended December
31, 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
Segment Information
For the year ended December 31, 1998
------------------------------------
Mailing Mail Other New OEM Other Total
Retail Annuity Retail Retail
--------- --------- -------- -------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,254 $ 1,790 $ 4,820 $ 2,681 $2,088 $ 1,405 $15,038
Cost of revenues 705 253 1,335 800 388 720 4,201
--------- --------- -------- --------- ------ ------- -------
Gross profit 1,549 1,537 3,485 1,881 1,700 685 10,837
Segment operating
expenses 1,521 1,371 1,640 1,099 813 1,202 7,646
--------- --------- -------- --------- ------ ------- -------
Segment profit
(loss) $ 28 $ 166 $1, 845 $ 782 $ 887 $ (517) 3,191
========= ========= ======== ========= ====== ========
General and administrative expenses ( 2,645)
Bonus expense not allocated to segments ( 270)
Interest income, net 238
-------
Income before taxes, as reported $ 514
=======
</TABLE>
<TABLE>
<CAPTION>
Segment Information
For the year ended December 31, 1997
------------------------------------
Mailing Mail Other OEM Other Total
Retail Annuity Retail
--------- --------- -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,338 $ 1,159 $ 6,552 $1,053 $ 1,251 $12,353
Cost of revenues 1,823 248 3,090 266 311 5,738
--------- --------- -------- ------ ------- -------
Gross profit 515 911 3,462 787 940 6,615
Segment operating
expenses 1,059 820 5,825 498 375 8,577
--------- --------- -------- ------ ------- -------
Segment profit
(loss) $ (544) $ 91 $ (2,363) $ 289 $ 565 (1,962)
========= ========= ========= ====== ======== =======
General and administrative expenses ( 2,185)
Restructuring charges ( 193)
Interest income, net 309
-----------
Income before taxes, as reported $ (4,031)
===========
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
Segment Information
For the year ended December 31, 1996
------------------------------------
Mailing Mail Other OEM Other Total
Retail Annuity Retail
--------- --------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,764 $ 559 $ 7,526 $ 548 $ 1,475 $ 12,872
Cost of revenues 884 214 2,271 26 556 3,951
--------- --------- -------- ----- -------- --------
Gross profit 1,880 345 5,255 522 919 8,921
Segment operating
expenses 2,009 337 5,053 466 395 8,260
--------- --------- -------- ----- -------- --------
Segment profit
(loss) $ (129) $ 8 $ 202 $ 56 $ 524 661
========= ========= ======== ===== ========
General and administrative expenses ( 1,831)
Write-off of acquired technology ( 255)
Interest income, net 398
---------
Income before taxes, as reported $ (1,027)
=========
</TABLE>
The following is a brief summary of the types of products and services from
which each segment derives its revenues:
Mailing Retail Products include software products and applications that were
designed for mailing list management and sold through the direct retail
channel.
Mail Annuity Products include annuity-based products that were designed to
correct addresses on the consumers' data base to take advantage of postal
savings and are sold directly to end-users.
Other Retail Products include all other marketing communication software
products and applications that were sold through the direct retail channel.
New Retail Products include new retail products sold through the direct
retail channel products that were released in 1998.
OEM Products include sales of various products via the Original Equipment
Manufacturing channel.
The segment operating expenses include all operating expenses except for
general and administrative expenses and bonus expense which are not evaluated
on a segment basis by the Company.
The following tables summarize sales to customers when sales to such
customers exceeded 10% of revenues as well as the amounts due from these
customers as a percentage of total gross accounts receivable.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
Percentage of net revenues 1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Customer A 37% 37% 34%
Customer B 15% 20% 29%
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
December 31,
------------
Percentage of total accounts receivable as of 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Customer A 56% 61%
Customer B 17% 17%
</TABLE>
5. Income Taxes
The components of income tax expense (benefit) for the years ended December
31, 1998, 1997, and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income taxes:
Current:
Federal $ 20,774 $ ( 282,345) $ (221,459)
State 800 --- ---
Foreign 13,426 --- ---
----------- ------------ ----------
Total current 35,000 ( 282,345) (221,459)
----------- ------------ ----------
Deferred:
Federal --- 282,345 43,482
State --- --- 105,977
----------- ------------ ----------
Total deferred 35,000 282,345 149,459
----------- ------------ ----------
Total income tax expense
(benefit) $ 35,000 $ --- $ (72,000)
=========== ============ ==========
</TABLE>
The following table reconciles the expected corporate federal income tax
expense (benefit) computed by multiplying the Company's income (loss) before
income taxes by 34% to the Company's reported income tax expense (benefit)
for the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---------- -------------- ----------
<S> <C> <C> <C>
Expected income tax expense (benefit) $ 174,684 $ (1,370,241) $ (349,208)
State income taxes, net of federal
tax effect 528 - 70,473
Change in valuation allowance (187,447) 282,345 281,600
Research and development tax credits - - (83,711)
Unutilized losses - 1,029,478 -
Non-deductible expenses 13,035 57,890 -
Foreign withholding tax 13,426 - -
Other 20,774 528 8,846
---------- -------------- ----------
Actual income tax expense (benefit) $ 35,000 $ - $ (72,000)
========== ============== ==========
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
Notes to Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets as of December 31, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Accrual and reserves $ 811,923 $ 1,340,235
Net operating loss carryforwards 1,065,861 489,843
Tax credit carryforwards 679,434 468,533
-------------- --------------
Total gross deferred tax assets 2,557,218 2,298,611
Less valuation allowance 2,557,218 2,298,611
-------------- --------------
Net deferred tax assets $ - $ -
============== ==============
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1998 was an increase of $258,607. The Company's accounting for deferred
taxes under SFAS No. 109 involves the evaluation of a number of factors
concerning the realizability of the Company's deferred tax assets. To
support the Company's conclusion that a 100% valuation allowance was
required, management primarily considered such factors as the Company's
history of operating losses, the nature of the Company's deferred tax assets
and the absence of taxable income in prior carryback years. Although
management's operating plans assume taxable and operating income in future
periods, management's evaluation of all the available evidence in assessing
the realizability of the deferred tax assets indicates that such plans are
not considered sufficient to overcome the available negative evidence.
As of December 31, 1998, the Company has federal and California net operating
loss carryforwards of approximately $2,722,000 and $2,404,000, respectively,
which expire in various years through 2018 and 2003, respectively. The
Company also has federal and California research and development tax credit
carryforwards of approximately $365,000 and $259,000, respectively. The
federal credits expire between 2010 and 2018. The Company also has federal
minimum tax credit and foreign tax credit carryforwards of approximately
$38,000 and $18,000, respectively. The foreign tax credit expires between
2002 and 2003.
Included in gross deferred tax assets above is approximately $235,000 related
to stock option compensation for which the benefit, when realized, will be
recorded directly to stockholders' equity.
6. Commitments
Leases
The Company has entered into agreements to lease its facilities under certain
non-cancelable operating leases extending through 2000. Future minimum lease
commitments under these leases are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<C> <C>
1999 523,161
2000 163,707
-----------
$ 686,868
===========
</TABLE>
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $501,023, $419,815, and $263,000, respectively. During 1998,
the Company entered into non-cancelable operating sublease agreements for its
San Francisco office and a portion of its Palo Alto office. The Company
received operating sublease revenues of $123,000 in 1998. The total future
minimum lease payments to be received under these non-cancelable operating
subleases are approximately $70,764, which are not reflected in the above
table.
<PAGE>
Bonus Plan
During 1998, the Company instituted a new bonus plan to replace the previous
profit sharing plan. The Company's contributions to its employee bonus plan
are made at the Company's discretion. Contributions to the bonus plan
amounted to $401,607 for the year ended December 31, 1998.
<PAGE>
EXHIBITS INDEX
Incorporated by Reference
Exhibit
Number Exhibit Description Form Date
- -------- ------------------------------ ------ -------
3.1 Certificate of Incorporation S-1 6/20/95
3.2 Bylaws S-1 6/20/95
10.1 Form of Indemnity Agreement for
officers and directors S-1 6/20/95
10.2 Form of Indemnity Agreement for
officers and directors S-1 6/20/95
10.3 1995 Equity Incentive Plan
(the "1995 Plan") S-1 6/20/95
10.4 Form of Incentive Stock Option
under the 1995 Plan S-1 6/20/95
10.5 Form of Nonstatutory Stock Option
under the 1995 Plan S-1 6/20/95
10.6 1995 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan")S-1 6/20/95
10.7 Form of Stock Option under the
Directors' Plan S-1 6/20/95
10.8 Lease Agreement by and between
MySoftware and 2197 E. Bayshore
Road Partnership dated February 25,
1993, as amended S-1 6/20/95
10.9 Software Development Agreement
by and between MySoftware and
Micro-Burst, Inc. dated October 11,
1993 ("the October 11, 1993
Agreement") S-1 6/20/95
10.10 Software Development Agreement
by and between MySoftware and
Micro-Crafts, Inc. dated September
13, 1993 ("the September 13, 1991
Agreement") S-1 6/20/95
10.11 Amendment to the September 13,
1991 Agreement between MySoftware
and MicroCrafts, Inc., dated
October 10, 1994 S-1 6/20/95
<PAGE>
EXHIBITS INDEX
(Continued)
Incorporated by Reference
Exhibit
Number ExhibitDescription Form Date
- ---------- --------------------------- ------- --------
10.12 Software Development Agreement
by and between MySoftware and
Micro-Crafts, Inc. dated October
18, 1992 ("the October 18, 1992
Agreement") S-1 6/20/95
10.13 Amendment to the October 18,
1992 Agreement between MySoftware
and MicroCrafts, Inc., dated
October 10, 1994 S-1 6/20/95
10.14 Software Development Agreement
by and between MySoftware and
Micro-Crafts, Inc. dated December
10, 1993) S-1 6/20/95
10.15 Software Purchase Agreement and
Assignment of Copyright dated
January 15, 1996 by and between
MySoftware and Mediatech, Inc. 10-K 12/31/95
10.16 Amendment to Lease Agreement
dated June 30, 1995 10-K 12/31/95
10.17 Lease Agreement by and between
MySoftware and Birmingham
Properties, Inc. dated October
8, 1996 10-KSB 12/31/96
10.18 Third Amendment to Lease
Agreement by and between
MySoftware and Holvick Family
Trust, dated January 31, 1997 10-KSB 12/31/96
10.19 Rights Agreement 8-K 6/15/98
10.20 1998 Non-Officer Stock Option
Plan S-8 12/14/98
10.21 Data Agreement with the Polk
Company N/A N/A
10.22 Data Agreement with Experian
Information Solutions, Inc. N/A N/A
23.1 Consent of KPMG LLP N/A N/A
27.1 Financial Data Schedule N/A N/A
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITOR
The Board of Directors
MySoftware Company
We consent to incorporation by reference in the registration statements
(No. 33-91898 and No. 333-68841) on Form S-8 of MySoftware Company of our
report dated February 5, 1999, relating to the balance sheets of MySoftware
Company as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the
December 31, 1998 annual report on Form 10-KSB of MySoftware Company.
KPMG LLP
Mountain View, California
March 26, 1999
<PAGE>
Confidential Treatment Requested
Under 17 C.F.R. 200.80(b)(4)
200.83 and 240.24b-2
THE POLK COMPANY
Data Products License Agreement
______________________________________________________________________________
MySoftware: MySoftware Company (a Delaware Corporation)
Address: 2197 East Bayshore Road, Palo Alto, CA 94303-3219
Contact: Ms. Sharon Chiu Phone: 650-473-3638 Fax: 650-325-0873
Agreed to by: Agreed to by:
MySOFTWARE COMPANY THE POLK COMPANY
By: By:
Print Name: Print Name:
Title: Title:
Date: Date:
_______________________________________________________________________________
TERMS AND CONDITIONS
1. LICENSE.
A. Polk hereby grants and MySoftware hereby accepts a nontransferable,
nonexclusive license to use certain data (the "Polk Data") from the
following Polk proprietary data product(s) (the "Polk Product(s)"), in
accordance with the terms and conditions hereof. The terms applicable to
each Polk Product are more particularly described in the respective
Exhibit(s) listed below.
Polk Product Exhibit
TotaList(tm) A
CRMI(tm) B
B. MySoftware hereby grants and Polk hereby accepts a nontransferable,
nonexclusive license to use certain MySoftware proprietary data (the
"MySoftware Data") in accordance with the terms and conditions hereof.
The MySoftware Data shall include the following, on an as available
basis: (i) name; (ii) address; (iii) e-mail address; (iv) product(s)
purchased; (v) date(s) of purchases; and (vi) other data elements
mutually agreed upon by Polk and MySoftware.
2. TERM; LICENSE YEAR; NEGOTIATIONS FOR SEPARATE AGREEMENT.
A. Term; License Year.
(1) The initial term of this Agreement shall commence on December 4, 1998
(the "Effective Date", which shall be used as the reference date of
this Agreement) and shall end on December 3, 1999. Thereafter, the
term of this Agreement shall continue until terminated by either
party upon at least 90 days' written notice to the other party;
provided, however, upon the mutual written agreement of Polk and
MySoftware, this Agreement may be renewed for a defined period of
time (example a one (1) year renewal term) with such mutual written
agreement to define whether the Agreement term automatically
continues or automatically expires at the end of such renewal term.
(2) The term "License Year" shall mean and refer to each twelve (12)
month period during the term hereof which begins on the Effective
Date or an anniversary thereof.
B. Negotiations for Separate Agreement.
(1) Polk and MySoftware agree to diligently pursue negotiations for a
separate written agreement concerning the establishment of a business
relationship between the parties designed to leverage [***] and
[***].
(2) In the event that the parties are not able to execute the separate
agreement referenced in Subsection B.(1) above by February 26,
1999, then either party may terminate this Agreement upon written
notice to the other party at least thirty (30) days prior to the
effective date of such termination. The option to terminate shall
be both party's sole remedy in the event that such separate
agreement is not executed. Further, each party shall be solely
responsible for any expenses it incurs in the course of negotiating
such separate agreement.
3. USE OF THE POLK DATA; LIMITATIONS ON USE.
[***] Confidential treatment requested.
<PAGE>
A. Permitted Uses; Specific Limitations on Use. The permitted uses of the
Polk Data are set forth in the applicable Exhibit(s) referenced in Section
1 hereof, with each such Exhibit setting forth the uses and the
limitations on use which are specific to each Polk Product.
B. Limitations on Use of the Polk Data.
(1) Rental Basis. In connection with the permitted uses of the Polk Data
referenced in Subsection A. above, all Polk Data permitted to be
furnished by MySoftware to any of its customers shall be on a rental
basis only and no other basis whatsoever.
(2) Excerpts Only. MySoftware's use of the Polk Data for any authorized
purpose hereunder is limited to the provision to MySoftware's
customers of excerpts from the Polk Data, and shall not include any
wholesale provision of the entire Polk Data file or segments
thereof to any other party.
(3) Polk Data Included on Lists. Any list created using the Polk Data
shall not contain any Polk Data information other than:
(a) that which is necessary to effect delivery of any direct mail
to the intended recipient thereof; and
(b) telephone numbers if same have been requested by the applicable
customer.
(4) Compliance. Use of the Polk Data and any information derived
therefrom by MySoftware or its customers must comply with:
(a) the Direct Marketing Association's Ethical Use and Fair
Information Practices Guidelines; and
(b) all federal, state and local laws, rules and regulations.
(5) State Restrictions. Because certain portions of the Polk Data are
derived from state procured motor vehicle information, Polk is
obligated to comply with certain restrictions and/or requirements
placed upon the use of such vehicle information by the individual
states. MySoftware shall strictly comply, and require that its
customers strictly comply, with all restrictions and requirements
now or hereafter imposed upon Polk by any state and made known to
MySoftware.
(6) Polk Restrictions. Polk may impose reasonable restrictions on the
use of the Polk Data to manage the integrity thereof and Polk's
access to its data sources in light of issues concerning privacy,
good taste, and other consumer related issues. MySoftware and its
customers shall strictly comply with all data use restrictions now
or hereafter imposed by Polk upon written notice.
C. MySoftware's Contractual Limitations on its Customers. MySoftware shall
only provide Polk Data, whether in the form of a direct marketing list
created using the Polk Data or through the performance of data
enhancement services, to customers that have agreed to use the Polk
Data in accordance with agreed upon written or click wrap terms and
conditions which, along with provisions agreed upon by Polk and
MySoftware concerning limitations on warranty and liability, shall
include the following:
(1) Statistics. The customer shall not convert or use the Polk Data to
produce statistical reports or any other information which may be
inferred or developed therefrom in any form, except for count reports
produced in relation to a list used for marketing purposes by such
customer.
(2) Directory Assistance. The customer shall not use telephone numbers
from the Polk Data in any application which provides electronic
telephone number directory assistance to third parties.
(3) Individual Look-Ups. The customer shall not use the Polk Data in any
application involving individual look-ups of people pertaining to: (i)
skip tracing functions; (ii) electronic directory assistance
applications; or (iii) supplying any information relating to the
neighbors of a particular name and address.
(4) Solicitations; Ad Copy. Any solicitation and ad copy used by the
customer in connection with the Polk Data:
(a) shall not disclose the source of the recipient's name and address;
and
(b) shall not contain any statement or indication that customer
possesses knowledge of any information about the recipient other
than the recipient's name and address.
(5) [***] Retention and Review. At least [***] copies of each [***]
and/or [***] which is used in conjunction with the Polk Data or any
information derived therefrom shall be retained by [***] for a
minimum period of [***] after the applicable [***] or [***]. Upon
a request from [***] to [***] within such [***] period, [***] shall
obtain and promptly deliver to [***] the requested mail piece or
telemarketing script copies. Polk and [***] recognize that [***]
may not respond to, or cooperate with, a request by [***] for any
such [***] or [***].
[***] Confidential treatment requested.
<PAGE>
(6) Polk Data Included on Lists. Any list created using the Polk Data
shall not contain any Polk Data information other than:
(a) that which is necessary to effect delivery of any direct mail to
the intended recipient thereof; and
(b) telephone numbers if same have been requested by the applicable
customer.
(7) Compliance. Use of the Polk Data and any information derived
therefrom by the customer must comply with:
(a) the Direct Marketing Association's Ethical Use and Fair
Information Practices Guidelines; and
(b) all federal, state and local laws, rules and regulations.
D. General Requirements.
(1) Data Access. MySoftware agrees to: (i) hold the Polk Data in
confidence; (ii) provide access to the Polk Data only (a) to its
employees and Authorized Users (defined below) to whom knowledge is
required and to the extent necessary for proper use in accordance
with this Agreement, and (b) to its customers solely in the form of
the products and services for which MySoftware is permitted to use
the Polk Data hereunder; (iii) require that its employees, Authorized
Users and customers hold the Polk Data in to prevent the accidental or
unauthorized disclosure of the Polk Data. MySoftware's obligations
under this Section shall survive any termination of this Agreement.
Polk may seek injunctive or other equitable relief against the breach
or threatened breach of any of the foregoing covenants in addition to
any other legal remedies which may be available.
(2) Authorized Users. Access to and use of the Polk Data shall be limited
as follows:
(a) MySoftware may designate any of its employees as an "Authorized
User" who may use the Polk Data in accordance with the terms
hereof.
(b) MySoftware may designate as an "Authorized User", any non-employee
party or other entity provided that such party:
(i) is engaged in work performed for or on behalf of MySoftware;
(ii) accesses and uses the Polk Data solely in the performance of
work performed for MySoftware;
(iii) is not a competitor of Polk or under common ownership with
or affiliated in any manner with a competitor of Polk; and
(iv) has executed a written agreement with Polk which limits such
party's use of the Polk Data to the performance of services
for MySoftware and requires that the Polk Data be held in
confidence.
MySoftware shall be as fully responsible to Polk for the acts and
omissions of the Authorized Users as MySoftware is for the acts
and omissions of its own employees.
(3) Location; Copies; Inspection.
(a) The Polk Data shall reside, and the services permitted hereunder
shall be performed by MySoftware only at:
(i) the computer facilities of MySoftware which have been
identified by MySoftware in a written notice to Polk; or
(ii) a service bureau contractor retained by MySoftware to perform
data processing services, which party has satisfied the
conditions of becoming an Authorized User pursuant to
Subsection C.(1) above.
(b) The Polk Data may be copied in whole or in part as MySoftware deems
necessary to use the Polk Data in accordance with the terms and
conditions hereof; provided, however, MySoftware shall not be
permitted to copy any Polk Data in the original form provided to
MySoftware by Polk other than for back-up purposes. In no event
shall any Polk Data be provided in its original form to any third
party for any reason whatsoever. All copies of the Polk Data
shall be subject to and governed by the terms and conditions
hereof. Upon Polk's request, MySoftware shall cause to appear on
each use of the Polk Data copyright or proprietary notices
specified by Polk.
(c) Upon reasonable notice from Polk to MySoftware, MySoftware shall
permit Polk to inspect the Polk Data wherever it is stored,
processed and/or used; provided, however, Polk is not required to
provide any prior notice for such inspection if it has reason to
believe that MySoftware is in breach of this Agreement. No such
inspection shall release MySoftware from any of its obligations
under this Agreement.
4. USE OF THE MYSOFTWARE DATA; LIMITATIONS ON USE.
A. Permitted Uses. Polk may use the MySoftware Data in connection with
and as part of Polk's various information services and products during
the term of this Agreement.
B. Limitations on Use of the MySoftware Data.
<PAGE>
(1) End Users; Brokers; Resellers. Polk may only use the MySoftware
Data (in whole or in part) on behalf of, and furnish the same to,
Polk's customers who are end users or brokers, and not resellers
(unless Polk has obtained the prior written approval of MySoftware
with respect to any reseller).
(2) Not Identify Records as MySoftware Customers. Polk shall utilize
the MySoftware data as part of a larger data set and shall not
expressly identify individual records as customers of MySoftware.
(3) Rental Basis. In connection with the permitted uses of the
MySoftware Data referenced in Subsection A. above, all MySoftware
Data permitted to be furnished by Polk to any of its customers
shall be on a rental basis only and no other basis whatsoever.
(4) MySoftware Restrictions. MySoftware may impose reasonable
restrictions on the use of the MySoftware Data to manage the
integrity thereof and MySoftware's access to its data sources in
light of issues concerning privacy, good taste, and other consumer
related issues. Polk and its customers shall strictly comply with
all data use restrictions now or hereafter imposed by MySoftware
upon written notice.
C. Polk's Contractual Limitations on its Customers. Polk shall only provide
MySoftware Data to customers that have agreed to use the MySoftware Data
in accordance with agreed upon written or click wrap terms and conditions
which, along with appropriate provisions concerning limitations on
warranty and liability, shall include the following:
(1) Solicitations; Ad Copy. Any solicitation and ad copy used by the
customer in connection with the MySoftware Data:
(a) shall not disclose the source of the recipient's name and
address; and
(b) shall not contain any statement or indication that customer
possesses knowledge of any information about the recipient
other than the recipient's name and address.
(2) Ad Copy & Script Retention and Review. At least two (2) copies of
each mail piece and/or telemarketing script which is used in
conjunction with the MySoftware Data or any information derived
therefrom shall be retained by the customer for a minimum period of
12 months after the applicable mail drop date or telemarketing
script use. Upon a request from Polk to the customer within such
12 month period, the customer shall obtain and promptly deliver to
Polk the requested mail piece or telemarketing script copies.
(3) MySoftware Data Included on Lists. Any list created using the
MySoftware Data shall not contain any MySoftware Data information
other than:
(a) that which is necessary to effect delivery of any direct mail
to the intended recipient thereof; and
(b) telephone numbers if same have been requested by the applicable
customer.
(4) Compliance. Use of the MySoftware Data and any information derived
therefrom by the customer must comply with:
(a) the Direct Marketing Association's Ethical Use and Fair
Information Practices Guidelines; and
(b) all federal, state and local laws, rules and regulations.
D. General Requirements.
(1) Data Access. Polk agrees to: (i) hold the MySoftware Data in
confidence; (ii) provide access to the MySoftware Data only (a) to
its employees and Authorized Users (defined below) to whom
knowledge is required and to the extent necessary for proper use in
accordance with this Agreement, and (b) to its customers solely in
the form of the products and services for which Polk is permitted
to use the MySoftware Data hereunder; (iii) require that its
employees, Authorized Users and customers hold the MySoftware Data
in confidence; and (iv) take steps to prevent the accidental or
unauthorized disclosure of the MySoftware Data. Polk's obligations
under this Section shall survive any termination of this Agreement.
MySoftware may seek injunctive or other equitable relief against
the breach or threatened breach of any of the foregoing covenants
in addition to any other legal remedies which may be available.
(2) Authorized Users. Access to and use of the MySoftware Data shall
be limited as follows:
(a) Polk may designate any of its employees as an "Authorized User"
who may use the MySoftware Data in accordance with the terms
hereof.
(b) Polk may designate as an "Authorized User", any non-employee
party or other entity provided that such party:
(i) is engaged in work performed for or on behalf of Polk;
(ii) accesses and uses the MySoftware Data solely in the
performance of work performed for Polk;
(iii) is not a competitor of MySoftware or under common
ownership with or affiliated in any manner with a
competitor of MySoftware; and
<PAGE>
(iv) has executed a written agreement with MySoftware which
limits such party's use of the MySoftware Data to the
performance of services for Polk and requires that the
MySoftware Data be held in confidence.
Polk shall be as fully responsible to MySoftware for the acts
and omissions of the Authorized Users as Polk is for the acts
and omissions of its own employees. MySoftware acknowledges
that Acxiom Corporation is the facilities manager of Polk's
computer facility which is located in Conway, Arkansas, and is
hereby approved as one of Polk's Authorized Users.
(3) Location; Copies; Inspection.
(a) The MySoftware Data shall reside, and the services permitted
hereunder shall be performed by Polk only at:
(i) the [***] facilities of [***] which have been identified
by Polk in a written notice to MySoftware; or
(ii) a [***] retained by [***] to perform [***] services,
which party has satisfied the conditions of becoming an
Authorized User pursuant to Subsection D.(2) above.
(b) The MySoftware Data may be copied in whole or in part as Polk
deems necessary to use the MySoftware Data in accordance with
the terms and conditions hereof; provided, however, Polk shall
not be permitted to copy any MySoftware Data in the original
form provided to Polk by MySoftware other than for back-up
purposes. In no event shall any MySoftware Data be provided
in its original form to any third party for any reason
whatsoever. All copies of the MySoftware Data shall be
subject to and governed by the terms and conditions hereof.
Upon MySoftware's request, Pol shall cause to appear on each
use of the MySoftware Data copyright or proprietary notices
specified by MySoftware.
(c) Upon reasonable notice from MySoftware to Polk, Polk shall
permit MySoftware to inspect the MySoftware Data wherever it
is stored, processed and/or used; provided, however,
MySoftware is not required to provide any prior notice for
such inspection if it has reason to believe that Polk is in
breach of this Agreement. No such inspection shall release
Polk from any of its obligations under this Agreement.
5. LICENSE FEES / ROYALTIES; TIME FOR PAYMENT; TAXES; RIGHT TO AUDIT.
A. MySoftware Fees / Royalties. MySoftware agrees to pay Polk various
fees and charges for the use of the Polk Data in accordance with the
fees and charges set forth in the Exhibit applicable to each Polk
Product.
B. Provision of MySoftware. The parties agree that the provision
hereunder of the MySoftware Data to Polk is part of the consideration
paid by MySoftware hereunder for the use of the Polk Data.
C. Time for Payment. All invoices are due and payable [***] after
MySoftware's receipt thereof. Any amount not paid by MySoftware when
due hereunder, shall bear interest at the lesser rate of one and
one-half percent (11/2%) per month or the highest rate under applicable
law. MySoftware's obligation to pay the amounts due Polk hereunder is
entirely independent of whether MySoftware receives payment from its
own customers. In the event MySoftware does not pay any amounts owed
hereunder within [***] after receipt of written notice from Polk that
such amounts were not paid when due as stated above, Polk may either
declare MySoftware to be in default hereunder , or suspend or restrict
MySoftware's ability to provide Polk Data and related services to its
customers until all amounts owed to Polk are paid in full.
D. Taxes. MySoftware shall pay when due all sales, use and excise or
similar taxes or levies related to this Agreement, exclusive, however,
of taxes based on Polk's income. If any such tax for which MySoftware
is responsible hereunder is paid by Polk, MySoftware agrees to promptly
reimburse Polk therefor.
E. Right to Audit. MySoftware agrees that at all times it shall maintain
current, accurate and complete books and records relating to all usage
of the Polk Data by MySoftware and any payments due Polk as a result
thereof and agrees that Polk, or any designee of Polk, shall have the
right no more than [***] times per year (unless the prior audit
disclosed a discrepancy and then Polk have the right to audit up to
[***] time per year), at any time following the date of this Agreement
to audit and copy or make extracts from all such books, records and any
source documents used in the preparation thereof wherever located,
during normal business hours and at Polk's expense, upon written notice
to MySoftware [***] business days prior to the commencement of any such
audit.
6. DELIVERY; UPDATES.
A. Polk Data.
(1) Initial Delivery. The Polk Data will be delivered to MySoftware on
an [***] and in a format and time frame agreed upon by the
parties.
(2) Updates. Updates to the Polk Data shall be ordered by MySoftware
and delivered by Polk at the frequencies set forth in the Exhibit
hereto for the applicable Polk Product.
B. MySoftware.
[***] Confidential treatment requested.
<PAGE>
(1) Initial Delivery. The MySoftware Data will be delivered to Polk on
an [***] and in a format and time frame agreed upon by the
parties.
(2) Updates. Updates to the MySoftware Data shall be delivered by
MySoftware on a [***] basis.
7. TITLE TO POLK DATA; NO ASSIGNMENT.
A. Title to the Polk Data shall at all times remain in Polk.
B. Except as set forth herein, the Polk Data shall not be assigned,
subleased, sublicensed, rented, offered for sale, sold or disposed of by
MySoftware in any manner whatsoever. The change of beneficial or record
owners of 50% or more of any class of MySoftware's outstanding capital
stock, or the merger, consolidation or reorganization of MySoftware by
a "Direct Competitor of Polk" (defined in Section 13 hereof), or the
purchase of substantially all of the assets of MySoftware by a Direct
Competitor of Polk, shall be considered as constituting an improper
assignment hereof. This Agreement may be assigned by MySoftware where
such assugnment is in connection with a merger, acquisition or sale of
substantially all of MySoftware's assets provided that the surviving
entity is not a Direct Competitor of Polk. Where there is a
contemplated acquisition, merger or sale of substantially all of
MySoftware's assets by or to a Direct Competitor of Polk, either party
may terminate this Agreement without cause by paying Polk the then
remaining minimum payments which would otherwise be due as set forth in
this Agreement.
8. TITLE TO MYSOFTWARE DATA; NO ASSIGNMENT.
A. Title to the MySoftware Data shall at all times remain in MySoftware.
B. Except as set forth herein, the MySoftware Data shall not be assigned,
subleased, sublicensed, rented, offered for sale, sold or disposed of by
Polk in any manner whatsoever. The change of beneficial or record
owners of 50% or more of any class of Polk's outstanding capital stock,
or the merger, consolidation or reorganization of Polk by a "Direct
Competitor of MySoftware" (defined in Section 13 hereof), or the
purchase of substantially all of the assets of Polk by a Direct
Competitor of MySoftware, shall be considered as constituting an
improper assignment hereof. This Agreement may be assigned by Polk
where such assignment is in connection with a merger, acquisition or
sale of substantially all of Polk's assets provided that the surviving
entity is not a Direct Competitor of MySoftware. Where there is a
contemplated acquisition, merger or sale of substantially all of Polk's
assets by or to a Direct Competitor of Polk, either party may terminate
this Agreement without cause by paying Polk the then remaining minimum
payments which would otherwise be due as set forth in this Agreement.
9. WARRANTY DISCLAIMER AND REMEDIES.
A. Polk Data.
(1) Polk warrants that the Polk Data will, upon delivery, be as
current, accurate and complete as may be achieved using the source
data, compilation and data processing methods normally employed by
Polk in the ordinary course of its business; provided, however, the
Polk Data is not warranted as being error free. THE FOREGOING IS A
LIMITED WARRANTY AND POLK MAKES AND MYSOFTWARE RECEIVES NO OTHER
WARRANTY, EXPRESS OR IMPLIED, AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY
EXCLUDED.
(2) Polk's sole obligation and MySoftware's sole remedy under the
limited warranty set forth in Subsection A. above is strictly and
exclusively limited to the prompt correction of any errors in the
Polk Data which are made known to Polk by written or electronic
mail notice from MySoftware describing such errors in sufficient
detail with any necessary backup information or documents;
provided, however, MySoftware acknowledges that some corrections of
errors in the Polk Data shall be dependent on the availabily of the
same from the source of the applicable data. In the event of any
breach of the foregoing warranty, MySoftware's sole remedy and
Polk's sole liability shall be limited to requiring that Polk
reperform its applicable obligations hereunder at no cost to
MySoftware.
B. MySoftware Data.
(1) MySoftware warrants that the MySoftware Data will, upon delivery,
be as current, accurate and complete as may be achieved using the
source data, compilation and data processing methods normally
employed by MySoftware in the ordinary course of its business;
provided, however, the MySoftware Data is not warranted as being
error free. THE FOREGOING IS A LIMITED WARRANTY AND MYSOFTWARE
MAKES AND POLK RECEIVES NO OTHER WARRANTY, EXPRESS OR IMPLIED, AND
ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXRESSLY EXCLUDED.
(2) MySoftware's sole obligation and Polk's sole remedy under the
limited warranty set forth in Subsection A. above is strictly and
exclusively limited to the prompt correction of any errors in the
MySoftware Data which are made known to MySoftware by written or
electronic mail notice from Polk describing such errors in
sufficient detail with any necessary backup information or
documents; provided, however, Polk acknowledges that some
corrections of errors in the MySoftware Data shall be dependent on
the availability of same from the source of the applicable data.
[***] Confidential treatment requested.
<PAGE>
10. LIMITATION OF LIABILITY; GENERAL INDEMNITY.
A. Limitation of Liability.
(1) Polk.
(a) In connection with the provision by Polk of the Polk Data to
MySoftware under this Agreement:
(i) the express warranty stated in Section 9.A. hereof and the
indemnity obligations set forth in Sections 10.B. (1)
hereof, are in lieu of all liabilities and obligations of
Polk arising out of or in connection therewith, and Polk
shall not be liable to MySoftware for any other claims or
damages, regardless of the form of action; and
(ii) in no event shall Polk be liable to MySoftware for any
indirect, incidental, special or consequential damages,
including but not limited to, lost business and lost
profits, whether foreseeable or not, even if Polk has been
advised of the possibility of such damages.
(b) In connection with Polk's obligations as a licensee of the
MySoftware Data:
(i) there shall be no limitation on MySoftware's ability to
recover direct damages from Polk in connection with any
breach of such obligations; and
(ii) except for any breach by Polk of its obligations under
Section 4.D.(1) hereof, Polk shall not be liable to
MySoftware for any indirect, incidental, special or
consequential damages, including but not limited to, lost
business and lost profits, whether foreseeable or not,
even if Polk has been advised of the possibility of such
damages.
(c) The liability limitations set forth in this Subsection A.(1)
shall survive any termination of this Agreement.
(2) MySoftware.
(a) In connection with the provision by MySoftware of the
MySoftware Data to Polk under this Agreement:
(i) the express warranty stated in Section 9.B. hereof and the
indemnity obligations set forth in Section 10.B.(2) hereof,
are in lieu of all liabilities and obligations of
MySoftware arising out of or in connection therewith, and
MySoftware shall not be liable to Polk for any other
claims or damages, regardless of the form of action; and
(ii) in no event shall MySoftware be liable to Polk for any
indirect, incidental, special or consequential damages,
including but not limited to, lost business and lost
profits, whether foreseeable or not, even if MySoftware
has been advised of the possibility of such damages.
(b) In connection with MySoftware's obligations as a licensee of
the Polk Data:
(i) there shall be no limitation on Polk's ability to recover
direct damages from MySoftware in connection with any
breach of such obligations; and
(ii) except for any breach by MySoftware of its obligations
under Sections 3.D.(1) hereof, MySoftware shall not be
liable to Polk for any indirect, incidental, special or
consequential damages, including but not limited to, lost
business and lost profits, whether foreseeable or not,
even if MySoftware has been advised of the possibility of
such damages.
(c) The liability limitations set forth in this Subsection A.(2)
shall survive any termination of this Agreement.
B. General Indemnity.
(1) By Polk. Polk agrees to indemnify and hold MySoftware, harmless
from and against any claim made by any third party which arises
from or is in any way connected with Polk's use of any MySoftware
Data, or the performance of any services by Polk. The obligations
of Polk under this Subsection B.(1) shall survive any termination
of this Agreement. Polk shall have no obligation to indemnify
under this Subsection B.(1) where the liability or claim is not the
result of negligence or an intentional act of Polk.
(2) By MySoftware. MySoftware agrees to indemnify and hold Polk,
harmless from and against any claim made by any third party which
arises from or is in any way connected with MySoftware's use of any
Polk Data, or the performance of any services by MySoftware. The
obligations of MySoftware under this Subsection B.(2) shall survive
any termination of this Agreement. MySoftware shall have no
obligation to indemnify under this Subsection B.(2) where the
liability or claim is not the result of negligence or an intentional
act of MySoftware.
11. DEFAULT.
<PAGE>
A. Either party hereto shall be in default upon the occurrence of any one
of the following events: (i) failure to pay the license fees or other
charges hereunder within [***] following the receipt of written notice
that amounts owed were not received on the due date thereof; (ii)
failure to perform any other term, condition or covenant of this
Agreement and such failure shall continue for a period of [***]
after receipt of written notice thereof; (iii) if such party ceases
the conduct of active business; (iv) if any proceedings under the U.S.
Bankruptcy Code or other insolvency laws shall be instituted by or
against such party, or if a receiver shall be appointed for such party
or any of its assets or properties; or (v) if such party shall make an
assignment for the benefit of creditors, or admit in writingits
inability to pay its debts as they come due.
B. Upon any material default and the failure to cure such material
default with the time periods set forth in Subsection A. above, the
non-defaulting party may terminate this Agreement and declare all
accrued license fees and other charges immediately due and payable. Any
such termination shall not entitle the defaulting party to a refund,
in whole or in part, of the license fees or other charges hereunder.
C. Upon any non-material default, the non-defaulting party may pursue
such rights or remedies which the non-defaulting party may have against
the defaulting party with respect to such default; provided, however,
the non-defaulting party shall not terminate this Agreement as a result
of such non-material default; provided, however, a series of
non-material defaults which demonstrate a disregard for the terms and
conditions of this Agreement may be deemed by the non-defaulting party
to be cause terminating this Agreement.
D. The defaulting party shall pay all costs, expenses, losses, damages
and reasonable attorney fees incurred by the non-defaulting party in
the exercise of any of its rights or remedies hereunder, or as a
result of enforcing any of the terms, conditions or provisions hereof.
E. No remedy referred to in this Section is intended to be exclusive, but
shall be cumulative and in addition to any other remedy referred to
herein or otherwise available to the non-defaulting party at law or in
equity, except as may be limited in Section 10 hereof.
12. CONFIDENTIALITY; ADVERTISING.
A. Confidentiality. The parties hereto hereby agree that the terms and
conditions of this Agreement including all Exhibits hereto and any
policies, business practices, plans and methods not in the public
domain which may be known or disclosed to either party as a result of
this Agreement will be held in confidence and not disclosed to any
third party for any reason whatsoever.
B. Advertising.
(1) MySoftware agrees that it will not advertise or in any way
publicly announce through any media that it has entered into this
Agreement or has or will be using the Polk Data, without the
express prior written consent of Polk, which consent shall not be
unreasonably withheld or delayed. Polk will provide MySoftware
identity and logo standards and requirements for use on the
MySoftware web sites.
(2) Polk agrees that it will not advertise or in any way publicly
announce through any media that it has entered into this Agreement
or has or will be using the MySoftware Data, without the express
prior written consent of MySoftware, which consent shall not be
unreasonably withheld or delayed.
13. COMPETING SERVICES.
A. MySoftware agrees that it shall not perform for or provide to any
"Direct Competitor of Polk": (i) any services which make use of the
Polk Data, or disclose any of the Polk Data in any manner; or (ii) any
list based upon, derived from or enhanced with the Polk Data. For
purposes of this Agreement, the term "Direct Competitor of Polk" shall
mean any party owning or in possession of a list with household counts
that match at least [***] of the Polk Data counts for the geographic
area covered by said party's list. Direct Competitors of Polk shall
include, but are not limited to each of the following companies and its
parent, if any, and subsidiaries of each such company and its parent:
[***].
B. Polk agrees that it shall not perform for or provide to any "Direct
Competitor of MySoftware": (i) any services which make use of the
MySoftware Data, or disclose any of the MySoftware Data in any manner;
or (ii) any list based upon, derived from or enhanced with the
MySoftware Data. For purposes of the Agreement, the term "Direct
Competitor of MySoftware" shall mean any party owning or in possession
of an Internet list or data sales software. Direct Competitors of
MySoftware shall include, but are not limited to each of the following
companies and its parent, if any, and subsidiaries of each such
company and its parent: [***].
[***] Confidential treatment requested.
<PAGE>
C. MySoftware to maintain consumer household database similar to the Polk
Data and offer services described herein based upon or derived from
any such database, provided that:
(1) MySoftware shall utilize Polk Data as a first priority for all
data appending applications and list selections; and
(2) at no time will the original Polk Data, in full or in part, be
merged with a Competitor's data, in full or in part, to form a
resultant merged/combined database.
D. In the event any significant marketing conflict arises between Polk
and MySoftware, upon written notice thereof from Polk specifying such
conflict, MySoftware and Pok shall immediately use their best efforts
to negotiate in good faith to resolve such conflict. MySoftware
acknowledges that: (i) all automotive manufacturing companies, their
distributors, dealers, and advertising agencies (collectively the
"Automotive Customer(s)") are currently customers or prospective
customer of Polk; and (ii) a marketing conflict would result from any
MySoftware efforts to market any services using the Polk Data to any
Automotive Customers. Accordingly, MySoftware agrees to resolve such
conflict with Polk before contracting with any Automotive Customer.
14. TERMINATION. Upon the expiration or earlier termination of this
Agreement the following shall occur:
A. Polk shall cease to provide any further services or Polk Data to
MySoftware.
B. MySoftware shall cease to provide any MySoftware Data to Polk.
C. MySoftware shall immediately pay Polk all fees and charges, if any,
which are accrued up to date of termination.
D. MySoftware shall immediately: (i) discontinue the use of the Polk
Data and all information contained therein or derived therefrom; (ii)
erase all data elements and information derived from the Polk Data
appearing on any MySoftware file; and (iii) return to Polk all tapes,
copies, partial copies and any other documentation, materials or other
information evidencing the Polk Data, together with a written
certification that all of the foregoing have been either returned or
destroyed.
E. Polk shall immediately: (i) discontinue the use of the MySoftware Data
and all information contained therein or derived therefrom; (ii) erase
all data elements and information derived from the MySoftware Data
appearing on any Polk file; and (iii) return to MySoftware all tapes,
copies, partial copies and any other documentation, materials or other
information evidencing the MySoftware Data, together with a written
certification that all of the foregoing have been either returned or
destroyed.
15. NOTICES. All notices, requests, demands or other communications by the
parties, other than routine operation communications under this Agreement,
required or permitted to be given by one party to the other shall be given
in writing by personal delivery, fax, or sent (postage prepaid with return
receipt or delivery confirmation requested) by registered mail, certified
mail, or express mail delivery, and shall be delivered, faxed or
addressed to such other party at the address or fax number specified below
or at such other address or fax number as either party may notify the
other from time to time in accordance with the Section. Such notices,
requests, demands or other communications shall be deemed to have been
received: (i) if personally delivered, upon delivery; (ii) if sent by
facsimile, on the date faxed (with receipt confirmed); or (iii) if sent
by registered, certified mail or express mail delivery, upon delivery
thereof as evidenced by such return receipt or delivery confirmation.
To Polk: The Polk Company To MySoftware: MySoftware Company
Attn.: Managing Director, Attn.: V.P. Operations
Strategic Partnerships 2197 East Bayshore Road
1621 18th Street Palo Alto, CA 94303-3219
Denver, CO 80202
Fax No. 303-294-9628 Fax No. 650-325-0873
16. MISCELLANEOUS PROVISIONS.
A. Excusable Delay. Neither party shall be liable to the other for any
delay in the time for performance of its obligations under this
Agreement if such delay arises out of circumstances beyond its
reasonable control including but not limited to strikes, wars, natural
disasters, equipment failure or breakdown, governmental regulations or
interference, or other calamity. In the event of any such excusable
delay, the time for performance of such obligations shall be extended
for a period equal to the length of the delay. The party whose
performance is hampered by the excusable delay shall provide written
notice thereof to the other party as soon as reasonable possible.
B. Relationship. The relationship of the parties created by this
Agreement is that of independent contractor and not that of
employer/employee, principal/agent, partnership, joint venture or
representative of the other. Neither party shall represent to third
parties that it is the representative of the other in any manner or
capacity whatsoever.
<PAGE>
C. Limits on Actions; Waiver. No action arising out of this Agreement,
regardless of form, may be brought by either party more than [***]
after the cause of action has accrued. No delay or failure of either
party in exercising any rights hereunder, and no partial or single
exercise thereof shall be deemed of itself to constitute a waiver of
such right or any other right hereunder. No waiver shall be effective
unless made in writing and signed by an authorized representative. In
the event that any provision of this Agreement shall by a court be
declared void or unenforceable, the validity of any other provisions
and of the entire Agreement shall not be affected thereby.
D. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
E. Entire Agreement. Section headings are for convenience only and will
not be construed as a part of this Agreement. The terms, covenants and
conditions contained herein constitute the complete and exclusive
statement of the terms hereof, and supersede all prior oral and written
statements of any kind made by the parties or their representatives
with respect to the subject matter hereof. In the event of any
conflict between the terms and conditions of this Agreement and any
MySoftware purchase order, the terms and conditions of this Agreement
shall prevail. No statement in writing subsequent to the date of this
Agreement purporting to modify or add to the terms and conditions
hereof shall be binding unless consented to in writing by duly
authorized representatives of MySoftware and Polk in a document making
specific reference to this Agreement.
[***] Confidential treatment requested.
<PAGE>
EXHIBIT A
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY. ("MySoftware")
TOTALIST (tm)
1. DESCRIPTION OF POLK PRODUCT. Polk procures, compiles, owns, and maintains
a national consumer household database derived from [***], and other
sources (hereinafter "TotaList"). The data from TotaList which is
provided to MySoftware hereunder shall hereinafter be called "TotaList
Data" and shall include at a minimum those data elements set forth in
Appendix 1 to this Exhibit A.
2. PERMITTED USES AND SPECIFIC LIMITATIONS ON USE. TotaList Data may only be
used by MySoftware for the purposes described below and for no other
purpose whatsoever.
A. List Rental. "List Rental" shall mean MySoftware's use of TotaList
Data in connection with the preparation of a list for use by a customer
of MySoftware. The list may only be used by such customer in
connection with its own marketing programs and for no other purpose
whatsoever.
B. Scored List Rental. "Scored List Rental" shall mean MySoftware's use
of area level TotaList Data in connection with the preparation of a list
for use by a customer of MySoftware, which list has been selected through
the use of a multivariate scoring model developed from the area level
TotaList Data. The list may only be used by such customer in
connection with its own marketing programs and for no other purpose
whatsoever.
C. Data Enhancement Services. MySoftware may use area level data TotaList
Data as defined by Polk in connection with performing any of the
following data enhancement services (the "DE Services").
(1) House File Enhancement. "House File Enhancement" shall mean the
performance by MySoftware of data appending for a customer which has
furnished its file to MySoftware for said purpose, and where the
customer may receive from MySoftware a copy of the file as enhanced
by area level TotaList Data. House File Enhancement may only be
performed when: (i) the file furnished to MySoftware is [***]; (ii)
the file as enhanced by area level TotaList Data will only be used
by [***] in connection with [***], and will not be sold, rented
or otherwise provided by [***] to [***].
(2) Enhanced List Rental Fulfillment. "Enhanced List Rental
Fulfillment" shall mean the performance by MySoftware of data
appending for a customer which has furnished its file to MySoftware,
for said purpose, and where MySoftware may use the customer's file as
enhanced by area level TotaList Data to select, create and furnish a
direct marketing list for use only by the customer or its designee;
provided, however, any such list shall not contain any data
elements or information from the area level TotaList in any form
whatsoever. Enhanced List Rental Fulfillment may only be performed
when the file furnished to MySoftware is: (i) [***] and (ii) resident
upon, controlled and regularly maintained by [***].
(3) Mailing List Screening. "Mailing List Screening" shall mean the
utilization by MySoftware of data appending to omit or select records
for a customer which has furnished a non-owned file to MySoftware for
said purpose. Mailing List Screening may only be performed for the
purpose of selecting, creating or analyzing from such file and
furnishing to the customer a direct marketing list derived
therefrom; provided, however, any such list: (i) shall not contain
any [***] in any form whatsoever; and (ii) shall only be used by
[***] in connection with [***] and will not under any circumstances
be sold, rented or otherwise provided to [***] by [***]. Mailing
List Screening may include the omission or selection of modeled
data from merged files provided by multiple customers.
(4) Profile Reports and Modeling. MySoftware may utilize area level
TotaList Data to enhance [***] and create [***] for MySoftware's
customers. Files used to generate [***] shall remain within
MySoftware's possession and not be disclosed to [***] without the
prior written approval of Polk. Fees shall be due to Polk
regardless of whether customers of MySoftware are invoiced for
[***].
D. Private Label. Polk acknowledges and agrees that MySoftware may offer
the (i) [***], (ii) [***], and (iii) [***], to third parties in a
Private Label arrangement. Under such private label arrangements, the
[***] will be made available within an environment branded with third
parties' logos and trademarks.
3. UPDATES. To maintain the overall quality and deliverability of the
TotaList Data, MySoftware agrees to order and use an updated version of
the TotaList Data not less frequently than once every [***] occurring
during the term hereof. Such updates shall be delivered to MySoftware as
soon as reasonably possible after Polk's receipt of MySoftware's written
[***] Confidential treatment requested.
<PAGE>
order therefor, subject to Polk's normal schedule for updating TotaList.
While MySoftware may order updated versions of TotaList more frequently
than once every [***] Polk shall not be obligated to produce such updates
more frequently than the frequency allowed by Polk's normal updating
schedule.
4. LICENSE FEES; ROYALTIES. MySoftware agrees to pay Polk for the use of the
TotaList Data in accordance with the fees and charges specified below:
A. Initial File Creation and File Updates. Polk shall ship to MySoftware
the initial file and applicable updates, and in connection therewith
MySoftware shall pay for: (i) the [***]; and (ii) the [***] used
to [***], provided, however, MySoftware shall not be charged for
[***] which MySoftware returns to Polk, at [***] sole expense,
within [***] of [***] original receipt thereof. For purposes of this
Agreement, the material cost of each tape or cartridge shall be [***].
Polk may, at its sole discretion, delay shipment of any updates if
MySoftware is not current with providing monthly royalty reports or
payment of invoices.
B. List Rental. MySoftware shall pay Polk for List Rental on a per order
basis, a sum per [***] household records (i.e. name and address) as
indicated in Subsection (a) below for the preparation of lists for or on
behalf of any of its customers. Prices shown are based upon [***].
[***] unlimited usage is [***] the original price. A [***] reuse for
the same order is [***] off original price.
(1) Quantity and Base Price.
<TABLE>
Quantity Base Price per M
-------- ----------------
<C> <C>
Less than [***] $ [***]
[***] to [***] $ [***]
[***] to [***] $ [***]
[***] to [***] $ [***]
[***] to [***] $ [***]
[***] and greater $ [***]
Notwithstanding the foregoing, MySoftware may offer its prospective
customers a free of charge sample of Polk Data for use in connection
with its own marketing programs and for no other purpose whatsoever;
provided, however, MySoftware shall (i) limit the access to such
free samples to [***] to a prospective customer during each
calendar year, and (ii) limit the size of such samples to a
minimum of [***] to a maximum of [***].
(2) Surcharge Applied.
(a) Scored List Rental. In addition to the charges in Subsection
B.(1) above, MySoftware shall pay to Polk as charges for
Scored List Rental a sum equal to [***] per [***] used by
MySoftware in the preparation of scored lists for or on behalf
of any of its customers.
(b) Data Elements. When the data elements set forth in Appendix 1
to this Exhibit A are used by MySoftware for List Rental,
MySoftware shall pay Polk the per thousand rates set forth in
Appendix 2 to this Exhibit A.
(3) List Rental Processing and Other Charges. In addition to the
charges listed in Subsections B.(1) and B.(2) above, any list
request processed by Polk will incur a [***] processing charge.
Other charges for selections made by Polk include the following,
when applicable:
(a) Minimum Order Price [***]
(b) Format charges:
(i) Cheshire labels [***]
(ii) Pressure sensitive (4 or 5 up) [***]
(iii) Pressure sensitive (1 up) [***]
(iv) Manuscripts (includes phone number) [***]
(v) 3 x 5 Cards (includes phone number) [***]
(vi) Magnetic tape [***]
[***] Confidential treatment requested.
<PAGE>
(vii) Magnetic cartridge [***]
(viii) Diskette [***]
(ix) Carrier route presort [***]
(x) Barcode [***]
C. Data Enhancement Services.
(1) Type of DE Service. The following are the fees and charges for
each type of DE Service.
(a) House File Enhancement. The prices shown on Appendix 2 to
this Exhibit A are based [***] and are [***]. Data
elements appended are authorized for use for a period of
[***] from the date of appending.
(b) Enhanced List Rental Fulfillment. See Appendix 2 to this
Exhibit A for pricing.
(c) Mailing List Screening. See Appendix 2 to this Exhibit A for
pricing, which pricing is:
(i) based on [***] of a [***] and are in effect for [***]
used; and
(ii) based upon the [***] the [***] (i) [***], or (ii)
[***], and is [***].
(d) Profile Reports and Modeling.
(i) Profile Reports. MySoftware shall pay Polk a minimum of
[***] for any profile or report created using the Polk
Data.
(ii) Modeling. MySoftware shall pay Polk a minimum of [***]
for any model created using the Polk Data.
(2) Appendix 2 to this Exhibit A. In connection with the DE Services
to which Appendix 2 to this Exhibit A applies, MySoftware shall pay
Polk as fees for use of the TotaList Data in connection with the
performance of DE Services the higher of (i) [***], , or (ii)
[***]. Data elements not listed on Appendix 1 to this Exhibit
A, but provided as part of the TotaList Data, are not available
for use in connection with DE Services without Polk's prior
written approval.
(3) Time for Application of Fees and Charges. The fees and charges
payable by MySoftware under Subsection C.(1) above, shall be paid
by MySoftware to Polk at the following times
(a) In the case of House File Enhancement, [***].
(b) In the case of Enhanced List Rental Fulfillment using a
customer's enhanced house file, [***].
(c) In the case of Mailing List Screening, [***].
(d) In the case of Profile Reports and Modeling, [***].
D. Minimum Use Charge. In the event MySoftware's usage of TotaList Data
for List Rental fails to generate attendant charges (the "Minimum Use
Charge") of at least (i) [***] during the [***] License Year, and
(ii) [***] during the [***] License Year, then MySoftware shall pay
to Polk such additional amounts required to [***] for each License
Year.
E. Price Increases. The prices to be charged MySoftware hereunder shall
remain in effect [***]. Thereafter, Polk may increase such prices
upon written notice thereof to MySoftware at least [***] prior to the
effective date of any such increase. Notwithstanding the foregoing, in
the event that any of Polk's data suppliers increase their price to
Polk, Polk may pass such increase through to MySoftware upon written
notice at least [***] prior to the effective date of such increase
5. ACCOUNTING AND INVOICING.
A. Polk shall invoice MySoftware for all amounts due under Section 4.A.
hereof on or about the time the TotaList Data or any updates thereto
are shipped to MySoftware.
B. MySoftware shall provide Polk with an accounting describing (i) all
household records from the TotaList Data (including the corresponding
list segment identification for such records) used by MySoftware in the
preparation of lists supplied to MySoftware's customers, and (ii) all DE
Services performed by MySoftware for or on behalf of its customers,
which accounting shall specify the name of the end user and be in the
form of Appendices 3 and 4 to this Exhibit A. Such
[***] Confidential treatment requested.
<PAGE>
accounting shall be performed by MySoftware on a monthly basis and
provided to Polk not later than the thirtieth (30th) day of the month
following the expiration of each calendar month occurring during the term
hereof regardless of whether any services have actually been performed
by MySoftware. Based on the aforesaid accounting, Polk shall issue an
invoice to MySoftware specifying the proper amount due in accordance
with Sections 4.B. and 4.C. hereof. Polk shall maintain the name of
MySoftware's end user in confidence.
<PAGE>
APPENDIX 1 TO EXHIBIT A
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY ("MySoftware")
TOTALIST POLK DATA ELEMENTS
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Legend
B ( [***]
ST ( [***]
SP ( [***]
P ( [***]
[***] Confidential treatment requested.
<PAGE>
APPENDIX 2 TO EXHIBIT A
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY ("MySoftware")
TOTALIST DATA FEES AND RATES
----------------------------
</TABLE>
<TABLE>
<CAPTION>
Data Enhancement
List Rental House File Enhanced List Mailing List
Surcharge Enhancement Rental Fulfillment Screening
----------- ----------- ------------------- ------------
<S> <C> <C> <C> <C>
Basic [***] See Exhibit B See Exhibit B See Exhibit B
Standard [***] See Exhibit B See Exhibit B See Exhibit B
Specialty [***] See Exhibit B See Exhibit B See Exhibit B
Premium
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] Confidental treatment requested.
<PAGE>
APPENDIX 3 TO EXHIBIT A
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY ("MySoftware")
POLK DATA LIST RENTAL USAGE REPORT
----------------------------------
FROM: MAIL TO:
MySoftware Company The Polk Company
2197 East Bayshore Road Attn.: Managing Director, StrategicPartnerships
Palo Alto, CA 94303-3219 1621 18th Street
Denver, CO 80202-1211
This report covers the use of the Polk Data for List Rental in the month of
___________, 19___.
TOTALIST
CLIENT RECORDS LIST SURCHARGE SURCHARGE AMOUNT
NAME/CODE (Quantity) RATE QUANTITY RATE DUE
- --------- ---------- ---- --------- --------- ------
THE FOREGOING IS A COMPLETE AND CORRECT REPORT: DATE: _______________________
By ____________________________________ PrintName _________________________
Signature and Title of Person Reporting
<PAGE>
APPENDIX 4 TO EXHIBIT A
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY ("MySoftware")
DATA ENHANCEMENT SERVICE USAGE REPORT
-------------------------------------
FROM: MAIL TO:
MySoftware Company The Polk Company
2197 East Bayshore Road Attn.: Managing Director, Strategic Partnerships
Palo Alto, CA 94303-3219 1621 18th Street
Denver, CO 80202-1211
This report covers the use of the Polk Data for enhancement purposes in the
month of ___________, 19___.
NUMBER
DATA OF
CLIENT TYPE ELEMENTS RECORD RATE ROYALTY
NAME/CODE USED S DUE POLK
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
- -------- ---- -------- ------ ---- --------
THE FOREGOING IS A COMPLETE AND CORRECT REPORT: DATE: _______________________
By _____________________________________ Print Name ________________________
Signature and Title of Person Reporting
TYPE LEGEND
A = House File Enhancement
B = Mailing List Screening
C = Enhanced List Rental Fulfillment
D = Profiling/Reporting
E = Modeling
THE FOREGOING IS A COMPLETE AND CORRECT REPORT: DATE: _______________________
By ____________________________________ Print Name _________________________
Signature and Title of Person Reporting
<PAGE>
EXHIBIT B
DATA PRODUCTS LICENSE AGREEMENT
dated as of December 4, 1998 between
THE POLK COMPANY ("Polk") and MySOFTWARE COMPANY. ("MySoftware")
CARRIER ROUTE MARKETING INFORMATION ("CRMI")
--------------------------------------------
1. DESCRIPTION. Polk procures, compiles, owns, and maintains a national area
level database derived from census information, motor vehicle information,
telephone information, demographic information, and other sources
(hereinafter "CRMI"). This database is provided at the postal carrier
route and ZIP code levels, and is more particularly described in a manual
entitled Carrier Route Marketing Information Users Manual.
2. PERMITTED USES AND SPECIFIC LIMITATIONS ON USE. The CRMI data may only be
used by MySoftware for the purposes described below and for no other
purpose whatsoever.
A. The CRMI data may be used for MySoftware's [***].
B. MySoftware may use the CRMI Data to [***].
C. MySoftware may provide [***].
D. Data Enhancement Services.
(1) Type of DE Service. The following are the fees and charges for
each type of DE Service.
(a) House File Enhancement. A price of [***] number of records
matched, net to Polk will be charged when using the CRMI data for
House File Enhancement. Data elements appended are authorized for
use for a period of one (1)year from the date of appending.
(b) Enhanced List Rental Fulfillment. MySoftware shall be prohibited
from using CRMI data for this type of use, unless prior written
authorization is received from Polk, which may be withheld for
any reason whatsoever. For purposes of this Agreement,
"Enhanced List Rental Fulfillment" shall mean the performance
by MySoftware of data appending for a customer which has
furnished its file to MySoftware, for said purpose, and where
MySoftware may use the customer's file as enhanced by the CRMI
data to select, create and furnish a direct marketing list for
use only by the customer or its designee.
(c) Profile Reports and Modeling.
(i) Profile Reports. MySoftware shall pay Polk a minimum of
[***] for any profile or report created using the Polk
Data.
(ii) Modeling. MySoftware shall pay Polk a minimum of [***]
for any model created using the Polk Data.
(2) Time for Application of Fees and Charges. The fees and charges
payable by MySoftware under Subsection C.(1) above, shall be paid
by MySoftware to Polk at the following times:
(a) In the case of House File Enhancement, [***].
(b) In the case of Mailing List Screening, [***].
(c) In the case of Profile Reports and Modeling, [***].
3. UPDATES. Future updated versions shall be delivered on a [***] basis
subject to Polk's normal CRMI updating schedule.
4. LICENSE FEES; ROYALTIES; ACCOUNTING AND TIME FOR PAYMENT.
A. Minimum Use Charge. MySoftware will pay fees per Exhibit A, Section
4.D. MySoftware Fees; Royalties; Minimum Use Charge.
B. Accounting and Time for Payment. MySoftware shall provide Polk with an
accounting describing the customer name and permitted use of the service
performed by MySoftware. Such accounting shall be performed by
MySoftware on a [***] basis and provided to Polk by [***] following the
end of the calendar quarter. A report shall be provided [***], even
when no use of CRMI data has occurred.
[***] Confidential treatment requested.
<PAGE>
5. MARKETS. Except as provided in Section 13 of the Agreement, MySoftware
shall not be restricted from marketing the CRMI data to any market or
industry.
<PAGE>
</TABLE>
Confidential Treatment Requested
Under 17 C.F.R. 200.80(b)(4).
200.83 and 240.24b-2.
BUSINESS MARKETING SERVICES RESELLER AGREEMENT
This Business Marketing Services Reseller Agreement (the "Agreement) is
entered into effective as of this 4th day of December, 1998, by and between
MySoftware Company having an address at 2197 E. BayShore Road, Palo Alto, CA.
94303 (hereinafter referred to as "Reseller") and Experian Information
Solutions, Inc., an Ohio Corporation acting by and through its Information
Solutions Division and having an address at 505 City Parkway West, Orange,
California 92868 (hereinafter referred to as "Experian").
Whereas, Reseller desires to obtain, and Experian agrees to grant to
Reseller, on the terms and conditions set forth herein, a non-exclusive,
nontransferable license to resell the Experian services defined in Exhibit A
(the "Services") to its Customers.
Now, therefore, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, and intending to be legally bound hereby, Experian and Reseller
hereby agree as follows:
1. APPOINTMENT.
Experian hereby grants Reseller a non-exclusive, nontransferable
license to resell the Services solely to customers located entirely within
the territory defined in Exhibit A ("Customers"). Such license is subject
to the terms and conditions set forth herein. Experian will provide to
Reseller a copy of the Experian business marketing database ("Experian
Data") from which Reseller will fulfill orders for Services received from
Reseller's end-user customers. Experian will provide identity and logo
standards and requirements to Reseller.
2. RESELLER OBLIGATIONS.
A. Reseller shall actively advertise, promote and sell the Services to
its Customers. Reseller shall randomly select mail pieces from a
minimum of one [***] customers [***] in order to screen for
impermissible or unethical offers. Reseller shall obtain Experian's
prior written approval for all marketing materials, promotions,
datacards, press releases and other information used to promote the
Services where there is direct reference to Experian, and of any
subsequent substantive changes thereto.
B. Reseller will incur all administration and other costs relating to
marketing and sale of the Services including but not limited to order
generation and tracking, invoicing and collections.
C. Within [***] days of the close of each calendar month, Reseller will
provide to Experian a billable activity report detailing all orders
received by Reseller for Experian Data during the prior month. The form
and content shall be reasonably requested by Experian, but at a minimum
provide the [***]. Reseller will develop and maintain, during the
Term of the Agreement, an on-line activity report system in the above
noted form and content. Reseller will be responsible for updating
this on-line activity report with the most current information as
noted abouve thoughout the term of the Agreement. Experian will have
access to this on-line activity report to check all orders received by
Resellar relating to Experian Data.
D. Resellar will submit a sales tax exemption certificate to Experian at
time of signing of this Agreement.
E. Resellar will limit all sales of Experian Business Marketing Services
data to a maximum of [***] per end-user Customer.
[***] Confidential treatment requested.
<PAGE>
F. Resellar may provide, on a one time basis to each new end-user customer
up to [***] free records for promotional purposes only. Resellar may
provide to a value-added resellar ("VAR") no more than [***] free
records per month for test purposes only.
G. The pricing contained in Exhibit C is contingent upon Reseller's
contribution of data to Experian under this Agreement. Reseller shall
provide its customer database file to Experian, including such data
with respect to online data customers, provided, however, that such
list shall not separately identify such customers from Reseller's
software customers. Reseller's customer database file provided to
Experian shall be in an automated format resonably specified by
Experian. If Reseller's data contribution is more than [***] days
delinquent from the specified quarterly submission date, then Experian
reserves the right to renegotiate the pricing in Exhibit C of this
Agreement. Experian will bear the expense of incorporating the data
Reseller contributes into Experian's database and, as so incorporated,
the data will become the property of Experian. At Experian's resonable
request, Reseller will use commercially resonable efforts verify the
accuracy (againinst Reseller's records) of the data Reseller
contributes. Reseller shall continue to provide updated data and data
on new accounts that Reseller acquires for the term of this Agreement.
Reseller will bear the expense of preparing and delivering all
contributed data to Experian. Experian may use the contributed data
as part of compiled lists for any purpose, including but not limited
to statistical analysis and marketing lists; provided, however, that
Experian will use reasonable efforts to not release specific information
identifying any listed business entity as Reseller's customer or
which identifies Reseller as the source of any specific contributed
inforamtion. Experian agrees that it shall not, with respect to any
"Direct Competitor" of Reseller; (i) perform any services or provide
any products which make use of or disclose Reseller's data on a
stand-alone basis. For purposes of the Agreement, the term "Direct
Competitor" shall meany any party owning or in possession of Internet
list or data sales software. Direct Competitors of MySoftware shall
include, but are not limited to each of the following companies and its
parent, if any, and subsidiaries of each such company and its parent:
[***].
3. EXPERIAN OBLIGATIONS.
Experian will provide updates to the Experian Data in the manner and at
the times specified on Exhibit A hereto.
3A. FUTURE ARRANGEMENTS.
Experian and Reseller shall continue to work together in good faith for a
minimum of [***] to reach definitive agreements regarding [***]. Neither
party shall have any obligation with respect to such arrangements until
agreement is reached on definitive agreements specifying the rights and
obligationsof the parties. No alleged breach of this provision shall be
the basis for any termination of or other action under this Agreement.
4. PAYMENT.
Reseller will pay Experian for the Services according to the amounts set
forth in Exhibit A. Reseller will submit payment to Experian within [***]
days of the close of each calendar month in accordance with the Royalties
owing to Experian as detailed on the Monthly Activity Report. Except as
set forth in Exhibit A, Reseller shall pay any undisputed invoiced fees
within [***] days of invoice date. If Reseller does not pay within [***]
days Reseller will also pay interest on the unpaid amount as the reate of
one and one-half percent (1.5%) per month or the highest amount
[***] Confidential treatment requested.
<PAGE>
permitted by law. The prices and rates for the Services do not include
applicable federal, state or local taxes, and Reseller shall be solely
responsible for the payment thereof.
5. USE RESTRICTIONS.
A. Reseller expressly agrees that it will not use and will prohibit its
Customer's use of any information provided by Experian ("Data") as a
factor in establishing an individual's eligibility for (i) credit or
insurance to be used primarily for personal, family or household
purposes, or (ii) employment. Reseller shall comply with all applicable
laws, regulations and ordinances, and all special use restrictions set
forth in this Agreement or reasonably adopted by Experian hereafter.
Under no circumstances will Reseller attempt, directly or indirectly,
to discover, reverse engineer, decompile or disassemble any confidential
or proprietary criteria developed or used by Experian in providing the
Services.
B. Reseller shall provide the Services to end-user Customers on a license
or rental basis and without conveying title to any Experian Data.
Reseller agrees that it will not, without the prior written consent of
Experian, provide any Data or Services to any person for resale,
sublicense, sublease, disclosure or transfer to any third party, except
as specifically provided in Subsection 5.C. Reseller shall keep the
Experian Data separate from any other data possessed by Reseller or
utilize the Experian Data to create any database.
C. Upon the prior written consent of Experian, which consent shall not be
unreasonable be withheld, Reseller will have the ability to develop
private-label branded sites for Reseller's private label partners for the
purposes of reselling Experian Data to end user Customer. For purposes
of this Agreement, a private label partner is a cusotmer of Reseller
where Reseller builds a mirror website for that customer and Experian
Data can be accessed by end-user Customers through this mirror website
(the "Private Label Partner"). For purposes of this Agreement, a mirror
website is defined as a website that resides with, is maintained and is
managed by the Reseller for the private label partner.
6. LIMITED WARRANTY.
Reseller acknowledges that amounts to be paid to Experian for the Data and
Services will generally represent a small portion of Reseller's overall
costs of the project for which the Data and Services will be used.
Reseller also acknowledges that the type of Data and Services licensed by
Experian will contain a degree of error. Finally, Reseller acknowledges
that the prices Experian charges for the data and Servies are based, in part
upon Experian's expectation that the risk of any loss or injury that may
be incurred by use of the Data and Services will not be borne by Experian.
For these reasons, Reseller agrees that it is responsible for determining
that all Data licensed by Experian is suffucuently accurate for Reseller's
Customer's purposes. If Reseller finds that the Data does not comply with
the requirements of the Job Specifications due to the fault of Experian,
then Reseller must so notify Experain within [***] days after the receipt
of the Data. After its receipt of such notice, Experian shall, at its
option, either correct the defect or refund any amounts paid by Reseller
for the defective Data. EXPERIAN DOES NOT GUARANTEE OR WARRANT THE
ACCURACY, COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE SERVICES, DATA OR THE MEDIA ON WHICH THE DATA IS
PROVIDED AND SHALL NOT BE LIABLE TO RESELLER OR TO ANY OF RESELLER'S
CUSTOMERS FOR ANY LOSS OR INJURY ARISING OUT OF OR CAUSED IN WHOLE OR IN
PART BY EXPERIAN'S ACTS OR OMISSIONS, WHETHER NEGLIGENT OR OTHERWISE, IN
PROCURING, COMPILING, COLLECTING, INTERPRETING, REPORTING, COMMUNICATING OR
DELIVERING THE DATA OR SERVICES. IN NO EVENT SHALL EXPERIAN BE LIABLE TO
RESELLER OR TO ANY CUSTOMER OR THIRD PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES TO
BUSINESS REPUTATION, LOST BUSINESS OR LOST PROFITS), WHETHER FORESEEABLE
[***] Confidential treatment requested.
<PAGE>
OR NOT AND HOWEVER CAUSED, EVEN IF EXPERIAN IS ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. THIS PARAGRAPH STATES EXPERIAN'S ENTIRE LIABILITY AND THE
SOLE REMEDY OF RESELLER AND ANY CUSTOMER IN CONNECTION WITH EXPERIAN'S
PROVISION OF THE DATA AND SERVICES.
WHILE RESELLER AGREES TO USE REASONABLE EFFORTS TO ENSURE THAT THE DATA
PROVIDED HEREUNDER IS IN THE PROPER FORMAT WHEN DELIVERED TO EXPERIAN, IT
DOES NOT GUARANTEE OR WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DATA OR THE
MEDIA ON WHICH THE DATA IS PROVIDED AND SHALL NOT BE LIABLE TO EXPERIAN OR
TO ANY OF EXPERIAN'S CUSTOMERS FOR ANY LOSS OR INJURY ARISING OUT OF OR
CAUSED IN WHOLE OR IN PART BY RESELLER'S ACTS OR OMISSIONS, WHETHER
NEGLIGENT OR OTHERWISE, IN PROCURING, COMPILING, COLLECTING, INTERPRETING,
REPORTING, COMMUNICATING OR DELIVERING THE DATA OR SERVICES. EXCEPT AS
EXPRESSLY SET FORTH ABOVE, RESELLER PROVIDES NO OTHER WARRANTY, EXPRESS OR
IMPLIED, ORAL OR WRITTEN, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR LIABILITY
WHICH MAY ARISE UNDER SECTION 9 BELOW, IN NO EVENT SHALL RESELLER BE LIABLE
TO EXPERIAN OR TO ANY CUSTOMER OR THIRD PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES TO
BUSINESS REPUTATION, LOST BUSINESS OR LOST PROFITS), WHETHER FORESEEABLE OR
NOT AND HOWEVER CAUSED, EVEN IF RESELLER IS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. THIS PARAGRAPH STATES RESELLER'S ENTIRE LIABILITY AND THE
SOLE REMEDY OF EXPERIAN AND ANY CUSTOMER IN CONNECTION WITH THE PROVISION
OF DATA AND THIS AGREEMENT.
7. LIMITATION OF LIABILITY.
IF, NOTWITHSTANDING THE FIRST PARAGRAPH OF THE PRIOR SECTION, LIABILITY CAN
BE IMPOSED ON EXPERIAN, THEN RESELLER AND EACH CUSTOMER AGREES THAT
EXPERIAN'S AGGREGATE LIABILITY FOR ANY OR ALL LOSSES OR INJURIES TO
RESELLER AND TO SUCH CUSTOMER ARISING OUT OF ANY ACTS OR OMISSIONS OF
EXPERIAN IN CONNECTION WITH ANYTHING TO BE DONE OR FURNISHED UNDER THIS
AGREEMENT, REGARDLESS OF THE CAUSE OF THE LOSS OR INJURY (INCLUDING
NEGLIGENCE) AND REGARDLESS OF THE NATURE OF THE LEGAL OR EQUITABLE RIGHT
CLAIMED TO HAVE BEEN VIOLATED, SHALL NEVER EXCEED THE AMOUNT PAID TO
EXPERIAN BY RESELLER FOR THE DATA FURNISHED UNDER THE APPLICABLE JOB
SPECIFICATION AND RESELLER AND EACH CUSTOMER COVENANTS AND PROMISES THAT
IT WILL NOT SUE EXPERIAN FOR AN AMOUNT GREATER THAN SUCH SUM AND THAT IT
WILL NOT SEEK PUNITITVE DAMAGES IN ANY SUIT AGAINST EXPERIAN.
8. AGREEMENT OF CUSTOMERS.
Reseller agrees that it will fully apprise all Customers of and secure the
binding agreement of such Customers to the obligations, restrictions and
limitations set forth in this Agreement, including without limitation the
provisions of Sections 6 and 7 hereof, on substantially similar terms as
the Customer Certificate set forth in Exhibit D hereto. If Reseller's
Customers will be obtaining the Data and Services on-line via Reseller's
website/page, then Reseller agrees to incorporate such obligations,
restrictions and limitations into Reseller's website/page in such a way that
Customers cannot obtain the Data and Services without first agreeing to
these obligations, restrictions and limitations. Additionally, Reseller
agrees to incorporate such obligaitons, restrictions and limitations into
each private label partners website/page in such a way that Customers
cannot obtain the Data and Services without first agreeing to these
obligations restrictions and limitations. Reseller agrees to indemnify,
defend and hold harmless Experian and its officers, employees, agents,
affiliates and subsidiaries against and from any claims for losses, expenses,
damages and costs including, without limitation, attorney's fees, that may
at any time be incurred by Experian arising out of, or
<PAGE>
related to, Reseller's failure to fulfill its obligations under this
Section. Notwithstanding anything to the contrary contained in this
Agreeent, Experian may terminate this Agreement immediately if it determines
that Reseller has failed to comply with the requirements of this Section
or if Reseller fails to remedy any Customer violation of this Section within
30 days notice of such violation.
9. WARRANTIES, REMEDIES AND INDEMNIFICATION.
Reseller will indemnify, defend, and hold Experian harmless from and
against any and all liabilities, damages, losses, claims, costs, and
expenses (including attorney's fees) arising out of or resulting from
Reseller's or any end user's use of the Experian Data including, without
limitation, (i) Reseller's or any Customer's failure to observe any use
restriction set forth herein; (ii) any claim alleging that Reseller or
any Customer violated the legal rights of another person (iii) any claim
by a third party alleging that the Services were defective in any way; or
(iv) any misrepresentation or breach of warranty by Reseller of Reseller's
nonperformance of any obligations imposed on it by this Agreement, provided
that the foregoing shall not apply to any claim arising directly as a
result of Experian's gross negligence or willful misconduct. Experian
shall provide Reseller prompt notice of and control over the defense of
any claim pursuant to this Section and shall reasonably cooperate in the
defense thereof.
10. INTELLECTUAL PROPERTY.
Reseller acknowledges that Experian has expended substantial time,
effort and funds to compile the Experian Data and that all information
contained in such database is and will continue to be the exclusive
property of Experian. Nothing contained in this Agreement shall be deemed
to convey to Reseller, any Customer, third party processor or other
party any right, title or interest, including any patent, copyright or
other proprietary right, in or to the Experian Data or any part thereof.
Reseller will not use, or permit its employees, agents, customers, and
subcontractors to use, the trademarks, service marks, logos, names, or any
other proprietary designations of Experian, or Experian's affiliates,
whether registered or unregistered, without Experian's prior written
consent.
11. TERM AND TERMINATION.
The term of this Agreement (the "Term") is the period consisting of the
Initial Term and, if this Agreement is renewed, the Renewal Term(s), as
follows:
A. Initial Term. The "Initial Term" shall begin on December 4, 1998
("Effective Date") and end at 11:59 p.m. on the day that is eighteen
months after the Effective Date.
B. Renewal Term(s). Unless one of the parties delivers to the other
written notice of such party's intent not to renew no later than
ninety (90) days prior to the expiration of the Initial Term, this
Agreement will renew automatically and without further action by either
party for an additional one-year period (a "Renewal Term").
Thereafter, this Agreement will continue to renew automatically for
successive terms of one year each unless and until either party
delivers nonrenewal notice no later than ninety (90) days before the
end of a Renewal Term.
C. Termination for Default. Reseller will be in default if it fails
to: (i) make any payment within ten (10) days after written default
notice that such is due hereunder; or (ii) perform any obligation
required to be performed by it within thirty (30) days after written
notice that such obligation has not been performed. If there is a good
faith dispute over an amount due, the parties will endeavor to
resolve the dispute by negotiation in good faith.
D. [Intentionally omitted]
E. Termination for Insolvency. Notwithstanding any other provision in
this Agreement, Experian may, upon written notice, terminate this
Agreement if there is a voluntary or involuntary liquidation,
dissolution, bankruptcy, insolvency, receivership or similar
conclusion of the business of Reseller.
<PAGE>
F. Effect of Termination. Upon expiration or termination of this
Agreement, the license granted herein will terminate, Reseller will
cease its use and resale of the Data and will either deliver any Data
to Experian, or destroy or erase it, at Experian's option. No
cancellation, expiration or termination of this Agreement will relieve
either party of any liability for monetary sums owing to the other,
nor will a termination preclude any other actions which might be
taken by either party at law or equity to enforce lawful obligations
arising hereunder. For purposes hereof, "Termination Date" means
the date this Agreement expired or is canceled or terminated. Within
30 days after the Termination Date, Reseller and Experian will jointly
perform a final accounting of all sums due. Nothing in this Agreement
will limit, or be deemed to limit, Experian's right to sell any Data
or Service to Customers before or after the Termination Date.
12. AUDIT RIGHTS.
Experian will have the right to audit Reseller's use and resale of the
Service hereunder. Reseller will be responsible for assuring full
cooperation with Experian in connection with such audits and will provide
Experian or obtain for Experian access to such properties, records and
personnel as Experian may reasonably require for such purpose. Experian
shall not perform such audits more frequently than [***] in any calendar
year, unless Experian believes in good faith that there exists a breach
of any term of this Agreement.
13. WAIVER.
Either party may at any time waive compliance by the other with any
covenants or conditions contained in this Agreement, but only by written
instrument signed by the party waiving such compliance. No such waiver,
however, shall be deemed to constitute the waiver of any such covenant or
condition in any other circumstance or the waiver of any other covenant or
condition.
14. BINDING ARBITRATION.
If the parties are unable to resolve a dispute arising out of or relating to
this Agreement, or the parties' respective rights hereunder, then the
parties will resolve such dispute in a binding arbitration conducted under
the auspices of the American Arbitration Association in Orange County,
California. The prevailing party in any arbitration or action shall be
entitled to an award of its reasonable attorneys' fees and costs.
15. CONFIDENTIALITY.
Each party will take reasonable precautions to assure that all information
disclosed to it by the other party marked "Confidential" (or with similar
legend) is held in strict confidence and disclosed only to those of their
respective employees whose duties reasonably require access to such
information. Each party will take reasonable precautions to prevent loss,
compromise, or misuse of any media containing Experian Data while in the
possession of that party and while in transport between the parties. Except
as specifically permitted by this Agreement, under no circumstances will
either party disclose, directly or indirectly, to any other person the terms
of this Agreement.
16. RELATIONSHIP.
The parties will perform all services hereunder as independent contractors.
Nothing contained in this Agreement shall be deemed to create any
association, partnership, joint venture, or relationship of principal and
agent or master and servant between the parties. Neither this Agreement
nor any provisions set forth herein is intended to, or shall, create any
rights in or confer any benefits upon any person other than the parties
hereto.
17. SUCCESSORS AND ASSIGNS.
Neither this Agreement nor the interests of the parties in this Agreement
may be assigned, transferred, shared or divided in any manner by Reseller
without the prior written consent of Experian; such consent not to be
unreasonably withheld or delayed. Any proposed sale, transfer or other
disposition of the assets, business or
[***] Confidential treatment requested.
<PAGE>
stock or change in controlling interest in Reseller or its parent company
(if any) shall be considered an assignment of this Agreement. This
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their respective heirs, representatives, successors and permitted
assignees. Notwithstanding the foregoing, where Reseller requests
Experian's consent to assign the Agreement in connection with a proposed
sale, transfer or other disposition of the assets, business or stock or
change in controlling interest in Reseller or its parent company (if any)
or similar transaction, Experian may either: (i) approve the continuation
of this Agreement despite such sale, transfer or disposition, in which
event this Agreement will remain in full force and effect according to its
terms; or (ii) elect to terminate this Agreement as of the date of such
sale, transfer, disposition or change.
18. REFORMATION/SEVERABILITY.
If any provision of this Agreement is declared invalid by any arbitration
or court of competent jurisdiction, then such provision shall be deemed
automatically adjusted to the minimum extent necessary to conform to the
requirements for validity as declared at such time and, as so adjusted,
shall be deemed a provision of this Agreement as though originally included
herein. In the event that the provision invalidated is of such a nature
that it cannot be so adjusted, the provision shall be deemed deleted from
this Agreement as though such provision had never been included herein.
In either case, the remaining provisions of this Agreement shall remain
in effect.
19. EXCUSABLE DELAYS.
Neither party shall be liable for any delay or failure in its performance
under this Agreement if and to the extent that such delay or failure is
caused by events beyond the reasonable control of the party including,
without limitation, acts of God or public enemies, labor disputes, equipment
malfunctions, computer downtime, software defects, material or component
shortages, supplier failures, embargoes, rationing, acts of local, state or
national governments or public agencies, utility or communication failures
or delays, fire earthquakes, flood, epidemics, riots and strikes. If a
party becomes aware that such an event is likely to delay or prevent
punctual performance of itsown obligations, the party will promptly notify
the other party and use all reasonable efforts to avoid or remove such
causes of nonperformance and to complete performance whenever such causes
are removed.
20. GOVERNING LAW.
This Agreement will be governed for all purposes by the internal substantive
laws of the State of California, which are intended to supersede any choice
of laws rules which might otherwise be applicable. Both parties hereby
consent to the jurisdiction of the courts of the State of California,
whether federal, state or local with respect to actions brought to
enforce or interpret this Agreement.
21. NOTICES.
All notices, requests and other communications hereunder shall be in
writing and shall be acknowledged at the time of receipt if delivered by
hand or communicated by electronic transmission, or, if mailed, three (3)
days after mailing registered or certified mail, return receipt requested,
with postage prepaid, to the address for the receiving party set forth on
Page 1 as such may be changed by notice to the other given as provided
above, then to the last address so designated.
22. COMPLETE AGREEMENT.
This Agreement sets forth the entire understanding of Reseller and Experian
with respect to the subject matter hereof and supersedes all letters of
intent, agreements, covenants, arrangements, communications, representations
or warranties, whether oral or written, by an officer, employee, or
representative of either party relating thereto. This Agreement may be
amended at any time by a written agreement which refers expressly to this
Agreement and which is signed by both parties.
[Signatures follow]
<PAGE>
IN WITNESS WHEREOF, Experian and Reseller have executed this Agreement.
Experian Information Solutions, Inc.
By and through its
Information Solutions Division
- -------------------------------- ------------------------------------
Signature Signature
- -------------------------------- ------------------------------------
Printed Name Printed Name
- -------------------------------- ------------------------------------
Title Title
- -------------------------------- ------------------------------------
Date Date
Experian Information Solutions, Inc.
By and through its
Information Solutions Division
------------------------------------
Signature
------------------------------------
Printed Name
Experian Contract Manager
------------------------------------
Title
------------------------------------
Date
<PAGE>
EXHIBIT A
Item No. 1: Definition of Customer and Territory
Worldwide
Item No. 2: Frequency of Usage
Reseller is licensed to resell the Services to its Customers provided such
Customers shall be restricted to using the Service, and certifying such
usage, as follows:
___[***]___ [***] time usage
___[***]__ [***] time usage
____[***]_ Unlimited usage for [***] after Customer's date of receipt of
any of the Services.
Item No. 3: Services
Experian agrees to license to Reseller the following Services on the terms
and conditions set forth in the Agreement.
Experian will provide to Reseller, in the agreed upon media, an extract of
[***] as defined in [***].
Experian will provide [***] on a [***] basis.
Item No. 4: Fees and Payments
Reseller agrees to pay Experian for the Services, which shall include payment
according to the following schedule:
See Exhibit C
[***] Confidential treatment requested.
<PAGE>
EXHIBIT B
BMS National Business Database
File Reference
December 1998
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] Confidential treatment requested.
<PAGE>
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] Confidential treatment requested.
<PAGE>
EXHIBIT C
Pricing
The pricing noted below is contingent upon the following conditions:
1) Contribution of Data by Reseller to Experian. If data contribution not
made, then Experian can re-negotiate the pricing.
2) Prices per Thousand except where noted
One Time Use of Data Bus. Mktg. Discount Risk
Aggregate Annual Revenue Database vs. Retail Reducer
- ------------------------------------------------------------------------
[***] commitment [***] [***] [***]
[***] commitment [***] [***] [***]
[***] commitment [***] [***] [***]
Unlimited Use of Data Bus. Mktg. Discount Risk
Aggregate Annual Revenue Database vs. Retail Reducer
- ------------------------------------------------------------------------
[***] commitment [***] [***] [***]
[***] commitment [***] [***] [***]
[***] commitment [***] [***] [***]
Selects Extract
- -----------------------
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] Confidential treatment requested.
<PAGE>
EXHIBIT D
CUSTOMER USE CERTIFICATION
This Use Certification is executed as of the date set forth below by the
undersigned customer (hereinafter referred to as "Customer") for the benefit
of MySoftware Company (hereinafter referred to as "Reseller") and Experian
Information Solutions, Inc., Business Information Services Division
(hereinafter referred to as "Experian").
In consideration for Customer's right to receive and use certain data and
services from Reseller and Experian, Customer understands and certifies that
the data and services obtained from Experian through Reseller:
(i) will not be used as a factor in establishing an individual's
eligibility for (a) credit or insurance to be used primarily for
personal, family or household purposes, or (b) employment;
(ii) will be used in compliance with all applicable laws, regulations
and ordinances, and all special use restrictions set forth in the
Agreement or adopted by Experian and/or Reseller hereafter; and
(iii) will be maintained in confidence and disclosed only to persons
whose duties reasonably relate to the business purposes for which
the information was requested.
Customer further acknowledges and agrees that the data and services:
(i) are not guaranteed and that neither the Reseller, Experian nor their
sources will be liable to the Customer for any loss or damage based
on any errors or omissions there from;
(ii) are subject to the following exclusion of warranty. RESELLER,
EXPERIAN AND THEIR SOURCES DO NOT GUARANTEE OR WARRANT THE ACCURACY,
COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE SERVICES, DATA OR THE MEDIA ON WHICH
THE DATA IS PROVIDED AND SHALL NOT BE LIABLE TO CUSTOMER FOR ANY
LOSS OR INJURY ARISING OUT OF OR CAUSED IN WHOLE OR IN PART BY
RESELLER'S, EXPERIAN'S OR THEIR SOURCES' ACTS OR OMISSIONS,
WHETHER NEGLIGENT OR OTHERWISE, IN PROCURING, COMPILING,
COLLECTING, INTERPRETING, REPORTING, COMMUNICATING OR
DELIVERING THE DATA OR SERVICES. IN NO EVENT SHALL RESELLER,
EXPERIAN OR THEIR SOURCES BE LIABLE TO CUSTOMER OR ANY THIRD
PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL
DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES TO BUSINESS
REPUTATION, LOST BUSINESS OR LOST PROFITS), WHETHER FORESEEABLE
OR NOT AND HOWEVER CAUSED, EVEN IF RESELLER, EXPERIAN OR THEIR
SOURCES ARE ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS
PARAGRAPH STATES RESELLER'S, EXPERIAN'S AND THEIR SOURCES'
ENTIRE LIABILITY AND THE SOLE REMEDY OF CUSTOMER IN CONNECTION
WITH THE PROVISION OF THE DATA AND SERVICES.
<PAGE>
(iii) IF, NOTWITHSTANDING THE PRIOR PARAGRAPH, LIABILITY CAN BE IMPOSED
ON RESELLER, EXPERIAN OR THEIR SOURCES, THEN CUSTOMER AGREES
THAT THE AGGREGATE LIABILITY FOR ANY OR ALL LOSSES OR INJURIES TO
CUSTOMER ARISING OUT OF ANY ACTS OR OMISSIONS OF RESELLER,
EXPERIAN OR THEIR SOURCES IN CONNECTION WITH ANYTHING TO BE
DONE OR FURNISHED UNDER THE AGREEMENT, REGARDLESS OF THE
CAUSE OR THE LOSS OR INJURY (INCLUDING NEGLIGENCE) AND
REGARDLESS OF THE NATURE OF THE LEGAL OR EQUITABLE RIGHT
CLAIMED TO HAVE BEEN VIOLATED, SHALL NEVER EXCEED THE AMOUNT
PAID TO RESELLER FOR THE DATA FURNISHED UNDER THE APPLICABLE JOB
SPECIFICATION AND CUSTOMER COVENANTS AND PROMISES THAT IT WILL
NOT SUE RESELLER, EXPERIAN OR THEIR SOURCES FOR AN AMOUNT
GREATER THAT SUCH SUM AND THAT IT WILL NOT SEEK PUNITIVE
DAMAGES IN ANY SUIT AGAINST RESELLER, EXPERIAN OR THEIR SOURCES.
------------------------------
Name of Customer
------------------------------
Signature
------------------------------
Print Name
------------------------------
Title
------------------------------
Date
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from MySoftware Company's
STATEMENTS OF OPERATIONS and BALANCE SHEETS and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,387
<SECURITIES> 0
<RECEIVABLES> 3,355
<ALLOWANCES> 0
<INVENTORY> 266
<CURRENT-ASSETS> 9,095
<PP&E> 217
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,932
<CURRENT-LIABILITIES> 4,321
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 5,606
<TOTAL-LIABILITY-AND-EQUITY> 9,932
<SALES> 15,038
<TOTAL-REVENUES> 15,038
<CGS> 4,201
<TOTAL-COSTS> 4,201
<OTHER-EXPENSES> 10,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 514
<INCOME-TAX> 35
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 479
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
